EXHIBIT 10.01
July 15, 1999
James E. Challenger
777 Prospect Avenue
Winnetka, Illinois 60093
Re: OFFER OF EMPLOYMENT BY INTEGRATED SYSTEMS, INC.
Dear Mr. Challenger:
I am very pleased to confirm our offer to you of employment with
Integrated Systems, Inc. (the "COMPANY"). You will initially report to the
Company's Chief Executive Officer in the position of Chief Technology Officer
and will have such responsibilities and authority as may from time to time be
assigned to you by the Board of Directors or the Chief Executive Officer of the
Company. The terms of our offer and the benefits currently provided by the
Company are as follows:
1. You will serve the Company as Chief Technology Officer and
with such duties and responsibilities as the Chief Executive Officer of Company
may from time to time determine. In addition, you will be elected to the Board
of Directors of the Company as soon as practicable after your first day of
employment. You will comply with and be bound by Company's operating policies,
procedures, and practices from time to time in effect during your employment.
You will perform your duties under this Agreement at the Illinois offices of
Company. You hereby represent and warrant that you are free to enter into and
fully perform this Agreement and the agreements referred to herein without
breach of any agreement or contract to which you are a party or by which you are
bound.
2. You will devote your full time and efforts exclusively to this
employment and apply all your skill and experience to the performance of your
duties and advancing the Company's interests in accordance with your experience
and skills. In addition, you will not engage in any consulting activity except
with the prior written approval of Company, or at the direction of Company, and
you will otherwise do nothing inconsistent with the performance of your duties
hereunder.
3. Your initial salary will be Two Hundred Thousand Dollars
($200,000.00) per year and will be subject to annual review. In addition, you
will be eligible to participate in Company's employee benefit plans of general
application, including without limitation those plans covering pension and
profit sharing, executive bonuses, stock purchases, and those plans covering
life, health, and dental insurance in accordance with the rules established for
individual participation in any such plan and applicable law. You will receive
such other benefits, including vacation, holidays and sick leave, as the Company
generally provides to its employees holding similar positions.
Employment Offer
Page 2
4. You will be eligible to earn a One Hundred Thousand Dollar
($100,000.00) bonus (the "MAXIMUM BONUS") during your first year of employment
with the Company. You and the Company will agree upon performance criteria for
fiscal year 2000 which will be allocated based on the following performance
factors: Company revenue 1/3, Company profit 1/3 and MBO 1/3.
5. As of the date hereof, you shall be granted under the
Company's 1998 Equity Incentive Plan (the "Plan"), a nonqualified stock option
on the date of this Agreement to purchase 125,000 shares of Common Stock at the
fair market value as determined on the date of grant in accordance with the
Plan. In addition, on the first anniversary of this Agreement, you shall be
granted a second nonqualified stock option to purchase 75,000 shares of Common
Stock at the fair market value as determined on the date of grant in accordance
with the Plan, provided that you have provided continuous services to the
Company during such one year period. Such options shall become exercisable
("VEST") over a four year period, with 25% vesting after one year and the
remaining 75% on a monthly basis thereafter. The option grant shall have a ten
year term from the grant date.
6. The Company will reimburse you for all reasonable and
necessary expenses incurred by you in connection with the Company's business,
provided that such expenses are deductible to the Company, are in accordance
with the Company's applicable policy and are properly documented and accounted
for in accordance with the requirements of the Internal Revenue Service.
7. As an employee of the Company, you will have access to certain
confidential information of the Company and you may, during the course of your
employment, develop certain information or inventions which will be the property
of the Company. To protect the interests of the Company, you will need to sign
the Company's standard "Employee Invention Assignment and Confidentiality
Agreement" as a condition of your employment. We wish to impress upon you that
we do not want you to bring with you any confidential or proprietary material of
any former employer or to violate any other obligations you may have to any
former employer.
8. While we look forward to a long and profitable relationship,
should you decide to accept our offer, you will be an at-will employee of the
Company, which means the employment relationship can be terminated by either of
us for any reason, at any time, with or without notice. Any statements or
representations to the contrary (and, indeed, any statements contradicting any
provision in this letter) should be regarded by you as ineffective. Further,
your participation in any stock option or benefit program is not to be regarded
as assuring you of continuing employment for any particular period of time.
