EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 7 day of January, 2003, is made by and
between M-Wave, Inc., a Delaware corporation (the "Company"), and Xxxxxx
X'Xxxxxxx (the "Employee"), a resident of the State of Missouri.
WHEREAS, Company desires to employ the Employee upon the terms and
conditions set forth herein; and
WHEREAS, Employee desires to be employed by Company upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual undertakings of the
parties hereto, it is agreed as follows:
Article I
EMPLOYMENT OF EMPLOYEE
The Company employs the Employee to act as an executive in the title
role for the Company, defined in Exhibit A, with such powers and duties as are
customarily performed by persons holding the same positions in an operation of a
size and nature similar to the Company. The Employee accepts such employment
upon the terms of this Agreement, and hereby agrees to devote his energy and
ability to the interests of the Company and to comply with directions of the
Chief Executive Officer or the Board of Directors ("Board") of the Company.
Subject to Article VI, during the term of this Agreement it shall not be a
violation of this Agreement for the Employee to participate in other activities,
so long as such activities do not significantly interfere with the performance
of the Employee's responsibilities as an employee of the Company in accordance
with this Agreement.
Article II
COMPENSATION
2.1 Salary. Commencing with the date hereof, the Company shall pay to
the Employee in accordance with the normal payroll practices of the Company an
annual salary at a rate described in Exhibit A. The Board may from time to time
increase the Employee's annual salary, provided that, when such annual salary is
increased, it shall not thereafter be reduced below such higher amount.
2.2 Signing Bonus. Within ten business days after this Agreement is
signed by the Company and Employee, the Company shall pay Employee a signing
bonus in the amount described in Exhibit A.
2.3 Annual Bonus. The Employee shall be eligible for an annual bonus as
set forth on Exhibit B.
Article III
TERM OF AGREEMENT
3.1 Contract Term. Subject to the termination provisions hereinafter
provided, the term of this Agreement shall be from the date hereof through two
calendar years (730 days) ("Contract Term"), or, if later, such later date to
which the term of the Agreement is extended pursuant to the following sentence.
Six months prior to the expiration of the Contract Term (if neither party prior
to such date has provided the other party with written notice that the Agreement
will not be extended pursuant to this sentence) and thereafter, the Contract
Term shall be automatically extended each day by one day to create a new six
month term until, at any time on or after such date, the Company delivers
written notice (an "Expiration Notice") to Employee or Employee delivers an
Expiration Notice to the Company, in either case, to the effect that the
Agreement shall expire on a date specified in the Expiration Notice (the
"Expiration Date") that is not less than six months after the date the
Expiration Notice is delivered to the Company or the Employee, respectively.
Article IV
TERMINATION BENEFITS
4.1 Discharge for Cause or Voluntary Termination. If, before the end of
the Contract Term, the Company terminates the Employee's employment for Cause or
the Employee incurs a Voluntary Termination (as such terms are defined in
Sections 4.5(a) and (b)), the Agreement shall terminate without further
obligations to the Employee, except that the Company shall pay to the Employee
any accrued but unpaid portion of his annual salary and any bonus payable in
accordance with Exhibit A ("Accrued Obligations").
4.2 Disability. If, before the end of the Contract Term, the Employee's
employment terminates due to disability, as defined in the Company's disability
insurance policy, the Agreement shall terminate without further obligations to
the Employee, except that the Company shall pay to the Employee any Accrued
Obligations.
4.3 Death. If, before the end of the Contract Term, the Employee's
employment terminates due to his death, the Agreement shall terminate without
further obligations to the Employee, except that the Company shall pay any
Accrued Obligations to the Employee's beneficiary as specified in Section 7.4 in
a lump sum in cash within 60 days after the date of such death.
