EXHIBIT 10.5
EXECUTION COPY
SOLECTRON CORPORATION
MICHAEL CANNON EMPLOYMENT AGREEMENT
This Agreement is entered into as of January 6, 2003 (the "EFFECTIVE
DATE") by and between Solectron Corporation (the "COMPANY"), and Michael Cannon
("EXECUTIVE").
1. Duties and Scope of Employment.
(a) Positions and Duties. As of the Effective Date,
Executive will serve as an executive officer of the Company. Beginning January
10, 2003, Executive will serve as President and Chief Executive Officer of the
Company. Executive will render such business and professional services in the
performance of his duties, consistent with Executive's position within the
Company, as will reasonably be assigned to him by the Company's Board of
Directors (the "BOARD"). The period of Executive's employment under this
Agreement is referred to herein as the "EMPLOYMENT TERM."
(b) Board Membership. As soon as possible following
Executive's commencement of service as President and Chief Executive Officer of
the Company, Executive will be appointed as a member of the Board. At each
annual meeting of the Company's stockholders during the Employment Term, the
Board will nominate Executive to continue to serve as a member of the Board,
which such service will be subject to any required stockholder approval.
(c) Obligations. During the Employment Term, Executive
will devote Executive's full business efforts and time to the Company. For the
duration of the Employment Term, Executive agrees not to actively engage in any
other employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board (which approval will not be
unreasonably withheld); provided, however, that Executive may, without the
approval of the Board, serve in any capacity with any civic, educational or
charitable organization, provided such services do not interfere with
Executive's obligations to Company.
2. At-Will Employment. Executive and the Company agree that
Executive's employment with the Company constitutes "at-will" employment.
Executive and the Company acknowledge that this employment relationship may be
terminated at any time, upon written notice to the other party, with or without
good cause or for any or no cause, at the option either of the Company or
Executive. However, as described in this Agreement, Executive may be entitled to
severance benefits depending upon the circumstances of Executive's termination
of employment. Upon the termination of Executive's employment with the Company
for any reason, the Executive will be entitled to payment of all accrued but
unpaid vacation, expense reimbursements and other benefits due to Executive
through his termination date under any Company-provided or paid plans, policies
and arrangements, and Executive will also be entitled to payment of the vested
portion, if any, of his Deferred Compensation (as adjusted for investment
returns thereon) in accordance with his payout election pursuant to Section
4(f).
3. Term of Agreement. This Agreement will have an initial term of
two (2) years commencing on the Effective Date. On the second anniversary of the
Effective Date and on each
annual anniversary of the Effective Date thereafter, this Agreement
automatically will renew for an additional term of one year unless at least
thirty (30) days prior to such anniversary, Executive or the Company gives the
other party written notice that the Agreement will not be renewed. If Executive
incurs a termination of employment that entitles Executive to receive the
payments and benefits described in Sections 8 through 10, this Agreement will
not terminate until all of Executive's and the Company's obligations under the
Agreement have been satisfied.
4. Compensation.
(a) Base Salary. The Company will initially pay Executive
an annual salary of $925,000 as compensation for his services (the "BASE
SALARY"). The Base Salary will be paid periodically in accordance with the
Company's normal payroll practices and be subject to the usual, required
withholding. Executive's salary will be subject to review and adjustments will
be made based upon the Company's standard practices.
(b) Signing Bonus. Executive will receive a bonus as the
result of executing this Agreement in the amount of $2,000,000 (the "SIGNING
BONUS") to be paid within thirty (30) days of the Effective Date.
(c) Annual Bonus. Executive's annual target bonus will be
two times his Base Salary ("TARGET BONUS"). Executive's annual bonus will be
payable upon achievement of performance goals established by the Compensation
Committee of the Board (the "COMMITTEE"); provided, however, that Executive's
annual bonus for his first year of employment will be guaranteed to equal at
least the Target Bonus.
(d) Stock Option. As of the Effective Date, Executive
will be granted a nonstatutory stock option to purchase 4,500,000 shares of the
Company's Common Stock (the "COMMON STOCK") at an exercise price equal to the
fair market value per share on the date of grant (the "OPTION"). Subject to the
accelerated vesting provisions set forth herein, the Option will vest as to
1/48th of the shares subject to the Option upon the Executive's completion of
each full month of Service (as defined in Section 14) over the forty-eight
(48)-month period measured from the date of grant. The Option may be granted
from one of the Company's stock option plans or pursuant to a stand-alone stock
option agreement or a combination of both. As a result, the Option will be
subject to the terms, definitions and provisions of the Company's stock option
plan under which it is granted, if any, (the "OPTION PLAN") and the stock option
agreement by and between Executive and the Company (the "OPTION AGREEMENT"),
both of which documents are incorporated herein by reference; provided, however,
that the terms and provisions of the Option Agreement shall be substantially the
same as if the portion of the Option represented by such Option Agreement had
been granted under the Option Plan.
