Exhibit 10.1
EMPLOYMENT AGREEMENT
This Agreement is entered into as of June 5, 1998 (the
"Effective Date"), between EFTC Corporation, a Colorado corporation (the
"Company"), and Xxxx Xxxxxxxx (the "Executive"), to be effective on the
Effective Date. Except as specifically set forth herein, as of the Effective
Date, this Agreement supersedes and replaces the agreement entered into
effective August 5, 1996 between the Company and the Executive (the "Prior
Employment Agreement").
The parties agree as follows:
1. Employment. The Company agrees to continue to employ the Executive and
the Executive agrees to continue to be employed by the Company on the terms set
forth in this Agreement.
2. Capacity and Duties. The Executive shall be employed by the Company as
its Chief Executive Officer or in such other executive capacity as the Board of
Directors of the Company (the "Board") shall determine. During his employment,
the Executive shall perform the duties and bear the responsibilities
commensurate with his position and shall serve the Company faithfully and to the
best of his ability, under the direction of the Board. The Executive shall
devote his entire working time, attention and energies to the business of the
Company. His actions shall at all times be such that they do not discredit the
Company or its products and services. Except for his involvement in personal
investments, provided such involvement does not require any significant services
on his part, the Executive shall not engage in any other business activity or
activities that require significant personal services by the Executive or that,
in the judgment of the Board, may conflict with the proper performance of the
Executive's duties hereunder.
3. Compensation.
(a) Salary. For all services rendered by the Executive, the Company shall
pay the Executive during the term of this Agreement an initial salary at the
rate of $250,000 per annum, through December 31, 1998, payable in arrears in the
same manner as the Company generally pays its employees' salaries. Effective
January 1, 1999, the Executive's annual salary shall be increased to $300,000
for the period from January 1, 1999 through December 31, 1999. Effective January
1, 2000, the Executive's annual salary shall be increased to $350,000 for each
of the two years during the period from January 1, 2000 through December 31,
2001. The amount of the salary payable during the term of this Agreement may be
increased at the discretion of the Board, although the Executive shall not have
any right to an increase.
(b) Bonus. The Executive may also receive a bonus of up to 100% of the
Executive's annual rate of salary applicable for each calendar year as described
in Section 3(a) based upon performance targets and objectives established by the
Board with respect to each
1
such calendar year. Sixty percent (60%) of the annual bonus potential for each
calendar year shall be based upon the attainment of financial performance
objectives established by the Board, of which 30% shall be based upon earnings
per share objectives, 15% shall be based upon net sales objectives, and 15%
shall be based upon margin objectives. The remaining 40% annual bonus potential
shall be based upon performance criteria to be established by the Board with
respect to each calendar year. If this Agreement is terminated (other than under
Section 5(c) or 5(d)), the Executive shall receive, within 90 days after the end
of the calendar year in which such termination occurs, a pro rata portion of
such bonus, if any, that accrues with respect to such calendar year based on the
period during such year that the Executive was employed by the Company prior to
termination.
(c) Benefits. The Company also shall provide the Executive, during the term
of this Agreement, with the benefits of such life and medical insurance plans,
profit sharing and 401(k) plans and other employee fringe benefit plans as shall
be provided generally to employees of the Company and for which the Executive
may be eligible under the terms of such plans. Nothing in this Agreement shall
require the Company to adopt or maintain any such employee benefit plans.
(d) Stock Options. The Company shall grant to the Executive non- qualified
stock options (the "Options") to purchase 350,000 shares of the Company's common
stock, $.01 par value per share (the "Common Stock"), with a per share exercise
price (the "Exercise Price") of $16.00. The Options shall be issued under the
Company's Equity Incentive Plan and shall be granted on the Effective Date. The
Options shall vest in 10% increments, with each 10% of the foregoing 350,000
share Options vesting when the price of the Common Stock averages a closing sale
price of an additional 20% or more in excess of the Exercise Price for 20 out of
the last 30 trading days. For example, if the last closing sale price of the
Common Stock averages 20% or more above the Exercise Price for 20 out of 30
consecutive trading days, 10% of the Options (or 35,000 shares) shall vest and
an additional 35,000 shares shall vest at such time as the closing sale price of
the Common Stock averages 40% or more above the Exercise Price for 20 out of 30
consecutive trading days.
