April 15, 1999
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into as of March
1, 1999 (the "Effective Date"), by and between Aeroflex Incorporated, a Delaware
corporation, with its principal office located at 00 Xxxxx Xxxxxxx Xxxx,
Xxxxxxxxx, Xxx Xxxx 00000 (together with its successors and assigns permitted
under this Agreement, "Aeroflex") and Xxxxxxx Xxxxx, who resides at 000X Xxxx
Xxxx Xxxxx Xxxx, Xxxxxxxxxxx, Xxx Xxxx 00000 ("Xxxxx"), amends and restates in
its entirety the original agreement made and entered into as of July 1, 1994
between Aeroflex and Xxxxx, as subsequently amended through July 1, 1998 (the
"Prior Agreement").
WITNESSETH:
WHEREAS, Aeroflex has determined that it is in the best interests of
Aeroflex and its stockholders to continue to employ Xxxxx and to set forth in
this Agreement the obligations and duties of both Aeroflex and Xxxxx; and
WHEREAS, Aeroflex wishes to assure itself of the services of Xxxxx for the
period hereinafter provided, and Xxxxx is willing to be employed by Aeroflex for
said period, upon the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, Aeroflex and Xxxxx (individually a "Party" and
together the "Parties") agree as follows:
1. DEFINITIONS.
(a) "Beneficiary" shall mean the person or persons named by Xxxxx pursuant
to Section 17 below or, in the event that no such person is named who survives
Xxxxx, his estate.
(b) "Board" shall mean the Board of Directors of Aeroflex.
(c) "Cause" shall mean:
(i) Xxxxx'x conviction of a felony involving an act or acts of dishonesty
on his part and resulting or intended to result directly or indirectly in gain
or personal enrichment at the expense of Aeroflex;
(ii) willful and continued failure of Xxxxx to perform his obligations
under this Agreement, resulting in demonstrable material economic harm to
Aeroflex, or
(iii) a material breach by Xxxxx of the provisions of Sections 14 or 15
below to the demonstrable and material detriment of Aeroflex.
Notwithstanding the foregoing, in no event shall Xxxxx'x failure to perform
the duties associated with his position caused by his mental or physical
disability constitute Cause for his termination.
For purposes of this Section 1(c), no act or failure to act on the part of
Xxxxx shall be considered "willful" unless it is done, or omitted to be done, by
him in bad faith or without reasonable belief that his action or omission was in
the best interests of Aeroflex. Any act or failure to act based upon authority
given pursuant to a resolution adopted by the Board or based upon the advice of
counsel for Aeroflex shall be conclusively presumed to be done, or omitted to be
done, by Xxxxx in good faith and in the best interests of Aeroflex.
(d) "Change in Control" shall mean the occurrence of any of the following
events:
(i) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act") (a "Person") of beneficial ownership (within the
meaning of Rule 13d- 3 promulgated under the Exchange Act) of voting securities
of Aeroflex when such acquisition causes such Person to own 20 percent or more
of the combined voting power of the then outstanding voting securities of
Aeroflex entitled to vote generally in the election of directors (the
"Outstanding Aeroflex Voting Securities"); provided, however, that for purposes
of this subsection (i), the following acquisitions shall not be deemed to result
in a Change in Control: (A) any acquisition directly from Aeroflex, (B) any
acquisition by Aeroflex, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Aeroflex or any corporation controlled
by Aeroflex or (D) any acquisition pursuant to a transaction that complies with
clauses (A), (B) and (C) of subsection (iii) below; and provided, further, that
if any Person's beneficial ownership of the Outstanding Aeroflex Voting
Securities reaches or exceeds 20 percent as a result of a transaction described
in clause (A) or (B) above, and such Person subsequently acquires beneficial
ownership of additional voting securities of Aeroflex, such subsequent
acquisition shall be treated as an acquisition that causes such Person to own 20
percent or more of the Outstanding Aeroflex Voting Securities; or
(ii) individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by Aeroflex's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding for this purpose
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or
(iii) consummation of a reorganization, merger or consolidation or sale or
other disposition of all or subsequently all of the assets of Aeroflex or the
acquisition of assets of another entity ("Business Combination"); excluding,
however, such a Business Combination pursuant to which (A) all or substantially
all of the individuals and entities who were the beneficial owners of the
Outstanding Aeroflex Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60 percent of,
respectively, the then outstanding shares of common stock or the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a corporation that as
a result of such transaction owns Aeroflex or all or substantially all of
Aeroflex's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Aeroflex Voting Securities, (B) no
Person (excluding any employee benefit plan (or related trust) of Aeroflex or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20 percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) approval by the stockholders of Aeroflex of a complete liquidation or
dissolution of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" shall mean the Compensation Committee of the Board.
