EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This employment agreement (the "Agreement") is made and entered into by
and between Xxxxxxx X. Xxxxxxxxxx ("Executive") and Micro Linear Corporation, a
Delaware corporation (the "Company"), effective as of May 27, 2002 (the
"Effective Date").
RECITAL
A. The Company and Executive desire to enter into this Agreement in
connection with the retention of Executive as an officer of the Company.
NOW, THEREFORE, in consideration of the covenants and agreements set
forth herein, the parties hereto agree as follows:
1. Employment Duties. During the period of Executive's employment (the
"Employment Period"), Executive shall serve as President and Chief Executive
Officer of the Company or in such other capacity as the Company and Executive
may mutually agree. During the Employment Period, Executive shall 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 Board of Directors (the "Board"). During the Employment
Period, Executive shall not serve as a director, employee, consultant or advisor
to any other corporation or other business enterprise without the prior written
consent of the Company; provided, however, that Executive may serve in any
capacity with any civic, educational or charitable organization or any trade
association without the approval of the Board, so long as such activities do not
interfere with his duties and obligations under this Agreement.
2. At Will Employment. The Company and Executive acknowledge that
Executive's employment is and shall continue to be at will, as defined under
applicable law. If Executive's employment terminates for any reason, Executive
shall not be entitled to any payments, benefits, damages, awards or compensation
other than as provided by this Agreement, or as may otherwise be available in
accordance with the Company's established employee plans and practices or other
agreements with the Company at the time of termination.
3. Compensation.
(a) Base Salary. During the Company's 2002 fiscal year, the Company
shall pay Executive a base salary (the "Base Salary") at a rate of $25,000 per
month, payable in accordance with the Company's customary payroll practices.
Executive's annual Base Salary shall be reviewed at least annually by the
Compensation Committee of the Board.
(b) Bonuses. During the Company's 2002 fiscal year, Executive shall be
eligible to receive a bonus in accordance with the Company's existing executive
bonus program, subject to a maximum bonus opportunity for the current fiscal
year of $100,000. In accordance with the existing bonus program, the bonus will
be determined by the Compensation Committee of the Board based upon successful
completion of key results. Executive's bonus for the 2002 year will be prorated
based on the Effective Date, but will be at least equal to the annual interest
on $500,000 of Executive's new home financing, as described below. Any such
bonus payments
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to which Executive becomes entitled hereunder shall be paid in accordance
with the Company's customary practices. Executive's bonus shall be reviewed
annually by the Compensation Committee of the Board.
(c) Options. Effective as of the Effective Date, the Company shall
grant Executive an option to purchase 250,000 shares of the Company's common
stock under the Company's 1991 Stock Option Plan and an option to purchase
250,000 shares of the Company's common stock under the Company's Nonstatutory
Stock Plan (collectively, the "Options"). The Options shall have an exercise
price equal to the fair market value of the common stock on the date of grant
and shall become vested and exercisable over four years; 25% of the shares
subject to the Options on the first anniversary of the date of grant and 1/48th
of the total shares subject to the Options at the end of each one-month period
thereafter, subject to Executive's continued [service] for the Company. In the
event of a Change in Control (as defined herein), you shall fully vest in and
have the right to exercise the Options as to all of the shares subject to such
Options, including such shares as to which the Options would not otherwise be
vested or exercisable. If the Options become fully vested and exercisable in the
event of a Change in Control, the Company agrees to notify you that the Options
are fully vested and exercisable for a period of ninety (90) days from the date
of such notice and the Options shall be canceled upon the expiration of such
period. The Option granted under the 1991 Stock Option Plan will be intended to
qualify as an incentive stock option to the maximum extent permitted under the
Internal Revenue Code of 1986, as amended, including the $100,000 limitation.
Except as otherwise provided herein, the Options shall be governed by the terms
and conditions of the option plan under which such option was granted and the
stock option agreements between the Company and Executive.
4. Employee Benefits.
(a) General. During the Employment Period, Executive shall be included
in ail employee benefit plans, programs or arrangements, including, without
limitation, any plans, programs or arrangements providing for retirement
benefits, incentive compensation, profit bonuses, fringe benefits, disability
benefits, health and life insurance, vacation and paid holidays, which shall be
established by the Company for, or made available to, its senior executives
generally.
