Exhibit 10.4
May 4, 1999
Xxxx Xxxxxx
Effective Management Systems, Inc.
00000 X. Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Dear Xxxx:
This letter outlines the agreement we have reached concerning your employment at
EMS during the next two years. This agreement replaces in total the Special
Compensation and Separation Agreement between you and EMS dated January 1, 1998.
o Your employment will not be terminated by EMS, except for gross
misconduct, during the period of March 1, 1999 through February 28, 2001,
providing you lend your best efforts to achieve the following two
assignments:
1) Support an orderly transition as you phase out of your current
position as CFO into your new position as a pre-sales consultant
in the Baan Sales & Marketing Group.
a) The transition period will begin on April 15, 1999 and
continue through July 15th 1999. The approximate time
dedicated to your CFO duties is as follows:
i) April 15th through April 30th: 8 work days
ii) May 1st through May 31st: 14 days
iii) June 1st through June 30th: 8 days
iv) July1st through July 15th: 5 days
You will make schedule provisions to assist at monthly and
quarterly closings and be available to lead the preparation
of the 10Q report due on July 15, 1999. You also may be
called upon to assist in merger or sale of product line
negotiations during this period. During this period, this
will take precedence over the above schedule at the
discretion of the President. Aside from this, your major
assignment in this period is to assist the COO in
reorganizing the corporate finance and accounting functions
to:
o Create a corporate headquarters function at the Naperville office.
o Retain a stable accounting group at the Milwaukee office to support TCM
operations
o Assist in revising our banking and auditing relationships as appropriate
to the requirements of any corporate restructuring ensuing from merger or
sale of a product line.
2) Lend your best efforts to perform as a pre-sales consultant in the
Baan Sales & Marketing Group according to the EMS Pre-Sales
Consultant 1999 Compensation Plan attached as exhibit A.
o Your base salary will be increased to $110,000 per annum effective
November 1, 1998. Retroactive pay will be made on March 15, 1998 for the
period of November 1, 1998 through February 28, 1999.
o Your base salary will be adjusted to $60,000 for the period of July 16,
1999 through July 15, 2000 when you have fully transitioned to the
position of pre-sales consultant.
o Your base will be increased to $110,000 on July 16, 2000.
o You will receive a payment for your accrued 1998 vacation of 3 weeks
minus 2-1/2 days on March 31, 1999.
o Beginning on July 16, 1999, you will be entitled to Gross Margin
Commission Payments according to the EMS Pre-Sales Consultant 1999
Compensation Plan attached as exhibit A. You will be offered
opportunities to earn commissions on an equal basis to other pre-sales
consultants.
o You were granted 25,000 options to purchase EMS common stock. The options
have a 10 year term. They vest as follows: 30% immediately, 60% at the
end of the first year and 100% at the end of the second year. The options
were issued April 8, 1999 at the then current market value of a share of
EMS common stock.
Sincerely,
Xxxxxxx X. Xxxxxx
COO
Memorandum
To: Pre-Sales Consultant
From: Manager
CC: Human resources
Date:
re: Your EMS Pre-Sales Consultant 1999 Compensation Plan
Pre-Sales Consulting Role
As an EMS Pre-Sales Consultant, you, together with each Sales
Representative, play a vital role in generating significant sales revenue
and gross margin for EMS. During the sales process with prospects and
customers, your responsibilities are to assess the degree of application
fit, to help set good customer expectations, to present application
software in the context of needs of the prospect, and to convey how the
application will benefit the customer. Working as a team with the Sales
Representatives and Managers, you play a key role in bringing in good,
profitable business for EMS.
