EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of this 30th day of
December 2004 ("Effective Date"), by and among Pacific Magtron International
Corp., a Nevada corporation ("PMIC"), Encompass Group Affiliates, Inc., a
Delaware corporation ("Encompass"), Advanced Communication Technologies, Inc., a
Florida corporation ("ACT"), and Xxxxxxxx X. Xx, an individual whose address is
________________________________ ("Executive"). For purposes hereof, the terms
PMIC, Encompass and ACT shall include each of their respective subsidiaries and
PMIC, Encompass and ACT shall be referred to collectively herein as the
"Company."
WITNESSETH
WHEREAS, Executive presently serves as a Director and as President, Chief
Executive Officer, Chief Financial Officer and Treasurer of PMIC;
WHEREAS, ACT, Executive and certain other shareholders of PMIC have
entered into a Stock Purchase Agreement, pursuant to which ACT will purchase all
of the shares of common stock of PMIC owned by Executive and each such other
shareholder (the "Stock Purchase"); and
WHEREAS, it is a condition to the Stock Purchase that Executive enter into
this Agreement with the Company effective as of the Effective Date.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Employment. PMIC hereby employs Executive, and Executive hereby accepts
employment with PMIC, as Chief Financial Officer and Chief Operating Officer, or
such other senior executive position as may be determined by the Board of
Directors of PMIC (the "Board") from time to time during the Employment Period
(as defined below). For purposes of this Agreement, "senior executive position"
shall mean a position of Vice President or a more senior position. In addition
to his duties set forth in this Section 1 and Section 3 below, Executive shall
at the request of the PMIC CEO (as defined below) or the Board serve as an
officer or director of PMIC or any subsidiary of PMIC, without additional
compensation and subject to any policy of the Compensation Committee of the
Board (the "PMIC Compensation Committee") with regard to directors' fees.
2. Term; Renewal. The term of this Agreement shall commence on the
Effective Date and expire on the third anniversary thereof (the "Employment
Period"), unless earlier terminated in accordance with its terms; provided,
however, that the Employment Period may, by written agreement between the
parties hereto, be extended for an additional one-year period.
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3. Employment and Duties.
3.1 Duties and Responsibilities.
(a) Executive's area of responsibility during the Employment
Period shall be that of Chief Financial Officer and Chief Operating Officer of
PMIC. Executive shall directly report to the Chief Executive Officer of PMIC
(the "PMIC CEO"), or such other senior executive officer of Encompass or ACT, as
determined from time to time by the Company. The services to be rendered by
Executive pursuant to this Agreement shall consist of such services as defined
and directed by the Board or the PMIC CEO.
(b) During the Employment Period, Executive shall serve the
Company faithfully and to the best of his ability; shall devote his entire
working time, attention, energy and skill to his employment and the benefit and
business of the Company; and shall use his best efforts, skills and ability to
promote the Company's interests and to perform such duties as from time to time
may be reasonably assigned to him and are consistent with his titles and
positions with the Company.
(c) During the Employment Period, in addition to any other
duties or responsibilities the Company may give to Executive consistent with
Section 1, Executive shall, subject to Section 3.2 herein, be required to sign,
and shall sign, all certifications and such other documents or instruments
requested by the Board, the Chief Executive Officer of ACT, or the PMIC CEO in
connection with PMIC's and/or ACT's obligations under or to (i) the Securities
and Exchange Commission, (ii) any exchange or association on which the Company's
shares of capital stock are listed, (iii) any federal, state or local authority,
and/or (iv) any other governmental, quasi-governmental or non-governmental
entity or organization (foreign or domestic) that regulates or has authority
over PMIC and/or ACT. In addition, in the event Executive, in his current
position or in any position Executive accepts in the future, becomes obligated
to sign certifications and such other documents or instruments as may be
required by the rules and regulations promulgated by any of (i) through (iv)
above, Executive shall, subject to Section 3.2 herein, sign all such
certifications and other documents or instruments as required thereby.
3.2 Observance of Rules and Regulations. Executive agrees to observe
and comply with all applicable laws and regulations, as well as the rules and
regulations of the Company with respect to the performance of his duties.
4. Compensation; Benefits and Expenses.
4.1 Base Salary. As compensation for the services to be rendered
hereunder, during the Employment Period, the Company shall pay to Executive a
minimum annual base salary (the "Base Salary") of $120,000.00. The Base Salary
shall be payable in accordance with usual payroll practices of the Company.
Executive's Base Salary shall be reviewed annually by the PMIC Compensation
Committee during the Employment Period and may be increased, but not decreased,
from time to time by the PMIC Compensation Committee in its sole discretion.