(g) "Consulting Period" shall mean the period specified in Section 13 below
during which Xxxxx serves as a consultant to Aeroflex.
(h) "Disability" shall mean the illness or other mental or physical
disability of Xxxxx, as determined by a physician acceptable to Aeroflex and
Xxxxx, resulting in his failure during the Employment Term or the Consulting
Period, as the case may be, (i) to perform substantially his applicable material
duties under this Agreement for a period of nine consecutive months and (ii) to
return to the performance of his duties within 30 days after receiving written
notice of termination.
(i) "Employment Term" shall mean the period specified in Section 2(b)
below.
(j) "Fiscal Year" shall mean the 12-month period beginning on July 1 and
ending on the next subsequent June 30, or such other 12-month period as may
constitute Aeroflex's fiscal year at any time hereafter.
(k) "Good Reason" shall mean, at any time during the Employment Term,
without Xxxxx'x prior written consent or his acquiescence:
(i) reduction in his then current Salary;
(ii) diminution, reduction or other adverse change in the bonus or
incentive compensation opportunities available to Xxxxx (with respect to the
level of bonus or incentive compensation opportunities, the applicable
performance criteria and otherwise the manner in which bonuses and incentive
compensation are determined) in the aggregate from those available as of the
Effective Date in accordance with Section 4(a) below;
(iii) Aeroflex's failure to pay Xxxxx any amounts otherwise vested and due
him hereunder or under any plan or policy of Aeroflex;
(iv) diminution of Xxxxx'x titles, position, authorities or
responsibilities, including not serving on the Board;
(v) assignment to Xxxxx of duties incompatible with his position as a
senior executive officer;
(vi) termination by Xxxxx of his employment within one year following a
Change in Control other than (a) by mutual agreement, (b) for Cause or (c) by
reason of Retirement, death or Disability;
(vii) imposition of a requirement that Xxxxx report other than directly to
Aeroflex's Chief Executive Officer or to the full Board;
(viii) a material breach of the Agreement by Aeroflex that is not cured
within 10 business days after written notification by Xxxxx of such breach; or
(ix)relocation of Aeroflex's corporate headquarters to a location more than
35 miles from the location first above described.
(l) "Retirement" shall mean termination of Xxxxx'x employment, other than
due to death, with eligibility to receive a benefit under the terms of
Aeroflex's Supplemental Executive Retirement Plan as then in effect.
(m) "Salary" shall mean the annual salary provided for in Section 3 below,
as adjusted from time to time.
(n) "Spouse" shall mean, during the Employment Term and the Consulting
Period, the woman who as of any relevant date is legally married to Xxxxx.
(o)"Subsidiary" shall mean any corporation of which Aeroflex owns, directly
or indirectly, more than 50 percent of its voting stock.
2. EMPLOYMENT TERM, POSITIONS AND DUTIES.
(a) Employment of Xxxxx. Aeroflex hereby continues to employ Xxxxx, and
Xxxxx hereby accepts continued employment with Aeroflex, in the positions and
with the duties and responsibilities set forth below and upon such other terms
and conditions as are hereinafter stated. Xxxxx shall render services to
Aeroflex principally at Aeroflex's corporate headquarters, but he shall do such
traveling on behalf of Aeroflex as shall be reasonably required in the course of
the performance of his duties hereunder.
(b) Employment Term. The Employment Term shall commence on the Effective
Date and shall terminate on June 30, 2004.
(c) Titles and Duties.
(i) Until the date of termination of his employment hereunder, Xxxxx shall
be employed as a senior executive officer of Aeroflex, reporting to the full
Board. In his capacity as a senior executive officer, Xxxxx shall have the
customary powers, responsibilities and authorities of senior executive officers
of corporations of the size, type and nature of Aeroflex including, without
limitation, authority, in conjunction with the Board as appropriate, to hire and
terminate other employees of Aeroflex.
(ii) During the Employment Term, Aeroflex shall uses its best efforts to
secure the election of Xxxxx to the Board. During the Employment Term, if the
Board forms an executive or similar committee, Xxxxx shall serve thereon.
(d) Time and Effort.
(i) Xxxxx agrees to devote his best efforts and abilities and his full
business time and attention to the affairs of Aeroflex in order to carry out his
duties and responsibilities under this Agreement.
(ii) Notwithstanding the foregoing, nothing shall preclude Xxxxx from (A)
serving on the boards of a reasonable number of trade associations, charitable
organizations and/or businesses not in competition with Aeroflex, (B) engaging
in charitable activities and community affairs and (C) managing his personal
investments and affairs; provided, however, that, such activities do not
materially interfere with the proper performance of his duties and
responsibilities specified in Section 2 (c) above.
