Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement") is made as of May 9,
2005 (the "Effective Date"), between Staktek Holdings, Inc., a Delaware
corporation (the "Company"), and Xxxxx Xxxxxxxxx ("Executive").
WHEREAS, the Company desires to retain the services of Executive as
President;
WHEREAS, the Parties desire to enter into this Agreement to set forth the
terms and conditions of Executive's employment by the Company and to address
certain matters related to Executive's employment with the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual provisions
contained herein, and for other good and valuable consideration, the Parties
hereto agree as follows:
1. Employment. Effective on the Effective Date and subject to the terms and
conditions of this Agreement, the Company agrees to employ Executive as its
President, and Executive agrees to perform the duties associated with that
position diligently and to the reasonable satisfaction of the Company's Board of
Directors. From the Effective Date until termination of this Agreement,
Executive will devote Executive's full business time, attention and energies to
the business of the Company. Executive will report to the Chief Executive
Officer of the Company, and will comply with the reasonable directives,
policies, and guidelines established by the Company's Board of Directors from
time to time.
2. Term and Termination.
(a) Term. Executive will be employed under this Agreement for an initial
term of two (2) years (the "Initial Term"), beginning on the Effective
Date. This Agreement shall renew for successive one (1) year periods after
the completion of the Initial Term unless either party gives written notice
of termination at least forty-five (45) days prior to the expiration of the
Initial Term, or any renewal term. As set forth in Section 3(d), upon
termination by the Company without Cause, Executive shall be entitled to
Severance Benefits. In the event the Initial Term or any subsequent renewal
term expires and the Agreement is no longer in effect, the only provision
that shall survive is Section 8 and Section 3 to the extent that there are
any amounts payable to Executive.
(b) Termination. Notwithstanding the foregoing, either party may terminate
this Agreement at any time, with or without Cause (defined below), by
giving written notice of termination to the other party. Upon termination,
neither party will have any continuing obligation to the other party,
except that the provisions of Sections 3(c), 3(d), 5, 7 and 8 and, to the
extent not theretofore paid or provided in respect of services rendered
prior to the date of termination, the provisions of Section 4, will survive
any termination of this Agreement and will remain in effect in accordance
with their terms.
(c) Cause. For purposes of this Agreement, a termination of employment is
for "Cause" if the termination occurs because of Executive's: (i)
unauthorized use or disclosure of the confidential information or trade
secrets of the Company, which use or disclosure causes, or could reasonably
be expected to cause, material harm to the Company; however, Company
confidential information or trade secrets does not include any information
that has become publicly known and made generally available through no
wrongful act of Executive, or information already known to Executive prior
to entering into this Agreement. Further, disclosure of confidential
information or trade secrets made in the ordinary course of the Company's
business under a non-disclosure agreement and in the best interest of the
Company shall not be deemed an unauthorized use or disclosure; (ii)
conviction of, or plea of "guilty" or "no contest" to, a felony or any
crime involving moral turpitude; (iii) willful misfeasance or gross
misconduct in the performance of Executive's duties; (iv) substance abuse
that in any manner materially interferes with the performance of
Executive's duties; (v) chronic absence from work for reasons other than
illness; or (vi) failure to perform Executive's assigned duties, after
receiving written notice from the Company, which shall be based on
reasonable grounds relating to failure to perform, and an opportunity of at
least thirty (30) days or whatever additional time may be reasonably
necessary, not to exceed ninety (90) days, to correct any such failure
and/or dispute the original notice.
3. Compensation.
(a) Beginning on the Effective Date, and thereafter during the term of
Executive's employment, the Company will pay Executive a base salary at the
rate of $22,916.66 per month (the "Base Salary"), payable in accordance
with the standard payroll practices of the Company in effect from time to
time. All of Executive's compensation under this Agreement will be subject
to deduction and withholding authorized by Executive or required by
applicable law. Salary adjustments will be determined by the Board of
Directors, in its sole and absolute discretion, on at least an annual
basis; however, under no circumstances may Executive's salary be reduced
below the Base Salary without his consent.
(b) Beginning on the Effective Date, Executive will be eligible to
participate in the Company's profit sharing program (attached hereto as
Exhibit A, and as may be amended by the Company from time to time) on
substantially the same terms as other executives of the Company.
Executive's maximum potential payout under the program is 100% of
Executive's annual base salary. Executive is entitled to a minimum bonus
payment of $25,000 per quarter for each quarter beginning with the second
quarter of 2005 and ending with the first quarter of 2006. After March 31,
2006, Executive is not entitled to any minimum bonus payment.
