<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] 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: 000-18674
MAPICS, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 04-2711580
(State of incorporation) (I.R.S. Employer
Identification No.)
5775-D GLENRIDGE DRIVE
ATLANTA, GEORGIA 30328
(Address of principal executive offices)
(404) 705-3000
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of class)
SERIES F JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS
(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 [ ]
The number of shares of the registrant's Common Stock outstanding at May 1,
1998 was 18,550,840.
================================================================================
<PAGE> 2
MAPICS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER NUMBER
- ------ ------
<S> <C> <C>
PART I - FINANCIAL INFORMATION
1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1998 and
September 30, 1997.................................................. 3
Consolidated Statements of Operations for the Three Months and the
Six Months Ended March 31, 1998 and 1997............................ 4
Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 1998 and 1997....................................... 5
Notes to Consolidated Financial Statements.............................. 6
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 8
PART II - OTHER INFORMATION
4. Submission of Matters to a Vote of Security Holders..................... 14
6. Exhibits and Reports on Form 8-K........................................ 15
Signature............................................................... 17
Exhibits Index.......................................................... 18
</TABLE>
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MAPICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1998 1997
-------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................................... $ 18,869 $ 5,562
Accounts receivable, net of allowances of $1,810 at
March 31,1998 and $1,702 at September 30, 1997 ................. 26,637 30,364
Prepaid expenses and other current assets ......................... 4,032 2,583
Deferred income taxes, net ........................................ 2,285 1,341
-------- --------
Total current assets ...................................... 51,823 39,850
Property and equipment, net ....................................... 4,799 3,562
Computer software costs, net ...................................... 16,843 16,615
Other intangible assets, net ...................................... 4,551 4,809
Deferred income taxes, net ........................................ 7,718 12,134
-------- --------
Total assets .............................................. $ 85,734 $ 76,970
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $ 8,286 $ 6,955
Accrued expenses and other current liabilities .................... 17,966 20,174
Deferred revenues ................................................. 26,033 25,134
-------- --------
Total current liabilities ................................. 52,285 52,263
-------- --------
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, $1.00 par value; 1,000 shares authorized Series D
convertible preferred stock, 225 shares issued
and outstanding (liquidation preference of $16,955) ........... 225 225
Series E convertible preferred stock, 100 shares issued
and outstanding (liquidation preference of $7,536) ............ 100 100
Common stock, $.01 par value; 50,000 shares authorized;
18,665 shares issued and 18,536 shares outstanding at
March 31, 1998; 18,499 shares issued and
outstanding at September 30, 1997 ............................. 187 185
Additional paid-in capital ........................................ 58,660 56,887
Accumulated deficit ............................................... (24,442) (32,690)
Treasury stock-at cost, 129 shares at March 31, 1998 .............. (1,281) --
-------- --------
Total stockholders' equity ................................ 33,449 24,707
======== ========
Total liabilities and stockholders'equity ................. $ 85,734 $ 76,970
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
MAPICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
1998 1997 1998 1997
------- ------- ------- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
License .............................................. $16,787 $11,051 $34,943 $25,328
Services ............................................. 12,221 9,735 23,659 18,837
------- ------- ------- -------
Total revenues ............................... 29,008 20,786 58,602 44,165
------- ------- ------- -------
Operating expenses:
Cost of license revenues ............................. 3,410 1,571 6,229 4,129
Cost of services revenues ............................ 3,428 2,718 6,609 5,301
Selling and marketing ................................ 10,655 6,799 21,118 14,834
Product development .................................. 3,581 2,481 7,056 4,969
General and administrative ........................... 2,179 2,438 4,346 4,360
------- ------- ------- -------
Total operating expenses ..................... 23,253 16,007 45,358 33,593
------- ------- ------- -------
Income from operations ................................. 5,755 4,779 13,244 10,572
Interest income, net ................................... 116 -- 167 --
------- ------- ------- -------
Income before income tax expense ....................... 5,871 4,779 13,411 10,572
Income tax expense ..................................... 2,260 1,841 5,163 4,071
------- ------- ------- -------
Net income ............................................. $ 3,611 $ 2,938 $ 8,248 $ 6,501
======= ======= ======= =======
Net income per common share (basic) (Note 3) ........... $ 0.20 $ 0.19 $ 0.45 $ 0.41
======= ======= ======= =======
Weighted average number of common shares
outstanding (basic) (Note 3) ...................... 18,477 15,815 18,495 15,792
======= ======= ======= =======
Net income per common share (diluted) (Note 3) ......... $ 0.16 $ 0.15 $ 0.37 $ 0.34
======= ======= ======= =======
Weighted average number of common and common
equivalent shares outstanding (diluted) (Note 3) .. 22,738 19,466 22,491 19,320
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
MAPICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
----------------------
1998 1997
-------- -------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ..................................................... $ 8,248 $ 6,501
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ................................................ 864 660
Amortization ................................................ 3,583 2,328
Provision for bad debts ..................................... 157 611
Deferred income taxes ....................................... 3,771 (490)
Changes in operating assets and liabilities:
Accounts receivable ....................................... 3,570 (1,234)
Prepaid expenses and other current assets ................. (1,449) (266)
Accounts payable .......................................... 1,331 (896)
Accrued expenses and other current liabilities ............ (2,208) (42)
Deferred revenues ......................................... 899 2,634
-------- -------
Net cash provided by operating activities ................. 18,766 9,806
-------- -------
Cash flows from investing activities:
Purchases of property and equipment ....................... (2,101) (481)
Additions to computer software costs ...................... (3,553) (2,385)
-------- -------
Net cash used for investing activities ................. (5,654) (2,866)
-------- -------
Cash flows from financing activities:
Proceeds from common stock option exercises ............... 1,476 --
Purchases of treasury stock ............................... (1,281) --
Net transfers to Marcam Corporation ....................... -- (6,466)
-------- -------
Net cash provided by (used for) financing activities ... 195 (6,466)
-------- -------
Net increase in cash and cash equivalents ........................ 13,307 474
Cash and cash equivalents at beginning of period ................. 5,562 378
-------- -------
Cash and cash equivalents at end of period ....................... $ 18,869 $ 852
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
MAPICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) REPORTING ENTITY
MAPICS, Inc. ("MAPICS" or the "Company"), formerly known as Marcam
Corporation, is a leading provider of enterprise resource planning ("ERP")
software applications for manufacturing enterprises worldwide. MAPICS' products
provide an integrated and function-rich ERP solution with the breadth and depth
of applications to manage an entire manufacturing enterprise. The MAPICS(R) XA
product line currently consists of over 40 integrated applications in the areas
of Engineering and Cost Management, Market and Demand Management, Plant
Operations and Logistics Management, Production Resource Planning, Financial
Management and Measurements and Cross Applications Solutions. MAPICS also
provides services to customers in the form of product support. MAPICS' primary
geographic markets include North America; the Europe, Middle East and Africa
region ("EMEA"); and the Latin America and Asia Pacific regions.
In April 1997, the Company's Board of Directors authorized management of the
Company to proceed with the separation of Marcam Corporation into two publicly
traded corporations. The separation was designed with the intent to enable each
company to better focus on its core markets, to better serve its existing
customers and to better finance its business.
On July 25, 1997, the Company transferred substantially all of the business,
assets and liabilities relating to its PRISM(R), Protean(TM) and Avantis(TM)
product lines, which address the needs of continuous flow process manufacturers,
and $39.0 million in cash to a newly formed wholly owned subsidiary, Marcam
Solutions, Inc. ("Marcam Solutions"). The Company borrowed $64.0 million from a
bank (the "Debt Financing") to finance the $39.0 million cash transfer to Marcam
Solutions and to repay Marcam Corporation's $25.0 million 9.82% Subordinated
Notes due 2001.
On July 29, 1997, the Company spun off to its stockholders, in a tax-free
distribution (the "Distribution"), all of the shares of common stock of Marcam
Solutions. In connection with the Distribution, Marcam Corporation changed its
name to MAPICS, Inc. and thereafter continues the operations related to the
MAPICS(R) product line, which addresses the needs of discrete and batch-process
manufacturers. Although the common stock of Marcam Solutions was distributed to
the Company's stockholders, the Distribution was recorded for accounting
purposes as a disposition by Marcam Solutions of the MAPICS business, due to the
relative significance of the PRISM(R), Protean(TM) and Avantis(TM) product
lines.
During August 1997, the Company obtained a senior secured term loan and
revolving credit facility to repay a portion of the borrowings from the Debt
Financing and for general corporate purposes. During August 1997, the Company
completed an underwritten public offering of 6.9 million shares of its common
stock (the "Offering") raising net proceeds of approximately $56.0 million,
after deducting Offering costs of approximately $6.1 million. The net proceeds
of the Offering along with borrowings of $6.4 million under the term loan credit
facility and working capital of $1.6 million were used to repay the $64.0
million of indebtedness from the Debt Financing.
On March 31, 1998, the Company changed its jurisdiction of incorporation
from the Commonwealth of Massachusetts to the State of Georgia where its
principal offices are located.
(2) BASIS OF PRESENTATION
The consolidated financial statements of MAPICS for reporting periods after
the Distribution, including the consolidated balance sheets as of March 31, 1998
and September 30, 1997, the consolidated statements of operations for the three
months and six months ended March 31, 1998 and consolidated statement of cash
flows for the six months ended March 31, 1998, consist solely of the separate
consolidated financial statements of MAPICS, Inc. and its wholly owned
subsidiaries and do not correspond to the historical consolidated financial
statements of Marcam Corporation. All significant intercompany accounts and
transactions have been eliminated in the consolidation.
The statements of operations of MAPICS for the three months and six months
ended March 31, 1997 and the statement of cash flows for the six months ended
March 31, 1997 have been prepared using Marcam Corporation's historical basis in
the assets and liabilities and historical results of operations of the business
related to the MAPICS(R) product line. These financial statements are
6
<PAGE> 7
combined and generally reflect the results of operations and cash flows of
MAPICS as if it were a separate entity for these periods. Certain costs and
expenses presented in the financial statements for the three months and six
months ended March 31, 1997 have been allocated based on management's estimates
of the cost of services provided to MAPICS by Marcam Corporation. Management
believes these allocations are reasonable. However, the financial information
included herein may not necessarily reflect the financial position, results of
operations and cash flows of MAPICS in the future, or what they would have been
had MAPICS been a separate entity during the three months and six months ended
March 31, 1997.
Except for the balance sheet as of September 30, 1997 and the statements of
operations and cash flows for six months ended March 31, 1997, the accompanying
financial statements are unaudited; however, in the opinion of management, these
financial statements contain all adjustments (consisting of only normal,
recurring adjustments) necessary to present fairly the Company's financial
position, results of operations and cash flows as of the dates and for the
periods indicated. The financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "Commission"). As permitted by the rules of the Commission applicable to
quarterly reports on Form 10-Q, these notes are condensed and do not contain all
disclosures required by generally accepted accounting principles. While the
Company believes that the disclosures presented are adequate to make these
financial statements not misleading, these financial statements should be read
in conjunction with the Company's audited financial statements and related notes
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on December 23, 1997.
The Company operates on a fiscal year ending September 30th. The results of
operations for the interim periods presented are not necessarily indicative of
the results to be expected for a full year.
(3) SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUE RECOGNITION
The Company licenses its software to its customers primarily through a
global network of independent affiliates. Although the affiliates provide the
principal channel through which the Company's products are distributed to its
customers, a sale is not considered to have occurred until an executed license
agreement is obtained from the ultimate customer.
The Company recognizes revenue from software licensing in accordance with
the guidance provided by Statement of Position ("SOP") 91-1, "Software Revenue
Recognition." The Company generally recognizes revenue from the licensing of its
software upon: (i) the signing of a license agreement between the Company and
the ultimate customer; (ii) delivery of the software to the customer or to a
location designated by the customer; (iii) determination that collection of the
related receivable is probable; and (iv) expiration of any contractual rights of
acceptance or return. Under the terms of the Company's license agreements, the
customer is responsible for installation and training. At the time the Company
recognizes revenue from the licensing of software, no significant vendor
obligations remain and the costs of insignificant obligations, if any, are
accrued. Revenue from the licensing of software is included in license revenues,
and the related commissions paid to affiliates are included in selling and
marketing expenses.
The Company recognizes services revenues from its periodic license fees
ratably over the terms of the periodic license agreements. The periodic license
fee, which is typically payable annually in advance, entitles the customer to
continue using the software and to receive certain support services, as
available.