3. SALARY.
(a) Initial Salary. Xxxxx shall receive from Aeroflex a Salary, payable in
accordance with the regular payroll practices of Aeroflex, in a minimum amount
of $350,000.
(b) Cost-of-Living Increase. During the Employment Term, Xxxxx'x Salary
shall be increased semiannually by an amount equal to the increase in the cost
of living for the immediately preceding calendar half-year, as reported in the
"Consumer Price Index, New York and Northeastern New Jersey, All Items,"
published by the United States Department of Labor, Bureau of Labor Statistics
(or, if such index is no longer published, a successor or comparable index that
is published). Such amount shall be calculated and paid to Xxxxx in a single sum
on or before the first day of the second month following the applicable calendar
half year, and thereafter his Salary shall be deemed to include the amount of
any such increase. The first calculation and payment shall be made on or before
August 1, 1999 with respect to the period July 1, 1998 through June 30, 1999. If
Xxxxx'x employment shall terminate during any such six-month period, the
cost-of-living increase provided in this Section 3(b) shall be prorated
accordingly.
(c) Salary Increase. Any amount to which Xxxxx'x Salary is increased, as
provided in Section 3(b) above or otherwise, shall not thereafter be reduced
without his consent, and the term "Salary" as used in this Agreement shall refer
to his Salary as thus increased.
4. BONUSES.
(a) Annual Bonus. For each Fiscal Year during the Employment Term Xxxxx
shall be eligible to receive an annual bonus equal to 3 percent of Aeroflex's
consolidated pre-tax earnings for such Fiscal Year, computed without regard to
any amount due under this Section 4(a). Any such bonus payable with respect to a
portion of a Fiscal Year shall be prorated accordingly. Xxxxx shall be entitled
to elect to defer, under the terms of any deferred compensation agreement or
annual incentive compensation plan applicable to him and then in effect, any
portion of his annual bonus that is not already subject to deferral thereunder.
(b) Special Bonus. Xxxxx shall be eligible to receive additional bonuses
during the Employment Term. The Committee shall determine, in its discretion,
the occasion for payment, and the amount, of any such bonus.
5. LONG-TERM INCENTIVE.
During the Employment Term, Xxxxx shall be eligible for an award under any
long-term incentive compensation plan established by Aeroflex for the benefit of
Xxxxx or, in the absence thereof, under any such plan established for the
benefit of members of the senior management of Aeroflex.
6. EQUITY OPPORTUNITY.
During the Employment Term, Xxxxx shall be eligible to receive grants of
options to purchase shares of Aeroflex's stock and awards of shares of
Aeroflex's stock, either or both as determined by the Committee, under and in
accordance with the terms of applicable plans of Aeroflex and related option and
award agreements. It is the intention of Aeroflex to grant stock options to
Xxxxx during the Employment Term. Also, to the extent permitted by any such
plan, Xxxxx shall be eligible during any Consulting Period to receive grants of
options and awards of shares of Aeroflex's stock in the same manner.
7. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.
During the Employment Term and any Consulting Period, Xxxxx shall be
entitled to prompt reimbursement by Aeroflex for all reasonable out-of-pocket
expenses incurred by him in performing services under this Agreement, upon his
submission of such accounts and records as may be reasonably required by
Aeroflex. In addition, Xxxxx shall be entitled to payment by Aeroflex of all
reasonable costs and expenses, including attorneys' and consultants' fees and
disbursements, incurred by him in connection with adoption of this Agreement and
any related compensatory arrangements that Aeroflex adopts solely for his
benefit.
8. PERQUISITES.
During the Employment Term and, and any Consulting Period, Aeroflex shall
provide Xxxxx with the following perquisites:
(a) an office of a size and with furnishings and other appointments, and
exclusive personal secretarial and other assistance, at least equal to that
provided to Xxxxx by Aeroflex as of the Effective Date; and
(b) the use of an automobile and payment of related expenses on the same
terms as are in effect on the Effective Date or, if more favorable to Xxxxx, as
are made available generally to other executive officers of Aeroflex at any time
thereafter.
9. EMPLOYEE BENEFIT PLANS.
(a) General. During the Employment Term, Xxxxx shall be entitled to
participate in all employee benefit plans and programs that are made available
to Aeroflex's senior executives or to its employees generally, as such plans or
programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit-sharing plans, savings and similar
plans, group life insurance, accidental death and dismemberment insurance,
travel accident insurance, hospitalization insurance, surgical insurance, major
and excess major medical insurance, dental insurance, short-term and long-term
disability insurance, sick leave (including salary continuation arrangements),
holidays, vacation (not less than four weeks in any calendar year) and any other
employee benefit plans or programs that may be sponsored by Aeroflex from time
to time, including plans that supplement the above-listed types of plans,
whether funded or unfunded.
