EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (“Agreement”), is executed and delivered this ___day of May,
2006, effective as of April 22, 2006 (the “Effective Date”) by and between TIMCO AVIATION SERVICES,
INC., a Delaware corporation (the “Company”), and XXXX X. XXXXXXXX (the “Employee”).
In consideration of the mutual representations, warranties, covenants and agreements contained
in this Agreement and other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Employment.
(a) Retention. The Company agrees to employ Employee as its Chairman of the Board and
Chief Executive Officer, and Employee agrees to accept such employment, subject to the terms and
conditions of this Agreement. Further, Employee shall serve pursuant to this Agreement as an
officer and director of each subsidiary of the Company.
(b) Employment Period. The Employee commenced services as an employee of the Company
under this Agreement as of the Effective Date. This Agreement shall commence as of the Effective
Date and, unless earlier terminated pursuant to this Agreement or extended through agreement of the
parties, shall expire on April 30, 2008. Thereafter, this Agreement shall automatically renew for
consecutive one year periods unless terminated by either party by six months written notice prior
to the expiration of the initial term or any renewal term. For purposes of this Agreement, the
initial employment term and any renewal term thereof are collectively referred to herein as the
“Employment Period.”
(c) Duties and Responsibilities. During the Employment Period, the Employee shall
serve as Chairman and Chief Executive Officer of the Company. In such role, Employee shall have
such authority and responsibility and perform such duties as are customary to Employee’s office and
as are necessary or appropriate to the business and operations of the Company, subject to the
direction of the Company’s Board of Directors (“Board”). During the Employment Period, the
Employee’s employment shall be full time. Employee shall perform his duties honestly, diligently,
in good faith and in the best interests of the Company, and Employee shall use his best efforts to
promote the interests of the Company.
(d) Other Activities. Except upon the prior written consent of the Company, the
Employee, during the Employment Period, will not accept any other employment. The Employee shall
be permitted to serve in ventures such as passive real estate investments, serving on charitable
and civic boards and organizations, and similar activities, so long as such activities do not
materially interfere with or detract from the performance of Employee’s duties or constitute a
breach of any of the provisions contained in this Agreement.
2. Compensation.
(a) Base Salary. In consideration for the Employee’s services hereunder and the
restrictive covenants contained herein, the Employee shall be paid an annual base salary (“Salary”)
of $400,000 per annum from the Effective Date until the end of the Employment
Period. Payments hereunder shall be made in accordance with the Company’s customary payroll
practices. Notwithstanding the foregoing, Employee’s annual Salary may be increased at anytime and
from time to time to levels greater than the level set forth in the preceding sentence at the
discretion of the Compensation Committee (the “Committee”) of the Board of the Company to reflect
merit or other increases.
(b) Bonus. In addition to the Salary, the Employee shall be eligible to receive an
annual bonus (“Bonus”) equal to 100% of the Employee’s Salary. The Bonus shall be based on the
achievement of corporate goals and objectives as established by the Committee or the Board. The
achievement of said goals and objectives shall be determined by the Committee or the Board. With
respect to any Fiscal Year during which the Employee is employed by the Company for less than the
entire Fiscal Year, the Bonus shall be prorated for the period during which the Employee was so
employed. Except as set forth above, all amounts of Bonus earned by Employee shall be payable
within thirty (30) days after completion of the audited financial statements for the previous
Fiscal Year. The term “Fiscal Year” as used herein shall mean each period of twelve (12) calendar
months commencing on January 1st of each calendar year during the Employment Period and expiring on
December 31st of such year.
(c) Merit and Other Bonuses. Employee shall be entitled to such other bonuses,
payments and benefits as may be determined by the Committee or the Board, in their sole discretion.
(d) Equity Incentives. Employee shall be eligible to receive grants of stock options,
restricted stock or other equity incentives, all at the discretion of the Committee or the Board.
(e) Other Compensation Programs. The Employee shall be entitled to participate in
Company’s incentive and deferred compensation programs and such other programs as are established
and maintained generally for the benefit of Company’s employees or executive officers, subject to
the provisions of such plans or programs.