Pre-Sales Consulting Tasks
Generating significant sales revenue and gross margin is facilitated
through sales consulting activities including:
Conducting prospect surveys to identify key business issues
Relating key business issues to Baan functionality
Preparing and presenting compelling "Proof of Concept" product
demonstrations
Assisting the Sales Representatives in developing Sales Strategy
Conducting prospect seminars
Innovating and applying new approaches and techniques
A strong desire to work as a team with Sales Representatives
andother Consultants
Continually embracing new functional and technological products
Pre-Sales Consulting Compensation
At plan, your annual compensation is $ . The fixed portion consists of an
annual salary of $ paid semi-monthly and effective . The variable
portion, a commission based entirely upon the gross margin you generate,
is targeted at $60,000 annually, paid on a monthly basis in the month
following shipment, with commission credit beginning as of December 1,
1998.
Because of your proven sales consulting abilities, you are entitled to
use of a company car, assuming you maintain a satisfactory driving
record. When you elect to acquire a company car, the company will cover
up to the standard lease allowance, currently at $425/month. If the car
you select costs more, then you must pay the difference. If the car you
select costs less, then the company will only pay the amount of the lease
payment.
Given you recently signed a private lease agreement for a car, until you
decide to acquire a company car, EMS will reimburse you for your existing
lease cost up to the rate of $425/month (submitted on monthly expenses).
You are also entitled to reimbursement for routine maintenance not
covered under warrantee. With your own car, you will remain responsible
for all other operating expenses and insurance. EMS will reimburse you
for all gasoline, less the standard deduction for personal use, currently
at $60.00/month. (This, of course, means that you may no longer expense
EMS for mileage.) We do recommend that you keep track of business use for
tax records, if needed.
You will be reimbursed for routine business expenses subject to EMS
prevailing policies. You are eligible for EMS profit sharing and employee
benefits, as defined by the prevailing EMS policies.
Leveraged Commission Rates
Your monthly gross margin objective is $ , or $ for the fiscal year. You
are paid a commission rate of 5% for all gross margin earned up to $ . As
an added reward, you will be paid at a higher, 7% rate for all gross
margin generated over $ for the fiscal year.
Gross Margin Commission Payment Rules
Commissions are payable to you in the month following shipment to a
customer in whose sale you contributed toward. Commissions are calculated
for all gross margin generated by you, as credited to the EMS Baan
Division, for all software and hardware, at net price less actual cost.
Commissions are calculated for the first year of upgrade and support
plans at price less 35% of list price. Because shipments are sometimes
staggered, commission payment is calculated for any shipments of these
types of products for that customer, for the first 6 months after the
date of the first shipment. Subject to management review, credit will
also be provided for additional users/phases that were identified on the
original contract, but shipped later without the need for additional
pre-sales effort. Commissions already paid on an order which later
becomes uncollectable is credited back on the commission statement at the
end of the month in which the charge-back occurred.
Gross Margin Splits
When you work the deal alone, you earn commission based upon 100% of the
gross
margin. When multiple consultants are involved in performing the demo,
then a gross margin split percentage is determined, with the total credit
application being 120%.
For example, when you work the deal alone, but others assisted with net
meeting demos, you still receive 100%. When you contribute with a
netmeeting demo on someone else's deal, you receive 20% gross margin
credit. When you lead the deal, and another assisted on-site, then a
gross margin split is mutually determined. It may be a 80%/40% split. If
both contributed equally, it would be a 60%/60% split. Note that helping
others to prepare, training others, and completing RFP's are tasks
expected of everyone, and commission credit is not applied.
Payments After Termination
If employment termination is initiated by either party, an immediate
freeze on commission payments will be placed by the Accounting
Department. Sixty days after the date of termination, a calculation of
commissions due the employee or owed to the company will be made as
follows:
+ Commissions Earned, but Unpaid
- Commissions Unearned, but Paid
-------------------------------------------------------------------------
= Commission Amount Due or Owed Back
I look forward to an exciting and productive year of working together to
achieve our goals and help EMS succeed in its sales mission.
Acceptance
Each party has read this plan, understands its contents and agrees to be
bound by it. This plan must be signed in order to receive commission
payments. EMS reserves the right to change this plan at any time.
Signature__________________________ Signature ________________________
Date __________________________ Date ________________________
