Exhibit 10.5
EMPLOYMENT AGREEMENT
Agreement made as of 18 March 1999 between Standard Microsystems Corporation, a
Delaware corporation having an office at 00 Xxxxx Xxxxx, X.X. Xxx 00000,
Xxxxxxxxx, Xxx Xxxx 00000 ("Company"), and Xxxxxx X. Xxxxxxxx, residing at 0
Xxxxxxxx Xxxxx Xxxx, Xxxxxx Xxxxxxxx, XX 00000 ("Executive").
W I T N E S S E T H:
WHEREAS, Company desires to employ Executive as Company's President and Chief
Executive Officer, upon the terms and conditions hereinafter in this Agreement
set forth, and Executive desires to be so employed;
Now, therefore, in consideration of the premises and the mutual covenants and
conditions contained herein, the parties hereto agree as follows:
1. Employment.
The Company hereby agrees to employ the Executive, and
the Executive hereby accepts such employment, upon the
terms and conditions hereinafter set forth.
2. Title and Duties.
Company shall employ Executive as Company's President and
Chief Executive Officer, effective as of the date of execution hereof.
Executive will render his services faithfully and to the best of his
ability and devote his full business time and attention to the
services to be rendered by him hereunder. As quickly as reasonably
possible, but in any event not later than 1 January 2000, Executive
shall establish a residence in Long Island, New York, but Executive
shall not thereafter be required to relocate outside of Long Island,
New York. Company shall use best efforts to cause Executive's
election and re-election as a director of Company during the
Employment Term.
3. Term; Severance; Change in Control.
a. The term of employment under this Agreement (the "Employment Term")
shall commence as of the date hereof and shall continue through
18 March 2002. Thereafter, the Employment Term shall be automatically
extended for one-year periods, unless either party shall give notice
("Contrary Notice"), at least six months prior to the end of the
Employment Term, that the Employment Term shall not be so extended.
b. Notwithstanding Section 3.a, the Employment Term shall terminate
prior to any date otherwise specified in Section 3.a, upon:
(i) Executive's death or disability ("disability" shall mean the
physical or mental incapacity of the Executive which prevents
Executive from performing the Executive's duties as herein provided
for a continuous period of 60 days or an aggregate period of 90 days
during any consecutive six-month period, and disability shall be
deemed to have occurred as of the end of the applicable period);
(ii) notice by Company of termination for cause, which shall mean
Executive's (w) material dishonesty in the course of employment, (x)
willful and material failure to perform his duties hereunder,
following delivery of written notice thereof and a reasonable period,
not to exceed 30 days from delivery of notice, to cure such failure,
or (z) conduct, regardless of whether in the course of employment,
constituting a felony or any crime involving moral turpitude;
(iii) notice by Company of termination other than for cause. Reduction
of compensation or duties, or requirement to relocate outside of Long
Island or other breach hereof and failure to cure within 30 days
following delivery of written notice thereof by Executive to Company
shall be considered notice of termination under this subsection.
Contract nonrenewal by Company shall also be considered notice of
termination under this subsection;
(iv) notice of voluntary termination by Executive within six months
after a change in control of Company (for purposes hereof, a "change
in control of Company" shall mean an event that Company would be
required to report as such pursuant to Securities and Exchange
Commission ("SEC") Form 8-K); or
(v) notice of voluntary termination by Executive within six months
after Company's shareholders fail to elect Executive as a member of
the Company's Board of Directors.
c. Should Company terminate the Employment Term pursuant to clauses
(i) or (iii) of Section 3.b: (i) Company shall pay Executive, in lump
sum on the day of termination, an amount equal to one year's Base
Salary, any vested or unvested stock grants, any deferred compensation
(if any deferred compensation plan shall be adopted in the future),
any accrued, unused vacation and unreimbursed business expenses
(including automobile and relocation expense, and tax gross up on such
automobile and relocation expenses); (ii) Company shall pay any
accrued, unpaid Bonus, as hereinafter defined, (i.e., a pro-rated
amount of the Bonus that Executive would have earned if Executive
remained employed through the then current fiscal year of Company, to
be based on the number of weeks employed during the then current
fiscal year), payable at the same time such Bonus would have been
paid for such fiscal year; (iii) Company shall continue to provide
paid coverage for life insurance, and all group health insurance plans
under COBRA, provided by Company to Executive as of the date of
such termination, for a period of 18 months from the date of
termination of the Employment Term, or until Executive shall have
sooner obtained full-time employment; (iv) insofar as any stock option
granted by Company to Executive would have, but for such termination,
become exercisable in accordance with its terms within 13 months of
the date of such termination, such option shall become exercisable as
of such termination date, remain exercisable during such 13 month
period, and expire at the end of such 13 month period. This Section
3.c sets forth Company's entire obligation to Executive in case of
termination of the Employment Term on any basis referred to in this
Section 3.c.