(c) Upon approval by the Company's Board of Directors, Executive will be
granted (i) an option to purchase up to Five Hundred Seven Thousand Five
Hundred Seven (507,507) shares of the Company's common stock, and (ii) an
option to purchase an additional Five Hundred Thousand (500,000) shares of
the Company's common stock, which with respect to (ii), exercisability is
subject to approval of the Company's stockholders (both grants,
collectively the "Option Shares"), at an exercise price equal to the
closing price on Nasdaq on the first day following the Company's restricted
trading period with respect to its first quarter 2005 earnings
announcement. Consistent with the terms of the Company's 2003 Stock Option
Plan, 25% will vest on the first anniversary of the Effective Date of this
Agreement, with the remaining Shares vesting in equal monthly installments
over the following thirty-six (36) months of Executive's employment with
the Company. Except as otherwise provided in this Agreement, vesting of
Option Shares shall cease upon the termination of Executive's employment
with the Company. The Option will be structured as an incentive stock
option to the extent permitted by IRS regulations. Following a "Change in
Control" (as defined in the 2003 Option Plan), the Option will vest in full
if: (A) the Option is not assumed or substituted by the successor or; (B)
if the Executive's employment is terminated without Cause during the first
twenty-four (24) months following the closing of the Change in Control
transaction.
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(d) In the event of a termination without Cause, the Company agrees: (A) to
continue to pay Executive his then-current Base Salary for an additional
twelve (12) months following the termination date, with the payments to be
made in accordance with the Company's standard payroll practices, and on
the Company's normal paydays; and (B) to accelerate vesting of the Option
Shares that would have vested over the twelve (12) months following the
termination date; however, if required by Section 409A of the Internal
Revenue Code, these payments and acceleration may not begin until the first
day of the seventh month following Executive's termination of employment.
The payments and the accelerated vesting of Option Shares set forth in this
section shall be referred to collectively as the "Severance Benefits."
Executive's right to the Severance Benefits is expressly conditioned on
Executive's execution of a customary general release of claims in favor of
the Company, its affiliates and their respective directors, officers,
employees, shareholders and partners, and his compliance with the surviving
provisions of this Agreement and the Company's Confidentiality Agreement.
4. Executive Benefits. Beginning on the Effective Date and thereafter
during the term of this Agreement, the Company will provide to Executive such
fringe benefits and perquisites that the Company provides to other executives of
the Company, including four (4) weeks of vacation and participation in all
Company health, dental and other employee benefit plans. In addition, the
Company will reimburse Executive for reasonable out-of-pocket business expenses
incurred and documented in accordance with the policies of the Company in effect
from time to time. The Company will reimburse Executive for up to $100,000 in
relocation expenses, as well as one house-hunting trip to Austin, Texas for
Executive and his immediate family in accordance with Staktek's Travel Policy,
subject to the terms and conditions of the relocation agreement attached as
Exhibit B. In addition, for a period of one (1) year from the Effective Date,
Executive is entitled to purchase up to $1.5 million of treasury shares of the
Company's common stock directly from the Company as a private placement, at a
price per share equal to the closing price on Nasdaq on the date of purchase.
This stock will not be subject to vesting but will be subject to Rule 144
promulgated under the Securities Act of 1933, other applicable state and federal
securities laws and the Company's policy on xxxxxxx xxxxxxx, including the
Company's restricted trading periods. The Company agrees to reimburse Executive
to up to $5,000 for Executive's current life insurance policy, as long as
Executive provides copies of receipts.
5. Restrictive Covenants.
(a) Consideration For Promise To Refrain From Competing. Executive agrees
that his services to the Company are special and unique; that the Company's
disclosure of confidential and proprietary information, trade secrets, and
specialized training and knowledge to Executive and Executive's level of
compensation, Severance Benefits and other benefits are in consideration of
and conditioned upon Executive's covenant not to compete with Company
following his termination as provided for in this Section 5. Executive
further acknowledges and agrees that the benefits received by Executive
pursuant to this Agreement constitute adequate consideration for
Executive's agreement to this Section 5. Executive acknowledges that this
consideration is adequate for Executive's promises contained within this
Section 5 and gives rise to the Company's interest in ensuring that he
refrains from post-termination competition as provided for herein.
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(b) Covenant Not to Compete. The "Noncompetition Period" will begin on the
Effective Date and end twelve (12) months after the date on which
Executive's employment with the Company terminates for any reason (the
"Termination Date"). During the Noncompetition Period, Executive will not,
directly or indirectly, on Executive's own behalf or as an officer,
director, employee, consultant or other agent of, or as a stockholder,
partner or other investor in, any person or entity (other than the Company
or its affiliates):
(i) Engage in (i) the development, design, manufacture or sale of
memory module stacking technology, (ii) the development, design,
manufacture or sale of DIMM manufacturing technology, or (iii) any
other business of the Company (the "Competing Business"), in each case
for any competing business within any geographic area in which the
Company or its subsidiaries conducts any business (including the
United States) (the "Territory"). Executive shall not be precluded
from working for any company so long as he does not engage in the
specific prohibited activities described herein this section.