4.4 Termination Other Than For Cause or Voluntary Termination. If the
Employee's employment is terminated before the end of the Contract Term other
than (i) in a Voluntary Termination by the Employee, (ii) for Cause by the
Company, any parent or subsidiary of the Company or any successor to the Company
or any parent or subsidiary of the Company, (iii) by reason of death, or (iv) by
reason of disability, as defined in the Company's disability insurance policy,
the Agreement shall terminate without further obligations to the Employee,
except that (A) the Employee shall be entitled to the health and medical
benefits referenced in Section 5.4 for the six month period following such
termination, (B) the Company shall pay the Employee any Accrued Obligations, (C)
the Employee shall become fully vested in his Company stock options granted
under this Agreement or otherwise, and (D) the Company shall pay to the
Employee the annual salary in effect as of such termination in accordance with
normal payroll practices of the Company for six months; provided, however, that
if such termination of the Employee occurs on or after a sale of all of the
stock of the Company or a sale of all or substantially all of the Company's
assets, the Employee shall receive on the date of such termination a lump sum
payment equal to two times the Employee's annual salary in effect as of such
termination instead of the six months of salary referenced in subparagraph (D)
of this Section.
4.5 Definitions.
(a) "Cause" means termination of the employment of the Employee
by the Company, any parent or subsidiary of the Company or any successor to
the Company or any parent or subsidiary of the Company because of (1)
conviction by the Employee of any felony or other crime involving
dishonesty, fraud or moral turpitude, or (2) the Employee's habitual
neglect of his duties. Cause shall not mean a discharge because of:
(1) bad judgment or negligence other than habitual neglect of
duty; or
(2) any act or omission believed by the Employee in good
faith to have been in or not opposed to the interest of the
Company, any parent or subsidiary of the Company or any successor
to the Company or any parent or subsidiary of the Company
(without intent of the Employee to gain therefrom, directly or
indirectly, a profit to which he was not legally entitled); or
(3) any act or omission in respect of which a determination
could properly have been made by the Board or, if employed by any
parent or subsidiary of the Company, such parent or subsidiary
or, if employed by any successor to the Company or any parent or
subsidiary of the Company, such successor, that the Employee met
the applicable standard of conduct for indemnification or
reimbursement under the bylaws of such company or the laws and
regulations under which such company is governed, in each case in
effect at the time of such act or omission; or
(4) any act or omission with respect to which notice of
termination of employment of the Employee is given more than
twelve (12) months after the earliest date on which the Chief
Executive Officer of the Company or any member of the Board or,
if employed by a parent or subsidiary of the Company, such parent
or subsidiary or, if employed by a successor to the Company or
any parent or subsidiary of the Company, such successor, who is
not a party to the act or omission, knew or should have known of
such act or omission.
(b) "Voluntary Termination" means the voluntary resignation of
the Employee from employment by the Company, any parent or subsidiary of
the Company or any successor to the Company or any parent or subsidiary of
the Company, except that a Voluntary Termination shall not include a
resignation by the Employee following (1) a material reduction or adverse
alteration in the nature of the Employee's position, responsibilities or
authorities under this Agreement, (2) the Employee becoming the holder
of a lesser office or title than that held pursuant to the terms of the
Agreement, (3) any reduction of the Employee's compensation or benefits
under the terms of the Agreement, (4) the relocation of the Employee's job
outside of the Chicago metropolitan area, (5) any other material adverse
change to the terms and conditions of the Employee's employment under this
Agreement, or (6) a sale of all of the stock of the Company or a sale of
all or substantially all of the Company's assets, provided such resignation
is during the sixty day period beginning on the date which is four months
after such sale, provided that any such event in (1) through (5) hereof
shall not be cured by Employer within 30 days of written notice by Employee
and provided further that, if the Employee shall consent in writing to any
event described in subsection (1) through (5) in this Section 4.5(b), the
Employee's subsequent resignation shall be treated as a Voluntary
Termination, unless a subsequent event described in such subsections to
which Employee did not consent occurs.
Article V
OTHER BENEFITS
5.1 Initial Option Grant. As of the end of the day of the date this
Agreement is signed by the Company and Employee, the Company shall grant
Employee an option to purchase the number of shares described in Exhibit A of
common stock of the Company under the Company's 1992 Stock Option Plan, as
amended, having an exercise price per share equal to the fair market value (as
defined in the Stock Option Plan) of a share of common stock of the Company.
