Exhibit 10.2.6
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of April
6, 1999, by and between CONDOR SYSTEMS, INC., a California corporation (the
"Company"), and XXXX X. XXXXXXX, an individual resident of the State of
California (the "Employee").
WHEREAS, the Company, WDC Acquisition Corp. and the Shareholders of
the Company (as defined in the Merger Agreement) have entered into that
certain Agreement and Plan of Merger (the "Merger Agreement") dated as of
March 8, 1999 pursuant to which WDC Acquisition Corp. will merge with and into
the Company at the Effective Time (as defined in the Merger Agreement);
WHEREAS, the Company wishes to assure that it will have the benefit
of the knowledge and experience of Employee, who has been the Chief Financial
Officer and Assistant Secretary of the Company; and
WHEREAS, Employee is willing to enter into an agreement to such end
upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts such employment with the Company, upon the terms and
conditions hereinafter set forth.
2. Term of Employment. Unless earlier terminated as provided in
Section 5, the Employee shall be employed by the Company under this Agreement
commencing on the date of the Effective Time (as defined in the Merger
Agreement) and ending on the second anniversary thereof (the "Employment
Period"). On the second and each succeeding anniversary of the Effective Time,
the Employment Period shall automatically be extended for one additional year
unless, not later than 30 days prior to such anniversary, the Employee or the
Company shall have given notice of his or its intention not to extend the
Employment Period. This Agreement will have no force and effect (i) until or
unless the Effective Time occurs and (ii) until or unless the stockholders of
the Company shall have approved this Agreement pursuant to Section 8 of this
Agreement. Upon its effectiveness, this Agreement will supercede the
Employment Agreement dated November 1996 between the Company and the Employee,
which shall remain in effect, in accordance with its terms, until superceded
by this Agreement.
3. Title and Duties.
(a) The Employee shall have the titles and positions of Chief
Financial Officer and Assistant Secretary of the Company. In addition
to the foregoing, the Company's Board of Directors (the "Board") may,
in the exercise of its business judgement, elect the Employee to such
other office or offices as it may determine during the Employment
Period.
(b) In such capacities, Employee shall report to the Chief
Executive Officer of the Company. Employee's responsibilities shall
be as specified by the Board or the Chief Executive Officer but, in
general, the Employee shall have such authority and such
responsibilities as are consistent with the foregoing positions.
(c) Throughout the Employment Period, the Employee shall devote
substantially all of his time, energy, skill and best efforts to the
performance of his duties hereunder in a manner which will faithfully
and diligently further the business and interests of the Company.
Subject to the preceding sentence, the Employee may serve, or
continue to serve, on the boards of directors of other entities and
may engage in appropriate civic or charitable activities as long as
such activities do not interfere or conflict with the performance of
the Employee's duties pursuant to this agreement, and provided that
any board of directors position is disclosed to the Board in writing
at least 10 days in advance of Employee's election to such board of
directors position.
4. Compensation.
(a) Base Salary. The Company shall pay the Employee as
compensation a salary at the beginning rate of $200,000 per year
("Base Salary"), payable in accordance with the ordinary compensation
practices of the Company. The Compensation Committee of the Board
shall annually review the Base Salary for possible increase, in its
sole discretion.
(b) Bonus. Employee shall be eligible to receive an annual bonus
(the "Bonus") of up to 100% of Base Salary for each calendar year in
accordance with the following:
(i) For an amount up to 75% of Base Salary:
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(A) If EBITDA, as hereunder defined, for any
calendar year is less than the Floor EBITDA for
such year, the Company will pay the Employee no
bonus.
(B) If EBITDA for any calendar year is equal
to the Target EBITDA for such year, the Company
shall pay the Employee a bonus of 45% of the actual
Base Salary paid to the Employee during such
calendar year;
(C) If EBITDA for any calendar year is equal
to or greater than the Ceiling EBITDA for such
year, the Company shall pay the Employee a total of
75% of the actual Base Salary paid to the Employee
during such calendar year;
(D) If EBITDA for any calendar year is greater
than the Floor EBITDA for such year but is less
than the Target EBITDA for such year, the Company
will pay the Employee a bonus calculated by linear
interpolation, as described in Attachment I. If
EBITDA for any calendar year is greater than the
Target EBITDA for such year but is less than the
Ceiling EBITDA for such year, the Company will pay
the Employee a bonus calculated by linear
interpolation, as described in Attachment I;
(ii) For an amount equal to 25% of Base Salary
(A) For any calendar year, if the Employee
achieves the Major Business Objectives for such
year, the Company will pay the Employee a bonus (in
addition to any bonus paid by the Company to
Employee pursuant to Section 4(b)(i) of this
Agreement) of 25% of the actual Base Salary paid to
the Employee during such calendar year. Therefore,
if the Employee achieves his Major Business
Objectives for any calendar year and the Company
achieves Target EBITDA for such year, Employee is
eligible for a total bonus of 70% of the actual
Base Salary paid to the Employee during such
calendar year.
