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EXHIBIT 10.01
MICRONICS COMPUTERS, INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into as of February 6, 1998 (the "Effective
Date") by and between Micronics Computers, Inc., a Delaware corporation (the
"Company"), having its principal place of business at 00000 Xxxxxxxxx Xxxx Xxxx,
Xxxxxxx, Xxxxxxxxxx 00000, and Xxxxxxx X. Xxxx ("Xx. Xxxx"), residing at
_____________________________________________. In consideration of the terms and
conditions set forth in this Agreement, the parties agree as follows:
1. EMPLOYMENT AND DUTIES.
1.1 APPOINTMENT. On the Effective Date, the Company hereby
employs Xx. Xxxx and Xx. Xxxx hereby accepts employment with the Company upon
the terms and conditions set forth in this Agreement. During the term of this
Agreement, Xx. Xxxx will be Chief Executive Officer of the Company and his
duties will be executive in nature, consistent with his title. Initially, he
will report to Wm. X. Xxxxxxxxx, Chairman of the Board of Directors of the
Company (the "Board"). Xx. Xxxx has been elected to the Board and will be
renominated at the April 1997 annual meeting of the Company's stockholders. Xx.
Xxxx hereby represents and warrants to the Company that he is free to enter into
and fully perform this Agreement and the documents referred to herein.
1.2 NATURE OF EMPLOYMENT. During the term of his employment with
the Company, Xx. Xxxx will devote his full skill, efforts, business time and
attention to his employment with the Company. Xx. Xxxx will not perform services
for compensation for any entity or person other than the Company without the
prior express written consent of the Company after approval by resolution of the
Board. However, Xx. Xxxx may participate in investment or other activities
unrelated to employment for another for compensation to the extent that such
activities do not preclude or conflict with his employment under this Agreement.
2. TERM. The term of this Agreement will commence as of the Effective
Date and will terminate on the earlier of the death of the Xx. Xxxx or on the
second anniversary of the date of this Agreement (the "Expiration Date").
3. COMPENSATION AND EXPENSES. In consideration for the services to be
rendered to the Company under this Agreement in all capacities, including,
without limitation, services as an officer, employee, director or member of any
committee of the Board of the Company or any subsidiary thereof, during the term
of this Agreement, Xx. Xxxx will be paid as follows:
3.1 SALARY. During the period from the Effective Date to August
3, 1998 ("Period One"), Xx. Xxxx will be paid $20,000 per month. From August 3,
1998 to February 2, 1999 ("Period Two"), Xx. Xxxx will be paid $22,000 per
month, and on and after February 2, 1999 ("Period Three"), subject to the
discretion of the Board, Xx. Xxxx will be paid a salary of
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$25,000 per month. Changes during Period Three, either up or down, will be
determined by the Board, in its sole discretion, at any time or from time to
time. Any such salary will be payable in installments, as earned, less any
normal payroll deductions, in accordance with prevailing payroll practices of
the Company from time to time and will be proportionately reduced to the extent
that Xx. Xxxx is not working full time for the Company. For purposes of this
Section 3.l, "full time" will be defined by the Company's policy, as amended
from time to time, concerning the number of hours that must be worked by an
individual to be considered a full-time employee and, if no policy is set, "full
time" shall mean at least 40 hours per week.
3.2 QUARTERLY BONUSES. The Board, in its sole discretion, may
determine by resolution to pay Xx. Xxxx all or any portion of the following
quarterly bonuses upon the achievement of the following milestones in any
Quarter (defined below):
3.2.1 Definitions.
(a) "Quarter" shall mean a three-month period
commencing on the first day of January, April, July or October in any calendar
year during the term of this Agreement and until April 1, 2000 so long as Xx.
Xxxx is employed full-time by the Company for the entire three-month period,
with the first such Quarter to commence on January 1, 1998 and the last such
Quarter to commence January 1, 2000.
(b) "Operating Income" shall mean the Company's actual
income from operations, determined in accordance with generally accepted
accounting principles for financial reporting purposes, consistently applied,
after review or audit of the Company's independent auditors in each case.