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4.2 Bonus.
(a) Within thirty (30) days after the Effective Date,
Executive shall receive a signing bonus in the amount of $225,000.
(b) Immediately following each fiscal year, the Company shall
set aside for the payment of PMIC executive bonuses, an amount equal to ten
percent (10%) of net income of PMIC during such fiscal year (the "PMIC Bonus
Pool"). For each fiscal year or portion thereof after the Effective Date and
during the Employment Period, the Company shall pay to Executive an annual
performance bonus, in cash, equal to a portion of the PMIC Bonus Pool, as
determined by the PMIC Compensation Committee, in its sole discretion (the "PMIC
Performance Bonus").
For purposes hereof, "net income" shall mean, with respect to PMIC, for any
fiscal year, the net income (loss) of PMIC for such fiscal year, determined in
accordance with generally accepted accounting principles, consistently applied;
provided, however, that there shall be excluded from net income (a) the net
income (loss) of any person in which PMIC has a joint interest with a third
party, except to the extent such net income is actually paid to PMIC by dividend
or other distribution during such fiscal year, (b) the net income (or loss) of
any person accrued prior to the date it becomes a subsidiary of PMIC or is
merged into or becomes consolidated with PMIC or its assets are purchased by
PMIC, and (c) the net income (if positive) of any subsidiary of PMIC to the
extent that the declaration or payment of dividends or similar distributions of
such net income by such subsidiary (i) is not at that time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order statute, rule or governmental regulation or (ii) would be subject
to any taxes payable on such dividends or distributions.
(c) In addition to the PMIC Performance Bonus, Executive may
receive, and ACT may grant to Executive, restricted shares of common stock of
ACT, with a vesting schedule and other terms established by the Compensation
Committee of the Board of Directors of ACT (the "ACT Compensation Committee"),
in its sole discretion (the "Incentive Bonus").
(d) Executive acknowledges that the amount of the PMIC Performance
Bonus and the amount of the Incentive Bonus shall at all times be determined by
the PMIC Compensation Committee and the ACT Compensation Committee,
respectively, in their respective sole discretion. The Company shall pay each of
the Performance Bonus and the Incentive Bonus to Executive within thirty (30)
days after the Company's audited results for the applicable fiscal year are
delivered to the Company.
4.3 Earn-Out.
(a) Earn-Out Shares. In the event Pacific Magtron, Inc. ("PMI"),
Pacific Magtron (GA), Inc. ("PMI-GA"), and LiveWarehouse, Inc. ("LW") achieve
the Milestones (as defined in Section 4.3(b) below) for any year during the
three (3) year period commencing January 1, 2005 and expiring December 31, 2007,
Executive shall have the right to receive on March 31 of the immediately
following calendar year, the applicable ratable portion of 66,666,666 shares of
restricted common stock of ACT (priced at $.01 per share, or $666,666 in the
aggregate), to be earned at the end of each such year at the rate of 25% for
each of the first and second years and 50% for the third year (the "Shares");
provided, that in the event the Milestones are not achieved in any year, except
as provided below, such ratable portion of Shares shall be forfeited entirely,
without any ability to re-earn such Shares in a future year; provided further,
that in the event Executive's employment with the Company is terminated for
"cause" by the Company (as contemplated by Section 6.1 of this Agreement) prior
to the expiration of the initial Employment Period, all of the Shares earned or
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to be earned by Executive shall be forfeited. In the event that Executive's
employment with the Company is terminated prior to the expiration of the initial
Employment Period for any reason other than "cause," Executive shall be
permitted to receive the Shares earned by him prior to such termination, but
shall in no event be entitled to receive Shares to be earned after the
Termination Date (as defined in Section 6.1 below). Notwithstanding the
foregoing, the number of Shares and the price per Share shall be adjusted
accordingly for stock splits, reverse stock splits and other recapitalizations
effected by ACT, so that Executive retains the right, after accounting for such
adjustment, to receive the same percentage of ACT's outstanding shares of Common
Stock as Executive would have had the right to receive had such adjustment not
been so effected.
Upon earning the Shares at the end of each year, if applicable, the Shares will
be placed in escrow with a mutually agreeable escrow agent to be held and
released in accordance with the terms of an escrow agreement in substantially
the form of Exhibit "A" hereto; provided, however, that in the event that the
employment of Executive is terminated by the Company prior to the expiration of
the initial Employment Period without cause (as contemplated by Section 6.2 of
this Agreement), Executive terminates this Agreement for Good Reason (as
contemplated by Section 6.3 of this Agreement), or this Agreement is terminated
due to Executive's death or Disability (as defined below), Executive shall
receive any Shares earned by him no later than the later of (a) the immediately
following March 31 or (b) thirty (30) days after the Termination Date. Upon
release from escrow, the Shares will include piggyback registration rights,
subject to customary underwriters' cutbacks.