d. Should Company terminate the Employment Term pursuant to clause 3.b
(ii), Company's obligations hereunder shall be fully satisfied upon
payment by the Company to the Executive of any unpaid Base Salary,
accrued, unused vacation time and unreimbursed business expenses
through the date of termination, provided, however, that such payment
shall not prevent the Company from seeking relief respecting any claim
it might have against the Executive hereunder or otherwise.
e. In the event of either a change in control of Company or the
Company's shareholders' failing to elect Executive as a member of the
Board of Directors or removing Executive as a Director once elected,
all stock options, all stock grants and deferred compensation (if any
deferred compensation plan shall be adopted in the future) shall
immediately vest, and, should Executive terminate the Employment Term
pursuant to clause 3.b.(iv) or (v), Executive shall be entitled to
the payments and insurance coverage referred to in clauses
3.c(i), (ii) and (iii).
4. Annual compensation.
a. In consideration of the services to be rendered by Executive
hereunder, the Company shall pay to the Executive:
(i) an annual base salary of $350,000, which may be increased, but not
decreased without Executive's consent, from time to time, by Company's
Board of Directors, based upon Compensation Committee review and
recommendation ("Base Salary"); and
(ii) a management incentive bonus ("Bonus"), with respect to fiscal
year 2000 equal to 80 percent of Base Salary, i.e., $280,000 (the
"Guaranteed Bonus"), payable in cash immediately upon execution hereof
or at the time requested by Executive, and any additional earned Bonus
for fiscal year 2000 (under the plan described below) and a Bonus with
respect to each succeeding fiscal year, determined in accordance with
Company's EVC Plan payable within 75 days following the end of such
fiscal year. Should Company terminate the Employment Term for cause,
or should Executive terminate the Employment Term voluntarily (other
than on account of Company's material breach hereof or pursuant to
clauses (iv) or (v) of Section 3.b), in either case prior to 1 March
2000, Executive shall pay to Company, on the date of such termination,
as liquidated damages, and not as penalty, an amount equal to the
product obtained by multiplying the Guaranteed Bonus (insofar as paid
to Executive) by a fraction, the numerator of which shall be the
number of whole calendar days remaining in Company's fiscal year 2000,
and the denominator of which shall be 365 (such fraction, the
"Forfeiture Fraction.").
The Bonus plan is defined by the Board of Directors for each fiscal
year, and, during the Company's fiscal year 2000, it shall be based on
the Company achieving specific changes in economic profit generated or
Economic Value Contributed ("EVC"). The fiscal year 2000 EVC plan for
the Company will be provided in a separate document. However, some of
the major provisions of the plan provide for an EVC target, indexing
Company EVC performance to the market, and additional bonus payment
for over target EVC performance not to exceed 75% of the at-plan Bonus
amount, i.e., for fiscal year 2000 not to exceed $210,000 over the
Bonus amount of $280,000 specified in 4.a. (ii). The target Bonus for
Executive will remain at 80% of Base Salary for the Company's fiscal
years 2001 and 2002; however, the basis on which Bonus is earned may
be modified by the Board of Directors. Any Bonus plan approved by the
Board of Directors for Executive will be consistent with the
management incentive bonus plan for other Company executives.
b. Any Bonus payable respecting fiscal year 2001 shall be paid 75% in
cash, and the balance shall be paid in shares of Company common stock
having a total Market Value, as hereinafter defined, equal to 25% of
the amount of such Bonus. Any Bonus payable respecting any subsequent
fiscal year shall be paid 50% in cash, and the balance shall be paid
in shares of Company common stock having a total Market Value equal to
50% of the amount of such Bonus. All common stock so issued shall be
subject to the same transfer restrictions and forfeiture under the
same conditions as shall apply generally to Company bonus awards of
Company common stock, except as otherwise provided herein in
paragraphs 3 and 6. Executive shall have the right to demand
registration for all vested stock and Company shall use best effort
to cause such registration at Company expense to be effective.
c. For purposes hereof, Market Value of a share of Company common
stock shall mean the closing sale price of such a share on the date
that Company's independent accountants shall have completed the audit
for the fiscal year respecting which the Bonus shall be paid.