(b) Reimbursement of Expenses. The Company shall reimburse Executive
for all out of pocket expenses reasonably incurred and paid by him in the
performance of his duties pursuant to this Agreement, in accordance with Company
policies.
(c) Executive Life Insurance. The Company shall maintain a term life
insurance policy on Executive with a death benefit payment in the amount of $1.0
million with Xxxxx Xxxxxxxxxx as the named beneficiary.
(d) Long Term Disability Policy. The Company shall maintain a long term
disability policy for Executive that provides a monthly benefit to Executive in
the event of his disability which is $4,000 per month above the standard group
disability policy maintained by the Company for its other employees.
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5. New Home Financing.
(a) The Company will cover all reasonable costs incurred to move
Executive's household from his current residence to the Silicon Valley area. The
Company will also cover real estate commissions, transaction fees, finance
charges and other reasonable expenses incurred by Executive in the sale of his
current residence and the purchase of a new residence. The Company will also
reimburse reasonable travel expenses during this transition period and
reasonable interim living expenses for Executive's family while Executive
searches for a new residence.
(b) The Company will provide Executive with a bridge loan to
assist him in making the down payment for his new home pending the sale of
Executive's existing residence in Georgia. This loan will be for up to $450,000
or the appraised value of the Georgia home, whichever is less, and will be
secured by a first mortgage on the Georgia home. The loan will bear interest at
the prime rate, as quoted in the Wall Street Journal for the date of the loan
(provided that such rate shall not be less than the minimum rate necessary to
avoid the imputation of income for Federal income tax purposes). Principal and
interest will be due on sale of the Georgia home or, if earlier, six months
after the date of the loan, unless extended with the approval of the Board of
Directors.
(c) Executive may elect either of the following two financing
assistance alternatives:
(i) Alternative One: If Executive obtains a jumbo first mortgage and
does not require further financial assistance from the Company (in addition to
the bridge loan described above) to purchase Executive's new home, the Company
will subsidize Executive's interest costs, on an after tax basis, to lower the
effective interest rate from "jumbo" rates to "conforming" rates. This subsidy
will be paid to Executive on a monthly basis as part of payroll. In addition, at
Executive's request, the Company will advance to Executive each month the
payment differential on $500,000 of financing (i.e., the amount that Executive
would not have been required to pay until the end of the year under Alternative
Two (2) below), with the advance to be repaid annually out of Executive's
executive bonus (or, if the bonus amount is insufficient and Executive has not
repaid the advance within two months after the end of the calendar year in which
the advance was made, the Company may withhold the amount due from any other
amount due the Executive, whose liability to repay the advance shall be fully
recourse to him; however, it is understood that in year one, in accordance
with 3(b) above, there will be no insufficiency, since a bonus amount at
least equal to this interest is guaranteed ). The subsidy and advance
provided under this Alternative One shall terminate upon the earliest of
(1) Executive's termination of employment for any reason, (2) the sale of the
residence, or (3) the fifth anniversary of the date of the first mortgage on
the residence.
(ii) Alternative Two: If Executive is not able to obtain jumbo
financing in an amount necessary to purchase his new home, and requests
financial assistance from the Company, the Company will loan Executive up to
$500,000, to be secured by a second mortgage on his new residence, subject to
the following conditions:
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(1) The mortgage securing the Company's loan will be
second in priority only to a first mortgage obtained
from a financial institution to purchase the
residence, and the aggregate principal amounts of the
loan and such other financing cannot exceed 100% of
the appraised value of the residence, based on an
independent appraisal reasonably acceptable to the
Company;
(2) The loan will bear interest at the same rate
payable on the first mortgage from the financial
institution, and will be interest only for five
years, payable annually, with the entire unpaid
principal balance and any accrued, unpaid interest
due on the fifth anniversary of the loan (provided
that such rate shall not be less than the minimum
rate necessary to avoid the imputation of income for
Federal income tax purposes);
(3) If Executive's employment is terminated for Cause
or Executive voluntarily resigns his position with
the Company without Good Reason (as such terms are
defined below), any unpaid balance of the loan will
be due 60 days after termination of his employment;
provided, however, that if after best efforts
Executive is not able to obtain comparable
replacement financing (defined as financing with an
interest rate no more than one percentage point
greater than that of the existing financing with the
same term) ("Comparable Replacement Financing"), the
note will continue for its remaining term;
(4) If Executive's employment is terminated by the
Company without Cause or by Executive for Good
Reason, or due to death or Disability, any unpaid
balance of the loan will be due one year after
termination of employment; provided, however, that if
after best efforts Executive is not able to obtain
Comparable Replacement Financing the note will
continue for its remaining term; and
(5) If Executive sells the residence, the unpaid
balance of the loan will be immediately due and
payable, unless otherwise agreed by the Board of
Directors.