Upon receipt of the Shares, Executive will acquire the Shares for his own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act of 1933, as amended. Executive is an "accredited
investor," as such term is defined in Rule 501(a) promulgated pursuant to the
Securities Act of 1933, as amended. Executive acknowledges that Executive has
had the opportunity to ask questions of and receive answers from, or obtain
additional information from, the executive officers of the Company concerning
the financial and other affairs of the Company, and to the extent deemed
necessary in light of such personal knowledge of the Company's affairs,
Executive has asked such questions and received answers to the full satisfaction
of Executive. Executive understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares or the fairness of suitability of
the investment in the Shares nor have such authorities passed upon or endorsed
the merits of the offering of the Shares.
Notwithstanding the foregoing, in the event that the Milestones are not achieved
in a given year, the Board of Directors of ACT shall have the right, in its sole
and absolute discretion, to grant to Executive all or a portion of the Shares
that could have been earned by Executive during such year.
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(b) Milestones. Revenue and EBITDA (earnings before interest, taxes,
depreciation and amortization) herein shall be defined according to generally
accepted accounting principles and no allocation from PMIC, ACT or Encompass
overhead shall be included in the calculation of EBITDA. The Milestones for the
combined Revenues and EBITDA of PMI, PMI-GA and LW are:
Calendar Year End Revenues EBITDA
----------------- -------- ------
December 31, 2005 $70,000,000 $490,000
December 31, 2006 $82,000,000 $738,000
December 31, 2007 $95,000,000 $950,000
Notwithstanding anything contained herein to the contrary, the
determination of the Milestones shall be based on unaudited pro forma financial
statements of PMI, PMI-GA and LW, prepared by the management of PMIC and
approved by Executive, the Chief Executive Officer of ACT and the ACT
Compensation Committee.
4.4 Other Benefits. Executive shall also be eligible to participate
in any life and health insurance programs and any incentive, savings and
retirement plans that the Company makes available to all of its executives of
similar seniority. Executive shall also be eligible to receive discretionary
performance based bonuses as approved and authorized by the ACT Compensation
Committee, including any incentive stock programs approved by ACT's
shareholders.
4.5 Business Expenses. Executive will be reimbursed, in accordance
with the Company's expense reimbursement policy, for business expenses that have
been pre-approved by the Board or the PMIC CEO upon presentation of vouchers or
other documents reasonably necessary to verify the expenditures and sufficient,
in form and substance, to satisfy Internal Revenue Service requirements for such
expenses.
4.6 Vacation. Executive shall be entitled to take up to four (4)
weeks of vacation per calendar year, which shall be taken in accordance with the
Company's vacation policy in effect from time to time for executives of
comparable seniority.
5. No Competitive Activities; Confidentiality; Invention
5.1 General Restriction. During the Employment Period and for a
period of two (2) years thereafter (the "Restricted Period"), Executive
covenants and agrees that, except on behalf of the Company, he will not,
directly or indirectly:
(a) Competing Business. Own, manage, operate, control,
participate in the ownership, management, operation or control of, be employed
by, or provide services as a consultant to, any individual or business that is
involved in business activities that are the same as, similar to or in
competition with, directly or indirectly, any business activities conducted, or
actively being planned, by Encompass and/or PMIC during the Restricted Period
and anywhere in the United States and Canada (it being acknowledged that
Encompass' and/or PMIC's businesses are international in scope). The ownership
of less than one percent (1%) of the outstanding stock of any public corporation
shall not be deemed a violation of this provision.
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(b) Soliciting Customers. Attempt in any manner to contact or
solicit any individual, firm, corporation or other entity (i) that is or has
been, a customer of Encompass and/or PMIC at any time during the Restricted
Period, (ii) to which a proposal has been made by Encompass and/or PMIC during
the Restricted Period or (iii) appearing Encompass' and/or PMIC's new business
target list on the date of Executive's termination (as such list has been
prepared and maintained in accordance with Encompass' and/or PMIC's past
practice), for the purpose of providing services or products similar to the
services and products provided by Encompass and/or PMIC, or engaging in any
activity which could be, directly or indirectly, competitive with the business
of Encompass and/or PMIC.
(c) Interfering with Other Relations. Persuade or attempt to
persuade any supplier, vendor, licensor or other entity or individual doing
business with Encompass and/or PMIC to discontinue or reduce its business with
Encompass and/or PMIC or otherwise interfere in any way with the business
relationships and activities of Encompass and/or PMIC.
