Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into this 23rd day of June,
2000, by and between Xxxxx Xxxx ("Executive") and EFTC Corporation, a Colorado
corporation (the "Company").
WITNESSETH:
WHEREAS, Executive and the Company deem it to be in their
respective best interests to enter into an agreement providing for the Company's
employment of Executive pursuant to the terms herein stated;
NOW, THEREFORE, in consideration of the premises and the
mutual promises and agreements contained herein, it is hereby agreed as follows:
1. Effective Date. This Agreement shall be effective as of July 17, 2000,
which date shall be referred to herein as the "Effective Date."
2. Position and Duties.
(a) The Company hereby agrees to employ Executive and Executive hereby agrees to
accept his employment as Chief Executive Officer of the Company for the "Term of
Employment" (as defined in Section 5). In this capacity, Executive shall devote
his reasonable best efforts to the performance of the services customarily
incident to such office and position and to such other services of an executive
nature as may be reasonably requested by the Board of Directors (the "Board") of
the Company, which may include services for one or more subsidiaries or
affiliates of the Company. Executive shall in his capacity as an employee and
officer of the Company be directly responsible to and obey the reasonable and
lawful directives of the Board.
(b) Executive shall use his reasonable best efforts during the Term of
Employment to protect, encourage, and promote the interests of the Company.
3. Compensation.
(a) Base Salary. The Company shall pay to Executive during the Term of
Employment a minimum salary at the rate of three hundred thousand dollars
($300,000) per calendar year. Such salary shall be payable in accordance with
the Company's normal payroll procedures. Executive's annual salary, as set forth
above or as it may be increased from time to time by the Board in its sole
discretion, shall be referred to hereinafter as "Base Salary."
(b) Bonus Compensation. Upon execution and delivery of this Agreement by both
parties, the Company shall pay Executive a signing bonus of $50,000 which shall
be paid on July 17, 2000 but otherwise in accordance with the Company's normal
payroll procedures. In addition to the Base Salary, for each fiscal year of the
Company, or portion thereof, during the Term of Employment, Executive shall be
eligible to participate in an incentive-based bonus compensation program (the
"Bonus Compensation") in an amount determined by the Compensation Committee of
the Board (the "Compensation Committee"), and consistent with other comparable
executives of the Company and its affiliated companies. The amount, if any, of
such Bonus Compensation for each such fiscal year shall be determined based upon
the Company's attainment of performance goals presented to the Board of
Directors or the Compensation Committee of the Board of Directors by Executive
and the Company's Chief Financial Officer and approved by the Board of Directors
or the Compensation Committee. Performance goals shall be based on the Company's
earnings before interest expenses, taxes, and amortization costs (adjusted to
reflect working capital carrying costs and capital spending) and on targets for
returns on invested capital to be determined by the Board of Directors. Without
limiting the foregoing, the amount of Bonus Compensation to be paid in respect
of any such fiscal year shall be up to an amount of not less than $250,000 for
meeting agreed upon performance amounts with additional amounts payable for
exceeding such performance goals by set threshold amounts.
4. Benefits. During the Term of Employment:
(a) Executive shall be eligible to participate in any life, health, dental and
long-term disability insurance programs, pension and retirement programs, leave
of absence and other fringe benefit programs made available to senior executive
employees of the Company from time to time, and Executive shall be entitled to
receive such other fringe benefits as may be granted to him from time to time by
the Compensation Committee.
(b) Executive shall be entitled to four weeks paid vacation per each full year
during the Term of Employment; provided that Executive may be provided with
additional paid vacation as provided by the Board (or its designee) in its sole
discretion.
(c) Executive shall be eligible to participate in the 2000 Equity Stock Option
Plan and such other equity based or incentive compensation plans or programs as
may be adopted by the Company from time to time (collectively, the "Equity
Plan") for its senior executives, at such level and in such amounts as may be
determined by the Board in its sole discretion, subject to the terms and
conditions of the Equity Plan and any applicable award agreements; provided that
Executive shall receive an initial award of options to purchase shares of common
stock of the Company substantially on the terms set forth on Exhibit A hereto.
(d) The Company shall reimburse Executive for reasonable business expenses
incurred in performing Executive's duties and promoting the business of the
Company, including, but not limited to, reasonable entertainment expenses,
travel and lodging expenses, following presentation of documentation in
accordance with the Company's business expense reimbursement policies.
