EMPLOYMENT AGREEMENT
EXHIBIT
10.21
This
Employment Agreement (the "Employment Agreement" or "Agreement") is by and
between eLinear, Inc., a Delaware corporation, Houston, Texas (the "Company"),
and Xxxxxxx Xxxxx (the "Executive") an individual, for employment beginning
December 21, 2004 (the "Commencement Date").
WHEREAS,
there was some prior confusion regarding the Executive’s compensation as the
chief executive officer and president of the Company; and
WHEREAS,
the Company and the Executive acknowledge and agree that this agreement is the
final and full agreement between the parties with regard to the Executive’s
employment as chief executive officer and president of the Company, and
therefore supercedes and replaces any and all prior agreements between the
parties on the subject matter hereof, whether written or oral;
WHEREAS,
Executive is willing to enter into an agreement with the Company upon the terms
and conditions herein set forth.
NOW,
THEREFORE, in consideration of the premises and covenants herein contained, the
parties hereto agree as follows:
1. Term
of Agreement. Subject
to the terms and conditions hereof, the term of employment of the Executive
under this Employment Agreement shall be for the period commencing on the
Commencement Date and terminating one year from the Commencement Date, unless
sooner terminated in accordance with the provisions of Section 6 hereof. (Such
term of employment is herein sometimes called the "Employment Term") Company
may, at its sole discretion, extend this contract for additional one-year
periods.
2. Employment. As of
the Commencement Date, the Company hereby agrees to employ the Executive as
Chief Executive Officer and President of
eLinear, Inc. with such duties as assigned from time to time by the Company’s
board of directors, and the
Executive hereby accepts such employment and agrees to perform his duties and
responsibilities hereunder in accordance with the terms and conditions
hereinafter set forth.
3. Duties
and Responsibilities.
(a) Duties.
Executive shall perform such duties as are usually performed by a Chief
Executive Officer and President, with such
duties as assigned from time to time by the Company of a
business similar in size and scope as the Company and such other reasonable
additional duties as may be prescribed from time-to-time by the Company’s board
of directors which are reasonable and consistent with the Company’s operations,
taking into account Executive’s expertise and job responsibilities. This
agreement shall survive any job title or responsibility change. All actions of
Executive shall be subject and subordinate to the review and approval of the
board of directors of the Company. The board of directors of the Company shall
be the final and exclusive arbiter of all policy decisions relative to the
Company’s business (including its subsidiaries).
(b) Devotion
of Time. During
the term of this agreement, Executive agrees to devote his exclusive and
full-time service during normal business hours to the business and affairs of
the Company (including its subsidiaries) to the extent necessary to discharge
the responsibilities assigned to Executive and to use reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the term of
this Agreement it shall not be a violation of this Agreement for Executive to
manage personal investments or companies in which personal investments are made
so long as such activities do not significantly interfere with the performance
of Executive’s responsibilities with the Company and which companies are not in
direct competition with the Company.
4. Compensation
and Benefits During the Employment Term.
(a) Salary.
For 2005,
Executive will be
compensated by the Company at an annual base salary of $128,000, from which
shall be deducted income tax withholdings, social security, Medicare and other
customary employee deductions in conformity with the Company’s payroll policy in
effect. In the event the Company extends this agreement for 2006, Executive will
be compensated by the Company at an annual base salary of $176,000, with
standard deductions as previously noted.
(b) Bonuses.
Executive shall also be entitled to receive bonuses as per the following
schedule. Executive acknowledges that the Compensation Committee will set the
bonus parameters to be achieved in their sole discretion and that Executive has
not been given any guidance as to the criteria to be used by the Compensation
Committee, nor has the Executive entered into this Agreement based on any
representations as to the criteria to be used by the Compensation
Committee.
Signing
bonus.
Executive will be entitled to receive a signing bonus in the amount of $24,000,
payable in six monthly installments of $4,000 each and commencing on January 31,
2005.