(iii) Definitions. for purposes of this Section 4:
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(A) "EBITDA" means, for each calendar year,
the EBITDA number achieved by the Company, as
determined annually for purposes of this Agreement
by the Compensation Committee of the Board.
(B) "Floor EBITDA" means, for any applicable
calendar year, a projected EBITDA established
annually for purposes of this Agreement by the
Compensation Committee of the Board, together with
the Employee; provided that the 1999 Floor EBITDA
shall be $19,000,000.
(C) "Target EBITDA" means, for any applicable
calendar year, a projected EBITDA established
annually for purposes of this Agreement by the
Compensation Committee of the Board, together with
the Employee; provided that the 1999 Target EBITDA
shall be $20,000,000.
(D) "Ceiling EBITDA" means, for any applicable
calendar year, a projected EBITDA established
annually for purposes of this Agreement by the
Compensation Committee of the Board, together with
the Employee; provided that the 1999 Ceiling EBITDA
shall be $21,000,000.
(E) "Major Business Objectives" means, for any
applicable calendar year, the major business
objectives of the Employee, as determined annually
by the Compensation Committee of the Board.
(c) Reimbursement of Expenses. The Company shall pay or reimburse
the Employee for all reasonable travel and other expenses incurred by
the Employee in the performance of his obligations under this
agreement, provided that the Employee properly accounts therefor in
accordance with the policies and procedures of the Company.
(d) Vacation. The Employee shall be entitled to a number of paid
vacation days in each calendar year as determined by the Company from
time to time for its employees in accordance with Company policy
(prorated for any calendar year in which the Employee is employed
under this Agreement for less than the entire year).
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(e) Employee Benefits. During the Employment Period, Employee
shall be eligible, on the same basis as he is currently eligible, for
employee benefits (including fringe benefits, vacation, automobile
allowance, pension and life, health, accident and disability
insurance) no less favorable than those benefits for which he is
eligible immediately prior to the Effective Time, except for the
Company's ESOP and other stock-based plans.
f) Withholding. All payments under this Agreement shall be
subject to withholding for applicable taxes.
5. Termination. The Employee's employment by the Company shall be
terminated upon the occurrence of any of the following:
(a) By Employee Without Cause. The Employee may terminate his
employment under this Agreement upon at least 120 days' prior notice
to the Board of the Company. Upon termination of his employment and
upon experiencing a qualifying event, COBRA coverage shall be made
available to the Employee in compliance with federal law.
(b) By Employee for Good Reason. The Employee may terminate his
employment under this Agreement after the Effective Time, upon at
least 30 days' prior notice to the Board of the Company, for Good
Reason. For purposes of this Agreement, "Good Reason" shall mean the
occurrence of the following:
(i) the occurrence of a "Change in Control." For
purposes of this Agreement, a "Change in Control" shall mean
the occurrence of (x) the consolidation, reorganization or
merger of the Company with or into another corporation or
corporations or other legal entitie(s) not controlled by any
entity that is an affiliate of the Company immediately
following the Effective Time, or (y) the conveyance of all
or substantially all of the stock or assets of the Company
to another person or entity not controlled by any entity
that is an affiliate of the Company immediately following
the Effective Time; provided that a Change in Control shall
not be deemed to occur upon the occurrence of an initial
public offering of the Company's capital stock ("IPO"); or
(ii) the Employee's duties, authority or
responsibilities as Chief Financial Officer, whether
managerial or supervisory, are materially diminished without
the prior consent of the Employee.
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(c) By the Company for Cause. The Company may terminate the
Employee's employment for Cause. "Cause" for purposes of this
Agreement shall mean Employee's (i) personal dishonesty; (ii) willful
misconduct; (iii) breach of fiduciary duty; (iv) failure to perform
designated duties or willful refusal to implement decisions of the
Board made in good faith; (v) willful violation, for financial gain,
of any law, rule or regulation; or (vi) material breach of any
provision of this Agreement; provided, however, that prior to any
proposed Board action pursuant to subparagraph (iv) the Board shall
give the Employee reasonable opportunity to respond and, if
appropriate, to otherwise perform as directed.
