EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the 1st day of March,
1999, is between Circuit Systems, Inc., an Illinois, corporation (the
"Company"), and X.X. Xxxxx ("D.S.").
WHEREAS, the Company, being well satisfied with D.S.' services as
President and Chief Executive Officer (referred to herein together as
"Chief Executive Officer"), desires to retain him in an executive
capacity for the period and upon the other terms and conditions herein
provided; and
WHEREAS, D.S. is willing to continue in employment by the Company
pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and obligations herein contained, and for other good and
valuable consideration, the receipt, adequacy, and sufficiency of
which are hereby acknowledged, the parties hereto do hereby covenant
and agree as follows:
1. EMPLOYMENT
1.1 Position. The Company hereby confirms D.S.' employment as
its Chief Executive Officer.
1.2 Duties. D.S.' duties will include all those duties
customarily associated with the position of Chief Executive Officer in
an emerging growth company, including those duties that require the
performance of policy-making functions as contemplated by Rule 3b-7 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Such duties shall also include management of all functions and
facilities required of and maintained by the Company and its
subsidiaries. D.S. agrees to devote substantially his entire business
time and attention to the performance of his duties hereunder and to
serve the Company diligently and to the best of his abilities.
Notwithstanding the foregoing, D.S. shall have the continuing right
(a) to make passive investments in the securities of any publicly-
owned corporation, (b) to make any other passive investments with
respect to which he is not obligated or required to, and does not in
fact, devote any substantial managerial efforts that interfere with
the fulfillment of his duties to the Company; and, (c) subject to the
prior written approval of the Company's Board of Directors (the "Board
of Directors"), to serve as a director of or consultant to other
companies and entities.
2. COMPENSATION AND BENEFITS
2.1 Base Annual Salary. The Company shall pay D.S. a base
annual salary of $560,000 (the "Base Annual Salary") periodically
throughout the year, commencing the date hereof, in accordance with
its customary payroll practices, as modified from time to time,
subject to all payroll and withholding deductions required by
applicable law. The Base Annual Salary shall be reviewed at least
annually by the Compensation Committee of the Board of Directors (the
"Compensation Committee"), but shall not be decreased without D.S.'
prior written consent.
2.2 Signing Bonuses. The Company will pay D.S. a cash bonus in
the amount of $300,000 upon signing of this Agreement (the "Signing
Bonus"). D.S. shall earn the Signing Bonus ratably over the Initial
Term (as hereafter defined) of this Agreement. In the event D.S.
voluntarily terminates his employment with the Company, D.S. shall be
obligation to return to the Company the "unearned" portion of the
Signing Bonus.
2.3 Cash Bonuses; Other Incentive Compensation. Subject to the
satisfaction of such criteria and the achievement of such objectives
as the Compensation Committee of the Board of Directors may establish,
D.S. may receive additional cash bonuses and other incentive
compensation (including stock options), it being understood that the
Compensation Committee shall at least once annually consider the
payment of a cash bonus to him.
2.4 Other Benefits. D.S. shall be entitled to other benefits
and perquisites no less favorable than those provided to the Company's
employees generally, as such benefits and perquisites may be modified
from time to time in the Company's discretion. Such benefits shall in
all events include health insurance, a 401(k) plan and paid holidays
annually. Such perquisites shall in all events include four weeks of
vacation annually, disability insurance and group term life insurance.
The Company shall pay D.S. compensation in accordance with paragraph
2.1 hereof in the event D.S. does not take his full vacation during
any calendar. To assist with the business travel essential to
conducting business in the Metropolitan Chicago area, throughout the
term of this Agreement the Company will provide D.S. with a company-
acquired and -maintained automobile. All expenses incidental to the
personal use of the automobile shall be borne by D.S.
2.5 Expense Reimbursement. D.S. shall be reimbursed by the
Company for his reasonable out-of-pocket business expenses in
accordance with the Company's established policies applicable to
executive officers generally. In addition, the Company will reimburse
D.S. for all expenses related to legal, tax and financial advice, not
to exceed $150,000 in the aggregate over the Initial Term of this
Agreement, and not to exceed $25,000 each year during any subsequent
year of this Agreement.
2.6 Insurance. The Company will pay annual premiums not to
exceed $100,000 for life insurance to be owned by D.S.
3. TERM
3.1 Term. The term of the Executive's employment hereunder
shall be the period of thirty eight (38) months commencing on March 1,
1999 and expiring on April 30, 2002 (the "Initial Term"). The Company
in its sole discretion may extend the term of D.S.'s employment
hereunder for successive periods of one (1) year on or before the
third anniversary of this Agreement and thereafter on or before each
successive anniversary of such extension, the intention being that at
the date of any such anniversary on which the employment is extended,
the term of Executive's employment will be for an additional one (1)
year period. The term of Executive's employment hereunder shall, in
any event, be subject to earlier termination as provided in paragraph
4 hereof.
