EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") dated January 1, 1999, is
entered into by and between Xxxx X. Xxxxx ("Employee") and Aviation Sales
Company, a Delaware corporation ("ASC").
PRELIMINARY STATEMENTS
A. ASC desires to employ the Employee on the terms set forth in this
Agreement.
B. The Employee desires to serve ASC as an employee on the terms set
forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:
1. EMPLOYMENT. ASC hereby agrees to employ Employee on the terms and
conditions set forth below commencing on the date hereof and Employee hereby
accepts such employment effective on such date. Subject to the terms and
conditions set forth herein and unless sooner terminated as hereinafter
provided, ASC shall employ Employee and Employee agrees to serve as an employee
of ASC from the date hereof to and including the third anniversary of the date
of this Agreement (the "Employment Term"). For purposes of this Agreement, the
Employment Term and any renewal term thereof are collectively referred to herein
as the "Term."
2. POSITION. During the Term, Employee shall perform all duties and
services incident to such position and such other duties and services of an
executive nature as may from time to time be assigned to him by the Board of
Directors of ASC (the "Board"), including without limitation services as an
officer or other executive of any Affiliate (as defined in Section 9 below) of
ASC. Employee shall be subject to the control and direction of the Board.
3. LOYALTY. Employee agrees that during the Term, he will devote his full
time and attention during regular business hours to the business and affairs of
ASC and its Affiliates (as defined herein) and will not, without the prior
permission of the Board, engage in any other business enterprise which requires
the personal time or attention of Employee. The foregoing shall not prevent (a)
the purchase, ownership or sale by Employee of investments or securities of any
business which is not competitive and does not have any business relations with
ASC or any of its Affiliates; and (b) the passive ownership of up to one percent
(1%) of the issued capital stock of any publicly traded company by itself,
whether such company is a competitor of ASC or not; provided the time or
attention devoted to each of such activities listed in subparagraphs (a) and (b)
above does not materially interfere with the performance of his duties
hereunder. Employee further agrees that during the Term, he will accept such
directorships, executive offices and committee memberships
in ASC and its Affiliates to which he may from time to time be elected and will
perform and render the duties and the services incidental thereto.
4. COMPENSATION. For the full, prompt and faithful performance of all of
the duties and services to be performed by Employee hereunder during the
Employment Term, ASC agrees to pay, and Employee agrees to accept, the amounts
set forth below:
(a) BASE SALARY. As compensation for all services rendered by
Employee in performance of his duties or obligations under this Agreement,
Employer shall pay Employee an annual base salary of Five-Hundred and Fifty
Thousand dollars ($550,000) (the "Base Salary"), payable in equal semi-monthly
installments or in the manner and on the timetable which Employer's payroll is
customarily handled or at such intervals as Employer and Employee may hereafter
agree to from time to time. Employer and Employee agree that the Base Salary
shall be adjusted annually on January 1 of each year, commencing January 1,
2000, to reflect the increase, if any, in the cost of living. The adjustment
shall be made by adding to such Base Salary an amount obtained by multiplying
the Base Salary by the percentage by which the level of the Consumer Price Index
for the Miami, Florida Metropolitan Area as of the last day of the preceding
calendar year by the Bureau of Labor Statistics of the United States Department
of Labor, has increased over its level as of the Effective Date of this
Agreement. Following the end of each calendar year during the Term, and within
thirty (30) days after the release by the Bureau of Labor Statistics of the
figures for the preceding year, Employer shall pay to Employee the amount of
additional compensation to which he is entitled on account of the cost-of-living
adjustment made to the Employee's salary. In no event shall the Base Salary ever
be decreased as a result of a decrease in the cost-of-living.
(b) BENEFIT PLANS. In addition to receiving the Base Salary
provided for in Section 4(a), Employee shall be entitled during the Term, upon
satisfaction of all eligibility requirements, if any, to participate in all
health, dental, disability, life insurance and other benefit programs now or
hereafter established by Employer which cover substantially all other of
Employer's employees and shall receive such other benefits as may be approved
from time to time by Employer.
(c) VACATION. Employee shall be entitled to receive three (3)
weeks of paid vacation for each year during the Term and shall be entitled to
receive paid holidays as enjoyed by all other employees of ASC.
