EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of the 26th
day of November, 1997 by and between Compass Aerospace Corporation, a Delaware
corporation (the "Company") and Xxxxxxxxx Xxxx (the "Executive").
RECITALS
WHEREAS, Company wishes to employ the Executive and Executive wishes to
accept employment upon the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the parties agree as follows:
1. Employment.
Company hereby employs and engages the services of Executive in the
position of President for the Term of Employment set forth in Section 2.
Executive agrees to serve Company for the Term of Employment as provided herein.
2. Term of Employment.
2.1 Initial Term. Executive's "Term of Employment" shall initially be for
a period of five (5) years, commencing on the effective date and ending five (5)
years thereafter (the "Initial Term").
2.2 Extension of Term. Upon expiration of the Initial Term, Executive's
Term of Employment shall automatically be extended for additional one (1) year
periods unless the Company or the Executive notifies the other party in writing
at least sixty (60) days prior to the end of the then current Term of Employment
of its intention to terminate this Agreement. Notwithstanding anything herein to
the contrary, the Term of Employment shall terminate upon the Executive's death
or permanent disability, or upon the Company's termination of Executive pursuant
to Section 7, hereof.
3. Position and Duties. During the Term of Employment:
(a) Executive shall perform services as President of the Company
subject to the direction and control of the Chairman of the Company's Board of
Directors (the "Chairman"). Executive shall perform such services and duties to
the best of his abilities, and shall perform such services and duties at such of
the Company's facilities as may be requested by
the Company. Executive shall also provide such services and duties to any of the
Company's subsidiaries and affiliates as shall be directed from time to time by
the Chairman.
(b) Executive agrees to devote his full business time to the
business and affairs of the Company, and to use his best efforts to promote the
interests of Company and to perform faithfully and efficiently the
responsibilities assigned to him in accordance with the terms of this Agreement
to the extent necessary to satisfactorily discharge such responsibilities.
Executive shall not, without the Board's prior consent, render to others
services of any kind for compensation, or engage in any other business activity
that would materially interfere with the performance of his responsibilities
under this Agreement. It is expressly understood and agreed that it shall not be
a violation of this Agreement for Executive to serve on corporate, civic or
charitable boards or committees, so long as such activities do not materially
interfere with the performance of such responsibilities or reflect adversely on
Company to any material extent.
4. Results and Proceeds.
As Executive's employer, Company shall, by virtue of such relationship,
own all rights in and to the results and proceeds directly or indirectly
connected with, or arising out of, Executive's services hereunder.
5. Compensation and Benefits.
5.1 Base Salary. During the Initial Term, Company shall compensate
Executive for the services to be rendered hereunder at an annual rate of Two
Hundred Fifty Thousand Dollars ($250,000) for the first year (the "Base Salary")
with an annual review each year thereafter. Executive understands and agrees
that Company has no obligation to increase his base salary as a result of such
evaluations. Such Base Salary shall be payable to Executive beginning on January
2, 1998 in equal bi-weekly installments or at such other intervals as salary is
normally paid by Company to its executive employees (except during any unpaid
vacation), subject to the usual or required employee payroll deductions and
withholdings. Notwithstanding anything to the contrary, Company will pay
Executive One Thousand Dollars ($1,000) covering the period of employment from
the date hereof until December 26, 1997, and Twenty Thousand Dollars ($20,000)
covering the period of employment from December 27, 1997 until January 1, 1998,
payable on January 2, 1998.
5.2 Reimbursement of Expenses. During the Term of Employment, Executive
shall be entitled to receive prompt reimbursement for all reasonable and
necessary business expenses incurred by Executive in connection with his
performance of services under this Agreement in accordance with Company's then
prevailing policies and procedures (which requirements shall include appropriate
itemization and substantiation of all such expenses incurred). Executive shall
be personally liable for any violation of these terms.
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5.3 Personal Paid Time. Executive shall be entitled to holidays specified
by the Company and personal paid time (" Personal Paid Time") (including,
without limitation four weeks' paid vacation and customary holidays) in
accordance with the policy applicable to Company employees and shall not be
entitled to paid vacation or sick time other than Personal Paid Time. Personal
Paid Time shall consist solely of a continuation of Executive's Base Salary, and
Executive shall be entitled to no additional compensation during Personal Paid
Time. Executive shall only be allowed to carry over into the next fiscal year
ten (10) days of unused Personal Paid Time. All remaining unused Personal Paid
Time will be cashed out.