(f) Vacations. The Employee shall be entitled to four weeks of vacation on an annual
basis. Employee shall be entitled to be reimbursed for any accrued and unused vacation time as of
the date he is no longer an employee of Company.
(g) Other Benefits. During the term of this Agreement, the Employee shall also be
entitled to participate in any other health insurance programs, life insurance programs, disability
programs, stock option plans, bonus plans, pension plans and other fringe benefit plans and
programs as are from time to time established and maintained for the benefit of Company’s employees
or executive officers, subject to the provisions of such plans and programs.
(h) Commuting Expenses. The Company shall provide, at its expense, a condominium in
which Employee may live while he is performing services hereunder in Greensboro, N.C., as well as a
vehicle for transportation when he is in Greensboro for purposes of his employment with the
Company. In addition, the Company will pay travel expenses from Waco, Texas to Greensboro and the
return trip, up to a maximum of 40 trips per calendar year.
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(i) Expenses. The Employee shall be reimbursed for all out-of-pocket expenses
reasonably incurred by him on behalf of or in connection with the business of the Company, pursuant
to the normal standards and guidelines followed from time to time by the Company.
(j) Withholding. All payments made to the Employee hereunder shall be made net of any
applicable withholding for income taxes and the Employee’s share of FICA, FUTA or other taxes. The
Company shall withhold such amounts from such payments to the extent required by applicable law and
remit such amounts to the applicable governmental authorities in accordance with applicable law.
3. Termination.
(a) For Cause. The Company shall have the right to terminate this Agreement and to
discharge the Employee for Cause (as defined below), at any time during the term of this Agreement.
Termination for Cause shall mean, during the term of this Agreement, (i) Employee’s conduct that
would constitute under federal or state law either a felony or a misdemeanor involving moral
turpitude, or a determination by the Company’s Board of Directors, after consideration of all
available information and following the procedures set forth below, that Employee has willfully
violated Company policies or procedures involving discrimination, harassment, alcohol or substance
abuse, or work place violence causing material injury to the Company, (ii) Employee’s actions or
omissions that constitute fraud, dishonesty or gross misconduct, (iii) Employee’s knowing and
intentional breach of any fiduciary duty that causes material injury to the Company, and (iv)
Employee’s inability to perform his material duties, after reasonable notice and an opportunity to
resolve the issues, due to alcohol or other substance abuse. Any termination for Cause pursuant to
this Section shall be given to the Employee in writing and shall set forth in detail all acts or
omissions upon which the Company is relying to terminate the Employee for Cause.
Upon any determination by the Company that Cause exists to terminate the Employee, the Company
shall cause a special meeting of the Board of Directors to be called and held at a time mutually
convenient to the Board of Directors and Employee, but in no event later than ten (10) business
days after Employee’s receipt of the notice that the Company intends to terminate the Employee for
Cause. Employee shall have the right to appear before such special meeting of the Board of
Directors with legal counsel of his choosing to refute such allegations and shall have a reasonable
period of time to cure any actions or omissions which provide the Company with a basis to terminate
the Employee for Cause (provided that such cure period shall not exceed 30 days). A majority of
the members of the Board of Directors must affirm that Cause exists to terminate the Employee. No
finding by the Board of Directors will prevent the Employee from contesting such determination
through appropriate legal proceedings provided that the Employee’s sole remedy shall be to xxx for
damages, not reinstatement, and damages shall be limited to those that would be paid to the
Employee if he had been terminated without Cause. In the event the Company terminates the Employee
for Cause, the Company shall only be obligated to continue to pay in the ordinary and normal course
of its business to the Employee his Salary plus accrued but unused vacation time through the
termination date and the Company shall have no further obligations to Employee from and after the
date of termination.
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(b) Resignation by Employee. If the Employee shall resign or otherwise terminate his
employment with the Company at anytime during the term of this Agreement, the Employee shall only
be entitled to receive his accrued and unpaid Salary and vacation pay through the termination date,
and the Company shall have no further obligations under this Agreement from and after the date of
resignation.
