EX-10.5 7 a2080179zex-10_5.txt EXHIBIT 10.5 PROPHET 21, INC. CHANGE IN CONTROL SEVERANCE PAY AGREEMENT THIS CHANGE IN CONTROL SEVERANCE PAY AGREEMENT (the "Agreement") is made as of the 28th day of March, 2002, by and between Prophet 21, Inc., a Delaware corporation with its principal place of business at 19 West College Avenue, Yardley, PA 19067 (the "Company"), and Douglas J. Levin an employee of the Company (the "Employee"). RECITALS: 1. The Company is a Delaware corporation. The Employee is currently employed by the Company as Executive Vice President. 2. The Company and the Employee desire to provide for the payment, in certain instances, of severance pay to the Employee in the event of the termination of his or her employment following a change of control of the Company, on the terms and conditions set forth in this Agreement. AGREEMENT: In consideration of the premises and the mutual covenants and conditions set forth herein, the Company and the Employee agree as follows: SECTION 1. OPERATION OF AGREEMENT. This Agreement shall be effective immediately upon its execution, but the provisions hereof shall not be operative unless and until a "Change in Control" (as such term is defined in Section 2 hereof) has occurred. The provisions of this Agreement shall not be operative and shall NOT APPLY to any termination of employment, for any reason, which occurs before the period beginning three months and one day prior to a Change of Control or which occurs after the period beginning the year and one day after a Change in Control. SECTION 2. CHANGE IN CONTROL. The term "Change in Control" as used in this Agreement shall mean the date upon which (a) any person (other than the Employee), group of associated persons acting in concert (none of whom is the Employee) or corporation becomes a direct or indirect beneficial owner of shares of stock of the Company representing an aggregate of more than fifty percent (50%) of the votes then entitled to be cast at an election of directors of the Company; or (b) all or substantially all of the Company's assets are sold or transferred to a third party (other than an affiliate of the Company). SECTION 3. SEVERANCE PAY UPON TERMINATION BY COMPANY WITHOUT CAUSE OR BY EMPLOYEE FOR GOOD REASON. If, during the three-month period immediately preceding a Change in Control or during the one year period immediately following a Change in Control, the Employee's employment with the Company is terminated: (a) By the Company for no reason or for any reason other than "Cause" as defined in (i) through (iv) immediately below: (i.) As a result of the Employee's death; (ii.) As a result of the Employee's disability (in the event that the Employee shall be unable to perform his or her duties for a period of ninety (90) consecutive calendar days or for a period of 120 calendar days in any twelve month period by reason of disability as a result of illness, accident or other physical or mental incapacity or disability; (iii.) As a result of the Employee's misappropriation of funds or property of the Company, attempting to willfully obtain any personal profit from any transaction in which the Employee has an interest which is adverse to the interests of the Company, and/or any other act of fraud or embezzlement; or (iv.) As a result of the Employee's conviction of a felony, or a plea of "guilty" or "no contest" to, a felony or a crime involving moral turpitude or commission of the acts constituting such a crime; or (b) By the Employee for "Good Reason" as a result of, or within 30 days of, any of the following: (i.) Failure to maintain the Employee in his current position or in a position commensurate therewith in the event of a merger of the Company; (ii.) The assignment to the Employee of any duties inconsistent with the Employee's position, authority, duties or responsibilities, or any other action by the Company which results in a diminution of such position, authority, duties or responsibilities, excluding for this purpose any isolated action not taken in bad faith and which is promptly remedied by the Company after receipt of notice thereof given by the Employee; (iii.) The failure to elect the Employee if currently a Board member to the Board of Directors of the Company, unless there is a merger of the Company, in which event the failure to elect the Employee to the board shall not be Good Reason; or (iv.) Reduction by the Company of the Employee's Base Salary as in effect on the Effective Date, or as the same shall be increased from time to time; then, the Company shall provide the Employee the following Severance Benefits (hereinafter defined): (a) an amount equal to two times the base salary (at the highest rate in effect 2 in the twelve months immediately preceding and including the termination date), plus an amount equal to twice the target bonus set for the account year in which the change of control occurs to be paid in one lump sum payment within 30 days of the occurrence of the Change in Control or in the event such termination occurred during the one year period following the occurrence of the Change in Control, the Company shall pay the Employee the Severance Amount, within thirty (30) days after the effective date of the Employee's termination; (b) continuation of all health care benefits the Employee and/or his dependents were receiving at the time of such termination for 12 months following the date of the Employee's termination; and (c) all of the Employee's outstanding