1
EXHIBIT 10.5
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is effective as of August 13, 1997 ("Effective Date")
between Integrated Process Equipment Corp. ("Company") and Xxxxx X. XxXxxxxx
("Executive").
1. Position, Duties and Start Date. Company hires Executive and
Executive accepts employment as Company's President and Chief Executive Officer.
Executive shall devote his full time and best efforts to these positions.
Executive shall comply with the policies of the Company and the direction of the
Company's Board of Directors ("Board"). Exhibit A specifies the separate
responsibilities of Executive and the Board's Chairman. To the extent requested
by the Board, Executive will serve as a Company Director without additional
compensation (other than continued vesting of Executive's existing 30,000 share
option granted in connection with his Board membership). Executive's full-time
employment will begin September 1, 1997 ("Start Date"). From the Effective Date
to the Start Date Executive will serve as a consultant to Company without
additional compensation.
2. Compensation.
(a) Company will pay Executive a monthly base salary of $33,333.33,
less applicable withholding, payable in accordance with Company's standard
payroll policy. At least annually the Board will consider increases in the
annual salary rate in light of Executive's individual performance, Company
performance and other relevant factors determined by the Board.
(b) Company will pay Executive a bonus payment of up to 100% of the
Executive's then base salary ("Bonus"), less applicable withholding, on a fiscal
year basis with the first year being prorated at 10/12ths. The Bonus payable at
the end of each fiscal year shall be determined by accomplishment of the Company
objectives, as agreed to by the Board's Compensation Committee prior to or as
soon as practical after the beginning of the year. The Board Compensation
Committee's reasonable determination as to whether an objective has been
accomplished will be final and binding. If the Executive is not employed by the
Company at the end of the fiscal year, the Board of Director's Compensation
Committee shall decide if any of the bonus will be paid based on the policies of
the Committee.
(c) Company or designee will purchase Executive's primary residence
for $670,000; the Company will reimburse Executive for $100,000 in reasonable
costs (including moving, temporary housing, losses on sale of club memberships,
etc.) of relocating to Phoenix, Arizona; Executive will relocate as soon as
practicable.
(d) Executive will be entitled to 4 weeks vacation per year, company
car, health and standard executive perks.
3. Equity Compensation. Company shall grant Executive the following
equity compensation under Company's 1997 Executive Stock Option Plan ("Plan").
2
(a) Company shall issue to Executive 50,000 shares of Company Common
Stock ("Shares") without consideration by Executive. The Shares shall vest at
the rate of 1667 shares, pre-tax, at the end of each full month after the
Effective Date (with the first 1667 shares to vest on September 30, 1997).
(b) Company shall grant Executive a stock option exercisable for up
to 50,000 shares of Common Stock ("Base Option"). The exercise price per share
for the Base Option shall be the per share fair market value of the Common Stock
on the Effective Date. The Base Option shall be fully vested and exercisable
upon grant. The Base Option shall be treated as an incentive stock option to the
extent permitted under the Internal Revenue Code and related regulations.
(c) Company shall grant Executive a stock option exercisable for up
to 400,000 shares of Common Stock ("Second Option"). The exercise price per
share for the Second Option shall be the per share fair market value of the
Common Stock on the Effective Date. The Second Option shall become exercisable
on each anniversary of the Start Date as to 25% of the number of shares
initially subject to the Second Option, provided in each case that Executive's
employment with Company has not terminated before such date.
(d) Company shall grant Executive a stock option exercisable for up
to 200,000 shares of Common Stock ("Performance Option"). The exercise price per
share for the Performance Option shall be the per share fair market value of the
Common Stock on the Effective Date. The Performance Option shall become
exercisable as to 50,000 shares on each of the first four anniversaries of the
Start Date if the incentive goals established by the Board have been met,
provided in each case that the Executive's employment with the Company has not
terminated prior to such date. The incentive goals for subsequent fiscal years
shall be specified by the Compensation Committee of the Board prior to the
beginning of each fiscal year. The Board's reasonable determination as to
whether an objective has been accomplished will be final and binding.
(e) The vesting of the Shares and the Second Option shall accelerate
by 12 months upon the closing of an Acquisition (as defined below), or as to
such greater amount as is necessary for Executive in total to receive vesting in
shares and options as to no less than 500,000 shares on such date, including
full vesting of the remainder of the 50,000 shares. For purposes of the
Agreement, an "Acquisition" shall mean (i) a merger, reorganization or sale of
substantially all of the assets of the Company if the holders of a majority of
the voting securities of the Company immediately before such transaction
(counting each share of Class A Common Stock as a single share and ignoring the
additional votes of such shares) do not constitute the holders of a majority of
the voting securities of the surviving corporation immediately after such
transaction or (ii) the acquisition of more than 50% of the Company's voting
equity securities by a single person or entity.
(f) Executive's option to purchase 30,000 shares of Common Stock
granted prior to the Effective Date shall remain in effect and shall be subject
to the terms and conditions of the option agreement under which it was granted.
-2-
3
4. Company Policies. Executive has reviewed and will comply with
Company's personnel policies, including signing Company's standard Proprietary
Information Agreement.
5. Term and Termination.
(a) The term of this Agreement shall continue until terminated by
either party in accordance with this Section 6.
(b) Company may terminate this Agreement at any time for Cause (as
defined below) without any severance obligation of the Company. "Cause" means
(i) willful or habitual neglect of Executive's obligations under this Agreement,
(ii) misuse of corporate funds, (iii) any other act of gross misconduct. A third
party arbitrator selected by mutual consent will make a final and binding
decision on any issue covered by this clause.
(c) Company may terminate this Agreement at any time without Cause,
provided that Company shall pay Executive as a severance payment a monthly
amount equal to his then current monthly base salary (less applicable
withholding) for a period of 12 months following the date of termination. In
addition, upon such termination, the vesting of the Shares and the Second Option
shall accelerate by 12 months from the vesting at the date of such termination.
The severance payments described in this Section 6(c) and the acceleration of
the vesting of the Shares and the Second Option shall discharge all of the
Company's obligations to the Executive.
(d) This Agreement may be terminated by the Executive at any time
upon 60 days written notice, in which case the Company shall have no severance
obligation to the Executive.
(e) This Agreement shall not constitute an agreement to employ
Executive for a specified term.
6. General.
(a) This Agreement shall be binding upon the legal representatives,
distributees, successors and assigns of the parties hereto.
(b) This Agreement and the exhibits hereto contain the entire
agreement of the parties, and may not be changed orally, but only by a writing
signed by the party against whom enforcement of such change is sought.
(c) If any provision of this Agreement is held invalid, illegal or
unenforceable, such provisions shall be deemed deleted and such deletion shall
not affect the validity of other provisions of this Agreement.
-3-
4
(d) This Agreement shall be governed by and construed according to
the laws of the State of California. The federal and state courts of the state
of California shall have exclusive jurisdiction to adjudicate any dispute rising
out of this Agreement.
INTEGRATED PROCESS EQUIPMENT CORP.:
By:_____________________________
Title:__________________________
EXECUTIVE:
________________________________
-4-