Notwithstanding the vesting schedule set forth above, all Options granted
pursuant to this Agreement shall fully vest, if the Executive remains employed
with the Company, at the end of seven years of continuous employment from the
Effective Date. In addition, notwithstanding any provision to the contrary
contained in the Company's Equity Incentive Plan, in the event of a Change in
Control, as defined in Section 5(d), the vesting schedule set forth above shall
be applied based upon 130% of the per share value of the consideration paid for
the Common Stock in the transaction that constitutes the Change in Control, if
any, as if 130% of such per share value were the average closing sale price for
20 out of the last 30 trading days for purposes of such vesting schedule. Once a
portion of the Options has become vested, that portion shall become exercisable
one year following the date on which such portion became vested, provided,
however, that any portion of the Options that becomes vested as a result of a
Change in Control as provided in the immediately preceding sentence shall be
immediately exercisable upon the date of the Change in Control. Only vested
Options that become exercisable in accordance with
2
the provisions of this Agreement may be exercised by the Executive. If the
employment of the Executive is terminated by the Company for reasons other than
set forth in Section 5(c), or upon the termination of the Executive's employment
with the Company at the end of the employment term specified in Section 4, all
vested Options shall become exercisable on the date of termination and the
Executive may exercise the vested Options within three months following the date
of termination but not thereafter. Only Options that had become vested and
exercisable on or before the date of termination may be exercised within the
three month period. In the event of the death of the Executive, those persons
entitled under his will or by the laws of descent may exercise all vested
Options within one year from the date of death but not thereafter. The Options
granted hereby shall be evidenced by such stock option certificates or
agreements that incorporate provisions of the Company's Equity Incentive Plan
not inconsistent with the foregoing as the Company determines to be appropriate.
To the extent that the foregoing grants under the Company's Equity Incentive
Plan require shareholder approval, the Company shall use its best efforts to
obtain such approval at the Company's next annual meeting of shareholders. The
Board intends and expects that the Options to be granted in accordance with the
provisions of this Section 3(d) will cover the entire employment period ending
December 31, 2001. Any stock options granted to the Executive by the Company
pursuant to the provisions of the prior Employment Agreement, or otherwise prior
to the Effective Date, shall be governed by the terms of the Prior Employment
Agreement or such other grant, and the foregoing provisions of this Section 3(d)
shall only apply to the Options.
(e) Sick Leave, Vacation. During the term of this Agreement, except as
otherwise provided in Section 5(b), the Executive shall be entitled to sick
leave consistent with the Company's customary sick leave policy and to four
weeks vacation per year, which shall be taken at times mutually satisfactory to
the Company and the Executive.
(f) Company Car. The Company shall provide to the Executive for his use
during the term of this Agreement a leased car consistent with the car currently
provided to the Executive, and the Executive shall be provided the opportunity
to purchase such car at the end of the lease term at the lease purchase price.
If the Executive elects to purchase such a leased car with his own funds, the
Company shall provide a comparable leased car to the Executive for his use
during the term of this Agreement, provided that the Company shall not provide
more than one leased car to the Executive at any time. The Company shall pay all
registration and licensing fees and maintenance and insurance costs for the car.
(g) Location of Employment. Executive shall reside near the
Company's headquarters, which is currently located in Denver, Colorado, while
employed with the Company.
(h) Expenses. During the term of this Agreement, the Company shall
reimburse the Executive for all reasonable out-of-pocket expenses incurred by
the Executive in connection with the business of the Company and in the
performance of his duties under this Agreement upon presentation to the Company
of an itemized accounting of such expenses with reasonable supporting data.