The Company has no commitment to reimburse the affiliates for any losses
incurred.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued SOP 97-2 "Software Revenue Recognition," which provides
guidance on applying generally accepted accounting principles in recognizing
revenue on software transactions and supercedes SOP 91-1. The Company will adopt
the provisions of SOP 97-2 on October 1, 1998. However, on March 31, 1998, the
AICPA issued SOP 98-4, "Deferral of the Effective Date of a Provision of SOP
97-2," which defers for one year certain provisions of SOP 97-2. Based upon the
Company's interpretation of the information currently available, management
believes that the adoption of SOP 97-2 will not have a material impact on the
Company's financial position, results of operations or financial statement
disclosures.
7
<PAGE> 8
(B) NET INCOME PER COMMON SHARE
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," during the three months ended December 31, 1997. SFAS
No. 128 requires the Company to present "basic" and "diluted" earnings per share
("EPS") for all periods presented in the statements of operations. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the Company.
The Company previously followed the provisions of Accounting Principles
Board Opinion No. 15, "Earnings Per Share," under which "primary" and "fully
diluted" EPS were $0.15 for the three months ended March 31, 1997, and $0.34 for
the six months ended March 31, 1997. SFAS No. 128 requires restatement of all
prior period earnings per share data presented in the statements of operations.
As restated, "basic" and "diluted" EPS were $0.19 and $0.15, respectively, for
the three months ended March 31, 1997, and $0.41 and $0.34, respectively, for
the six months ended March 31, 1997. Net income per common share for the three
months and six months ended March 31, 1997, was calculated using the capital
structure of Marcam Corporation including the weighted average number of common
and common equivalent shares outstanding, giving effect to the Distribution on a
pro forma basis.
The weighted average number of common shares outstanding used to calculate
basic EPS includes (i) the weighted average number of common shares outstanding
(18,477,000 and 18,495,000 shares for the three months and six months ended
March 31, 1998, respectively; and, 11,482,000 and 11,459,000 for the three
months and six months ended March 31, 1997, respectively) plus (ii) the number
of shares of common stock from the Offering, the proceeds from which were deemed
to be used to pay the capital contribution of $39.0 million to Marcam Solutions,
based on the Offering price of $9.00 per share (4,333,000 shares for the three
months and six months ended March 31, 1997).
The weighted average number of common and common equivalent shares
outstanding used to calculate diluted EPS includes the weighted average number
of common shares outstanding plus the number of shares of common stock from the
Offering, as presented above, plus the weighted average number of common
equivalent shares from the assumed exercise of dilutive stock options, warrants
and convertible preferred stock (4,261,000 and 3,996,000 equivalent shares for
the three months and six months ended March 31, 1998, respectively; and
3,651,000 and 3,528,000 equivalent shares for the three months and six months
ended March 31, 1997, respectively).
(4) COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these legal matters will have a material adverse effect on the Company's future
financial position or results of operations.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere herein.
This discussion contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. Words such as "may," "would," "could," "will,"
"expect," "estimate," "anticipate," "believe," "intends," "plans," and similar
expressions and variations thereof are intended to identify forward-looking
statements. The Company's actual results could differ materially from those
contemplated by the forward-looking statements contained herein. Factors that
may cause such a difference include but are not limited to those discussed in
the cautionary statements contained herein as well as those discussed in the
section entitled "Factors Affecting Future Performance" contained in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1997 as filed with the Securities and Exchange Commission. The cautionary
statements made in this report should be read as being applicable to all related
forward-looking statements wherever they appear in this report.
8
<PAGE> 9
OVERVIEW
The Company licenses its software to its customers primarily through a
global network of independent affiliates. Although the affiliates provide the
principal channel through which the Company's products are distributed to its
customers, a sale is not considered to have occurred until an executed license
agreement is obtained from the ultimate customer.
When it first licenses its software, the Company receives both an initial
license fee and a periodic license fee. The periodic license fee, which is
typically paid annually in advance entitles the customer to continue using the
software and to receive certain support services, as available. If a customer
does not renew its periodic license, it is no longer entitled to use the
Company's software. The Company believes this licensing arrangement provides a
source of recurring revenues from its installed base of customers and enables
customers to take advantage of new releases and enhancements of its software.
Initial license fees are recorded as license revenues and typically recognized
upon delivery of the software to the customer. Periodic license fees are
recorded as services revenue and recognized ratably over the term of the
periodic license agreement.
The Company's cost structure is designed so that a significant portion of
its costs vary in direct relation to license revenues, particularly commissions
paid to affiliates which are included in selling and marketing expenses and
product royalties which are included in cost of license revenues. The Company's
single largest expense is commissions paid to affiliates, which are based on the
revenues they generate from licensing MAPICS(R) products. The affiliates, rather
than the Company, provide the Company's customers with consulting and
implementation services relating to the MAPICS(R) products. As a result, the
Company does not generate revenues from providing consulting and implementation
services nor does it incur the fixed costs inherent in maintaining a services
business, other than those costs associated with customer support provided by
MAPICS.
In January 1998, the Company formally launched MAPICS(R) XA Release 4
("Release 4"), the latest version of its ERP software solution and its first
major release since becoming an independent company. Release 4 adds six new
applications and enhancements to 22 of the existing applications of MAPICS(R)
XA, including enriched multiple language capabilities, expanded international
financial management and improved multi-facility demand and supply management to
help companies streamline their global communications and information exchange
within their own enterprises, across multinational sites and among their
supply-chain partners.
MAPICS(R) XA Release 5, scheduled for delivery late in calendar 1998, is
planned to feature euro-currency support, MAPICS(R) Browser, a major expansion
of client/server capabilities, a Java-based user interface for the
character-based applications, as well as additional application enhancements. In
addition, the Company is continuing its Java-based development activities to
re-host certain of its applications to run on the Microsoft Windows(R) NT
platform as well as the IBM(R) AS/400(TM) platform. The Company currently
anticipates that core product development expenditures will increase. Because
the costs of establishing technological feasibility of computer software
products are charged to product development expense as they are incurred, the
Company's operating results may be affected adversely by significant increases
in the level of product development investments.
9
<PAGE> 10
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenues represented by certain line items in the Company's consolidated
statements of operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
----------------- -----------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues:
License ............................ 57.9% 53.2% 59.6% 57.3%
Services ........................... 42.1 46.8 40.4 42.7
----- ----- ----- -----
Total revenues ............. 100.0 100.0 100.0 100.0
----- ----- ----- -----
Operating expenses:
Cost of license revenues ........... 11.8 7.6 10.6 9.3
Cost of services revenues .......... 11.8 13.1 11.3 12.0
Selling and marketing .............. 36.8 32.7 36.1 33.6
Product development ................ 12.3 11.9 12.0 11.3
General and administrative ......... 7.5 11.7 7.4 9.9
----- ----- ----- -----
Total operating expenses.... 80.2 77.0 77.4 76.1
----- ----- ----- -----
Income from operations ............... 19.8 23.0 22.6 23.9
Interest income, net ................. 0.4 -- 0.3 --
----- ----- ----- -----
Income before income tax expense ..... 20.2 23.0 22.9 23.9
Income tax expense ................... 7.8 8.8 8.8 9.2
----- ----- ----- -----
Net income ........................... 12.4% 14.2% 14.1% 14.7%
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1997
Revenues. Total revenues increased 39.6% to $29.0 million for the three
months ended March 31, 1998 from $20.8 million for the three months ended March
31, 1997. License revenues increased 51.9% to $16.8 million for the three months
ended March 31, 1998 from $11.1 million for the three months ended March 31,
1997, primarily from a volume increase in license sales to existing customers
for additional applications and upgraded systems and a volume increase in
license sales to new customers.
The Company's license revenue growth has been most significant in North
America and the EMEA region. During the three months ended March 31, 1998,
operations in North America and the EMEA region accounted for 68% and 24% of
total license revenues, respectively, compared to 63% and 23%, respectively, for
the three months ended March 31, 1997. Revenue growth in the Company's two
smallest geographic markets, Latin America and Asia Pacific, has been less
significant. During the three months ended March 31, 1998, operations in these
markets accounted for a combined 8% of total license revenues compared to 14%
for the three months ended March 31, 1997.
Services revenues increased 25.5% to $12.2 million for the three months
ended March 31, 1998 from $9.7 million for the three months ended March 31,
1997, primarily due to the increase in the Company's installed customer base.
Cost of License Revenues. Cost of license revenues increased 117.1% to
$3.4 million for the three months ended March 31, 1998 from $1.6 million for the
three months ended March 31, 1997. Cost of license revenues increased as a
percentage of license revenues to 20.3% for the three months ended March 31,
1998 from 14.2% for the three months ended March 31, 1997. These increases were
due to an increase in royalties paid to third-party software suppliers
("Solution Partners") and an increase in amortization expense related to
computer software costs.
10
<PAGE> 11
Cost of Services Revenues. Cost of services revenues increased 26.1% to $3.4
million for the three months ended March 31, 1998 from $2.7 million for the
three months ended March 31, 1997, primarily as a result of the increased volume
in fees paid to affiliates and Solution Partners for providing support services
in the EMEA, Latin America and Asia Pacific regions. However, as a percentage of
total services revenues, these costs remained relatively constant at 28.1% and
27.9% for the three months ended March 31, 1998 and 1997, respectively.
Selling and Marketing. Selling and marketing expenses increased 56.7% to
$10.7 million for the three months ended March 31, 1998 from $6.8 million for
the three months ended March 31, 1997. As a percentage of total revenues,
selling and marketing expenses increased to 36.8% for the three months ended
March 31, 1998 from 32.7% for the three months ended March 31, 1997. These
increases were due to increased commissions earned by affiliates on increased
license revenues, the hiring of additional sales and marketing personnel and
increased spending on marketing programs. Management currently expects to
continue making incremental investments in sales and marketing personnel to
support the Company's independent affiliate channel and on marketing programs to
promote the MAPICS(R) product.
Product Development. Overall product development expenses increased 44.3% to
$3.6 million for the three months ended March 31, 1998 from $2.5 million for the
three months ended March 31, 1997. As a percentage of total revenues, product
development expenses increased to 12.3% for the three months ended March 31,
1998 from 11.9% for the three months ended March 31, 1997.
Gross core development expenditures increased 43.9% to $4.2 million for the
three months ended March 31, 1998 from $2.9 million for the three months ended
March 31, 1997. This increase was due to the Java development effort to re-host
the Company's software applications to the Microsoft Windows(R) NT environment,
while continuing efforts to expand the MAPICS(R) XA product line. The amounts of
core development expenditures capitalized during the three months ended March
31, 1998 and March 31, 1997 were $660 thousand and $492 thousand, respectively,
representing 15.6% and 16.7% of gross core development expenditures during those
periods. The amount of core development expenditures capitalized as a percentage
of gross core development expenditures during the three months ended March 31,
1998 decreased because a lower proportion of these expenditures had reached the
technological feasibility stage as compared to the three months ended March 31,
1997. Gross translation expenditures increased 84.5% to $1.3 million during the
three months ended March 31, 1998 from $727 thousand during the three months
ended March 31, 1997. Translation expenditures are typically project related,
and the timing of these expenditures is subject to change from period to period.
The amounts of translation expenditures capitalized during the three months
ended March 31, 1998 and March 31, 1997 were $1.3 million and $697 thousand,
respectively, representing 99.4% and 95.9%, respectively, of gross translation
expenditures during those periods.
General and Administrative. General and administrative expenses decreased
10.6% to $2.2 million during the three months ended March 31, 1998 from $2.4
million during the three months ended March 31, 1997. General and administrative
expenses represented 7.5% and 11.7% of total revenues during the three months
ended March 31, 1998 and 1997, respectively. The decrease in general and
administrative expenses as a percentage of total revenues reflects the fixed
nature of the general and administrative expenses.
Interest Income, Net. Interest income, net, which was $116 thousand for the
three months ended March 31, 1998 compared to $0 for the three months ended
March 31, 1997, reflects interest earned on cash and cash equivalents net of
costs to maintain the Company's revolving credit facility. Prior to the
Distribution, MAPICS transferred all excess cash to Marcam Corporation.
Income Tax Expense. Income tax expense represented 38.5% of income before
income tax expense for the three months ended March 31, 1998 and 1997.
Net Income. Net income increased 22.9% to $3.6 million, or $0.16 per share
(diluted), for the three months ended March 31, 1998 from $2.9 million, or $0.15
per share (diluted), for the three months ended March 31, 1997.
SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO SIX MONTHS ENDED MARCH 31, 1997
Revenues. Total revenues increased 32.7% to $58.6 million for the six months
ended March 31, 1998 from $44.2 million for the six months ended March 31, 1997.
