EXHIBIT 99.2
eMACHINES, INC.
XXXX XXXXXXXXX EMPLOYMENT AGREEMENT
This Agreement is entered into as of May 1, 2001 (the "Effective Date"), by
and between eMachines, Inc. (the "Company"), and Xxxx Xxxxxxxxx ("Executive").
WHEREAS, the Company desires to retain Executive in the capacity of Senior
Vice President, Customer Care, of the Company, and Executive desires to accept
such employment; and
WHEREAS the parties desire and agree to enter into an employment
relationship by means of this Agreement;
NOW THEREFORE in consideration of the premises and mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by and among the parties as follows:
1. Duties and Scope of Employment.
------------------------------
(a) Positions and Duties. As of the date of this Agreement,
--------------------
Executive will serve as Senior Vice President, Customer Care, of the Company.
During the Employment Term (as defined below), Executive will render such
business and professional services in the performance of his duties, consistent
with Executive's position within the Company, as shall reasonably be assigned to
him by the Company's Chief Executive Officer; provided, however, that the
Company's Board of Directors (the "Board") shall have the right to revise such
responsibilities from time to time as the Board may deem appropriate. The
Executive's services shall be performed at the Company's principal executive
offices.
(b) Term. The period of Executive's employment under this
----
Agreement, commencing as of May 14, 2001, is referred to herein as the
"Employment Term."
(c) Obligations. During the Employment Term, Executive will
-----------
perform his duties faithfully and in a diligent and competent manner and will
devote his full business efforts and time to the Company. For the duration of
the Employment Term, Executive agrees not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board.
2. At-Will Employment. The parties agree that Executive's employment
------------------
with the Company will be "at-will" employment and may be terminated at any time
with or without cause or notice. Executive understands and agrees that neither
his job performance nor promotions, commendations, bonuses or the like from the
Company give rise to or in any way serve as the basis for modification,
amendment, or extension, by implication or otherwise, of his employment with the
Company.
3. Compensation. As compensation for the services to be performed by
------------
Executive under this Agreement, the Company shall, during the Employment Term,
provide Executive with the compensation and benefits set forth in Sections 3 and
4 of this Agreement.
(a) Base Salary. The Company will pay Executive an annual
-----------
salary of Two Hundred Twenty Five Thousand Dollars ($225,000) (the "Base
Salary"). The Base Salary will be paid periodically in accordance with the
Company's normal payroll practices. The Base Salary will be subject to review
and adjustments will be made based upon the Company's normal performance review
practices.
(b) Signing Bonus. Executive shall receive a Seventy-Five
-------------
Thousand Dollar ($75,000) signing bonus payable thirty (30) days after the
commencement of employment (the "Signing Bonus").
(c) Subsequent Annual Bonuses. With respect to each year of
-------------------------
employment with the Company under this Agreement after the first year of such
employment, Executive shall be eligible to receive a bonus (each, a "Subsequent
Annual Bonus") pursuant to the Company's bonus program for Senior Vice
Presidents as then in effect except that with respect to Executive's second year
of employment with the Company, Executive shall be eligible to receive a bonus
of not less than Seventy-Five Thousand Dollars ($75,000) (the "Bonus Program").
Each Subsequent Annual Bonus shall be based upon Executive's achievement of
performance objectives set forth or established pursuant to the Bonus Program
for such year. Payment of each Subsequent Annual Bonus shall be made in
accordance with the Bonus Program; provided, however, that payment of the
Subsequent Annual Bonus is subject to Executive's employment with the Company
through the end of the applicable year of employment with the Company (based on
anniversary dates of the commencement of employment).
(d) Stock Option. Subject to approval of the Board, Executive
------------
will be granted a stock option (the "Option"), which will be, to the extent
possible under the One Hundred Thousand Dollar ($100,000) rule of Section 422(d)
of the Internal Revenue Code of 1986, as amended (the "Code"), an "incentive
stock option" (as defined in Section 422 of the Code), to purchase two hundred
fifty thousand (250,000) shares of the Company's Common Stock at an exercise
price per share equal to the per share fair market value of the Company's Common
Stock on the date of grant, determined in accordance with the Company's 1998
Amended and Restated Stock Plan (the "Option Plan"). Subject to the accelerated
vesting provisions set forth in Section 6(c) of this Agreement, the Option will
vest as to twenty-five percent (25%) of the shares subject to the Option one (1)
year after the commencement of employment, and as to 1/48th of the shares
subject to the Option monthly thereafter, so that the Option will be fully
vested and exercisable four (4) years from the vesting commencement date,
subject to Executive's continued service with the Company on the relevant
vesting dates. The Option will be subject to the terms, definitions and
provisions of the Option Plan and the stock option agreement by and between
Executive and the Company (the "Option Agreement").