(e) Restricted Stock. As of the Effective Date, the
Company will issue Executive $3,500,000 worth of Common Stock (rounded to the
nearest whole share) calculated based on the average of the closing selling
price of such Common Stock for the 10-trading days ending with the date
immediately prior to the Effective Date at an issue price per share equal to the
par value per share of such Common Stock (the "RESTRICTED STOCK") payable by the
Executive at the time of issuance. In the event Executive's Service (as defined
in Section 14) terminates for any reason, the Company will have the right to
repurchase the Restricted Stock at the price paid by Executive for
such Restricted Stock (the "REPURCHASE RIGHT"). Subject to the accelerated
vesting provisions set forth herein, all of the Restricted Stock will vest and
be released from the Company's Repurchase Right upon the Executive's
continuation in Service through the second anniversary of the Effective Date.
The Restricted Stock will be subject to a restricted stock agreement by and
between Executive and the Company (the "RESTRICTED STOCK AGREEMENT"), which such
agreement is hereby incorporated by reference and will provide that Executive
may satisfy the minimum withholding tax obligation that may arise upon the
vesting of such Restricted Stock with shares of Restricted Stock that so vest
and are released from the Company's Repurchase Right on such date and that are
valued, for such purpose, at the closing selling per share of Common Stock on
such date.
(f) Deferred Compensation. On the Effective Date, the
Company will credit $3,000,000 under its Executive Deferred Compensation Plan,
as amended and restated effective January 1, 2003 (the "DEFERRED COMPENSATION
PLAN") for the benefit of Executive (the "DEFERRED COMPENSATION PAYMENT").
Subject to the accelerated vesting provisions set forth herein, 1/8th (or 12.5%)
of the Deferred Compensation Payment (as adjusted for investment returns
thereon) will vest upon the Executive's completion of each full quarter of
Service (as defined in Section 14) over the two (2)-year period measured from
the Effective Date. The entire Deferred Compensation Payment will be held in a
so-called rabbi trust, and Executive will have the right to invest and reinvest
the Deferred Compensation Payment and earnings thereon throughout the deferral
period, subject to the terms of the Deferred Compensation Plan. Executive will
elect the schedule for the deferred payout of the Deferred Compensation Payment
within thirty (30) days after the Effective Date and such election will be
consistent with the deferred payment provisions of Articles 5 and 6 of the
Deferred Compensation Plan.
(g) Recoupment of Merger Bonus. To the extent Executive
recoups all or part of the bonus under the "Merger Incentive Plan" of his former
employer that he would have otherwise received in June 2003 had he remained
employed with his former employer through such date, the amount of the Deferred
Compensation Payment and Restricted Stock will correspondingly be reduced to
reflect the amount Executive so receives. Such reduction will first come from
the Deferred Compensation Payment, then the Restricted Stock award.
5. Employee Benefits. During the Employment Term, Executive will
be eligible to participate in accordance with the terms of all Company employee
benefit plans, policies and arrangements that are applicable to other senior
executives of the Company, as such plans, policies and arrangements and terms
may exist from time to time.
6. Relocation. During the Employment Term, if the Company
relocates its headquarters to South San Jose, CA, Executive may request a
reasonable relocation package in the event he finds it necessary to move from
his principal residence as a result of such relocation by the Company.
7. Expenses. The Company will reimburse Executive for reasonable
travel, entertainment or other expenses incurred by Executive in the furtherance
of or in connection with the performance of Executive's duties hereunder, in
accordance with the Company's expense reimbursement policy as in effect from
time to time.
8. Severance with Respect to Deferred Compensation and Restricted
Stock.
(a) Termination Without Cause; Resignation for Good
Reason; Termination Due to Death or Disability. In the event that (i) the
Company terminates Executive's employment without "Cause" (as defined in Section
8(b)), (ii) Executive resigns as a result of "Good Reason" (as defined in
Section 8(c)) or (iii) Executive's employment terminates due to his death or
"Disability" (as defined in Section 8(d)), then Executive will be entitled to
(A) the immediate vesting of the Deferred Compensation Payment and (B) the
immediate vesting and release from the Company's Repurchase Right of the
Restricted Stock.
