July 18, 1994
Xx. Xxxxx Xxxx
00 Xxxxxxx
Xxxxxx Xxxxxx Xxxxx, XX 00000
EMPLOYMENT AGREEMENT
Dear Xxxx:
This letter contains the terms and conditions upon which DCT Components,
Inc., formerly known as Xxxxxxxxx Tool & Manufacturing, Inc., Xxxxxxxxx
Manufacturing Co., Inc., Xxxxxx Manufacturing, Inc. and NTM Fasteners, Inc.
(herein collectively the "Corporation") will employ you.
1. Title and Duties.
You shall render services in an executive capacity as Chairman and Chief
Executive Officer of the Corporation. You shall serve as a member of the Board
of Directors while an employee of the Corporation. Your duties shall be
consistent with the general duties of supervision and management as determined
by the Board of Directors of the Corporation.
In addition, you shall have the following specific duties:
(a) Develop an operating and profit plans and budgets for approval by
the Board of Directors;
(b) Develop plans and programs to achieve, maintain or enhance the
quality awards and recognition of the Corporation;
(c) Develop and implement a management training and development
program; and
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(d) Assure that all necessary and appropriate management systems,
policies and procedures are in place and operational; and
(e) Such other duties as shall be customarily associated with the
position of Chief Executive Officer.
Your office will be in the principal business office of the Corporation in
Clinton Township, Michigan, but you agree to take such trips and temporary
assignments away from this office as may be required in the performance of your
responsibilities as Chairman and Chief Executive Officer.
You shall devote your full business time and effort to the performance of
your duties for the Corporation. Your services to the Corporation shall he
rendered to the best of your ability and with loyalty to the Corporation. You
shall not, during the term of this Agreement, render services to any person,
firm, or corporation in any business that is competitive with the business of
the Corporation; nor shall you have any interest, direct or indirect, in any
business that is competitive with the business of the Corporation, other than
ownership of not more than two (2%) percent of the outstanding stock of any
corporation whose stock is held of record by more than 500 stockholders and is
actively traded.
2. Term.
The term of your employment with the corporation shall commence July 18,
1994 (the "Employment Date" ) and shall be terminable by either party upon
thirty (30) days written notice, as
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set forth in Paragraph 4(c) herein.
3. Compensation and Benefits.
Your compensation for the services you render shall be as follows:
(a) Salary.
The Corporation shall pay you an annual salary of $150,000.00
payable in weekly installments (less applicable withholding and
payroll taxes). This salary level will be reviewed annually. Salary
increases will be awarded based upon performance. Provided, however,
for each year that the Corporation is profitable (using the aggregate
profits and losses of each entity included in the definition of
Corporation) your percentage salary increase shall be not less than
the percentage Consumer Price Increase for that year in the
metropolitan Detroit area.
(b) Bonus.
You shall be entitled to a bonus based upon the profitability of
the Corporation as well as a subjective review of your overall
performance and meeting the management goals and objectives as
established by the Board of Directors. The total bonus for which you
will be eligible is 100% of your salary. The portion of your bonus
based upon profitability shall be 75% of your total bonus and shall be
computed using a formula tied to the profitability of the Corporation
as a percentage of total sales and
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shall be paid annually by March 15, for the preceding calendar year's
performance or parts thereof.
For your bonus computation based upon profitability, a factor
shall be applied to each year's pre-tax profit percentage of sales
based upon the following formula:
Years ending December 31st Factor
-------------------------- ------
1994, 1995, 1996 20x
1997, 1998 15x
1999 and thereafter 10x
By way of example, if the annual profit as a percentage of sales is 6%
for the year ending December 31, 1996, your bonus, based upon
profitability, would be 20 times 6% or 120% of your salary, provided,
however, the aggregate bonus based upon profit percentage cannot
exceed 75% of your annual salary. In addition to the annual profit
percentage bonus, you shall be eligible for an additional annual bonus
based upon the overall performance of the Corporation and your
achieving your management objectives. In awarding this bonus, the
Board will consider the Corporation's overall profitability and cost
percentages, quality awards, management team and operating systems and
your achieving your management objectives. This bonus award shall also
be paid by March 15, for the preceding calendar year's performance or
parts thereof. For purposes of this Agreement, the term "pre-tax
profit" shall be the pre-tax profit of the Corporation as computed by
the certified public accountant regularly retained by the Corporation
in
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accordance with generally accepted accounting principles consistently
applied. It is our intention that you have a realistic opportunity to
earn a bonus of up to 100% of your then annual salary when considering
both of the components outlined above.
