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Exhibit 10.18
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is dated
as of July 29, 2005 (the "Effective Date"), by and between BPO
Management Services, Inc., a Delaware corporation (the "Company"),
and Patrick Dolan (the "Founder").
RECITALS
WHEREAS, the Company wishes to secure the ongoing
services of the Founder pursuant to the terms and conditions set
forth herein, and therefore the Founder and the Company intend
hereby to enter into an employment agreement as set forth
herein;
NOW, THEREFORE, in consideration of the premises
and the mutual covenants set forth below, the parties hereby agree
as follows:
1. Employment. From
and after the Effective Date, the Company hereby agrees to employ
the Founder as Chief Executive Officer of the Company, and the
Founder hereby accepts such employment, on the terms and conditions
set forth below.
2. Term. The
Founder’s employment by the Company hereunder shall begin on
the Effective Date and shall end 2 1/2 years from
the Effective Date (the "Employment
Period"), but subject to earlier termination upon termination of
the Founder’s employment. The Employment Period may be
extended by mutual agreement of the Company and the
Founder.
3. Position and
Duties. During the Employment Period, the Founder shall serve as
Chief Executive Officer of the Company with such duties, authority
and responsibilities that are customary for such position and such
other related duties as requested by the Board of Directors of the
Company ("Board") from time to time. The Founder shall report
directly to the Board. Unless otherwise authorized by the Board,
the Founder shall devote substantially all of his working time,
attention and energies during normal business hours (other than
absences due to illness or vacation) to the performance of his
duties for the Company. Notwithstanding the above, the Founder
shall be permitted, to (i) serve on civic or charitable boards or
committees, (ii) serve on boards of other companies, and the
Founder shall be entitled to receive and retain all remuneration
received by him from the items listed in clauses (i) through (ii)
of this paragraph.
4. Place of
Performance. During the Employment Period, the locations of
employment of the Founder shall be in Orange County, California and
the Founder shall not be required to relocate his employment to any
other location.
5. Compensation and
Related Matters.
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(a)
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Base Salary. Commencing on February 1, 2006 and
thereafter during the Employment Period, the Company shall pay the
Founder a base salary at the rate of not less than $225,000 per
year ("Base Salary"). The Base Salary shall be paid in
approximately equal installments in accordance with the
Company’s customary payroll practices. The Base Salary and
the Annual Bonus as described below shall be subject to annual
review by the Board and may be increased in the Board’s
discretion. If the Base Salary is increased by the Board, such
increased Base Salary shall then constitute the Base Salary for all
purposes under this Agreement.
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(b)
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Annual Bonus. For each full fiscal year of the
Company that begins and ends during the Employment Period, and for
the portion of the fiscal year of the Company that begins in 2008
(each a "Partial Year"), the Founder shall be eligible to earn an
annual cash bonus (the "Annual Bonus") in such amount as shall be
determined by the Board of Directors based on the achievement of
Company and individual performance goals as established by the
Board for each such fiscal year (or Partial Year), with such Annual
Bonus being prorated for any Partial Year; provided, however, that
with respect to the first Partial Year ending on December 31, 2005,
such bonus, if any , shall not be paid until on or after February
1, 2006. The Board shall establish objective criteria to be used to
determine the extent to which performance goals have been
satisfied.
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(c)
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Business, Travel and Entertainment Expenses. The
Company shall promptly reimburse the Founder for all business,
travel and entertainment expenses incurred prior to, on or after
the Effective Date hereof including expenses incurred prior to the
formation of the Company, with respect to the business or
prospective business of the Company, and including expenses
incurred in connection with the formation of the Company and the
acquisition of Adapsys Document Management, Inc., a corporation
incorporated under the laws of Canada, and ADAPSYS
TRANSACTION PROCESSING INC. , a corporation
incorporated under the laws of Canada (expenses relating to the
formation of the Company and the acquisition of such companies,
collectively, the " Acquisition Expenses
"), and except for the Acquisition Expenses, subject
to the Company’s expense reimbursement policies.
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(f)
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Vacation. During the Employment Period, the
Founder shall be entitled to six
weeks of vacation per year. Vacation not taken
during the applicable fiscal year (but not in excess of
four weeks) shall be carried over
to the next following fiscal year.
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(g)
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Welfare, Pension and Incentive Benefit Plans.
During the Employment Period, the Founder (and his eligible spouse
and dependents) shall be entitled to participate in all welfare
benefit plans and programs maintained by the Company from time to
time for the benefit of its employees, including, without
limitation, all medical, hospitalization, dental, disability,
accidental death and dismemberment, travel accident and life
insurance plans, programs and arrangements. In addition, during the
Employment Period, the Founder shall be eligible to participate in
all pension, retirement, savings and other employee benefit plans
and programs maintained from time to time by the Company for the
benefit if its employees.
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(h)
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Telephone and Internet Access; Car Allowance.