4. TERMINATION AND SEVERANCE PAY
4.1 At Will. D.S. and the Company acknowledge and agree that
D.S.' employment with the Company is "at will" during the term of this
Agreement. Accordingly, either party may terminate D.S.' employment
by the Company, with or without cause, in which case D.S. shall have
no claim for lost wages, although termination of D.S.' employment
shall be subject to the terms and conditions of this Agreement
regarding severance pay, benefits and other obligations.
4.2 Voluntary Resignation. In the event that D.S.' employment
with the Company terminates as a result of his voluntary resignation,
D.S. shall be entitled to no severance pay or benefits.
4.3 Involuntary Termination.
(a) Severance Pay. In the event that D.S.' employment with
the Company is terminated by the Company For Just Cause (as defined in
Section 4.3(c) hereof), D.S. shall not be entitled to severance pay or
benefits. In the event that D.S.' employment with the Company is
terminated by the Company other than for Just Cause, DS shall be
entitled to severance pay in the form of continuation of Base Annual
Salary for thirty six (36) months from the effective date of the
termination. D.S. shall have no duty to mitigate such payments by
seeking or accepting other employment; accordingly, such payments
shall not be reduced due to receipt of other compensation from such
other employment as he may obtain during the term of his severance
payments.
(b) Additional Benefits. In the event that D.S' employment
with the Company is terminated by the Company other than For Just
Cause, D.S. shall be entitled to continue to participate in the
Company's employee benefit programs as and to the extent theretofore
made available to him pursuant to Section 2.4 above. Such benefits
shall be continued at no additional cost to D.S., except to the
extent, if any, that tax laws require the inclusion of the value of
such benefits in his gross income. Such benefits shall continue for
the benefit of D.S. for the entire period of his severance pay
continuation as provided in Section 4.3(a) above, in the same manner
and at the same level as in effect immediately prior to D.S.'
termination. In addition, upon any termination of D.S.' employment
by the Company other than For Just Cause, (i) any and all employee
stock options and other similar rights held by D.S. shall become fully
vested and exercisable immediately, and (ii) any and all cash bonuses
that would be payable to D.S. at the end of a period but for his
earlier termination shall be payable to him immediately and pro rata
(in accordance with the percentage of completion of the period in
question and with reference to the best available financial
information proximate to the time of termination).
(c) For Just Cause. For purposes of this Agreement, the
term "For Just Cause" shall mean any termination of employment of D.S.
for one or more of the following reasons: (i) the substantial failure
by D.S., for any reason other than his death or Disability (as defined
below), to comply with a lawful, written instruction of the Company's
Board of Directors, which instruction is consistent with his duties as
elsewhere provided in this Agreement, which failure continues without
interruption for the 30 days immediately following D.S.' receipt of
such instruction; (ii) the substantial and continuing failure of D.S.,
for any reason other than his death or Disability, to render vital
service to the Company in execution of his essential duties, as
determined by the Board of Directors in good faith with reference to
D.S.'s employment agreement then in effect, after giving written
notice to D.S. and an opportunity for him to remedy such failure
within 30 days of receiving such notice; (iii) the conviction of D.S.
for a felony involving an act of moral turpitude, which conviction has
become final and non-appealable; (iv) recklessness in the performance
of D.S.'s duties to the Company causing material harm to the Company;
or (v) material dishonesty, material breach of fiduciary duty or
material breach by D.S. of any representation, covenant or other
agreement contained in this Agreement.
(d) Constructive Termination. If D.S. without his prior
written consent, is removed from the position of Chief Executive
Officer, or if D.S.' duties are restricted or reduced in such a manner
as to result in his position with the Company no longer including
duties requiring the performance of policy making functions by an
executive officer within the meaning of Rule 3b-7 of the Exchange Act,
then, in either such case, the employment of D.S. shall be deemed, in
his discretion, involuntarily terminated by the Company other than For
Just Cause, it being understood that D.S. must exercise his discretion
under this Section 4.3(d) in writing to the Board of Directors within
sixty days following the latest to occur of any event constituting
involuntary termination pursuant to this Section 4.3(d).
4.4 Death. In the event of D.S.'death, this Agreement shall
automatically terminate and shall be of no further force or effect, it
being understood that the Company shall be obligated to make all the
payments and to provide all the benefits due to D.S. hereunder to the
time of his death. In addition, the Company shall (a) commencing the
first day of the month after the month in which death occurs, pay
seventy-five percent (75%) of D.S.'s salary for three (3) years to his
widow, or if he has no widow then or thereafter surviving, to his
estate, and (b) at its own expense, continue to provide full medical
coverage to D.S.'s widow for three (3) years or until her death,
whichever is earlier.
