EMPLOYMENT AGREEMENT
EXHIBIT 10.5
FOR
INFORMATION PURPOSES ONLY - TO BE EXECUTED ON START DATE
LMI
AEROSPACE, INC.,
a
Missouri corporation (the “Corporation”), and XXXXXX
X. XXXXXXXX (“Employee”)
hereby agree as follows:
1. Employment.
The
Corporation hereby employs Employee, and Employee accepts employment from the
Corporation, upon the terms and conditions hereinafter set forth in this
Employment Agreement (“Agreement”).
2. Term
of Employment.
(A) The
initial term of Employee’s employment under this Agreement shall commence on the
date of this Agreement (the “Commencement Date”) and shall terminate on December
31, 2009; provided, however, that this Agreement shall automatically extend
for
successive one-year terms unless not later than October 31 of any year beginning
in 2009, either party has given written notice to the other party of its or
his
intention not to extend the term of this Agreement (in which case, this
Agreement shall terminate at the end of the then-current term); and provided,
further, that the term of employment may be terminated upon the earlier
occurrence of any of the following events:
(1) Upon
the
termination of the business or corporate existence of the
Corporation;
(2) At
the
Corporation’s option, in the event the Corporation determines that Employee is
not performing the duties required of him hereunder to the satisfaction of
the
Corporation;
(3) Upon
the
death of Employee;
(4) At
the
Corporation’s option, if Employee shall suffer a permanent disability. For the
purposes of this Agreement, “permanent disability” means any physical or mental
impairment that renders Employee unable for a period of six (6) months or more
to perform the essential job functions of his position, even with reasonable
accommodation, as determined by a physician selected by the Corporation.
Employee acknowledges and agrees that he shall voluntarily submit to a medical
and/or psychological examination for the purpose of determining his continued
fitness to perform the essential functions of his position whenever requested
to
do so by the Corporation. If the Corporation elects to terminate the employment
relationship under this subparagraph (4), the Corporation shall notify Employee
or his representative in writing, and the termination shall become effective
on
the date that such notification is given;
(5) At
the
Corporation’s option, upon ten (10) calendar days’ written notice to Employee,
in the event of any breach or default by Employee of any of the terms of this
Agreement or of any of Employee’s duties or obligations hereunder. In lieu of
providing ten (10) calendar days’ advance written notice, the Corporation, at
its sole option, may terminate Employee’s services immediately and pay him an
amount that is equivalent to ten (10) calendar days of his salary, less any
deductions required by law;
(6) At
the
Corporation’s option, without any advance notice, in the event that Employee
engages in conduct that, in the opinion of the Corporation, (1) constitutes
dishonesty of any kind (including, but not limited to, any misrepresentation
of
facts or falsification of records) in Employee’s relations, interactions or
dealings with the Corporation or its customers; (2) constitutes a felony; (3)
potentially may or will expose the Corporation to public disrepute or disgrace,
or potentially may or will cause harm to the customer relations, operations
or
business prospects of the Corporation; (4) constitutes harassment or
discrimination towards any person associated with the Corporation, whether
an
employee, agent or customer, based upon that person’s race, color, national
origin, sex, age, disability, religion or other protected status; (5) reflects
disruptive or disorderly conduct, including but not limited to, acts of
violence, fighting, intimidation or threats of violence against any person
associated with the Corporation, whether an employee, agent or customer, or
possessing a weapon while on the Corporation’s premises or while acting on
behalf of the Corporation; (6) is indicative of abusive or illegal drug use
while on the Corporation’s premises or while acting on the Corporation’s behalf;
or (7) constitutes a willful violation of any governmental rules or regulations;
or
(7) At
Employee’s option, after providing the Corporation with at least thirty (30)
calendar days advance written notice of his intention to terminate the
employment relationship.