(e) The Company shall reimburse Executive for reasonable moving expenses
incurred by Executive as a result of his move to the Phoenix, Arizona area in
connection with his employment by the Company following presentation of
documentation thereof; provided, that such expenses shall not exceed $60,000 in
the aggregate; and, provided further, that the reimbursement of any
non-deductible expenses for state or federal income tax purposes shall be
"grossed up" in sufficient amount to cause Executive to be fully reimbursed even
after payment of all applicable income taxes. In addition, the Company shall
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advance to Executive a relocation bridge loan (the "Bridge Loan") in an amount
not to exceed Two Hundred Thousand Dollars ($200,000) to be applied by Executive
to the purchase of a new home in the Phoenix metropolitan area. The Bridge Loan
shall be for a term not to exceed one year and shall accrue interest at the rate
of eight percent (8.0%) per annum.
5. Term; Termination of Employment. As used herein, the phrase "Term of
Employment" shall mean the period commencing on the Effective Date and, except
as otherwise specifically provided below, ending on December 31, 2003 which
shall automatically renew for periods of one year unless one party gives written
notice to the other at least 90 days prior to the end of the then current term
that the Agreement shall not be further extended. Notwithstanding the foregoing,
the Term of Employment shall expire on the first to occur of the following:
(a) Termination by the Company without Cause or Resignation for Good Reason.
Notwithstanding anything to the contrary in this Agreement, whether express or
implied, (i) the Company may, at any time, terminate Executive's employment for
any reason other than Cause (as defined below) by giving Executive at least 60
days' prior written notice of the effective date of termination and (ii) the
Executive may resign for Good Reason (as defined below) by giving the Company at
least 60 days' prior written notice of the effective date of termination. In the
event Executive's employment hereunder is terminated by the Company other than
for Cause or Executive resigns for Good Reason, the Company shall, in accordance
with the Company's customary payroll practices, continue to pay to Executive:
x. Base Salary and
y. a pro-rated Bonus Compensation for the year in which such termination
occurs, based on performance to the date of termination
during the period commencing on the effective date of such termination and
ending on the first anniversary of the effective date of such termination;
provided, that notwithstanding the foregoing Executive shall not be eligible to
receive any Bonus Compensation pursuant to this Section 5(a) for a termination
occurring in any calendar year unless the date of termination occurs on or after
June 30 of such calendar year.
(b) Termination for Cause. The Company shall have the right to terminate
Executive's employment at any time for Cause by giving Executive written notice
of the effective date of termination (which effective date may, except as
otherwise provided below, be the date of such notice). If the Company terminates
Executive's employment for Cause, Executive shall be paid his unpaid Base Salary
through the date of termination and the Company shall have no further obligation
hereunder from and after the effective date of such termination.
(c) Certain Definitions. For purposes of this Agreement:
(i) "Cause" shall mean:
(A) Fraud, misappropriation, embezzlement, or other act of
material misconduct by Executive against the Company or any of its affiliates;
(B) Executive's conviction of or plea of guilty or nolo contendere to a
felony;
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(C) Executive's breach of any material term of this Agreement including
without limitation Section 6 which, if such breach is curable without material
harm to the Company, remains uncured for a period of thirty (30) days following
written notice by the Company to Executive of such breach; or
(D) Executive's willful refusal or failure to act on any reasonable and
lawful directive or order from the Board which is material to the business of
the Company and which remains uncured for a period of thirty (30) days following
written notice by the Company to Executive describing such refusal or failure to
act.
(ii) "Good Reason" shall mean:
(A) A material breach of a material term of this Agreement by the Company;
(B) Any material adverse change in Executive's job title, duties,
responsibilities or authority;
(C) Failure of the Company to pay Base Salary or Bonus Compensation when
due under this Agreement; or
(D) Executive shall, without his consent, not be a member of the Board;
provided, however, that none of the events described in this Section 5(c)(ii)
shall constitute Good Reason unless Executive shall have notified the Company in
writing describing the events which constitute Good Reason and then only if the
Company shall have failed to cure such event within ten (10) days after the
Company's receipt of such written notice.
(d) Termination on Account of Death. In the event of Executive's death while in
the employ of the Company, his employment hereunder shall terminate on the date
of his death and Executive shall be paid (x) his unpaid Base Salary through the
date of termination and (y) any unpaid Bonus Compensation for the prior year. In
addition, any other benefits payable on behalf of Executive shall be determined
under the Company's insurance and other compensation and benefit plans and
programs then in effect in accordance with the terms of such programs.
(e) Resignation by Executive without Good Reason. In the event that Executive's
employment with the Company is voluntarily terminated by Executive for any
reason other than for Good Reason, Executive shall be paid (x) his unpaid Base
Salary through the date of termination and (y) any unpaid Bonus Compensation for
the prior year, and the Company shall have no further obligation hereunder from
and after the effective date of termination. Executive shall give the Company at
least 60 days' advance written notice of his intention to terminate his
employment hereunder.