Performance
Bonuses for 2005
based on board of directors approved 2005 Business Model.
Assumption:
eLinear achieves breakeven or profitability in Q4 2005 with a cumulative loss
not to exceed $2.5M by the end of 12/31/05. All Performance Bonuses are based on
closing of all accounts and adjustments by 1/31/06. All Performance Bonuses are
payable in eleven monthly installments beginning 2/1/06
Incremental
Bonuses for achieving major milestones in 2005:
Measurement Bonus
Achieve
$36M in revenue in 2005 $24,000
Achieve
2% Q4 profit on Incremental Sales + $40M in Revenues $20,000
Achieve
3% Q4 profit on Incremental Sales + $44M in Revenues $44,000
Achieve
4% Q4 profit on Incremental Sales + $48M in Revenues $32,000
Achieve
4.5% Q4 profit on Incremental Sales + $50M in Revenue $24,000
Achieve
4.5% Q4 profit on Incremental Sales + $52M in Revenues $24,000
Achieve
5% Q4 profit on Incremental Sales + $54M in Revenues $24,000
Achieve
5% Q4 profit on Incremental Sales + $56M in Revenues $24,000
Achieve
6% Q4 profit on Incremental Sales + $60M in Revenues $96,000
Total
Potential Performance Bonuses $292,000
The
percentage is X % of the incremental revenue in excess of $36
million.
| (c) |
Relocation
Allowance.
Executive
will receive a relocation allowance of $24,000. Such bonus will be payable
in six equal monthly installments beginning July 31, 2005. Executive will
also receive a family travel allowance for airfare in the amount of
$3,000. This will be paid in the amount of $500 per month for six months
commencing January 31, 2005 and ending on June 30,
2005. |
| (d) |
Option.
Upon the authorization and approval of the shareholders of the Company of
a 2005 Stock Option Plan, the Executive shall be granted (i) a
non-qualified stock option to purchase 150,000 shares of the Company’s
common stock vesting as per the following Section (e) and an exercise
price of $0.10 per share, and (ii) an employee incentive stock option to
purchase 300,000 shares of the Company’s common stock vesting as per the
following Section (e) and an exercise price of $1.19 per share. Vesting of
the options shall follow the following vesting schedule, provided that no
vesting shall occur unless Executive is employed by the Company on the
respective vesting date; provided further that if the Company terminates
the Executive during the Employment Term for any reason other than for
Cause, for vesting calculation purposes, the options due the Executive at
year-end will be prorated in relation to the date of Executive’s
employment termination and such prorated amount will vest immediately at
the date of Executive’s employment termination. For the avoidance of
doubt, if Executive is terminated for Cause, resigns, or dies, Executive
will not be entitled to any prorated vesting as set forth in the previous
sentence. In addition, if Executive is terminated for any reason, resigns,
or dies this option shall expire on the earlier of: (i) four years from
the date hereof, or (ii) six months from the date of the termination,
resignation, or death. Notwithstanding the foregoing, the Executive will
not have any rights, title or interest in the options or the shares
underlying the options until the shareholders of the Company have
authorized and approved a 2005 Stock Option Plan. Upon the approval of the
2005 Stock Option Plan, the option shall be evidenced by an option
agreement, shall expire in five years from December 22, 2004, and shall be
subject to the terms of the Company’s 2005 Stock Option Plan and such
option agreement. The term of the option is not intended to extend or
otherwise modify the Employment Term. |
(e) Options
and Vesting Schedule
150,000
($0.10) Immediately
upon the shareholders adoption of the 2005 Stock Option Plan
100,000
($1.19) 1/31/06
100,000
($1.19) 1/31/07
100,000($1.19) 1/31/08
5.
Change
of Control
In the
case of a change of control of the Company, all unvested options, those
described in paragraph 4(c) and any others granted since the effective date of
this Agreement, shall be accelerated and will vest immediately. Change of
control is defined as the sale of over 50.1% of eLinear common stock to a single
entity, whereby the single entity owns in excess of 50.1% of eLinear common
stock immediately after the sale of the eLinear common stock.
