EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT (this " Agreement "),
dated as of this 30 th 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
1
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.
(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.
2
(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.
(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 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
3
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
4
included
in the calculation of EBITDA. The Milestones for the combined
Revenues and EBITDA of PMI, PMI-GA and LW are:
|
|
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
5
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.
(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