License revenues increased 38.0% to $34.9 million for the six months ended March
31, 1998 from $25.3 million for the six months ended March 31, 1997, primarily
from a volume increase in license sales to existing customers for additional
applications and upgraded systems and a volume increase in license sales to new
customers.
11
<PAGE> 12
The Company's license revenue growth has been most significant in North
America and the EMEA region. During the six months ended March 31, 1998,
operations in North America and the EMEA region accounted for 66% and 25% of
total license revenues, respectively, compared to 62% and 27%, respectively, for
the six months ended March 31, 1997. Revenue growth in the Company's two
smallest geographic markets, Latin America and Asia Pacific, has been less
significant. During the six months ended March 31, 1998, operations in these
markets accounted for a combined 9% of total license revenues compared to 11%
for the six months ended March 31, 1997.
Services revenues increased 25.6% to $23.7 million for the six months ended
March 31, 1998 from $18.8 million for the six months ended March 31, 1997,
principally due to the increase in the Company's installed customer base.
Cost of License Revenues. Cost of license revenues increased 50.9% to $6.2
million for the six months ended March 31, 1998 from $4.1 million for the six
months ended March 31, 1997. Cost of license revenues increased as a percentage
of license revenues to 17.8% for the six months ended March 31, 1998 from 16.3%
for the six months ended March 31, 1997. These increases were due to an
increase in royalties paid to Solution Partners and an increase in amortization
expense related to computer software costs.
Cost of Services Revenues. Cost of services revenues increased 24.7% to $6.6
million for the six months ended March 31, 1998 from $5.3 million for the six
months ended March 31, 1997, primarily as a result of the increased volume in
fees paid to affiliates and Solution Partners for providing support services in
the EMEA, Latin America and Asia Pacific regions. However, as a percentage of
total services revenues, these costs remained relatively constant at 27.9% and
28.1% for the six months ended March 31, 1998 and 1997, respectively.
Selling and Marketing. Selling and marketing expenses increased 42.4% to
$21.1 million for the six months ended March 31, 1998 from $14.8 million for the
six months ended March 31, 1997. As a percentage of total revenues, selling and
marketing expenses increased to 36.1% for the six months ended March 31, 1998
from 33.6% for the six months ended March 31, 1997. These increases were due to
increased commissions earned by affiliates on increased license revenues, the
hiring of additional sales and marketing personnel and increased spending on
marketing programs. Management currently expects to continue making incremental
investments in sales and marketing personnel to support the Company's
independent affiliate channel and on marketing programs to promote the MAPICS(R)
product.
Product Development. Overall product development expenses increased 42.0% to
$7.1 million for the six months ended March 31, 1998 from $5.0 million for the
six months ended March 31, 1997. As a percentage of total revenues, product
development expenses increased to 12.0% for the six months ended March 31, 1998
from 11.3% for the six months ended March 31, 1997.
Gross core development expenditures increased 36.7% to $8.3 million for the
six months ended March 31, 1998 from $6.0 million for the six months ended March
31, 1997. This increase was due to additional spending in connection with the
Java development effort to re-host the Company's software applications to the
Microsoft Windows(R) NT environment, while continuing efforts to expand the
MAPICS(R) XA product line. The amounts of core development expenditures
capitalized during the six months ended March 31, 1998 and March 31, 1997 were
$1.2 million and $1.2 million, respectively, representing 14.8% and 19.1% of
gross core development expenditures during those periods. The amount of core
development expenditures capitalized as a percentage of gross core development
expenditures during the six months ended March 31, 1998 decreased because a
lower proportion of these expenditures had reached the technological feasibility
stage as compared to the six months ended March 31, 1997. Gross translation
expenditures increased 79.1% to $2.4 million during the six months ended March
31, 1998 from $1.3 million during the six months ended March 31, 1997.
Translation expenditures are typically project related, and the timing of these
expenditures is subject to change from period to period. The amounts of
translation expenditures capitalized during the six months ended March 31, 1998
and March 31, 1997 were $2.3 million and $1.2 million, respectively,
representing 99.0% and 93.8%, respectively, of gross translation expenditures
during those periods.
General and Administrative. General and administrative expenses decreased
0.3% to $4.3 million during the six months ended March 31, 1998 from $4.4
million during the six months ended March 31, 1997. General and administrative
expenses represented 7.4% and 9.9% of total revenues during the six months ended
March 31, 1998 and 1997, respectively. The decrease in general and
administrative expenses as a percentage of total revenues reflects the fixed
nature of the general and administrative expenses.
12
<PAGE> 13
Interest Income, Net. Interest income, net, which was $167 thousand for the
six months ended March 31, 1998 compared to $0 for the six months ended March
31, 1997, reflects interest earned on cash and cash equivalents net of costs to
maintain the Company's revolving credit facility. Prior to the Distribution,
MAPICS transferred all excess cash to Marcam Corporation.
Income Tax Expense. Income tax expense represented 38.5% of income before
income tax expense for the six months ended March 31, 1998 and 1997.
Net Income. Net income increased 26.9% to $8.2 million, or $0.37 per share
(diluted), for the six months ended March 31, 1998 from $6.5 million, or $0.34
per share (diluted), for the six months ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended March 31, 1998 and 1997, MAPICS primarily funded
its operations and capital expenditures with cash generated from operating
activities. As of March 31, 1998, the Company had $18.9 million in cash and cash
equivalents and working capital of $25.6 million, excluding $26.0 million of
deferred revenues which are included in current liabilities. As of September 30,
1997, the Company had $5.6 million in cash and cash equivalents and working
capital of $12.7 million, excluding $25.1 million of deferred revenues. During
the six months ended March 31, 1998, MAPICS increased cash and working capital,
excluding deferred revenues, by $13.3 million and $12.9 million, respectively.
Net cash provided by operating activities was $18.8 million for the six
months ended March 31, 1998 compared with $9.8 million for the six months ended
March 31, 1997, reflecting growth in earnings, an increase in accounts
receivable collections and cash savings from the favorable income tax attributes
inherited from Marcam Corporation in connection with the Distribution. Pursuant
to a tax sharing agreement between Marcam Corporation and Marcam Solutions,
MAPICS is entitled to utilize certain favorable income tax attributes
(principally net operating loss carryforwards and tax credits) of Marcam
Corporation immediately following the Distribution. The Company believes that
the utilization of these favorable income tax attributes will continue to result
in cash savings from the reduction of income taxes payable in future periods as
these favorable income tax attributes are utilized.
Net cash used for investing activities was $5.7 million for the six months
ended March 31, 1998 compared with $2.9 million for the six months ended March
31, 1997. The Company used cash for investing activities related to computer
software development, computer software translation and purchases of computer
equipment.
Net cash provided by financing activities for the six months ended March 31,
1998 was $195 thousand, reflecting proceeds of $1.5 million from the exercise of
common stock options, less payments of $1.3 million to purchase 128,600 shares
of the Company's common stock pursuant to a stock repurchase plan authorized by
the Company's Board of Directors on December 15, 1997.
Additional borrowings of up to $15.0 million, subject to certain
limitations, are available to the Company under a revolving credit facility with
a bank. Availability of revolving credit loans and the rate of interest thereof
vary depending upon the Company's ability to maintain certain financial ratios.
As of March 31, 1998, the Company met all of those financial ratios, although no
amount was outstanding under the revolving credit facility at any time during
the six months ended March 31, 1998.
As of March 31, 1998, the Company did not have any material commitments for
capital expenditures.
Management believes that cash and cash equivalents on hand at March 31,
1998, together with cash flows from operations and available borrowings under
the revolving credit facility will be sufficient to meet the Company's working
capital and capital expenditure needs in the foreseeable future. However, the
Company may use its cash and cash equivalents in the future to acquire products
or technologies that are complementary to those of the Company.
YEAR 2000 ISSUE
Many existing computer hardware and software systems were designed to use
only two digits to identify a year in date fields (e.g., "98" for "1998"). If
not corrected, these systems and programs could fail or create erroneous results
when working with dates beyond the year 1999. This is commonly referred to as
the "Year 2000 Issue."
13
<PAGE> 14
In July 1997, the Company received Information Technology Association of
America *2000 certification, validating that the Company's development processes
meet the I/T industry's best software development practices for addressing the
Year 2000 Issue, and the Company believes that its currently available product,
MAPICS(R) XA, is Year 2000-enabled. However, there can be no assurance that the
products it develops or those of its suppliers or others contain all necessary
date code changes or that errors will not be found in new products or product
enhancements after their commercial release. In addition, it has been widely
reported that "business interruption" litigation may arise out of the Year 2000
Issue and, while the Company is not aware of any such claims against it and
believes that such claims will be without merit, the Company is uncertain
whether and to what extent it may be affected by such litigation.
The Company's internal business operations use the MAPICS(R) XA product as
well as third-party computer hardware and software systems. While management
believes it has successfully addressed the Year 2000 Issue with the MAPICS(R) XA
product it uses, the Company is uncertain whether all of the third-party
hardware and software systems it uses internally are Year 2000-enabled. The
Company continues to work with its vendors to verify that their systems are Year
2000-enabled and is currently unaware of any Year 2000 Issue with its internal
systems that would have a material adverse effect on the Company's business or
results of operations.
Management believes that the Year 2000 Issue is favorably impacting current
demand for Year 2000-enabled hardware and software products, including those
offered by the Company. However, such demand is likely to decrease once
companies have repaired or replaced their existing systems which are not Year
2000-enabled. Management is unable to quantify the effect that the demand for
Year 2000-enabled products has had on its current business and results of
operations and cannot predict the effect that any increase or decrease in demand
will have on its future business and results of operations.
INFLATION
To date, the Company believes inflation has not had a material impact on the
Company's operations.
PART II: OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on February 3, 1998, the
following matters were brought before and voted upon by the shareholders with
the number of votes as indicated below:
1. A proposal to approve a change in domicile of the Company from
Massachusetts to Georgia, including approving a related agreement and plan
of merger and new Georgia articles of incorporation.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,787,376 10,587 13,721 2,665,514
</TABLE>
2. A proposal to elect two directors to serve until the 2001 Annual Meeting of
Stockholders.
<TABLE>
<CAPTION>
Withheld
For Authority
--- ---------
<S> <C> <C>
Roger Heinen, Jr. 18,456,140 21,058
Edward J. Kfoury 18,458,680 18,518
</TABLE>
3. A proposal to approve the amendment and restatement of the Company's 1991
Non-Employee Director Stock Option Plan.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,310,398 626,571 31,467 2,508,762
</TABLE>
4. A proposal to approve the Company's 1998 Non-Employee Directors Stock
Incentive Plan.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,818,889 117,397 32,150 2,508,762
</TABLE>
14
<PAGE> 15
5. A proposal to approve the Company's 1998 Long-Term Incentive Plan.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,250,400 722,482 24,372 2,479,944
</TABLE>
6. A proposal to approve the amendment and restatement of the Company's 1990
Employee Stock Purchase Plan.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
15,903,362 36,452 28,622 2,508,762
</TABLE>
7. A proposal to ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the fiscal year ending September
30, 1998.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
<S> <C> <C> <C>
18,457,583 4,966 14,649 -0-
</TABLE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2.1** Agreement and Plan of Merger dated as of March 30, 1998 between MAPICS,
Inc., a Massachusetts corporation and MAPICS, Inc., a Georgia
corporation
3.5 Articles of Incorporation of the Company (incorporated by reference
from Exhibit 1 to the Company's Registration Statement on Form 8-A
dated March 31, 1998, No. 000-18674)
3.6 By-laws of the Company (incorporated by reference from Exhibit 2 to the
Company's Registration Statement on Form 8-A dated March 31, 1998, No.