4. Benefits, etc.
-------------
(a) Employee Benefits. During the Employment Term, Executive
-----------------
will be entitled to participate in the employee benefit plans currently and
hereafter maintained by the Company of
-2-
general applicability to other senior executives of the Company, including,
without limitation, the Company's group medical, dental, vision, disability,
life insurance, and flexible-spending account plans. The Company reserves the
right to cancel or change the benefit plans and programs it offers to its
employees at any time.
(b) Vacation. Executive will be entitled to fifteen (15) days
--------
of paid vacation per year in accordance with the Company's vacation policy, with
the timing and duration of specific vacations mutually and reasonably agreed to
by the parties hereto.
(c) Expenses. The Company will reimburse Executive for
--------
reasonable travel, entertainment or other expenses incurred by Executive in the
furtherance of or in connection with the performance of Executive's duties
hereunder, in accordance with the Company's expense reimbursement policy as in
effect from time to time.
(d) Relocation and Temporary Living Reimbursement. The Company
---------------------------------------------
will reimburse Executive for reasonable moving expenses incurred by Executive
and his family during their relocation from Executive's primary residence to the
Orange County, California area. The Company will reimburse Executive for
reasonable temporary living and storage expenses that Executive incurs during
the first ninety (90) days of the Employment Term, and during this period,
Company will provide Executive with such temporary housing in the Orange County,
California area as the Company reasonably selects.
(e) Housing Reimbursement. The Company will pay Executive the
---------------------
reasonable closing costs incurred by Executive as a result of the sale of his
primary residence located in The Woodlands, Texas, which amount shall be
"grossed up" for tax purposes at an assumed tax rate of thirty-six percent
(36%). Company shall also pay Executive the reasonable closing costs incurred by
Executive as a result of the purchase of his primary residence located in Orange
County, California, which amount shall be "grossed up" for tax purposes at an
assumed tax rate of thirty-six percent (36%).
(f) Golf Club Membership. The Company shall ask TriGem
--------------------
Computer, Inc. to transfer one of its memberships in the Coto de Caza Country
Club to Executive for Executive's use during the Employment Term. If a
membership is so transferred, Executive shall not be responsible for the Twenty-
One Thousand Dollar ($21,000) initiation fee (which shall be paid by the Company
and "grossed up" for tax purposes at an assumed tax rate of thirty-six percent
(36%)). Executive shall make all other payments associated with such membership,
however Executive shall be entitled to reimbursement from the Company of up to
Four Hundred Twenty Dollars ($420) per calendar month for any golf club fees. To
obtain such reimbursement, Executive must submit an expense report for the golf
club fees on a monthly basis in a manner consistent with the Company's travel
and entertainment policy as then in effect.
5. Termination.
-----------
(a) Termination by Company.
----------------------
(i) The Employment Team shall terminate upon
Executive's death; and
-3-
(ii) The Company may terminate the Employment Term for
Cause (as defined below), Total Disability (as defined below) or any other
reason, in each case, by written notice to Executive.
(b) Termination by Executive. Executive may terminate the
------------------------
Employment Term for Good Reason (as defined below) or for any other reason, in
each case, by written notice to the Company.
6. Effect of Termination.
---------------------
(a) Voluntary Termination by Executive; Termination for Death,
----------------------------------------------------------
Total Disability and Cause. If the Employment Term is voluntarily terminated by
--------------------------
Executive, is terminated because of Executive's death or Total Disability, or is
terminated by the Company for Cause, in each case, (i) all vesting of the Option
will terminate immediately, (ii) all payments of compensation by the Company to
Executive hereunder will terminate immediately (except as to amounts already
earned), (iii) Executive will only be eligible for severance benefits in
accordance with the Company's established policies as then in effect, and (iv)
Executive shall not be entitled to any portion of the applicable annual bonus
for such year and shall promptly repay to the Company any such portion
previously paid to Executive.
(b) Other Termination. If the Employment Term is terminated by
-----------------
the Company other than for Cause or Total Disability or as a result of
Executive's death, then (i) Executive shall be entitled to receive continuing
payments of severance pay (less applicable withholding taxes) at a rate equal to
his Base Salary rate, as then in effect, for a period of six (6) months from the
date of such termination, to be paid periodically in accordance with the
Company's normal payroll policies, and (ii) if such termination occurs prior to
the first anniversary of commencement of employment, Executive shall repay to
the Company an amount equal to the Signing Bonus multiplied by a fraction
determined by dividing (x) the number of days from the termination date to the
first anniversary of the date of the commencement of employment by (y) three
hundred sixty-five (365) days. The foregoing severance payments based on Base
Salary and accrued bonuses to which Executive is entitled upon such termination
are referred to herein collectively as the "Severance Payment." Any portion of
the Severance Payment to which Executive is entitled under Section 6(b)(ii)
shall be paid in a lump sum within ten (10) days following the effective date of
termination of the Employment Term. The Severance Payment shall be in lieu of
any further payments to Employee.