(d) EXPENSES. ASC agrees to reimburse Employee for all reasonable
expenses incurred by him in providing services under this Agreement in
accordance with its policies and practices regarding expense reimbursement then
in effect.
(e) AUTOMOBILE ALLOWANCE. Employee shall be entitled to receive an
automobile allowance of $750 per month, payable on the first day of each month
during the Term. Employee shall be responsible for paying all costs related to
ownership of his vehicle, including maintenance and repairs, insurance and fuel.
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(f) EBITDA INCENTIVE COMPENSATION PLAN. Employee shall be
entitled to participate in ASC's 1999 EBITDA Plan, as described in that certain
document entitled "AVIATION SALES COMPANY 0000 XXXXXX XXXX," as amended from
time to time, whereby Employee shall have the opportunity to earn an incentive
bonus of up to 125% of his Base Salary.
(g) STOCK OPTIONS. Employee shall receive stock option grants for
shares of ASC's common stock in an amount equal to 350,000 shares, such grant to
be effective on the date hereof at a price equal to the closing price of a share
of ASC's stock on the New York Stock Exchange on the last trading day before the
effective date of grant. Such options shall vest over a three-year period, with
one-third of such options vesting on the first, second and third anniversaries
of this Agreement. Employee may receive such additional stock option grants as
are determined by the Compensation Committee of the Board, in accordance with
its policies regarding stock option grants to executive employees generally.
(h) CLUB MEMBERSHIP. ASC will provide Employee with a corporate
membership to a country club mutually acceptable to Employee and to ASC,
including initiation fees and monthly dues.
(i) LIFE INSURANCE. ASC shall pay the sum of $5,000 per year for
insurance premiums to maintain a whole life insurance policy insuring the life
of Employee currently maintained by Employee through Northwestern Mutual Life
Insurance Company. Employee shall retain ownership of the foregoing policy and
any cash value relating thereto.
5. TERMINATION FOR DEATH, DISABILITY OR CAUSE. ASC may terminate this
Agreement, the remainder of the Term and Employee's employment hereunder as
follows:
(a) DEATH. In the event of the death of Employee, this Agreement
shall automatically terminate as of the date of death, and ASC's sole obligation
will be to pay to Employee's estate the sum of (i) one year's Base Salary,
determined by reference to Employee's Base Salary as in effect on the date of
Employee's death, plus (ii) the product of the incentive bonus, if any, which
would have been earned by the Employee for the year during which the Employee
dies pursuant to the incentive plan referred to section 4(f) of this Agreement
if the Employee had rendered services pursuant to this Agreement for the entire
year, multiplied by a fraction, the numerator of which is the number of days
elapsed between (and including) the first day of such year and the last date on
which the Employee rendered services pursuant to this Agreement, and the
denominator of which is the total number of days during such year. The payment
of the Base Salary pursuant to clause (i) above shall be made by ASC either in a
lump sum, or in a series of payments in accordance with ASC's payroll practices;
the payment of the incentive bonus pursuant to clause (ii) above shall be made
at such time as such bonus would have been paid had Employee survived in
accordance with ASC's payroll practices (or an earlier date, as determined in
the sole discretion of the Board).
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(b) DISABILITY. In the event that Employee shall, because of
physical or mental illness or incapacity, be unable to perform the duties and
services to be performed by him under this Agreement for a consecutive period of
three months or such shorter periods aggregating three months in any 12-month
period ("Disability"), ASC shall not be obligated to pay to Employee any
compensation or benefits beyond the date of Disability and may, in its sole
discretion, terminate this Agreement without any further obligation; provided,
however, that in the case of a termination of this Agreement by ASC on account
of Disability, ASC will be obligated to pay to Employee one year's Base Salary,
determined by reference to Employee's Base Salary as in effect on the date of
Employee's termination under this paragraph. The payment of such Base Salary
shall be made by ASC either in a lump sum, or in a series of payments in
accordance with ASC's payroll practices.
(c) TERMINATION FOR CAUSE. ASC may terminate Employee's employment
at any time for Cause. In the event ASC elects to terminate Employee's
employment for Cause, ASC will pay Employee only his then current Base Salary
then unpaid, computed to the last day worked. "Cause" shall mean any of the
following: (i) any embezzlement or wrongful diversion of funds of ASC or any
affiliate of Company by Employee; (ii) gross malfeasance by Employee in the
conduct of his duties; (iii) material breach of Sections 8, 9 or 10 of this
Agreement; and (iv) gross neglect by Employee in carrying out his duties.
