EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT (this "Agreement"), dated as of this 30th day of
December 2004 ("Effective Date"), by and among Pacific Magtron
International
Corp., a Nevada corporation ("PMIC"), Encompass Group Affiliates,
Inc., a
Delaware corporation ("Encompass"), and Advanced Communications
Technologies,
Inc., a Florida corporation ("ACT"), and Hui Cynthia Lee, an
individual whose
address is _______________________________ ("Executive"). For
purposes hereof,
the terms PMIC, Encompass and ACT shall include each of their
respective
subsidiaries and PMIC, Encompass and ACT shall be referred to
collectively
herein as the ("Company").
WITNESSETH
WHEREAS,
Executive presently serves as a Director and as Secretary of
PMIC
and is a shareholder of PMIC;
WHEREAS,
ACT, Executive and certain other shareholders of PMIC have
entered into a Stock Purchase Agreement, pursuant to which ACT will
purchase all
of the shares of common stock of PMIC owned by Executive and each
such other
shareholder (the "Stock Purchase"); and
WHEREAS,
it is a condition to the Stock Purchase that Executive enter
into
this Agreement with the Company effective as of the Effective
Date.
NOW,
THEREFORE, in consideration of the mutual covenants and
promises
herein contained, and other good and valuable consideration, the
receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as
follows:
1.
Employment. PMIC hereby employs Executive, and Executive hereby
accepts
employment with PMIC, as Senior Vice President, or such other
senior executive
position as may be determined by the Board of Directors of PMIC
(the "Board")
from time to time during the Employment Period (as defined below).
For purposes
of this Agreement, "senior executive position" shall mean a
position of Vice
President or a more senior position.
2. Term;
Renewal. The term of this Agreement shall commence on the
Effective Date and expire on the second anniversary thereof (the
"Employment
Period"), unless earlier terminated in accordance with its terms;
provided,
however, that the Employment Period may, by written agreement
between the
parties hereto, be extended for an additional one-year period.
3.
Employment and Duties.
3.1 Duties and Responsibilities.
(a) Executive's area of responsibility during the Employment
Period shall be that of Senior Vice President of PMIC. Executive
shall directly
report to the Chief Executive Officer of PMIC (the "PMIC CEO"), or
such other
senior executive officer of ACT or Encompass, as determined from
time to time by
the Board or the PMIC CEO. The services to be rendered by Executive
pursuant to
this Agreement shall consist of such services as defined and
directed by the
Board or the PMIC CEO.
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(b) During the Employment Period, Executive shall serve the
Company faithfully and to the best of her ability; shall devote her
entire
working time, attention, energy and skill to her employment and the
benefit and
business of the Company; and shall use her best efforts, skills and
ability to
promote the Company's interests and to perform such duties as from
time to time
may be reasonably assigned to her and are consistent with her
titles and
positions with the Company.
(c) During the Employment Period, in addition to any other
duties or responsibilities the Company may give to Executive
consistent with
Section 1, Executive shall subject to Section 3.2 below be required
to sign, and
shall sign, all certifications and such other documents or
instruments requested
by the Board, the Chief Executive Officer of ACT, the Chief
Executive Officer of
Encompass, or the PMIC CEO in connection with PMIC's and/or ACT's
obligations
under or to (i) the Securities and Exchange Commission, (ii) any
exchange or
association on which the Company's shares of capital stock are
listed, (iii) any
federal, state or local authority, and/or (iv) any other
governmental,
quasi-governmental or non-governmental entity or organization
(foreign or
domestic) that regulates or has authority over PMIC and/or ACT. In
addition, in
the event Executive, in her current position or in any position
Executive
accepts in the future, becomes obligated to sign certifications and
such other
documents or instruments as may be required by the rules and
regulations
promulgated by any of (i) through (iv) above, Executive shall,
subject to
Section 3.2 below, sign all such certifications and other documents
or
instruments as required thereby.
3.2 Observance of Rules and Regulations. Executive agrees to
observe
and comply with all applicable laws and regulations, as well as the
rules and
regulations of the Company with respect to the performance of her
duties.