If
employment is terminated for any of the reasons set forth in subparagraphs
(3)
through (7) of this section 2(A), Employee shall be entitled to receive only
the
Base Salary (as that term is hereinafter defined) accrued but unpaid as of
the
date of the termination and shall be ineligible to receive any additional
compensation or severance pay. If, on the other hand, employment is terminated
by the Corporation during the term of this Agreement for any reason other than
those set forth in paragraphs (3) through (7) of this section 2(A), subject
to
the conditions set forth in paragraphs 2(C) and (D) of this Agreement, the
Corporation shall provide severance pay to Employee in an amount based upon
his
length of service with the Corporation. Specifically, the Corporation shall
provide Employee with six (6) months of Base Salary if he has less than five
(5)
years of service with the Corporation as of the date of his termination and
with
twelve (12) months of Base Salary if he has five (5) or more years of service
with the Corporation as of the date of his termination.
(B) If
Employee’s employment with the Corporation is terminated in conjunction with a
change in the control of the Corporation or in conjunction with the sale of
substantially all of the operating assets of the Corporation, the Corporation
will provide Employee with severance pay under the circumstances specified
in
subparagraphs (1) and (2) of this section 2(B), and the conditions set forth
in
paragraphs 2(C) and (D) of this Agreement. For the purposes of this Agreement,
a
“change in control” is defined as the sale of substantially all of the operating
assets of the Corporation or the acquisition of more than fifty percent (50%)
of
the stock of the Corporation by a group of shareholders or an entity that
acquires control of the Corporation (a “Purchaser”).
(1) If
the
change in control or the sale results in the involuntary termination of Employee
or results in Employee electing to terminate his employment for a good reason
as
determined by the Corporation in its sole discretion (such as the Purchaser
refusing to offer full time employment to Employee on terms comparable to those
provided by the Corporation prior to the acquisition or the Purchaser requiring
Employee to move to a new location), the Corporation shall provide Employee
with
severance pay in an amount that is equal to two times his annual Base Salary
and
shall pay Employee any reasonably anticipated Performance Bonus for the fiscal
year in which he was terminated, on a prorated basis.
(2) If
Employee voluntarily terminates his employment without a good reason (as
determined by the Corporation in its sole discretion) within ninety (90) days
after the change in control or the sale, the Corporation shall provide Employee
with six (6) months of Base Salary if he has less than five (5) years of service
with the Corporation as of the date of his termination and with twelve (12)
months of Base Salary if he has five (5) or more years of service with the
Corporation as of the date of his termination.
(C) The
severance pay provided for in section 2(A) of this Agreement shall be paid
in
equal monthly installments, unless the Corporation, within its sole discretion,
elects to pay the present value of the severance pay in a lump sum within thirty
(30) calendar days of the termination. For purposes of calculating the present
value of the severance pay, the discount rate shall be the prime rate quoted
in
the Wall Street Journal on the day the Corporation elects to pay the present
value of the severance pay in a lump sum.
(D) Notwithstanding
anything to the contrary, (i) the amount of severance pay provided under this
Agreement shall not under any circumstances exceed the limitations set forth
in
§ 280G of the Code, and (ii) the Corporation’s obligation to pay the severance
pay provided for in this section 2 shall be conditioned on Employee’s execution
of a written release satisfactory to the Corporation.
3. Compensation.
(A) During
the period from the Commencement Date to December 31, 2007, the Corporation
shall compensate Employee for Employee’s services rendered hereunder by paying
to Employee an annual salary (the “Base Salary”) of Two Hundred Forty Thousand
Dollars ($240,000.00), prorated for the months employed in 2007. During the
period from January 1, 2008 to December 31, 2008, Employee’s Base Salary shall
be Two Hundred Fifty Thousand Dollars ($250,000.00). During the period from
January 1, 2009 to December 31, 2009, Employee’s Base Salary shall be Two
Hundred Sixty Thousand Dollars ($260,000.00). Thereafter, as long as this
Agreement remains in effect, the annual Base Salary that the Corporation shall
pay to Employee for his services rendered hereunder will be Two Hundred Sixty
Thousand Dollars ($260,000.00). Payment of this salary will be made in
accordance with the payroll policies of the Corporation in effect from time
to
time. Notwithstanding anything in this paragraph to the contrary, the
Corporation reserves the right to deduct or withhold all amounts from Employee’s
salary as may be required by law or otherwise mutually agreed to by the parties
hereto.