(d) Employees. Attempt in any manner to solicit any individual, who
is at the time of such attempted solicitation, or was at any time during the one
(1) year period preceding the termination of Executive's employment, an employee
or consultant of Encompass and/or PMIC, to terminate his or her employment or
relationship with Encompass and/or PMIC, or engage such individual, as an
employee or consultant. Cooperate with any other person in persuading, enticing
or aiding, or attempting to persuade, entice or aid, any employee of or
consultant to Encompass and/or PMIC to terminate his or her employment or
business relationship with Encompass and/or PMIC, or to become employed as an
employee or retained as a consultant by any person other than Encompass and/or
PMIC.
In the event of a voluntary or involuntary filing under Chapter 7 of the United
States Bankruptcy Code by PMIC and Encompass that is not dismissed within ninety
(90) days, Executive shall no longer be bound by the restrictions contained in
this Section 5.1.
5.2 Confidentiality Agreement. Executive shall not, either during
the Employment Period or at any time thereafter, use or disclose to any third
person any Confidential Information (as defined below) of the Company, other
than at the direction of the Company, or pursuant to a court order or subpoena,
provided that Executive will give notice of such court order or subpoena to the
Company prior to such disclosure. Upon the termination of Executive's employment
with the Company for any reason, Executive shall return any notes, records,
charts, formulae or other materials (whether in hard copy or computer readable
form) containing Confidential Information (as defined below), and will not make
or retain any copies of such materials. Without limiting the generality of the
foregoing, the parties acknowledge that the Company from time to time may be
subject to agreements with its customers, suppliers or licensors to maintain the
confidence of such other persons' confidential information. The terms of such
agreements may require that the Company's employees, including Executive, be
bound by such agreements, and Executive shall be deemed so bound upon notice to
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him of the terms of such agreements. The term "Confidential Information" as used
herein shall mean any confidential or proprietary information of the Company
whether of a technical, engineering, operational, financial or economic nature,
including, without limitation, all prices, discounts, terms and conditions of
sale, trade secrets, know-how, customers, inventions, business affairs or
practices, systems, products, product specifications, designs, plans,
manufacturing and other processes, data, ideas, details and other information of
the Company. Confidential Information shall not include information which can be
proven by Executive to have been developed by his own work as of the Effective
Date completely independent of its disclosure by the Company or which is in the
public domain, provided such information did not become available to the general
public as a result of Executive's breach of this Section 5.2.
5.3 Disclosure of Innovations. Executive shall make prompt and full
written disclosure to the Company and solely the Company of all writings,
inventions, processes, methods, plans, developments, improvements, procedures,
techniques and other innovations of any kind that Executive may make, develop or
reduce to practice, alone or jointly with others, at any time during the
Employment Period, whether during working hours or at any other time and whether
at the request or upon the suggestion of the Company or otherwise, and whether
or not they are eligible for patent, copyright, trademark, trade secret or other
legal protection (collectively, "Innovations"). Examples of Innovations shall
include, but are not limited to, discoveries, research, formulas, tools,
know-how, marketing plans, new product plans, production processes, advertising,
packaging and marketing techniques and improvements to computer hardware or
software. The written disclosures provided for herein shall be made to the PMIC
CEO or the Board.
5.4 Assignment of Ownership of Innovations. All Innovations shall be
the sole and exclusive property of the Company. Executive hereby assigns all
rights, title or interest in and to the Innovations to the Company. At the
Company's request and expense, during the Employment Period and at any time
thereafter, Executive will assist and cooperate with the Company in all respects
and will execute documents and give testimony to obtain, maintain, perfect and
enforce for the Company any and all patent, copyright, trademark, trade secret
and other legal protections for the Innovations.
5.5 Remedies. Executive acknowledges that the restrictions contained
in the foregoing Sections 5.1 through 5.4, in view of the nature of the business
in which the Company is engaged, are reasonable and necessary in order to
protect the legitimate interests of the Company, and that the legal remedies for
a breach of any of the provisions of this Section 5 will be inadequate and that
such provisions may be enforced by restraining order, injunction, specific
performance or other equitable relief. Such equitable remedies shall be
cumulative and in addition to any other remedies which the injured party or
parties may have under applicable law, equity, this Agreement or otherwise.
Executive shall not, in any action or proceeding to enforce any of the
provisions of this Section 5, assert the claim or defense that an adequate
remedy at law exists. The prevailing party shall be entitled to recover its
legal fees and expenses in any action or proceeding for breach of this Section
5.