000-18674)
4.5 Specimen Stock Certificate (incorporated by reference from Exhibit 3 to
the Company's Registration Statement on Form 8-A dated March 31, 1998,
No. 000-18674)
4.6 Amended and Restated Rights Agreement, dated as of March 30, 1998,
among MAPICS, Inc., a Georgia corporation, MAPICS, Inc., a
Massachusetts corporation, and BankBoston, N.A., which includes as
Exhibit A the terms of the Series F Preferred Stock, as Exhibit B the
Form of Rights Certificate and as Exhibit C the Form of Summary of
Rights (incorporated by reference from Exhibit 4 to the Company's
Registration Statement on Form 8-A dated March 31, 1998, No. 000-18674)
10.41* 1998 Non-Employee Director Stock Option Plan (incorporated by reference
from Exhibit 99.1 to the Company's Registration Statement on Form S-8
dated March 31, 1998, No. 333-48989)
10.42* 1998 Non-Employee Director Stock Incentive Plan (incorporated by
reference from Exhibit 99.2 to the Company's Registration Statement on
Form S-8 dated March 31, 1998, No. 333-48989)
10.43* 1998 Long-Term Incentive Plan (incorporated by reference from Exhibit
99.3 to the Company's Registration Statement on Form S-8 dated March
31, 1998, No. 333-48989)
10.44* 1998 Employee Stock Purchase Plan (incorporated by reference from
Exhibit 99.4 to the Company's Registration Statement on Form S-8 dated
March 31, 1998, No. 333-48989)
10.45** Amendment No. 1 to 1998 Long-Term Incentive Plan dated May 5, 1998
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.46** Change of Control Agreement between MAPICS, Inc. and Richard C. Cook
dated as of March 24, 1998
10.47** Change of Control Agreement between MAPICS, Inc. and Thomas F. Aery
dated as of March 31, 1998
10.48** Change of Control Agreement between MAPICS, Inc. and William J. Gilmour
dated as of March 31, 1998
11** Statement Re Computation of Per Share Earnings
27** Financial Data Schedule (for SEC use only)
</TABLE>
- -----------------------------------------
* Compensatory management plan
** Filed herewith
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K with the Securities and
Exchange Commission dated March 31, 1998 which reported pursuant to Item 5
the change in the jurisdiction of incorporation of MAPICS, Inc. on March 31,
1998 from the Commonwealth of Massachusetts to the State of Georgia.
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on May 12, 1998.
MAPICS, Inc.
By: /s/ WILLIAM J. GILMOUR
--------------------------------------
William J. Gilmour
Vice President of Finance and
Chief Financial and Accounting Officer
17
<PAGE> 18
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ----------- ----
<S> <C> <C>
2.1 Agreement and Plan of Merger dated as of March 30, 1998 between MAPICS,
Inc., a Massachusetts corporation and MAPICS, Inc., a Georgia
corporation 19
10.45 Amendment No. 1 to 1998 Long-Term Incentive Plan dated May 5, 1998 26
10.46 Change of Control Agreement between MAPICS, Inc. and Richard C. Cook 28
dated as of March 24, 1998
10.47 Change of Control Agreement between MAPICS, Inc. and Thomas F. Aery
dated as of March 31, 1998 47
10.48 Change of Control Agreement between MAPICS, Inc. and William J. Gilmour
dated as of March 31, 1998 64
11 Statement Re Computation of Per Share Earnings 83
27 Financial Data Schedule (for SEC use only) 84
</TABLE>
18
<PAGE> 1
EXHIBIT 2.1
AGREEMENT
AND
PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of March
30, 1998 between MAPICS, Inc., a Massachusetts corporation ("MAPICS-Mass."), and
MAPICS, Inc., a Georgia corporation ("MAPICS-Georgia"; together with
MAPICS-Mass., the "Constituent Corporations") and a wholly-owned subsidiary of
MAPICS-Mass., sets forth certain agreements in connection with the merger of
MAPICS-Mass. with and into MAPICS-Georgia (the "Merger").
WITNESSETH:
WHEREAS, as of the date hereof, MAPICS-Mass. has the following
authorized capital stock: (a) 50,000,000 shares of common stock, $.01 par value
per share ("MAPICS-Mass. Common Stock"), and (b) 1,000,000 shares of preferred
stock, $1.00 par value per share ("MAPICS-Mass. Preferred Stock), of which (i) 1
share has been designated Series A Preferred Stock ("MAPICS-Mass. Series A
Preferred Stock"), (ii) 1 share has been designated Series B Preferred Stock
("MAPICS-Mass. Series B Preferred Stock"), (iii) 1 share has been designated
Series C Preferred Stock ("MAPICS-Mass. Series C Preferred Stock"), (iv) 225,000
shares have been designated Series D Convertible Preferred Stock ("MAPICS-Mass.
Series D Preferred Stock"), (v) 100,000 shares have been designated Series E
Convertible Preferred Stock ("MAPICS-Mass. Series E Preferred Stock) and (vi)
30,000 shares have been designated Series F Junior Participating Preferred Stock
(MAPICS-Mass. Series F Preferred Stock"). The MAPICS-Mass. Common Stock and the
MAPICS-Mass. Preferred Stock are collectively referred to herein as the
"MAPICS-Mass. Stock."
WHEREAS, as of the date hereof, there are outstanding (a) 18,574,522
shares of MAPICS-Mass. Common Stock, (b) no shares of MAPICS-Mass. Series A
Preferred Stock, (c) no shares of MAPICS-Mass. Series B Preferred Stock, (d) no
shares of MAPICS-Mass. Series C Preferred Stock, (e) 225,000 shares of
MAPICS-Mass. Series D Preferred Stock, (f) 100,000 shares of MAPICS-Mass. Series
E Preferred Stock and (g) no shares of MAPICS-Mass. Series F Preferred Stock.
WHEREAS, as of the date hereof, MAPICS-Georgia has the following
authorized capital stock: (a) 50,000,000 shares of common stock, $.01 par value
per share ("MAPICS-Georgia Common Stock"), and (b) 1,000,000 shares preferred
stock, $1.00 par value per share ("MAPICS-Georgia Preferred Stock), of which (i)
225,000 shares have been designated Series D Convertible Preferred Stock, (ii)
100,000 shares have been designated Series E Convertible Preferred Stock and
(iii) 30,000 shares have been designated Series F Junior Participating Preferred
Stock. The MAPICS-Georgia Common Stock and the MAPICS-Georgia Preferred Stock
are collectively referred to herein as the "MAPICS-Georgia Stock."
<PAGE> 2
WHEREAS, as of the date hereof, there are outstanding 100 shares of
MAPICS-Georgia Common Stock, all of which are owned by MAPICS-Mass., and no
shares of MAPICS-Georgia Preferred Stock.
WHEREAS, the respective boards of directors and stockholders of the
Constituent Corporations have approved this Agreement, the Merger and the other
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for the purpose of setting forth
the terms and conditions of the Merger, the method by which the Merger will be
effected, the manner and basis of converting the shares of MAPICS-Mass. Stock
into shares of MAPICS-Georgia Stock, the manner of determining the effective
date of the Merger and such other provisions as are deemed necessary or
desirable, the parties hereto do hereby agree as follows:
ARTICLE I
THE MERGER
1.1 Upon the terms and subject to the conditions of this Agreement
and in accordance with applicable law, at the Effective Time (as defined below)
MAPICS-Mass. shall be merged with and into MAPICS-Georgia and the separate
existence of MAPICS-Mass. shall thereupon cease. MAPICS-Georgia shall be the
surviving corporation in the Merger (hereinafter sometimes referred to as the
"Surviving Corporation"), and the Surviving Corporation shall retain the name
"MAPICS, Inc."
1.2 At the Effective Time, the Surviving Corporation shall thereupon
and thereafter possess all of the rights, privileges, immunities and franchises
of a public and a private nature of each of the Constituent Corporations; all
property, real, personal and mixed, tangible and intangible and all and every
other interest of or due to each of the Constituent Corporations shall be taken
and deemed to be transferred to and vested in the Surviving Corporation without
further action. The title to any real estate, or any interest therein, vested in
any of the Constituent Corporations shall not revert or in any way be impaired
by reason of the Merger. The Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each of the
Constituent Corporations. Neither the rights of creditors nor any liens upon the
property of any of the Constituent Corporations shall be impaired by the Merger.
1.3 The location of the principal and registered office of the
Surviving Corporation is 5775-D Glenridge Drive, Suite 300, Atlanta, Georgia
30328.
1.4 The Merger shall be effective as of the date and time specified
in the Certificates of Merger delivered to the Georgia Secretary of State and
the Massachusetts Secretary of State (the "Effective Time").
-2-
<PAGE> 3
ARTICLE II
CERTIFICATE OF INCORPORATION, BYLAWS, DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION
2.1 The Articles of Incorporation of MAPICS-Georgia in effect
immediately prior to the Effective Time of the Merger shall be the Articles of
Incorporation of the Surviving Corporation unless and until amended as provided
by law and by such Articles of Incorporation.
2.2 The Bylaws of MAPICS-Georgia in effect immediately prior to the
Effective Time of the Merger shall be the Bylaws of the Surviving Corporation
unless and until amended or repealed as provided by law, by the Articles of
Incorporation of the Surviving Corporation and by such Bylaws.
2.3 The directors of MAPICS-Georgia immediately prior to the
Effective Time of the Merger shall be the directors of the Surviving
Corporation, and the officers of MAPICS-Georgia immediately prior to the
Effective Time of the Merger shall be the officers of the Surviving Corporation,
in both cases until their successors shall have been elected and shall qualify
or until otherwise provided by law, by the Articles of Incorporation of the
Surviving Corporation and by the Bylaws of the Surviving Corporation.
ARTICLE III
MANNER AND BASIS OF CONVERTING SHARES, OPTIONS
AND WARRANTS OF THE CONSTITUENT CORPORATIONS
3.1 Except as provided in Section 3.5, at the Effective Time, by
virtue of the Merger and without any action by the holder thereof or any action
in addition to that contemplated hereby by either Constituent Corporation:
(a) each then outstanding share of MAPICS-Mass. Common Stock
will be automatically converted into one (1) share of fully-paid and
non-assessable MAPICS-Georgia Common Stock;
(b) each then outstanding share of MAPICS-Mass. Preferred
Stock which has been designated as a particular series thereof will be
automatically converted into one (1) share of fully-paid and non-assessable
MAPICS-Georgia Preferred Stock with such series designation;
(c) each share of MAPICS-Mass. Common Stock then held in the
treasury of MAPICS-Mass. will be automatically converted into one (1) share of
MAPICS-Georgia Common Stock, which share shall be held in the treasury of
MAPICS-Georgia; and
(d) each then outstanding option, warrant, purchase right,
unit or other security of MAPICS-Mass. will be automatically converted into, and
shall be an identical security of, MAPICS-Georgia, exercisable (if at all) at
the same price per share and upon the same terms and conditions immediately
before and immediately after such conversion, and the number of shares of
MAPICS-Georgia Common Stock reserved for issuance upon exercise of
-3-
<PAGE> 4
such options, warrants, purchase rights, units or other securities, as so
converted, shall be equal to the number of shares of MAPICS-Mass. Common Stock
so reserved as of the Effective Time.
3.2 Notwithstanding any other provision of this Agreement, no
certificate or scrip for fractional shares of MAPICS-Georgia Stock shall be
issued in the Merger, and any such fractional interest that may result from the
Merger shall be disregarded and void ab initio.
3.3 Upon and after the Effective Time, all of the outstanding
certificates which immediately prior thereto represented shares of MAPICS-Mass.
Stock or warrants, units or other securities of MAPICS-Mass. shall be deemed for
all purposes to evidence ownership of and to represent the shares of
MAPICS-Georgia Stock or warrants, units or other securities of MAPICS-Georgia,
as the case may be, into which the shares of MAPICS-Mass. Stock or warrants,
units or other securities of MAPICS-Mass. represented by such certificates have
been converted as provided in Section 3.1 and shall be so registered on the
books and records of the Surviving Corporation or its transfer agent. The
registered holder of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to the Surviving Corporation or its transfer agent, have and be entitled to
exercise any voting and other rights with respect to, and to receive any
dividends and other distributions upon, the shares of MAPICS-Georgia Stock or
warrants, units or other securities of MAPICS-Georgia, as the case may be,
evidenced by such outstanding certificate.
3.4 As of the Effective Time, the 100 shares of MAPICS-Georgia
Common Stock issued upon its organization to MAPICS-Mass. shall be canceled and
the consideration paid therefore by MAPICS-Mass. shall be returned by
MAPICS-Georgia to MAPICS-Mass., so that immediately thereafter the then
outstanding shares of MAPICS-Georgia Stock shall consist only of the shares to
be issued by the Surviving Corporation upon the conversion and exchange of
shares of MAPICS-Mass. Stock pursuant to Section 3.1.