(B) With
respect to each complete fiscal year of the Corporation during which (i)
Employee is employed under the terms of this Agreement as of the last day of
such fiscal year, and (ii) the Corporation’s “Annual Income from Operations” (as
that term is hereinafter defined) is more than Ten Million Dollars
($10,000,000.00), the Corporation shall pay to Employee, in addition to the
Base
Salary, an annual “Performance Bonus.”
The
amount of the annual Performance Bonus (if any) shall be equal to:
|
(1)
|
5.00%
of Employee’s Base Salary; plus
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|
(2)
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0.625%
of the Corporation’s Annual Income from Operations that is above Ten
Million Dollars ($10,000,000.00). In the event the Corporation does
not
meet its “Annual On-Time Delivery Metric” (as that term is defined in
Appendix A), the bonus amount described in this Paragraph 3(B)(2),
shall
be reduced by up to Twenty-five Percent (25.0%), such amount to be
determined by the Compensation Committee of the Board of Directors
of the
Corporation.
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The
Compensation Committee of the Board of Directors of the Corporation retains
the
right to modify or adjust the manner in which the Performance Bonus is
calculated in the event that the Corporation either acquires the assets of
another entity, or any portion thereof, or sells its assets, or any portion
thereof, to another entity.
In
the
event the Corporation’s Annual Income from Operations for any given fiscal year
is less than Ten Million Dollars ($10,000,000.00), Employee shall not be
entitled to a Performance Bonus with respect to such fiscal year.
For
purposes of the calculation of the Performance Bonus, the Corporation’s “Annual
Income from Operations” means the consolidated Income from Operations of the
Corporation and its subsidiaries, for a given fiscal year, as determined by
the
firm of independent certified public accountants providing auditing services
to
the Corporation, using generally accepted accounting principles consistently
applied, and calculated without regard to (a) any bonus paid to the
Corporation’s Chairman of the Board, (b) federal and state income tax, (c) any
interest expense or other income and expense as they appear on the Corporation’s
annual audited financial statements, (d) any expenses or income related to
the
disputed claim with the Lockheed Corporation ongoing at the time of execution
of
this Agreement, and (e) any income or loss attributable to any other corporation
or entity (including the assets of a corporation or entity that constitute
an
operating business) acquired by or merged into the Corporation subsequent to
the
effective date of this Agreement. The Corporation shall pay to Employee any
Performance Bonus due Employee hereunder not later than fifteen (15) days after
the receipt by the Corporation of its annual audited financial statements,
which
the Corporation expects to receive within ninety (90) days after the end of
each
fiscal year of the Corporation.
(C) In
addition to the Base Salary and Performance Bonus (if any), Employee shall be
entitled to receive such bonus compensation as the Compensation Committee of
the
Board of Directors of the Corporation may authorize from time to
time.
(D) As
further inducement to Employee to enter into this Agreement, the Compensation
Committee has approved the grant to Employee of __________ (_________) shares
of
restricted stock under the LMI Aerospace, Inc. 2005 Long-Term Incentive Plan
(the “Plan”), subject to an accrued vesting of thirty-three percent (33%) of
such grant upon each anniversary of the date of the grant, subject to the terms,
conditions and limitations set forth in the Plan and documents evidencing the
award of such grant.
4. Duties
of Employee.
(A) Employee
shall serve as Chief Operating Officer or in such other positions as may be
determined by the Board of Directors of the Corporation, and Employee shall
perform such duties on behalf of the Corporation and its subsidiaries by such
means, at such locations, and in such manner as may be specified from time
to
time by the Chief Executive Officer or Board of Directors of the
Corporation.
