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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 29 day of January, 2001, is made by and
between M-Wave, Inc., a Delaware corporation (the "Company"), and Xxxxxx X.
Xxxxx (the "Employee"), a resident of the State of Illinois.
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 five 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.
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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
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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
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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. After completing six months of employment, 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
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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
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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 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
If to the Employee: Xxxxxx X. Xxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
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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 29, 2001 by and between M-Wave, Inc.
and Xxxxxx X. Xxxxx ("Agreement").
(All capitalized terms used in this Exhibit are defined as set forth in the
Agreement)
TITLE: Chief Executive Officer as defined in the Company
organization chart.
ANNUAL SALARY: $160,000.
ANNUAL BONUS: For each calendar year during the Contract Term, the
Employee shall be eligible to receive an annual bonus
for such year based on a set of objectives as
determined in the discretion of the Compensation
Committee of the Board within the first sixty days of
the year ("Executive Bonus Plan"). The annual bonus
payable to the Employee (if any) shall be based on the
Company's or Employee's achieving minimum objectives
("Threshold Amount"). If the Employee's or Company's
performance for a year does not exceed the Threshold
Amount for a year, the Employee shall not receive any
bonus for such year. If the Threshold Amount is
satisfied for a year, the Employee shall receive an
annual bonus in the amount determined under the
Executive Bonus Plan, which amount shall not exceed 60%
of the base salary paid by the Company to the Employee
for the year.
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
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termination and the Employee's base salary as in effect
at such termination would continue until the end of the
year.
VACATION: Three (3) weeks.
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EXHIBIT B
Executive Bonus Plan
1. Sales volume must hit a threshold of at least $60 million in annual M-Wave
sales or the percent payout is zero.
2. After achieving the threshold described in Section 1, the following
schedule based on pre-tax profit margins for M-Wave applies:
a. Under 8% payout = 0%
b. 8% up to 9% = 20% of annual salary
c. 9% up to 10% = 35% of annual salary
d. 10% up to 11% = 50% of annual salary
e. 11% or greater = 60% of annual salary
3. After achieving the threshold described in Section 1, and achieving at
least an 8% pre-tax profit margin for M-Wave, a distribution of 2% to 3% of
the total outstanding shares of M-Wave per the discretion of the
Compensation Committee will be distributed in options per the following
schedule:
a. 2/3 of the distribution to Executives, dispersed on an individual
basis per the discretion of the M-Wave Compensation Committee.
b. 1/3 of the distribution to the salaried employees, dispersed on an
individual basis per the discretion of Management.
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