(d) OTHER TERMINATION. In the event ASC terminates Employee for
reasons other than death, Disability or Cause, and such termination is not
related to a Change in Control (as defined below), ASC shall pay Employee an
aggregate amount equal to two full year's Base Salary as in effect at such time.
ASC shall pay such amount in 12 equal monthly installments beginning on the
first day of the calendar month immediately after the date of such termination
and on the first day of each of the next eleven calendar months thereafter.
6. VOLUNTARY TERMINATION BY EMPLOYEE. Employee may voluntarily terminate
his employment hereunder (i) during the 12 month period commencing on the date
on which a Change in Control (as defined below) occurs, or (ii) for Good Reason
(as defined below). Except as provided in the preceding sentence, Employee may
not voluntarily terminate his employment hereunder during the Term.
7. TERMINATION RELATING TO A CHANGE IN CONTROL AND FOR GOOD REASON. If
(i) Employee's employment is terminated by ASC within 12 months after a Change
in Control (as defined below), (ii) Employee terminates his employment within 12
months after a Change in Control, in his sole discretion, or (iii) Employee
terminates his employment for Good Reason (as defined below), ASC shall pay
Employee the Special Termination Payment (as defined below).
(a) TERMINATION FOR GOOD REASON. Termination by Employee of his
employment for "Good Reason" shall mean a termination by Employee (i) upon a
significant demotion or material adverse change in his duties and
responsibilities; or (ii) a material breach or violation by ASC of any provision
of this Agreement after Employee has given ASC at least thirty (30) days prior
written
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notice together with an opportunity to cure said breach or violation during such
thirty (30) day period.
(b) CHANGE IN CONTROL. For purposes of this Agreement, a "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")) (collectively, a "person") of
Beneficial ownership (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of twenty (20%) percent
or more of the then outstanding shares of common stock of ASC
(collectively, the "Outstanding Common Stock"); provided, however, that
the following shall not constitute a Change of Control:
(A) Any acquisition directly from ASC (excluding an
acquisition by virtue of the exercise of a conversion privilege);
(B) Any acquisition by an Underwriter (as such term is
defined in Section 2(11) of the Securities Act of 1933, as
amended) for the purpose of making a public offering;
(C) Any acquisition by ASC, whether or not the threshold
set forth above is exceeded in such acquisition; or
(D) Any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by ASC or any corporation
controlled by ASC;
(ii) The liquidation of all or substantially all of the assets of
ASC where this Agreement is not assumed by a successor or assign of the
foregoing; or
(iii) If within two (2) years after:
(A) The completion of a tender offer or exchange offer
for the voting stock of ASC (other than a tender offer or exchange
offer by ASC) or a proxy contest in connection with the election
of members of the Board;
(B) A merger, consolidation, transfer or sale of twenty
percent (20%) of the book value of the gross assets of ASC
measured at the time of such merger, consolidation, transfer or
sale in one (1) or more transactions;
(C) The acquisition by any person, directly or
indirectly, of the Beneficial Ownership of securities of ASC
representing twenty percent (20%) of the Outstanding Common Stock;
or
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(D) Any combination of the foregoing;
A majority of the Board shall not consist
of:
(I) Persons who were directors of ASC on
the date hereof; or
(II) Persons who were elected or nominated
for election as directors with the approval of a
majority of the persons referred to in paragraph
7(b)(iii)(D)(I) above or persons theretofore elected in
accordance with this paragraph 7(b)(iii)(D)(II).
(c) SPECIAL TERMINATION PAYMENT. The "Special Termination Payment"
shall mean an aggregate amount equal to two full year's Base Salary as in effect
at the time of the termination giving rise to the Special Termination Payment.
ASC shall pay such amount in 12 equal monthly installments beginning on the
first day of the calendar month immediately after the date of such termination
and on the first day of each of the next eleven calendar months thereafter.
(d) NO MITIGATION. Employee shall not be required to mitigate the
amount of any payment contemplated by this Section 7 (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that Employee may receive from any other source.