3.2.2 Operating Income Bonus. If Operating Income for any
Quarter (the "First Quarter") is $500,000 or more and Operating Income for the
following Quarter (the "Second Quarter") exceeds Operating Income for the First
Quarter, then Xx. Xxxx will be eligible to receive a $50,000 bonus for the First
Quarter. For example, (a) if Operating Income earned for the Quarter that
commenced on January 1, 1998 is $500,000 and Operating Income is $500,000.01 for
the Quarter commencing on April 1, 1998, then Xx. Xxxx will be eligible to
receive a $50,000 bonus for the Quarter that commenced on January 1, 1998, and
(b) if Operating Income is $499,999.01 for the Quarter commencing on October 1,
1999 and is $500,000.01 for the Quarter commencing on January 1, 2000, then Xx.
Xxxx will not be eligible for a bonus for the Quarter commencing on October 1,
1999.
3.4 WHEN BONUS EARNED AND PAID. Each bonus provided for under
this Section 3 will be paid to Xx. Xxxx within 20 days after the Board has
approved the same, in its discretion, by resolution duly adopted at a meeting or
by written consent and Operating Income has been determined for the Quarters in
question. For purposes of such meeting or written consent, Xx. Xxxx may be
counted to establish a quorum, Xx. Xxxx'x vote will not be counted in connection
with such approval and such approval may occur subsequent to the termination of
this Agreement. Accordingly, computation of any amount available for
distribution will not be construed to create Xx. Xxxx'x rights to receive
"wages" until Board approval has been obtained and such 20 day period has run.
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3.5 BENEFITS. During the term of this Agreement, Xx. Xxxx will
not be entitled to any payments under the Company's Cash Bonus Plan or its
Profit Sharing Plan. Except as to participation in such Plans, Xx. Xxxx will be
provided with such vacation, disability, insurance and other benefits as are
provided to the Company's employees generally.
3.6 EXPENSES. The Company will reimburse Xx. Xxxx for all
reasonable and necessary expenses incurred by Xx. Xxxx in connection with the
Company's business, provided that such expenses are deductible to the Company,
are in accordance with applicable policy set by the Board or Company management
from time to time and are properly documented and accounted for in accordance
with the policy of the Company and with the requirements of the Internal Revenue
Service.
4. COMPANY STOCK.
4.1 OPTION GRANT. As of the Effective Date, Xx. Xxxx has been
granted an option pursuant to the Company's 1989 Stock Option Plan (the "Plan")
for the purchase in the aggregate of 350,000 shares of the Company's Common
Stock, exercisable at an exercise price per share equal to the per share closing
price of the Company's Common Stock on February 5, 1998. The option vests as to
87,500 shares on February 6, 1999 and the remaining 262,500 shares vest as to an
equal number of shares each month over the following three-year period, for a
total vesting period of four years. This option is an Incentive Stock Option
with respect to the first $100,000 worth of stock that vests in each year. In
accordance with the Plan, all options accelerate vesting upon certain
acquisitions of the Company. However, the Company and Xx. Xxxx agree that such
accelerated vesting will not apply to two-thirds of the shares of Common Stock
subject to the option described in this Section 4.1 if the acquisition
transaction is closed by the Company within six months after the Effective Date.
4.2 ADDITIONAL OPTIONS. Additional options will be granted to Xx.
Xxxx under the Plan (or any successor plan) subsequent to the execution of this
Agreement at an exercise price equal to the closing price of the Company's
Common Stock on the Nasdaq National Market on the day preceding the date of
Board approval of such grant (a) for an additional 100,000 shares approximately
six months after the Effective Date and (b) for an additional 100,000 shares
upon completion of two consecutive Quarters in which Operating Income exceeds
$500,000 in each such Quarter, assuming in each case that Xx. Xxxx remains
continuously employed by the Company through the date of grant. Each option
described in this Section 4.2 will vest in arrears as to an equal number of
shares each month over a four-year period commencing on the date of grant and
will qualify as an Incentive Stock Option to the extent possible given the
$100,000 per annum vesting restriction imposed by applicable tax laws relating
to Incentive Stock Options. Any further options granted to Xx. Xxxx will be at
the sole discretion of the Board.