(b) Cause. For purposes of this Section 8, "CAUSE" will
mean (i) Executive's commission of a willful act of embezzlement, fraud or
dishonesty which results in material loss, material damage or material injury to
the Company, or (ii) a material and willful violation by Executive of a federal
or state law or regulation that results in material loss, material damage or
material injury to the Company.
(c) Disability. For purposes of this Section 8,
"DISABILITY" will mean that Executive has been unable to perform the principal
functions of Executive's duties due to a physical or mental impairment, but only
if such inability has lasted or is reasonably expected to last for at least six
(6) months. Whether Executive has a Disability will be determined by the Board
based on evidence provided by Executive's physician who is reasonably acceptable
to the Board.
(d) Good Reason. For purposes of this Section 8, "GOOD
REASON" will mean (without Executive's consent): (i) any change (except for
Executive's commencement of service as the Company's President and Chief
Executive Officer as of January 10, 2003) or reduction in Executive's title,
authority, level of reporting, status, or responsibilities, (ii) any reduction
in Executive's compensation (including Base Salary, Target Bonus and benefits),
other than a percentage reduction of not more than 10% which is the same for all
officers of the Company, (iii) any breach by the Company of its obligations to
Executive under this Agreement, or (iv) any relocation of Executive's principal
place of employment by more than twenty-five (25) miles. With respect to clause
(iii), Executive will not resign for Good Reason without first providing the
Company with written notice specifically identifying the acts or omissions
constituting the grounds for a Good Reason termination and a reasonable cure
period of not less than thirty (30) days following such notice.
(e) Voluntary Termination without Good Reason;
Termination for Cause. For purposes of this Section 8, if Executive's employment
with the Company terminates voluntarily by Executive without Good Reason or for
Cause by the Company, then (i) all further vesting of the Restricted Stock and
all outstanding options to purchase the Company's Common Stock will terminate
immediately, (ii) all payments of compensation by the Company to Executive
hereunder will terminate immediately (except as to amounts already earned),
(iii) the Executive will be paid all accrued but unpaid vacation, expense
reimbursements and other benefits due to Executive through his termination date
under any Company-provided or paid plans, policies and arrangements, (iv)
Executive will be entitled to payment of the vested portion, if any, of his
Deferred Compensation (as adjusted for investment returns thereon) in accordance
with his payout election pursuant to Section 4(f), and (v) Executive will only
be eligible for severance benefits in accordance with the Company's established
policies as then in effect.
(f) No Conditions. The benefits payable to Executive
pursuant to this Section 8 shall be not be subject to his compliance with any of
the conditions set forth in Sections 11(a), (b) and (c) of this Agreement.
9. Regular Severance.
(a) Termination Without Cause; Resignation for Good
Reason; Termination Due to Death or Disability. In the event that the Company
terminates Executive's employment for reasons other than "Cause" (as defined in
Section 14) or in the event Executive resigns as a result of "Good Reason" (as
defined in Section 14), either of which occur prior to a "Change of Control" (as
defined in Section 14) or after twelve (12) months following a Change of
Control, then in addition to the benefits Executive may otherwise be entitled
pursuant to Section 8, Executive will receive: (i) a lump-sum payment equal to
two (2) times his annual Base Salary and Target Bonus, each at the level then in
effect, (ii) Company-paid coverage for Executive and Executive's eligible
dependents under the Company's "Benefit Plans" (as defined in Section 14) for
twenty-four (24) months following such termination, (iii) accelerated vesting as
to each outstanding option granted to Executive to purchase Common Stock in an
amount equal to the lesser of (A) 50% of the shares subject to each such option
at the time of grant (as adjusted for any subsequent stock splits, stock
dividends or the like) or (B) the total number of unvested shares subject to
each such option at the time of Executive's termination or resignation; and (iv)
one year following any such termination or resignation in which to exercise any
outstanding stock options to purchase Common Stock. In the event the Executive's
employment terminates by reason of death or "Disability" (as defined in Section
14), either of which occur prior to a Change of Control or after twelve (12)
months following a Change of Control, then he will only be entitled to receive
the benefits described in clauses (ii) through (iv).