4.
Compensation; Benefits and Expenses.
4.1 Base Salary. As compensation for the services to be
rendered
hereunder, during the Employment Period, the Company shall pay to
Executive a
minimum annual base salary (the "Base Salary") of $120,000.00. The
Base Salary
shall be payable in accordance with usual payroll practices of the
Company.
Executive's Base Salary shall be reviewed annually by the
Compensation Committee
of the Board (the "PMIC Compensation Committee") during the
Employment Period
and may be increased, but not decreased, from time to time by the
PMIC
Compensation Committee in its sole discretion.
4.2 Bonus.
(a) Within thirty (30) days after the Effective Date,
Executive shall receive a signing bonus in the amount of
$225,000.
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(b) Immediately following each fiscal year, PMIC shall set
aside for the payment of PMIC executive bonuses, an amount equal to
ten percent
(10%) of net income of PMIC during such fiscal year (the "PMIC
Bonus Pool"). For
each fiscal year or portion thereof after the Effective Date and
during the
Employment Period, PMIC shall pay to Executive an annual
performance bonus, in
cash, equal to a portion of the PMIC Bonus Pool, as determined by
the PMIC
Compensation Committee, in its sole discretion (the "PMIC
Performance Bonus").
For purposes hereof, "net income" shall mean, with respect to PMIC,
for any
fiscal year, the net income (loss) of PMIC for such fiscal year,
determined in
accordance with generally accepted accounting principles,
consistently applied;
provided, however, that there shall be excluded from net income (a)
the net
income (loss) of any person in which PMIC has a joint interest with
a third
party, except to the extent such net income is actually paid to
PMIC by dividend
or other distribution during such fiscal year, (b) the net income
(or loss) of
any person accrued prior to the date it becomes a subsidiary of
PMIC or is
merged into or becomes consolidated with PMIC or its assets are
purchased by
PMIC, and (c) the net income (if positive) of any subsidiary of
PMIC to the
extent that the declaration or payment of dividends or similar
distributions of
such net income by such subsidiary (i) is not at that time
permitted by
operation of the terms of its charter or any agreement, instrument,
judgment,
decree, order statute, rule or governmental regulation or (ii)
would be subject
to any taxes payable on such dividends or distributions.
(c) In addition to the PMIC Performance Bonus, Executive may
receive, and ACT may grant to Executive, restricted shares of
common stock of
ACT, with a vesting schedule and other terms established by the
Compensation
Committee of the Board of Directors of ACT (the "ACT Compensation
Committee"),
in its sole discretion (the "Incentive Bonus").
(d) Executive acknowledges that the amount of the PMIC
Performance Bonus and the amount of the Incentive Bonus shall at
all times be
determined by the PMIC Compensation Committee and the ACT
Compensation
Committee, respectively, in their respective sole discretion. PMIC
shall pay
each of the Performance Bonus and the Incentive Bonus to Executive
within thirty
(30) days after the Company's audited results for the applicable
fiscal year are
delivered to the Company.
4.3 Earn-Out.
(a) Earn-Out Shares. In the event Pacific Magtron, Inc.
("PMI"), Pacific Magtron (GA), Inc. ("PMI-GA"), and LiveWarehouse,
Inc. ("LW")
achieve the Milestones (as defined in Section 4.3 below) for any
year during the
two (2) year period commencing January 1, 2005 and expiring
December 31, 2006,
Executive shall have the right to receive on March 31 of the
immediately
following calendar year, the applicable ratable portion of
33,333,333 shares of
restricted common stock of ACT (priced at $.01 per share, or
$333,333 in the
aggregate), to be earned at the end of each such year at the rate
of 50% for
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each year (the "Shares"); provided, that in the event the
Milestones are not
achieved in any year, except as provided below, such ratable
portion of Shares
shall be forfeited entirely, without any ability to re-earn such
Shares in a
future year; provided further, that in the event Executive's
employment with
PMIC is terminated for "cause" by PMIC (as contemplated by Section
6.1 of this
Agreement) prior to the expiration of the initial Employment
Period, all of the
Shares earned or to be earned by Executive shall be forfeited. In
the event that
Executive's employment with PMIC is terminated prior to the
expiration of the
initial Employment Period for any reason other than "cause,"
Executive shall be
permitted to receive the Shares earned by her prior to such
termination, but
shall in no event be entitled to receive Shares to be earned after
the
Termination Date (as defined in Section 6.1 below). Notwithstanding
the
foregoing, the number of Shares and the price per Share shall be
adjusted
accordingly for stock splits, reverse stock splits and other
recapitalizations
effected by ACT, so that Executive retains the right to receive,
after
accounting for such adjustment, the same percentage of ACT's
outstanding shares
of Common Stock as Executive would have had the right to receive
had such
adjustment not been so effected.