5. COLLATERAL AGREEMENTS. Xx. Xxxx and the Company acknowledge that
they have entered into, or will enter into prior to February 6, 1998, an
Indemnification Agreement and a Confidentiality and Proprietary Rights Agreement
(the "Proprietary Rights Agreement") in standard form used by the Company with
its employees generally. Such Agreements will not terminate as a result of
expiration or termination of this Agreement and thereafter will continue in full
force and effect in accordance with their terms.
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6. TERMINATION OF EMPLOYMENT DURING TERM.
6.1 DEFINITIONS.
6.1.1 "Good Cause" shall mean (a) habitual neglect or
malfeasance of duty that continues uncured after 30 days notice by the Company
to Xx. Xxxx, (b) a material act of dishonesty, (c) conviction of a felony, (d)
inability to render services under this Agreement for any period in excess of 90
days out of any twelve-month period (whether due to ill health or otherwise),
(e) failure to cure or cease repeated or a serious violation or violations of
the Company's published and written rules, or of the directions of the Board,
that remain or remains uncured 30 days after receipt of written notice thereof
or (f) material or repeated breach of this Agreement or of the Proprietary
Rights and Confidentiality Agreement to be entered into by the Company and Xx.
Xxxx as provided in Section 5 above that remains uncured 30 days after receipt
of written notice thereof.
6.1.2 "Severance." If Xx. Xxxx'x employment with the Company
is terminated by the Company without Good Cause during Period One, then
"Severance" will mean $120,000. If such termination occurs during Period Two,
"Severance" will mean $22,000 times the number of full months that Xx. Xxxx has
served as an employee under the terms of this Agreement (the "Service Period"),
and if such termination occurs during Period Three, "Severance" will mean an
amount equal to twelve months' of Xx. Xxxx'x monthly salary then-current at the
time of such termination.
6.2 TERMINATION BY XX. XXXX. Xx. Xxxx, in his sole discretion,
may terminate his employment with the Company at any time prior to the
Expiration Date upon giving the Company at least 45 days prior written notice
delivered to any other member of the Board at such Board member's last known
address. Such termination will also terminate this Agreement.
6.3 TERMINATION BY THE COMPANY. The Company, in the sole
discretion of the Board, may terminate Xx. Xxxx'x employment prior to the
Expiration Date, with or without Good Cause. Termination by the Company for Good
Cause will terminate this Agreement. However, if termination is without Good
Cause (a) the Company must give Xx. Xxxx at least seven days' prior written
notice, (b) Severance will be paid to Xx. Xxxx, payable over six months if such
termination occurs during Period One, over the number of full months that is
equal to the Service Period if such termination occurs during Period Two and
over a twelve month period if such termination occurs during Period Three and
(c) during any time that Severence is paid to Xx. Xxxx, the Company will provide
COBRA benefits to Xx. Xxxx and his immediate family at the Company's expense.
Payments of Severance will be made in equal amounts at such times as Xx. Xxxx
would have been paid had he remained employed by the Company to the date of each
payment so long as Xx. Xxxx does not materially breach the terms of the
Proprietary Rights Agreement. This Agreement will be terminated in every other
respect as of the date Xx. Xxxx ceases to be an employee of the Company
subsequent to a termination by the Company without Good Cause.
6.4 TERMINATION AS A DIRECTOR. Any termination of Xx. Xxxx'x
status as an employee of the Company will also automatically terminate Xx.
Xxxx'x status as an officer and
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as a director serving on the Board, without any further action having to be
taken by any person or entity. However, Xx. Xxxx agrees to provide such written
resignations therefrom as the Company may reasonably request.