6. Termination
(a) Executive's
employment under the Agreement may be terminated under any of the following
circumstances:
(i)
Immediately
by the Company, upon the death of Executive.
(ii)
By the
Executive at any time, upon 14 days written notice.
(iii)
Immediately,
upon written notice by the Company for Cause which for purposes of the Agreement
shall be defined as (i) Executive's willful and persistent inattention to his
reasonable duties which amounts to gross negligence or willful dishonesty
towards, fraud upon, or deliberate injury or attempted injury to, the Company,
(ii) Executive's willful breach of any term or provision of the Agreement which
breach shall have remained substantially uncorrected for 15 days with an
opportunity to cure following written notice to the Executive; or (iii) the
commission by Executive of any act or any failure by Executive to act involving
criminal conduct or moral turpitude, whether or not directly relating to the
business and affairs of the Company.
(b) Effects
of Termination. In the
event that the Agreement is terminated pursuant to Section 6(a) or upon
expiration of the term of the Agreement, neither the Executive nor the Company
shall have any further obligations hereunder except for (a) obligations
occurring prior to the date of termination, and (b) obligations, promises
or covenants contained herein which are expressly made to extend beyond the term
of the Agreement.
(c) Improper
Termination. In the
event of the Executive's termination by the Company for any reason other than
for Cause or the death of the Executive, Executive shall continue to be paid, as
severance pay, an amount equal to his salary at the time of termination until
the earlier of: (i) the end of the Employment Term, or (ii) 90 calendar days
from the date of the termination.
(d) Severance
Pay. For
2005, in the event of severance before 6/30/05, Executive will receive $32,000
payable in three equal monthly installments of $10,667 beginning on the date of
termination. In the event of severance after 7/1/05 and before 12/31/05,
Executive will receive $64,000 payable in six equal monthly installments of
$10,667 beginning on the date of termination.
For 2006,
in the event of that the Company chooses not to exercise its option to extend
this agreement then there is no severance due. However, should the Company
choose not to renew this agreement, then the Company must give ninety (90) days
advance notice to Executive of its intentions not to renew this agreement. In
the event of termination before 6/30/06, Executive will receive $64,000 payable
in six equal installments of $10,667 beginning on the date of termination. In
the event of severance after 7/1/06 and before 12/31/06, Executive will receive
$64,000 payable in six monthly installments of $10,667 beginning on the date of
termination.
7.
Revealing
of Trade Secrets, etc.
Executive acknowledges the interest of the Company in maintaining the
confidentiality of information related to its business and shall not at any time
during the Employment Term or thereafter, directly or indirectly, reveal or
cause to be revealed to any person or entity the supplier lists, customer lists
or other confidential business information of the Company; provided, however,
that the parties acknowledge that it is not the intention of this paragraph to
include within its subject matter (a) information not proprietary to the
Company, (b) information which is then in the public domain through no fault of
Executive, or (c) information required to be disclosed by law.
8. Non-Competition
Agreement. As part
of the consideration for the compensation and benefits to be paid and extended
to Executive hereunder, and as an additional incentive for the Company to enter
into this employment relationship, Executive agrees to the non-competition
provisions of this section.
(a) Executive
hereby agrees that for a period commencing on the date hereof and ending 1 year
following the termination of Executive’s employment with the Company for
whatever reason, he will not, directly or indirectly, as employee, agent,
consultant, stockholder, director, co-partner or in any other individual or
representative capacity, own, operate, manage, control, engage in, invest in or
participate in any manner in, act as a consultant or advisor to, render services
for, or otherwise assist any person or entity (other than the Company) that
engages in or owns, invests in, operates, manages or controls any venture or
enterprise that engages or proposes to engage in the business of technology
consulting and IT equipment sales within Xxxxxx County (the
"Territory").
(b) Restrictions
on Future Employment.
