EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 20, 1995 by and between
Manufacturers' Services Limited, a Delaware corporation (the "Company"), and
Xxxxx X. Xxxxx ("Executive").
WHEREAS, Executive is currently serving as Chairman of the Board, Chief
Executive Officer and President of the Company;
WHEREAS, the Company has entered into a Securities Purchase Agreement
dated as of January 20, 1995 (the "Securities Purchase Agreement") by and among
certain investors denominated collectively therein as the "DLJ Entities",
Executive and certain other investors denominated collectively therein as the
"Founders" and the Company;
WHEREAS, Executive is one of the Founders and Executive and the Company
wish to enter into this Agreement, including without limitation the restrictive
covenants set forth in Section 6, in connection with the sale of Common Stock
(as hereinafter defined) to the DLJ Entities pursuant to the Securities Purchase
Agreement;
WHEREAS, the Company considers it essential to its best interest and the
best interest of its stockholders to xxxxxx the continued employment of
Executive by the Company from and after the date of the closing of such purchase
of Common Stock; and
WHEREAS, Executive is willing so to continue his employment on the
terms hereinafter set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Definitions. (a) As used herein, the following terms shall have the
meanings set forth below:
"Agreement" means this Employment Agreement.
"Base Salary" has the meaning set forth in Section 4.1 hereof.
"Board" means the Board of Directors of the Company.
"Bonus" has the meaning set forth in Section 4.2 hereof.
"Cause" means (i) Executive's Willful and continued failure substantially
to perform his duties as described herein (other than (x) as a result of total
or partial incapacity due to physical or mental illness, (y) for Good Reason, or
(z) as a result of the Company's material
breach of its obligations under this Agreement) following the notice and cure
period provided for in Section 5.1, (ii) Executive's dishonesty in the
performance of his duties or (iii) the conviction of Executive of, or the entry
of a plea of guilty by Executive to, a felony involving the Executive's personal
conduct under the laws of the United States or any state thereof or conviction
of, or the entry of a plea of guilty to, a crime involving the Executive's
personal conduct in any other jurisdiction in which the Company does business
which would constitute a felony under the laws of the United States or any state
thereof if such crime had been committed within the jurisdiction of the United
States or any state thereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $.001 per share, of the
Company.
"Company" means Manufacturers' Services Limited, a Delaware corporation.
"Compensation Committee" means the Compensation Committee of the Board.
"Confidential Information" has the meaning set forth in Section 7 hereof.
"Disability" means physical or mental incapacity resulting in Executive
being unable for a period of six (6) consecutive months or for an aggregate of
six (6) months in any twenty-four (24) consecutive month period to perform his
duties. Any question as to the existence of the Disability of Executive as to
which Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive and the
Company. If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination
of Disability made in writing to the Company and Executive shall be final and
conclusive for all purposes of this Agreement.
"Effective Date" means January 20, 1995.
"Employment Term" has the meaning set forth in Section 2 hereof.
"Executive" means Xxxxx X. Xxxxx.
"Fair Market Value" means, with respect to any share of Common Stock the
right to purchase or sell which is granted hereunder, the fair market value of
such share of Common Stock at the time of exercise of such right to purchase or
sell as determined by the Board. If Executive shall object to any such
determination, the Board shall retain an independent appraiser reasonably
satisfactory to Executive to determine such fair market value.
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"Good Reason" means:
(i) Executive is not elected or appointed to, or is removed from,
the positions described in Section 3 hereof for any reason other than for
Cause or by reason of Executive's death or Disability;
(ii) Executive is assigned duties and responsibilities that are
inconsistent, in a material respect, with the scope of duties and
responsibilities associated with Executive's position as described in
Section 3 hereof;
(iii) the Company appoints an employee to a position at the Company
senior to that of the Executive;
(iv) the Company requires Executive to relocate to an area more than
100 miles from Executive's current location;
(v) breach by the Company of any of its material agreements under
this Agreement; or
(vi) a fifty percent (50%) change in ownership (other than as a
result of a public offering) or a sale of substantially all of the Common
Stock or substantially all of the assets of the Company to one other
party.
"Initial Term" has the meaning set forth in Section 2 hereof.
"Management Stock Option Plan" means the 1995 Non-Qualified Stock Option
Plan of the Company.
"Note" means a three year term note bearing interest at the Prime Rate.