5. Benefits; Expenses.
Executive shall be entitled to such benefits as are provided generally
to Company's senior executive officers. In addition, Executive shall
receive a $1,200 per month car allowance, plus all expenses, including
insurance, repairs and maintenance, fuel and normal travel expenses
(i.e. tolls, parking, etc.). All the preceding expenses are fully tax
protected. On or about 1 January 2000, Executive will be provided
with a Company-leased car (STS or similar), at which time the $1,200
per month car allowance will cease, but the other expenses will
continue to be reimbursed and any reportable income associated with
the use or expense of the leased car will be fully tax protected.
Company shall furnish Executive with individual supplemental life
insurance coverage in the amount of $312,500 and individual disability
income coverage. Company shall furnish and maintain continuously
directors and officers liability insurance coverage during employment,
and will continue to indemnify and advance legal expenses on behalf of
Executive, during Employment Term and after termination for actions
occurring during the Employment Term to the extent permitted by law.
Executive shall accrue vacation time at a rate of twenty days per
year. Company will grant Executive, effective the date hereof,
options to purchase 280,000 shares of Company Common Stock with
four-year (25% per year) vesting and ten-year expiration. Executive's
benefit under the Executive Retirement Plan shall vest 50% after five
years of service and pro-ratably over the next five years as to the
remaining 50%.
6. Relocation Assistance.
Company shall reimburse travel and living expenses in the Hauppauge,
NY area for Executive through 31 December 1999 and pay packing
and moving expenses incident to relocation of Executive's household to
the Hauppauge area. Any tax ramifications of the above travel, living,
packing or moving expenses will be reimbursed. On execution hereof,
Company shall issue to Executive 20,000 shares of Company common
stock, and use best efforts to register the shares for resale by
30 June 1999. Should Company terminate the Employment Term for cause,
or should Executive terminate the Employment Term voluntarily (other
than on account of Company's material breach hereof or pursuant to
3.b.(iv) or 3.b.(v)), in either case prior to 1 March 2000 or upon
purchase of a home on Long Island, whichever is earlier, Executive
shall, as liquidated damages, and not as penalty, transfer to Company
a number of shares of Company common stock equal to 20,000 multiplied
by the Forfeiture Fraction, or an amount equal to the product obtained
by multiplying 20,000 by the Forfeiture Fraction and multiplying that
amount by the mean of the closing sale prices of the Company common
stock on the first ten trading days following effectiveness of the
registration of the shares for resale. At Executive's request prior
to 1 January 2000, Company shall lend Executive up to $60,000, on an
unsecured basis, and up to an additional $100,000, secured by the
common stock referred to in the second preceding sentence, to defray
relocation costs. Any such loan(s) shall be repayable five years from
issuance and bear the same interest as is earned on Company cash
deposits in its bank accounts, payable quarterly.
7. Other Considerations.
Company shall provide up to ten days off for Executive to participate
in Robotic Vision Systems, Inc.'s pending patent suit litigation.
Company shall permit Executive to hold up to two outside directorships
with companies not competing with Company.
8. Intellectual Property.
a. Assignment of Inventions.
(i) Subject to paragraph (a)(ii) below, Executive hereby assigns and
agrees to assign to Company, or to any business concern controlled by
or under common control with Company ( "Company Affiliate") as Company
shall specify, all of Executive's right, title and interest in and to
any inventions, formulas, techniques, processes, ideas, algorithms,
discoveries, designs, developments and improvements which Executive
may make, reduce to practice, conceive, invent, discover, design or
otherwise acquire during Executive's employment by Company or any
Company Affiliate, whether or not made during regular working hours,
relating to the actual or anticipated business, products, research or
development of Company or any Company Affiliate (collectively,
"Inventions").
(ii) The foregoing shall not apply to, and Executive shall not be
required to assign any of Executive's rights in, an invention that
Executive developed entirely on Executive's own time without using any
equipment, supplies, facilities, computer programs, or trade secret(s)
and/or other proprietary and/or confidential information of Company or
any Company Affiliate, except for those inventions that either:
(1) relate directly or indirectly at the time of
conception or reduction to practice of the
invention, to the business of Company or any Company
Affiliate, or to the actual or contemplated
products, research or development of Company or any
Company Affiliate, or
(2) result from any work performed by Executive for
Company or any Company Affiliate.
b. Trade Secrets.