(b) Medical Care Reimbursement and Insurance. During the Employment Term
and Consulting Period, Aeroflex shall reimburse Xxxxx for 100 percent of any
medical expenses incurred by him for himself and his Spouse that are not
reimbursed by insurance or otherwise, offset by any amounts that are
reimbursable by Medicare if Xxxxx and his Spouse, when eligible, elect to be
covered by Medicare. Aeroflex shall provide Xxxxx and his Spouse during his
lifetime with hospitalization insurance, surgical insurance, major and excess
major medical insurance and dental insurance in accordance with the most
favorable plans, policies, programs and practices of Aeroflex and its
Subsidiaries made available generally to other senior executive officers of
Aeroflex and its Subsidiaries as in effect from time to time.
(c) Life Insurance Benefit. In addition to the group life insurance
available to employees generally, Aeroflex shall provide Xxxxx with an
individual permanent life insurance benefit in an initial amount of not less
than approximately $1,000,000, the terms and conditions of such benefit to be
more fully described in an insurance ownership agreement between Xxxxx and
Aeroflex.
(d) Disability Benefit. In consideration of the benefit payable to Xxxxx in
the event of termination of his employment due to Disability, as provided in
Section 10(e) below, or, if applicable, in the event of termination of Xxxxx'x
consulting services due to Disability during the Consulting Period, as provided
in Section 13(d) below, Aeroflex shall not be obligated to provide Xxxxx with
long-term disability insurance. Notwithstanding the foregoing, if Aeroflex does
provide Xxxxx with such insurance, he shall be the owner of any individual
policies obtained and shall pay the premiums thereon.
(e) Retirement Benefit. Xxxxx shall be entitled to the benefits provided
under the Aeroflex Incorporated Supplemental Executive Retirement Plan (the
"SERP"); provided, however, that if Aeroflex fails to maintain the SERP, Xxxxx'x
retirement benefit shall be determined as if the SERP had remained in effect
until termination of his employment with Aeroflex by retirement. These benefits
are in addition to the benefits provided under this Agreement, and no
modification, amendment or termination of this Agreement shall affect Xxxxx'x
rights under the SERP as in effect on the Effective Date or, if more favorable
to Xxxxx, as in effect at any time thereafter.
10. TERMINATION OF EMPLOYMENT.
(a) Termination by Mutual Agreement. The Parties may terminate this
Agreement by mutual agreement at any time. If they do so, Xxxxx'x entitlements
shall be as the Parties mutually agree.
(b) General. Notwithstanding anything to the contrary herein, in the event
of termination of Xxxxx'x employment under this Agreement, he or his
Beneficiary, as the case may be, shall be entitled to receive (in addition to
payments and benefits under, and except as specifically provided in, subsections
(c) through (h) below, as applicable):
(i) his Salary through the date of termination;
(ii) any unused vacation from prior years;
(iii) any annual bonus for the current Fiscal Year, prorated to the date of
termination;
(iv) any annual or special bonus previously awarded but not yet paid to
him;
(v) any deferred compensation under any incentive compensation plan of
Aeroflex or any deferred compensation agreement then in effect;
(vi) any other compensation or benefits, including without limitation
long-term incentive compensation described in Section 5 above, benefits under
equity grants and awards described in Section 6 above and employee benefits
under plans described in Section 9 above, that have vested through the date of
termination or to which he may then be entitled in accordance with the
applicable terms and conditions of each grant, award or plan; and
(vii) reimbursement in accordance with Sections 9(a) and (b) above of any
business and medical expenses incurred by Xxxxx or his Spouse, as applicable,
through the date of termination but not yet paid to him.
(c) Termination due to Retirement. In the event that Xxxxx'x employment
terminates due to Retirement, he shall be entitled, in addition to the
compensation and benefits specified in Section 10(b), to the benefits provided
under the SERP, as provided in Section 9(e) above. The Consulting Period shall
begin on the day following termination of Xxxxx'x employment by Retirement.
(d) Termination due to Death. In the event that Xxxxx'x employment
terminates due to his death, his Beneficiary shall be entitled, in addition to
the compensation and benefits specified in Section 10(b), to his Salary payable
for the remainder of the Employment Term at the rate in effect immediately
before such termination.
(e) Termination due to Disability. In the event of Disability, Aeroflex or
Xxxxx may terminate Xxxxx'x employment. If Xxxxx'x employment terminates due to
Disability, he shall be entitled, in addition to the compensation and benefits
specified in Section 10(b), to his Salary payable for the remainder of the
Employment Term at the rate in effect immediately before such termination,
offset by any long-term disability insurance benefit that Aeroflex has provided
for him and for which it has paid the applicable group or individual insurance
premiums.