"Notice of Termination" means a written notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
"Options" means options to purchase capital stock of the Company granted
to Executive pursuant to any stock option plan of the Company.
"Other Stockholders" has the meaning assigned to such term in the
Stockholders Agreement.
"Permitted Transferee" has the meaning assigned to Permitted Transferees
of Other Stockholders in the Stockholders Agreement.
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"Prime Rate" means the rate of interest publicly announced by Xxxxxx
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Put Right" has the meaning set forth in Section 5.2(c) hereof.
"Stockholders Agreement" means the Stockholders Agreement dated as of
January 20, 1995 by and among the Company, the Founders and the DLJ Entities.
"Willful" means, when applied to any action or omission of Executive, that
Executive, in acting or omitting to act, did so without a good faith belief that
such action or omission was in, or was not contrary to, to the best interests of
the Company.
2. Term of Employment. Subject to the provisions of Sections 5.1 - 5.4
herein, inclusive, Executive shall be employed by the Company for a period
commencing on the Effective Date and ending on the third anniversary thereof
(the "Initial Term"); provided that the Employment Term shall be automatically
extended thereafter until terminated by not less than three months' prior
written notice given by the Company or Executive to the other of its or his, as
the case may be, intent to terminate this Agreement (the Initial Term, together
with any extensions thereof, is hereinafter referred to as the "Employment
Term").
3. Position. (a) During the term hereof, Executive shall be appointed and
shall serve as Chief Executive Officer and President of the Company and in the
performance of such duties shall report directly to (and only to) the Board.
Subject to applicable law and the overall policy directives of the Board,
Executive shall have complete autonomy with respect to the day-to-day management
of the business and affairs of the Company and shall have all executive powers
and authority which are necessary to enable him to discharge his duties as
President and Chief Executive Officer of the Company.
(b) During the term of his employment hereunder, Executive shall serve on
the Board and as Chairman of the Board.
(c) During the term of his employment hereunder, the Company shall not
employ or otherwise retain any other person who is afforded executive
responsibilities equal to or greater than those of Executive.
(d) During the term of his employment hereunder, Executive shall in good
faith and consistent with his ability, experience and talent perform the duties
set forth in this Section 3 and shall devote all of his productive time and
efforts to the performance of such duties.
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4. Compensation
4.1 Base Salary. The Company shall pay Executive an annual base salary
("Base Salary") at the initial rate of $150,000 to be increased by the Company
to the annual rate of $350,000 in the event that the Company achieves
$75,000,000 in revenues in any one fiscal quarter as reflected in the
consolidated financial statements for such fiscal quarter (such increase to take
effect promptly after the receipt by the Board of the consolidated financial
statements for such fiscal quarter). Base Salary shall be payable in regular
installments in accordance with the Company's usual payment practices but not
less frequently than semi-monthly during the Employment Term. Base Salary shall
be reviewed at least semi-annually on an ongoing basis for adjustment in
accordance with Executive's performance.
4.2 Bonus. With respect to each fiscal year, all or part of which is
contained in the Employment Term, Executive shall be eligible to receive, in
addition to his Base Salary, a cash bonus (the "Bonus") consisting of (i) a
"Target Bonus" paid quarterly if earned at a rate of up to 50% of his Base
Salary, plus (ii) a "Super Achievement Bonus" paid annually if earned at a rate
of up to an additional 50% of Base Salary. The Target Bonus and Super
Achievement Bonus will be based on the Company achieving a certain percentage of
EBIT for such fiscal year as established in the "Annual Operating Plan" and in
the "DLJ Memo", respectively, as defined and illustrated in Exhibit A, which is
attached hereto and incorporated herein by reference. The Bonus will be payable
promptly following the receipt by the Board of the consolidated audited
financial statements for such fiscal year.
4.3 Benefits. Executive shall be entitled to participate in all of the
Company's incentive and benefit plans and arrangements, including, without
limitation, all employee incentive and benefit plans or arrangements currently
available or made available in the future by the Company to its senior
executives, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements, but on a basis no less
favorable than that afforded to any other director, officer or employee of the
Company. The Company shall also provide to Executive all health, major medical,
hospitalization and disability insurance on the same terms as such benefits are
provided to other senior executives of the Company. Executive will be entitled
to four (4) weeks paid vacation for each twelve (12) month period following the
Effective Date. Unused vacation from any year may be utilized only in the next
succeeding year, and in no event will Executive receive cash compensation for
unused vacation from a prior year.