5.6 Company Property. All Confidential Information; all Innovations;
and all correspondence, files, documents, advertising, sales, manufacturers' and
other materials or articles or other information of any kind, in any media, form
or format furnished to Executive by the Company, which may not deemed
confidential, shall be and remain the sole property of the Company ("Company
Property"). Upon termination of Executive's employment or at the Company's
request, whichever is earlier, Executive shall immediately deliver to the
Company all such Company Property.
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5.7 Public Policy/Severability. The parties do not wish to impose
any undue or unnecessary hardship upon Executive following his departure from
employment with PMIC and/or Encompass, as the case may be. The parties have
attempted to limit the provisions of this Section 5 to achieve such a result,
and the parties expressly intend that all provisions of this Section 5 be
construed to achieve such result. If, contrary to the effort and intent of the
parties, any covenant or other obligation contained in this Section 5 shall be
found not to be reasonably necessary for the protection of the Company, to be
unreasonable as to duration, scope or nature of restrictions, or to impose an
undue hardship on Executive, then it is the desire of the parties that such
covenant or obligation not be rendered invalid thereby, but rather that the
duration, scope or nature of the restrictions be deemed reduced or modified,
with retroactive effect, to render such covenant or obligation reasonable, valid
and enforceable. The parties further agree that in the event a court, despite
the efforts and intent of the parties, declares any portion of the covenants or
obligations in this Section 5 invalid, the remaining provisions of this Section
5 shall nonetheless remain valid and enforceable.
6. Termination.
6.1 Termination For Cause. Notwithstanding anything to the contrary
contained herein, this Agreement may be terminated immediately for "cause," at
which time the Company shall have no further obligations or liabilities to
Executive whether under this Agreement or otherwise and Executive's right to
further compensation and benefits hereunder (including, but not limited to,
unearned Shares) shall immediately cease, other than payment to Executive of
Base Salary accrued, and reimbursement of expenses incurred in accordance with
Section 4.5, prior to the effective date of termination of this Agreement (the
"Termination Date"). As used herein and throughout this Agreement, the term
"cause" shall mean (i) any act or omission by Executive that constitutes
malfeasance or misfeasance in the course of Executive's duties hereunder, or in
the objectively reasonable judgment of the Chief Executive Officer of ACT, the
Board of Directors of ACT, the Board or the PMIC CEO, Executive has been grossly
negligent (including habitual neglect of duties), or insubordinate in carrying
out his duties hereunder, (ii) a material breach of this Agreement by Executive
that is not cured within twenty (20) days of receipt of written notice thereof,
(iii) Executive's breach of a fiduciary duty owed to the Company or its
affiliates, or (iv) Executive's conviction of, or pleading nolo contendere to, a
criminal offense or crime constituting a misdemeanor or felony, or conviction in
respect to any act involving fraud, dishonesty or moral turpitude (other than
minor traffic infractions or similar minor offenses).
6.2 Termination without Cause.
(a) Without Cause. This Agreement may be terminated by the
Company without cause and for any reason or no reason prior to the expiration of
the Employment Period upon thirty (30) days' prior written notice from the
Company to the Executive.
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(b) Severance. In the event that the Company terminates
Executive's employment without cause, the Company shall pay to Executive (i)
Base Salary accrued, Shares earned in accordance with Section 4.3, and expenses
incurred in accordance with Section 4.5, prior to the Termination Date, (ii) any
unpaid bonus owed to Executive for a prior fiscal year, (iii) other benefits
earned by Executive in accordance with Section 4.4 ((i), (ii) and (iii),
collectively, the "Accrued Payments"), which Accrued Payments shall be paid to
Executive in accordance with Section 4.1, Section 4.2, Section 4.3 and Section
4.5, as applicable, (iv) any accrued vacation under Section 4.6, and (v) an
additional amount of Base Salary which would have been payable to Executive
during the six (6) month period immediately following the Termination Date (the
"Severance Payment"), which Severance Payment shall be payable in cash to
Executive in equal monthly installments on the first business day of each
calendar month during the six (6) month period immediately following the
Termination Date. Except as provided in the preceding sentence, the Company
shall have no further obligations or liabilities to Executive whether under this
Agreement or otherwise and Executive's right to further compensation and
benefits hereunder (including, but not limited to, unearned Shares) shall
immediately cease.