The Employee's right to compensation and other benefits from the
Company under this agreement shall cease upon the Company's terminating the
Employee's employment under this agreement for Cause. The provisions of this
Section 5(c) shall take precedence over the provisions of Section 5(a)
notwithstanding any prior notice by the Employee to the Company under Section
5(a).
(d) By the Company Without Cause. The Company may terminate the
Employee's employment under this agreement without Cause therefor at
any time.
6. Severance Pay
(a) In the event that the Employee's employment under this
Agreement is terminated pursuant to the provisions of Section 5(b) or
5(d), or if the employee's Employment Period is not renewed by the
Company pursuant to Section 2, as severance pay the Employee shall be
paid a total of $500,000. Such severance pay shall be paid in a lump
sum to an escrow account at a bank designated by the Company, and
thereafter shall be paid to the Employee in eight equal installments
on the last business day of each of the eight fiscal quarters
following the fiscal quarter during which Employee's employment is
terminated, beginning with such fiscal quarter; provided that the
escrow agreement will provide that all payments of Employee's
severance pay will cease if Employee breaches any of the provisions
of Section 7 of this Agreement. Employee shall also be entitled to
continued eligibility to participate in all health, medical and
dental benefit plans of the Company for which Employee was eligible
immediately prior to the effective time of the termination of
Employee's employment, or comparable coverage, for two years, or, if
sooner, until comparable health insurance coverage is available to
Employee in connection with subsequent employment or self-employment.
In addition,
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the termination of the Employee's employment shall not accelerate
vesting of any unvested Options or Stock Appreciation Rights (as such
terms are defined in the 1999 Management Incentive Plan) held by the
Employee.
(b) In the event that the Employee's employment under this
Agreement is terminated upon the death or disability of the Employee,
then the Employee will not be entitled to the severance benefits set
forth in Section 6(a); however, the Company will pay to the Employee
or the Employee's spouse (if she is then living) the Employee's
then-current Base Salary in accordance with the Company's normal pay
practices until the earlier of (i) the end of the sixth calendar
month following Employee's termination of active service, or (ii)
such time as the Employee's spouse (or a trust for her benefit) has
received proceeds from the life or disability insurance policy, as
the case may be, described in Section 4(e). Any Base Salary paid
after the death or disability of the Employee pursuant to clause (i)
above shall be repaid to the Company upon the receipt of the
insurance proceeds described in clause (ii) by the Employee's spouse
(or by a trust for her benefit). The Company shall also pay to
Employee or Employee's spouse the pro rata portion of Employee's
bonus for the year during which the death or disability of the
employee occurs which payment shall not be subject to repayment. As
of the date of the death or disability of Employee, all benefits for
the Employee pursuant to section 4(c), (d) and (e) of this Agreement
shall cease. Options and Stock Appreciation Rights (as such terms are
defined in the Company's 1999 Management Incentive Plan) held by the
Employee shall expire on the dates upon which such Options and Stock
Appreciation Rights would have expired had it not been for the
termination of Employee's employment or service. The Employee shall
have the right to exercise such Options and Stock Appreciation Rights
prior to such expiration to the extent such were exercisable at the
date of such termination of employment or service and shall not have
been exercised. In addition, the termination of the Employee's
employment shall not accelerate vesting of any unvested Options or
Stock Appreciation Rights held by the Employee.