(c) Termination by Company Without Cause. At any time during the term of this
Agreement the Company shall have the right to terminate this Agreement and to discharge the
Employee without Cause effective upon delivery of written notice to the Employee. Upon any such
termination by the Company without Cause, or upon the Company’s failure to renew this Agreement,
the Company shall pay to the Employee all of the Employee’s accrued but unpaid Salary and vacation
pay through the date of termination, and thereafter, the Company: (i) shall continue to pay to the
Employee his Salary payable in accordance with Section 2(a) for a period of two (2) years, and (ii)
shall continue Employee’s health benefits under the Company’s then health insurance program(s) for
a period of two (2) years (or until Employee’s death or the date on which Employee becomes covered
by the health plan of a subsequent employer, to the extent that either of these events occurs
earlier). All payments made to the Employee pursuant to this Section 2(c) are collectively,
referred to herein as the “Severance Payment.” Other than the Severance Payment, the Company
shall have no further obligation to the Employee except for the obligations set forth in Section 14
of this Agreement after the date of such termination; provided, however, that the Employee shall
only be entitled to continuation of the Severance Payments as long as he is in compliance with the
provisions of Sections 7 and 8 of this Agreement.
(d) Disability of the Employee. This Agreement may be terminated by the Company upon
the Disability of the Employee. “Disability” shall mean any mental or physical illness, condition,
disability or incapacity which prevents the Employee from reasonably discharging his duties and
responsibilities under this Agreement for a period of 180 consecutive days. In the event that any
disagreement or dispute shall arise between the Company and the Employee as to whether the Employee
suffers from any Disability, then, in such event, the Employee shall submit to the physical or
mental examination of a physician licensed under the laws of the State of North Carolina, who is
mutually agreeable to the Company and the Employee, and such physician shall determine whether the
Employee suffers from any Disability. In the absence of fraud or bad faith, the determination of
such physician shall be final and binding upon the Company and the Employee. The entire cost of
such examination shall be paid for solely by the Company. In the event the Company has purchased
Disability insurance for Employee, the Employee shall be deemed disabled if he is completely
(fully) disabled as defined by the terms of the Disability policy. In the event that at any time
during the term of this Agreement the Employee shall suffer a Disability and the Company terminates
the Employee’s employment for such Disability, the Company shall continue to pay to the Employee
his Salary, payable in accordance with Section 1(a) for three (3) months from the date of the
termination, when and as the same would have been due and payable hereunder but for such
termination, except that payment of the Salary in accordance with said paragraph shall be mitigated
to the extent payments are made to the Employee pursuant to disability insurance programs
maintained by the Company.
(e) Death of the Employee. In the event of the death of Employee, the employment of
the Employee by the Company shall automatically terminate on the date of the
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Employee’s death and the Company shall only be obligated to pay Employee’s estate Employee’s
accrued and unpaid Salary through the termination date plus accrued but unused vacation time
through the termination date and the Company shall have no further obligations to Employee from and
after the date of termination.
4. Termination of Employment by Employee for Change of Control.
(a) Termination Rights. Notwithstanding the provisions of Section 3 and Section 4 of
this Agreement, in the event that there shall occur a Change of Control (as defined below) of the
Company and within two years after such Change of Control the Employee’s employment hereunder is
terminated by the Company without Cause, or within such two year period the Employee terminates his
employment with the Company for Good Reason (as defined below), then the Company shall be required
to pay to the Employee all accrued but unpaid Salary and vacation pay through the date of
termination, plus the product of two (2) multiplied by the Employee’s then current Salary
(collectively, the foregoing consideration payable to the Employee shall be referred to herein as
the “Change in Control Payment”). The Change in Control Payment shall be made no later than 10
days after the Employee’s termination pursuant to this Section 4. To the extent that payments are
owed by the Company to the Employee pursuant to this Section 4, they shall be made in lieu of
payments pursuant to Section 3, and in no event shall the Company be required to make payments or
provide benefits to the Employee under both Section 3 and Section 4. Additionally, Employee shall
be entitled to receive the Change of Control Payment set forth above in the event that within one
year after the term of this Agreement, a Change of Control shall occur.