3
4. Term. Unless sooner terminated in accordance with Section 5, this
Agreement shall have a term beginning on the Effective Date and ending on
December 31, 2001. This Agreement shall continue thereafter from three-month
period to three-month period until either party gives notice to the other at
least 30 days prior to the end of the original or then current renewal term of
his or its intention that this Agreement shall terminate at the end of such
term. Sections 6, 7, 8 and 9 shall remain in full force and effect for the
periods specified in such sections notwithstanding the termination of this
Agreement.
5. Termination.
(a) Death. If the Executive dies during the term of this Agreement, the
Company shall pay his estate the compensation that would otherwise have been
payable to him for the month in which his death occurs, together with any
amounts representing accrued but unpaid bonus, accrued vacation, deferred
compensation and similar amounts, and this Agreement shall terminate on the last
day of such month.
(b) Disability. If during the term of this Agreement the Executive is
prevented from performing his duties by reason of illness or incapacity for a
continuous period of 120 days, the Company may terminate this Agreement on 30
days' prior notice to the Executive or his duly appointed legal representative.
For purposes of this Section 5(b), a period of illness or incapacity shall be
deemed "continuous" notwithstanding the Executive's performance of his duties
during such period for continuous periods of less than 15 days in duration. If
the Company terminates this Agreement pursuant to this Section 5(b) because of
the Executive's disability, the Company shall pay the Executive the compensation
that would otherwise have been payable to him for the month in which such
termination occurs, together with any amounts representing accrued but unpaid
bonus, accrued vacation, deferred compensation and similar amounts.
(c) Cause. The Company may terminate this Agreement at any time, with
notice simultaneous with the termination, for cause, with the prior approval of
the Board. For purposes of this Agreement, cause shall be defined as one or more
of the following:
(i) willful misconduct that is materially injurious to the Company as
determined by a majority of the Board (excluding the Executive if the Executive
is then a director);
(ii) conduct that would constitute a felony or other crime of moral
turpitude where committed;
(iii) failure to perform material required duties and obligations to the
Company under this Agreement, which failure materially, adversely affects the
Company and continues for at least 30 days after notice in writing thereof is
given by the Board (excluding the Executive); and
4
(iv) a material breach by the Executive during the term of this Agreement
of Xxxxxxx 0, 0 xx 0 xxxxx.
(x) At the Company's Election. The Company may terminate this Agreement at
any time with the prior approval of the Board, without cause, by giving 30 days'
written notice of termination to the Executive. On the effective date of any
termination pursuant to this Section 5(d), the Company shall pay the Executive a
severance payment equal to the amount that the Executive would have received had
this Agreement remained in effect for the Severance Period (as defined below)
and shall allow the Executive to participate during the Severance Period, at the
Company's expense, in such employee welfare plans as are generally made
available during such period to the Company's employees. The Company shall be
deemed to have terminated the Executive's employment pursuant to this Section
5(d) if the Executive terminates such employment after a material reduction of
his responsibilities, other benefits or the facilities or assistance at his
disposal (other than a reduction that is part of an overall change for the
Company's employees, is not disproportionately detrimental to the Executive and
occurs before any Change in Control (as defined below)) or a change of more than
15 miles in location of the principal offices of the Company or of the
Executive's primary office.
(i) In order to receive a severance payment under this Section 5(d), the
Executive must (A) resign from the Board, if he is then a member of it, and (B)
sign a release, in form and substance reasonably satisfactory to the Company,
fully releasing the Company (and its officers, directors, shareholders,
employees and agents) from any claim or cause of action that the Executive may
have against the Company or such other persons relating in any way to this
Agreement, the Executive's employment by the Company or any other aspect of the
Executive's relationship with the Company, through the date of such release. The
release shall be signed at such times as are reasonably requested by the Company
in order for the release to be fully effective under state and federal age
discrimination laws and other laws that may impose similar requirements, and
shall prohibit the Executive from making any communications or taking other acts
that may injure the business, goodwill or reputation of the Company or its
officers, directors, shareholders, employees or agents. The Company may defer
making severance payments until such time as any legally required revocation
periods set forth in the release have expired.