4.5 Disability. In the event of D.S.' Disability (as defined
below) during the term of this Agreement for any period of at least
three consecutive months, the Company shall have the right,
exercisable in its discretion, to terminate this Agreement (the
"Disability Date"). In the event that the Company does elect to
terminate this Agreement, the Base Annual Salary otherwise then
payable to D.S. shall be reduced by twenty-five percent (25%), and
shall be paid to D.S. for a three (3) year period from the Disability
Date, subject to reinstatement upon D.S.'s return to employment and
discharge of his duties hereunder; the Company may fund this
obligation, in whole or in part, by the purchase of a disability
income protection policy for D.S. The Company, at its sole expense,
shall also continue to provide full medical coverage to D.S. and his
spouse for the same three (3) year period from the Disability Date.
For purposes of this Agreement, "Disability" shall mean the inability
of D.S. to perform the essential functions of his employment hereunder
by reason of physical or mental illness or incapacity as determined by
a physician chosen by the Company and reasonably satisfactory to D.S.
or his legal representative.
5. NON-DISCLOSURE, NON-SOLICITATION, NON-COMPETE AND NON-DISPARAGEMENT
5.1 Non-Disclosure. Except as is reasonably necessary in the
performance of his duties hereunder, D.S. shall not disclose to any
person or entity or use for his own direct or indirect benefit any
Confidential Information (as defined below) pertaining to the Company
obtained by him in connection with his employment with the Company.
For purposes of this Agreement, the term "Confidential Information"
shall include information with respect to the Company's products,
services, processes, suppliers, customers, customers' account
executives, financial, suppliers and distribution information, price
lists, identity and list of actual and potential customers, trade
secrets, technical information, business plans and strategies;
provided, however, that such information shall not be treated as
Confidential Information to the extent that it has been publicly
disclosed by the Company (other than by D.S. through a breach of this
Section 5.1).
5.2 Non-Solicitation. D.S. agrees that for a period of three
(3) years after termination of his employment for any reason other
than involuntary termination not for Just Cause, he shall not (a)
directly or indirectly solicit, induce or attempt to solicit or induce
any Company employee to discontinue such employee's employment by the
Company, (b) usurp any opportunity of the Company of which he became
aware during his tenure at the Company, or that was made available to
him on the basis of a mistaken belief that he was still employed by
the Company, or (c) directly or indirectly solicit or induce or
attempt to influence any person or business that is an account,
customer or client of the Company to reduce or cancel the business of
any such account, customer or client with the Company.
5.3 Non-Compete. D.S. agrees that, so long as he is employed by
the Company and for a period of three (3) years after termination of
his employment for any reason other than involuntary termination not
For Just Cause, he shall not, without prior written consent of the
Company's Board of Directors, either directly or indirectly
(including, without limitation, through a partnership, joint venture,
corporation or other entity or as a consultant, director or employee),
engage in the business engaged in by the Company as of the date hereof
within any of those geographical areas in which the Company currently
conducts active business operations. The parties hereto agree that
the scope and the nature of such covenant, and the duration and the
area within which such covenant is to be effective, are reasonable in
light of all facts and circumstances.
5.4 Non-Disparagement. D.S. agrees that, so long as he is
employed by the Company and for a period of three years after
termination of his employment for any reason other than involuntary
termination not For Just Cause, he shall not make any public comment
(whether written or oral) concerning or touching upon the Company or
any of its Affiliates, including but not limited to any or all of the
Company's executive officers and directors, which comment would tend
to disparage the personal, financial or business reputation of such
other person or persons, except for such comments as may be required
by law and except for such comments as may be made in litigation,
arbitration or mediation with such person or persons.
6. CERTAIN COVENANTS OF THE COMPANY
6.1 No Waiver. The waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed as a
waiver of any subsequent breach thereof.
6.2 Assignment. This Agreement may not be assigned by D.S. and
may not be assigned by the Company otherwise than by operation of law.
This Agreement shall be binding upon the Company's successors and
assigns.
6.3 Entire Agreement. This Agreement supersedes any and all
prior written or oral agreements between D.S. and the Company and
evidences the entire understanding of the parties hereto with respect
to the terms and conditions of D.S.' employment with the Company.
6.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois
without regard to the choice of law rules of the State of Illinois or
any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.
/s/
By: ________________________________
Chairman, Compensation Committee
Circuit Systems, Inc.
/s/
________________________________
X.X. Xxxxx