(b) Change of Control of the Company Defined. For purposes of this Section 4, a
“Change of Control of the Company” shall be deemed to have occurred if:
(i) Any “person” (as such term is defined in Sections 13(d)(3) and Section 14(d)(3) of the
Exchange Act), other than the Company, any majority owned subsidiary of the Company, any
compensation plan of the Company, any majority owned subsidiary of the Company or Xxxx X. Xxxxxx
and his affiliates and/or heirs, becomes the “beneficial owner” (as such term is defined in Rule
13d 3 of the Exchange Act), directly or indirectly, of securities of the Company representing more
than 50% of the combined voting power of the Company; or
(ii) Any “person” (as such term is defined in Sections 13(d)(3) and Section 14(d)(3) of the
Exchange Act), other than the Company, any majority owned subsidiary of the Company, any
compensation plan of the Company, any majority owned subsidiary of the Company or Xxxx X. Xxxxxx
and his affiliates and/or heirs), becomes the “beneficial owner” (as such term is defined in Rule
13d 3 of the Exchange Act), directly or indirectly, of securities of the Company representing more
than 35% of the combined voting power of the Company provided: (A) such person or person are not
acting as a “group” (as such term is defined in Rule 13(d) under the Exchange Act) with respect to
the Company’s voting securities with Xxxx X. Xxxxxx and his affiliates and/or heirs and (B) such
person or persons own Company securities with more of the combined voting power of the Company than
those held by Xxxx X. Xxxxxx and his affiliates and/or heirs; or
(iii) The shareholders of the Company approve (1) a reorganization, merger, or consolidation
with respect to which persons who were the shareholders of the
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Company immediately prior to such reorganization, merger, or consolidation do not immediately
thereafter own more than 50% of the combined voting power entitled to vote generally in the
election of the directors of the reorganized, merged or consolidated entity; (2) a liquidation or
dissolution of the Company; or (3) the sale of all or substantially all of the assets of the
Company or of a subsidiary of the Company that accounts for more than 66 2/3% of the consolidated
revenues of the Company, but not including a reorganization, merger or consolidation of the
Company.
(c) Good Reason Defined. For purposes of this Agreement, “Good Reason” shall mean a
termination by Employee of his employment with the Company after a Change of Control based upon a
significant demotion or material adverse change in Employee’s duties and responsibilities, unless
such change has been agreed to in writing by Employee.
5. Successor To Company. The Company shall require any successor, whether direct or
indirect, to all or substantially all of the business, properties and assets of the Company whether
by purchase, merger, consolidation or otherwise, prior to or simultaneously with such purchase,
merger, consolidation or other acquisition to execute and to deliver to the Employee a written
instrument in form and in substance reasonably satisfactory to the Employee pursuant to which any
such successor shall agree to assume and to timely perform or to cause to be timely performed all
of the Company’s covenants, agreements and obligations set forth in this Agreement (a “Successor
Agreement”). The failure of the Company to cause any such successor to execute and deliver a
Successor Agreement to the Employee shall constitute a material breach of the provisions of this
Agreement by the Company.
6. Restrictive Covenants. In consideration of his employment and the other benefits
arising under this Agreement, the Employee agrees that during the Employment Period and for a
period of two (2) years following the Employment Period, the Employee shall not directly or
indirectly:
(a) alone or as a partner, joint venturer, officer, director, member, employee, consultant,
agent, independent contractor or stockholder of, or lender to, any company or business, engage in
any business which competes, directly or indirectly, with any business of the Company; provided,
however, that the beneficial ownership of less than one percent (1%) of the shares of stock of any
corporation having a class of equity securities actively traded on a national securities exchange
or over-the-counter market shall not be deemed, in and of itself, to violate the prohibitions of
this Section; or
(b) for any reason, (i) induce any customer of the Company or any of its subsidiaries or
affiliates to patronize any business directly or indirectly in competition with the businesses
conducted by the Company or any of its subsidiaries or affiliates in any market in which the
Company or any of its subsidiaries or affiliates does business; (ii) canvass, solicit or accept
from any customer of the Company or any of its subsidiaries or affiliates any such competitive
business; or (iii) request or advise any customer or vendor of the Company or any of its
subsidiaries or affiliates to withdraw, curtail or cancel any such customer’s or vendor’s business
with the Company or any of its subsidiaries or affiliates; or
(c) for any reason, employ, or knowingly permit any company or business directly or indirectly
controlled by him, to employ, any person who was employed by the
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Company or any of its subsidiaries or affiliates at or within the prior six months, or in any
manner seek to induce any such person to leave his or her employment.
