EXHIBIT 10.3
Employment Agreement dated September 1, 1994 between the Company and R. Xxxx
XxXxxxx.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this 1st
day of September, 1994 by and between XxXxxxx Aircraft Holdings, Inc. (the
"Company") and R. Xxxx XxXxxxx ("Executive") and is effective as of September 1,
1994 (the "Effective Date").
RECITALS
Executive is currently employed by the Company in the capacity of Chief
Executive Officer and is one of the key executives of the Company.
Executive agrees that in order to maintain consistency of management
within the Company, he will perform his duties as Chief Executive Officer.
The Board of Directors of the Company (the "Board") is encouraging
Executive to perform his assigned duties without distraction.
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Executive and the Company hereby
agree as follows:
1. TERM OF AGREEMENT. Except as otherwise provided herein, the Company
and Executive agree that Executive will remain in the employ of the Company
through August 31, 1998. The "Term of Agreement" as used herein shall refer
to the period commencing on the Effective Date and ending on August 31, 1998.
2. DUTIES. Executive agrees to serve the Company during the Term of
Agreement, to devote his full business time to the Company and to promote the
interests of the Company; provided, however, that nothing contained herein
shall prevent Executive from serving as a director or trustee of any other
corporation with the consent of the Company, which shall not be unreasonably
withheld. The Company agrees that it will not assign duties inconsistent
with those attendant to the position of Chief Executive Officer and a
director and will not decrease his responsibilities as currently in effect.
Except as so limited, the powers and duties of Executive are to be more
specifically determined by the Board from time to time.
3. COMPENSATION AND BENEFITS. During the Term of Agreement, Executive
shall receive the following compensation and benefits:
a. SALARY. During the Term of the Agreement, the Company shall pay
Executive, during the first year of the Term of Agreement, an annual salary
of $180,000, payable at least on a semi-monthly basis and during each
subsequent year of the Term of Agreement, an annual salary (payable at
least on a semi-monthly basis) at least equal to Executive's salary for the
immediately preceding year plus an amount calculated in a manner at least
as favorable to Executive as the manner in which the pay increases for
other executives of the Company are calculated;
b. BONUS. During the Term of Agreement, the Company shall pay
Executive annual bonus payments as a percentage of his annual base salary
then in effect, based upon the Company's achievement of written mutually
agreed performance goals as set forth in the Company's operating plan.
Performance goals shall be established by the Board annually and shall be
based on pre-tax earnings of the Company. Pre-tax earnings ("EBITDA")
shall be calculated to mean the earnings of the Company and its
subsidiaries for the applicable fiscal year before interest and taxes,
before portions of cash expenses paid to prior owners of business acquired
by the Company which are accounted for as deferred consideration with
respect to such acquisitions, before amortization of non-cash expenses such
as noncompetition agreements, personal service contracts, prepaid
consulting, etc., before depreciation, before amortization of organization
costs, as determined in accordance with generally accepted accounting
principles, except that the EBITDA of each subsidiary acquired by the
Company during the fiscal year shall be accounted for as if such subsidiary
had been acquired on the first day of such fiscal year. The amount of
bonus, calculated as a percentage of Executive's salary, payable to
Executive is set forth below:
Level of achievement Bonus
-------------------- -----
EBITDA equals 80% of performance goal 30% of annual base salary
EBITDA equals 90% of performance goal 40% of annual base salary
EBITDA equals 100% of performance goal 50% of annual base salary
EBITDA equals 110% of performance goal 60% of annual base salary
Said bonus shall be deemed earned on a pro rata basis throughout the year.
c. INCENTIVE STOCK OPTIONS.
(i) Pursuant to the XxXxxxx Aircraft Holdings, Inc. 1993 Share
Incentive Plan (the "Plan"), Executive shall receive options to
purchase shares of the Company's common stock subject to the following
terms:
(1) Upon execution of this Agreement, the Company shall
grant to Executive options to purchase 275,000 shares of the
Company's common stock, such options to become exercisable
according to the schedule set forth on Exhibit A hereto;
2
(2) All such options shall have an exercise price of
fifteen cents ($.15) per share.
(3) The options shall be exercisable for ten years from the
date of grant.
(4) All such options shall be immediately vested on the
date of grant.