3.5 Any outstanding shares of MAPICS-Mass. Stock held by a
stockholder (a "Dissenting Stockholder") who shall have elected to dissent from
the Merger and who shall have exercised and perfected appraisal rights
("Appraisal Rights") with respect to such shares in accordance with Sections 85
through 98 of Chapter 156B of the Massachusetts Business Corporation Law
("MBCL") shall not be converted into shares of MAPICS-Georgia Common Stock as a
result of the Merger. Such Dissenting Stockholder shall be entitled to receive
therefor only the consideration required to be paid to such Dissenting
Stockholder by Sections 85 through 98 of Chapter 156B of the MBCL and, upon the
payment of such consideration, such shares of MAPICS-Mass. Stock shall be
immediately canceled without any further action. Notwithstanding the foregoing
provisions of this Section 3.5, if any such Dissenting Stockholder shall, prior
to the Effective Time, (x) withdraw his election to dissent from the Merger or
(y) fail to properly exercise and perfect his appraisal rights in accordance
with Sections 85 through 98 of Chapter 156B of the MBCL, such Dissenting
Stockholder's shares of MAPICS-Mass. Stock shall be converted, as of the
Effective Time, into shares of MAPICS-Georgia Stock in accordance with Section
3.1.
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<PAGE> 5
ARTICLE IV
BENEFIT PLANS
4.1 Each option or other right to purchase or otherwise acquire
shares of MAPICS-Mass. Common Stock granted under any employee option plan,
employee stock purchase plan or other benefit plan maintained by MAPICS-Mass.
(collectively, the "Plans") which is outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action by the
holder thereof or any action in addition to that contemplated hereby by either
Constituent Corporation, be converted into and become an option or other right
to purchase or otherwise acquire (and MAPICS-Georgia hereby assumes the
obligation to deliver) the same number of shares of MAPICS-Georgia Common Stock,
at the same price per share and upon the same terms and conditions, as are set
forth in the Plan under which such option or other right was granted (together
with any instruments, agreements or other documents related thereto). The number
of shares of MAPICS-Georgia Common Stock reserved for issuance upon the exercise
of all such options or other rights, converted as described in the preceding
sentence, shall be equal to the number of shares of MAPICS-Mass. Common Stock so
reserved immediately prior to the Effective Time. MAPICS-Georgia hereby assumes,
as of the Effective Time, (a) the Plans and all obligations of MAPICS-Mass.
thereunder, including the outstanding options, stock purchase rights or awards
or portions thereof granted pursuant to the Plans and the right to grant
additional options and stock purchase rights thereunder, and (b) all obligations
of MAPICS-Mass. under all of its other benefit plans in effect immediately prior
to the Effective Time.
ARTICLE V
FURTHER ACTIONS AND AGREEMENTS
5.1 If at any time after the Effective Time of the Merger the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either Constituent Corporation acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or to otherwise
carry out this Agreement, the officers and directors of the Surviving
Corporation shall, and hereby are authorized to, execute and deliver, in the
name and on behalf of the Constituent Corporations or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of the Constituent Corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or to otherwise carry out this Agreement.
5.2 As required by Section 79 of Chapter 156B of the MBCL, the
Surviving Corporation:
(a) agrees that, for so long as required by Section 79 of Chapter 156B
of the MBCL, it may be sued in the Commonwealth of Massachusetts for any
obligation (including the obligation created by Section 85 of Chapter 156B of
the MBCL) of (i) a Constituent Corporation incurred prior to the Effective Time
and (ii) the Surviving Corporation incurred after the Effective Time; and
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<PAGE> 6
(b) irrevocably appoints the Secretary of State of the Commonwealth of
Massachusetts as its agent to accept service of process in any action for the
enforcement of any obligation referred to in clause (a) of this Section 5.2,
including taxes.
ARTICLE VI
MISCELLANEOUS
6.1 For the convenience of the parties hereto and to facilitate the
filing and recording of this Agreement, any number of counterparts hereof may be
executed, and each such counterpart shall be deemed an original instrument and
all of such counterparts shall constitute one document, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
6.2 This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia.
6.3 The parties hereto, by resolution of their respective boards of
directors, may amend, modify or supplement this Agreement, or waive the
application of any provision hereof (including, without limitation, the
condition set forth in Section 6.5), provided that any such amendment,
modification, supplement or waiver is in writing and signed by the parties
hereto.
6.4 By written notice to the other party hereto at any time prior to
the Effective Time, whether before or after approval by the stockholders of
MAPICS-Mass. of this Agreement, the Merger and the other transactions
contemplated hereby for any reason, either MAPICS-Mass. or MAPICS-Georgia, by
resolution of their respective boards of directors, may terminate this Agreement
and abandon the Merger and the other transactions contemplated hereby, and in
that event, neither party shall have any further obligation to the other party
or to the stockholders of the other party.
6.5 Subject to Section 6.3, it is a condition to the consummation of
the Merger and the other transactions contemplated hereby that the aggregate
amounts paid or to be paid to Dissenting Stockholders constitute less than 1% of
the value of the net assets of MAPICS-Mass. as of the date of the Merger
immediately prior to giving effect thereto. Any determination pursuant to this
Section 6.5 shall be made in the sole discretion of the Boards of Directors of
MAPICS-Mass. and MAPICS-Georgia.
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<PAGE> 7
IN WITNESS WHEREOF, each Constituent Corporation has caused this
Agreement to be executed by its duly authorized officers and its corporate seal
to be affixed hereto, as of the date first above written.
[SEAL] MAPICS, INC., a Massachusetts corporation
By: /s/ Richard C. Cook
------------------------------------------
Name: Richard C. Cook
Title: President
By: /s/ William J. Gilmour
------------------------------------------
Name: William J. Gilmour
Title: Treasurer
ATTEST:
By: /s/ Martin D. Avallone
------------------------------------------
Name: Martin D. Avallone
Title: Clerk
[SEAL] MAPICS, INC., a Georgia corporation
By: /s/ Richard C. Cook
------------------------------------------
Name: Richard C. Cook
Title: President
ATTEST:
By: /s/ Martin D. Avallone
------------------------------------------
Name: Martin D. Avallone
Title: Secretary
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<PAGE> 1
EXHIBIT 10.45
AMENDMENT NO. 1
TO THE
MAPICS, INC. 1998 LONG-TERM INCENTIVE PLAN
This Amendment No. 1 ("Amendment") to the MAPICS, Inc. 1998 Long-Term
Incentive Plan is made and executed this 5th day of May, 1998, to be effective
as of May 5, 1998.
WHEREAS, the Compensation Committee of the Board of Directors of
MAPICS, Inc. (the "Corporation"), deems it to be in the best interests of the
Corporation and its shareholders to effect certain amendments to the MAPICS,
Inc. 1998 Long-Term Incentive Plan (the "Plan") pursuant to Section 15.1 of the
Plan, which amendments do not require approval of the stockholders of the
Corporation;
NOW, THEREFORE, in accordance with Section 15.1 of the Plan, the Plan
is hereby amended as follows:
1. RESTRICTED STOCK AWARDS. Section 10.2 of the Plan is hereby amended
by adding the following sentence to the end of Section 10.2:
Notwithstanding the foregoing, if at any time the aggregate number of
shares of Stock granted as Restricted Stock Awards under the Plan
exceeds 10% percent of the total Stock authorized to be granted under
the Plan, any Awards of Restricted Stock over such 10% threshold shall
be subject to the following minimum vesting provisions: (a) one year
from the date of grant if vesting is based on the grantee meeting
performance criteria, or (b) three years from the date of grant if
vesting is not related to performance.
2. NO ACCELERATION OF AWARDS UPON DISABILITY. Section 13.8 of the Plan
is hereby deleted in its entirety and the following is substituted in lieu
thereof:
13.8 ACCELERATION UPON DEATH. Notwithstanding any other
provision in the Plan or any Participant's Award Agreement to the
contrary, upon the Participant's death during his employment or service
as a consultant or director, all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may
be exercised shall become fully exercisable and all restrictions on
outstanding Awards shall lapse. Any Option or Stock Appreciation Rights
Awards shall thereafter continue or lapse in accordance with the other
provisions of the Plan and the Award Agreement. To the extent that this
provision causes Incentive Stock Options to exceed the dollar
limitation set forth in Section 7.2(d), the excess Options shall be
deemed to be Non-Qualified Stock Options.
<PAGE> 2
3. VESTING AND EXERCISE OF OPTIONS AFTER DEATH OR DISABILITY. Clauses
(4) and (5) of Section 7.2(c) of the Plan are hereby deleted in their entirety
and the following clauses are substituted in lieu thereof:
(4) If the Participant terminates employment by reason of his
Disability, the Incentive Stock Option shall continue to vest, and
shall lapse at the time it would otherwise lapse, in accordance with
the terms of the Plan or the applicable Award Agreement; provided,
however, the to the extent that an Incentive Stock Option is not
exercised prior to the expiration of one year after the Participant's
termination of employment, such Option shall be deemed to be a
Non-Qualified Stock Option.
(5) If the Participant dies while employed, or during the
three-month period described in paragraph (3) or during the period
described in paragraph (4) and before the Option otherwise lapses, the
Option shall vest immediately pursuant to Section 13.8 of the Plan and
shall lapse at the time it would otherwise lapse in accordance with the
terms of the Plan or the applicable Award Agreement. Upon the
Participant's death, any exercisable Incentive Stock Options may be
exercised by the Participant's beneficiary, determined in accordance
with Section 13.6.
4. EFFECT OF AMENDMENT. As modified hereby, the provisions of the Plan
shall remain in full force and effect.
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be
duly executed as of the date first above written.
MAPICS, INC.
By: /s/ Martin D. Avallone
------------------------------
Title: Secretary
---------------------------
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<PAGE> 1
EXHIBIT 10.46
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between MAPICS, Inc. (the "Company") and Richard C. Cook
(the "Executive"), dated as of the 24th day of March, 1998.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section l(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs during the Change of Control
Period and if the Executive's employment with the Company has been terminated
either by the Company without Cause or by the Executive for Good Reason (as such
terms are defined in Section 5) within one year prior to the date on which the
Change of Control occurs, and unless it is reasonably demonstrated by the
Company that such termination of employment (i) was not at the request of a
third party who has taken steps reasonably calculated to effect the Change of
Control and (ii) did not otherwise arise in connection with or anticipation of
the Change of Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such termination of
employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company
<PAGE> 2
shall give notice to the Executive that the Change of Control Period shall not
be so extended.
2. Change of Control. For the purposes of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a Change
of Control: (i) any acquisition by a Person who is on the date of this Agreement
the beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (ii) any acquisition directly from the Company, (iii) any
acquisition by the Company, (iv) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (v) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of subsection (c)
of this Section 2; or
(b) Individuals who, as of the date of this Agreement, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior
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<PAGE> 3
to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the Effective Date, and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) engage in other business activities that do not
represent a conflict of interest with the full execution of his duties to the
Company, and (C) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the
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<PAGE> 4
extent that any such activities have been conducted by the Executive prior to
the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate, at least equal to 12 times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be reviewed
no more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest annual bonus for the last three full fiscal years prior to
the Effective Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year). Each such Annual Bonus shall
be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
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<PAGE> 5
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive days as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the
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<PAGE> 6
Company or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period with or without Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief Executive Officer of the
Company which specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Executive has not substantially performed
the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason or for no reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
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<PAGE> 7
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 30
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the
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<PAGE> 8
Company other than for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such termination or any
later date specified in such notice, (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability, or the Executive shall terminate
employment for Good Reason, then in consideration of Executive's services
rendered prior to such termination and of Executive's covenants contained in
Section 10 hereof:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred, for the most recently completed
fiscal year during the Employment Period, if any (such amount being referred to
as the "Most Recent Annual Bonus") and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365, and (3) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon and subject to any prior election by the Executive to receive such
deferred amounts in installments) and any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of the amounts described in clauses
(1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to three times the sum of (1) the
Executive's Annual Base Salary and (2) the Most Recent Annual Bonus;
(ii) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies and their families, provided, however,
that if the Executive becomes re-employed with another employer and is eligible
to receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be secondary
to those provided under such other plan during such applicable period of
eligibility. For
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<PAGE> 9
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to have
retired on the last day of such period;
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(iv) notwithstanding any provision of this Agreement to the
contrary, the Executive shall forfeit his right to receive, or, to the extent
such amounts have previously been paid to the Executive, shall repay in full to
the Company within thirty (30) days of a final determination of the Executive's
liability therefor as set forth below, the amount described in Section
6(a)(i)(B) of this Agreement if at any time during the period of two years after
the Date of Termination he violates the Restrictive Covenants set forth in
Section 10 hereof.