(B) Employee
agrees to abide by and conform to all rules established by the Corporation
applicable to its employees.
(C) Employee
acknowledges that he is being employed as a full-time employee, and Employee
agrees to devote so much of Employee’s entire time, attention and energies to
the business of the Corporation as is necessary for the successful operation
of
the Corporation and shall endeavor at all times to improve the business of
the
Corporation. Employee shall not accept any business commitments other than
with
the Corporation without the advance written consent of the Corporation’s Chief
Executive Officer.
5. Expenses.
During
the period of Employee’s employment, except as otherwise specifically provided
in this Agreement, the Corporation will pay directly, or reimburse Employee
for,
all items of reasonable and necessary business expenses approved in advance
by
the Corporation if such expenses are incurred by Employee in the interest of
the
business of the Corporation. The Corporation shall also reimburse Employee
for
automobile expenses incurred by Employee in the performance of Employee’s duties
hereunder. The amount of such reimbursement shall be in accordance with the
automobile expense reimbursement policy adopted (and as it may be modified
from
time to time) by the Corporation’s Board of Directors. All such expenses paid by
Employee will be reimbursed by the Corporation upon presentation by Employee,
from time to time (but not less than quarterly), of an itemized account of
such
expenditures in accordance with the Corporation’s policy for verifying such
expenditures.
6. Fringe
Benefits.
(A) Employee
shall be entitled to participate in any health, accident and life insurance
program and other benefits that have been or may be established by the
Corporation for salaried employees of the Corporation.
(B) Employee
shall be entitled to an annual vacation without loss of compensation for such
period as may be determined by the Board of Directors of the
Corporation.
(C) The
Corporation shall furnish to Employee during the term of his employment an
automobile selected by the Corporation to aid Employee in the performance of
his
duties. Upon agreement of the Corporation and Employee, the Corporation may,
in
lieu of the automobile, provide Employee with a Five Thousand Dollar ($5,000.00)
annual automobile allowance.
7. Covenants
of Employee.
(A) During
the term of Employee’s employment with the Corporation and for all time
thereafter, Employee covenants and agrees that Employee will not in any manner
directly or indirectly, except as required in Employee’s duties to the
Corporation, disclose or divulge to any person, entity, firm or company
whatsoever, or use for Employee’s own benefit or the benefit of any other
person, entity, firm or company, directly or indirectly, any knowledge, devices,
information, techniques, customer lists, business plans or other data belonging
to the Corporation or developed by Employee on behalf of the Corporation during
his employment with the Corporation, without regard to whether all of the
foregoing matters will be deemed confidential, material or important, the
parties hereto stipulating, as between them, that the same are important,
material, confidential and the property of the Corporation, that disclosure
of
the same to or use of the same by third parties would greatly affect the
effective and successful conduct of the business of the Corporation and the
goodwill of the Corporation, and that any breach of the terms of this
subparagraph (A) shall be a material breach of this Agreement.
(B) During
the term of Employee’s employment with the Corporation and for a period of two
(2) years or one (1) year with respect to subparagraph (4) below (the “Covenant
Term”) after cessation for whatever reason of such employment (except as
hereinafter provided in subparagraph (C) of this paragraph 7), Employee
covenants and agrees that Employee will not in any manner directly or
indirectly:
(1) solicit,
divert, take away or interfere with any of the customers (or their respective
affiliates or successors) of the Corporation;
(2) engage
directly or indirectly, either personally or as an employee, partner, associate
partner, officer, manager, agent, advisor, consultant or otherwise, or by means
of any corporate or other entity or device, in any business which is competitive
with the business of the Corporation. For purposes of this covenant a business
will be deemed competitive if it is conducted in whole or in part within any
geographic area wherein the Corporation is engaged in marketing its products,
and if it involves the manufacture of component parts for the aerospace industry
or any other business which is in any manner competitive, as of the date of
cessation of Employee’s employment, with any business then being conducted by
the Corporation or as to which the Corporation has then formulated definitive
plans to enter;
(3) induce
any salesman, distributor, supplier, manufacturer, representative, agent, jobber
or other person transacting business with the Corporation to terminate their
relationship with the Corporation, or to represent, distribute or sell products
in competition with products of the Corporation; or
(4) induce
or
cause any employee of the Corporation to leave the employ of the
Corporation.