Alternatives One and Two are intended to be equivalent on an after-tax
basis, and cash flow equivalent on a monthly and yearly basis. If upon
implementation of either alternative, it is discovered that Alternatives One and
Two are not equivalent, the Company will make whatever adjustments it determines
are necessary to make them equivalent.
6. Definition of Terms. The following terms referred to in this
Agreement shell have the following meanings:
(a) Cause. "Cause" shall mean (i) habitual failure to report to
work during normal work hours, other than customarily excused absences for
personal illnesses or other reasonable and infrequent causes, or intoxication on
the job; (ii) an act of dishonesty that has a demonstrable, detrimental effect
upon the Company, in the good faith determination of the Board based upon
successful completion of key results; (iii) material breach of this Agreement;
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(iv) conviction of a theft or a felony; or (v) any other wrongful or malicious
act that is seriously detrimental to the Company, in the good faith
determination of the Board.
(b) Change in Control. "Change in Control" shall mean the first
to occur of (i) the closing of a merger or consolidation of the Company with any
other corporation or entity, other than a merger or consolidation which results
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), directly or indirectly, at
least 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, or (ii) the approval by the stockholders of the
Company of a plan of complete liquidation of the Company or (iii) the closing of
the sale or disposition by the Company of all or substantially all of the
Company's assets.
(c) Disability. "Disability" shall mean that Executive has been
unable to substantially perform his duties as the result of his incapacity due
to physical or mental illness for a period of ninety (90) days. Termination
resulting from Disability may only be effected after at least 30 days' written
notice by the Company of its intention to terminate Executive's employment
relationship. In the event that Executive resumes the performance of
substantially all of his duties hereunder before the termination of his
employment relationship becomes effective, the noticed intent to terminate shall
automatically be deemed to have been revoked.
(d) Good Reason. "Good Reason" shall mean (i) without Executive's
express written consent, the significant reduction of Executive's duties,
authority or responsibilities, relative to Executive's duties, authority or
responsibilities as in effect immediately prior to such reduction, or the
assignment to Executive of such reduced duties, authority or responsibilities;
(ii) a reduction by the Company in Executive's Base Salary or a material
reduction by the Company in the kind or level of employee benefits to which
Executive was entitled immediately prior to such reduction with the result that
Executive's overall benefits package is significantly reduced; (iii) the
relocation of Executive to a facility or a location more than fifty (50) miles
from Executive's then present location, without Executive's express written
consent; (iv) any purported termination of Executive by the Company which is not
effected for Disability or for Cause, or any purported termination for which the
grounds relied upon are not valid; or (v) the failure of the Company to obtain
the assumption of this Agreement by any successors contemplated in Section 17
below.
7. Termination of Employment Relationship. The following provisions
shall govern termination of Executive's employment:
(a) Termination without Cause; Resignation for Good Reason. In
the event the Company terminates Executive's employment other than for Cause, or
in the event Executive terminates his employment with the Company for Good
Reason, then the Company shall, subject to Executive's continuing obligations
under Section 10 below, pay to Executive severance payments of one month's Base
Salary for a period of twelve (12) months following the date of termination (the
"Severance Period"). Such severance payments shall be paid at regular payroll
intervals. The Company shall also continue to make available to Executive and
his covered dependents, and to pay for, to the same extent as paid prior to
termination, all group health, life
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and other similar insurance plans or Company sponsored arrangements providing
comparable benefits in which Executive or such covered dependents participate on
the date of Executive's termination, through the Severance Period.