During the Employment Period, the Company shall pay or promptly
reimburse the Founder for telephone, cell phone, computer usage and
internet access at his home for business use. During the Employment
Period, the Company shall pay Founder a monthly car allowance of
$750.00 per month.
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(i)
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Equity Awards. The Board shall in its sole
discretion, and with approval of the Compensation Committee, if
any, that is formed by the Board, and without approval of the "ADM
Parties" as defined in the that certain Rights Agreement dated July
29, 2005 and entered into among the Company, Founder, James
Cortens, Brian Meyer, Donald West, Ray Belisle and certain other
parties related to the preceding as provided for in such Rights
Agreement (together with all amendments thereto, the "
Rights Agreement ") or any other
persons or entities, may make an annual grant of stock options to
Founder. In addition to the options that may be granted as provided
for in the preceding sentence, the Founder is hereby granted a
stock option to purchase 750,000 shares of common stock of the
Company at an exercise price of two and one half cents ($0.025) per
share and subject to the following: (i) vesting at 25% per each 12
month fiscal period commencing on the Effective Date; (ii) full
100% vesting upon the earlier of a Change of Control Event as
defined below, or 48 months from the Effective Date, or termination
of Founder’s employment by the Company without cause by the
Company; and (iii) such other terms as provided for in that
certain Grant of Stock Option attached
hereto .
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6. Termination. The
Founder’s employment hereunder may be terminated during the
Employment Period under the following circumstances:
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(a)
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Death. The Founder’s employment hereunder
shall terminate upon his death.
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(b)
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Disability. If, as a result of the
Founder’s incapacity due to physical or mental illness as
determined by a physician selected by the Founder, and reasonably
acceptable to the Company, (i) the Founder shall have been
substantially unable to perform his duties hereunder for 12
consecutive months, or for an aggregate of 270 days during any
period of twelve consecutive months and (ii) within thirty days
after written Notice of Termination is given to the Founder after
such 12 month or 270 aggregate day period, the Founder shall not
have returned to the substantial performance of his duties on a
full-time basis, the Company shall have the right to terminate the
Founder’s employment hereunder for "Disability."
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(c)
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Cause. The Company shall have the right to
terminate the Founder’s employment for "Cause." For purposes
of this Agreement, the Company shall have "Cause" to terminate the
Founder’s employment only upon the
Founder’s:
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(i) willful gross
misconduct or conviction of a felony after the Effective Date that,
in either case, results in material and demonstrable damage to the
business or reputation of the Company; or
(ii) willful and continued failure to
perform his duties hereunder within twenty business days after the
Company delivers to his a written demand for performance that
specifically identifies the actions to be performed.
For purposes of this Section 6 (c), no act or
failure to act by the Founder shall be considered "willful" if such
act is done by the Founder in the good faith belief that such act
is or was to be beneficial to the Company or one or more of its
businesses, or such failure to act is due to the Founder’s
good faith belief that such action would be materially harmful to
the Company or one of its affiliates or subsidiaries’
businesses. Cause shall not exist unless and until the Company has
delivered to the Founder a copy of a resolution duly adopted by a
majority of the Board (excluding the Founder for purposes of
determining such majority) at a meeting of the Board called and
held for such purpose after reasonable (but in no event less than
thirty days’) notice to the Founder and an opportunity for
the Founder, together with his counsel, to be heard before the
Board, finding that in the good faith opinion of the Board that
"Cause" exists, and specifying the particulars thereof in detail.
This Section 6 (c) shall not prevent the Founder from challenging
in any court of competent jurisdiction the Board’s
determination that Cause exists or that the Founder has failed to
cure any act (or failure to act) that purportedly formed the basis
for the Board’s determination.
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(d)
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Without Cause. The Company shall have the right
to terminate the Founder’s employment hereunder without Cause
by providing the Founder with a Notice of Termination.
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(e) Good Reason. The Founder may terminate his
employment for "Good Reason" after giving the Company detailed
written notice thereof, if the Company shall have failed to cure
the event or circumstance constituting "Good Reason" within ten
business days after receiving such notice and provided such event
or circumstance is capable of cure. Good Reason shall mean the
occurrence of any of the following:
(i) the assignment to the Founder of
duties inconsistent with this Agreement or a change in his titles
or authority;
(ii) any failure by the Company to comply
with Section 5 hereof in any material way;
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(iii) the
requirement of the Founder to relocate to locations other than
those provided in Section 4 hereof;
(iv) the failure of the Company to comply
with and satisfy Section 12(a) of this Agreement; or
(v) any material breach of this Agreement by the Company;
or
(vi) the acquisition of
the Company by another entity by means of any transaction or series
of related transactions (including, without limitation, any stock
acquisition, reorganization, merger or consolidation) other than a
transaction or series of transactions in which the holders of the
voting securities of the Company outstanding immediately prior to
such transaction continue to retain (either by such voting
securities remaining outstanding or by such voting securities being
converted into voting securities of the surviving entity), as a
result of shares in the Company held by such holders prior to such
transactions, at least fifty percent (50%) of the total voting
power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such transaction or
series of transactions, or sale of 80% or more of the assets of the
Company (any of preceding, a " Change of Control
Event").