(C) The
parties agree that the Covenant Term provided for in the preceding subparagraph
(B) shall be:
(1)reduced
to six (6) months after cessation for whatever reason of Employee’s employment
with the Corporation in the event all of the operating assets or all of the
common stock of the Corporation is sold to any entity or individuals
unaffiliated with the Corporation, its successors or assigns; or
(2)eliminated
if the business currently operated by the Corporation is terminated, and the
assets of the Corporation are liquidated.
(D) All
the
covenants of Employee contained in this paragraph 7 shall be construed as
agreements independent of any other provision of this Agreement, and the
existence of any claim or cause of action against the Corporation, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the
enforcement by the Corporation of these covenants.
(E) It
is the
intention of the parties to restrict the activities of Employee under this
paragraph 7 only to the extent necessary for the protection of legitimate
business interests of the Corporation, and the parties specifically covenant
and
agree that should any of the provisions set forth therein, under any set of
circumstances not now foreseen by the parties, be deemed too broad for such
purpose, said provisions shall automatically be amended and modified to the
minimum extent necessary in order for the provision(s) in question to be valid
and enforceable.
8. Documents.
Upon
cessation of Employee’s employment with the Corporation, for whatever reason,
all documents, records (including without limitation, customer records),
notebooks, invoices, statements or correspondence, including copies thereof,
relating to the business of the Corporation then in Employee’s possession,
whether prepared by Employee or others, will be delivered to and left with
the
Corporation, and Employee agrees not to retain copies of the foregoing documents
without the written consent of the Corporation.
9. Remedies.
In the
event of the breach by Employee of any of the terms of this Agreement,
notwithstanding anything to the contrary contained in this Agreement, the
Corporation may terminate the employment of Employee in accordance with the
provisions of paragraph 2 of this Agreement. It is further agreed that any
breach or evasion of any of the terms of this Agreement by Employee will result
in immediate and irreparable injury to the Corporation and will authorize
recourse to injunction and/or specific performance as well as to other legal
or
equitable remedies to which the Corporation may be entitled. In addition to
any
other remedies that it may have in law or equity, the Corporation also may
require an accounting and repayment of all profits, compensation, remuneration
or other benefits realized, directly or indirectly, as a result of such breaches
by Employee or by a competitor’s business controlled, directly or indirectly, by
Employee. No remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy and each and every
remedy given hereunder or now or hereafter existing at law or in equity by
statute or otherwise. The election of any one or more remedies by the
Corporation shall not constitute a waiver of the right to pursue other available
remedies. Employee expressly agrees to pay all reasonable costs and attorneys’
fees incurred by the Corporation in order to enforce Employee’s obligations
under this Agreement, regardless of whether litigation is commenced or
prosecuted to a judgment.
10. Severability.
All
agreements and covenants contained herein are severable, and in the event any
of
them shall be held to be invalid by any court of competent jurisdiction, this
Agreement, subject to subparagraph 7(E) hereof, shall continue in full force
and
effect and shall be interpreted as if such invalid agreements or covenants
were
not contained herein.
11. Waiver
or Modification.
No
waiver or modification of this Agreement or of any covenant, condition or
limitation herein shall be valid unless in writing and duly executed by the
party to be charged therewith, and no evidence of any waiver or modification
shall be offered or received in evidence in any proceeding, arbitration or
litigation between the parties hereto arising out of or affecting this
Agreement, or the rights or obligations of the parties hereunder, unless such
waiver or modification is in writing, duly executed as aforesaid, and the
parties further agree that the provisions of this paragraph 11 may not be waived
except as herein set forth. Failure of the Corporation to exercise or otherwise
act with respect to any of its rights hereunder in the event of a breach of
any
of the terms or conditions hereof by Employee shall not be construed as a waiver
of such breach nor prevent the Corporation from thereafter enforcing strict
compliance with any and all of the terms and conditions hereof.