(e) EQUALIZATION PAYMENT. If any of the Special Termination
Payment will be subject to the tax (the "Excise Tax") imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax
that may hereafter be imposed), ASC shall pay to the Employee in cash an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Employee after deduction from the Payment and the Gross-Up Payment of any
Excise Tax imposed upon the Special Termination Payment and any federal, state
and local income tax and Excise Tax imposed upon the Gross-Up Payment shall be
equal to the original amount of the Special Termination Payment, prior to
deduction of any Excise Tax imposed with respect to the Special Termination
Payment. Nothing in this Agreement shall be construed as requiring ASC to
include in the Gross-Up Payment any amount relating to any federal income or
other taxes on the Special Termination Payment (other than Excise Taxes)
provided for under this Agreement, other than federal income or other taxes on
any Gross-Up Payment. The Gross-Up Payment shall be paid to the Employee at such
times as the Special Termination Payment is paid to the Employee, in the same
proportions as any partial payments of the Special Termination Payment bear to
the total Special Termination Payment.
(f) TAX COMPUTATION. For purposes of determining whether any of
the Special Termination Payment will be subject to the Excise Tax and the
amounts of such Excise Tax:
(i) Any payments or benefits received or to be received by the
Employee as a result of a Change in Control of ASC shall be treated as
"parachute payments" within the meaning of
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Section 280G(b)(2) of the Code, except to the extent that, in the opinion of
ASC's tax counsel, such payments or benefits do not constitute parachute
payments, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the excise tax, except to the extent
that, in the opinion of ASC's tax counsel, such excess parachute payments are
not subject to the Excise Tax;
(ii) The value of any noncash benefits or any deferred payment or
benefit shall be determined by ASC's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code; and
(iii) For purposes of determining the amount of the Gross-Up
Payment, the Employee shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the calendar year in which the
Gross-Up Payment is to be made, and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Employee's residence
on the date of termination, net of the maximum reduction in Federal income taxes
which could be obtained from deduction of such state and local taxes.
(g) SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service imposes an Excise Tax with respect to the Special Termination Payment
that is greater than the Excise Tax calculated hereunder, ASC shall reimburse
the Employee for the full amount necessary to make the Employee whole in
accordance with the principles set forth above, plus an appropriate market rate
of interest, as determined by ASC's independent auditors.
8. NON-SOLICITATION. Employee agrees that during the Term and for a
period of 12 months after the termination of Employee's employment with ASC, he
will not, directly or indirectly:
(i) Employ, hire, engage or be associated with any employee or
other person then or during any part of the preceding 12 months connected
with ASC or any of its Affiliates;
(ii) Induce any person connected with or employed by ASC or any of
its Affiliates to leave the employ of such entities; or
(iii) Solicit the employment of any such person on his own behalf
or on behalf of any other business enterprise.
The provisions of this Section shall survive the termination or
expiration of this Agreement.
9. NON-COMPETITION. In consideration of ASC entering into this Agreement,
including, without limitation, the provisions relating to Special Termination
Payments contained in Sections 5(d) and 7(c) hereof, Employee agrees that from
and after the date hereof and continuing for the lesser of (i) the longest
period of time permitted by applicable law, or (ii) 12 months after
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termination of Employee's employment with ASC for any reason whatsoever
(other than termination by reason of the expiration of the Term) (the
"Restrictive Period"), Employee shall not do any one or more of the following,
directly or indirectly:
(A) anywhere in the United States, its territories or
possessions or any other country in the world where ASC or its
Affiliates has sold products or performed services within the 12
month period prior to the date hereof, engage or participate in,
or assist, advise or be connected with (including as an owner,
partner, shareholder, consultant, director, officer or employee or
(without limitation by the specific enumeration of the foregoing)
otherwise) any person, entity or business enterprise involved in a
business that is competitive with any business of ASC or its
Affiliates; provided, however, that the ownership of up to one
percent (1%) of the issued capital stock of any publicly traded
company by itself shall not constitute a violation of any
provision of this Section 11; or
(B) solicit, attempt to solicit or aid in the
solicitation of any customer of ASC or its Affiliates which has
been a customer of ASC or its Affiliates during the Restrictive
Period or within the 12 month period prior to the date hereof, to
purchase from any source other than ASC or its Affiliates any
product or service which could be supplied or performed, as the
case may be, by ASC or any of its Affiliates.