(b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable of
the following: (1) of the benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of the Company and
such affiliated companies under such plans, programs, practices and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date, or (2) similar benefits in effect on
the date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of the following: (1) disability and other benefits generally provided by the
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<PAGE> 10
Company and its affiliated companies to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date, or (2) disability and other benefits
in effect at any time thereafter generally with respect to other peer executives
of the Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
explicitly provided herein, such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
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<PAGE> 11
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the Executive, after taking into
account the Payments and the Gross-Up Payment, would not receive a net after-tax
benefit of at least $100,000 (taking into account both income taxes and any
Excise Tax) as compared to the net after-tax proceeds to the Executive resulting
from an elimination of the Gross-Up Payment and a reduction of the Payments, in
the aggregate, to an amount (the "Reduced Amount") such that the receipt of
Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall
be made to the Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Coopers &
Lybrand L.L.P. or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting
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<PAGE> 12
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive
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<PAGE> 13
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Restrictions on Conduct of the Executive. The Executive and the
Company understand and agree that the purpose of the provisions of this Section
10 is to protect legitimate business interests of the Company, as more fully
described below, and is not intended to eliminate the Executive's
post-employment competition with the Company per se, nor is it intended to
impair or infringe upon the Executive's right to work, earn a living, or acquire
and possess property from the fruits of his labor. The Executive hereby
acknowledges that the post-employment restrictions set forth in this Section 10
are reasonable and that they do not, and will not, unduly impair his ability to
earn a living after the termination of this Agreement. Therefore, subject to the
limitations of reasonableness imposed by law upon the restrictions set forth
herein by the time and geographical area described below, the Executive shall be
subject to the restrictions set forth in this Section 10.
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<PAGE> 14
(a) Definitions. The following capitalized terms used in this Section
10 shall have the meanings assigned to them below, which definitions shall apply
to both the singular and the plural forms of such terms:
"Competitive Services" means providing enterprise resource
planning software applications for discrete and batch-process mid-size
manufacturing enterprises (i.e., enterprises having annual revenue of $20
million to $500 million).
"Confidential Information" means any confidential or proprietary
information possessed by the Company or its affiliated entities or relating to
its or their business, including without limitation, any confidential customer
lists, details of client or consultant contracts, current and anticipated
customer requirements, pricing policies, price lists, market studies, business
plans, operational methods, marketing plans or strategies, product development
techniques or plans, unannounced computer software programs, computer software
program source code, data and documentation, data base technologies, computer
program structures and architectures, inventions and ideas, past, current and
planned research and development, compilations, devices, methods, techniques,
processes, financial information and data, business acquisition plans, new
personnel acquisition plans and any other information that would constitute a
"trade secret(s)" under the common law or statutory law of the State of Georgia.
"Determination Date" means the date of termination of the
Executive's employment with the Company for any reason whatsoever or any earlier
date (during the Employment Period) of an alleged breach of the Restrictive
Covenants by the Executive.
"Person" means any individual or any corporation, partnership,
joint venture, association or other entity or enterprise.
"Principal or Representative" means a principal, owner, partner,
shareholder, joint venturer, investor, member, trustee, director, officer,
manager, employee, agent, representative or consultant.
"Protected Customers" means customers of the Company that
purchased Competitive Services from the Company within one (1) year prior to the
Determination Date.
"Protected Employees" means employees of the Company who were
employed by the Company at any time within six (6) months prior to the
Determination Date.
"Restricted Period" means the period extending two (2) years from
the termination of the Executive's employment with the Company for any reason
whatsoever.
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<PAGE> 15
"Restricted Territory" means the following territory, in which
the Executive engages in the provision of Competitive Services on behalf of the
Company on the date of this Agreement: State of Georgia.
"Restrictive Covenants" means the restrictive covenants contained
in Section 10 hereof.
(b) Restrictive Covenants.
(i) Restriction on Disclosure and Use of Confidential
Information. The Executive understands and agrees that the Confidential
Information constitutes a valuable asset of the Company and its affiliated
entities, and may not be converted to the Executive's own use. Accordingly, the
Executive hereby agrees that the Executive shall not, directly or indirectly, at
any time during the Restricted Period reveal, divulge, or disclose to any Person
not expressly authorized by the Company any Confidential Information, and the
Executive shall not, directly or indirectly, at any time during the Restricted
Period use or make use of any Confidential Information in connection with any
business activity other than that of the Company. The parties acknowledge and
agree that this Agreement is not intended to, and does not, alter either the
Company's rights or the Executive's obligations under any state or federal
statutory or common law regarding trade secrets and unfair trade practices.
(ii) Nonsolicitation of Protected Employees. The Executive
understands and agrees that the relationship between the Company and each of its
Protected Employees constitutes a valuable asset of the Company and may not be
converted to the Executive's own use. Accordingly, the Executive hereby agrees
that during the Restricted Period the Executive shall not directly or indirectly
on the Executive's own behalf or as a Principal or Representative of any Person
or otherwise solicit or induce any Protected Employee to terminate his or her
employment relationship with the Company or to enter into employment with any
other Person.
(iii) Nonsolicitation of Protected Customers. The Executive
understands and agrees that the relationship between the Company and each of its
Protected Customers constitutes a valuable asset of the Company and may not be
converted to the Executive's own use. Accordingly, the Executive hereby agrees
that, during the Restricted Period, the Executive shall not, without the prior
written consent of the Company, directly or indirectly, on the Executive's own
behalf or as a Principal or Representative of any Person or otherwise, solicit a
Protected Customer for the purpose of providing or selling Competitive Services;
provided, however, that the prohibition of this covenant shall apply only to
Protected Customers with whom the Executive had Material Contact on the
Company's behalf during the twelve (12) months immediately preceding the Date of
Termination. For purposes of this Agreement, the Executive had "Material
Contact" with a Protected Customer if (a) he had business dealings with the
Protected Customer on the Company's behalf; (b) he was responsible for
supervising or coordinating the dealings between the Company and the Protected
Customer; or (c) he
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<PAGE> 16
obtained Confidential Information about the customer as a result of his
association with the Company.
(iv) Noncompetition with the Company. The Executive understands
and agrees that, during the Restricted Period and within the Restricted
Territory, he shall not, directly or indirectly, on his own or on behalf of any
Person, be affiliated with as a Principal or Representative any Person engaged,
in whole or in part, in the provision of Competitive Services in a capacity
where Executive's duties or responsibilities for such Person will include
strategic planning, policymaking or management; provided, however, that the
provisions of Section 10 shall not be deemed to prohibit the ownership by the
Executive of any securities of the Company or its affiliated entities or not
more than five percent (5%) of any class of securities of any corporation having
a class of securities registered pursuant to the Exchange Act.
(c) Exceptions from Disclosure Restrictions. Anything herein to the
contrary notwithstanding, the Executive shall not be restricted from disclosing
or using Confidential Information that: (a) is or becomes generally available to
the public other than as a result of an unauthorized disclosure by the Executive
or his agent; (b) becomes available to the Executive in a manner that is not in
contravention of applicable law from a source (other than the Company or its
affiliated entities or one of its or their officers, employees, agents or
representatives) that is not bound by a confidential relationship with the
Company or its affiliated entities or by a confidentiality or other similar
agreement; (c) was known to the Executive on a non-confidential basis and not in
contravention of applicable law or a confidentiality or other similar agreement
before its disclosure to the Executive by the Company or its affiliated entities
or one of its or their officers, employees, agents or representatives; or (d) is
required to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure is required by law, the Executive shall
provide the Company with prompt notice of such requirement so that the Company
may seek an appropriate protective order prior to any such required disclosure
by the Executive.
(d) Enforcement of Restrictive Covenants.
(i) Rights and Remedies Upon Breach. In the event the Executive
breaches, or threatens to commit a breach of, any of the provisions of the
Restrictive Covenants, the Company shall have the following rights and remedies,
which shall be independent of any others and severally enforceable, and shall be
in addition to, and not in lieu of, any other rights and remedies available to
the Company at law or in equity:
(A) the right and remedy to enjoin, preliminarily and
permanently, the Executive from violating or threatening to violate the
Restrictive Covenants and to have the Restrictive Covenants specifically
enforced by any court of competent jurisdiction, it being agreed that any breach
or threatened breach of the Restrictive Covenants would cause irreparable injury
to the Company and that money damages would not provide an adequate remedy to
the Company; and
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<PAGE> 17
(B) the right and remedy to require the Executive to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by the Executive as
the result of any transactions constituting a breach of the Restrictive
Covenants.
(ii) Severability of Covenants. The Executive acknowledges and
agrees that the Restrictive Covenants are reasonable and valid in time and scope
and in all other respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, are invalid or unenforceable, the remainder of
the Restrictive Covenants shall not thereby be affected and shall be given full
effect, without regard to the invalid portions.
(iii) Attorneys' Fees. In any action relating to the enforcement
of the Restrictive Covenants, the prevailing party in such action shall be
entitled to be paid any and all costs and expenses incurred by him or it in
enforcing or establishing his or its rights thereunder, including, without
limitation, reasonable attorneys' fees, whether suit be brought or not, and
whether or not incurred in trial, bankruptcy or appellate proceedings.
11. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The 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 the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than-by a
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<PAGE> 18
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Richard C. Cook
2291 Littlebrook Lane
Dunwoody, Georgia 30338
If to the Company:
MAPICS, Inc.
5775-D Glenridge Drive
Atlanta, Georgia 30328
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective
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<PAGE> 19
Date, in which case the Executive shall have no further rights under this
Agreement. However, absent termination of employment of the Executive, this
Agreement may not be terminated by the Company during the Change of Control
Period and before the Effective Date. From and after the Effective Date, this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof, including without limitation any then-current
employment agreement between the Company and the Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf by its
undersigned officer thereunto, duly authorized, all as of the day and year first
above written.
/s/ Richard C. Cook
----------------------------------------
MAPICS, INC.
By: /s/ Martin D. Avallone
-------------------------------------
Title: Secretary
----------------------------------
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<PAGE> 1
EXHIBIT 10.47
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between MAPICS, Inc. (the "Company") and Thomas F.
Aery (the "Executive"), dated as of the 31st day of March, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its stockholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during
the Change of Control Period (as defined in Section l(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs during the Change of
Control Period and if the Executive's employment with the Company has been
terminated either by the Company without Cause or by the Executive for Good
Reason (as such terms are defined in Section 5) within one year prior to the
date on which the Change of Control occurs, and unless it is reasonably
demonstrated by the Company that such termination of employment (i) was not at
the request of a third party who has taken steps reasonably calculated to effect
the Change of Control and (ii) did not otherwise arise in connection with or
anticipation of the Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company
<PAGE> 2
shall give notice to the Executive that the Change of Control Period shall not
be so extended.
2. Change of Control. For the purposes of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a Change
of Control: (i) any acquisition by a Person who is on the date of this Agreement
the beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (ii) any acquisition directly from the Company, (iii) any
acquisition by the Company, (iv) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (v) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of subsection (c)
of this Section 2; or
(b) Individuals who, as of the date of this Agreement,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date of this Agreement whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior
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to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the
Effective Date, and (B) the Executive's services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) engage in other business activities that do not
represent a conflict of interest with the full execution of his duties to the
Company, and (C) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the
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extent that any such activities have been conducted by the Executive prior to
the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated companies in
respect of the 12-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary increase awarded
to the Executive prior to the Effective Date and thereafter at least annually.
Any increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to the Executive's highest annual bonus for the last three full fiscal years
prior to the Effective Date (annualized in the event that the Executive was not
employed by the Company for the whole of such fiscal year). Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
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(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive days as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the
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Company or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period with or without Cause. For purposes of
this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason or for no reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
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<PAGE> 7
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section 4(a)(i)(B)
hereof or the Company's requiring the Executive to travel on Company business to
a substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company
for Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section 12(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than 30 days after the giving of such notice). The failure by the Executive
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the
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<PAGE> 8
Company other than for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such termination or any
later date specified in such notice, (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or the Executive shall terminate employment
for Good Reason, then in consideration of Executive's services rendered prior to
such termination and of Executive's covenants contained in Section 10 hereof:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the extent not theretofore paid,
(2) the product of (x) the Annual Bonus paid or payable, including any bonus or
portion thereof which has been earned but deferred, for the most recently
completed fiscal year during the Employment Period, if any (such amount being
referred to as the "Most Recent Annual Bonus") and (y) a fraction, the numerator
of which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365, and (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon and subject to any prior election by the Executive to receive
such deferred amounts in installments) and any accrued vacation pay, in each
case to the extent not theretofore paid (the sum of the amounts described in
clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to two and one-half
(2.5) times the sum of (1) the Executive's Annual Base Salary and (2) the Most
Recent Annual Bonus;
(ii) for two years and six months after the
Executive's Date of Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this Agreement
if the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes re-employed with
another employer and is eligible to receive medical or other welfare benefits
under another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For
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<PAGE> 9
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until two years and six months after the Date of Termination
and to have retired on the last day of such period;
(iii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits").