(b) Voluntary Termination without Good Reason;
Termination for Cause. For purposes of this Section 9, if Executive's employment
with the Company terminates voluntarily by Executive without Good Reason or for
Cause by the Company, then (i) all further vesting of the Executive's
outstanding options to purchase Common Stock will terminate immediately, (ii)
all payments of compensation by the Company to Executive hereunder will
terminate immediately (except as to amounts already earned), (iii) the
Executive's vested rights to the Restricted Stock and Deferred Compensation (as
adjusted for investment returns thereon) will be determined in accordance with
the applicable provisions of Sections 4 and 8, (iv) the Executive will be paid
all accrued but unpaid vacation, expense reimbursements and other benefits due
to Executive through his termination date under any Company-provided or paid
plans, policies and arrangements, (v) Executive will be entitled to payment of
the vested portion, if any, of his Deferred Compensation (as adjusted for
investment returns thereon) in accordance with his payout election pursuant to
Section 4(f), and (vi) Executive will only be eligible for severance benefits in
accordance with the Company's established policies as then in effect.
10. Change of Control Severance.
(a) Termination Without Cause; Resignation for Good
Reason; Termination Due to Death or Disability. If within twelve (12) months
following a Change of Control the Company terminates Executive's employment for
reasons other than "Cause" (as defined in Section 14) or Executive resigns for
"Good Reason" (as defined in Section 14), then in addition to the benefits
Executive may otherwise be entitled pursuant to Section 8, Executive will
receive: (i) a lump sum payment equal to two (2) times his annual Base Salary
and Target Bonus, both at the level in effect immediately prior to his
termination date or (if greater) at the level in effect immediately prior to the
Change in Control, (ii) Company-paid coverage for Executive and Executive's
eligible dependents under the Company's "Benefit Plans" (as defined in Section
14) for thirty-six (36) months following such termination, (iii) immediate
vesting of 100% of the shares subject to all outstanding options to purchase the
Company's Common Stock, and (iv) two years following such termination or
resignation in which to exercise any outstanding options to purchase the
Company's Common Stock. In the event the Executive's employment terminates by
reason of death or "Disability" (as defined in Section 14) within 12 months
following a Change of Control, then he will only be entitled to receive the
benefits described in clauses (ii) through (iv) above.
(b) Voluntary Termination without Good Reason;
Termination for Cause. For purposes of this Section 10, if Executive's
employment with the Company terminates voluntarily by Executive without Good
Reason or for Cause by the Company, then (i) all further vesting of the
Executive's outstanding options to purchase Common Stock will terminate
immediately, (ii) all payments of compensation by the Company to Executive
hereunder will terminate immediately (except as to amounts already earned),
(iii) the Executive's vested rights to the Restricted Stock and Deferred
Compensation (as adjusted for investment returns thereon) will be determined in
accordance with the applicable provisions of Sections 4 and 8, (iv) the
Executive will be paid all accrued but unpaid vacation, expense reimbursements
and other benefits due to Executive through his termination date under any
Company-provided or paid plans, policies and arrangements, (v) Executive will be
entitled to payment of the vested portion, if any, of his Deferred Compensation
(as adjusted for investment returns thereon) in accordance with his payout
election pursuant to Section 4(f), and (vi) Executive will only be eligible for
severance benefits in accordance with the Company's established policies as then
in effect.
11. Conditions to Receipt of Severance; No Duty to Mitigate.
(a) Separation Agreement and Release of Claims. The
receipt of any severance pursuant to Sections 9 and 10 will be subject to
Executive signing and not revoking a separation agreement and release of claims
in a form reasonably acceptable to the Company. Such agreement will provide
(among other things) that Executive will not disparage the Company during the
twenty-four month period following a termination that would otherwise trigger
the payment of severance under Sections 9 and 10. No severance pursuant to such
Sections will be paid or provided until the separation agreement and release
agreement becomes effective.
(b) Non-Competition. In the event of a termination of
Executive's employment that would otherwise entitle Executive to the receipt of
severance pursuant to Sections 9 and 10, Executive agrees not to engage in
"Competition" (as defined in Section 14) during the twenty-four (24) month
period following such termination. In the event Executive engages in Competition
within such period, all continuing payments and benefits to which Executive may
otherwise be entitled pursuant to Sections 9 and 10 will immediately cease
(including Executive's ability to exercise any outstanding stock options) and
the Company will be entitled to monetary damages (not to exceed the value of the
applicable severance benefits actually paid pursuant to Sections 9 and 10) or
equitable relief in the event of a breach of such covenant.
(c) Nonsolicitation. The receipt of any severance
benefits pursuant to Sections 9 and 10 will be subject to Executive not
violating the provisions of Section 18. In the event Executive breaches the
provisions of Section 18, all continuing payments and benefits to which
Executive may otherwise be entitled pursuant to Sections 9 and 10 will
immediately cease (including Executive's ability to exercise any outstanding
stock options).