Executive shall regard and preserve as confidential:
(x) all trade secrets and/or other proprietary and/or
confidential information belonging to Company or any Company
Affiliate; and (y) all trade secrets and/or other proprietary and/or
confidential information belonging to a third party which have been
confidentially disclosed to Company or any Company Affiliate, which
trade secrets and/or other proprietary and/or confidential information
described in (x) and (y) above (collectively, "Confidential
Information") have been or may be developed or obtained by or
disclosed to Executive by reason of Executive's employment. Executive
shall not, without written authority from Company to do so, use for
Executive's own benefit or purposes, or the benefit or purpose of any
person or entity other than Company or any Company Affiliate, nor
disclose to others, either during Executive's employment with Company
or thereafter, except as required in the course of employment with
Company or any Company Affiliate, or except as required by law, any
Confidential Information (Executive, as CEO, shall have the usual and
customary discretion to determine when disclosure is required for the
benefit of Company). This provision shall not apply to Confidential
Information that has been voluntarily disclosed to the public by
Company or any Company Affiliate, or otherwise entered the public
domain through lawful means. Confidential Information shall include,
but not be limited to, all nonpublic information relating to any of
the following regarding Company or any Company Affiliate: (1)
business, research, development and marketing plans, strategies and
forecasts; (2) business; (3) products (whether existing, in
development, or being contemplated); (4) customers' identities,
usages, and requirements; (5) reports; (6) formulas;
(7) specifications; (8) designs, software and other technology;
(9) research and development programs; and (10) terms of contracts.
c. Works of Authorship.
Executive agrees that any original works of authorship, including,
without limitation, all documents, blueprints, drawings, mask works
and computer programs (including, without limitation, all software,
firmware, object code, source code, documentation, specifications,
revisions, supplements, modules, and upgrades), conceived, created,
performed or produced during the term of Executive's employment with
Company or any Company Affiliate, and all foreign and domestic,
registered and unregistered, copyrights and mask work rights and
applications for registrations therefor related to any such work
of authorship, in each case, whether or not made during regular
working hours, relating to the actual or anticipated business,
products, research or development of Company or any Company Affiliate
(collectively, "Works of Authorship") shall be the exclusive property
of Company or any Company Affiliate as Company shall specify. To the
extent that Executive has or obtains any right, title or interest in
or to any Works of Authorship, Executive hereby assigns and agrees to
assign to Company or any Company Affiliate as Company shall specify,
all of such right, title and interest therein and thereto. This
paragraph does not include any publicly available materials, unless
such materials shall have become public in violation of this
Agreement.
d. Disclosure.
Executive shall promptly and fully disclose any and all Inventions
and Works of Authorship to Company's General Counsel or other official
as Company's Board of Directors may designate for such purpose.
e. Further Assistance.
Executive shall, during Executive's employment with Company or any
Company Affiliate and at any time thereafter, upon the request of and
at the expense of Company or such Company Affiliate, but at no
additional compensation to Executive: do all acts and things
including, but not limited to, making and executing documents,
applications and instruments and giving information and testimony, in
each case, deemed by Company from time to time, in its sole
discretion, to be necessary or appropriate (1) to vest, secure,
defend, protect or evidence the right, title and interest of Company
in and to any and all Inventions, Works of Authorship and Confidential
Information; and (2) to obtain for Company, in relation to all such,
letters patent, design registrations, copyright registrations and/or
mask work registrations, in the United States and any foreign
countries, and/or any reissues, renewals and/or extensions thereof.
f. Previous Obligations.
Executive represents and warrants to Company that Executive has no
continuing obligation with respect to assignment of inventions,
developments or improvements to any previous employer(s), other than
Robotic Vision Systems, Inc. respecting any invention, development,
or improvement made prior to 1 March 1999, nor does Executive claim
any existing title in any previous unpatented inventions, developments
or improvements within the scope of this Section 8. except as may be
set forth on an Exhibit hereto acknowledged on the face thereof as an
Exhibit hereto by an authorized representative of Company.
g. Return of Documents.
All media on which any Inventions, Works of Authorship or Confidential
Information may be recorded or located, including, without limitation,
documents, samples, models, blueprints, photocopies, photographs,
drawings, descriptions, reproductions, cards, tapes, discs and other
storage facilities (collectively, "Documentation") made by Executive
or that come into Executive's possession by reason of Executive's
employment are the property of Company and shall be returned to
Company by Executive upon termination of employment. Executive will
not deliver, reproduce, or in any way allow any Documentation to be
delivered or used by any third party without the written direction or
consent of a duly authorized representative of Company.