(iv) notwithstanding any provision of this Agreement
to the contrary, the Executive shall forfeit his right to receive, or, to the
extent such amounts have previously been paid to the Executive, shall repay in
full to the Company within thirty (30) days of a final determination of the
Executive's liability therefor as set forth below, the amount described in
Section 6(a)(i)(B) of this Agreement if at any time during the period of two
years after the Date of Termination he violates the Restrictive Covenants set
forth in Section 10 hereof.
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable of the following: (1) of the benefits
provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date, or (2) similar benefits in effect on the date of the Executive's
death with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the Executive,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of the following: (1) disability and other benefits
generally provided by the
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Company and its affiliated companies to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date, or (2) disability and other benefits
in effect at any time thereafter generally with respect to other peer executives
of the Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
explicitly provided herein, such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
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applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. Limitation of Benefits.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any benefit, payment
or distribution by the Company to or for the benefit of the Executive (whether
payable or distributable pursuant to the terms of this Agreement or otherwise)
(a "Payment") would, if paid, be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then the Payment shall be reduced to the
extent necessary of avoid the imposition of the Excise Tax. The Executive may
select the Payments to be limited or reduced.
(b) All determinations required to be made under this
Section 9, including whether an Excise Tax would otherwise be imposed and the
assumptions to be utilized in arriving at such determination, shall be made by
Coopers & Lybrand L.L.P. or such other certified public accounting firm as may
be designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that a Payment is due
to be made, or such earlier time as is requested by the Company. In the event
that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive may appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Payments
hereunder will have been unnecessarily limited by this Section 9
("Underpayment"), consistent with the calculations required to be made
hereunder. The Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
10. Restrictions on Conduct of the Executive. The Executive and
the Company understand and agree that the purpose of the provisions of this
Section 10 is to protect legitimate business interests of the Company, as more
fully described below, and is not intended to eliminate the Executive's
post-employment competition with the Company per se, nor is it intended to
impair or infringe upon the Executive's right to work, earn a living, or acquire
and possess property from the fruits of his labor. The Executive hereby
acknowledges that the post-employment restrictions set forth in this Section 10
are reasonable and that they do not, and will not, unduly impair his ability to
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earn a living after the termination of this Agreement. Therefore, subject to the
limitations of reasonableness imposed by law upon the restrictions set forth
herein by the time and geographical area described below, the Executive shall be
subject to the restrictions set forth in this Section 10.
(a) Definitions. The following capitalized terms used in this
Section 10 shall have the meanings assigned to them below, which definitions
shall apply to both the singular and the plural forms of such terms:
"Competitive Services" means providing enterprise
resource planning software applications for discrete and batch-process mid-size
manufacturing enterprises (i.e., enterprises having annual revenue of $20
million to $500 million).
"Confidential Information" means any confidential or
proprietary information possessed by the Company or its affiliated entities or
relating to its or their business, including without limitation, any
confidential customer lists, details of client or consultant contracts, current
and anticipated customer requirements, pricing policies, price lists, market
studies, business plans, operational methods, marketing plans or strategies,
product development techniques or plans, unannounced computer software programs,
computer software program source code, data and documentation, data base
technologies, computer program structures and architectures, inventions and
ideas, past, current and planned research and development, compilations,
devices, methods, techniques, processes, financial information and data,
business acquisition plans, new personnel acquisition plans and any other
information that would constitute a "trade secret(s)" under the common law or
statutory law of the State of Georgia.
"Determination Date" means the date of termination of
the Executive's employment with the Company for any reason whatsoever or any
earlier date (during the Employment Period) of an alleged breach of the
Restrictive Covenants by the Executive.
"Person" means any individual or any corporation,
partnership, joint venture, association or other entity or enterprise.
"Principal or Representative" means a principal,
owner, partner, shareholder, joint venturer, investor, member, trustee,
director, officer, manager, employee, agent, representative or consultant.
"Protected Customers" means customers of the Company
that purchased Competitive Services from the Company within one (1) year prior
to the Determination Date.
"Protected Employees" means employees of the Company
who were employed by the Company at any time within six (6) months prior to the
Determination Date.
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<PAGE> 13
"Restricted Period" means the period extending two
(2) years from the termination of the Executive's employment with the Company
for any reason whatsoever.
"Restricted Territory" means the following territory,
in which the Executive engages in the provision of Competitive Services on
behalf of the Company on the date of this Agreement: State of Georgia.
"Restrictive Covenants" means the restrictive
covenants contained in Section 10 hereof.
(b) Restrictive Covenants.
(i) Restriction on Disclosure and Use of Confidential
Information. The Executive understands and agrees that the Confidential
Information constitutes a valuable asset of the Company and its affiliated
entities, and may not be converted to the Executive's own use. Accordingly, the
Executive hereby agrees that the Executive shall not, directly or indirectly, at
any time during the Restricted Period reveal, divulge, or disclose to any Person
not expressly authorized by the Company any Confidential Information, and the
Executive shall not, directly or indirectly, at any time during the Restricted
Period use or make use of any Confidential Information in connection with any
business activity other than that of the Company. The parties acknowledge and
agree that this Agreement is not intended to, and does not, alter either the
Company's rights or the Executive's obligations under any state or federal
statutory or common law regarding trade secrets and unfair trade practices.
(ii) Nonsolicitation of Protected Employees. The
Executive understands and agrees that the relationship between the Company and
each of its Protected Employees constitutes a valuable asset of the Company and
may not be converted to the Executive's own use. Accordingly, the Executive
hereby agrees that during the Restricted Period the Executive shall not directly
or indirectly on the Executive's own behalf or as a Principal or Representative
of any Person or otherwise solicit or induce any Protected Employee to terminate
his or her employment relationship with the Company or to enter into employment
with any other Person.
(iii) Nonsolicitation of Protected Customers. The
Executive understands and agrees that the relationship between the Company and
each of its Protected Customers constitutes a valuable asset of the Company and
may not be converted to the Executive's own use. Accordingly, the Executive
hereby agrees that, during the Restricted Period, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, on the
Executive's own behalf or as a Principal or Representative of any Person or
otherwise, solicit a Protected Customer for the purpose of providing or selling
Competitive Services; provided, however, that the prohibition of this covenant
shall apply only to Protected Customers with whom the Executive had
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<PAGE> 14
Material Contact on the Company's behalf during the twelve (12) months
immediately preceding the Date of Termination. For purposes of this Agreement,
the Executive had "Material Contact" with a Protected Customer if (a) he had
business dealings with the Protected Customer on the Company's behalf; (b) he
was responsible for supervising or coordinating the dealings between the Company
and the Protected Customer; or (c) he obtained Confidential Information about
the customer as a result of his association with the Company.
(iv) Noncompetition with the Company. The Executive
understands and agrees that, during the Restricted Period and within the
Restricted Territory, he shall not, directly or indirectly, on his own or on
behalf of any Person, be affiliated with as a Principal or Representative any
Person engaged, in whole or in part, in the provision of Competitive Services in
a capacity where Executive's duties or responsibilities for such Person will
include strategic planning, policymaking or management; provided, however, that
the provisions of Section 10 shall not be deemed to prohibit the ownership by
the Executive of any securities of the Company or its affiliated entities or not
more than five percent (5%) of any class of securities of any corporation having
a class of securities registered pursuant to the Exchange Act.
(c) Exceptions from Disclosure Restrictions. Anything
herein to the contrary notwithstanding, the Executive shall not be restricted
from disclosing or using Confidential Information that: (a) is or becomes
generally available to the public other than as a result of an unauthorized
disclosure by the Executive or his agent; (b) becomes available to the Executive
in a manner that is not in contravention of applicable law from a source (other
than the Company or its affiliated entities or one of its or their officers,
employees, agents or representatives) that is not bound by a confidential
relationship with the Company or its affiliated entities or by a confidentiality
or other similar agreement; (c) was known to the Executive on a non-confidential
basis and not in contravention of applicable law or a confidentiality or other
similar agreement before its disclosure to the Executive by the Company or its
affiliated entities or one of its or their officers, employees, agents or
representatives; or (d) is required to be disclosed by law, court order or other
legal process; provided, however, that in the event disclosure is required by
law, the Executive shall provide the Company with prompt notice of such
requirement so that the Company may seek an appropriate protective order prior
to any such required disclosure by the Executive.
(d) Enforcement of Restrictive Covenants.
(i) Rights and Remedies Upon Breach. In the event the
Executive breaches, or threatens to commit a breach of, any of the provisions of
the Restrictive Covenants, the Company shall have the following rights and
remedies, which shall be independent of any others and severally enforceable,
and shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company at law or in equity:
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<PAGE> 15
(A) the right and remedy to enjoin, preliminarily
and permanently, the Executive from violating or threatening to violate the
Restrictive Covenants and to have the Restrictive Covenants specifically
enforced by any court of competent jurisdiction, it being agreed that any breach
or threatened breach of the Restrictive Covenants would cause irreparable injury
to the Company and that money damages would not provide an adequate remedy to
the Company; and
(B) the right and remedy to require the Executive to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by the Executive as
the result of any transactions constituting a breach of the Restrictive
Covenants.
(ii) Severability of Covenants. The Executive
acknowledges and agrees that the Restrictive Covenants are reasonable and valid
in time and scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, are invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
(iii) Attorneys' Fees. In any action relating to the
enforcement of the Restrictive Covenants, the prevailing party in such action
shall be entitled to be paid any and all costs and expenses incurred by him or
it in enforcing or establishing his or its rights thereunder, including, without
limitation, reasonable attorneys' fees, whether suit be brought or not, and
whether or not incurred in trial, bankruptcy or appellate proceedings.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The 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 the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
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<PAGE> 16
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than-by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Thomas Aery
750 Chastain Road, Apt 1120
Kennesaw, Georgia 30144
If to the Company:
MAPICS, Inc.
5775-D Glenridge Drive
Atlanta, Georgia 30328
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
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<PAGE> 17
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company is
"at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. However, absent termination of
employment of the Executive, this Agreement may not be terminated by the Company
during the Change of Control Period and before the Effective Date. From and
after the Effective Date, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof, including without
limitation any then-current employment agreement between the Company and the
Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf by its
undersigned officer thereunto, duly authorized, all as of the day and year first
above written.
/s/ Thomas F. Aery
-------------------------------------------
MAPICS, INC.
By: /s/ Richard C. Cook
--------------------------------------
Title: President
-----------------------------------
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<PAGE> 1
EXHIBIT 10.48
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between MAPICS, Inc. (the "Company") and William J.
Gilmour (the "Executive"), dated as of the 31st day of March, 1998.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section l(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs during the Change of Control
Period and if the Executive's employment with the Company has been terminated
either by the Company without Cause or by the Executive for Good Reason (as such
terms are defined in Section 5) within one year prior to the date on which the
Change of Control occurs, and unless it is reasonably demonstrated by the
Company that such termination of employment (i) was not at the request of a
third party who has taken steps reasonably calculated to effect the Change of
Control and (ii) did not otherwise arise in connection with or anticipation of
the Change of Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such termination of
employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company
<PAGE> 2
shall give notice to the Executive that the Change of Control Period shall not
be so extended.
