1
EXHIBIT 10.4
Cooperative Computing, Inc.
0000 Xxx Xxxx Xxxx
Xxxxxx, Xxxxx 00000
June 14, 1999
Xxxxxxx Xxxxxx
0000 Xxxxxxxxx
Xxxxxx, Xxxxx 00000
Dear Xxxx:
We are pleased to offer you employment as President and Chief
Operating Officer of Cooperative Computing, Inc. on the terms described on the
attached Term Sheet. If you desire to accept this offer, please sign and date
this letter in the space provided below, execute a copy of the
Noncompetition/Nonsolicitation Agreement included with this letter, and return
both documents to Xxx Xxxxxxxxxx at 000 Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx. This offer will expire and be of no force and effect if not accepted
today.
A form of option agreement evidencing the options to be granted to you
will be forwarded to you for signature promptly.
Very truly yours,
COOPERATIVE COMPUTING, INC.
By: /s/ X. X. XXXXX
Xxxx X. Xxxxx, Director
By: /s/ XXX XXXXXXXXXX
Xxx Xxxxxxxxxx, Director
AGREED AND ACCEPTED:
/s/ XXXXXXX X. XXXXXX
Xxxxxxx Xxxxxx
Date: June 14, 1999
2
PROJECT BRIGHT STAR
TERMS OF EMPLOYMENT
The following is a summary of the terms of employment between
Cooperative Computing, Inc. (the "Company") and Xxxxxxx Xxxxxx (the
"Executive").
TITLES: President and Chief Operating Officer
RESPONSIBILITIES: Reporting directly to the Executive
Committee of the Company (Xxx Xxxxx, Xxxx
Xxxxx, Xxxxx Xxxxxx and Xxx Xxxxxxxxxx),
with direct and primary responsibility over
the Automotive and Hard Lines Divisions
(which are the principal divisions of the
Company, excluding Europe), including
sales, marketing, manufacturing, logistics,
implementation and customer service.
TERM: From June 1999, through September 30, 2002
(the "Initial Term"), automatically renewed
on a year to year basis unless either party
elects not to renew at least 60 days prior
to the end of the then applicable term. For
the purposes of any renewal, unless
otherwise agreed, Executive's annual base
salary will equal that applicable at the
end of the prior term. Executive's bonus,
if any, will be as provided in any bonus
plan then applicable to executive officers
of the Company generally or as otherwise
agreed.
BASE COMPENSATION: $350,000 annually, payable monthly in
arrears
QUARTERLY BONUS: During the Initial Term, Executive will be
eligible to receive bonuses of up to 50% of
Executive's base salary in effect during
such quarter, with the actual amount to be
determined based upon the Company's
achievement of quarterly financial and
other objectives. Notwithstanding the
foregoing, the Executive will be entitled
to a bonus during the first four full
quarters of the Initial Term $43,750 for
each such quarter, to the extent Executive
remains employed by the Company during the
applicable quarter. The bonuses will be
payable quarterly in arrears.
SPECIAL CASH INCENTIVE: In addition to the base compensation and
quarterly bonus described above, Executive
will be entitled during the Initial Term to
receive a special cash bonus of (a) $1.5
million upon the achievement of the First
Hurdle (described below), (b) $2.0 million
upon the achievement of the Second Hurdle
(described below) and (c) $1.5 million upon
achievement of the Third Hurdle (described
below). The First Hurdle will be satisfied
as of the end
3
of the first fiscal year in which the
Company achieves a $5.0 million increase in
Consolidated EBITDA (as defined in the
Company's indenture governing its 9% senior
subordinated notes due 2008, provided that
such Consolidated EBITDA will not be
impacted negatively or positively by SOP
97-2 or by write downs of accounts
receivable within the first 18 months of
employment) versus the Consolidated EBITDA
for the fiscal year ended September 30,
1999 ("Base Cash Flow"); the Second Hurdle
will be satisfied as of the end of the
first fiscal year in which the Company
achieves a $10.0 million increase in
Consolidated EBITDA versus the Base Cash
Flow; and the Third Hurdle will be
satisfied as of the end of the first fiscal
year in which the Company achieves a $15.0
million increase in Consolidated EBITDA
versus the Base Cash Flow. These bonuses
will be cumulative in the event the Company
achieves more than one hurdle as of the end
of any particular fiscal year (for example,
if Consolidated EBITDA for the fiscal year
ended September 30, 2000 is $10.0 million
greater than the Base Cash Flow, Executive
would be entitled to a $3.5 million bonus)
and once a bonus is paid as to a particular
hurdle, Executive will not be entitled to
any further bonus in respect of that hurdle
(for example, if the Company pays the $3.5
million bonus as provided in the prior
example, and the Consolidated EBITDA for
the next fiscal year is $15 million greater
than the Base Cash Flow, Executive will be
entitled to an additional one time bonus of
$1.5 million in respect of the Third
Hurdle, and no further special bonuses
would be payable). Any bonus payable
pursuant to this provision will be payable
within 30 days after approval by the Audit
Committee of the computation of
Consolidated EBITDA for the applicable
fiscal year (but in no event later than 120
after the end of such fiscal year).
