Exhibit 10.26
EXECUTIVE EMPLOYMENT
AGREEMENT
This Executive
Employment Agreement (the “ Agreement ”) is made
and entered into as of the 3 rd day of March, 2008, by and
between Stephen Pudles (the “ Executive ”) and
API Nanotronics Corp., a Delaware corporation (the “
Company ”).
WHEREAS , the Company desires to employ Executive and to
enter into an agreement, embodying the terms of such employment;
and
WHEREAS , Executive desires to accept such employment
and enter into such an agreement;
NOW, THEREFORE
, in consideration of the premises
and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:
1. Term of Employment .
Subject to the provisions of Section 8 of this Agreement,
Executive shall be employed by the Company for a period commencing
on /s/ no later than 5-5 (the “ Effective Date
”) and ending on the date of termination of this Agreement in
accordance with the provisions of Section 8.
2. Position .
a. During the Employment Term,
Executive shall serve as the Chief Executive Officer of the
Company. In such position, Executive shall have such duties and
authority as shall be determined from time to time by the Board of
Directors of the Company, the Compensation Committee of the Board
of Directors or such other delegate of the Board of
Directors’ authority hereunder as the Board of Directors may
designate (collectively, the “ Board ”).
Executive shall be nominated to serve as a member of the Board of
Directors of the Company at the Company’s next Annual
Meeting. Executive shall serve as a member of the Boards of
Directors of the Company and any of its subsidiaries without
additional compensation if requested.
b. During the Employment Term,
Executive will devote Executive’s full business time and best
efforts to the performance of Executive’s duties hereunder
and will not engage in any other business, profession or occupation
for compensation or otherwise which would conflict or interfere
with the rendition of such services, either directly or indirectly,
without the prior written consent of the Board; provided
that nothing herein shall preclude Executive, subject to the prior
approval of the Board, from accepting appointment to or continuing
to serve on any board of directors or trustees of any business
corporation or any charitable organization or any industry
association; further provided , in each case, and in the
aggregate, that such activities do not conflict or interfere with
the performance of Executive’s duties hereunder or conflict
with Section 9 or Section 10. Set forth on Exhibit
A hereto is a complete list, as of the Effective Date, of the
Executive’s positions on any board of directors or trustees
of any business corporation or any charitable
organization.
c. At all times during the
Employment Term, Executive shall strictly adhere to and obey all of
the Company’s written rules, regulations and policies,
including
without limitation the API Nanotronics Corp.
Code of Ethics as provided to Executive on February 21, 2008,
and as amended from time to time to conform to applicable rules and
regulations or as determined by the Board or Directors, which
govern the operation of the Company’s business and the
conduct of employees of the Company.
3. Base Salary . During the
Employment Term, the Company shall pay Executive a base salary at
the annual rate of $265,000, payable in regular installments in
accordance with the Company’s usual payment practices.
Executive shall be entitled to such increases in Executive’s
base salary, if any, as may be determined from time to time in the
sole discretion of the Board. Executive’s annual base salary,
as in effect from time to time, is hereinafter referred to as the
“ Base Salary .”
4. Annual Bonus .
a. With respect to each full fiscal
year of the Company during the Employment Term (“ Fiscal
Year ”), Executive shall be eligible to earn an annual
bonus award (an “ Annual Bonus ”). The amount of
each Annual Bonus shall be based on achievement of the annual
EBITDA targets and other performance targets (collectively, the
“ Bonus Targets ”) determined by the Board
commencing with the Bonus Targets for the Company’s Fiscal
Year commencing June 1, 2008 and ending
May 31, 2009. Within 90 days following the Effective Date
and thereafter on or before the date which is 30 days prior to the
end of each of the Company’s subsequent Fiscal Year ends, the
Board will propose Bonus Targets for the upcoming Fiscal Year in
consultation with the Executive and will make any adjustments to
the Bonus Targets that the Board and the Executive agree are
reasonable and appropriate. For each Fiscal Year, if the Company
achieves 100% of its Bonus Targets for such Fiscal Year, the Annual
Bonus shall be equal to 50% of Executive’s Base Salary for
that Fiscal Year. The Board will determine in its discretion what
adjustments, if any, will be made to the Annual Bonus amount to be
paid to Executive in the event the Company achieves more than 100%
of its Bonus Targets for a Fiscal Year.
b. Each Annual Bonus shall be deemed
to vest and accrue at the end of the last day of the Fiscal Year
for which it is earned. Each Annual Bonus shall be paid as soon as
practicable following the end of the Fiscal Year for which it is
earned, subject to the certification by the Chief Financial Officer
of the Company and approval by the Board of achievement of the
applicable performance targets and goals described in this
Section 4 above and the amount of such Annual Bonus. The
Annual Bonus, if any, shall be paid to Executive in all cases
within the later of i) two and one-half (2.5) months after the
end of the Fiscal Year or ii) 30 days after the completion of an
external audit to the satisfaction of the Board, but in no event
later than two and one-half (2.5) months after the end of the
calendar year in which the Annual Bonus vests.
