FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is effective as of February 3,
1998, by and between Elgar Electronics Corporation, a California corporation
("Employer"), and ___________ ("Employee").
RECITALS
A. WHEREAS, Employer is engaged in the design, manufacture and
distribution of a wide range of high technology, programmable, variable output
power supply products, predominantly for test and measurement applications.
B. WHEREAS, Carlyle EEC Holdings, Inc. ("Holdings", which on or about
February 3, 1998 changed its name to Elgar Holdings, Inc.) is the owner of all
of the shares of common stock of Employer.
C. WHEREAS, Holdings, JFL-EEC LLC, a Delaware limited liability company
("JFL- EEC"), JFL-EEC Merger Sub Co. ("MergerCo") and TC Group, L.L.C., have
entered into an Agreement and Plan of Merger, dated as of January 2, 1998 (the
"Recapitalization Agreement").
D. WHEREAS, in connection with the Recapitalization Agreement, Holdings
has determined to effect a recapitalization of Holdings and Elgar pursuant to
which, among other things, (i) JFL-EEC will make a capital contribution in the
amount of approximately $19.0 million to MergerCo (the "Lehman Investment"),
(ii) MergerCo will issue to certain purchasers shares of its Series A 10%
Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock") and
certain warrants (the "Warrants") in exchange for an aggregate of $10.0 million,
(iii) MergerCo will offer and issue $90.0 million in aggregate principal amount
of its 9-7/8% Senior Notes due 2008 (the "Senior Notes"), (iv) MergerCo will
merge with and into this Company, with this Company surviving such merger and
assuming the liabilities and obligations of MergerCo (the "Merger"), including
without limitation the liabilities and obligations with respect to the Series A
Preferred Stock, the Warrants and the Senior Notes, (v) pursuant to the
Recapitalization Agreement, (A) immediately prior to the Merger, Holdings will
effect an approximately 9,340 to 1 stock split, such that at the effective time
of the Merger there will be approximately 9,340,000 shares of Holdings' common
stock, $.01 par value per share (the "Common Stock") issued and outstanding, (B)
Carlyle-EEC Acquisition Partners, L.P., the owner of all of the issued and
outstanding capital stock of Holdings immediately prior to the Merger, will
liquidate and distribute the shares of Common Stock to its partners, and (C)
each share of the Common Stock issued and outstanding immediately prior to the
Merger, other than certain shares held by certain shareholders and members of
management (the "Continuing Shares"), will be converted into the right to
receive cash, and (vi) Holdings and Employer will enter into a new credit
facility providing for revolving credit borrowings of up to $15.0 million (all
such transactions described in this paragraph shall be collectively referred to
herein as the Recapitalization").
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E. WHEREAS, Employee will receive substantial benefits from the
Recapitalization, including without limitation the receipt of a portion of the
cash consideration for the Merger.
F. WHEREAS, Employee will remain a shareholder of Holdings as a result of
continuing to own certain of the Continuing Shares.
G. WHEREAS, Employer desires to engage Employee and Employee desires to
accept such engagement to provide such services to Employer as are set forth in
this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereto hereby agree as follows:
AGREEMENT
1. EMPLOYMENT. Employer engages Employee to serve as __________ and Employee
hereby accepts such engagement upon the terms and conditions set forth herein.
2. TERM. Employee's term of employment under this Agreement shall commence
upon the date hereof and shall continue until terminated in accordance with
Section 4 herein.
3.. DUTIES. Employee will devote his full business time, utmost knowledge and
best skill to the performance of the duties and responsibilities as President
and Chief Executive Officer of Employer, as such duties and responsibilities are
performed by Employee as of the date of this Agreement. Employee shall report
directly to the President of Employer. Employee will not engage in any other
gainful occupation which requires his personal attention without prior consent
of the President of Employer. Notwithstanding the foregoing, Employee shall
perform such other duties as the President reasonably may require from time to
time.
4. TERMINATION.
4.1. EVENTS TRIGGERING TERMINATION. At the written election of Employer in
its sole discretion, this Agreement shall terminate immediately, effective upon
the occurrence of any one of the following events:
(a) Employee's conviction of a felony or other crime involving moral
turpitude;
(b) Employee's material breach of or failure to perform his obligations
hereunder, failure by Employee to abide by, conform with or otherwise observe
any material written policy of Employer, or the continuing failure to conform to
the reasonable directives of the Board of Directors of Employer;
(c) The death of Employee;
(d) The total and permanent disability of Employee. Employee shall be
deemed totally and permanently disabled if the Employee shall become
incapacitated by reason of sickness, accident or other physical or mental
disability and shall for a period of thirty (30)
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consecutive days be unable to perform his normal duties hereunder, with or
without reasonable accommodation by Employer; or
(e) The sixty-fifth birthday of Employee.