(b) Termination for Cause; Voluntary Resignation. In the event
the Company terminates Executive's employment for Cause, or If Executive
voluntarily resigns other than for Good Reason, then Executive shall be entitled
only to payment of all amounts earned or owed to Executive and all vesting of
equity compensation through and including the date of such termination or
resignation.
8. Death or Permanent Disability. In the event Executive's employment
terminates due to Executive's death or Disability, Executive or Executive's
estate shall not receive any additional payments under this Agreement but shall
receive such payments or benefits as may be provided under the Company's benefit
plans and programs, if any.
9. Date of Termination. The date of termination of employment by the
Company shall be the date specified in a written notice of termination to
Executive. The date of resignation shall be the date specified in the written
notice of resignation from Executive to the Company. Termination of Executive's
employment relationship for Cause shall be communicated by delivery to Executive
of a copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board (excluding Executive) at a
meeting of the Board called and held for such purpose (a "Notice of
Termination"). For purposes of this Agreement, no purported termination of
Executive's employment for Cause shall be effective without delivery of such
Notice of Termination.
10. Non Solicit. Executive agrees that during the term of this
Agreement and for a period of twelve (12) months following Executive's
termination of employment, Executive will not, on behalf of any business
enterprise other than the Company, solicit the employment of or hire any person
who is or was employed by the Company at the time of termination.
11. Assignment. Executive's rights and obligations under this Agreement
shall not be assignable by Executive. The Company's rights and obligations under
this Agreement shall not be assignable by the Company except as incident to the
transfer, by merger, liquidation, or otherwise, of all or substantially all of
the business of the Company.
12. Notices. Any notice required or permitted under this Agreement
shall be given in writing and shall be deemed to have been effectively made or
given if personally delivered, or if sent by facsimile, or mailed to the other
party at its address set forth below in this Section 12, or at such other
address as such party may designate by written notice to the other party hereto.
Any effective notice hereunder shall be deemed given on the date personally
delivered or on the date sent by facsimile or deposited in the United States
mail (sent by certified mail, return receipt requested), as the case may be, at
the following address:
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(i) If to the Company:
Micro Linear Corporation
0000 Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chief Financial Officer
(ii) If to Executive:
Xxxxxxx X. Xxxxxxxxxx
0000 Xxxxxxxx Xx.
Xxxxxx, XX 00000
13. Disputes. Any disputes under this Agreement between the parties
hereto shall be settled by arbitration in Santa Xxxxx County, California under
the auspices of, and in accordance with the rules of, the American Arbitration
Association, by an arbitrator who is mutually agreeable to the parties hereto,
or if the Company and Executive cannot agree on the selection of the arbitrator,
then before three arbitrators, one of which shall be appointed by Executive, one
of which shall be appointed by the Company, and the third of which shall be
chosen by the American Arbitration Association (such arbitrator or arbitrators
hereinafter referred to as the "Arbitrator"). The decision in such arbitration
shall be final and conclusive on the parties and judgment upon such decision may
be entered in any court having jurisdiction thereof. The Company and Executive
shall share equally all expenses of the Arbitrator incurred in any arbitration
hereunder. If an Arbitrator determines that any term or provision hereof is
invalid or unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired and (b) such Arbitrator shall have the authority to replace such
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
14. Entire Agreement. This Agreement and the documents expressly
referred to herein represent the entire agreement of the parties with respect to
the matters set forth herein, and to the extent inconsistent with other prior
contracts, arrangements or understandings between the parties, supersedes all
such previous contracts, arrangements or understandings between the Company and
Executive. The Agreement may be amended only by mutual written agreement of the
parties hereto.
15. Withholding. The Company shall be entitled to withhold, or cause to
be withheld, from payment any amount of withholding taxes required by law with
respect to payments made to Executive in connection with his employment
hereunder.
16. Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of California without reference to rules
relating to conflict of law.
17. Successors. This Agreement shall be binding upon and inure to the
benefit of, and shall be enforceable by Executive and the Company, their
respective heirs, executors, administrators and assigns.
18. Headings. The headings of sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
19. Counterparts. This Agreement may be executed by either of the
parties hereto in counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MICRO LINEAR CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Title: Chief Financial Officer
----------------------------------
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxxxxx
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