The provisions of this Section 6 shall apply to Employee whether or not Employee’s employment with
the Company has been terminated for Cause or without Cause and whether or not the Company is
required to pay Employee severance benefits under Section 3 of this Agreement. Notwithstanding the
foregoing, if this Agreement expires by its terms at the end of the Employment Period or if
Employee is terminated without Cause, then the provisions of this Section 6 shall only apply to
Employee if the Company provides Employee with all of the severance benefits which it would be
obligated to provide to him under Section 3(c) of this Agreement as if the Employee had been
terminated from his employment with the Company without Cause.
7. Confidentiality. The Employee agrees that at all times during the term of this
Agreement and after the termination of employment for as long as such information remains
non-public information, the Employee shall (i) hold in confidence and refrain from disclosing to
any other party all information, whether written or oral, tangible or intangible, of a private,
secret, proprietary or confidential nature, of or concerning the Company or any of its subsidiaries
or affiliates and their business and operations, and all files, letters, memoranda, reports,
records, computer disks or other computer storage medium, data, models or any photographic or other
tangible materials containing such information (“Confidential Information”), including without
limitation, any sales, promotional or marketing plans, programs, techniques, practices or
strategies, any expansion plans (including existing and entry into new geographic and/or product
markets), and any customer lists, (ii) use the Confidential Information solely in connection with
his employment with the Company or any of its subsidiaries or affiliates and for no other purpose,
(iii) take all precautions necessary to ensure that the Confidential Information shall not be, or
be permitted to be, shown, copied or disclosed to third parties, without the prior written consent
of the Company or any of its subsidiaries or affiliates, and (iv) observe all security policies
implemented by the Company or any of its subsidiaries or affiliates from time to time with respect
to the Confidential Information. In the event that the Employee is ordered to disclose any
Confidential Information, whether in a legal or regulatory proceeding or otherwise, the Employee
shall provide the Company or any of its subsidiaries or affiliates with prompt notice of such
request or order so that the Company or any of its subsidiaries or affiliates may seek to prevent
disclosure. In addition to the foregoing the Employee shall not at any time libel, defame, ridicule
or otherwise disparage the Company.
8. Specific Performance; Injunction. The parties agree and acknowledge that the
restrictions contained in Sections 6 and 7 are reasonable in scope and duration and are necessary
to protect the Company or any of its subsidiaries or affiliates. If any provision of Section 6 or
7 as applied to any party or to any circumstance is adjudged by a court to be invalid or
unenforceable, the same shall in no way affect any other circumstance or the validity or
enforceability of any other provision of this Agreement. If any such provision, or any part
thereof, is held to be unenforceable because of the duration of such provision or the area covered
thereby, the parties agree that the court making such determination shall have the power to reduce
the duration and/or area of such provision, and/or to delete specific words or phrases, and in its
reduced form, such provision shall then be enforceable and shall be enforced. The Employee agrees
and acknowledges that the breach of Section 6 or 7 will cause irreparable injury to the Company or
any of its subsidiaries or affiliates and upon breach of any provision of
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such Sections, the Company or any of its subsidiaries or affiliates shall be entitled to
injunctive relief, specific performance or other equitable relief, without being required to post a
bond; provided, however, that, this shall in no way limit any other remedies which the Company or
any of its subsidiaries or affiliates may have (including, without limitation, the right to seek
monetary damages).