(5) All such options shall be subject to the terms and
conditions of the Plan.
d. BENEFITS. During the Term of Agreement, the Company shall provide
and maintain in full force and effect through existing plans at least the
types and amounts of group insurance (including conversion features) and
benefits, including life (in an amount at least equal to $1,000,000),
health, disability and hospitalization insurance, and other health care
benefits, including medical, hospital and surgical benefits and health care
benefits for Executive, his spouse and eligible dependents (collectively
"Health Care Benefits") to which Executive was entitled in the immediately
preceding year or Health Care Benefits provided by the Company to other
senior executives (whichever would result in greater Health Care Benefits
to Executive); provided, however, that in no event will the Health Care
Benefits (but not including life insurance) be substantially different or
more expensive than those provided by the Company to other senior
executives;
e. PROFIT SHARING PLAN. The Company agrees that Executive will be a
participant on the same basis as all other employees in any profit sharing
plan that may be implemented during the Term of Agreement;
f. TRAVEL. During the Term of Agreement, the Company shall reimburse
all business-related travel, entertainment and other expenses;
g. VACATION. During the Term of Agreement, the Company shall provide
Executive with four weeks paid vacation time, annually; and
4. TERMINATION.
a. FOR CAUSE. The Company may terminate this Agreement for "Cause"
if: (i) Executive commits any material act of dishonesty constituting a
felony which results or is intended to result directly or indirectly in
substantial gain or personal enrichment to Executive at the expense of the
Company, or (ii) Executive willfully and continually fails to substantially
perform his duties with the Company (other than any such failure resulting
from incapacity due to
3
mental or physical illness) after a written demand for substantial
performance is delivered to Executive by the Board which demand
specifically identifies the manner in which the Board believes that
Executive has not substantially performed his duties, and such failure
results in demonstrable material injury to the Company. This Agreement
shall in no event be considered terminated by the Company for Cause if such
termination was a result of (i) Executive's bad judgment or negligence, or
(ii) any act or omission without intent of gaining therefrom directly or
indirectly a profit to which Executive was not legally entitled, or (iii)
any act or omission by Executive believed in good faith to have been or not
opposed to the best interests of the Company, or (iv) any act or omission
by Executive with respect to which a determination shall have been made
that Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement of payment of expenses under the
regulations of the Company or the laws of the State of Ohio as in effect at
the time of such act or omission. This Agreement shall in no event be
considered terminated by the Company for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of two-thirds of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to Executive
and an opportunity for him, together with his counsel, to be heard before
the Board), finding that in the good faith opinion of the Board, Executive
was guilty of conduct set forth above in clauses (i) and (ii) of the first
sentence of this paragraph and specifying the particulars thereof in
detail.
b. WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON. In the event the
Company terminates this Agreement without Cause or Executive terminates
this Agreement for Good Reason, the Company shall pay to Executive for one
year the following:
(i) base salary plus bonus in amount equal to the amount earned
in the immediately preceding year, payable at least on a semi-monthly
basis. Executive's right to receive compensation from the Company
pursuant hereto shall not be affected by Executive's receipt of
compensation in connection with any subsequent employment by any other
corporation or entity;
(ii) Health Care Benefits commensurate with those provided by
the Company to other senior executives for Executive, his spouse and
eligible dependents; provided, however, that in no event will the
Health Care Benefits (but not including life insurance) be
substantially different or more expensive than those provided by the
Company to other senior executives;
4
(iii) the cost of relocation of Executive's belongings from
California to Copley, Ohio in an amount not to exceed $50,000; and
(iv) one-half of the cost of any outplacement services incurred
by Executive; provided that the amount payable by the Company shall
not exceed $20,000.
For purposes of this Agreement, "Good Reason" shall exist if (i) the
Company fails to honor its obligations hereunder, or (ii) the Company
requests Executive's resignation or retirement.
c. DEATH. In the event of Executive's death, the Company shall pay
to Executive's personal representative (i) base salary for one year,
payable at least on a semi-monthly basis, and (ii) Executive's bonus
through year-end. The Company shall also provide Health Care Benefits
commensurate with those provided by the Company to other senior executives
for Executive's spouse and eligible dependents for one year.
d. DISABILITY. In the event Executive becomes Disabled (as
hereinafter defined), the Company shall pay to Executive (i) base salary
for one year, payable at least on a semi-monthly basis, which year shall be
deemed to have commenced on the first day of the 180 day disability period
described below, and (ii) Executive's bonus through year-end. The Company
shall also provide Health Care Benefits commensurate with those provided to
other senior executives for Executive, his spouse and eligible dependents
for one year. For purposes of this Agreement, Executive shall be
considered "Disabled" only if, as a result of his incapacity due to mental
or physical illness, he shall have been absent from his duties with the
Company on a full-time basis for a period of 180 consecutive days, and (i)
a physician selected by him and approved by the Board is of the opinion
that he is suffering from total disability, and (ii) the Company has given
Executive 30 days written notice of potential termination, and within said
30 day period thereafter, Executive has not returned to the full-time
performance of his duties. During any period that Executive fails to
perform his duties hereunder due to mental or physical illness prior to
termination hereunder, Executive shall receive his full base salary at the
rate then in effect.