The Founder’s right to terminate his
employment hereunder for Good Reason shall not be affected by his
incapacity due to physical or mental illness. The Founder’s
continued employment shall not constitute consent to, or a waiver
of rights with respect to, any act or failure to act constituting
Good Reason hereunder.
7. Termination
Procedure.
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(a)
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Notice of Termination. Any termination of the
Founder’s employment by the Company or by the Founder during
the Employment Period (other than pursuant to Section 6(a)) shall
be communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice indicating the specific termination provision
in this Agreement relied upon and setting forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Founder’s employment under that
provision.
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(b)
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Date of Termination. "Date of Termination" shall
mean
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(i) if the
Founder’s employment is terminated by his death, the date of
his death,
(ii) if the Founder’s employment is terminated pursuant to
Section 6(b), thirty (30) days after the date of receipt of the
Notice of Termination (provided that the Founder does not return to
the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and
(iii) if the Founder’s employment is terminated for any
other reason, the date on which a Notice of Termination is given or
any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation upon
Termination or During Disability. In the event the Founder is
disabled or his employment terminates during the Employment Period,
the Company shall provide the Founder with the payments and
benefits set forth below. The Founder acknowledges and agrees that
the payments set forth in this Section 8 constitute liquidated
damages for termination of his employment during the Employment
Period
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(a)
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Termination by Company or by Founder for Good
Reason. If a Change of Control Event occurs, or if the
Founder’s employment is terminated by the Company without
Cause (other than Disability) or by the Founder for Good
Reason:
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(i) the Company
shall pay to the Founder, on or before the Date of Termination, a
lump sum payment equal to the sum of (A) all accrued and unpaid
Base Salary and accrued unpaid vacation pay through the Date of
Termination, (B) provided no Change of Control Event has occurred,
Base Salary for the remainder of the Employment Period; and (c)
provided no Change of Control Event has occurred, two times the
highest Annual Bonus paid with respect to any fiscal year beginning
during the Employment Period, and if no Annual Bonus has been paid,
then two times the minimum Annual Bonus;
(ii) the Company shall continue to provide
the Founder and his eligible spouse and dependents for a period
equal to the remainder of the Employment Period, the medical,
hospitalization, dental and life insurance programs provided for in
Section 5(g), as if he had remained employed; provided, that if the
Founder, his spouse or his eligible dependents cannot continue to
participate in the Company programs providing such benefits, the
Company shall arrange to provide the Founder and his spouse and
dependents with the economic equivalent of the benefits they
otherwise would have been entitled to receive under such plans and
programs;
(iii) the Company shall, consistent with
past practice, reimburse the Founder pursuant to Section 5(e) for
business expenses incurred but not paid prior to such termination
of employment;
(iv) the Founder’s unvested stock options previously
granted to him shall all become immediately 100% vested; and
(v) the Founder shall be entitled to any
other rights, compensation and/or benefits as may be due to the
Founder in accordance with the terms and provisions of any
agreements, plans or programs of the Company.
The payments and benefits provided for as subclause (A) of
clause (i) above and in clause (iii) above are hereinafter referred
to as the "Accrued Obligations."
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(b)
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Cause or by Founder without Good Reason. If the
Founder’s employment is terminated by the Company for Cause
or by the Founder other than for Good Reason, then the Company
shall provide the Founder with his Accrued Obligations and shall
have no further obligation to the Founder hereunder except for the
benefits provided under any stock option grants and any other
agreements, plans or programs of the Company.
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(c)
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Disability. During any period that the Founder
fails to perform his duties hereunder as a result of incapacity due
to physical or mental illness ("Disability Period"), the Founder
shall continue to receive his full Base Salary set forth in Section
5(a) until his employment is terminated pursuant to Section 6(b).
In the event the Founder’s employment is terminated for
Disability pursuant to Section 6(b), the Company shall have no
further obligations to the Founder hereunder except to the extent
of disability benefits or other employee benefit plans and stock
option grants otherwise available to Founder.
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(d)
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Death. If the Founder’s employment is
terminated by his death, the Company shall have no further
obligations hereunder except for any benefits such as life
insurance and any other benefits otherwise available to Founder or
his family under insurance, stock option grants or other employee
benefit plans..
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(e)
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Offset. Amounts owed to the Founder under this
Agreement shall not be offset by any claims the Company may have
against the Founder, and 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 other
circumstances, including, without limitation, any counterclaim,
recoupment, defense or other right which the Company may have
against the Founder or others.
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(f) Stock Options. Founder’s rights under
any stock option grants issued to Founder shall not be reduced or
adversely affected by any term in this Agreement and such rights to
the extent as expressly provided for under any stock option grants
issued by the Company shall survive Founder’s termination of
employment for any reason.
9. Confidential
Information.
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(a)
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Confidential Information. Except as may be
required or appropriate in connection with his carrying out his
duties under this Agreeme
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