Exhibit 10.4
DIVESTITURE AGREEMENT
This Divestiture Agreement (the "Agreement") between Cotelligent, Inc.
("Company"), a Delaware corporation, and Xxxxxx Xxxxxx ("Employee") is hereby
entered into and effective as of April 1, 2000 (the "Effective Date"). This
Agreement shall terminate on the second anniversary of the Effective Date. This
Agreement hereby supersedes any other agreements or understandings, written or
oral, between the Company and Employee (other than Employee's employment
agreement) pertaining to the divestiture described herein.
1. Definitions.
(a) Divestiture. For all purposes under this Agreement, "Divestiture" means
the occurrence of the following event after the Effective Date:
The transfer of all or a significant portion of the stock or assets of
Cotelligent's Professional Services Division to a third party by merger,
consolidation, acquisition, sale, sale of securities or assets, exchange
of assets, joint-venture or any other business combination transaction.
(b) Consideration From the Divestiture. For all purposes under this Agreement,
"Consideration From the Divestiture" means the gross proceeds paid to
Cotelligent for the Divestiture minus commissions and underwriting fees
paid by Cotelligent and minus any accounting charge to Cotelligent's
financials relating to the Employee's full vesting and extended exercise
term for his equity created pursuant to Section 2(b) hereof, provided,
however, Consideration From the Divestiture shall be computed without
regard to any indemnity escrow or other similar account or charge-back that
may result in a reduction of the gross proceeds paid to Cotelligent for the
Divestiture.
2. Effect of Divestiture.
(a) Bonus Payments. Provided Employee is actively employed on the effective
date of a Divestiture (or is terminated by Cotelligent without Good Cause
(as defined in Employee's employment agreement) in anticipation and within
45 days of the Divestiture), the Employee shall receive a $250,000 bonus,
payable within 5 business days after the effective date of the Divestiture,
if the Consideration from the Divestiture exceeds $100,000,000 plus an
additional 1% of the amount by which the Consideration From the Divestiture
exceeds $100,000,000.
(b) Equity Arrangements.
(i) Provided the Employee is employed by the Company on the effective
date of a Divestiture (or is terminated by Cotelligent without Good
Cause (as defined in Employee's employment agreement) in anticipation
and within 45 days of the Divestiture), the Employee shall become
fully vested in all of his outstanding stock option, stock
appreciation rights, restricted stock, phantom stock or similar plans
or agreements of the Company upon the effective date of a Divestiture.
Notwithstanding any subsequent termination of the Employee's
employment, all
such awards shall remain exercisable for the remaining term of the
applicable agreement. To the extent that such plans or agreements
provide for full vesting on the same or an earlier date than this
Agreement, such plans or agreements shall prevail.
(ii) If the Divestiture is effective during the term of this
Agreement, and Employee is an active employee on such date (or is
terminated by Cotelligent without Good Cause (as defined in Employee's
employment agreement) in anticipation and within 45 days of the
Divestiture), the Maturity of Employee's Note used to purchase shares
pursuant to the Leveraged Stock Purchase Plan will be the fifth
anniversary of February 23, 2000, notwithstanding the terms of the
Note and an earlier date of Employee's termination of employment with
the Company. In addition, if the Divestiture is effective during the
term of this Agreement, Executive shall also have the right,
notwithstanding the terms of the Note, to prepay his Note, at his
discretion, provided that such prepayment does not result in any
earnings charge to the Company. Executive will fully cooperate with
the Company so that the Company can avoid an earnings charge relating
to the Note prepayment.
3. Tax Effect of Payments.
(a) Tax Restoration Payment. In the event that it is determined that any
payment or distribution of any type to or for the benefit of the Employee
made by the Company, by any of its affiliates, by any person who acquires
ownership or effective control or ownership of a substantial portion of the
Company's assets (within the meaning of section 280G of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder (the
"Code")) or by any affiliate of such person, whether paid or payable or
distributed or distributable pursuant to the terms of an employment
agreement or otherwise (the "Total Payments"), would be subject to the
excise tax imposed by section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest or penalties, are collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment or
payments (an "Excise Tax Restoration Payment") in an amount that shall fund
the payment by the Employee of any and all IRS imposed Excise Tax on the
Total Payments as well as all income taxes imposed on the Excise Tax
Restoration Payment, any Excise Tax imposed on the Excise Tax Restoration
Payment and any interest or penalties imposed with respect to taxes on the
Excise Tax Restoration or any Excise Tax, or the Employee may elect, with
the Company's consent, to have the amounts payable hereunder reduced or to
have any portion of applicable options or restricted stock not vest to the
extent necessary to avoid the Excise Tax.
(b) Determination by Auditors. All mathematical determinations and all
determinations of whether any of the Total Payments are "parachute
payments" (within the meaning of section 280G of the Code) that are
required to be made under this Section 4, shall be made by the independent
auditors retained by the Company most recently prior to the Divestiture
(the "Auditors"), who shall provide their determination (the
"Determination"), together with detailed supporting calculations regarding
the amount of any relevant matters, both to the Company and to the Employee
within seven (7) business days of the Employee's termination date, if
applicable, or such earlier time as is requested by the Company or by the
Employee. The Auditors shall furnish the Employee with a written statement
that such Auditors have concluded that no Excise Tax is
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payable (including the reasons therefor) and that the Employee has
substantial authority not to report any Excise Tax on the Employee's
federal income tax return. Any Determination by the Auditors shall be
binding upon the Company and the Employee, absent manifest error. The
Company shall pay the fees and costs of the Accountants.
4. Miscellaneous Provisions.
(a) Notice.
(b) Notices and all other communications contemplated by this Agreement shall
be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of the Employee, mailed
notices shall be addressed to him at the home address which he or she most
recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Secretary.
(c) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by
the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
(d) Whole Agreement. No agreements, representations or understandings (whether
oral or written and whether express or implied) which are not expressly set
forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.
(e) No Setoff; Withholding Taxes. There shall be no right of setoff or
counterclaim, with respect to any claim, debt or obligation, against
payments to the Employee under this Agreement. All payments made under
this Agreement shall be subject to reduction to reflect taxes required to
be withheld by law.
(f) Choice of Law. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of California.
(g) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full
force and effect.
(h) Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in San
Francisco in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Discovery shall be permitted to the same
extent as in a proceeding under the Federal Rules of Civil Procedure,
including (without limitation) such discovery as is specifically authorized
by section 1283.05 of the California Code of Civil Procedure, without need
of prior leave of the arbitrator under section 1283.05(e) of such Code.
Judgment on the award rendered by the arbitrator may be entered in any
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court having jurisdiction thereof. All fees and expenses of the arbitrator
and such Association and attorney fees shall be paid as determined by the
arbitrator.
(i) No Assignment. The rights of any person to payments or benefits under this
Agreement shall not be made subject to option or assignment, either by
voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this Subsection (h)
shall be void.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.
EMPLOYEE:
_______________________________________
Xxxxxx Xxxxxx
COTELLIGENT, INC.:
_______________________________________
By:
As Its:
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