(c) Additional Benefits Upon Termination Following a Change of
----------------------------------------------------------
Control. If the Employment Term is terminated by the Company other than for
-------
Cause or Total Disability or as a result of Executive's death or by Executive
for Good Reason, in either case, at any time within twelve (12) months after a
Change of Control (as defined below) of the Company, then all of the stock
options granted by the Company to the Executive, including the Option, prior to
the Change of Control shall become fully vested and exercisable as of the date
of the termination to the extent such stock options are outstanding and
unexercisable at the time of such termination.
7. Definitions.
-----------
(a) Cause. For purposes of this Agreement, "Cause" is defined
-----
as (i) an act of dishonesty made by Executive in connection with Executive's
responsibilities as an employee, (ii)
-4-
Executive's conviction of, or plea of nolo contendere to, a felony, (iii)
Executive's gross misconduct in connection with Executive's responsibilities as
an employee, (iv) Executive's continued failure to substantially perform his
employment duties after Executive has received a written demand for performance
from the Company which specifically sets forth the factual basis for the
Company's belief that Executive has not substantially performed his duties, (v)
Executive's breach of any material provision of this Agreement or the
Confidentiality Agreement after Executive has received a written demand for
performance from the Company which specifically sets forth the factual basis for
the Company's belief that Executive has breached such provision, or (vi) failure
by Executive to take or pass the drug test as required in Section 12(b) of this
Agreement.
(b) Change of Control. For purposes of this Agreement, a
-----------------
"Change of Control" of the Company means:
(i) the date on which a change in the ownership of the
Company's outstanding securities occurs such that any "person" (as such term is
used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities;
(ii) a change in the composition of the Board occurring
within a two (2) year period, as a result of which fewer than a majority of the
Company's directors are Incumbent Directors. "Incumbent Directors" means
directors who either (A) are members as of the date of this Agreement, or (B)
are elected, or nominated for election, to the Board with the affirmative votes
of at least a majority of the Incumbent Directors at the time of such election
or nomination (but will not include an individual whose election or nomination
is in connection with an actual or threatened proxy contest relating to the
election of directors to the Board);
(iii) the date of the consummation of a merger or
consolidation of the Company with any other entity that has been approved by the
Company's stockholders, other than a merger or consolidation that would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation;
(iv) the date on which the stockholders of the Company
approve a plan of complete liquidation of the entity; or
(v) the date of the consummation of the sale or
disposition by the Company of all or substantially all the Company's assets.
None of the foregoing transactions or series of transactions shall
constitute a Change of Control if a shareholder who together with its affiliates
owns, directly or indirectly, fifteen percent (15%) or more of the total voting
power represented by the outstanding voting securities of the Company as of the
date of this Agreement, owns, together with its affiliates, directly or
indirectly, as a result of such transaction or series of transactions, or after
giving effect to such transactions, more
-5-
than fifty percent (50%) of the total voting power represented by the
outstanding voting securities of the Company or such surviving entity; provided,
that in the case of a sale or disposition by the Company of all or substantially
all of the Company's assets, the successor entity has assumed all of the
obligations under this Agreement, the Options and the Option Agreement.
(c) Good Reason. For purposes of this Agreement, "Good Reason"
-----------
means (i) without the Executive's express written consent, a significant
reduction of the Executive's duties, position or responsibilities relative to
the Executive's duties, position, or responsibilities in effect immediately
prior to such reduction; provided, however, that a reduction in duties, position
or responsibilities solely by virtue of the Company being acquired and made part
of a larger entity (as, for example, when the Chief Financial Officer of a
company remains as such following a change of control of the Company but is not
made the Chief Financial Officer of the acquiring company) shall not constitute
Good Reason; (ii) without the Executive's express written consent, a significant
reduction by the Company in the Base Salary of the Executive as in effect
immediately prior to such reduction; (iii) without the Executive's express
written consent, a material reduction by the Company in the kind or level of
employee benefits (other than salary, bonus and golf club membership) to which
the Executive is entitled immediately prior to such reduction with the result
that the Executive's overall benefits package (other than salary, bonus and golf
club membership) is significantly reduced; or (iv) without the Executive's
express written consent, the relocation of the Executive to a facility or a
location more than fifty (50) miles from the current location of the Company's
headquarters and principal place of business.