4.4 Business Expenses. Reasonable travel, entertainment and other business
expenses incurred by Executive in the performance of his duties hereunder shall
be reimbursed by the Company in accordance with Company policies.
5. Termination. Executive's employment may be terminated by either party
at any time. In the event of any such termination, the rights of the parties
will be determined as set forth in this Section 5.
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5.1 Termination For Cause by the Company. (a) If Executive's employment is
terminated by the Company for Cause, he shall be entitled to receive his Base
Salary through the date of termination. All vested and unvested Options held by
Executive, any Permitted Transferee of Executive or any trust for the benefit
thereof at the time of termination will terminate upon termination of
Executive's employment pursuant to this Section 5.1. All other benefits due
Executive following termination of Executive's employment pursuant to this
Section 5.1 shall be determined in accordance with the plans, policies and
practices of the Company. If Executive's employment is proposed to be terminated
for Cause pursuant to clause (i) of the definition of Cause, the Company shall
give Executive written notice of the event or circumstances constituting Cause
and thirty (30) days from the date of such notice to cure such event or
circumstances, if curable.
(b) In the event of termination of Executive for Cause, the Company shall
have the right to purchase from Executive, any Permitted Transferee of Executive
or any trust for the benefit thereof all shares of Common Stock then owned by
Executive, any Permitted Transferee of Executive or any trust for the benefit
thereof at a price per share payable, at the option of the Company, in cash or a
Note, in an amount equal to the lesser of Fair Market Value and the initial cost
per share of such share of Common Stock.
5.2 Executive's Disability or Death. (a) If Executive's employment
hereunder is terminated in the event of Executive's Disability or death,
Executive (or his estate) shall continue to receive the higher of (i) one year's
Base Salary calculated at the level at the time of Executive's Disability or
death plus an amount equal to the previous year's Bonus received by Executive
and (ii) Base Salary of Executive for the remainder of the Initial Term as if
such termination had not occurred, reduced by any disability benefits paid in
lieu of Base Salary under the Company's employee benefit plans as then in
effect. All other benefits due Executive following termination of Executive's
employment for Disability or death shall be determined in accordance with the
plans, policies and practices of the Company.
(b) In the event Executive's Employment is terminated by death or
Disability, (i) vested Options held at the time of termination by Executive, any
Permitted Transferee of Executive or any trust for the benefit thereof will
remain outstanding, (ii) Options scheduled to vest over time will continue to
vest in accordance with the vesting schedule set forth in the stock option award
plan or agreement applicable to such Options and (iii) all other Options will
terminate.
(c) In the event Executive's employment is terminated by death or
Disability, Executive, any Permitted Transferee of Executive or any trust for
the benefit thereof shall have the right to sell to the Company (x) all shares
of Common Stock then owned by Executive, any Permitted Transferee of Executive
or any trust for the benefit thereof and (y) all shares of Common Stock to be
acquired upon the exercise of all vested Options then held by Executive, any
Permitted Transferee of Executive or any trust for the benefit thereof, at a
price per share payable, at the option of the Company, in cash or a Note, equal
to Fair Market Value (less, in the case of any share of Common Stock subject to
vested Options, the
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applicable exercise price of such Options) (the "Put Right"); provided that (i)
such Put Right will only arise during a sixty (60) day period following
termination of Executive's employment by the Company by death or Disability and
(ii) the purchase by the Company will not constitute an event of default under
the terms of any of the Company's outstanding debt obligations.
5.3. Termination of Employment Without Cause by the Company. (a) If
Executive's employment is terminated by the Company without Cause (other than by
reason of Disability or death), Executive shall continue to receive his Base
Salary for the remainder of the Initial Term as if such termination had not
occurred or, if greater, the sum of (i) one year's Base Salary calculated at the
level at the time of Executive's termination and (ii) an amount equal to the
previous year's Bonus received by Executive.
(b) In the event of such a termination of employment by the Company
without Cause, during the period from the date of termination through the date
Executive ceases receiving payments in lieu of Base Salary pursuant to Section
5.3(a) above, Executive will continue to receive any welfare benefits provided
to him pursuant to Section 4.3 hereof at a level substantially comparable to
that in effect immediately prior to such termination or the Company will pay
Executive, in cash, the equivalent value of such welfare benefits after payment
of any of Executive's applicable taxes. All other benefits due Executive
following such termination of employment by the Company without Cause shall be
determined in accordance with the plans, policies and practices of the Company.