(c) Equity Participation Plan.
Upon the completion of your eighteenth (18th) month of
employment, you will be entitled to participate in future equity
growth in the Corporation through a phantom stock plan, stock
appreciation rights plan, equity participation contract or similar
plan to be developed by the Corporation and mutually agreed upon. Your
equity participation plan would have the following attributes:
(i) Months 19 to 30 1%
Months 31 to 43 2%
Months 44 to 56 3%
Months 57 to 69 4%
Months 70 to 82 5%
You would be entitled to receive the applicable percentage
increase above net book value (stockholder equity) as of December 31,
1995, as computed by the certified public accountant then serving the
Corporation in accordance with generally accepted accounting
principles consistently applied, upon termination of your employment
with the Corporation and in accordance with the payment terms
incorporated into the plan;
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July ____, 1994
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(ii) Each of the applicable years allocation under the plan
shall be immediately vested; and
(iii) Upon your termination of employment any payments you may be
entitled to under the plan shall be paid in accordance with
the terms of the plan.
(d) Business Expenses.
The Corporation shall reimburse you for business travel and
entertainment expenses consistent with the Corporation's policies as
they exist from time to time.
(e) Automobile Allowance.
The Corporation shall pay you a One Thousand and no/100
($1,000.00) Dollar per month car allowance to cover all of your
automobile expenses.
(f) Life Insurance.
The Corporation shall pay the annual premium on a Seven Hundred
Sixty-Nine Thousand and no/100 ($769,000.00) Dollar term life
insurance policy on your life to be owned by you and you shall have
the right to designate the beneficiary.
(g) Disability Insurance.
The Corporation shall pay the premium on, or, shall reimburse the
premium to you for a Five Thousand and no/100 ($5,000.00) Dollars per
month disability income insurance policy.
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(h) Vacation.
You shall be entitled to five (5) weeks vacation per year.
(i) Detroit Athletic Club.
The Corporation shall reimburse you for all dues and assessments
for your membership in the Detroit Athletic Club.
(j) Young Presidents Organization.
The Corporation shall be responsible for your annual dues and the
cost for you to attend an area conference or university on alternating
years. The annual cost shall not exceed $8,000.00 unless otherwise
mutually agreed.
(k) Health Insurance.
The Corporation shall provide health insurance coverage for you
and your family in accordance with the Corporation's plan in effect
from time to time. For the first ninety (90) days, the Corporation
shall reimburse your COBRA coverage costs from your former employer.
(1) Other Benefits.
You shall be allowed to participate in all other benefit plans
provided to employees in accordance with their respective eligibility
requirements, including by way of example, the 401(k) and profit
sharing plan.
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4. Termination.
(a) Automatic Termination.
This Agreement shall automatically terminate upon your death or
disability. Disability shall mean physical or mental illness which, in
the reasonable opinion of the Board of Directors of the Corporation,
results in your inability to perform the duties required under this
Agreement for a period of three (3) consecutive months. Such
disability shall constitute a termination for cause, as described in
Subparagraph (b) below.
(b) Termination for Cause.
This Agreement may be terminated by the Corporation for cause
immediately upon written notice to you specifying with particularity
the basis for termination. Termination shall be deemed to be "for
cause" if you have been dismissed for dishonesty, conviction of a
felony, material breach of this Agreement (including breach of
confidentiality as set forth in Paragraph 5 below) and gross
insubordination or performing duties in an unsatisfactory manner.
Provided, however, if you are being terminated by the Corporation for
"performing duties in an unsatisfactory manner", prior to your
termination, the Corporation shall be obligated to give you notice in
writing of those duties which you are performing not to the
satisfaction of the Corporation. After the receipt of said notice, you
shall have one hundred eighty (180) days to improve your performance
and during
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this period the Corporation shall provide written evaluations every
thirty (30) days of your performance. After the one hundred eighty
(180) day period, if the Corporation still has determined that you are
performing your duties in an unsatisfactory manner, your termination
for cause shall be effective upon the expiration of the one hundred
eighty (180) day period. In the event of any termination for cause as
provided in this Paragraph 4(b), you shall no longer be an employee of
the Corporation and shall have no rights hereunder. In the event of
termination for cause, all payments and benefits, including any
accrued bonus for the previous fiscal year and equity participation
plan, as provided herein shall terminate on the effective date of your
termination.