6.3 Termination for Good Reason.
(a) Good Reason. Executive may terminate this Agreement for
Good Reason at any time within ninety (90) days after the Executive first has
actual knowledge of the occurrence of such Good Reason. For purposes of this
Agreement, the term "Good Reason" shall mean any of the following: (i) the
assignment to Executive of any duties that are not consistent with the duties
set forth in Sections 1 and 3 of this Agreement or any other action by the
Company that results in a material diminution in any of the Executive's
positions with the Company or in the Executive's authority, duties or
responsibilities and to which Executive has not consented (excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company within ten (10) days after receipt of
notice thereof given by Executive); (ii) any failure by the Company to comply
with any of the provisions of Section 4 of this Agreement provided such failure
is for an amount in excess of $10,000 and not cured within five (5) days after
receipt of notice thereof given by Executive or is an isolated, insubstantial
and inadvertent failure which is not remedied by the Company within ten (10)
days after receipt of notice thereof given by the Executive; (iii) the Company's
requiring Executive, without Executive's consent and full agreement, to be based
at any office other than at PMIC's headquarters located in Milpitas, California;
and (iv) any failure by the Company to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Encompass, ACT or PMIC to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.
(b) Severance. In the event that Executive terminates this
Agreement for Good Reason, the Company shall pay to Executive the Severance
Payment in accordance with Section 6.2(b) of this Agreement. Except as provided
in the preceding sentence, the Company shall have no further obligations or
liabilities to Executive whether under this Agreement or otherwise and
Executive's right to further compensation and benefits hereunder (including, but
not limited to, unearned Shares) shall immediately cease.
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6.4 Termination of Other Positions. Upon the Termination Date,
Executive hereby resigns as Chief Financial Officer and Chief Operating Officer
of PMIC and from any and all other positions as officer and/or director
Executive may then hold with the Company, and as fiduciary of any benefit plan
of the Company. Executive shall promptly execute any further reasonable
documentation as requested by the Company and, if Executive is to receive any
payments from the Company, execution of such further documentation shall be a
condition thereof.
7. Disability or Death.
7.1 Disability. If, during the Employment Period, Executive becomes
disabled or incapacitated as determined under the Company's Long Term Disability
Policy ("Permanently Disabled"), the Company shall have the right at any time
thereafter (but in no event less than 120 days after the event causing such
disability or incapacity), so long as Executive is then still Permanently
Disabled, to terminate this Agreement upon thirty (30) days' prior written
notice to Executive. In the event the Company does not have a Long Term
Disability Policy at the time of the event causing the Executive to become
Permanently Disabled, "Permanently Disabled" shall mean Executive's inability to
fully perform his duties and responsibilities hereunder to the full extent
required by the Company by reason of illness, injury or incapacity for 120
consecutive days or for more than six (6) months during any twelve (12) month
period. If the Company elects to terminate this Agreement in the event that
Executive becomes Permanently Disabled, the Company shall have no further
obligations or liabilities to Executive, whether under this Agreement or
otherwise (including, but not limited to, unearned Shares), other than payment
to Executive of the Accrued Payments, which Accrued Payments shall be paid to
Executive in accordance with Section 4.1, Section 4.2, Section 4.4 and Section
4.5, as applicable.
7.2 Death. If Executive dies during the Employment Period, this
Agreement shall automatically terminate as of the date of Executive's death, and
the Company shall have no further obligations or liabilities to Executive,
whether under this Agreement or otherwise (including, but not limited to,
unearned Shares), other than payment to Executive's estate of the Accrued
Payments, which Accrued Payments shall be paid to Executive in accordance with
Section 4.1, Section 4.2, Section 4.3 and Section 4.5, as applicable.
8. Dispute Resolution. If there shall be any dispute between the Company
and Executive (i) in the event of any termination of Executive's employment by
the Company, or (ii) otherwise arising out of this Agreement, such dispute shall
be resolved in accordance with the dispute resolution procedures set forth in
Exhibit B attached to this Agreement, the provisions of which are incorporated
as a part of this Agreement, and the parties of this Agreement agree that such
dispute resolution procedures will be the exclusive method for resolution of
disputes under this Agreement; provided, however, that (a) the Company or
Executive may seek preliminary judicial relief if, in such party's judgment,
such action is necessary to avoid irreparable injury during the pendency of such
procedures, and (b) nothing in Exhibit B will prevent either party from
exercising the rights of termination set forth in this Agreement. IT IS
EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS AGREEMENT, WHICH INCORPORATES BINDING
ARBITRATION, THE COMPANY AND EXECUTIVE AGREE TO WAIVE COURT OR JURY TRIAL
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9. Indemnification. Each of the Company and Executive shall indemnify the
other for any losses, damages, liabilities, judgments, claims, costs, penalties
and expenses incurred by such other party (including, without limitation, costs
and reasonable attorneys' fees and costs), resulting from the indemnifying
party's failure to perform any of their respective obligations contained in this
Agreement.
