EMPLOYMENT AGREEMENT

 

                                      

                              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"), Advanced Communication Technologies, Inc., a

Florida corporation ("ACT"), and Theodore S. Li, 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 President, Chief

Executive Officer, Chief Financial Officer and Treasurer 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 Chief Financial Officer and Chief Operating Officer, 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. In addition

to his duties set forth in this Section 1 and Section 3 below, Executive shall

at the request of the PMIC CEO (as defined below) or the Board serve as an

officer or director of PMIC or any subsidiary of PMIC, without additional

compensation and subject to any policy of the Compensation Committee of the

Board (the "PMIC Compensation Committee") with regard to directors' fees.

 

      2. Term; Renewal. The term of this Agreement shall commence on the

Effective Date and expire on the third 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.

 

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      3. Employment and Duties.

 

            3.1 Duties and Responsibilities.

 

                  (a) Executive's area of responsibility during the Employment

Period shall be that of Chief Financial Officer and Chief Operating Officer of

PMIC. Executive shall directly report to the Chief Executive Officer of PMIC

(the "PMIC CEO"), or such other senior executive officer of Encompass or ACT, as

determined from time to time by the Company. 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 his ability; shall devote his entire

working time, attention, energy and skill to his employment and the benefit and

business of the Company; and shall use his 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 him and are consistent with his 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 herein, 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, 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 his 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 herein, 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 his 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 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.

 

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            4.2 Bonus.

 

                  (a) Within thirty (30) days after the Effective Date,

Executive shall receive a signing bonus in the amount of $225,000.

 

                  (b) Immediately following each fiscal year, the Company 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, the Company 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. The Company 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(b) below) for any year during the

three (3) year period commencing January 1, 2005 and expiring December 31, 2007,

Executive shall have the right to receive on March 31 of the immediately

following calendar year, the applicable ratable portion of 66,666,666 shares of

restricted common stock of ACT (priced at $.01 per share, or $666,666 in the

aggregate), to be earned at the end of each such year at the rate of 25% for

each of the first and second years and 50% for the third 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 the Company is terminated for

"cause" by the Company (as contemplated by Section 6.1 of this Agreement) prior

to the expiration of the initial Employment Period, all of the Shares earned or

 

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to be earned by Executive shall be forfeited. In the event that Executive's

employment with the Company 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 him 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, after accounting for such

adjustment, to receive 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 the Company 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 him 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 his 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.

 

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            (b) Milestones. Revenue and EBITDA (earnings before interest, taxes,

depreciation 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:

 

       Calendar Year End          Revenues       EBITDA

       -----------------          --------       ------

       December 31, 2005          $70,000,000    $490,000

       December 31, 2006          $82,000,000    $738,000

       December 31, 2007          $95,000,000    $950,000

 

      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, he 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

and 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.

 

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            (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 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 co