12. Assignability.
This
Agreement may be assigned by the Corporation to another entity that purchases
substantially all of the assets of the Corporation or acquires a majority of
the
stock of the Corporation. The services to be performed by Employee hereunder
are
personal in nature, and, therefore, Employee shall not assign Employee’s rights
or delegate Employee’s obligations under this Agreement, and any attempted or
purported assignment or delegation not herein permitted shall be null and
void.
13. Successors.
Subject
to the provisions of paragraph 12, this Agreement shall be binding upon and
shall inure to the benefit of the Corporation and Employee and their respective
heirs, executors, administrators, legal administrators, successors and
assigns.
14. Notices.
Any
notice or other communication required or permitted hereunder shall be in
writing and shall be deemed to have been given if delivered personally, by
over-night courier, or by certified or registered mail, return receipt
requested, if to the Corporation, to:
Xxxxxx
X.
Xxxx, President
LMI
AEROSPACE, INC.
X.X.
Xxx
000
Xx.
Xxxxxxx, XX 00000-0000
and,
if
to Employee, to:
Xxxxxx
X.
Xxxxxxxx
0000
Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxx,
XX 00000-0000
or
to
such other address as may be specified by either of the parties in the manner
provided under this paragraph 14.
15. Construction.
This
Agreement shall be deemed for all purposes to have been made in the State of
Missouri and shall be governed by and construed in accordance with the laws
of
the State of Missouri, notwithstanding either the place of execution hereof,
nor
the performance of any acts in connection herewith or hereunder in any other
jurisdiction.
16. Venue.
The
parties hereto agree that any suit filed arising out of or in connection with
this Agreement shall be brought only in the United States District Court for
the
Eastern District of Missouri, unless that court lacks jurisdiction, in which
case such action shall be brought only in the Circuit Court for St. Louis
County, Missouri.
17. Disclosure
of Existence of Agreement.
To
preserve the Corporation’s rights under this Agreement, the Corporation may
advise any third party of the existence of this Agreement and its terms, and
Employee specifically releases and agrees to indemnify and hold the Corporation
harmless from any liability for doing so.
18. Agreement
Drafted by the Corporation’s Counsel; Interpretation.
Each
party hereto acknowledges that the Corporation’s counsel, Gallop, Xxxxxxx &
Xxxxxx, X.X., prepared this Agreement on behalf of and in the course of its
representation of the Corporation and not Employee. Employee acknowledges and
represents that: (a) he has been advised to seek the advice of independent
counsel and (b) he has had the opportunity to seek the advice of independent
counsel. Notwithstanding the foregoing, if a question of interpretation arises,
this Agreement shall be construed as if drafted jointly by the parties, and
no
presumption or burden of proof shall arise favoring or disfavoring any party
by
virtue of the authorship of any provision of this Agreement.
19. Review
by and Approval of Compensation Committee.
This
Agreement, including each element of Employee’s compensation provided for in
paragraph 3 has been reviewed and approved by the Compensation
Committee.
20. Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties with respect
to
the subject matter hereof and supersedes any and all prior employment,
consulting and similar agreements, written and/or oral between the Corporation
and Employee. Employee hereby waives and releases all rights and claims under
any such employment, consulting or other similar agreements or with respect
thereto.
The
parties have executed this Agreement on this _____________ day of February,
2007.
“CORPORATION”
LMI
AEROSPACE,
INC.
By:
__________________________
Xxxxxx
X. Xxxx,
President
“EMPLOYEE”
_______________________________
Xxxxxx
X.
Xxxxxxxx