10. Governing Law. This Agreement shall be governed by the internal laws
of the State of Delaware, without regard to its or any other jurisdiction's
conflict of laws principles. Any action to enforce any term hereof shall be
brought exclusively within the state or federal courts of Delaware to which
jurisdiction and venue all parties hereby submit themselves.
11. Binding Effect. Except as otherwise herein expressly provided, this
Agreement shall be binding upon, and shall inure to the benefit of the parties
hereto, their respective heirs, legal representatives, successors and assigns.
12. Assignment. Any assignee of the Company shall have the right to
enforce the restrictive covenants set forth in this Agreement, and the Company
shall have the right to assign this Agreement, including the right to enforce
such covenants to any successor or assign of the Company. Executive shall not
assign this Agreement or his rights and obligations hereunder.
13. Notices. All notices, designations, consents, offers, acceptances,
waivers or any other communication provided for herein, or required hereunder,
shall be sufficient if in writing and if sent by registered or certified mail,
return receipt requested, overnight courier, or delivered by hand or confirmed
facsimile transmission to (i) Executive at his last known address on the books
of the Company or (ii) the Company at its principal place of business.
14. Additional Documents. Each of the parties hereto agrees to execute and
deliver, without cost or expense to any other party, any and all such further
instruments or documents and to take any and all such further action reasonably
requested by such other of the parties hereto as may be necessary or convenient
in order to effectuate this Agreement and the intents and purposes thereof.
15. Counterparts. This Agreement may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and such counterparts may
be delivered by facsimile transmission, which facsimile copies shall be deemed
originals.
16. Entire Agreement. This Agreement contains the sole and entire
agreement and understanding of the parties and supersedes any and all prior
agreements, discussions, negotiations, commitments and understandings among the
parties hereto with respect to the subject matter hereof, including, without
limitation, that certain expired Letter of Intent, dated May 18, 2004, by and
among Executive, the Company and the other parties named therein. There are no
representations, agreements, arrangements or understandings, oral or written,
between or among the parties concerning the subject matter hereto, which are not
fully expressed herein or in any supplemental written agreements of even or
subsequent date hereof.
11
17. Severability. If any provision of this Agreement, or the application
thereof to any person or circumstances, shall, for any reason and to any extent,
be invalid or unenforceable, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby, but rather shall be enforced to the greatest extent permitted by law.
18. Modification. This Agreement cannot be changed, modified or discharged
orally, but only if consented to in writing by both parties.
19. Contract Headings. All headings of the Sections of this Agreement have
been inserted for convenience of reference only, are not to be considered a part
of this Agreement, and shall in no way affect the interpretation of any of the
provisions of this Agreement.
20. Waiver. Failure to insist upon strict compliance with any of the
terms, covenants, or conditions hereof 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 time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
21. Representation of Executive. Executive, with the full knowledge that
the Company is relying thereon, represents and warrants that he has not made any
commitment inconsistent with the provisions hereof and that he is not under any
disability which would prevent him from entering into this Agreement and
performing all of his obligations hereunder.
22. Joint Participation in Drafting. Each party to this Agreement
participated in the drafting of this Agreement. As such, the language used
herein shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any party to this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the day and year first above written.
PACIFIC MAGTRON INTERNATIONAL CORP.,
a Nevada corporation
By: /s/ Xxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
ADVANCED COMMUNICATIONS TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
ENCOMPASS GROUP AFFILIATES, INC., a
Delaware corporation
By: /s/ Xxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
EXECUTIVE:
/s/ Xxxxxxxx X. Xx
------------------------------------------
XXXXXXXX X. XX
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EXHIBIT A
DISPUTE RESOLUTION PROCEDURES
1. If a controversy arises that is covered by Section 8 of the Agreement,
then not later than twelve (12) months from the date of the event that is the
subject of dispute Executive or the Company may serve on the other a written
notice specifying the existence of such controversy and setting forth in
reasonably specific detail the grounds of the notice ("Notice of Controversy");
provided that, in any event, the other party will have at least thirty (30) days
from and after the date of the Notice of Controversy to serve a written notice
of any counterclaim ("Notice of Counterclaim"). The Notice of Counterclaim will
specify the claim or claims in reasonably specific detail. If the Notice of
Controversy or the Notice of Counterclaim, as the case may be, is not served
within the applicable period, the claim set forth therein will be deemed to have
been waived, abandoned and rendered unenforceable.
2. For a three (3) week period following receipt of the Notice of
Controversy or the Notice of Counterclaim, as the case may be, the parties will
make a good faith effort to resolve the dispute through negotiation ("Period of
Negotiation"). Neither party will take any action during the Period of
Negotiation to initiate arbitration proceedings.