(c) In the event of such a termination of employment by the Company
without Cause, Executive, any Permitted Transferee of Executive or any trust for
the benefit thereof shall have the Put Right; provided that (i) such Put Right
will only arise during a sixty (60) day period following termination of
Executive's employment by the Company without Cause and (ii) the purchase by the
Company will not constitute an event of default under the terms of any of the
Company's outstanding debt obligations.
(d) In the event of a termination of employment by the Company without
Cause, (i) vested Options held by Executive, any Permitted Transferee of
Executive or any trust of the benefit thereof at the time of such termination
will remain outstanding and subject to the Put Right, (ii) Options scheduled to
vest over time will continue to vest in accordance with the vesting schedule set
forth in the stock option award plan or agreement applicable to such Options and
(iii) all other Options will terminate; provided that if Executive fails to
comply with any of the provisions of Section 6.1 of this Agreement the Options
described in clauses (i) and (ii) of this sentence will immediately thereupon
terminate.
(e) If Executive's employment is terminated by Executive for Good Reason,
such termination shall be treated for purposes of this Section 5.3 as a
termination of Executive's employment by the Company without Cause. Executive
shall give the Company written notice of the event or circumstance constituting
Good Reason and thirty (30) days from the date of such notice to cure such event
or circumstance, if curable.
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5.4 Voluntary Termination of Employment by Executive. (a) If Executive
terminates his employment with the Company for any reason (other than death,
Disability or Good Reason as provided in Sections 5.2 and 5.3 hereof), Executive
shall be entitled to the same payments he would have received if his employment
had been terminated by the Company for Cause.
(b) Upon a voluntary termination, (i) vested Options held by Executive,
any Permitted Transferee of Executive or any trust for the benefit thereof at
the time of such termination will remain outstanding and (ii) all other Options
will terminate.
(c) Upon a voluntary termination, the Company shall have the right to
purchase from Executive, any Permitted Transferee of Executive or any trust for
the benefit thereof all shares of Common Stock then owned by Executive, any
Permitted Transferee of Executive or any trust for the benefit thereof at a
price per share payable, at the option of the Company, in cash or a Note, in an
amount equal to Fair Market Value. Such right must be exercised within twelve
(12) months following such transaction and shall lapse from and after the date
of the initial public offering of shares of Common Stock.
(d) Upon a voluntary termination, the Company shall have the right at any
time (without regard to whether any exercise notice has been delivered) to
purchase from Executive, any Permitted Transferee of Executive or any trust for
the benefit thereof all vested Options then held by Executive, any Permitted
Transferee of Executive or any trust for the benefit thereof at an aggregate
price payable, at the option of the Company, in cash or a Note, in an amount
calculated by subtracting the aggregate exercise price of such vested Options
from the aggregate Fair Market Value of the shares of Common Stock for which
such vested Options are exercisable. Such right must be exercised within twelve
(12) months following such termination and shall lapse from and after the date
of the initial public offering of shares of Common Stock.
5.5 Mitigation. Anything in this Agreement to the contrary
notwithstanding, in the event that Executive provides services for pay to anyone
other than the Company or any of its affiliates or subsidiaries from the date of
termination of Executive's employment hereunder until the date Executive ceases
receiving payments pursuant to Sections 5.1 - 5.4 hereof, inclusive, any medical
or other welfare benefits to which Executive is entitled from the Company during
such period pursuant to this Agreement shall be reduced by the medical and other
welfare benefits which Executive is eligible to receive during such period as a
result of Executive's performing such services.
5.6 Notice of Termination. Any purported termination of employment by the
Company or by Executive shall be communicated by written Notice of Termination
to the other party hereto.
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6. Non-Competition; Non-Solicitation.
6.1 Non-Competition. Executive acknowledges and recognizes the highly
competitive nature of the businesses of the company and accordingly agrees that
during the Employment Term or during any period that Executive receives or is
entitled to receive any severance payments under this Agreement or under any
other severance arrangement of the Company, Executive will not enter into
competitive endeavors and will not undertake any commercial activity which is
contrary to the best interests of the Company or its affiliates, including
becoming an employee, officer, director, agent or owner of any outstanding
shares of, or any other equity interest in, any company, firm, business, person
or other entity in any geographic area which derives more than ten percent (10%)
of its profits, revenues or earnings before taxes from electronic contract
manufacturing; provided, that Executive may own up to two percent (2%) of the
stock of any such company whose stock is registered for public trading.