e. WITHOUT GOOD REASON. Executive may terminate the Agreement
without Good Reason upon 90 days written notice to the Company. In the
event Executive terminates the Agreement pursuant hereto, the Company
shall, at its option, (i) pay to Executive, at least on a semi-monthly
basis, an amount equal to his base salary for a period of one year or (ii)
release Executive from the non-competition provision contained in paragraph
5 hereof.
5
5. NON-COMPETITION. Upon termination of this Agreement for any reason,
except in the event this Agreement is terminated by Executive pursuant to
paragraph 4(e) hereof and the Company makes an election under clause (ii)
thereof, Executive agrees that (a) for a period of 12 months from the date of
such termination, he will not, directly or indirectly, own, manage, control or
participate in the ownership, management or control of, or be employed or
engaged by or otherwise affiliated or associated as a consultant, independent
contractor or otherwise with, any corporation, partnership, proprietorship, firm
or association or other business entity, or otherwise engage in any business
which is engaged in, or competes with the business of the Company or any of its
subsidiaries (as conducted on the date of such termination), and (b) for a
period of 12 months from the date of such termination, he will not, directly or
indirectly, employ or otherwise associate in business with any officer or
employee of the Company or any of its subsidiaries, induce any officer or
employee of the Company or any of its subsidiaries to terminate his or her
relationship with the Company or induce any officer or employee to solicit
business or have any interest in the ownership, management or control of any
concern which does solicit business from any customer of record of the Company
or any of its subsidiaries, which, to Executive's knowledge, was such at the
time of termination of this Agreement. In the event of any breach by Executive
of the restrictions in this paragraph, the Company shall be entitled to
immediate injunctive relief and may obtain a temporary order restraining any
threatened or future breach. Nothing in this paragraph shall be deemed to
limited the Company's remedies at law or in equity for any breach by Executive
hereof.
6. REGISTRATION RIGHTS AND SHAREHOLDER AGREEMENT. The Company covenants
that it will use its best efforts to cause the Registration Rights Agreement
and the Shareholder Agreement entered into by and among the Company, Executive
and certain shareholders of the Company to be amended to provide that the
incentive stock options granted pursuant to paragraph 3(c) of this Agreement
and the common shares of the Company to be received upon exercise thereof shall
be entitled to the same rights accorded to other shares owned by Executive
pursuant to those agreements. If Company is unable to cause the amendment of
said agreements, this Agreement shall be amended accordingly.
7. ASSIGNMENT. The rights of Executive under this Agreement are not
transferable by assignment or otherwise, shall not by subject to commutation or
encumbrance and shall not be subject to claims of Executive's creditors.
8. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of Executive and his heirs, and the Company and any successor thereto,
including any organization which shall succeed to substantially all of the
business and property of the Company, whether by means of merge, consolidation,
acquisition of substantially all of the assets of the Company or otherwise,
including by operation of law (a "Successor Organization"). The Company shall
not merge, reorganize,
6
consolidate, sell all or substantially all of its assets, combine by operation
of law or otherwise with or to any Successor Organization unless, as a
condition to such transaction, the Successor Organization assumes the
obligations of the Company under this Agreement. For purposes of this
Agreement, the "Company" shall include any Successor Organization.
9. MISCELLANEOUS. This Agreement supersedes and makes void any prior
agreement between the parties and sets forth the entire agreement and
understanding of the parties hereto with respect to the matters covered hereby
and may not be amended or modified except by further written agreement of the
parties. This Agreement shall be governed and construed by the laws of the
State of Ohio. The invalidity of any term of this Agreement shall not
invalidate or otherwise affect any other term.
IN WITNESS WHEREOF, the parties have set hereunto their hands as of the
date first above written.
XXXXXXX AIRCRAFT HOLDINGS, INC.
By: /s/ R. Xxxx XxXxxxx
----------------------------
Its:
---------------------------
/s/ R. Xxxx XxXxxxx
------------------------------
R. Xxxx XxXxxxx
7
EXHIBIT A
Options granted to Executive pursuant to Section 3(c)(i) of the Agreement
shall become exercisable as follows:
Level of Achievement Number of Shares
-------------------- ----------------
Upon execution of the Agreement 50,000
45,000
45,000
45,000
45,000
45,000