(f) Termination on Account of Disability. To the extent not prohibited by The
Americans With Disabilities Act of 1990 or other applicable law, if, as a result
of Executive's incapacity due to physical or mental illness (as determined in
good faith by a physician acceptable to the Company and Executive), Executive
shall have been absent from the full-time performance of his duties with the
Company for 120 consecutive days during any twelve (12) month period or if a
physician acceptable to the Company advises the Company that it is likely that
Executive will be unable to return to the full-time performance of his duties
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for 120 consecutive days during the succeeding twelve (12) month period, his
employment may be terminated for "Disability." During any period that Executive
fails to perform his full-time duties with the Company as a result of incapacity
due to physical or mental illness, he shall continue to receive his Base Salary,
Bonus Compensation and other benefits provided hereunder, together with all
compensation payable to him under the Company's disability plan or program or
other similar plan during such period, until Executive's employment hereunder is
terminated pursuant to this Section 5(f). In the event of a Disability,
Executive's benefits shall be determined under the Company's retirement,
insurance, and other compensation and benefit plans and programs then in effect,
in accordance with the terms of such programs and to the extent permitted by
applicable law.
(g) No Mitigation of Damages. In the event of any termination of Executive's
employment hereunder, Executive shall not be required to seek other employment
to mitigate damages, and any income earned from Executive from other employment
or self-employment shall not be offset against any obligations of the Company
under this Agreement.
6. Confidential Information, Non-Solicitation and Non-Competition.
(a) During the Term of Employment and for a period of eighteen months following
the date Executive ceases to be employed by the Company for any reason (the
"Non- Compete Period"), Executive shall not, directly or indirectly, engage in,
work for, consult or provide advice or assistance to any Named Competitor (as
defined below) within the United States and its territories and protectorates.
"Named Competitor" shall mean any company that derives more than 50% of its
annual revenues from the provision of high mix electronic manufacturing services
to original equipment manufacturers in the computer peripherals, medical
equipment, industrial controls, telecommunications equipment and electronic
instrumentation industries. Executive further agrees that during the Non-Compete
Period he will not give material assistance or encouragement to any other person
in carrying out any activity that would be prohibited by the provisions of this
Section 6 if such activity were carried out by Executive, or give any assistance
or encouragement to any other person in carrying out any such activity for the
purpose of competing against the Company, and, in particular, Executive agrees
that he will not induce any employee of the Company to carry out any such
activity; provided, however, that the "beneficial ownership" by Executive,
either individually or as a member of a "group," as such terms are used in Rule
13d of the General Rules and Regulations under the Exchange Act, of not more
than five percent (5%) of the voting stock of any publicly held corporation
shall not be a violation of this Agreement. Notwithstanding the foregoing, this
Section 6(a) shall not apply if Executive is terminated by the Company prior to
January 17, 2001, for any reason other than for Cause.
(b) Executive agrees that, during the Term of Employment, and for a period of
eighteen months thereafter, he will not, directly or indirectly, solicit or
contact any customer or supplier of the Company on behalf of any Named
Competitor or in any way interfere with the Company's relationship with any
customer or supplier of the Company.
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(c) Executive agrees that, during the Term of Employment, and for a period of
eighteen months thereafter, he will not, directly or indirectly, solicit or
recruit any employee of the Company for the purpose of being employed by him or
by any Named Competitor.
(d) Executive and the Company expressly agree that the Company will or would
suffer irreparable injury if Executive were to violate any provision of this
Section 6 and that the Company would by reason of such violation be entitled to
injunctive relief in a court of appropriate jurisdiction.
(e) If it is determined by a court of competent jurisdiction in any state that
any restriction in this Section 6 is excessive in duration or scope or is
unreasonable or unenforceable under the laws of that state, it is the intention
of the parties that such restriction may be modified or amended by the court to
render it enforceable to the maximum extent permitted by the law of that state.
7. Taxes. All payments to be made to Executive under this Agreement will
be subject to any applicable withholding of federal, state and local income and
employment taxes.
8. Miscellaneous. This Agreement shall also be subject to the following
miscellaneous considerations:
(a) Executive and the Company each represent and warrant to the other that he or
it has the authorization, power and right to deliver, execute, and fully perform
his or its obligations under this Agreement in accordance with its terms.
(b) This Agreement contains a complete statement of all the arrangements between
the parties with respect to Executive's employment by the Company, this
Agreement supersedes all prior and existing negotiations and agreements between
the parties concerning Executive's employment, and this Agreement can only be
changed or modified pursuant to a written instrument duly executed by each of
the parties hereto.
(c) If any provision of this Agreement or any portion thereof is declared
invalid, illegal, or incapable of being enforced by any court of competent
jurisdiction, the remainder of such provisions and all of the remaining
provisions of this Agreement shall continue in full force and effect.