As used in this Agreement, an "Affiliate" shall mean and include any person or
entity which controls a party, which such party controls or which is under
common control with such party. "Control" means the power, direct or indirect,
to direct or cause the direction of the management and policies of a person or
entity through voting securities, contract or otherwise. The provisions of this
Section shall survive the termination of this Agreement.
Additionally, ASC, at its option, may require that the Employee,
directly or indirectly, not compete with ASC in the manner set forth in
Subsections 9(A) and 9(B) above for six months after the end of the Term by
written notice to Employee (given at least six months prior to the end of the
Term) of its intent to exercise this right and by paying Employee a special
termination payment equal to one year's Base Salary as in effect during the last
year of the Term, which special termination payment shall be paid in a lump sum
on the last day of the Term.
10. CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges that
various kinds of confidential and proprietary information and trade secrets,
including but not limited to ASC's and its Affiliate's sales, marketing and
operating methods and lists of ASC's and its Affiliate's customers and vendors,
as they may exist from time to time, are valuable, special and unique assets of
ASC's and its Affiliates respective businesses. Employee will not, during or
after his employment, except in accordance with his employment by ASC, disclose
or cause or permit to be disclosed any confidential or proprietary information
or trade secrets of ASC or its Affiliates to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of ASC or as otherwise be required by law or legal
process. The provisions of this section shall survive the termination and
expiration of this Agreement.
11. REMEDIES. In the event that Employee shall violate any provision of
Sections 8, 9 or 10 above, then Employee hereby agrees that ASC shall be
entitled to a temporary or permanent injunction against him by any court of
competent jurisdiction prohibiting him from violating such provision. In any
proceeding for an injunction and upon any motion for a temporary or permanent
injunction, Employee agrees that his ability to answer in damages shall not be a
bar or interposed as a defense to the granting of such temporary or permanent
injunction against Employee. Employee
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further agrees that ASC will not have an adequate remedy at law in the event of
any breach by Employee hereunder and that ASC will suffer irreparable damage and
injury if Employee breaches any of the provisions of Sections 8, 9 or 10 above.
The provisions of this Section shall survive the termination or expiration of
this Agreement.
12. NOTICES. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
received at the address specified herein. In the case of Employee, notices shall
be delivered to him at the home address which he has most recently communicated
to ASC in writing. In the case of ASC, notices shall be delivered to ASC's
corporate headquarters, and all notices shall be directed to the attention of
ASC's Chief Executive Officer, with a copy to ASC's General Counsel.
13. MODIFICATION AND WAIVER. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by Employee and by an authorized officer of ASC
(other than Employee). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
14. COMPLETE AGREEMENT. This Agreement supersedes all previous agreements
entered into by Employee and ASC. No agreements, representations or
understandings (whether oral or written and whether expressed or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
15. NO ASSIGNMENT. No right, benefit or interest hereunder, shall be
subject to anticipation, alienation, sale, assignment, encumbrance, charge,
pledge, hypothecation, or set-off in respect of any claim, debt or obligation,
or to execution, attachment, levy or similar process, or assignment by operation
of law. Any attempt, voluntary or involuntary, to effect any action specified in
the immediately preceding sentence shall, to the full extent permitted by law,
be null, void and of no effect.
16. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with and subject to, the laws of the State of Florida
applicable to Agreements made and to be performed entirely within such State, as
to all matters governed by state law or, if controlling, by applicable federal
law.
17. SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
18. LITIGATION; VENUE. Any action at law or in equity under this
Agreement shall be brought in the courts of Dade or Broward County, Florida, and
in no other court (whether or not jurisdiction can be established in another
court). Each party hereto waives the right to argue that venue is not
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appropriate in the courts of Dade or Broward County, Florida. THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A
TRIAL BY JURY, THIS WAIVER BEING A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING
INTO THIS AGREEMENT.
19. WITHHOLDING. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes, unless specifically set forth herein
to the contrary.
20. COUNTERPARTS. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one (1) and the same instrument.
21. TERMINATION OF PREVIOUS EMPLOYMENT AGREEMENT. Upon the effectiveness
of this Agreement, the current employment agreement between Employee and a
subsidiary of the Company shall terminate and shall be of no further force and
effect.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first above written.
AVIATION SALES COMPANY
By: _______________________________ _______________________________
Title: _____________________________ XXXX X. XXXXX
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