restricted stock will immediately become vested and distributed and all of the Employee's outstanding stock options shall become fully vested and exercisable, subject to the terms of applicable Stock Option Agreement executed by the Company and the Employee, except that the Employee shall have until the remainder of any term of any stock option grant to exercise any such option. The Company may withhold from any such severance compensation any federal, state, city, county or other taxes. In addition, notwithstanding any contrary provision of this Agreement, the Company shall not be required to make any payment or property transfer to, or for the Employee's benefit (under this Agreement or otherwise) that would subject Employee to the excise tax described in section 4999 of the Code. If the Severance Benefits under this Agreement, when combined with any other payments that Employee has the right to receive, exceed the "parachute amount" described in Code Section 280G (generally a present value of three times annual compensation), then the Severance Benefits will be reduced so that the present value of the total amount received by the Employee is $1.00 less that the parachute amount. All determination under this Paragraph shall be made by independent auditors retained by the Company on information supplied by the Company and the Employee, and shall be binding on the Company and the Employee. All fees and expenses of the Auditors shall be paid the Company. SECTION 4. NO SEVERANCE PAY UPON ANY OTHER TERMINATION. Upon any termination of the Employee's employment with the Company other than as set forth in Section 3, the sole obligation hereunder of the Company shall be to pay the Employee's regular compensation up to the effective date of termination. The severance pay provisions hereunder do not, however, impact in any way the rights of the Employee or the obligations of the Company under any employment agreement or any other agreement (a "Separate Agreement") for the payment of employment compensation between the Employee and the Company, whether such agreement(s) are in existence now or come into existence, hereafter; except, however, (i) that if such Separate Agreement provides for severance pay which would be applicable under circumstances that would also obligate the Company to make similar payments under this Agreement, then this Agreement shall not be deemed as additive but shall be construed so that the obligations hereunder when applied in conjunction with the Separate Agreement, do not require the 3 Company to make such payments in excess of the amount or time set forth herein, and (ii) with regard to the acceleration of options, the Employee may elect to substitute the acceleration provision of this Agreement in place of any provision dealing specifically with acceleration in the Separate Agreement, and, if such election is made, the treatment so elected shall be honored. SECTION 5. ENTIRE OBLIGATION. Payment to the Employee pursuant to Sections 3 or 4 of this Agreement shall constitute the entire obligation of the Company to the Employee and full settlement of any claim under law or equity that the Employee might otherwise assert against the Company, or any of its employees, officers or directors on account of the Employee's termination. SECTION 6. NO OBLIGATION TO CONTINUE EMPLOYMENT. This Agreement does not create any obligation on the part of the Company to continue to employ the Employee following a Change in Control or in the absence of a Change in Control. SECTION 7. TERM OF AGREEMENT. This Agreement shall terminate and no longer be in effect on the earlier of: (i) the termination date of employment agreement between the Company and the Employee, if any; (ii) the date upon which the Employee ceases to be an employee of the Company; unless a Change in Control occurs within three months after such termination date; or (iii) if a Change in Control occurs while the Employee is employed by the Company, until the date one year following the Change in Control. SECTION 8. SEVERABILITY. Should any clause, portion or section of this Agreement be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability of validity of the remainder of the Agreement. SECTION 9. ASSIGNMENT: SUCCESSORS IN INTEREST. This Agreement, being personal to the Employee, may not be assigned by the Employee. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company, and the heirs, executors and personal representatives of the Employee. SECTION 10. WAIVER. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. SECTION 11. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania applicable in the case or agreements made and to be performed entirely within such State. SECTION 12. ARBITRATION. Any controversy or claim arising out of or in connection with this Agreement shall be settled by arbitration in accordance wit the rules of the American Arbitration Association then in effect in the Commonwealth of Pennsylvania and judgment upon such award rendered by the arbitrator maybe entered in any court having jurisdiction thereof. The arbitration shall be held in the Commonwealth 4 of Pennsylvania. The arbitration award shall include attorneys' fees and costs to the prevailing party. IN WITNESS WHEREOF, this Agreement has been executed by the undersigned as of the date first above written. Prophet 21, Inc. By: ------------------------------ John Meggitt Chairman of the Board ----------------------------------- Douglas J. Levin 5