5. Stock Option Award . On or
as soon as practicable following the Effective Date, Executive will
be granted under the Company’s 2006 Equity Incentive Plan
(the “ Plan ”) an option agreement (the “
Option Agreement ”) containing (i) incentive
options for shares of common stock, up to the amount permitted by
applicable law, and non-qualified stock options for the remainder
resulting in the aggregate right to purchase up to 11,236,650
shares of the
Company’s
common stock (the “ Time Based Shares ”), and
(ii) nonqualified options to purchase up to 7,491,100 shares
of the Company’s common stock (the “ Performance
Shares ”), subject to the terms and conditions of the
Company’s Plan, and subject to the action of the committee
that administers such Plan (collectively, the “ Stock
Options ”). The per-share exercise price for the Stock
Options will be the fair market value of a share of the
Company’s common stock on the date of grant as provided in
the Plan. The Stock Options with respect to the Time Based Shares
will vest in equal installments annually over a three-year period
tied to the Effective Date of this Agreement and the Stock Options
with respect to the Performance Shares will vest in equal
installments annually over a three-year period tied to the Fiscal
Year end of the Company upon the Company achieving various
performance goals. Such performance targets shall be based upon
EBITDA targets and other performance targets (collectively, the
“Performance Targets”) determined by the Board in
consultation with Executive. The Performance Targets for the Stock
Options with respect to the (i) first one-third (
1
/
3 ) of the Performance
Shares shall be determined within 90 days of the date of this
Agreement, (ii) the second one-third (
1
/
3
) of the
Performance Shares shall be determined no later than 30 days prior
to the Company’s May 2009 Fiscal Year end and (iii) the
third and final one-third ( 1 / 3 ) of the Performance Shares
shall be determined no later than 30 days prior to the
Company’s May 2010 Fiscal Year end . Additionally, the Option
Agreement shall have the other terms as set forth in Exhibit
B and other reasonable and customary stock option agreement
terms not inconsistent with those set forth in Exhibit B
.
6. Employee Benefits
.
a. During the Employment Term,
Executive shall be entitled to participate in the employee benefit
plans of the Company or API Electronics Inc. (other than annual
bonus plans, severance plans, and incentive plans) as in effect
from time to time (collectively, “ Employee Benefits
”), on the same basis as those benefits are generally made
available to other similarly situated executives.
b. Executive shall receive three
(3) weeks paid vacation, of which not more than ten
(10) days shall be taken consecutively, during each year of
employment to accumulate from year to year to the extent not used
and to be paid in cash to the extent not taken during the
Employment Term, and such holiday and sick time as the as provided
under the Company’s policies from time to time.
c. Executive shall receive a car
allowance of $1,000 per month.
d. Executive shall be reimbursed for
the costs of temporary housing within commuting distance of 375
Rabro Drive, Hauppauge, New York for a period commencing on the
Effective Date and ending on the earlier of (i) six months
from the Effective Date and (ii) the purchase of a new
permanent residence within commuting distance of the
Company’s offices at 375 Rabro Drive, Hauppauge, New York
(the “ New Residence ”). Costs of temporary
housing reimbursed shall consist of reasonable rent, which amount
shall be approved in advance by the Company, utilities (heat,
electricity, gas and water), telephone, cable or satellite TV
service, high speed internet connection and a one-car parking space
if not included with rent.
e. Executive shall be reimbursed for
the relocation expenses of moving from his present residence
(“ Old Residence ”) to his New Residence
consisting of (i) the cost of the physical movement of his
belongings, (ii) any real estate agent fee on the sale of his
Old Residence or the purchase of his New Residence,
(iii) attorneys fees incurred in the sale of his Old Residence
or the purchase of his New Residence, (iv) land transfer taxes
paid by Executive on the sale of his Old Residence or the purchase
of his New Residence and (v) one month’s salary to be
used by Executive for other miscellaneous moving costs on a
non-accountable basis (collectively, “Relocation
Expenses”). The aggregate amount of Relocation Expenses for
which Executive shall be reimbursed shall not exceed
$100,000.
f. The Company will reimburse you
for reasonable out-of-pocket expenses related to your attendance at
four meetings of the IPC, all subject to your submission of an
expense reimbursement request in accordance with Company
guidelines.