In the event that Employee's employment is terminated by Employer pursuant
to Sections 4.1(a), 4.1(b), 4.1(c), or 4.1(e) hereof, Employer shall promptly
pay to Employee (or in the event that such termination is pursuant to Section
4.1(c), to Employee's estate or other legal representative) the annual base
salary provided for in Section 5.1 accrued to the date of Employee's termination
and not theretofore paid to Employee. Rights and benefits of Employee under the
benefits plans and programs of Employer shall be determined in accordance with
the terms of such plans and programs.
4.2 TERMINATION BY WRITTEN NOTICE. This Agreement may also be terminated
by either party for any reason or for no reason upon thirty (30) days prior
written notice to the other.
4.3. SEVERANCE COMPENSATION. If Employer terminates this Agreement and
such termination is not pursuant to Sections 4.1 (a), 4.1 (b), 4.1(c) or
4.1(e), or for no reason, then Employer shall continue to pay to Employee his
annual base salary in the same periodic installments provided for in Section
5.1 hereof for a period of twelve (12) consecutive months following the date
of such termination (the "Severance Period"); provided, however, that the
severance compensation to be paid to Employee in respect of a termination for
the reason specified in Section 4.1(d) shall be integrated with any disability
insurance proceeds paid to Employee during the Severance Period so that Employee
receives no more than an amount equal to 100% of his annual base salary under
Section 5.1 during the Severance Period. In addition, during the Severance
Period Employer shall continue to pay the allowance set forth in Section 5.5 and
make all Employer contributions to medical and dental and life insurance
premiums for all Employer maintained plans under which Employee is an insured or
covered as of the commencement of the Severance Period.
5. COMPENSATION.
5.1 BASE SALARY. As compensation for all services rendered by Employee
under this Agreement, Employer shall pay Employee an annual base salary of
__________, payable bi-weekly in arrears or otherwise in accordance with the
standard payroll practices of Employer. This annual base salary may be
augmented by salary increases as determined by the President. All regular
compensation shall be paid in accordance with Employer's standard payroll
procedures.
5.2 OTHER BONUSES. Employee shall be eligible for additional bonus
compensation as may be determined by the President and/or the Board of
Directors.
5.3 WITHHOLDING. All compensation paid to Employee under this Agreement
shall be subject to customary withholding and employment taxes as required by
federal and state law.
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5.4 OTHER BENEFITS. Employee shall be entitled to such other benefits,
including retirement benefits, as are provided to other full-time employees of
Employer, subject to any terms, conditions or restrictions associated with such
benefits, all as determined by written company policy in effect from time to
time during the term of this Agreement.
6. VACATION. Employee shall be entitled to four (4) weeks annual paid
vacation per year, subject to accrual and use in accordance with written company
policy in effect from time to time during the term of this Agreement and
applicable law. Employee's vacation will be scheduled at those times which are
mutually convenient to Employer's business and Employee.
7. BUSINESS EXPENSES. During the term of this Agreement, Employer shall
reimburse Employee for all reasonable and necessary out-of-pocket business
expenses of Employee related to Employee's duties hereunder in accordance with
the policies and procedures of Employer in effect from time to time, including,
without limitation:
(a) Actual expenses for travel, meals and lodging for necessary travel
between Employer's business locations;
(b) Actual expenses for travel, meals and lodging for other travel
approved in advance by Employer; and
(c) Professional entertainment and promotional expenses approved in
advance by Employer.
8. TRADE SECRETS.
8.1 TRADE SECRETS IN GENERAL. During the course of Employee's employment,
Employee will have access to various trade secrets of Employer. For purposes of
this Agreement, "Trade Secret" shall mean information which is not generally
known to the public and, as a result, is of economic benefit to Employer in the
conduct of its business. Employee and Employer agree that Trade Secrets shall
include but not be limited to all information developed or obtained by Employer
and comprising the following items, whether or not such items have been reduced
to tangible form (e.g., physical writing): all methods, techniques, processes,
ideas, trade names, service marks, slogans, forms, customer lists, pricing
structures, menus, business forms, marketing programs and plans, layouts and
designs, financial information, operational methods and tactics, cost
information, the identity of or contractual arrangements with suppliers, the
identity or buying habits of customers, accounting procedures, and any document,
record or other information of Employer relating to the above. Trade Secrets
include not only information belonging to Employer which existed before the date
of this Agreement, but also information developed by Employee for Employer or
its employees during the term of this Agreement.