9. Notices. All notices, requests, demands, claims and other communications hereunder
shall be in writing and shall be deemed given if delivered by hand delivery, by certified or
registered mail (first class postage pre-paid), guaranteed overnight delivery or facsimile
transmission if such transmission is confirmed by delivery by certified or registered mail (first
class postage pre-paid) or guaranteed overnight delivery to, the following addresses and telecopy
numbers (or to such other addresses or telecopy numbers which such party shall designate in writing
to the other parties): (a) if to the Company, at its principal executive offices, addressed to the
President and Vice President, Legal, with a copy to Xxxxxx X. Xxxxxxxx, Esq., Akerman, Senterfitt &
Xxxxxx, P.A., Xxx Xxxxxxxxx Xxxxx Xxxxxx, Xxxxx, Xxxxxxx 00000; and (b) if to the Employee, at the
address listed on the signature page hereto.
10. Amendment; Waiver. This Agreement may not be modified, amended, or supplemented,
except by written instrument executed by all parties. No failure to exercise, and no delay in
exercising, any right, power or privilege under this Agreement shall operate as a waiver, nor shall
any single or partial exercise of any right, power or privilege hereunder preclude the exercise of
any other right, power or privilege. No waiver of any breach of any provision shall be deemed to
be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any
waiver be implied from any course of dealing between the parties. No extension of time for
performance of any obligations or other acts hereunder or under any other agreement shall be deemed
to be an extension of the time for performance of any other obligations or any other acts. The
rights and remedies of the parties under this Agreement are in addition to all other rights and
remedies, at law or equity, that they may have against each other.
11. Assignment; Third Party Beneficiary. This Agreement, and the Employee’s rights
and obligations hereunder, may not be assigned or delegated by him. The Company may assign its
rights, and delegate its obligations, hereunder to any affiliate of the Company, or any successor
to the Company or its aviation services business, specifically including the restrictive covenants
set forth in Section 6 hereof. The rights and obligations of the Company under this Agreement
shall inure to the benefit of and be binding upon its respective successors and assigns.
12. Severability; Survival. In the event that any provision of this Agreement is
found to be void and unenforceable by a court of competent jurisdiction, then such unenforceable
provision shall be deemed modified so as to be enforceable (or if not subject to modification then
eliminated herefrom) to the extent necessary to permit the remaining provisions to be enforced in
accordance with the parties intention. The provisions of Sections 5, 6 and 7 will survive the
termination for any reason of the Employee’s relationship with the Company.
13. Indemnification. The Company agrees to indemnify the Employee during the term and
after termination of this Agreement in accordance with the provisions of the Company’s certificate
of incorporation and bylaws and the Delaware General Corporation Law.
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14. Counterparts. This Agreement may be signed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one and the same instrument.
15. Governing Law. This Agreement shall be construed in accordance with and governed
for all purposes by the laws of the State of North Carolina applicable to contracts executed and to
be wholly performed within such State.
16. Entire Agreement. This Agreement contains the entire understanding of the parties
in respect of its subject matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter.
17. Headings. The headings of Paragraphs and Sections are for convenience of
reference and are not part of this Agreement and shall not affect the interpretation of any of its
terms.
18. Construction. This Agreement shall be construed as a whole according to its fair
meaning and not strictly for or against any party. The parties acknowledge that each of them has
reviewed this Agreement and has had the opportunity to have it reviewed by their respective
attorneys and that any rule of construction to the effect that ambiguities are to be resolved
against the drafting party shall not apply in the interpretation of this Agreement.
19. Resolution of Disputes. Any disputes arising under or in connection with this
Agreement shall be resolved by third party mediation of the dispute and, failing that, by binding
arbitration to be held in Greensboro, North Carolina in accordance with the rules and procedures of
the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first above
written.
| TIMCO AVIATION SERVICES, INC., a Delaware corporation |
||||
| By: | /s/ Xxx Xxxxxx | |||
| Xxx Xxxxxx, President | ||||
| EMPLOYEE: | ||||||
| /s/ Xxxx X. Xxxxxxxx | ||||||
| XXXX X. XXXXXXXX | ||||||
| Address for Notices: | ||||||
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