5.4 Stock Options. Within 180 days of the date hereof, the Company shall
adopt a Stock Option Plan (the "Plan"), pursuant to which Executive shall be
granted a stock option to purchase 416,667 shares of common stock of the Company
(the "Common Stock@) with an exercise price equal to $1 per share. Such option
will vest with respect to 70,376 shares of Common Stock immediately and with
respect to the remaining 346,291 shares on the second anniversary of the date
hereof, and will be subject to standard repurchase and exercise provisions as
stated in the Plan, including without limitation (i) customary antidilution
protection as relates to the number of shares subject to such option (e.g., in
the event of stock splits) but excluding antidilution protection as relates to
the percentage of Common Stock subject to such option (e.g., in the event of new
stock issuances), and (ii) immediate vesting in the event that Executive is
terminated without cause, dies or becomes disabled; provided, however, that such
option will immediately vest in its entirety if any entity other than Compass
Holdings, LLC or its successors acquires 51% or more of the Common Stock or if
the Company sells all or substantially all of Company's assets. Executive shall
also be granted stock options to purchase up to an additional 250,000 shares of
Common Stock as follows: Executive shall be granted options to purchase 62,500
shares on March 1, 1999; 62,500 shares on March 1, 2000; 62,500 shares on March
1, 2001, and 62,500 shares on March 1, 2002; provided in each case that no such
options shall be granted in any year unless the Company's EBITDA for the
applicable prior year is in excess of 35% of the weighted average during such
year of the aggregate purchase prices paid for the enterprise values of all
acquired businesses constituting the Company.
5.5 Executive's Representations Regarding Stock. Executive represents that
he has retained and consulted with his own professional advisors to review and
evaluate the economic, tax and other consequences of the stock options. The
Executive further represents that any interest he may acquire will be acquired
for investment purposes only and that he understands that there is no public
market for any of the securities comprising the stock options and that the
securities he will receive are subject to restrictions on both transferability
and resale, and may not be transferred or resold except as permitted under the
Securities Act of 1933, as amended, and the applicable state securities laws,
pursuant to registration or exemption therefrom. The shares of stock issuable to
the Executive shall bear an appropriate legend setting out restrictions on
transfer and the fact that the securities have not been registered.
5.6 Withholding on Stock Options. The Company shall deduct from all stock
issued under the stock options any federal, state, or local taxes required by
law to be withheld with
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respect to such payments. In the alternative, the Executive may pay to the
Company the amount of any such taxes which the Company is required to withhold
with respect to the issuance of stock.
5.7 Restrictions on Transfer of Shares. The shares issuable to Executive
will be transferable only in accordance with the terms of this Agreement. The
Company is hereby granted an option to purchase Executive's shares if either
Executive terminates employment, other than by death or permanent disability, or
elects to sell or otherwise transfer title to the shares. The option price shall
be fair market value as agreed by the parties, or if the parties cannot agree,
as determined by an independent appraiser mutually agreed by the parties, except
in the case of an offer to purchase by a third party, in which case the option
price shall be the lesser of fair market value and the price offered by the
third party.
6. Covenants. Executive covenants in favor of Company as follows:
6.1 Trade Secrets of Others. Executive represents that Executive's
performance of all the terms of this Agreement does not and will not breach any
agreement to keep in confidence proprietary information, material or trade
secrets acquired by Executive in confidence or in trust prior to Executive's
rendering of services to Company. Executive agrees not to enter into any
agreement either written or oral in conflict herewith.
6.2 Confidentiality; Trade Secrets. Executive acknowledges that his
position with Company is one of the highest trust and confidence both by reason
of his position and by reason of his access to and contact with the trade
secrets and confidential and proprietary business information of Company,
Executive agrees that during the Term of Employment and thereafter:
(a) He shall protect and safeguard the trade secrets and
confidential and proprietary information of Company, including (by way of
illustration and not limitation) its arrangements with vendors, customers and
joint venture partners (referred to collectively as the company's
"contractors"); its data, records, patents, licenses, trademarks, copyrights,
compilations of information, processes, programs, know-how, improvements,
discoveries, marketing plans, strategies, forecasts, unpublished financial
statements, budgets, projections, licenses, prices, costs, files, documents,
drawings, memoranda, notes, or other documents, whether maintained
electronically or in hard copy (all such information is hereinafter called the
"Proprietary Information"); other than information known to him before the date
hereof and learned from third parties without breach of any obligation of
confidentiality or otherwise to Company, or in the public domain;
(b) He shall not disclose any of such Proprietary Information,
except as may be required in the ordinary course of performing his duties as an
employee of Company; and
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(c) He shall not use, directly or indirectly, for his own benefit or
for the benefit of another, any of such Proprietary Information, other than for
the benefit of Company as may be required in the ordinary course of performing
his duties as an employee of Company.