8.2 RESTRICTION ON USE OF TRADE SECRETS. Employee agrees that his use of
Trade Secrets is subject to the following restrictions during the term of the
Agreement and for an indefinite period thereafter so long as the Trade Secrets
have not become generally known to the public:
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(a) NON-DISCLOSURE. Employee will not publish or disclose, or allow
to be published or disclosed, Trade Secrets to any person who is not an employee
of Employer unless such disclosure is necessary for the performance of
Employee's obligations under this Agreement.
(b) USE RESTRICTION. Employee shall use any Trade Secret only for
the limited purpose for which it was disclosed. Employee shall not disclose any
Trade Secret to any third party (including subcontractors) other than in
accordance with customary practices and existing agreements with customers and
shall disclose the Trade Secret only to other employees of Employer or as
provided under such agreements with customers having a need to know. Employee
shall promptly notify Employer of any Trade Secret disclosed other than in
accordance herewith.
(c) NON-REMOVAL. Employee will not remove any Trade Secrets from the
offices of Employer or the premises of any facility in which Employer is
performing services, or allow such removal, other than in accordance with
customary practices and existing agreements with customers.
(d) SURRENDER UPON TERMINATION. Upon termination of his employment
with Employer for any reason, Employee will surrender to Employer all documents
and materials in his possession or control which contain Trade Secrets.
(e) PROHIBITION AGAINST UNFAIR COMPETITION. At any time after the
termination of his employment with Employer for any reason, Employee will not
engage in competition with Employer while making use of the Trade Secrets of
Employer.
8.3 INVENTIONS. Any and all inventions, innovations, or improvements
("Inventions") made, developed or created by the Employee (whether at the
request or suggestion of Employer or otherwise, whether alone or in conjunction
with others, and whether during regular hours of work or otherwise) during the
term hereof which may be directly or indirectly useful in, or relate to, the
business of Employer, shall be promptly and fully disclosed by Employee to
Employer and shall be Employer's exclusive property as against Employee and
Employee shall promptly deliver to an appropriate representative of Employer all
papers, drawings, models, data and other material relating to any Inventions
made, developed or created by him as aforesaid. Employee shall, at the request
of Employer, and without any payment therefor, execute any documents necessary
or advisable in the opinion of Employer's counsel to direct issuance of patents
or copyrights to Employer with respect to such Inventions as are to be
Employer's exclusive property as against Employee or to vest in Employer title
to such Inventions as against Employee. The expense of securing any such patent
or copyright shall be borne by Employer. Notwithstanding the foregoing, the
Agreement does not require assignment of an Invention which qualifies fully for
protection under Section 2870 of the California Labor Code, a copy which is
attached as Exhibit A.
8.4 NON SOLICITATION. During the term of employment of Employee and until
the expiration of twenty-four (24) months following the termination of the
employment of Employee, Employee shall not:
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(a) advise or in any way encourage any person, firm or corporation
who is, at the time of termination of employment of Employee, or was at any time
during the term of employment of Employee with Employer, a customer or client of
Employer, to breach any contract with Employer;
(b) recruit, hire, assist others in the soliciting, recruiting or
hiring, or discuss other employment with, any person who is at the time of
termination of the employment of Employee with Employer, or was at anytime
during the employment of Employee with Employer, an employee of Employer, or
induce or attempt to induce any such employee to terminate his or her employment
with Employer; or
(c) use or disclose to any person, firm or corporation the name of
any present, former, prospective customer, client or employee of Employer.
8.5 COVENANT. During the term of employment of Employee and until the
expiration of twenty-four (24) months following the termination of the
employment of Employee, Employee shall not, directly or indirectly, engage in or
carry on, or have any interest in any person, firm, corporation, or business
(whether as an employee, officer, director, agent, partner, security holder,
creditor, consultant, or otherwise) that engages in or carries on, any business
which is the same as, similar to, or competitive with the business presently
conducted on the date hereof by Employer (a "Competitive Business") within the
Area set forth below; provided, however, Employee may purchase or otherwise
acquire up to one percent of any class of securities of any person (but without
participating in the activities of such person) if such securities are listed on
any national or regional securities exchange, or have been registered under
Section 12(g) of the Securities Exchange Act of 1934. Competitive Business
shall mean any person, firm, corporation, a company, enterprise or person which
manufactures or distributes programmable power supply equipment, whether AC, DC
or both. The Area shall include the county of San Diego, California and all
other counties within the United States in which Elgar Electronics Corporation
now or ever has engaged in or conducted business or elects in the future to
conduct business prior to the termination of employment of Employee. Employee
acknowledges and agrees that this covenant is given in connection with the
Recapitalization and is reasonable with respect to its duration, geographical
area and scope. It is the intention of Employee and Employer that this covenant
shall be enforceable to the maximum extent, and if a court is called upon to
interpret this covenant, it is agreed and stipulated by Employee and Employer
that such court shall so interpret this covenant to provide that it shall cover
the greatest geographical area for the greatest period of time not to exceed the
expiration of twenty-four (24) months following the termination of the
employment of Employee.