7 GENERAL PROVISIONS.
7.1 ARBITRATION. Xx. Xxxx and the Company will submit to binding
arbitration in any controversy or claim arising out of, or relating to, this
Agreement or any breach hereof, provided, however, that the Company retains its
right to, and shall not be prohibited, limited or in any other way restricted
from, seeking or obtaining equitable relief from a court having jurisdiction
over the parties. Such arbitration shall be conducted in accordance with the
Rules of the American Arbitration Association in effect at that time, and
judgment upon the determination or award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. Cost of the arbitration
(including, without limitation, reasonable attorney's fees and disbursements)
will be borne by the losing party in such arbitration as determined the
arbitrator(s) thereof. Notwithstanding the foregoing, any controversy or claim
arising out of, or relating both to this Agreement or any breach hereof and to a
breach of one or more of the Agreements described in Section 5 above will not be
subject to arbitration pursuant to this Section 7.1 but may be litigated in any
court having jurisdiction thereof.
7.2 ENFORCEABILITY. If any provision of this Agreement shall be
found by any arbitrator(s) or court of competent jurisdiction to be invalid or
unenforceable, the parties hereby waive such provision to the extent that it is
found to be invalid or unenforceable and to the extent that to do so would not
deprive one of the parties of the substantial benefit of its bargain. Such
provision shall, to the extent allowable by law and the preceding sentence, be
modified by such arbitrator(s) or court so that it becomes enforceable and, as
modified, shall be enforced as any other provision hereof, all the other
provisions continuing in full force and effect. Remedies provided for in this
Agreement are cumulative and are in addition to any other right or remedy
granted to any party by contract, at law, in equity or otherwise.
7.3 NO WAIVER. The failure by either party at any time to require
performance or compliance by the other of any of its obligations or agreements
shall in no way affect the right to require such performance or compliance at
any time thereafter. The waiver by either party of a breach of any provision
hereof shall not be taken or held to be a waiver of any preceding or succeeding
breach of such provision or as a waiver of the provision itself. No waiver of
any kind shall be effective or binding, unless it is in writing and is signed by
the party against whom such waiver is sought to be enforced.
7.4 ASSIGNMENT. This Agreement and all rights hereunder are
personal to Xx. Xxxx and may not be transferred or assigned by Xx. Xxxx at any
time. The Company may assign its rights, together with its obligations
hereunder, to any parent, subsidiary, affiliate or successor, in connection with
any sale, transfer or other disposition of all or substantially all of its
business and assets, provided, however, that any such assignee assumes the
Company's obligations hereunder. This Agreement shall be binding upon, and inure
to the benefit of, the permitted successors and personal representatives of the
respective parties hereto.
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7.5 WITHHOLDING. All sums payable to Xx. Xxxx hereunder shall be
reduced by federal, state, local and other withholding and similar taxes or
payments required by applicable law.
7.6 ENTIRE AGREEMENT; AMENDMENT. Except as specifically provided
herein, this Agreement constitutes the entire and only agreement between the
parties relating to employment of Xx. Xxxx by the Company and his status as an
officer and director of the Company. This Agreement supersedes and cancels any
and all previous contracts, arrangements or understandings with respect thereto.
This Agreement may be amended, modified, superseded, canceled, renewed or
extended only by an agreement in writing executed by both parties hereto.
7.7 NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered personally or mailed by certified mail,
return receipt requested, postage prepaid to the address of the relevant party
as set forth above or as may be changed by notice given hereafter in accordance
with the provisions of this Section 7.7.
7.8 GENERAL INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and shall in no way affect the meaning
or interpretation of this Agreement. In this Agreement, the singular includes
the plural, the plural includes the singular, and the masculine gender includes
both male and female referents. This Agreement maybe executed in two or more
counterparts, each of which shall be deemed to be an original but all of which,
taken together, constitute one and the same agreement. This Agreement and the
rights and obligations of the parties hereto shall be construed in accordance
with the laws of the State of California, without giving effect to the
principles of conflict of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first written above.
XX. XXXX: MICRONICS COMPUTERS, INC.
/s/ XXXXXXX X. XXXX By: /s/ WM. X. XXXXXXXXX
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Xxxxxxx X. Xxxx Xx. X. Xxxxxxxxx, Authorized Signatory
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