(d) Total Disability. For purposes of this Agreement, "Total
----------------
Disability" means Executive's mental or physical impairment that has or is
likely to prevent Executive from performing the responsibilities and duties of
his position for three (3) months or more in the aggregate during any six (6)
month period. Any question as to the existence or extent of Executive's
disability upon which the Executive and the Company cannot agree shall be
resolved by a qualified independent physician who is an acknowledged expert in
the area of the mental or physical impairment, selected in good faith by the
Board and approved by the Executive, which approval shall not unreasonably be
withheld.
8. Confidential Information. Executive agrees to enter into the
------------------------
Company's standard confidential information and invention assignment agreement
(the "Confidentiality Agreement") upon commencing employment hereunder.
9. Non-Solicit. Executive covenants and agrees with the Company
-----------
that during his service to the Company and for a period expiring one (1) year
after the date of termination of such services, he will not solicit any of the
Company's then-current employees to terminate their employment with the Company
or to become employed by any firm, company or other business enterprise with
which Executive may then be connected.
10. Representations of Executive. Executive represents that the
----------------------------
execution of this Agreement and the Confidentiality Agreement, and performance
of Employee's obligations hereunder and thereunder, will not conflict with, or
result in a violation or breach of, any other agreement to which Executive is a
party or any judgment, order or decree to which Executive is subject.
-6-
11. Arbitration.
-----------
(a) General. In consideration of Executive's service
-------
to the Company, its promise to arbitrate all employment-related disputes and
Executive's receipt of the compensation, pay raises and other benefits paid to
Executive by the Company, at present and in the future, Executive agrees that
any and all controversies, claims, or disputes with anyone (including the
Company and any employee, officer, director, shareholder or benefit plan of the
Company in their capacity as such or otherwise) arising out of, relating to, or
resulting from Executive's service to the Company under this Agreement or
otherwise or the termination of Executive's service with the Company, including
any breach of this Agreement, shall be subject to binding arbitration under the
Arbitration Rules set forth in California Code of Civil Procedure Section 1280
through 1294.2, including Section 1283.05 (the "Rules") and pursuant to
California law. Disputes which Executive agrees to arbitrate, and thereby agrees
to waive any right to a trial by jury, include any statutory claims under state
or federal law, including, but not limited to, claims under Title VII of the
Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age
Discrimination in Employment Act of 1967, the Older Workers Benefit Protection
Act, the California Fair Employment and Housing Act, the California Labor Code,
claims of harassment, discrimination or wrongful termination and any statutory
claims. Executive further understands that this Agreement to arbitrate also
applies to any disputes that the Company may have with Executive.
(b) Procedure. Executive agrees that any arbitration
---------
will be administered by the American Arbitration Association ("AAA") and that a
neutral arbitrator will be selected in a manner consistent with its National
Rules for the Resolution of Employment Disputes. The arbitration proceedings
will allow for discovery according to the rules set forth in the National Rules
for the Resolution of Employment Disputes or California Code of Civil Procedure.
Executive agrees that the arbitrator shall have the power to decide any motions
brought by any party to the arbitration, including motions for summary judgment
and/or adjudication and motions to dismiss and demurrers, prior to any
arbitration hearing. Executive agrees that the arbitrator shall issue a written
decision on the merits. Executive also agrees that the arbitrator shall have the
power to award any remedies, including attorneys' fees and costs, available
under applicable law. Executive understands the Company will pay for any
administrative or hearing fees charged by the arbitrator or the AAA except that
Executive shall pay the first Two Hundred Dollars ($200) of any filing fees
associated with any arbitration Executive initiates. Executive agrees that the
arbitrator shall administer and conduct any arbitration in a manner consistent
with the Rules and that to the extent that the AAA's National Rules for the
Resolution of Employment Disputes conflict with the Rules, the Rules shall take
precedence.
(c) Remedy. Except as provided by the Rules,
------
arbitration shall be the sole, exclusive and final remedy for any dispute
between Executive and the Company. Accordingly, except as provided for by the
Rules, neither Executive nor the Company will be permitted to pursue court
action regarding claims that are subject to arbitration. Notwithstanding
anything in this Agreement to contrary, the arbitrator will not have the
authority to disregard or refuse to enforce any lawful Company policy, and the
arbitrator shall not order or require the Company to adopt a policy not
otherwise required by law that the Company has not adopted.