(d) No Duty to Mitigate. Executive will not be required
to mitigate the amount of any payment contemplated by this Agreement, nor will
any earnings that Executive may receive from any other source reduce any such
payment.
12. Golden Parachute Excise Tax.
(a) In the event it will be determined that any payment
or distribution by the Company or other amount with respect to the Company to or
for the benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
12 (a "PAYMENT"), is (or will be) subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "CODE") or any
interest or penalties are (or will be) incurred by Executive with respect to the
excise tax imposed by Section 4999 of the Code with respect to the Company (the
excise tax, together with any interest and penalties, are hereinafter
collectively referred to as the "EXCISE TAX"), Executive will be entitled to
receive an additional cash payment (a "GROSS-UP PAYMENT") from the Company in an
amount equal to the sum of the Excise Tax and an amount sufficient to pay the
cumulative Excise Tax and all cumulative income taxes (including any interest
and penalties imposed with respect to such taxes) relating to the Gross-Up
Payment so that the net amount retained by Executive is equal to all payments to
which Employee is entitled pursuant to the terms of this Agreement (excluding
the Gross-Up Payment) or otherwise less income taxes (but not reduced by the
Excise Tax or by income taxes attributable to the Gross-Up Payment).
(b) Subject to the provisions of Section 12(c), all
determinations required to be made under this Section 12, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at the determination, will be made by
a nationally recognized certified public accounting firm selected by the Company
with the consent of Executive, which should not unreasonably be withheld (the
"ACCOUNTING FIRM") which will provide detailed supporting calculations both to
the Company and Executive within thirty (30) days after the receipt of notice
from Executive that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm will be
borne solely by the Company. The Company, as determined in accordance with this
Section 12, will pay any Gross-Up Payment to Executive within five (5) days
after the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it will so indicate to
Executive in writing. Any determination by the Accounting Firm will be binding
upon the Company and Executive; provided, however, that as a result of
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm, it is possible that Gross-Up
Payments that the Company should have made will not have been made (an
"UNDERPAYMENT"), consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies in accordance with Section 12(c),
or elects not to exercise such remedies, and Executive thereafter is required to
make a
payment of any Excise Tax, the Accounting Firm will determine the amount of
Underpayment that has occurred and the Underpayment will be promptly paid by the
Company to or for the benefit of Executive.
(c) Executive will notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require a
Gross-Up Payment (that has not already been paid by the Company). The
notification will be given as soon as practicable but no later than ten (10)
business days after Executive is informed in writing of the claim and will
apprise the Company of the nature of the claim and the date on which the claim
is requested to be paid. Executive will not pay the claim prior to the
expiration of the 30-day period following the date on which Executive gives
notice to the Company or any shorter period ending on the date that any payment
of taxes with respect to the claim is due. If the Company notifies Executive in
writing prior to the expiration of the 30-day or shorter period that it desires
to contest the claim, Executive will:
(i) give the Company any information reasonably
requested by the Company relating to the claim;
(ii) take any action in connection with
contesting the claim as the Company will reasonably request in writing from time
to time, including, without limitation, accepting legal representation with
respect to the claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest the claim; and
(iv) permit the Company to participate in any
proceedings relating to the claim.
(d) The Company will bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with the contest and will indemnify and hold Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of the representation and payment of costs
and expenses. Without limitation of the forgoing provisions of this Section 12,
the Company will control all proceedings taken in connection with the contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with the taxing authority in
respect of the claim and may, at its sole option, either direct Executive to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and Executive agrees to prosecute the contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company will determine. If the Company directs
Executive to pay the claim and sue for a refund, the Company will advance the
amount of the payment to Executive, on an interest-free basis, and will
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto) imposed
with respect to the advance or with respect to any imputed income with respect
to the advance; and any extension of the statute of limitations relating to
payment of taxes for the taxable year of Executive with respect to which the
contested amount is claimed to be due will be limited solely to the contested
amount. The Company's control of the contest will be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and Executive
will be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 12(d), Executive becomes entitled to receive any
refund with respect to the claim, Executive will, subject to the Company's
compliance with the requirements of Section 12(d), promptly pay to the Company
the amount of the refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to this Section 12(d), a determination is made
that Executive will not be entitled to any refund with respect to the claim and
the Company does not notify Executive in writing of its intent to contest the
denial of refund prior to the expiration of thirty (30) days after the
determination, then the advance will be forgiven and will not be required to be
repaid and the amount of the advance will offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
(e) Should the Company elect not to contest the Internal
Revenue Service claim in accordance with the foregoing provisions of Section
12(c) or otherwise not provide Executive with written notice of its intention to
contest such claim within the applicable thirty (30) day or shorter notice
period provided in Section 12(c), then the Company will promptly thereafter pay
Executive the applicable Gross-Up Payment attributable to such claim.