Upon earning the Shares at the end of each year, if applicable, the
Shares will
be placed in escrow with a mutually agreeable escrow agent to be
held and
released in accordance with the terms of an escrow agreement in
substantially
the form of Exhibit "A" hereto; provided, however, that in the
event that the
employment of Executive is terminated by PMIC prior to the
expiration of the
initial Employment Period without cause (as contemplated by Section
6.2 of this
Agreement), Executive terminates this Agreement for Good Reason (as
contemplated
by Section 6.3 of this Agreement), or this Agreement is terminated
due to
Executive's death or Disability (as defined below), Executive shall
receive any
Shares earned by her no later than the later of (a) the immediately
following
March 31 or (b) thirty (30) days after the Termination Date. Upon
release from
escrow, the Shares will include piggyback registration rights,
subject to
customary underwriters' cutbacks.
Upon receipt of the Shares, Executive will acquire the Shares for
her own
account and not with a view to their distribution within the
meaning of Section
2(11) of the Securities Act of 1933, as amended. Executive is an
"accredited
investor," as such term is defined in Rule 501(a) promulgated
pursuant to the
Securities Act of 1933, as amended. Executive acknowledges that
Executive has
had the opportunity to ask questions of and receive answers from,
or obtain
additional information from, the executive officers of the Company
concerning
the financial and other affairs of the Company, and to the extent
deemed
necessary in light of such personal knowledge of the Company's
affairs,
Executive has asked such questions and received answers to the full
satisfaction
of Executive. Executive understands that no United States federal
or state
agency or any other government or governmental agency has passed on
or made any
recommendation or endorsement of the Shares or the fairness of
suitability of
the investment in the Shares nor have such authorities passed upon
or endorsed
the merits of the offering of the Shares.
Notwithstanding the foregoing, in the event that the Milestones are
not achieved
in a given year, the Board of Directors of ACT shall have the
right, in its sole
and absolute discretion, to grant to Executive all or a portion of
the Shares
that could have been earned by Executive during such year.
(b) Milestones. Revenue and EBITDA (earnings before interest,
depreciation, taxes and amortization) herein shall be defined
according to
generally accepted accounting principles and no allocation from
PMIC, ACT or
Encompass overhead shall be included in the calculation of EBITDA.
The
Milestones for the combined Revenues and EBITDA of PMI, PMI-GA and
LW are:
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Calendar Year End
Revenues
EBITDA
-----------------
--------
------
December 31, 2005
$70,000,000
$490,000
December 31, 2006
$82,000,000
$738,000
Notwithstanding anything contained herein to the contrary, the
determination of the Milestones shall be based on unaudited pro
forma financial
statements of PMI, PMI-GA and LW, prepared by the management of
PMIC and
approved by Executive, the Chief Executive Officer of ACT and the
ACT
Compensation Committee.
4.4 Other Benefits. Executive shall also be eligible to
participate
in any life and health insurance programs and any incentive,
savings and
retirement plans that the Company makes available to all of its
executives of
similar seniority. Executive shall also be eligible to receive
discretionary
performance based bonuses as approved and authorized by the ACT
Compensation
Committee, including any incentive stock programs approved by
ACT's
shareholders.