Except as otherwise provided in the Stock Option Plan, the option shall become
exercisable as described in Exhibit A.
5.2 Additional Option Grants. The Employee shall be eligible to receive
additional stock options as determined in the discretion of the Compensation
Committee of the Board based upon such factors as it determines in its
discretion. Any such additional options shall become exercisable as to 25% of
the number of shares subject to the option on the first anniversary of the date
of grant and on each anniversary thereafter.
5.3 Vacation. The Employee shall be eligible for vacation as described
in Exhibit A and six personal days per year.
5.4 Additional Benefits. The Employee shall be entitled to participate
in any pension, insurance, or other employee benefit plan, subject to the
eligibility requirements of such plans, and other perquisites which are
available to employees of the Company or which hereafter are made available to
the employees of the Company by the Board.
Article VI
RESTRICTIVE COVENANTS
6.1 Non-Competition. The Employee agrees that during the
Non-Competition Period, as defined hereinafter, he shall not enter into or
engage in or be connected with or engage to work for any individual, firm or
corporation which is engaged in or connected with any business which is in
competition with the Company in the continental United States or any other
country in which the Company is doing business or is reasonably expected to do
business, unless he obtains the express written approval of the Board in its
sole discretion after full disclosure of the nature
of the intended arrangement. The "Non-Competition Period" means the period of
the Employee's employment during the Contract Term and a period of one year
following the Employee's termination of employment for any reason.
6.2 Non-Solicitation. The Employee agrees that during the
Non-Competition Period, he shall not (a) encourage any employee of the Company
or any of its subsidiaries to leave his employment with the Company or
subsidiary or (b) solicit any customers of the Company or any of its
subsidiaries.
6.3 Non-Disclosure. The Employee agrees not to disclose either during
the period of his employment or at any time thereafter to any person, firm, or
corporation any information that the Company desires to protect and keep secret
and confidential concerning the business or affairs of the Company which he may
have acquired in the course of, or as incident to, his employment hereunder for
his own benefit or to the detriment or intended detriment of the Company.
6.4 Injunction. The Employee acknowledges that the Company relies on
the provisions of this Article VI and that monetary damages will not be an
adequate remedy to a breach of this Article, and that it would be impossible for
the Company to measure damages in the event of such a breach. Therefore, the
Employee agrees that, in addition to other rights that the Company may have, the
Company is entitled to an injunction preventing the Employee from doing any act
that would be in breach of this Article VI.
Article VII
MISCELLANEOUS
7.1 Expenses.
(a) Subject to the provisions of Section 7.1(c), if the Employee
incurs legal or other fees and expenses in a good faith effort to establish
entitlement to benefits under this Agreement, regardless of whether the
Employee ultimately prevails, the Company shall reimburse him for such fees
and expenses.
(b) Reimbursement of fees and expenses described in Section
7.1(a) shall be made monthly during the course of any action upon the
written submission of a request for reimbursement together with proof that
the fees and expenses were incurred.
(c) If the Employee's employment is terminated by the Company for
Cause, no reimbursement for fees and expenses shall be due to Employee
unless a court of competent jurisdiction determines that Cause does not
exists.
7.2 Certain Reduction of Payments by Company. If an accounting firm
selected by the Employee determines that any payments payable to the Employee
under this Agreement or otherwise are subject to tax under Code Section 4999,
the cash payments hereunder shall be reduced (but not below zero) as determined
by such accounting firm if and to the extent necessary to provide the Employee
with a greater net after-tax benefit, taking into account all taxes imposed on
the Employee under Sections 1 and 4999 of the Code, determined by applying
the highest marginal rate under Section 1 of the Code which the accountant
determines should apply to the Employee's taxable income for the taxable year.
The fees and expenses of the accounting firm for making the foregoing
determination shall be paid by the Company.
7.3 Assignment, Successors. The Company may freely assign its
respective rights and obligations under this Agreement to a successor of the
Company's business, without the prior written consent of the Employee. This
Agreement shall be binding upon and inure to the benefit of the Employee and his
estate and the Company and any assignee of or successor to the Company.