(f) Termination by Aeroflex for Cause. Aeroflex may terminate Xxxxx'x
employment hereunder for Cause only upon written notice to Xxxxx not less than
30 days prior to any intended termination, which notice shall specify the
grounds for such termination in reasonable detail. Cause shall in no event be
deemed to exist except upon a finding reflected in a resolution approved by a
majority (excluding Xxxxx) of the members of the Board (whose findings shall not
be binding upon or entitled to any deference by any court, arbitrator or other
decision-maker ruling on this Agreement) at a meeting of which Xxxxx shall have
been given proper notice and at which Xxxxx (and his counsel) shall have a
reasonable opportunity to present his case.
In the event that Xxxxx'x employment is terminated for Cause, he shall be
entitled only to the compensation and benefits specified in Section 10(b).
(g) Termination Without Cause or by Xxxxx for Good Reason.
(i) Termination without Cause shall mean termination of Xxxxx'x employment
by Aeroflex and shall exclude termination (A) due to Retirement, death,
Disability or Cause or (B) by mutual agreement of Xxxxx and Aeroflex. Aeroflex
shall provide Xxxxx 15 days' prior written notice of termination by it without
Cause, and Xxxxx shall provide Aeroflex 15 days' prior written notice of his
termination for Good Reason.
(ii) In the event of termination by Aeroflex of Xxxxx'x employment without
Cause or of termination by Xxxxx of his employment for Good Reason, he shall be
entitled, in addition to the compensation and benefits specified in Section
10(b), to:
(A) his Salary, payable for the remainder of the Employment Term at the
rate in effect immediately before such termination;
(B) annual bonuses for the remainder of the Employment Term (including a
prorated bonus for any partial Fiscal Year) equal to the average of the three
highest annual bonuses awarded to him during the ten Fiscal Years preceding the
Fiscal Year of termination, such bonuses to be paid at the same time annual
bonuses are regularly paid by Aeroflex to Xxxxx;
(C) continued medical reimbursement for the remainder of the Employment
Term and thereafter the lifetime medical benefits described in Section 9(b)
above;
(D) a lump-sum payment equal to the then present value of the excess, if
any, of (x) the retirement benefit to which Xxxxx would have been entitled if he
had remained employed under this Agreement until age 70 over (y) the early
retirement benefit actually payable to him, both as calculated and payable under
the SERP; and
(E) continued participation in all employee benefit plans or programs
available to Aeroflex employees generally in which Xxxxx was participating on
the date of termination of his employment until the end of the Employment Term;
provided; however, that (x) if Xxxxx is precluded from continuing his
participation in any employee benefit plan or program as provided in this clause
(E), he shall be entitled to the after-tax economic equivalent of the benefits
under the plan or program in which he is unable to participate until the end of
the Employment Term, and (y) the economic equivalent of any benefit foregone
shall be deemed to be the lowest cost that Xxxxx would incur in obtaining such
benefit on an individual basis; and
(F) other benefits in accordance with applicable plans and programs of the
Company.
(iii) Prior written consent by Xxxxx to any of the events described in
Section 1(k) above shall be deemed a waiver by him of his right to terminate for
Good Reason under this Section 10(g) solely by reason of the events set forth in
such waiver.
(h) Change in Control. Notwithstanding anything to the contrary in this
Section 10, termination of Xxxxx'x employment within the one-year period
following a Change in Control for any reason other than Cause, Retirement, death
or Disability, shall be governed by Section 10(g). In the event of any such
termination, Xxxxx shall be entitled to compensation and benefits in accordance
with the provisions of Section 10(g)(ii).
11. NO DUTY TO MITIGATE; NO OFFSET.
Xxxxx shall not be required to mitigate damages or the amount of any
payment provided for under this Agreement by seeking other employment or
otherwise, nor will any payment hereunder be subject to offset in the event
Xxxxx does receive compensation for services from any other source.
12. PARACHUTES.
(a) Application. If all, or any portion, of the payments provided under
this Agreement, and/or any other payments and benefits that Xxxxx receives or is
entitled to receive from Aeroflex or a Subsidiary, whether or not under an
existing plan, arrangement or other agreement, constitutes an "excess parachute
payment" within the meaning of Section 280G(b) of the Code (each such parachute
payment, a "Parachute Payment") and will result in the imposition on Xxxxx of an
excise tax under Section 4999 of the Code, then, in addition to any other
benefits to which Xxxxx is entitled under this Agreement, Aeroflex shall pay him
an amount in cash equal to the sum of the excise taxes payable by him by reason
of receiving Parachute Payments, plus the amount necessary to put him in the
same after-tax position (taking into account any and all applicable federal,
state and local excise, income or other taxes at the highest possible applicable
rates on such Parachute Payments (including without limitation any payments
under this Section 12) as if no excise taxes had been imposed with respect to
Parachute Payments (the "Parachute Gross-up").