(c) Termination Without Cause.
This Agreement my be terminated by either you or the Corporation
without cause upon thirty (30) days prior written notice.
(d) Severance Benefits.
If (i) this Agreement is terminated by the Corporation pursuant
to Paragraph 4(c) during the first thirty-six (36) months of the
Agreement, you shall be entitled to receive in addition to
compensation set forth in Paragraph 3(a), severance benefits equal to
twelve (12) months salary and benefits excluding any bonus to which
you might otherwise have been entitled (less applicable withholding
and payroll taxes) but reduced by the amount
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of your salary for such period from any other employment and payable
at the time such salary payments would otherwise be made. You shall
promptly advise the Corporation of any reemployment. Such payments
shall be in full settlement of any and all claims at law or in equity
you may have against the Corporation.
Other than Severance Benefits provided in this Paragraph 4(d),
your compensation and benefits are payable only through the date of
termination of your employment. Any salary payable to you for the
period prior to termination shall be prorated on a daily basis. Should
the Corporation be sold and you are thereafter terminated within
twelve (12) months of the date of sale, the severance payments to
which you shall be entitled shall be for twelve (12) months. Sale is
hereby understood to include a sale or transfer of controlling stock
interest.
Upon any termination of this Agreement, your obligations under
Paragraph 5 of this Agreement will survive. Provided that the economic
responsibilities of the Corporation are met in a timely fashion.
5. Confidential Information, Inventions, Etc.
(a) You shall not during the term of this Agreement or after
termination, directly or indirectly,
(i) Attempt to induce any employee of the Corporation to render
services for any other employer; or
(ii) Use or furnish to anyone (except as
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required in the ordinary course of performing your employment duties
for the Corporation) any confidential information, invention,
discoveries, technical data, product data, financial data or trade
secrets relating to the Corporation's business, including information
relating to processes, or contracts involved in such business, or the
design, production, sale, or distribution of any products of the
Corporation, or the personnel of the Corporation or their compensation
or employment arrangements, or the identity of, or products purchased,
or customers of, or prices paid by, customers of the Corporation.
Records prepared by you or that come into your possession during your
employment are and remain the property of the Corporation, and when
your employment terminates, such records and any copies or summaries
must be left with the Corporation. The Corporation shall be entitled
to injunctive relief if you violate this Paragraph, in addition to any
other remedy provided by law.
(b) You will treat as for the sole benefit of the Corporation, and
fully and promptly disclose and assign to the Corporation, without
additional compensation, all ideas, discoveries, inventions and
improvements, whether patentable or not, which relate to the business,
activities or interests of the Corporation or which result from or relate
to the subject matter of any work which you may do for, on the premises of,
at the expense of, or on behalf of the Corporation, and which are or have
been
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made, conceived or reduced to practice by you, alone or jointly with
others, during or after usual working hours, either on or off your job,
while you are employed by the Corporation. All such ideas, discoveries,
inventions and improvements which you may claim to have been conceived by
you, solely or jointly, within six (6) months after the termination of such
employment shall be presumed to have been made during such employment
unless you prove otherwise.
At the Corporation's expense, at any time during or after such employment,
you will sign all papers and do such other acts as the Corporation deems
necessary or desirable or may reasonably require of you to assign and protect
the Corporation's or its nominee's rights to such ideas, discoveries, inventions
and improvements, including applying for, obtaining and enforcing patents,
trademarks or copyrights on such ideas, discoveries, inventions and improvements
in any and all countries of the world.
6. Covenant Not To Compete.
You agree that for a period of two (2) years following termination of this
Agreement either by you or the Corporation, you shall not enter into any
arrangement or understanding, be employed by, engage in, be connected with, or
have any interest in, directly or indirectly as owner, partner, shareholder,
director, manager, supervisor, or any other kind of employee, agent, consultant,
or advisor, any entity which competes
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with the Corporation anywhere in the States of Michigan, Indiana, Ohio and
Illinois or the Province of Ontario, Canada. Excluded from this Paragraph is
your ownership of not more than two (2%) percent of the outstanding stock of any
corporation whose stock is held of record by more than 500 stockholders and is
actively traded. The Corporation shall be entitled to injunctive relief if you
violate this Paragraph, in addition to any other remedy provided by law.