9. Competition.
Executive covenants and agrees that (a) for so long as he shall
be employed by Company or any Company affiliate, he shall not,
directly or indirectly, as principal, partner, agent, servant,
employee, stockholder, or otherwise, anywhere in the world (the
"Territory"), engage or attempt to engage in any business activity
competitive with the business being conducted or, to the knowledge of
Executive prior to Notice of Termination or actual termination,
whichever is earlier, being planned to be conducted by Company or any
Company affiliate, and (b) for one year after termination, Executive
shall not, in the Territory, so engage or attempt to engage in any
business activity competitive with any business conducted or planned
to be conducted by any of Company or any Company affiliate within one
year prior to termination. The foregoing shall not prohibit
Executive, his affiliates, spouse, and children from owning
beneficially any publicly traded security, so long as the beneficial
ownership by all of them, when combined with the beneficial ownership
of such publicly traded security by any person (as defined above) of
which any of them is a member, constitutes less than 5% of the class
of such publicly traded security. Executive recognizes that the
foregoing territorial and time limitations are reasonable and properly
required for the adequate protection of the business of Company and
that in the event that any such territorial or time limitation is
deemed to be unreasonable in any proceeding to enforce these
provisions or otherwise, Executive agrees to request, and to submit
to, the reduction of said territorial or time limitation to such an
area or period as shall be deemed reasonable by the relevant tribunal.
In the event that Executive shall be in violation of the foregoing
restrictive covenants, then the time limitation thereof shall be
extended for a period of time during which such breach or
breaches shall occur. The existence of any claim or cause of action by
Executive against Company, if any, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the
enforcement by Company of the foregoing restrictive covenants.
10. Miscellaneous.
a. Executive agrees that a remedy at law for any breach or proposed or
attempted breach of the provisions of Sections 8 or 9 shall be
inadequate and that Company shall be entitled to injunctive relief
with respect to such breach or proposed or attempted breach, in
addition to any other remedy it might have. The provisions of
Sections 8 and 9 shall be enforceable notwithstanding the existence of
any claim or cause of action of Executive against Company or any
Company Affiliate, whether predicated on such Section or otherwise.
b. Except as otherwise provided herein, the agreements, assignments
and appointments made by Executive hereunder and the obligations of
Executive herein shall survive the termination of Executive's
employment with Company, whether by Executive or Company.
c. This Agreement may be modified only by a written instrument duly
executed by the parties hereto. No term or provision of this
Agreement shall be deemed waived, and no breach excused, unless such
waiver or consent shall be in writing and signed by the parties
hereto. The failure of either party or any Company Affiliate at any
time to enforce performance of any provision of this Agreement shall
in no way affect such person's rights thereafter to enforce the
same, nor shall the waiver by any such person of any breach of any
provision hereof be deemed to be a waiver of any other breach of the
same or any other provision hereof.
d. If any provision of this Agreement, or the application of such
provision, is held invalid, the remainder of this Agreement and the
application of such provision to persons or circumstances other than
those as to which it is held invalid shall not be affected thereby.
e. Any notice authorized or required to be given hereunder shall be
deemed given or made, if in writing, upon personal delivery, by
telecopier on the date that transmission is confirmed electronically,
if such confirmation occurs by 4:00PM on such date and such date is a
business day, or otherwise, on the first business day thereafter, or
three days after mailing by certified or registered mail, return
receipt requested, to the Company, at the address set forth at the
top of the first page, to the attention of Xx. Xxxx Xxxxxxx,
Chairman of the Board, or to the Executive at the address to which
this letter is addressed, as set forth above, or such other address
of which either party shall give notice to the other.
f. This agreement shall be governed by the laws of the state of New
York, applicable to an agreement negotiated, signed, and wholly to be
performed in such state.
g. Any dispute arising hereunder (including but not limited to
interpretation or performance) shall be resolved in New York, NY by
arbitration before a single arbitrator in accordance with the rules of
the American Arbitration Association, except that the arbitrator shall
be an active member of the New York bar specializing for at least 15
years in general corporate law and contracts practice, who shall
apply the terms of this agreement and make findings of fact and
conclusions of law in making the arbitration award.
IN WITNESS WHEREOF, the undersigned have executed this agreement on the dates
below as of the date first written above.
STANDARD MICROSYSTEMS
CORPORATION
/s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx Xxxxxxx
---------------------- ---------------------
Xxxxxx X. Xxxxxxxx Xxxx Xxxxxxx
Chairman of the Board
Date: March 18, 1999 Date: March 18, 1999