9. Please note that because of employer regulations adopted in
the Immigration Reform and Control Act of 1986, within three (3) business days
of starting your new position you will need to present documentation
demonstrating that you have authorization to work in the United States. If you
have questions about this requirement, which applies to U.S. citizens and
non-U.S. citizens alike, you may contact our personnel office.
Employment Offer
Page 3
10. You and the Company shall submit to mandatory binding
arbitration in any controversy or claim arising out of, or relating to, this
Agreement or any breach hereof, PROVIDED, HOWEVER, that the Company retains its
right to, and shall not be prohibited, limited or in any other way restricted
from, seeking or obtaining equitable relief from a court having jurisdiction
over the parties. Such arbitration shall be conducted in Santa Clara, California
in accordance with the National Rules For the Resolution of Employment Disputes
of the American Arbitration Association in effect at that time, and judgment
upon the determination or award rendered by the arbitrator may be entered in any
court having jurisdiction thereof.
11. If any provision of this Agreement shall be found by any
arbitrator or court of competent jurisdiction to be invalid or unenforceable,
then the parties hereby waive such provision to the extent that it is found to
be invalid or unenforceable and to the extent that to do so would not deprive
one of the parties of the substantial benefit of its bargain. Such provision
shall, to the extent allowable by law and the preceding sentence, be modified by
such arbitrator or court so that it becomes enforceable and, as modified, shall
be enforced as any other provision hereof, all the other provisions continuing
in full force and effect.
12. The failure by either party at any time to require performance
or compliance by the other of any of its obligations or agreements shall in no
way affect the right to require such performance or compliance at any time
thereafter. The waiver by either party of a breach of any provision hereof shall
not be taken or held to be a waiver of any preceding or succeeding breach of
such provision or as a waiver of the provision itself. No waiver of any kind
shall be effective or binding, unless it is in writing and is signed by the
party against whom such waiver is sought to be enforced.
13. This Agreement and all rights hereunder are personal to you
and may not be transferred or assigned by you at any time. The Company may
assign its rights, together with its obligations hereunder, to any parent,
subsidiary, affiliate or successor, or in connection with any sale, transfer or
other disposition of all or substantially all of its business and assets,
PROVIDED, HOWEVER, that any such assignee assumes the Company's obligations
hereunder.
14. All sums payable to you hereunder shall be reduced by all
federal, state, local and other withholding and similar taxes and payments
required by applicable law.
15. This Agreement constitutes the entire and only agreement
between the parties relating to employment of you with the Company, and other
than the Non-competition Agreement dated as of the date hereof, this Agreement
supersedes and cancels any and all previous contracts, arrangements or
understandings with respect thereto.
16. This Agreement may be amended, modified, superseded, canceled,
renewed or extended only by an agreement in writing executed by both parties
hereto.
17. All notices and other communications required or permitted
under this Agreement shall be in writing and hand delivered, sent by facsimile,
sent by certified first class mail, postage pre-paid, or sent by nationally
recognized express courier service. Such notices and other communications shall
be effective upon receipt if hand delivered or sent by facsimile, five (5)
Employment Offer
Page 4
days after mailing if sent by mail, and one (l) day after dispatch if sent by
express courier, to the following addresses, or such other addresses as any
party shall notify the other parties:
If to the Company: Integrated Systems, Inc.
201 Moffett Park Drive
Sunnyvale, California 94089
Facsimile: (408) 542-1959
Attention: Chief Financial Officer
If to you: James E. Challenger
777 Prospect Avenue
Winnetka, Illinois 60093
18. This Agreement shall be binding upon, and inure to the benefit of,
the successors and personal representatives of the respective parties hereto.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which, taken together,
constitute one and the same agreement.
20. This Agreement and the rights and obligations of the parties hereto
shall be construed in accordance with the laws of the State of California,
without giving effect to the principles of conflict of laws.
21. If you decide to accept our offer, and I hope you will, please sign
the enclosed copy of this letter in the space indicated and return it to me.
Your signature will acknowledge that you have read and understood and agreed to
the terms and conditions of this offer letter and the attached documents, if
any. Should you have anything else that you wish to discuss, please do not
hesitate to call me.
We look forward to the opportunity to welcome you to the Company.
Very truly yours,
INTEGRATED SYSTEMS, INC.
/s/ Charles M. Boesenberg
-----------------------------
Charles Boesenberg, President
I have read and understood this offer letter and hereby acknowledge, accept and
agree to the terms set forth above.
/s/ James E. Challenger Date signed:
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James E. Challenger