7. Successors or Assigns.
This Agreement shall be binding upon the successors and assigns of the
Corporation, any assigns of all or substantially all of its business, and any
other corporation into which the Corporation may be merged or with which it may
be consolidated. This Agreement, and any rights you my have to receive payments,
may not be assigned or pledged by you.
8. Other.
Any dispute or claim involving this Agreement shall be settled by an
arbitration in Southfield, Michigan under the commercial rules of the American
Arbitration Association. Any dispute or claim shall be deemed waived unless
arbitration is demanded within ninety (90) days of the occurrence giving rise to
the dispute or claim. The arbitrator shall have no authority to change any
provision of this Agreement; the arbitrator's sole authority shall be to
interpret or apply the provisions of this
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Agreement. The decision of the arbitrator shall be final and binding and the
exclusive remedy for any alleged breach of the employment relationship. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction.
Any notice given pursuant to this Agreement shall be deemed given when sent
by nationally recognized courier service, registered or certified mail, postage
prepaid and return receipt requested, addressed to the appropriate party; if to
the Corporation, at 00000 Xxxxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000, and if to you,
at the address indicated above, unless notice of a different address has been
given.
This Agreement contains our entire agreement and supersedes all prior oral
or written understandings and agreements. We can modify this Agreement only by a
writing signed by both you and the Corporation. This Agreement is governed by
Michigan law.
If you agree with the terms of this letter, please sign and return the
enclosed copy to make it our binding agreement. This letter has been approved by
the Corporation's Board of Directors.
DCT COMPONENTS, INC.
By: /s/ Xxxxxx Xxxxxxxxx
---------------------------
Xxxxxx Xxxxxxxxx
Its: Director
Accepted, and Agreed:
/s/Xxxxx Xxxx
--------------------- Dated: 9/2, 1994
Xxxxx Xxxx
AMENDMENT OF EMPLOYMENT AGREEMENT
This Amendment of Employment Agreement (hereinafter referred to as "Amendment")
is made and entered into this 30th day of June, 1996 by and between DCT
Component Systems, Inc. (hereinafter referred to as the "Corporation") and Xxxxx
Xxxx (hereinafter referred to as the "Employee").
WITNESSETH
WHEREAS, the Corporation and Employee entered into an Employment Agreement dated
July 18, 1994 whereby the Corporation agreed to employ the Employee as the
Chairman and Chief Executive of the Corporation (hereinafter referred to as
"Employment Agreement"), and the Employee agreed to be employed by the
Corporation on such basis, a copy of which is attached hereto as Exhibit A and
thereby made a part hereof;
WHEREAS, simultaneously herewith, the Corporation is selling to the Employee,
and the Employee is purchasing from the Corporation, Two Hundred Sixty-Nine
(269) shares of the common stock of the Corporation pursuant to a stock Purchase
Agreement of even date herewith (hereinafter referred to as "Stock Purchase
Agreement");
WHEREAS, simultaneously herewith, the Corporation is adopting an Executive Bonus
Pool Plan whereby the Corporation shall provide bonuses to certain key employees
and managers of the Corporation, including officers and directors, based upon
the pre-tax earnings of the Corporation, for which the Employee will be eligible
(hereinafter referred to as "Bonus Pool Plan");
WHEREAS, in consideration of the benefits to which Employee shall become
entitled to under the Stock Purchase Agreement and the Bonus Pool Plan, Employee
has agreed to amend the Employment Agreement to eliminate certain provisions of
the Employment Agreement regarding bonuses to be provided by, and equity
participation in, the Corporation;
NOW THERFORE, for and in consideration of the promises and mutual agreements
herewith set forth, the parties hereto agree as follows:
Section 1. Bonus. The parties hereby agree that the Employment
Agreement is amended to delete Section 3(b) of the Employment Agreement
in its entirety.
Section 2. Equity Participation Plan. The parties hereby agree that
the Employment Agreement is amended to delete Section 3 (c) of the
Employment Agreement in its entirety
Section 3. Waiver. Employee waives and any and all rights whether
absolute or contingent, accrued or unaccrued, that he may have under
Section 3 (b) and Section 3 (c) of the Employment Agreement.
Section 4. Continuation. Except as provided above, the Employment
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
as of the day first above written.
WITNESSETH: "EMPLOYEE"
/s/ Xxxxx Xxxx
---------------- --------------------
Xxxxx Xxxx
----------------
"CORPORATION"
DCT COMPONENT SYSTEMS, INC.
a Michigan Corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
----------------- --------------------------
----------------- ITS: CEO
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