(ii) Directly or indirectly influence or attempt to influence any
customer, potential customer, supplier or accounts of the Company or
its subsidiaries located within the Territory to purchase, sell or
lease goods or services relating to a Competing Business other than
from or to the Company; or
(iii) Solicit, encourage, or take any other action which is intended,
directly or indirectly, to induce any other employee of the Company to
terminate such employee's employment with the Company, or interfere in
any manner with the contractual or employment relationship between the
Company and any other employee of the Company, or hire or attempt to
hire any former employee of the Company whose termination from
employment has been effective for ninety (90) days or less.
Provided, however, that the foregoing restrictions will not apply to any
investment in publicly traded securities constituting not more than 5% of the
outstanding securities in any class of such securities. For purposes of this
Agreement, the term "affiliate" means with respect to any person or entity any
other person or entity controlling, controlled by or under common control with
such person or entity. For purposes of this Section 5, the definition of
"Business" will be the business of the Company as of the date of Executive's
termination and the business of the Company actually proposed to be entered into
as evidenced by written and adopted business plans of the Company.
6. Directors' and Officers' Insurance. Company shall maintain a minimum of
Ten Million Dollars ($10,000,000) of Directors' and Officers' ("D&O") Insurance
while Executive is employed. The D&O policy shall be a third-party product. The
Company's failure to maintain uninterrupted D&O insurance coverage shall be
deemed a material breach of this Agreement, which shall entitle Executive to the
Severance Benefits, as defined and described above in Section 3(d).
7. Enforcement
(a) Executive represents to the Company that Executive is willing and able
to engage in businesses other than a Competing Business within the
Territory and that enforcement of the restrictions set forth in Section 5
would not be unduly burdensome to Executive. The Company and Executive
acknowledge and agree that the restrictions set forth in Section 5 are
reasonable as to time, geographic area and scope of activity and do not
impose a greater restraint than is necessary to protect the goodwill and
other business interests of the Company, and Executive agrees that that the
Company is justified in believing the foregoing.
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(b) If the provisions of Section 5 are found by a court of competent
jurisdiction to contain unreasonable or unnecessary limitations as to time,
geographical area or scope of activity, then such court is hereby directed
to reform such provisions to the minimum extent necessary to cause the
limitations contained therein as to time, geographical area and scope of
activity to be reasonable and enforceable.
(c) Executive acknowledges and agrees that the Company would be irreparably
harmed by any violation of Executive's obligations under Section 5 hereof
and that, in addition to all other rights or remedies available at law or
in equity, the Company will be entitled to injunctive and other equitable
relief to prevent or enjoin any such violation. If Executive violates
Section 5, the period of time during which the provisions thereof are
applicable will automatically be extended for a period of time equal to the
time that Executive began such violation until such violation permanently
ceases.
8. Confidentiality and Proprietary Rights. Executive agrees to read, sign
and abide by a Confidentiality Agreement, which is attached hereto as Exhibit A
and incorporated herein by reference.
9. Mediation. In the event that any disputes arise between the Parties with
respect to this Agreement, the Parties acknowledge and agree that prior to
initiating any litigation regarding such dispute, they shall submit their
dispute to a mutually agreeable mediator for purposes of conducting non-binding
mediation in an effort to resolve the dispute without the necessity of
litigation.
10. No Obligation to Third Party. Executive represents and warrants that
Executive is not under any obligation to any person or other third party and
does not have any other interest which is inconsistent or in conflict with this
Agreement, or which would prevent, limit, or impair Executive's performance of
any of the covenants hereunder or Executive's duties as an employee of the
Company.
11. Entire Agreement. This Agreement, along with the agreements and
documents that make up the 2003 Stock Option Plan and the Company's Employee
Innovations and Proprietary Rights Assignment Agreement (which are incorporated
herein by reference), embodies the complete agreement of the parties with
respect to the subject matter hereof and supersedes any prior written, or prior
or contemporaneous oral, understandings or agreements between the parties that
relate in any way to the subject matter hereof. This Agreement may be amended
only in writing executed by the Company and Executive.
12. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the respective heirs, executors, administrators, legal
representatives and successors of the Company and Executive.
13. Notice. Any notice required or permitted under this Agreement must be
in writing and will be deemed to have been given when delivered personally, by
telecopy or by overnight courier service or three days after being sent by mail,
postage prepaid, to (a) if to the Company, to the Company's principal place of
business, or (b) if to Executive, to Executive's residence or to Executive's
latest address then contained in the Company's records (or to such changed
address as such person may subsequently give notice of in accordance herewith).
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14. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH SUBSTANTIVE LAWS OF TEXAS, WITHOUT GIVING EFFECT
TO ANY CONFLICTS OF LAW, RULE OR PRINCIPLE THAT MIGHT REQUIRE THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
15. Counterparts. This Agreement may be executed in counterparts and by
different parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Agreement.
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IN WITNESS WHEREOF, the Company and Executive have executed and delivered
this Agreement as of the date first above written.
STAKTEK HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxx
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Name: Xxxxx X. Xxxx
Title: CEO
EXECUTIVE
/s/ Xxxxx Xxxxxxxxx
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XXXXX XXXXXXXXX
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Exhibit A
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