9. UNFAIR COMPETITION, MISAPPROPRIATION OF TRADE SECRETS AND VIOLATION OF
SOLICITATION CLAUSES. Employee acknowledges that unfair competition,
misappropriation of Trade Secrets or violation of any of the provisions
contained in Section 8 would cause irreparable injury to Employer, that the
remedy at law for any violation or threatened violation thereof would be
inadequate, and that Employer shall be entitled to temporary and permanent
injunctive or other equitable relief without the necessity of proving actual
damages. Employee agrees that such
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relief shall be available in a court of law regardless of the arbitration
provisions contained in Section 17 of this Agreement.
10. CONFLICT OF INTEREST. Employee acknowledges that the obligations and
services to be provided by Employee hereunder are special and unique. Employee
agrees that he will not at any time during the term of employment serve as an
officer, director, employee, or otherwise have an interest in any entity that
engages in business similar to that of Employer and Employer's subsidiaries.
This provision shall not apply to equity or stock ownership interests of less
than 5% of any publicly traded company.
11. SUCCESSORS AND ASSIGNS. The rights and obligations of the Employer under
this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Employer. Employee shall not be entitled to assign
any of his rights or obligations under this Agreement.
12. GOVERNING LAW. This Agreement shall be interpreted, construed, governed
and enforced in accordance with the laws of the State of California.
13. AMENDMENTS. No amendment or modification of the terms or conditions of
this Agreement shall be valid unless in writing and signed by the parties
hereto.
14. SEVERABILITY. Each term, condition, covenant or provision of this
Agreement shall be viewed as separate and distinct, and in the event that any
such term, covenant or provision shall be held by a court of competent
jurisdiction to be invalid, the remaining provisions shall continue in full
force and effect.
15. WAIVER. A waiver by either party of a breach of provision or provisions of
this Agreement shall not constitute a general waiver, or prejudice the other
party's right otherwise to demand strict compliance with that provision or any
other provisions in this Agreement.
16. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient, if in writing, sent by certified mail to his residence in
the case of Employee, or hand delivered to the Employee, or to its principal
office (corporate office) in the case of the Employer.
17. ARBITRATION. Except as provided in Section 9, any dispute or claim that
may arise out of the provisions of this Agreement which cannot be resolved by
agreement of the parties acting in good faith within a reasonable time,
including any interpretation or alleged breach hereof, shall be resolved by
arbitration in accordance with the then-effective employment arbitration rules
of the San Diego, California, Chapter of the American Arbitration Association.
Except as otherwise set forth in Section 9 hereof, the parties intend that
litigation not be used to settle any dispute or claim arising out of this
Agreement. The written determination and award of the arbitrator or
arbitrators, as applicable, shall be final, binding and conclusive, and such
determination may be entered in any court of competent jurisdiction with each
side to pay their own attorneys' fees and costs.
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18. ENTIRE AGREEMENT. Employee acknowledges receipt of this Agreement and
agrees that this Agreement and Exhibit A attached hereto represent the entire
Agreement with Employer concerning the subject matter hereof, and supersedes any
previous oral or written communications, representations, understandings or
Agreements with Employer or any officer or agent thereof. Employee understands
that no representative of the Employer has been authorized to enter into any
Agreement or commitment with Employee which is inconsistent in any way with the
terms of this Agreement.
19. CONSTRUCTION. This Agreement shall not be construed against any party on
the grounds that such party drafted the Agreement.
20. ACKNOWLEDGMENT. Employee acknowledges that he has had the opportunity to
consult with independent counsel of his own choice concerning this Agreement,
and that he has taken advantage of that opportunity to the extent that he
desires. Employee further acknowledges that he has read and understands this
Agreement, is fully aware of its legal effect, and has entered into it
voluntarily based on his own judgment.
21. SURVIVORSHIP. The respective rights and obligations of Employee and
Employer hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
22. COUNTERPARTS. This Agreement may be executed in one or more counterpart
copies, each of which shall be deemed to be an original and all of which taken
together shall be deemed one and the same instrument.
Elgar Electronics Corporation, a
California corporation
Dated: February 3, 1998
By:
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Donald Glickman,
Chairman of the Board
Dated: February 3, 1998
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[Executive]
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EXHIBIT A
SECTION 2870
CALIFORNIA LABOR CODE
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.