(d) Availability of Injunctive Relief. In addition to
---------------------------------
the right under the Rules to petition the court for provisional relief,
Executive agrees that any party may also petition the court
-7-
for injunctive relief where either party alleges or claims a violation of this
Agreement or the Confidentiality Agreement or any other agreement regarding
trade secrets, confidential information, nonsolicitation or Labor Code (S)2870.
In the event either party seeks injunctive relief, the prevailing party shall be
entitled to recover reasonable costs and attorneys fees.
(e) Administrative Relief. Executive understands that
---------------------
this Agreement does not prohibit Executive from pursuing an administrative claim
with a local, state or federal administrative body such as the Department of
Fair Employment and Housing, the Equal Employment Opportunity Commission or the
workers' compensation board. This Agreement does, however, preclude Executive
from pursuing court action regarding any such claim.
(f) Voluntary Nature of Agreement. Executive
-----------------------------
acknowledges and agrees that Executive is executing this Agreement voluntarily
and without any duress or undue influence by the Company or anyone else.
Executive further acknowledges and agrees that Executive has carefully read this
Agreement and that Executive has asked any questions needed for Executive to
understand the terms, consequences and binding effect of this Agreement and that
Executive fully understands this Agreement, including that Executive is waiving
Executive's right to a jury trial. Finally, Executive agrees that Executive has
been provided an opportunity to seek the advice of an attorney of Executive's
choice before signing this Agreement.
12. Miscellaneous Provisions.
------------------------
(a) Assignment. This Agreement will be binding upon
----------
and inure to the benefit of (a) the heirs, executors and legal representatives
of Executive upon Executive's death and (b) any successor of the Company,
subject, in the case of the transfer of all or substantially all the assets or
business of the Company to the agreement of the successor to the effect of this
provision. Any such successor of the Company will be deemed substituted for the
Company under the terms of this Agreement for all purposes. For this purpose,
"successor" means any person, firm, corporation or other business entity which
at any time, whether by purchase, merger or otherwise, directly or indirectly
acquires all or substantially all of the assets or business of the Company. None
of the rights of Executive to receive any form of compensation payable pursuant
to this Agreement may be assigned or transferred except by will or the laws of
descent and distribution. Any other attempted assignment, transfer, conveyance
or other disposition of Executive's right to compensation or other benefits is
void.
(b) Drug Testing. Executive acknowledges that upon
------------
commencement of his employment with the Company, he shall submit to a drug test
as required of all Company employees.
(c) Notices. All notices, requests, demands and other
-------
communications called for hereunder shall be in writing and shall be deemed
given (i) on the date of delivery if delivered personally, (ii) one (1) day
after being sent by a well established commercial overnight service, or (iii)
four (4) days after being mailed by registered or certified mail, return
receipt requested, prepaid and addressed to the parties or their successors at
the following addresses, or at such other addresses as the parties may later
designate in writing:
-8-
If to the Company:
eMachines, Inc.
00000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
----
If to Executive:
at the last residential address known by the Company.
(d) Severability. In the event that any provision hereof
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement will continue in full force and effect
without said provision.
(e) Integration. This Agreement, together with the Option
-----------
Plan, Option Agreement and the Confidentiality Agreement, represents the entire
agreement and understanding between the parties as to the subject matter herein
and supersedes all prior or contemporaneous agreements whether written or oral.
(f) Waiver and Amendment. No provision of this Agreement may
--------------------
be waived except by a writing executed by the party against whom the waiver is
to be effective. A party's failure to enforce any provision of this Agreement
shall neither be construed as a waiver of the provision nor prevent the party
from enforcing any other provision of this Agreement. No provision of this
Agreement may be amended or otherwise modified except by a writing signed by the
parties to this Agreement.
(g) Headings. All captions and section headings used in this
--------
Agreement are for convenient reference only and do not form a part of this
Agreement.
(h) Governing Law. This Agreement will be governed by the laws
-------------
of the State of California (with the exception of its conflict of laws
provisions).
(i) Acknowledgment. Executive acknowledges that he has had the
--------------
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
(j) Counterparts. This Agreement may be executed in
------------
counterparts, and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of
each of the undersigned.
(k) Withholding, Etc. The Company may make such deductions and
----------------
withholdings from all sums payable pursuant to this Agreement that are required
by law or as Executive requests for taxes and other charges.
-9-
IN WITNESS WHEREOF, each of the parties has executed this Agreement, and in
the case of the Company by its duly authorized officers, as of the Effective
Date.
COMPANY:
eMACHINES, INC.
By: /s/ XXXXX XXXXXXXXX
-----------------------------------------
Title: EVP
--------------------------------------
EXECUTIVE:
/s/ X. XXXXXXXXX
--------------------------------------------
Xxxx Xxxxxxxxx
-10-