13. Attorneys' Fees. The Company will reimburse Executive's
reasonable attorneys' fees (up to $20,000) in connection with the negotiation,
preparation and execution of this Agreement with the Company.
14. Definitions.
(a) Benefit Plans. For purposes of this Agreement,
"BENEFIT PLANS" means plans, policies or arrangements that the Company sponsors
(or participates in) and that immediately prior to Executive's termination of
employment provide Executive and/or Executive's eligible dependents with
medical, dental, vision and/or financial counseling benefits. Benefit Plans do
not include any other type of benefit (including, but not by way of limitation,
disability, life insurance or retirement benefits). A requirement that the
Company provide Executive and Executive's eligible dependents with coverage
under the Benefit Plans will not be satisfied unless the coverage is no less
favorable than that provided to Executive and Executive's eligible dependents
immediately prior to Executive's termination of employment. Notwithstanding any
contrary provision of Sections 9 and 10, but subject to the immediately
preceding sentence, the Company may, at its option, satisfy any requirement that
the Company provide coverage under any Benefit Plan by instead providing
coverage under a separate plan or plans providing coverage that is no less
favorable or by paying Executive a lump-sum payment which is, on an after-tax
basis, sufficient to provide Executive and Executive's eligible dependents with
equivalent coverage under a third party plan that is reasonably available to
Executive and Executive's eligible dependents.
(b) Cause. For purposes of Sections 9 and 10 of this
Agreement, "CAUSE" will mean (i) a willful failure by Executive to substantially
perform Executive's material duties under this Agreement other than a failure
resulting from the Executive's complete or partial incapacity due to physical or
mental illness or impairment, (ii) a willful act by Executive that constitutes
gross misconduct and is injurious to the Company, (iii) a willful breach by
Executive of a material
provision of this Agreement, (iv) a material and willful violation by Executive
of a federal or state law or regulation applicable to the business of the
Company which is injurious to the Company, or (v) Executive's conviction or plea
of guilty or no contest to a felony. The Company will not terminate Executive's
employment for Cause without first providing Executive with written notice
specifically identifying the acts or omissions constituting the grounds for a
Cause termination and, with respect to clauses (i) through (iv), a reasonable
cure period of not less than thirty (30) days following such notice. No act or
failure to act by Executive will be considered "willful" unless committed
without good faith and without a reasonable belief that the act or omission was
in the Company's best interest.
(c) Change of Control. For purposes of this Agreement,
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, conveyance or other
disposition of all or substantially all of the Company's assets to any "person"
(as such term is used in Section 13(d) of the Securities Exchange Act of 1934,
as amended), entity or group of persons acting in concert;
(ii) any person or group of persons becoming the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 30% or more of the total
voting power represented by the Company's then outstanding voting securities;
(iii) a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its controlling
entity) at least 50% of the total voting power represented by the voting
securities of the Company or such surviving entity (or its controlling entity)
outstanding immediately after such merger or consolidation; or
(iv) a contest for the election or removal of
members of the Board that result s in the removal from the Board of at least 33%
of the incumbent members of the Board.
(d) Competition. The Company will create a written list
of up to six companies that compete with the Company (each a "COMPETITOR"). The
Company may revise such list (by adding new companies to the list and reducing a
like number of companies from the list at the same time) in writing until the
last thirty (30) days of Executive's employment with the Company. For purposes
of this Agreement, Executive will be deemed to have engaged in "COMPETITION" if
he renders services for any of the six or fewer Competitors on the list
described in the previous two sentences.
(e) Disability. For purposes of Sections 9 and 10 of this
Agreement, "DISABILITY" will mean that Executive has been unable to perform the
principal functions of Executive's duties due to a physical or mental
impairment, but only if such inability has lasted or is reasonably expected to
last for at least six months. Whether Executive has a Disability will be
determined by the Board based on evidence provided by one or more physicians
selected by the Board and reasonably acceptable to Executive.