7.4 Beneficiary. If the Employee dies prior to receiving all of the
amounts to which he is entitled hereunder, the aggregate of such amounts shall
be paid in a single lump sum payment to the beneficiary designated in writing by
the Employee and if no such beneficiary is designated, to the Employee's estate.
7.5 Nonalienation of Benefits. Benefits payable under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, prior to actually being received by the
Employee, and any such attempt to dispose of any right to benefits payable
hereunder shall be void.
7.6 Severability. If all or any part of this Agreement is declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any paragraph or part of a paragraph so
declared to be unlawful or invalid shall, if possible, be construed in a manner
which will give effect to the terms of such paragraph or part of a paragraph to
the fullest extent possible while remaining lawful and valid.
7.7 Amendment and Waiver. This Agreement shall not be altered, amended
or modified except by written instrument executed by the Company and the
Employee. A waiver of any term, covenant, agreement or condition contained in
this Agreement shall not be deemed a waiver of any other terms, covenant,
agreement or condition, and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of any later
default thereof or of any other term, covenant, agreement or condition.
7.8 Notices. All notices required by this Agreement shall be in writing
and delivered by hand or by first class registered or certified mail, postage
prepaid, and addressed as follows:
If to the Company: M-Wave, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxx 00000
If to the Employee: Xxxxxx X'Xxxxxxx
000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxx 00000
Either party may from time to time designate a new address by notice given in
accordance with this paragraph.
7.9 No Mitigation. In no event shall Employee be obligated to seek
other employment or take any other action to mitigate the amounts payable to
Employee under any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned as a result of
Employee's employment by another employer.
7.10 Complete Agreement. This Agreement contains the entire agreement
of the parties with respect to the subject matter hereof and supercedes all
previous oral and written agreements and all contemporaneous oral negotiations,
commitments, writings and understandings.
7.11 Applicable Law. The provisions of this Agreement shall be
interpreted and construed in accordance with the laws of the State of Illinois,
without regard to its choice of law principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
M-WAVE, INC.
By:
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Its:
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EMPLOYEE:
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EXHIBIT A
To employment agreement dated as of January 7, 2003 by and between M-Wave, Inc.
and Xxxxxx X'Xxxxxxx ("Agreement").
(All capitalized terms used in this Exhibit are defined as set forth
in the Agreement)
TITLE: Chief Operating Officer as defined in the Company
organization chart.
ANNUAL SALARY: $175,000.
SIGNING BONUS: $75,000.
RELOCATION: Temporary housing allowance for 60 days. (up to $3,500)
Reimbursement for movement of household goods. (up to
$5,000)
Reimbursement of real estate commissions if present
residence is sold within 12 months of the date of this
agreement.
ANNUAL BONUS: To be determined.
Any annual bonus payable for a year shall be paid to
the Employee as soon as practicable after the end of
the year in respect of which the bonus is payable.
ACCRUED OBLIGATIONS: If, before the end of the Contract Term, the Employee's
employment terminates for any reason other than for
Cause or a Voluntary Termination, the Company shall pay
an annual bonus to the Employee, if any, for the year
of such termination as soon as practicable after the
termination equal to the product of the following:
(1) a fraction, the numerator of which is the
number of months (including as a whole month any
partial month) that have elapsed since the beginning of
the year until the date of such termination and the
denominator of which is twelve; and
(2) the annual bonus, if any, that the Employee
would be entitled to receive assuming that the rate at
which the performance goals have been achieved as of
the date of such termination and the Employee's base
salary as in effect at such termination would continue
until the end of the year.
INITIAL OPTION GRANT: 100,000 shares.
INITIAL OPTION GRANT
EXERCISE SCHEDULE: Except as otherwise provided in the Stock Option
Plan and subject to Section 4.4 of the Agreement, the
option shall become exercisable as to the rate of 25%
every six months from the date of the agreement,
whereas all options are vested after 24 months. The
exercise price will be closing price on the date of the
agreement.
VACATION: Three (3) weeks.
EXHIBIT B
Executive Bonus Plan
To be determined.