4.5 Business Expenses. Executive will be reimbursed, in
accordance
with the Company's expense reimbursement policy, for business
expenses that have
been pre-approved by the Board or the PMIC CEO upon presentation of
vouchers or
other documents reasonably necessary to verify the expenditures and
sufficient,
in form and substance, to satisfy Internal Revenue Service
requirements for such
expenses.
4.6 Vacation. Executive shall be entitled to take up to four
(4)
weeks of vacation per calendar year, which shall be taken in
accordance with the
Company's vacation policy in effect from time to time for
executives of
comparable seniority.
5. No
Competitive Activities; Confidentiality; Invention
5.1 General Restriction. During the Employment Period and for a
period of two (2) years thereafter (the "Restricted Period"),
Executive
covenants and agrees that, except on behalf of the Company, she
will not,
directly or indirectly:
(a) Competing Business. Own, manage, operate, control,
participate in the ownership, management, operation or control of,
be employed
by, or provide services as a consultant to, any individual or
business that is
involved in business activities that are the same as, similar to or
in
competition with, directly or indirectly, any business activities
conducted, or
actively being planned, by Encompass and/or PMIC during the
Restricted Period
anywhere in the United States and Canada (it being acknowledged
that Encompass'
and/or PMIC's businesses are international in scope). The ownership
of less than
one percent (1%) of the outstanding stock of any public corporation
shall not be
deemed a violation of this provision.
(b) Soliciting Customers. Attempt in any manner to contact or
solicit any individual, firm, corporation or other entity (i) that
is or has
been, a customer of Encompass and/or PMIC at any time during the
Restricted
Period, (ii) to which a proposal has been made by Encompass and/or
PMIC during
the Restricted Period or (iii) appearing on Encompass' and/or
PMIC's new
business target list on the date of Executive's termination (as
such list has
been prepared and maintained in accordance with Encompass' and/or
PMIC's past
practice), for the purpose of providing services or products
similar to the
services and products provided by Encompass and/or PMIC, or
engaging in any
activity which could be, directly or indirectly, competitive with
the business
of Encompass and/or PMIC.
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(c) Interfering with Other Relations. Persuade or attempt to
persuade any supplier, vendor, licensor or other entity or
individual doing
business with Encompass and/or PMIC to discontinue or reduce its
business with
Encompass and/or PMIC or otherwise interfere in any way with the
business
relationships and activities of Encompass and/or PMIC.
(d) Employees. Attempt in any manner to solicit any
individual, who is at the time of such attempted solicitation, or
was at any
time during the one (1) year period preceding the termination of
Executive's
employment, an employee or consultant of Encompass and/or PMIC, to
terminate his
or her employment or relationship with Encompass and/or PMIC, or
engage such
individual, as an employee or consultant. Cooperate with any other
person in
persuading, enticing or aiding, or attempting to persuade, entice
or aid, any
employee of or consultant to Encompass and/or PMIC to terminate his
or her
employment or business relationship with Encompass and/or PMIC, or
to become
employed as an employee or retained as a consultant by any person
other than
Encompass and/or PMIC.
In the event of a voluntary or involuntary filing under Chapter 7
of the United
States Bankruptcy Code by PMIC and Encompass that is not dismissed
within ninety
(90) days, Executive shall no longer be bound by the restrictions
contained in
this Section 5.1.
5.2 Confidentiality Agreement. Executive shall not, either
during
the Employment Period or at any time thereafter, use or disclose to
any third
person any Confidential Information (as defined below) of the
Company, other
than at the direction of the Company, or pursuant to a court order
or subpoena,
provided that Executive will give notice of such court order or
subpoena to the
Company prior to such disclosure. Upon the termination of
Executive's employment
with the Company for any reason, Executive shall return any notes,
records,
charts, formulae or other materials (whether in hard copy or
computer readable
form) containing Confidential Information (as defined below), and
will not make
or retain any copies of such materials. Without limiting the
generality of the
foregoing, the parties acknowledge that the Company from time to
time may be
subject to agreements with its customers, suppliers or licensors to
maintain the
confidence of such other persons' confidential information. Th