(f) Good Reason. For purposes of Sections 9 and 10 of
this Agreement, "GOOD REASON" will mean (without Executive's consent) (i) a
material reduction in Executive's title, authority, level of reporting, status,
or responsibilities, (ii) a reduction in the aggregate level of Executive's
compensation (Base Salary, Target Bonus and benefits) by more than 10%, other
than a percentage reduction which is the same for all officers of the Company,
(iii) a material breach by the Company of its obligations to Executive under
this Agreement, or (iv) a relocation of Executive's principal place of
employment by more than twenty-five (25) miles. With respect to a termination of
employment that occurs during the six (6) month period immediately following a
Change of Control, clause (i) of the preceding sentence will be applied by
replacing the word "reduction" with the word "change." Any change which results
in Executive's ceasing to serve as the Chief Executive Officer of a publicly
held company will be deemed to constitute a material change or reduction in
Executive's authority and responsibilities constituting grounds for a Good
Reason resignation.
(g) Service. For purposes of this Agreement, "SERVICE"
means the performance of services by Executive as an officer, employee,
consultant or board member of the Company or any parent or subsidiary
corporation (as such terms are defined in Sections 424(e) and (f) of the
Internal Revenue Code).
15. Confidential Information. Executive agrees to enter into the
Company's standard Confidential Information and Invention Assignment Agreement
(the "CONFIDENTIAL INFORMATION AGREEMENT") upon commencing employment hereunder.
16. Assignment. This Agreement will be binding upon and inure to
the benefit of (a) the heirs, executors and legal representatives of Executive
upon Executive's death and (b) any successor of the Company. Any such successor
of the Company will be deemed substituted for the Company under the terms of
this Agreement for all purposes. For this purpose, "SUCCESSOR" means any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. Except as otherwise
permitted by the terms of the Option Plan and the Option Agreement, none of the
rights of Executive to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Executive's right to compensation or other benefits will be null
and void.
17. Notices. All notices, requests, demands and other
communications called for hereunder will be in writing and will be deemed given
(i) on the date of delivery if delivered personally, (ii) one (1) day after
being sent by a well established commercial overnight service, or (iii) four (4)
days after being mailed by registered or certified mail, return receipt
requested, prepaid and addressed to the parties or their successors at the
following addresses, or at such other addresses as the parties may later
designate in writing:
If to the Company:
Solectron Corporation
847 Gibraltar Drive
Milpitas, CA 95035
Attn: Chairman, Compensation Committee of the Board of
Directors
If to Executive:
at the last residential address known by the Company.
18. Non-Solicitation. For a period beginning on the Effective Date
and ending twenty-four (24) months after the Executive ceases to be employed by
the Company, Executive, directly or indirectly, whether as employee, owner, sole
proprietor, partner, director, member, consultant, agent, founder, co-venturer
or otherwise, will: (i) not solicit, induce or influence any person to leave
employment with the Company; or (ii) not directly or indirectly solicit business
from any of the Company's substantial customers and users on behalf of any
Competitor (as defined in Section 14(d)).
19. Severability. In the event that any provision hereof becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement will continue in full force and effect without said
provision.
20. Arbitration.
(a) General. In consideration of Executive's service to
the Company, its promise to arbitrate all employment related disputes and
Executive's receipt of the compensation, pay raises and other benefits paid to
Executive by the Company, at present and in the future, Executive agrees that
any and all controversies, claims, or disputes with anyone (including the
Company and any employee, officer, director, shareholder or benefit plan of the
Company in their capacity as such or otherwise) arising out of, relating to, or
resulting from Executive's service to the Company under this Agreement or
otherwise or the termination of Executive's service with the Company, including
any breach of this Agreement, will be subject to binding arbitration under the
Arbitration Rules set forth in California Code of Civil Procedure Section 1280
through 1294.2, including Section 1283.05 (the "RULES") and pursuant to
California law. Disputes which Executive agrees to arbitrate, and thereby agrees
to waive any right to a trial by jury, include any statutory claims under state
or federal law, including, but not limited to, claims under Title VII of the
Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age
Discrimination in Employment Act of 1967, the Older Workers Benefit Protection
Act, the California Fair Employment and Housing Act, the California Labor Code,
claims of harassment, discrimination or wrongful termination and any statutory
claims. Executive further understands that this Agreement to arbitrate also
applies to any disputes that the Company may have with Executive.
(b) Procedure. Executive agrees that any arbitration will
be administered by the American Arbitration Association ("AAA") and that a
neutral arbitrator will be selected in a manner consistent with its National
Rules for the Resolution of Employment Disputes. The arbitration proceedings
will be held in Santa Clara County, CA and will allow for discovery according to
the rules set forth in the National Rules for the Resolution of Employment
Disputes or California Code of Civil Procedure. Executive agrees that the
arbitrator will have the power to decide any motions brought by any party to the
arbitration, including motions for summary judgment and/or adjudication and
motions to dismiss and demurrers, prior to any arbitration hearing. Executive
agrees that the arbitrator will issue a written decision on the merits.