The Proprietary Information shall be the exclusive property of Company,
Executive agrees that he shall deliver to Company all files, records, documents,
drawings, memoranda, and other materials, whether electronic or hard copy,
relating to the Proprietary Information or pertaining to his work with Company
in the event of either Company's request or the termination of his employment
for any reason, and that he will not take with him any of the foregoing or any
reproduction of any of the foregoing.
6.3 Remedies for Breach of Covenants of Executive. The covenants set forth
in Section 6 of this Agreement shall continue to be binding upon Executive,
notwithstanding the termination of his employment with Company for any reason
whatsoever. Such covenants shall be deemed and construed as separate agreements
independent of any other provisions of this Agreement and any other agreement
between Company and Executive. The existence of any claim or cause of action by
Executive against Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Company of any or all of
such covenants. It is expressly agreed that the remedy at law for the breach of
any such covenants is inadequate and that injunctive relief shall be available
to prevent the breach of any threatened breach thereof.
6.4 Litigation. Executive agrees that during the Term of Employment or
thereafter, Executive shall do all things, including the giving of evidence in
suits and other proceedings, which Company shall deem necessary to obtain,
maintain, defend or assert rights accruing to Company during the Term of
Employment and in connection with which Executive has knowledge, information and
expertise. All reasonable expenses incurred by Executive during the Term of
Employment or thereafter in fulfilling the duties set forth in this Section,
shall be reimbursed by Company to the full extent legally appropriate including,
without limitation, a reasonable payment for Executive's time in the event this
Agreement has terminated prior to the time Executive renders such duties.
6.5 Future Cooperation. The Parties hereto agree to cooperate with each
other without additional compensation from and after the date hereof, to supply
any information and to execute documents reasonably required for the purposes of
giving effect to this Agreement, or in connection with the consummation of any
actions contemplated hereby.
7. Termination of Employment. This Agreement and the employment of Employee
hereunder shall terminate upon the occurrence of the first to occur of the
following events or conditions, and the parties shall remain subject to the
following conditions and covenants after termination:
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7.1 Expiration of Term. This Agreement shall terminate upon expiration of
the term specified in Section 2 hereof.
7.2 Death or Incapacity. This Agreement shall automatically terminate upon
the death or Incapacity of Executive. "Incapacity" shall mean Executive's
inability by reason of mental or physical condition to perform substantially all
of his duties and responsibilities hereunder for a continuous period of three
(3) months or more, or for any aggregate period of four (4) months or more in
any twelve-month period whether or not continuous. In the event of a dispute as
to the existence of any such disability, Executive agrees to submit to medical
or psychiatric examinations conducted by physicians mutually agreed upon by
Company and Executive and to be bound by any determination made by such
physicians.
7.3 Cause. Company may terminate Executive's employment for Cause. "Cause"
shall mean (i) a determination by Company in its sole discretion exercised in
good faith that there has been substantial misconduct (including, without
limitation, any willful failure to implement reasonable or proper material
policies or procedures established by Company for the transaction of business by
Company) or neglect by Executive of Executive's duties hereunder, a breach or
non-observance by Executive of any of the covenants of Executive contained
herein, or Executive's failure within a reasonable time after written notice to
correct any performance deficiency specified in the notice to the satisfaction
of Company; or (ii) Executive's embezzlement, fraud, acceptance of a bribe or
kickback or other similar act for Executive's personal benefit or to the
detriment of Company on Executive's part. Executive's termination for Cause
shall be effective immediately upon notice to Executive. If Executive's
employment is terminated for Cause, or if Executive voluntarily terminates his
employment, Company shall pay Executive his pro rata Base Salary through the
effective date of the termination of his employment (which shall be no earlier
than the date of receipt of notice thereof) at the rate in effect at the time of
such termination, and Company shall have no further obligations to Executive
under this Agreement. Executive shall forfeit all benefits and rights granted
pursuant to Section 5 which have not vested as of the effective date of
termination.
7.4 Other Than For Cause. Company may terminate Executive other than for
Cause and in such case, shall pay Executive his pro rata Base Salary through the
effective date of the termination of his employment, and an amount equal to the
aggregate unpaid cash compensation contemplated to be paid to Executive from
such date until the end of the Term, payable monthly. Further, all amounts which
are vested benefits to which the Executive is entitled under any employee's
benefits plan of the Company shall be payable in accordance with the terms of
such benefits plan. Executive's termination other than for Cause shall be
effective immediately upon notice to Executive.
7.5 Continuation of Covenants. Notwithstanding termination of his
employment pursuant to the provisions of this Section 7, the obligations of
Executive set forth in Sections 5.2, 5.7, 6, 11, and 12 herein shall survive the
termination of this Agreement.