3. If the parties agree during the Period of Negotiation to mediate the
dispute, then the Period of Negotiation will be extended by an amount of time to
be agreed upon by the parties to permit such mediation. In no event, however,
may the Period of Negotiation be extended by more than five weeks or, stated
differently, in no event may the Period of Negotiation be extended to encompass
more than a total of eight weeks.
4. If the parties agree to mediate the dispute but are thereafter unable
to agree within a week on the format and procedures for the mediation, then the
effort to mediate will cease, and the period of Negotiation will terminate four
weeks from the Notice of Controversy or the Notice of Counterclaim, as the case
may be.
5. Following the termination of the Period of Negotiation, the dispute,
including the main claim and counterclaim, if any, will be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. ss.1 et seq.
("FAA"), and judgment upon the award may be entered in any court having
jurisdiction. The format and procedures of the arbitration are set forth below
(referred to below as the "Arbitration Agreement").
6. A notice of intention to arbitrate ("Notice of Arbitration") will be
served within forty-five (45) days of the termination of the Period of
Negotiation. If the Notice of Arbitration is not served within this period, the
claim set forth in the Notice of Controversy or the Notice of Counterclaim, as
the case may be, will be deemed to have been waived, abandoned and rendered
unenforceable.
7. The arbitration, including the Notice of Arbitration, will be governed
by the Commercial Rules of the American Arbitration Association ("AAA") in
effect on the date of the Notice of Arbitration, except that the terms of this
Arbitration Agreement will control in the event of any difference or conflict
between such Rules and the terms of this Arbitration Agreement.
8. The arbitrator will reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of Delaware. The
arbitration hearing will take place in Delaware.
9. There will be one arbitrator, regardless of the amount in controversy.
The arbitrator selected, in order to be eligible to serve, will be a lawyer in
Delaware with at least fifteen (15) years experience specializing in either
general commercial litigation or general corporate and commercial matters. In
the event the parties cannot agree on a mutually acceptable single arbitrator
from the list submitted by the AAA, the AAA will appoint the arbitrator who will
meet the foregoing criteria.
10. At the time of appointment and as a condition of the appointment, the
arbitrator will be apprised of the time limitations and other provisions of this
Arbitration Agreement and will indicate such dispute resolver's agreement to the
Tribunal Administrator to comply with such provisions and time limitations.
11. During the thirty (30) day period following appointment of the
arbitrator, either party may serve on the other a request for limited numbers of
documents directly related to the dispute. Such documents will be produced
within seven (7) days of the request.
12. Following the thirty-day period of document production, there will be
a forty-five (45) day period during which limited depositions will be
permissible. Neither party will take more than five (5) depositions, and no
deposition will exceed three (3) hours of direct testimony.
13. Disputes as to discovery or prehearing matters of a procedural nature
will be promptly submitted to the arbitrator pursuant to telephone conference
call or otherwise. The arbitrator will make every effort to render a ruling on
such interim matters at the time of the hearing (or conference call) or within
five (5) business days thereafter.
14. Following the period of depositions, the arbitration hearing will
promptly commence. The arbitrator will make every effort to commence the hearing
within thirty (30) days of the conclusion of the deposition period and, in
addition, will make every effort to conduct the hearing on consecutive business
days to conclusion.
15. An award will be rendered, at the latest, within nine (9) months of
the date of the Notice of Arbitration and within thirty (30) days of the close
of the arbitration hearing. The award will set forth the grounds for the
decision (findings of fact and conclusions of law) in reasonably specific
detail. The award will be final and nonappealable except as provided in the FAA
and except that a court of competent jurisdiction will have the power to review
whether, as a matter of law, based upon the findings of fact by the arbitrator,
the award should be confirmed or should be modified or vacated in order to
correct any errors of law made by the arbitrator. Such judicial review will be
limited to issues of law, and the parties agree that the findings of fact made
by the arbitrator will be final and binding on the parties and will serve as the
facts to be relied upon by the court in determining the extent to which the
award should be confirmed, modified or vacated.
Except for consequential damages arising from Executive's breach of
Section 5 of the Agreement, which shall not be limited, the award may only be
made for compensatory damages, and if any other damages (whether exemplary,
punitive, consequential, statutory or other) are included, the award will be
vacated and remanded, or modified or corrected, as appropriate to promote this
damage limitation.
Notwithstanding the foregoing, nothing contained herein shall limit the
Company's ability to seek a permanent injunction for Executive's breach of
Section 5 of the Agreement.