(d) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Arizona, except to the extent preempted by federal
law or to the extent federal law is expressly made applicable under this
Agreement.
(e) The Company may assign this Agreement to any direct or indirect subsidiary
or parent of the Company or joint venture in which the Company has an interest,
or any successor (whether by merger, consolidation, spin-off, purchase or
otherwise) to all or substantially all of the stock, assets or business of the
Company or any subsidiary or parent of the Company, and this Agreement shall be
binding upon and inure to the benefit of such successors and assigns. Except as
expressly provided herein, Executive may not sell, transfer, assign, or pledge
any of his rights or interests pursuant to this Agreement.
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(f) Any rights of Executive hereunder shall be in addition to any rights
Executive may otherwise have under benefit plans, agreements, or arrangements of
the Company to which he is a party or in which he is a participant, including,
but not limited to, any Company-sponsored employee benefit plans.
(g) For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid. All notices to
Executive shall be addressed to Executive at the address contained in the
Company's records concerning the Executive. All notices to the Company shall be
directed to the attention of the Board with a copy to the Secretary of the
Company.
(h) Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
(i) Failure to insist upon strict compliance with any of the terms, covenants,
or conditions hereof shall not be deemed a waiver of such term, covenant, or
condition, nor shall any waiver or relinquishment of, or failure to insist upon
strict compliance with, any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time or
times.
(j) This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same instrument.
(k) The Company shall indemnify Executive to the fullest extent permitted by the
laws of the State of Arizona, as in effect at the time of the subject act or
omission, and he will be entitled to the protection of any insurance policies
that the Company may elect to maintain generally for the benefit of its
directors and officers against all liabilities, damages, costs, charges and
expenses, including reasonable attorneys' fees, incurred or sustained by him in
connection with any action, suit or proceeding to which he may be made a party
by reason of his being or having been a director, officer or employee of the
Company or any of its affiliates or his having served any other enterprise, plan
or trust as director, officer, employee or fiduciary at the request of the
Company. The provisions of this Section 8(k) shall survive any termination of
Executive's employment or any termination of this Agreement.
9. Resolution of Disputes. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted in Phoenix, Arizona in accordance with the rules of the American
Arbitration Association governing employment disputes as then in effect. The
Company and Executive hereby agree that the arbitrator will not have the
authority to award punitive damages, damages for emotional distress or any other
damages that are not contractual in nature. Judgment may be entered on the
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arbitrator's award in any court having jurisdiction. The fees and expenses of
the American Arbitration Association and the arbitrator shall be borne by the
Company. Notwithstanding the foregoing, the Company shall be entitled to seek a
restraining order or injunction in any court of competent jurisdiction, even if
the arbitrator shall not yet have made any findings or awards, to prevent any
continuation of any violation of the provisions of Section 6, and Executive
consents that such restraining order or injunction may be granted without the
necessity of the Company's posting any bond except to the extent otherwise
required by applicable law
10. Attorneys' Fees.
(a) Upon invoice in conformity with the Company's customary practices, the
Company shall pay Executive the amount of all reasonable legal fees incurred by
Executive in connection with the negotiation of this Agreement; provided, that
such expenses shall not exceed $4,000 in the aggregate.
(b) If any suit or action is filed by any party to enforce this Agreement or
otherwise with respect to the subject matter of this Agreement, each party shall
be responsible to pay the attorneys fees and costs incurred by such party in
preparation or in prosecution or defense of such suit or action; provided,
however, that the court or adjudicator may in its sole discretion allocate
attorneys fees and costs to Executive.
[signature page follows]
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* * * * * * * *
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
EXECUTIVE: EFTC CORPORATION
/s/ Xxxxx Xxxx By: /s/ Xxxx Xxxxxxxx
------------- --------------------
Xxxxx Xxxx Title: Chairman
Address: 000 Xxxxxx Xxxxx
Xxxxxxx, XX 00000
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EXHIBIT A
Option Award Term Sheet
Shares:
900,000 shares at an exercise price of $2.63 per share. This award is to be made
pursuant to the Company's 2000 Stock Option Plan.
Vesting:
Time based:
450,000 options will time vest over 5 years, with 90,000 vesting
immediately upon execution and delivery of the Employment Agreement and
the commencement of Executive's employment in Phoenix on July 17, 2000
and 72,000 vesting on each anniversary thereof.
Performance based:
450,000 options will vest on a sliding, linear scale based on the
following benchmark internal rates of return in the Company, as
determined by Xxxxxx-XXXX Funding, L.L.C., which the Company and the
Executive believe represent an accurate measure of the Company's
performance:
100% vest with IRR greater than or equal to 40%.
50% vest with IRR greater than or equal to 30%.
0% vest with IRR less than or equal to 20%.