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8. Equity. The Parties hereto agree that the services to be rendered by
Executive are special, unique and of an extraordinary character. In the event of
the breach by Executive of any of the provisions of this Agreement, Company, in
addition and as a supplement to such other rights and remedies as may exist in
its favor, may apply to any court of law or equity having jurisdiction to
enforce the specific performance of this Agreement, and/or may apply for
injunctive relief against any act which would violate any of the provisions of
this Agreement.
9. Assignment.
9.1 By Executive. This Agreement is personal to Executive and without the
prior written consent of Company (which consent may be withheld in Company's
sole discretion), shall not be assignable by Executive. Executive shall not have
the right to sell, transfer or assign the right to receive payments or benefits
hereunder, and any such attempted assignment or transfer shall at the option of
Company, terminate this Agreement for Cause.
9.2 By Company. The provisions of this Agreement shall inure to the
benefit of and be binding upon Company, its successors and assigns, including
without limitation any corporation which may acquire all or substantially all of
Company's assets and business, or with or into which Company may be
consolidated, merged or reorganized. Upon any such merger, consolidation or
reorganization, the term "Company" as used herein shall be deemed to refer to
such successor corporation.
10. Severability. In case one or more provisions of this Agreement shall for any
reason be held by an arbitrator or court of competent jurisdiction to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the validity or enforceability of any other
provision of this Agreement. In the event any provision of this Agreement is
determined by an arbitrator or court to be unenforceable by reason of its being
extended for too great a period of time or over too great a range of activities,
the parties hereto agree that the affected provision shall be interpreted to
extend only over the maximum period of time or range of activities as to which
it may be enforceable.
11. Arbitration of Disputes. Except as otherwise provided herein, any dispute or
controversy arising from or relating to this Agreement, or from any other aspect
of Executive's employment or the termination thereof, including but not limited
to alleged violations of federal, state and/or local statutes (for example,
claims for discrimination including but not limited to discrimination based on
race, sex, sexual orientation, religion, national origin, age, marital status,
medical condition as defined under California law, handicap or disability; and
claims relating to leaves of absence mandated by state or federal law), breach
of any contract or covenant (express or implied), tort claims, violation of
public policy or any other alleged violation of Executive's statutory,
contractual or common law rights (and including claims against the Company's
officers, directors, employees or agents), which Executive and the Company or
other party are unable to resolve through direct discussion, regardless of the
kind or type of dispute (excluding claims for workers' compensation,
unemployment insurance and any solely monetary dispute
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within the jurisdiction of small claims court) shall be decided exclusively by
final and binding arbitration in the County of Los Angeles, State of California,
in accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association. Any such dispute shall be submitted to AAA within one
(1) year of the date when the dispute first arose, or within one (1) year of the
termination of the employment, whichever occurs first. Any failure to timely
request arbitration shall constitute a waiver of all rights to raise any claims
in any forum arising out of any dispute that was subject to arbitration.
Executive hereby waives the right to pursue employment termination-related
claims, unless otherwise provided by law, except those specifically excluded
herein. Executive and the Company each have the right to be represented by
counsel with respect to arbitration of any dispute pursuant to this paragraph.
At the request of either Company or Executive, arbitration proceedings shall be
conducted in the utmost secrecy, and, in such case, all documents, testimony and
records shall be received, heard and maintained by the arbitrator in secrecy,
available for inspection only by Company or by Executive and their respective
attorneys and experts who shall agree, in advance and in writing, to receive all
such information confidentially and to maintain the secrecy of such information
until such information shall become generally known.
12. Governing Law. This Agreement, and each and every related document, are to
be governed by and construed in accordance with the laws of the State of
California.
13. Notices. All notices, requests, demands or other communications hereunder
shall be in writing and shall be addressed as follows:
To Company: Compass Aerospace Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Fax: 000-000-0000
To Executive: Xx. Xxxxxxxxx Xxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx, XX 00000
or such other addresses as a party may from time to time specify in writing to
the other in accordance with this notice provision. All notices hereunder shall
be effective: (a) four (4) days after deposit in the United Sates mail, postage
prepaid, registered or certified mail, return receipt requested; or (b) upon
delivery, if delivered in person to the address set forth above, sent by
commercial courier, overnight service, e-mail or by facsimile.
14. Entire Agreement. This Agreement constitutes the entire understanding among
the Parties, and supersedes any and all prior agreements, arrangements and
understandings, both written and oral. No change, supplement, amendment,
modification, waiver or termination of
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this Agreement or any provisions contained herein shall be binding unless
executed in writing by the Chairman.
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the date first above written.
COMPASS AEROSPACE CORPORATION,
a Delaware corporation
"Compass"
By: /s/ Xxxxxxx X. Xxxxx
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Its: Chairman of the Board
---------------------------------
XXXXXXXXX XXXX
"Executive"
/s/ Xxxxxxxxx Xxxx
------------------------------------------
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