(b) Computation. The amount of any payment under this Section 12 shall be
computed by a certified public accounting firm of national reputation selected
by Aeroflex and acceptable to Xxxxx. If Aeroflex or Xxxxx disputes the
computation rendered by such accounting firm, Aeroflex shall select an
alternative certified public accounting firm of national reputation to perform
the applicable computation. If the two accounting firms cannot agree upon the
computations, Xxxxx and Aeroflex shall jointly appoint a third certified public
accounting firm of national reputation within 10 calendar days after the two
conflicting computations have been rendered. Such third accounting firm shall be
asked to determine within 30 calendar days the computation of the Parachute
Gross-up to be paid to Xxxxx, and payments shall be made accordingly.
(c) Payment. In any event, Aeroflex shall pay to Xxxxx or pay on his behalf
the Parachute Gross-up as computed by the accounting firm initially selected by
Xxxxx by the time any taxes payable by him as a result of the Parachute Payments
become due, with Xxxxx agreeing to return the excess amount of such payment over
the final computation rendered from the process described in Section 12(b).
Xxxxx and Aeroflex shall provide the accounting firms with all information that
any of them reasonably deems necessary in order to compute the Parachute
Gross-up. The cost and expenses of all the accounting firms retained to perform
the computations described above shall be borne by Aeroflex.
In the event that the Internal Revenue Service ("IRS") or the accounting
firm computing the Parachute Gross-up finally determines that the amount of
excise taxes thereon initially paid was insufficient to discharge Xxxxx'x excise
tax liability, Aeroflex shall make additional payments to him as may be
necessary to reimburse him for discharging the full liability.
Xxxxx shall apply to the IRS for a refund of any excise taxes paid and
remit to Aeroflex the amount of any such refund that he receives. Aeroflex shall
reimburse Xxxxx for his expenses in seeking a refund of excise taxes and for any
interest and penalties imposed on excise taxes that he is required to pay.
13. CONSULTING PERIOD.
(a) General. Effective upon the end of the Employment Term (but only if the
Employment Term ends by reason of its expiration or, if earlier, upon
termination of Xxxxx'x employment (i) by mutual agreement or (ii) by
Retirement), Xxxxx shall become a consultant to Aeroflex, in recognition of the
continued value to Aeroflex of his extensive knowledge and expertise. Unless
earlier terminated, as provided in Section 13(e), the Consulting Period shall
continue for three years.
(b) Duties and Extent of Services.
(i) During the Consulting Period, Xxxxx shall consult with Aeroflex and its
senior executive officers regarding its respective businesses and operations.
Such consulting services shall not require more than 50 days in any calendar
year, nor more than one day in any week, it being understood and agreed that
during the Consulting Period Xxxxx shall have the right, consistent with the
prohibitions of Sections 14 and 15 below, to engage in full-time or part-time
employment with any business enterprise that is not a competitor of Aeroflex.
(ii) Xxxxx'x service as a consultant shall only be required at such times
and such places as shall not result in unreasonable inconvenience to him,
recognizing his other business commitments that he may have to accord priority
over the performance of services for Aeroflex. In order to minimize interference
with Xxxxx'x other commitments, his consulting services may be rendered by
personal consultation at his residence or office wherever maintained, or by
correspondence through mail, telephone, fax or other similar mode of
communication at times, including weekends and evenings, most convenient to him.
(iii) During the Consulting Period, Xxxxx shall not be obligated to serve
as a member of the Board or to occupy any office on behalf of Aeroflex or any of
its Subsidiaries.
(c) Compensation. During the Consulting Period, Xxxxx shall receive from
Aeroflex each year an amount equivalent to two-thirds of his Salary at the end
of the Employment Term, payable and subject to annual increase as provided in
Section 3 above.
(d) Disability. In the event of Disability during the Consulting Period,
Aeroflex or Xxxxx may terminate Xxxxx'x consulting services. If Xxxxx'x
consulting services are terminated due to Disability, he shall be entitled to
compensation, in accordance with Section 13(c), for the remainder of the
Consulting Period.
(e) Termination. The Consulting Period shall terminate after three years
or, if earlier, upon Xxxxx'x death or upon his failure to perform consulting
services as provided in Section 13(b), pursuant to 30 days' written notice by
Aeroflex to Xxxxx of the grounds constituting such failure and reasonable
opportunity afforded Xxxxx to cure the alleged failure. Upon any such
termination, payment of consulting fees and benefits (with the exception of
lifetime medical benefits under Section 9(b) above) shall cease.
(f) Other. During the Consulting Period, Xxxxx shall be entitled to expense
reimbursement (including secretarial, telephone and similar support services)
and perquisites and medical benefits, pursuant to the terms of Sections 7, 8 and
9(b), respectively.