(c) If the Employee terminates his employment pursuant to
Section 5(a) and continues to provide services to the Company, or if
the Employee's Employment under this Agreement is terminated pursuant
to Section 5(c), the Company shall continue to pay the Employee his
then-current Base Salary in equal monthly installments until the
termination of his active service with the Company if the Employee
resigns pursuant to Section 5(a), or until the date of his
termination if the Employee's employment is terminated pursuant to
Section 5(c). As of the effective date of Employee's termination
pursuant to Section 5(a) or Section 5(c),
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Employee shall be entitled to no bonus or benefits pursuant to this
Agreement, and the Employee's right to exercise any Option or Stock
Appreciation Right Shall terminate, and such Option or Stock
Appreciation Right shall expire, on the day of such termination of
employment or service. In addition, the Company or its designee shall
have the right to purchase all or a portion of the vested Options
and/or Shares (as defined in the 1999 Management Incentive Plan)
acquired upon the exercise of Options by the Employee at a per share
price equal to the lower of (i) the price paid by Employee for such
Shares which have been issued or which are issuable under vested but
unexercised Options and (ii) the fair market value (as determined in
accordance with Section 2.07 of the Investors Agreement dated as of
April 1999 by and between the Company and the several Shareholders
(as defined therein) from time to time parties thereto) of such
Shares which have been issued or which are issuable under vested but
unexercised Options on the date of purchase, less the exercise price
in the case of vested Options. The Company or its designee shall also
have the right to purchase all or a portion of any other Shares,
including Rollover Shares (as defined in the 1999 Management
Incentive Plan), previously purchased by the Employee, at a per share
price equal to the fair market value (as determined in accordance
with Section 2.07 of the Investors Agreement dated as of April 1999
by and between the Company and the several Shareholders (as defined
therein) from time to time parties thereto) of the Shares on the date
of purchase. If the Company elects to exercises its right under this
Section 6(c), the Company shall deliver written notice (a"Purchase
Notice") to the Employee to such effect within 30 days of a
termination of Employee's employment. For purposes of this Section
6(c), the "date of purchase" shall mean the third business day
following the receipt of notice by the Employee that the purchase
right is to be exercised. Payment of the purchase price may be made
in cash or by certified check; provided that if the terms of any
agreement to which the Company is a party, or any of the indentures
governing any debt securities issued by the Company or any of its
subsidiaries would prohibit the Company from effecting such payment,
payment may be effected through a promissary note having such
commercially reasonable terms and interest rate as may be determined
by the Company in its reasonable discretion, provided that in any
event such note shall become due at such time as the prohibitions
described above shall lapse.
(d) The provisions of this Section 6 and Section 7 of this
Agreement shall survive any termination of this Agreement.
7. Non-Competition and Non-Solicitation
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(a) Subject to Section 7(b) below, in consideration of his
employment hereunder and in view of the confidential position to be
held by the Employee hereunder, during the Employment Period and
through the two-year period commencing on the effective date of the
termination of Employee's employment hereunder, the Employee shall
not, directly or indirectly, be employed by, or act as a consultant
or lender to or in association with, or as a director, officer,
employee, partner, owner, joint venturer, member or otherwise of any
person, firm, corporation, partnership, limited liability company,
association or other entity that engages in the same business as, or
competes with, any business actually conducted by the Company or any
or its subsidiaries (other than beneficial ownership of up to 2% of
the outstanding voting stock of a publicly traded company that is or
owns such a competitor);
(b) In the event that the employee is terminated by the Company
for Cause or resigns without Good Reason, during the Employment
Period and through the one-year period commencing on the effective
date of the termination of Employee's employment hereunder, the
Employee shall not, directly or indirectly, be employed by, or act as
a consultant or lender to or in association with, or as a director,
officer, employee, partner, owner, joint venturer, member or
otherwise of any person, firm, corporation, partnership, limited
liability company, association or other entity that engages in the
same business as, or competes with, any business actually conducted
by the Company or any of its subsidiaries (other than beneficial
ownership of up to 2% of the outstanding voting stock of a publicly
traded company that is or owns such a competitor);
(c) In consideration of his employment hereunder and in view of
the confidential position to be held by the Employee hereunder, during
the Employment Period and through the one-year period commencing on
the effective date of the termination of Employee's employment
hereunder, the Employee will not (i) induce or attempt to induce any
employee of the Company or any of its subsidiaries to leave the
employ of the Company or such subsidiary, or in any way interfere
with the relationship between the Company or any of it subsidiaries
and any employee thereof, (ii) hire directly or indirectly any person
who is then an employee of the Company or any of its subsidiaries, or
(iii) induce or attempt to induce any customer, supplier, licensee or
other business relation of the Company or any of its subsidiaries to
cease doing business with the Company or such subsidiary, or in any
way interfere with the relationship between any such customer,
supplier, licensee or business relation and the Company or such
subsidiary; provided, however, that the Employee will cease to be
bound
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by this Section 7(c) on the six-month anniversary of the effective
date of the termination of Employee's employment hereunder if his
employment is terminated without Cause;
(d) The Employee expressly agrees that the character, duration
and geographic scope of the provisions of this Section 7 are
reasonable in light of the circumstances as they exist on the date
hereof. If any competent court shall determine that the character,
duration or geographic scope of such provisions is unreasonable, then
it is the intention and the agreement of the Employee and the Company
that this Agreement shall be construed by the court in such a manner
as to impose only those restrictions on the Employee's conduct that
are reasonable in the light of the circumstances and that are
necessary to assure to the Company the benefits of this Section 7.
