EXHIBIT 99.1
July 22, 1999
Mr. Scott W. Klein
3604 Shantara Lane
Plano, Texas 75093
Dear Scott:
On behalf of Creative Computers, Inc. ("Creative," or the "Company"), it is
my pleasure to confirm our offer to you of the position of President of Creative
Computers under the terms and conditions outlined below. Your responsibilities
generally will be to act as the President of the Company, reporting to the
Chairman and Chief Executive Officer. Your duties may change from time to time
as necessary. As we discussed, your position will involve and require travel
and time away from your current residence.
You will start your new position on July 26, 1999 ("Commencement Date").
Upon assuming your position, you will contemporaneously resign from your
director and officer positions with Creative's subsidiary, eCOST.com, Inc.
("ecost"). However, you agree that you will provide transition management
services to ecost until such time as a new chief executive officer is hired. If
the Company terminates your employment (other than for "cause" as defined below)
you will be entitled during the "Severance Period" (as defined below) to
severance in an amount equal to up to six months salary (as specified below) and
continuation, at the Company's expense, of health insurance benefits for you and
your family, subject to your execution of a separation agreement, satisfactory
to the Company's Board of Directors, containing customary mutual releases.
Severance payments will be made in equal bi-monthly installments over a six-
month period; provided that, if you obtain other employment during the six month
period, the Company's obligation to pay the severance payments otherwise due
during the remainder of the six-month period shall cease as of the date you
obtain such other employment. Your employment will cease for all purposes as of
the date of your termination by the Company notwithstanding the post-termination
severance payments provided for in the two preceding sentences. The shorter of
(i) six months after the Company terminates your employment (other than for
"cause") or (ii) the period from the date of such termination until you obtain
other employment is referred to in this paragraph as the "Severance Period."
Notwithstanding the foregoing, in the event of termination of your employment
with Creative (other than for cause), Creative may, in its sole discretion,
offer to you the opportunity to return to ecost as its President and Chief
Executive Officer on terms identical to those set forth in your April 15, 1999
employment letter, including the granting to you of options to purchase ecost
common stock (with an exercise price equal to the then per share fair market
value of ecost common stock) that will restore your current 500,000 share option
position. In the event
Mr. Scott W. Klein
July 22, 1999
Page Two
Creative so offers to you the opportunity to return to ecost, Creative shall
have no severance payment obligation to you under this paragraph as a result of
the termination of your Creative employment.
For the purpose of the preceding paragraph, "cause" shall mean: (i) a
material breach by you of your employment obligations with the Company,
including your obligations hereunder, which breach is not cured within fifteen
(15) days after written notice thereof from the Company; (ii) your commission of
an act of personal dishonesty or breach of fiduciary duty involving personal
profit in connection with your employment by the Company; (iii) your commission
of an act involving willful misconduct or gross negligence on your part in the
conduct of your duties as an officer of the Company; (iv) a material and willful
violation of a federal or state law or regulation by you applicable to the
business of the Company; (v) your conviction of, or pleading of nolo contendere
to, a felony or a crime involving moral turpitude; or (vi) a diagnosis of your
addiction to illegal drugs. No act, or failure to act, by you shall 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. You agree
that any dispute between you and the Company arising out of your employment will
be resolved by binding arbitration in Los Angeles County pursuant to the
American Arbitration Association's employment dispute resolution rules then in
effect.
You are going to be employed in the Company's Torrance, California facility
and accordingly need to commute to that facility to work on a weekly basis
(Monday through Friday). The Company will pay your coach airfare to commute
from your Texas residence to the Company's Torrance, California headquarters.
The Company will also arrange and pay for temporary lodging (hotel room or
apartment) when you are working at the Company's Torrance office. At the
Company's request, you agree to relocate your permanent residence to Southern
California, and the Company will pay up to an aggregate of $150,000 of your
documented out-of-pocket relocation expenses described.
As compensation for your services and in consideration for your agreement
to enter into the Employee Proprietary Information Agreement described below,
you will earn a base salary of $309,150 per annum ($5,745.19 per week) payable
in accordance with Creative's standard payroll practices. You will also be
eligible to receive performance bonuses of up to $50,000 each year, in the sole
discretion of the Company's Compensation Committee; provided that, for the first
twelve months of your employment, your performance bonus will not be less than
$12,500. Your yearly salary may be increased or decreased, by mutual agreement.
You will also receive a car allowance of up to $1,450 per month plus a monthly
amount to cover insurance on the
Mr. Scott W. Klein
July 22, 1999
Page Three
automobile (to be determined at the time of employment) which amounts will be
added to your salary and which amounts will be grossed up for taxes, to the
extent necessary. The Company will also pay for vehicle registration fees and
maintenance expenses associated with the automobile. During the term of your
employment, you will also receive (i) health insurance coverage for you and the
members of your family and (ii) three weeks of paid vacation during your first
year of employment and four weeks per year thereafter. In addition, except for
the salary, bonus, car allowance and other benefits specifically provided for in
this letter, you shall be eligible to receive other benefits during the course
of your employment comparable to those generally made available to other senior
executives of Creative.
In addition to the compensation set forth above, you will be granted on the
Commencement Date an option to purchase 250,000 shares of the common stock of
Creative with an exercise price equal to the closing price of the Company's
common stock on such date. Vesting of your option will be at a rate of 20% per
year on each anniversary date of the option. Vesting of your option will be
subject to the condition that you are still employed by the Company. Generally,
the option shall expire 90 days after you are no longer with the Company.
Effective as of the Commencement Date, you agree that, in consideration of the
Creative stock option described above, the number of shares covered by your
current stock option to purchase shares of ecost Common Stock shall be reduced
from 500,000 shares to 150,000 shares. Finally, upon approval by stockholders
of Creative of an increase in the number of shares issuable under Creative's
Stock Incentive Plan (or, if earlier, the approval by stockholders of a new
stock option plan), you will be granted an option to purchase an additional
75,000 shares of Creative common stock vesting at a rate of 20% per year from
the Commencement Date, with an exercise price equal to the closing price of
Creative common stock on the date of such shareholder approval.
In addition, you agree not to in any way jeopardize or expose the Company
to liability by using for the Company's benefit trade secrets of any former
employer or client. You agree that upon the Commencement Date, your April 15,
1999 employment offer letter with ecost shall be terminated and that neither
ecost nor Creative will have any further obligations thereunder, other than
payment thereunder of unpaid salary accruing through, and reimbursement of
expenses incurred prior to, the Commencement Date. You further agree and
represent that you have not entered into any agreements with any former employer
or client that would affect your ability to give your full efforts to the
Company, would expose the Company to any liability, or would negatively impact
the Company's ability to run its business and compete effectively for personnel
or for business on a go-forward basis. You further agree to sign an Employee
Proprietary
Mr. Scott W. Klein
July 22, 1999
Page Four
Information Agreement. A copy of that agreement is attached for your review and
signature.
We look forward to your starting your new position. If there is any matter
in this letter that you want to discuss further, please do not hesitate to
contact me.
Sincerely,
/s/ FRANK F. KHULUSI
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Frank F. Khulusi
Chairman and CEO
Encl: Proprietary Information Agreement
Accepted and Agreed:
/s/SCOTT W. KLEIN
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Scott W. Klein July 22, 1999