Executive understands that the foregoing restrictions may limit his ability to
engage in certain businesses in the Territory during the period provided for
above, but acknowledges that Executive will receive sufficiently high
remuneration and other benefits (e.g., high
remuneration during the term of the Agreement and access to certain confidential
and proprietary information and trade secrets) under this Agreement to justify
such restriction. Executive acknowledges that money damages would not be
sufficient remedy for any breach of this section by Executive, and Company or
any of its subsidiaries or affiliates shall be entitled to enforce the
provisions of this section by terminating any payments then owing to Executive
under this Agreement and/or to specific performance and injunctive relief as
remedies for such breach or any threatened breach, without any requirement for
the securing or posting of any bond in connection with such remedies. Such
remedies shall not be deemed the exclusive remedies for a breach of this
section, but shall be in addition to all remedies available at law or in equity
to Company or any of its subsidiaries or affiliates, including, without
limitation, the recovery of damages from Executive and his agents involved in
such breach.
(c) Acknowledgement
by Parties. It is
expressly understood that the restrictions contained in this section are related
to and result from the agreements of the Company and Executive in this section
and it is agreed that the Company and Executive consider the restrictions
contained in this section to be reasonable and necessary to protect the
confidential and proprietary information and trade secrets of the Company and
its subsidiaries and affiliates.
9. Survival. In the
event that this Agreement shall be terminated, then notwithstanding such
termination, the obligations of Executive pursuant to Section 7 and 8 of this
Agreement shall survive such termination.
10. Contents
of Agreement, Parties in Interest, Assignment, etc. This
Agreement sets forth the entire understanding of the parties hereto with respect
to the subject matter hereof. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, representatives, successors and assigns of the parties hereto,
except that the duties and responsibilities of Executive hereunder which are of
a personal nature shall neither be assigned nor transferred in whole or in part
by Executive. This Agreement shall not be amended except by a written instrument
duly executed by the parties.
11. Severability;
Construction. If any
term or provision of this Agreement shall be held to be invalid or unenforceable
for any reason, such term or provision shall be ineffective to the extent of
such invalidity or unenforceability without invalidating the remaining terms and
provisions hereof, and this Agreement shall be construed as if such invalid or
unenforceable term or provision had not been contained herein. The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this
Agreement.
12. Notices. Any
notice, request, instruction or other document to be given hereunder by any
party to the other party shall be in writing and shall be deemed to have been
duly given when delivered personally; or five (5) days after dispatch by
registered or certified mail, postage prepaid, return receipt requested; or one
(1) day after dispatch by overnight courier service; in each case, to the party
to whom the same is so given or made:
If
to the Company addressed to:
eLinear,
Inc.
0000 Xxxx
Xxx Xxxxxxx Xxxxxxx Xxxxx, Xxx. X-000
Xxxxxxx,
Xxxxx 00000
Attn:
Chairman of the Board
If
to Executive addressed to:
Xxxxxxx
Xxxxx
0000
Xxxxxxx 0 X. #0000
Xxxxxxx,
Xxxxx 00000
_________________
or to
such other address as the one party shall specify to the other party in
writing.
13. Counterparts
and Headings. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original and all which together shall constitute one and the same
instrument. All headings are inserted for convenience of reference only and
shall not affect the meaning or interpretation of this Agreement.
14. Governing
Law; Venue. This
Agreement shall be construed and enforced in accordance with, the laws of the
State of Texas, without regard to the conflict of laws provisions thereof. Venue
of any dispute concerning this Agreement shall be exclusively in Xxxxxx County,
Texas.
15. Waiver. The
failure of either party to enforce any provision of this Agreement shall not be
construed as a waiver or limitation of that party’s right to subsequently
enforce and compel strict compliance with every provision of this
Agreement.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
Executive eLINEAR,
INC.
___________________________
___________________________
Xxxxxxx
Xxxxx Xxxxx
Xxxxx, Chairman of the Board