14. CONFIDENTIAL INFORMATION.
(a) General.
(i) Xxxxx understands and hereby acknowledges that as a result of his
employment with Aeroflex he will necessarily become informed of and have access
to certain valuable and confidential information of Aeroflex and any of its
Subsidiaries, joint ventures and affiliates, including, without limitation,
inventions, trade secrets, technical information, computer software and
programs, know-how and plans ("Confidential Information"), and that any such
Confidential Information, even though it may be developed or otherwise acquired
by Xxxxx, is the exclusive property of Aeroflex to be held by him in trust
solely for Aeroflex's benefit.
(ii) Accordingly, Xxxxx hereby agrees that, during the Employment Term and
the Consulting Period and subsequent to both, he shall not, and shall not cause
others to, use, reveal, report, publish, transfer or otherwise disclose to any
person, corporation or other entity any Confidential Information without prior
written consent of the Board, except to (A) responsible officers and employees
of Aeroflex or (B)_responsible persons who are in a contractual or fiduciary
relationship with Aeroflex or who need such information for purposes in the
interest of Aeroflex. Notwithstanding the foregoing, the prohibitions of this
clause (ii) shall not apply to any Confidential Information that becomes of
general public knowledge other than from Xxxxx or is required to be divulged by
court order or administrative process.
(b) Return of Documents. Upon termination of his employment with Aeroflex
for any reason or, if applicable, upon expiration of the Consulting Period,
Xxxxx shall promptly deliver to Aeroflex all plans, drawings, manuals, letters,
notes, notebooks, reports, computer programs and copies thereof and all other
materials, including without limitation those of a secret or confidential
nature, relating to Aeroflex's business that are then in his possession or
control.
(c) Remedies and Sanctions. In the event that Xxxxx is found to be in
violation of Section 14(a) or (b) above, Aeroflex shall be entitled to relief as
provided in Section 16 below.
15. NONCOMPETITION/NONSOLICITATION.
(a) Prohibitions. During the Employment Term and, if applicable, the
Consulting Period, Xxxxx shall not, without prior written authorization of the
Board, directly or indirectly, through any other individual or entity:
(i) become on officer or employee of, or render any service to, any direct
competitor of Aeroflex;
(ii) solicit or induce any customer of Aeroflex to cease purchasing goods
or services from Aeroflex or to become a customer of any competitor of Aeroflex;
or
(iii) solicit or induce any employee of Aeroflex to become employed by any
competitor of Aeroflex.
(b) Remedies and Sanctions. In the event that Xxxxx is found to be in
violation of Section 15(a) above, Aeroflex shall be entitled to relief as
provided in Section 16 below.
(c) Exceptions. Notwithstanding anything to the contrary in Section 15(a)
above, its provisions shall not:
(i) apply if Aeroflex terminates Xxxxx'x employment without Cause or Xxxxx
terminates his employment for Good Reason, each as provided in Section 10(g)
above; or
(ii) be construed as preventing Xxxxx from investing his assets in any
business that is not a direct competitor of Aeroflex.
16. REMEDIES/SANCTIONS.
Xxxxx acknowledges that the services he is to render under this Agreement
are of a unique and special nature, the loss of which cannot reasonably or
adequately be compensated for in monetary damages, and that irreparable injury
and damage may result to Aeroflex in the event of any breach of this Agreement
or default by Xxxxx. Because of the unique nature of the Confidential
Information and the importance of the prohibitions against competition and
solicitation, Xxxxx further acknowledges and agrees that Aeroflex will suffer
irreparable harm if he fails to comply with his obligations under Section 14(a)
or (b) above or Section 15(a) above and that monetary damages would be
inadequate to compensate Aeroflex for any such breach. Accordingly, Xxxxx agrees
that, in addition to any other remedies available to either Party at law, in
equity or otherwise, Aeroflex will be entitled to seek injunctive relief or
specific performance to enforce the terms, or prevent or remedy the violation,
of any provisions of this Agreement.
17. BENEFICIARIES/REFERENCES.
Xxxxx shall be entitled to select (and change, to the extent permitted
under any applicable law) a beneficiary or beneficiaries to receive any
compensation or benefit payable under this Agreement following his death by
giving Aeroflex written notice thereof; provided, however, that absent any then
effective contrary notice, his beneficiary shall be his surviving Spouse. In the
event of Xxxxx'x death, or of a judicial determination of his incompetence,
reference in this Agreement to Xxxxx shall be deemed to refer, as appropriate,
to his beneficiary, estate or other legal representative.
18. WITHHOLDING TAXES.
All payments to Xxxxx or his Beneficiary under this Agreement shall be
subject to withholding on account of federal, state and local taxes as required
by law.