(ii) For purposes of this Section 5(d), the Severance Period shall be one
year.
A "Change of Control" shall be deemed to have occurred if (i)
a person (as such term is used in Section 13(d) of the Securities Exchange Act
of 1934, as amended (the "1934 Act")) becomes the beneficial owner (as defined
in Rule 13d-3 under the 0000 Xxx) of shares of the Company or the Company's
successor having 30% or more of the total number of votes that may be cast for
the election of directors of the Company without the prior approval of at least
a majority of the members of the Company's board of directors unaffiliated with
such person (unless such person beneficially owned shares with at least 15% of
such votes on the date of this
5
Agreement), or (ii) individuals who constitute the directors of the Company at
the beginning of a 24-month period cease to constitute at least 2/3 of all
directors at any time during such period, unless the election of any new or
replacement directors was approved by a vote of at least a majority of the
members of the Company's board of directors in office immediately prior to such
period and of the new and replacement directors so approved. Notwithstanding the
foregoing, no Change in Control will be deemed to have occurred if the Executive
or any group of which the Executive is a member is the person whose acquisition
constituted the Change in Control.
(e) End of Agreement Term. If this Agreement terminates at the end of the
employment term specified in Section 4 and the Executive does not remain as an
employee of the Company, then the Company shall pay the Executive severance
compensation consisting of one year's base salary at the then base salary rate.
(f) General Provisions Regarding Severance. Any payment pursuant to Section
5(d) or (e) shall be paid, at the Company's election, either in equal monthly
installments over a 12-month period or in one lump sum. Any such payment shall
be "grossed up," if necessary, so that the Executive is left after the payment
of any excise tax imposed under Sections 280G and 4999 of the Internal Revenue
Code of 1986 (or any successor statute) in connection with any benefits received
upon termination with the amount he would have had if such excise tax had not
been imposed on the Executive.
6. Confidential Information.
(a) Confidentiality. The Executive acknowledges that the trade secrets,
know-how and proprietary processes of the Company and its confidential business
plans, strategies, concepts, prospects and financial data (collectively,
"Confidential Information") are valuable, unique assets of the Company. The
Executive shall not, during or after the term of this Agreement, disclose any of
the Confidential Information (unless already generally known to and available
for use by the public other than as a result of a violation by the Executive of
this Section 6 or as required by law) to any person or entity for any purpose,
nor shall the Executive use or permit the use of any Confidential Information
except, in either case, as is required for the Executive to perform his duties
as an employee of the Company.
(b) Surrender or Destruction. The Executive will, upon termination of his
employment with the Company, deliver to the Company all records, forms,
contracts, studies, reports, appraisals, financial data, lists of names or other
customer data, and any other articles or papers, computer tapes and materials
that have come into his possession by reason of his employment with the Company,
whether or not prepared by him, and he shall not retain memoranda or copies of
any of those items.
7. Covenants Not to Compete or Interfere.
(a) Scope. In view of the unique and valuable services that the Executive
has been retained to render to the Company and the Executive's current and
future
6
knowledge of the customers, trade secrets and other proprietary information
relating to the business of the Company and its customers and suppliers, the
Executive agrees that during the period he is an employee of the Company and for
one year after any termination of this Agreement by the Company for cause or any
voluntary termination by the Executive of his employment by the Company, he will
not Participate In (as defined below) the businesses of electronic contract
manufacturing or electronic repair services within the United States of America.
(b) Definition. For purposes of this Section 7, "Participate In"means
"directly or indirectly, for his own benefit or for, with or through any other
person, firm or corporation, own, manage, operate, control, lend money to or
participate in the ownership, management, operation or control of, or be
connected as a director, officer, employee, partner, consultant, agent,
independent contractor or otherwise with, or acquiesce in the use of his name
in." Notwithstanding the foregoing, the Executive shall not be deemed to
Participate In a business merely because he owns less than 5% of the outstanding
stock of a corporation (measured in voting power or equity), if, at the time of
its acquisition by the Executive, such stock is listed on a national securities
exchange or is reported on Nasdaq. If any restriction contained in this Section
7 is deemed to be invalid, illegal or unenforceable by reason of its duration,
geographical scope or otherwise, then such provision shall be deemed reduced in
extent, duration, geographical scope or otherwise by the minimum reduction
necessary to cause the restriction to be enforceable.