2. Change of Control. For the purposes of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a Change
of Control: (i) any acquisition by a Person who is on the date of this Agreement
the beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (ii) any acquisition directly from the Company, (iii) any
acquisition by the Company, (iv) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (v) any acquisition by any corporation pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of subsection (c)
of this Section 2; or
(b) Individuals who, as of the date of this Agreement, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior
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<PAGE> 3
to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the Effective Date, and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) engage in other business activities that do not
represent a conflict of interest with the full execution of his duties to the
Company, and (C) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's responsibilities
as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the
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<PAGE> 4
extent that any such activities have been conducted by the Executive prior to
the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate, at least equal to 12 times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company and its affiliated companies in respect of the
12-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be reviewed
no more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's highest annual bonus for the last three full fiscal years prior to
the Effective Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year). Each such Annual Bonus shall
be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
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<PAGE> 5
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive days as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the
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<PAGE> 6
Company or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period with or without Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief Executive Officer of the
Company which specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Executive has not substantially performed
the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason or for no reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
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<PAGE> 7
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 30
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the
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<PAGE> 8
Company other than for Cause or Disability, the Date of Termination shall be the
date on which the Company notifies the Executive of such termination or any
later date specified in such notice, (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability, or the Executive shall terminate
employment for Good Reason, then in consideration of Executive's services
rendered prior to such termination and of Executive's covenants contained in
Section 10 hereof:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Annual Bonus paid or payable, including any bonus or portion
thereof which has been earned but deferred, for the most recently completed
fiscal year during the Employment Period, if any (such amount being referred to
as the "Most Recent Annual Bonus") and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365, and (3) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon and subject to any prior election by the Executive to receive such
deferred amounts in installments) and any accrued vacation pay, in each case to
the extent not theretofore paid (the sum of the amounts described in clauses
(1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to three times the sum of (1) the
Executive's Annual Base Salary and (2) the Most Recent Annual Bonus;
(ii) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies and their families, provided, however,
that if the Executive becomes re-employed with another employer and is eligible
to receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be secondary
to those provided under such other plan during such applicable period of
eligibility. For
- 8 -
<PAGE> 9
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to have
retired on the last day of such period;
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(iv) notwithstanding any provision of this Agreement to the
contrary, the Executive shall forfeit his right to receive, or, to the extent
such amounts have previously been paid to the Executive, shall repay in full to
the Company within thirty (30) days of a final determination of the Executive's
liability therefor as set forth below, the amount described in Section
6(a)(i)(B) of this Agreement if at any time during the period of two years after
the Date of Termination he violates the Restrictive Covenants set forth in
Section 10 hereof.
(b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable of
the following: (1) of the benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of the Company and
such affiliated companies under such plans, programs, practices and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date, or (2) similar benefits in effect on
the date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of the following: (1) disability and other benefits generally provided by the
- 9 -
<PAGE> 10
Company and its affiliated companies to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date, or (2) disability and other benefits
in effect at any time thereafter generally with respect to other peer executives
of the Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, except as
explicitly provided herein, such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the
- 10 -
<PAGE> 11
applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the Executive, after taking into
account the Payments and the Gross-Up Payment, would not receive a net after-tax
benefit of at least $100,000 (taking into account both income taxes and any
Excise Tax) as compared to the net after-tax proceeds to the Executive resulting
from an elimination of the Gross-Up Payment and a reduction of the Payments, in
the aggregate, to an amount (the "Reduced Amount") such that the receipt of
Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall
be made to the Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Coopers &
Lybrand L.L.P. or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting
- 11 -
<PAGE> 12
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive
- 12 -
<PAGE> 13
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Restrictions on Conduct of the Executive. The Executive and the
Company understand and agree that the purpose of the provisions of this Section
10 is to protect legitimate business interests of the Company, as more fully
described below, and is not intended to eliminate the Executive's
post-employment competition with the Company per se, nor is it intended to
impair or infringe upon the Executive's right to work, earn a living, or acquire
and possess property from the fruits of his labor. The Executive hereby
acknowledges that the post-employment restrictions set forth in this Section 10
are reasonable and that they do not, and will not, unduly impair his ability to
earn a living after the termination of this Agreement. Therefore, subject to the
limitations of reasonableness imposed by law upon the restrictions set forth
herein by the time and geographical area described below, the Executive shall be
subject to the restrictions set forth in this Section 10.
- 13 -
<PAGE> 14
(a) Definitions. The following capitalized terms used in this Section
10 shall have the meanings assigned to them below, which definitions shall apply
to both the singular and the plural forms of such terms:
"Competitive Services" means providing enterprise resource
planning software applications for discrete and batch-process mid-size
manufacturing enterprises (i.e., enterprises having annual revenue of $20
million to $500 million).
"Confidential Information" means any confidential or proprietary
information possessed by the Company or its affiliated entities or relating to
its or their business, including without limitation, any confidential customer
lists, details of client or consultant contracts, current and anticipated
customer requirements, pricing policies, price lists, market studies, business
plans, operational methods, marketing plans or strategies, product development
techniques or plans, unannounced computer software programs, computer software
program source code, data and documentation, data base technologies, computer
program structures and architectures, inventions and ideas, past, current and
planned research and development, compilations, devices, methods, techniques,
processes, financial information and data, business acquisition plans, new
personnel acquisition plans and any other information that would constitute a
"trade secret(s)" under the common law or statutory law of the State of Georgia.
"Determination Date" means the date of termination of the
Executive's employment with the Company for any reason whatsoever or any earlier
date (during the Employment Period) of an alleged breach of the Restrictive
Covenants by the Executive.
"Person" means any individual or any corporation, partnership,
joint venture, association or other entity or enterprise.
"Principal or Representative" means a principal, owner, partner,
shareholder, joint venturer, investor, member, trustee, director, officer,
manager, employee, agent, representative or consultant.
"Protected Customers" means customers of the Company that
purchased Competitive Services from the Company within one (1) year prior to the
Determination Date.
"Protected Employees" means employees of the Company who were
employed by the Company at any time within six (6) months prior to the
Determination Date.
"Restricted Period" means the period extending two (2) years from
the termination of the Executive's employment with the Company for any reason
whatsoever.
- 14 -
<PAGE> 15
"Restricted Territory" means the following territory, in which
the Executive engages in the provision of Competitive Services on behalf of the
Company on the date of this Agreement: State of Georgia.
"Restrictive Covenants" means the restrictive covenants contained
in Section 10 hereof.
(b) Restrictive Covenants.
(i) Restriction on Disclosure and Use of Confidential
Information. The Executive understands and agrees that the Confidential
Information constitutes a valuable asset of the Company and its affiliated
entities, and may not be converted to the Executive's own use. Accordingly, the
Executive hereby agrees that the Executive shall not, directly or indirectly, at
any time during the Restricted Period reveal, divulge, or disclose to any Person
not expressly authorized by the Company any Confidential Information, and the
Executive shall not, directly or indirectly, at any time during the Restricted
Period use or make use of any Confidential Information in connection with any
business activity other than that of the Company. The parties acknowledge and
agree that this Agreement is not intended to, and does not, alter either the
Company's rights or the Executive's obligations under any state or federal
statutory or common law regarding trade secrets and unfair trade practices.
(ii) Nonsolicitation of Protected Employees. The Executive
understands and agrees that the relationship between the Company and each of its
Protected Employees constitutes a valuable asset of the Company and may not be
converted to the Executive's own use. Accordingly, the Executive hereby agrees
that during the Restricted Period the Executive shall not directly or indirectly
on the Executive's own behalf or as a Principal or Representative of any Person
or otherwise solicit or induce any Protected Employee to terminate his or her
employment relationship with the Company or to enter into employment with any
other Person.
(iii) Nonsolicitation of Protected Customers. The Executive
understands and agrees that the relationship between the Company and each of its
Protected Customers constitutes a valuable asset of the Company and may not be
converted to the Executive's own use. Accordingly, the Executive hereby agrees
that, during the Restricted Period, the Executive shall not, without the prior
written consent of the Company, directly or indirectly, on the Executive's own
behalf or as a Principal or Representative of any Person or otherwise, solicit a
Protected Customer for the purpose of providing or selling Competitive Services;
provided, however, that the prohibition of this covenant shall apply only to
Protected Customers with whom the Executive had Material Contact on the
Company's behalf during the twelve (12) months immediately preceding the Date of
Termination. For purposes of this Agreement, the Executive had "Material
Contact" with a Protected Customer if (a) he had business dealings with the
Protected Customer on the Company's behalf; (b) he was responsible for
supervising or coordinating the dealings between the Company and the Protected
Customer; or (c) he
- 15 -
<PAGE> 16
obtained Confidential Information about the customer as a result of his
association with the Company.
(iv) Noncompetition with the Company. The Executive understands
and agrees that, during the Restricted Period and within the Restricted
Territory, he shall not, directly or indirectly, on his own or on behalf of any
Person, be affiliated with as a Principal or Representative any Person engaged,
in whole or in part, in the provision of Competitive Services in a capacity
where Executive's duties or responsibilities for such Person will include
strategic planning, policymaking or management; provided, however, that the
provisions of Section 10 shall not be deemed to prohibit the ownership by the
Executive of any securities of the Company or its affiliated entities or not
more than five percent (5%) of any class of securities of any corporation having
a class of securities registered pursuant to the Exchange Act.
(c) Exceptions from Disclosure Restrictions. Anything herein to the
contrary notwithstanding, the Executive shall not be restricted from disclosing
or using Confidential Information that: (a) is or becomes generally available to
the public other than as a result of an unauthorized disclosure by the Executive
or his agent; (b) becomes available to the Executive in a manner that is not in
contravention of applicable law from a source (other than the Company or its
affiliated entities or one of its or their officers, employees, agents or
representatives) that is not bound by a confidential relationship with the
Company or its affiliated entities or by a confidentiality or other similar
agreement; (c) was known to the Executive on a non-confidential basis and not in
contravention of applicable law or a confidentiality or other similar agreement
before its disclosure to the Executive by the Company or its affiliated entities
or one of its or their officers, employees, agents or representatives; or (d) is
required to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure is required by law, the Executive shall
provide the Company with prompt notice of such requirement so that the Company
may seek an appropriate protective order prior to any such required disclosure
by the Executive.
(d) Enforcement of Restrictive Covenants.
(i) Rights and Remedies Upon Breach. In the event the Executive
breaches, or threatens to commit a breach of, any of the provisions of the
Restrictive Covenants, the Company shall have the following rights and remedies,
which shall be independent of any others and severally enforceable, and shall be
in addition to, and not in lieu of, any other rights and remedies available to
the Company at law or in equity:
(A) the right and remedy to enjoin, preliminarily and
permanently, the Executive from violating or threatening to violate the
Restrictive Covenants and to have the Restrictive Covenants specifically
enforced by any court of competent jurisdiction, it being agreed that any breach
or threatened breach of the Restrictive Covenants would cause irreparable injury
to the Company and that money damages would not provide an adequate remedy to
the Company; and
- 16 -
<PAGE> 17
(B) the right and remedy to require the Executive to
account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by the Executive as
the result of any transactions constituting a breach of the Restrictive
Covenants.
(ii) Severability of Covenants. The Executive acknowledges and
agrees that the Restrictive Covenants are reasonable and valid in time and scope
and in all other respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, are invalid or unenforceable, the remainder of
the Restrictive Covenants shall not thereby be affected and shall be given full
effect, without regard to the invalid portions.
(iii) Attorneys' Fees. In any action relating to the enforcement
of the Restrictive Covenants, the prevailing party in such action shall be
entitled to be paid any and all costs and expenses incurred by him or it in
enforcing or establishing his or its rights thereunder, including, without
limitation, reasonable attorneys' fees, whether suit be brought or not, and
whether or not incurred in trial, bankruptcy or appellate proceedings.
11. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The 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 the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than-by a
- 17 -
<PAGE> 18
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
William J. Gilmour
12080 Brookmill Point
Alpharetta, Georgia 30201
If to the Company:
MAPICS, Inc.
5775-D Glenridge Drive
Atlanta, Georgia 30328
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement.
- 18 -
<PAGE> 19
However, absent termination of employment of the Executive, this Agreement may
not be terminated by the Company during the Change of Control Period and before
the Effective Date. From and after the Effective Date, this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof, including without limitation any then-current employment
agreement between the Company and the Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf by its
undersigned officer thereunto, duly authorized, all as of the day and year first
above written.
/s/ William J. Gilmour
----------------------------------------
MAPICS, INC.
By: /s/ Richard C. Cook
-------------------------------------
Title: President
----------------------------------
-19-
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF
PER SHARE EARNINGS
Set forth below are computations, on a basic and diluted basis in accordance
with subparagraph (b)(11) of Item 601 of Regulation S-K of the Securities and
Exchange Commission, of earnings per share of the Company's common stock for the
three months and six months ended March 31, 1998 and 1997, respectively (in
thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
-------------------------- ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net income $ 3,611 $ 2,938 $ 8,248 $ 6,501
Weighted average common shares outstanding 18,477 15,815 18,495 15,792
Basic earnings per share $ 0.20 $ 0.19 $ 0.45 $ 0.41
DILUTED EARNINGS PER SHARE:
Net income $ 3,611 $ 2,938 $ 8,248 $ 6,501
Weighted average common and common
equivalent shares outstanding 22,738 19,466 22,491 19,320
Diluted earnings per share $ 0.16 $ 0.15 $ 0.37 $ 0.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MAPICS, INC. FOR THE YEAR ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 18,869
<SECURITIES> 0
<RECEIVABLES> 28,447
<ALLOWANCES> 1,810
<INVENTORY> 0
<CURRENT-ASSETS> 51,823
<PP&E> 9,290
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0
325
<COMMON> 187
<OTHER-SE> 32,937
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</TABLE>