8. Stockholder Approval. This Agreement shall be effective upon
submission to and approval by stockholders of the Company holding more than
75% of the voting power of all outstanding common stock of the Company. In
connection with such submission and approval, the Company represents that it
has provided each stockholder with the disclosure required by Treasury
Regulation Section 1.280G-1-Q&A 7(d).
9. Entire Agreement; Amendments. This Agreement (upon its
effectiveness), together with option and other agreements relating to stock of
the Company entered into substantially contemporaneously herewith or with the
Closing, contains the entire understanding of the parties with respect to the
matters set out herein, merging and superseding all prior and contemporaneous
agreements and understandings between the parties with respect to such
matters. This Agreement may be amended only by a written instrument duly
executed by all parties or their respective heirs, successors, assigns or
legal personal representatives.
10. No Conflicts; No Assignments.
(a) Employee represents and warrants to the Company that he is
not as of the date of this Agreement, and will not become during the
Employment Period, a party to any oral or written contract that
prohibits, or materially restricts or limits, or will prohibit or
materially restrict or limit the performance of his duties or the
fulfillment of his obligations as an employee and an officer of the
Company or under this Agreement.
(b) The Employee acknowledges that the services to be rendered by
him are unique and personal and, accordingly, that he shall not
assign
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any of his rights or delegate any of his duties or obligations under
this Agreement.
11. Waiver of Breach. Either party may, by written notice to the
other: (i) extend the time for the performance of any of the obligations or
other actions of the other, (ii) waive compliance with any of the covenants of
the other contained in this Agreement, and (iii) waive or modify performance
of any of the obligations of the other. However, mere forbearance or
indulgence by either party in any regard whatsoever shall not constitute a
waiver of the covenant or condition to be performed by the other party to
which the same may apply and, until complete performance of said covenant or
condition, said party shall be entitled to invoke any remedy available under
this Agreement or by law or in equity despite said forbearance or indulgence.
12. Gender Number. Whenever the context of this Agreement so
required the masculine gender shall include the feminine or neuter, the single
number shall include plural, and reference to one or more parties hereto shall
include all assignees of the party.
13. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14. Arbitration; Governing Law. To the fullest extent permitted by
law, any dispute, claim or controversy of any kind including but not limited
to, tort, contract and statute arising under, in connection with or related to
this Agreement shall be resolved exclusively by binding arbitration in the
State of California, in accordance with the rules of the American Arbitration
Association. The Company and the Employee hereby waive any objection to
personal jurisdiction or venue in any forum located in the State of
California. No claim, lawsuit or action of any kind may be filed by either
party to this Agreement; arbitration is the exclusive dispute resolution
mechanism between the parties. Judgment may be entered on the arbitrator's
award in any court of relevant jurisdiction. This agreement shall be governed
by and construed in accordance with the laws of the State of California as
such laws are applied to agreements entered into and to be performed entirely
within California by California residents.
15. Severability. In the event that any provision of this Agreement,
or the application thereof to any person or circumstance, is held by a court
of competent jurisdiction to be invalid, illegal or unenforceable in any
respect in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement in that jurisdiction or
the application of that provision to any other person or circumstance or in
any other jurisdiction, and this
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agreement shall then be construed in that jurisdiction as if such invalid,
illegal or unenforceable provision had not been contained in this Agreement,
but only to the extent of such invalidity, illegality or unenforceability.
16. Further Assurances. Each party shall perform such further acts
and execute and deliver such further documents as may be reasonably necessary
to carry out the provisions of this Agreement.
17. Enforcement. In the event either party hereto fails to perform
any of its obligations under this Agreement or in the event a dispute arises
concerning the meaning or interpretation of any provision of this Agreement,
the defaulting party or the party not prevailing in such dispute as the case
may be, shall pay the reasonable costs and expenses incurred by the other
party in enforcing or establishing its rights hereunder, including without
limitation, court costs and reasonable attorney's fees.
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IN WITNESS WHEREOF, the Company and the Employee have duly executed
and delivered this Employment Agreement as of the day and year first above
written.
CONDOR SYSTEMS, INC.
By: /s/ R.E. Young
------------------------------
Title: Chief Financial Officer
---------------------------
EMPLOYEE:
/s/ Xxxx X. Xxxxxxx
---------------------------------
Xxxx X. Xxxxxxx