(c) Noninterference. During the period specified in Section 7(a) of this
Agreement, the Executive shall not (i) directly or indirectly cause or attempt
to cause any employee of the Company to leave the employ of the Company, (ii) in
any way interfere with the relationship between the Company and any employee,
customer or supplier, (iii) directly or indirectly hire any employee of the
Company to work for any organization of which the Executive is an officer,
director, employee, consultant, independent contractor or owner of an equity or
other financial interest, or (iv) interfere or attempt to interfere with any
transaction in which the Company was involved during the term of this Agreement
or his employment.
8. Intellectual Property.
(a) The Executive agrees to assign to the Company, or to any person or
entity designated by the Company, the entire right, title and interest of the
Executive in and to all inventions, ideas, discoveries and improvements
(collectively, "Inventions"), whether patented or unpatented, and material
subject to copyright, made or conceived by the Executive, solely or jointly,
that arise out of or are related to research conducted by, for or under the
direction of the Company, or that relate to methods, apparatuses, designs,
products, processes or devices, sold, leased, used or under consideration or
development by the Company at the time of such Invention. The Executive further
acknowledges that all copyrightable materials developed or produced by the
Executive within the scope of his employment by the Company constitute works
made for hire.
7
(b) The Executive shall communicate promptly and disclose to the Company,
in such form as the Company may reasonably request, all information, details and
data pertaining to any such inventions, ideas, discoveries and improvements
described in Section 8 above.
9. Injunctive Relief. Upon an actual or threatened breach by the Executive
of Section 6 or Section 7 of this Agreement, the Company shall be entitled to an
injunction restraining the Executive from such breach. Nothing in this Agreement
shall limit the Company's ability to obtain any other remedies, including
damages for such actual or threatened breach.
10. Waiver of Breach. A waiver by the Company of a breach of any provision
of this Agreement by the Executive shall not be construed as a waiver of any
breach of another provision or subsequent breach of the same provision.
11. Severability. The invalidity or unenforceability in any application of
any provision in this Agreement will not affect the validity or enforceability
of any other provision or of such provision in any other application.
12. Notices. All communications, requests, consents and other notices
provided for in this Agreement shall be in writing and shall be deemed given if
and when delivered personally by hand, sent by facsimile at the appropriate
number indicated below with electronic confirmation of receipt, or mailed by
first class mail, postage prepaid, addressed as follows:
(i) If to the Company:
EFTC Corporation
0000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attn:
Facsimile No. (000) 000-0000
with a copy to: Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No. (000) 000-0000
(ii) If to the Executive:
8
or to such other address or facsimile number as either party may designate by
notice pursuant to this Section 12.
13. Governing Law. This Agreement shall be governed by Colorado law.
14. Assignment. The Company may assign its rights and delegate its
obligations under this Agreement to any affiliate of the Company or to any
acquiror of substantially all of the business of the Company whether through
merger, purchase of assets, purchase of stock or otherwise. Otherwise, neither
party may assign any rights or delegate any duties under this Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective legal representatives, heirs, and permitted successors and
assigns.
15. Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties and supersedes all prior understandings, agreements
or representations by the parties, written or oral, that relate to the subject
matter of this Agreement.
16. Amendments. No provision of this Agreement may be amended or waived
except by an instrument in writing signed by the party sought to be charged with
the amendment or waiver.
Executed as of the date set forth on page 1.
EFTC CORPORATION
By /s/ August X. Xxxxxxxxx
August X. Xxxxxxxxx
/s/ Xxxx Xxxxxxxxx
Xxxx Xxxxxxxx
9