19. INDEMNIFICATION AND LIABILITY INSURANCE.
Nothing herein is intended to limit Aeroflex's indemnification of Xxxxx,
and Aeroflex shall indemnify him to the fullest extent permitted by applicable
law consistent with Aeroflex's Certificate of Incorporation and By-Laws as in
effect on the Effective Date, with respect to any action or failure to act on
his part while he is an officer, director or employee of Aeroflex or any
Subsidiary. Aeroflex shall cause Xxxxx to be covered at all times by directors'
and officers' liability insurance on terms no less favorable than the directors'
and officers' liability insurance maintained by Aeroflex as in effect on the
Effective Date in terms of coverage and amounts. Aeroflex shall continue to
indemnify Xxxxx as provided above and maintain such liability insurance coverage
for him after the Employment Term and, if applicable, the Consulting Period for
any claims that may be made against him with respect to his service as a
director or officer of Aeroflex or a consultant to Aeroflex.
20. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict Xxxxx'x
entitlement to participate fully in compensation, employee benefit and other
plans of Aeroflex in which senior executives are eligible to participate.
21. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of Xxxxx) and
assigns. No rights or obligations of Aeroflex under this Agreement may be
assigned or transferred by Aeroflex except pursuant to (a) a merger or
consolidation in which Aeroflex is not the continuing entity or (b) sale or
liquidation of all or substantially all of the assets of Aeroflex, provided that
the surviving entity or assignee or transferee is the successor to all or
substantially all of the assets of Aeroflex and such surviving entity or
assignee or transferee assumes the liabilities, obligations and duties of
Aeroflex under this Agreement, either contractually or as a matter of law.
Aeroflex further agrees that, in the event of a sale of assets or
liquidation as described in the preceding sentence, it shall use its best
efforts to have such assignee or transferee expressly agree to assume the
liabilities, obligations and duties of Aeroflex hereunder; provided, however,
that notwithstanding such assumption, Aeroflex shall remain liable and
responsible for fulfillment of the terms and conditions of this Agreement; and
provided, further, that in no event shall such assignment and assumption of this
Agreement adversely affect Xxxxx'x right upon a Change in Control, as provided
in Section 10(h) above. No rights or obligations of Xxxxx under this Agreement
may be assigned or transferred by him.
22. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his obligations, as the case may be, under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization. Aeroflex represents and warrants that this Agreement has been
duly authorized by all necessary corporate action and is valid, binding and
enforceable in accordance with its terms.
23. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersedes any prior agreements, whether written or oral,
between the Parties concerning the subject matter hereof, including without
limitation the Prior Agreement. Payments and benefits provided under this
Agreement are in lieu of any payments or other benefits under any severance
program or policy of Aeroflex to which Xxxxx would otherwise be entitled.
24. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Xxxxx and an authorized officer of
Aeroflex. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Party to be charged with the waiver. No delay by either Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
25. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
26. SURVIVAL.
The respective rights and obligations of the Parties under this Agreement
shall survive any termination of Xxxxx'x employment with Aeroflex.
27. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York, without reference to principles of
conflict of laws.
28. COSTS OF DISPUTES.
Aeroflex shall pay, at least monthly, all costs and expenses, including
attorneys' fees and disbursements, of Xxxxx in connection with any proceeding,
whether or not instituted by Aeroflex or Xxxxx, relating to any provision of
this Agreement, including but not limited to the interpretation, enforcement or
reasonableness thereof; provided, however, that, if Xxxxx institutes the
proceeding and the judge or other decision-maker presiding over the proceeding
affirmatively finds that his claims were frivolous or were made in bad faith, he
shall pay his own costs and expenses and, if applicable, return any amounts
theretofore paid to him or on his behalf under this Section 28. Pending the
outcome of any proceeding, Aeroflex shall pay Xxxxx all amounts due to him
without regard to the dispute; provided, however, that if Aeroflex shall be the
prevailing party in such a proceeding, Xxxxx shall promptly repay all amounts
that he received during pendency of the proceeding.
29. NOTICES.
Any notice given to either Party shall be in writing and shall be deemed to
have been given when delivered either personally, by fax, by overnight delivery
service (such as Federal Express) or sent by certified or registered mail
postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as the Party may
subsequently give notice of.
If to Aeroflex or the Board:
Aeroflex Incorporated
00 Xxxxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxx
FAX: (000) 000-0000
If to Xxxxx:
Xxxxxxx Xxxxx
000X Xxxx Xxxx Xxxxx Xxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
30. HEADINGS.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
31. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
Aeroflex Incorporated
Attest: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxxx X. Xxxx
------------------- ----------------------
Chairman of The Board
Witness:/s/ Xxxxx X. Xxxxxxxxx /s/ Xxxxxxx Xxxxx
---------------------- ----------------------
Xxxxxxx Xxxxx