7. Business Expenses . During
the Employment Term, reasonable business expenses incurred by
Executive in the performance of Executive’s duties hereunder
shall be reimbursed by the Company in accordance with Company
policies.
8. Termination . The
Employment Term and Executive’s employment hereunder may be
terminated by either party at any time and for any reason;
provided that Executive will be required to give the Company
at least 60 days advance written notice of any resignation of
Executive’s employment. Notwithstanding any other provision
of this Agreement, the provisions of this Section 8 shall
exclusively govern Executive’s rights upon termination of
employment with the Company and its affiliates.
a. By the Company For Cause or By
Executive Resignation .
(i) The Employment Term and
Executive’s employment hereunder may be terminated by the
Company for Cause (as defined below) and shall terminate
automatically upon Executive’s resignation; provided
that Executive shall be required to give the Company at least 60
days advance written notice of a resignation.
For purposes of this Agreement,
“ Cause ” shall mean:
|
|
(A)
|
the wilfull and
material breach of Exectuive of any provision of this
Agreement;
|
|
|
(B)
|
any act by
Executive of fraud or dishonesty including, but not limited to,
stealing or falsification of company records, with respect to the
Company or its affiliates;
|
|
|
(C)
|
failure by
Executive to perform his duties as lawfully directed by the Board,
provided the Company has delivered to Executive a written notice
setting forth such failure and shall have given Executive an
opportunity to meet with the Company and to remedy or cure such
failure within 15 business days following delivery of such written
notice;
|
|
|
(D)
|
misappropriation of company funds or of any
corporate opportunity;
|
|
|
(E)
|
conviction of
Executive of a felony, or of a crime that the Company, in its sole
discretion, determines involves a subject matter which may reflect
negatively on the reputation or business of the Company or any of
its affiliates (or a plea of nolo contendere thereto),
provided that notice of termination is given within 90 days of the
Company’s knowledge of the conviction;
|
|
|
(F)
|
acts by
Executive attempting to secure or securing any personal profit not
fully disclosed to and approved by the Board in connection with any
transaction entered into on behalf of the Company or any of its
affiliates;
|
|
|
(G)
|
gross, willful
or wanton negligence, misconduct, or conduct on the part of
Executive, which constitutes a breach of any fiduciary duty or duty
of loyalty owed to the Company by Executive, provided the Company
has delivered to Executive a written notice setting forth such
conduct and shall have given Executive an opportunity to meet with
the Company and to remedy or cure such conduct within 15 business
days following delivery of such written notice;
|
|
|
(H)
|
acceptance by
Executive of employment with another employer;
|
|
|
(I)
|
conduct on the
part of Executive, even if not in connection with the performance
of Executive’s duties contemplated under this Agreement, that
could result in serious prejudice to the interests of the Company
or any of its affiliates, as determined by the Board in its sole
discretion, and failure by Executive to cease such conduct
immediately upon receipt of notice to cease such conduct;
or
|
|
|
(J)
|
violation of
any material federal or state securities laws, rules or
regulations, as determined by the Board in its sole and good faith
discretion.
|
(ii) If Executive’s employment
is terminated by the Company for Cause, or if Executive resigns,
Executive shall be entitled to receive:
(A) the Base Salary through the date
of termination;
(B) reimbursement, within 30 days
following submission by Executive to the Company of appropriate
supporting documentation, for any unreimbursed
business expenses properly incurred
by Executive in accordance with Company policy prior to the date of
Executive’s termination; provided claims for such
reimbursement (accompanied by appropriate supporting documentation)
are submitted to the Company within 90 days following the date of
Executive’s termination of employment; and
(C) such Employee Benefits, if any,
as to which Executive may be entitled under the employee benefit
plans as described in Section 6 (the amounts described in
clauses (A) through (C) hereof being referred to as the
“ Accrued Rights ”).
Following such termination of
Executive’s employment by the Company for Cause or
resignation by Executive, except as set forth in this
Section 8(a)(ii), Executive shall have no further rights to
any compensation or any other benefits under this
Agreement.
b. Disability or Death
.
(i) The Employment Term and
Executive’s employment hereunder shall terminate upon
Executive’s death and may be terminated by the Company if
Executive becomes physically or mentally incapacitated and is
therefore unable for a period of six (6) consecutive months or
for an aggregate of nine (9) months in any twenty-four
(24) consecutive month period to perform Executive’s
duties (such incapacity is hereinafter referred to as “
Disability ”). Any question as to the existence of the
Disability of Executive as to which Executive and the Company
cannot agree shall be determined in writing by a qualified
independent physician mutually acceptable to Executive and the
Company. If Executive and the Company cannot agree as to a
qualified independent physician, each shall appoint such a
physician and those two physicians shal