6.2 Non-Solicitation. In the event of a termination of employment of
Executive for any reason, Executive shall refrain from directly or indirectly
soliciting or hiring employees of the Company, directly or indirectly inducing
any such employees to terminate their employment by the Company, or seeking to
employ any such employees, in each case, for two years after Executive's
termination; provided that in the event of a termination without Cause, the
restrictions in this clause 6.2 shall lapse on the first anniversary of the date
of such termination.
7. Confidentiality. Executive acknowledges that the nature of Executive's
engagement by the Company is such that Executive will have access to
Confidential Information (as hereinafter defined) which has value to the
Company. During and after his employment by the Company, Executive shall keep
all of the Confidential Information in confidence and shall not disclose any of
the same to any other person, except the Company's personnel, agents and
representatives and other persons designated in writing by the Company or except
as otherwise required by law. The term "Confidential Information", as used
herein, means all information or material relating to the Company not generally
known by non-Company personnel which (i) is marked "Confidential Information",
"Proprietary Information" or other similar marking, (ii) is known by Executive
to be considered confidential and proprietary by the Company or (iii) derives
value by virtue of the fact that it is not generally known; provided that the
term "Confidential Information" does not include information that was or becomes
generally available publicly other than through disclosure by Executive in
violation of this Agreement.
8. Non-Compliance. If after termination Executive fails to comply with any
provisions of Section 6 the Company shall have the right to purchase from
Executive, any Permitted Transferee of Executive or any trust for the benefit
thereof all shares of Common Stock then owned by Executive, any Permitted
Transferee of Executive or any trust for the benefit thereof at a price per
share payable, at the option of the Company, in cash or a Note,
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in an amount equal to the lesser of Fair Market Value and the initial cost per
share of such share of Common Stock.
9. Specific Performance. Executive acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Sections 6.1, 6.2 or 7 hereof would be inadequate and, in
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach, in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to obtain equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available; provided,
however, that if the Company obtains any such equitable relief at any time
during the Initial Term, it shall thereby waive its rights under Section 8
hereof.
10. Enforceability. It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in Sections 6.1,
6.2 and 7 hereof to be reasonable, if a final judicial determination is made by
a court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is an unenforceable restriction against
Executive, the provisions of this Agreement shall not be rendered void but shall
be deemed amended to apply as to such maximum time and territory and to such
maximum extent as such court may judicially determine or indicate to be
enforceable. Alternatively, if any court of competent jurisdiction finds that
any restriction contained in this Agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such finding shall
not affect the enforceability of any of the other restrictions contained herein.
11. Miscellaneous.
11.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
11.2. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to the employment of Executive by the
Company. There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein; however, this Agreement shall not
supersede the Securities Purchase Agreement, the Stockholders Agreement or any
stock option agreement or indemnification agreement between Executive and the
Company, which agreements shall be interpreted in accordance with their terms.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
11.3. No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
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11.4. Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
11.5 Assignment. Absent the prior written consent of the Company, this
Agreement shall not be assignable by Executive, except that Executive may assign
payments due hereunder to a trust established for the exclusive benefit of any
Permitted Transferee of Executive.
11.6. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees of
Executive and successors and assigns of the Company.
11.7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
given to the respective addresses or telecopy numbers set forth on the execution
page or this Agreement, provided that all notices to the Company shall be
directed to the attention of the Board with a copy to the Secretary of the
Company or to such other address as either party may have furnished to the other
in writing in accordance herewith. Each such notice or other communication shall
be effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified on the execution page of this Agreement if a copy of
such notice or other communication is sent by certified mail, return receipt
requested, and is posted within one business day, or is personally delivered,
whether by courier or otherwise, within two business days, after the date of
such telecopy, (ii) if given by prepaid overnight courier, one business day
after deposit with such courier or (iii) if given by United States mail, postage
prepaid, three business days after deposit with the United States postal
service; provided that notice of change of address shall be effective only upon
receipt.
11.8. Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such Federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.
11.9. Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
---------------------------------
Xxxxx X. Xxxxx
00 Xxxxxxxxxxx Xxxx
Xxxxx, XX 00000
Fax: (000)000-0000
MANUFACTURERS' SERVICES LTD.
By:
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Xxxxxxxx Xxxx, Director
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000)000-0000