Executive will also be entitled to a one
time cash bonus of $5.0 million (less any
bonuses previously paid pursuant to the
provisions of the first sentence above)
upon the occurrence during the Initial Term
of either of the events specified in
paragraphs (a) or (c) of the definition of
Change of Control set forth below under
"Stock Options" (to the extent Executive is
employed by the Company at the time of such
event). In addition, in the event the
Company has achieved the Second Hurdle or
is reasonably likely to achieve the Second
Hurdle, Executive is terminated during the
Initial
2
4
Term without Cause (as defined) or
Executive terminates his employment for
Good Reason (as defined) while ongoing
discussions are taking place between the
Company and one or more other persons
relating to a transaction (the "Pending
Transaction") that will result in the
occurrence of one of the events specified
in clause (a) or (c) of the definition of
Change of Control, and such Pending
Transaction is consummated within 120 days
after the date of Executive's termination,
Executive shall be entitled to receive (in
addition to any other amounts payable to
Executive upon such termination) upon
consummation of the Pending Transaction a
one time cash bonus of $5.0 million (less
any bonuses previously paid pursuant to the
first sentence of this paragraph).
TERMINATION: If terminated for Cause, if the employee
resigns voluntarily without Cause, or if
Executive's employment terminates as a
result of his death or disability, the
employee is entitled to no further
consideration after the date of such
termination. If terminated by the Company
without Cause, by the Executive for Good
Reason, or if this Agreement is not renewed
by the Company upon expiration of the
Initial Term, Executive shall be entitled
to severance in an amount equal to 18
months' base salary (based upon the base
salary then in effect) payable monthly in
arrears, plus the pro rated portion of any
quarterly bonus that would be payable in
respect of the quarter during which
Executive is terminated, plus any Special
Cash Bonuses earned, but not paid, in
respect of any fiscal years ending prior to
the termination of employment, in each case
payable at the time such bonus otherwise
would have been payable in accordance with
past practice, plus accrued benefits (if
any). "Cause" means (a) a conviction of a
crime (other than minor traffic offenses
and the like), (b) the Executive breaches
any obligations under the
non-competition/non-solicitation agreement
entered into concurrently herewith (and
fails to cure the breach within 30 days
after notice), (c) the employee engages in
dishonesty or fraud, (d) the employee is
physically able to perform his duties and
services but refuses to do so, or (e) the
employee engages in gross negligence or
willful misconduct injurious to the
Company, Cooperative Computing Holding
Company, Inc. ("Holdings") or their
respective subsidiaries. "Good Reason"
shall mean (a) any breach by the Company of
its obligations hereunder, (b) any
significant reduction, approved by the
Board without Executive's written
3
5
consent, in the Executive's title, duties
or responsibilities other than for Cause
(unless in the case of either clause (a) or
(b) the Executive has notified the Company
within 30 days after the occurrence of such
event and the Company has cured such event
within 30 days after receipt of such
notice) or (c) Executive is required to
relocate without his consent to an area
that is outside a 50 mile radius of Austin,
Texas.
RELOCATION: Executive will permanently relocate to
Austin, Texas prior to December 31, 1999
(the "Relocation Date"). The Company will
reimburse the Executive for normal and
customary relocation expenses, including
travel for housing searches, commuting to
Austin, Texas prior to relocation through
the earlier of his relocation or the
Relocation Date, closing costs on the sale
of Executive's existing residence, closing
costs on the purchase of the Executive's
residence in Austin, Texas, moving
expenses, and temporary living expenses
prior to closing on Executive's residence
in Austin, Texas. All expenses reimbursed
will be grossed up for United States
federal income tax purposes.
STOCK OPTIONS: Executive will be granted, as of the
effective time of Executive's employment
with the Company, options (the "Options")
to purchase an aggregate of 500,000 shares
of Common Stock, par value $.000125 per
share ("Common Stock"), of Holdings. The
Options will be evidenced by a separate
option agreement to be entered into and
will be granted pursuant to, and subject to
the terms of (except for those terms
outlined below), Holdings' 1998 Stock
Option Plan. The Options will be
exercisable at $5.00 per share and will
vest and become exercisable, except as
provided below, in three equal annual
installments commencing on the first
anniversary of the effective time of
Executive's employment. Notwithstanding the
foregoing, the Options will fully vest and
become exercisable upon the occurrence of a
Change of Control (as defined). "Change of
Control" shall have the meaning given that
term in the 1998 Stock Option Plan, which
as so defined generally means the first to
occur of the following events: (a) any
sale, lease, exchange, or other transfer
(in one transaction or a series of related
transactions) of all or substantially all
of the assets of Holdings to any Person or
group of related Persons for purposes of
Section 13(d) of the Securities Exchange
Act of 1934, other than to one or more
4
6
members of the Shareholder Group (as
defined in the 1998 Stock Option Plan), (b)
a majority of the Board of Directors of
Holdings shall consist of Persons who are
not Continuing Directors (as defined in the
1998 Stock Option Plan), or (c) the
acquisition by any Person or group of
Persons (other than one or more members of
the Shareholder Group) of the power,
directly or indirectly, to vote securities
having more than 50% of the ordinary voting
power for the election of directors of
Holdings.
NO MITIGATION: Executive's severance payments will not be
subject to mitigation as a result of any
employment or other compensation received
by Executive after termination of his
employment.
GOVERNING LAW: Governed by Texas law, without regard to
principles of conflicts of laws.
5