Executive also agrees that the arbitrator will have the power to award any
remedies, including attorneys' fees and costs, available under applicable law.
Executive understands the Company will pay for any administrative or hearing
fees
charged by the arbitrator or AAA except that Executive will pay the first
$200.00 of any filing fees associated with any arbitration Executive initiates.
Executive agrees that the arbitrator will administer and conduct any arbitration
in a manner consistent with the Rules and that to the extent that the AAA's
National Rules for the Resolution of Employment Disputes conflict with the
Rules, the Rules will take precedence.
(c) Remedy. Except as provided by the Rules, arbitration
will be the sole, exclusive and final remedy for any dispute between Executive
and the Company. Accordingly, except as provided for by the Rules, neither
Executive nor the Company will be permitted to pursue court action regarding
claims that are subject to arbitration. Notwithstanding, the arbitrator will not
have the authority to disregard or refuse to enforce any lawful Company policy,
and the arbitrator will not order or require the Company to adopt a policy not
otherwise required by law which the Company has not adopted.
(d) Availability of Injunctive Relief. In addition to the
right under the Rules to petition the court for provisional relief, Executive
agrees that any party may also petition the court for injunctive relief where
either party alleges or claims a violation of this Agreement or the
Confidentiality Agreement or any other agreement regarding trade secrets,
confidential information, nonsolicitation or Labor Code Section 2870. In the
event either party seeks injunctive relief, the prevailing party will be
entitled to recover reasonable costs and attorneys' fees.
(e) Administrative Relief. Executive understands that
this Agreement does not prohibit Executive from pursuing an administrative claim
with a local, state or federal administrative body such as the Department of
Fair Employment and Housing, the Equal Employment Opportunity Commission or the
workers' compensation board. This Agreement does, however, preclude Executive
from pursuing court action regarding any such claim.
(f) Voluntary Nature of Agreement. Executive acknowledges
and agrees that Executive is executing this Agreement voluntarily and without
any duress or undue influence by the Company or anyone else. Executive further
acknowledges and agrees that Executive has carefully read this Agreement and
that Executive has asked any questions needed for Executive to understand the
terms, consequences and binding effect of this Agreement and fully understand
it, including that Executive is waiving Executive's right to a jury trial.
Finally, Executive agrees that Executive has been provided an opportunity to
seek the advice of an attorney of Executive's choice before signing this
Agreement.
21. Attorneys' Fees in the Event of Litigation. In the event of
any litigation between the Company and Executive under this Agreement (including
arbitration as provided in Section 20), the prevailing party will be entitled to
reasonable attorneys' fees incurred in connection therewith.
22. Integration. This Agreement, together with the Option Plan,
Option Agreement, Restricted Stock Agreement, the Deferred Compensation Plan and
the Confidential Information Agreement represents the entire agreement and
understanding between the parties as to the subject matter herein and supersedes
all prior or contemporaneous agreements whether written or oral. No waiver,
alteration, or modification of any of the provisions of this Agreement will be
binding unless in writing that specifically references this Section 22 and
signed by duly authorized representatives of the parties hereto.
23. Waiver of Breach. The waiver of a breach of any term or
provision of this Agreement, which must be in writing, will not operate as or be
construed to be a waiver of any other previous or subsequent breach of this
Agreement.
24. Headings. All captions and section headings used in this
Agreement are for convenient reference only and do not form a part of this
Agreement.
25. Tax Withholding. All payments made pursuant to this Agreement
will be subject to withholding of applicable taxes.
26. Governing Law. This Agreement will be governed by the laws of
the State of California (with the exception of its conflict of laws provisions).
27. Acknowledgment. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
28. Counterparts. This Agreement may be executed in counterparts,
and each counterpart will have the same force and effect as an original and will
constitute an effective, binding agreement on the part of each of the
undersigned.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by their duly authorized officers, as of the day and
year first above written.
COMPANY:
SOLECTRON CORPORATION
By: /s/ Kevin O'Connor Date: 14 Jan. 2003
__________________________________________ __________________________
Title: Senior Vice President, Human Resources
_______________________________________
EXECUTIVE:
/s/ Michael Cannon Date: 10 Jan. 2003
_____________________________________________ __________________________
Michael Cannon
[SIGNATURE PAGE TO MICHAEL CANNON EMPLOYMENT AGREEMENT]