EMPLOYMENT AGREEMENT
Exhibit
10.3
AGREEMENT
dated as of December 16, 2009 between XXXXXXX XXXXXXXXX, residing at 00 Xxxxxx
Xxxxx, Xxxxxxx, XX 00000 (“Executive”), and CPI AEROSTRUCTURES, INC., a New York
corporation having its principal office at 00 Xxxxxxxxx Xxxx., Xxxxxxxx, Xxx
Xxxx 00000 (“Company”);
WHEREAS,
Executive has served as the Company’s Senior Vice President, Operations pursuant
to an Amended and Restated Employment Agreement, dated December 1, 2006, as
amended on November 19, 2008, which expires by its terms on December 31, 2009
(“Existing Employment Agreement”); and
WHEREAS,
the Company desires to employ Executive as its Chief Operating Officer,
effective January 1, 2010 pursuant to the terms and conditions herein set
forth.
IT IS
AGREED:
1. Employment, Duties and
Acceptance.
1.1 General. The
Company hereby agrees to the employment of Executive as its Chief Operating
Officer (“COO”), effective January 1, 2010. All of Executive’s powers
and authority in any capacity shall at all times be subject to the direction and
control of the Chief Executive Officer and the Company’s Board of
Directors. The Board may assign to Executive such management and
supervisory responsibilities and duties for the Company or any subsidiary of the
Company, including serving as an officer and/or director of any subsidiary, as
are consistent with Executive’s status as COO.
1.2 Full-Time
Position. Executive accepts such employment and agrees to
devote substantially all of his business time, energies and attention to the
performance of his duties hereunder. Nothing herein shall be
construed as preventing Executive from making and supervising personal
investments, provided they will not interfere with the performance of
Executive’s duties hereunder or violate the provisions of Section 5.4
hereof.
1.3 Location. The
Company will maintain its principal executive offices within a thirty (30) mile
radius of its current location in Edgewood, New York. Executive shall
undertake such occasional travel, within or outside the United States, as is
reasonably necessary in the interests of the Company.
2. Term. The
term of Executive’s employment hereunder shall commence on January 1, 2010 and
shall continue until December 31, 2012 (“Term”) unless terminated earlier as
hereinafter provided in this Agreement, or unless extended by mutual written
agreement of the Company and Executive. Unless the Company and
Executive have otherwise agreed in writing, if Executive continues to work for
the Company after the expiration of the Term, his employment thereafter shall be
under the same terms and conditions provided for in this Agreement, except that
his employment will be on an “at will” basis and the provisions of Sections 4.4
and 4.6(c) shall no longer be in effect.
3. Compensation and
Benefits.
3.1 Salary. The
Company shall pay to Executive a salary (“Base Salary”) at the annual rate of
(i) $190,000 from January 1, 2010 until December 31, 2010; (ii) $220,000 from
January 1, 2011 to December 31, 2011; and (iii) $240,000 from January 1, 2012
until December 31, 2012 . Executive’s compensation shall
be paid in equal, periodic installments in accordance with the Company’s normal
payroll procedures.
3.2 Bonus. In
addition to Base Salary, for each of the years ending December 31, 2010, 2011
and 2012, Executive shall be paid a bonus (“Bonus”) to be calculated in the
manner set forth on Schedule A annexed
hereto. The amount of the Bonus shall be pro-rated to the date of
termination of Executive’s employment. The cash portion of the Bonus
shall be paid, and the stock portion of the Bonus shall be issued, on March
10th (or
the first business day thereafter if such date is not a business day) of the
following year.
3.3 Benefits. Executive
shall be entitled to such medical, life, disability and other benefits as are
generally afforded to other executives of the Company, subject to applicable
waiting periods and other conditions.
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3.4 Vacation. Executive
shall be entitled to such paid vacation days in each year during the Term and to
a reasonable number of other days off for religious and personal reasons in
accordance with customary Company policy.
3.5 Automobile. During
the Term, the Company shall provide a luxury class automobile (reasonably
satisfactory to Executive) for Executive to be used in connection with the
business of the Company. The Company shall reimburse Executive for
all costs associated with the use of such automobile, including lease and
insurance costs, repairs and maintenance.
3.6 Expenses. The
Company shall pay or reimburse Executive for all transportation, hotel and other
expenses reasonably incurred by Executive on business trips and for all other
ordinary and reasonable out-of-pocket expenses actually incurred by him in the
conduct of the business of the Company against itemized vouchers submitted with
respect to any such expenses and approved in accordance with customary
procedures.
3.7 Club
Membership. During the Term, Executive shall be entitled to a
country club membership, as long as the Company maintains a group membership at
such club.
4. Termination.
4.1 Death. If
Executive dies during the Term, Executive’s employment hereunder shall terminate
and the Company shall pay to Executive’s estate the amount set forth in Section
4.6(a).
4.2 Disability. The
Company, by written notice to Executive, may terminate Executive’s employment
hereunder if Executive shall fail because of illness or incapacity to render
services of the character contemplated by this Agreement for six consecutive
months. Upon such termination, the Company shall pay to Executive the
amount set forth in Section 4.6(a).
4.3 By Company for
“Cause”. The Company, by written notice to Executive, may
terminate Executive’s employment hereunder for “Cause”. As used
herein, “Cause” shall mean: (a) the refusal or failure by Executive to carry out
specific directions of the Chief Executive Officer or the Board which are of a
material nature and consistent with his status as COO (or whichever positions
Executive holds at such time), or the refusal or failure by Executive to perform
a material part of Executive’s duties hereunder; (b) the commission by Executive
of a material breach of any of the provisions of this Agreement; (c) fraud or
dishonest action by Executive in his relations with the Company or any of its
subsidiaries or affiliates (“dishonest” for these purposes shall mean
Executive’s knowingly or recklessly making of a material misstatement or
omission for his personal benefit); or (d) the conviction of Executive of a
felony under federal or state law. Notwithstanding the foregoing, no
“Cause” for termination shall be deemed to exist with respect to Executive’s
acts described in clauses (a) or (b) above, unless the Company shall have given
written notice to Executive within a period not to exceed ten (10) calendar days
of the initial existence of the occurrence, specifying the “Cause” with
reasonable particularity and, within thirty (30) calendar days after such
notice, Executive shall not have cured or eliminated the problem or thing giving
rise to such “Cause;” provided, however, no more than two cure periods need be
provided during any twelve-month period. Upon such termination, the
Company shall pay to Executive the amount set forth in Section
4.6(b).
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4.4 By Executive for “Good
Reason”. The Executive, by written notice to the Company, may
terminate Executive’s employment hereunder if a “Good Reason”
exists. For purposes of this Agreement, “Good Reason” shall mean the
occurrence of any of the following circumstances without the Executive’s prior
written consent: (a) a substantial and material adverse change in the
nature of Executive’s title, duties or responsibilities with the Company that
represents a demotion from his title, duties or responsibilities as in effect
immediately prior to such change (such change, a “Demotion”); provided, however, that in
the event of a “Change in Control” (as defined below), no Demotion shall be
deemed to have occurred as long as Executive shall remain as the Company’s head
operational officer, notwithstanding title; (b) material breach of this
Agreement by the Company; (c) a failure by the Company to make any payment to
Executive when due, unless the payment is not material and is being contested by
the Company, in good faith; or (d) a liquidation, bankruptcy or receivership of
the Company. Notwithstanding the foregoing, no “Good Reason” shall be
deemed to exist with respect to the Company’s acts described in clauses (a), (b)
or (c) above, unless Executive shall have given written notice to the Company
within a period not to exceed ten (10) calendar days of the initial existence of
the occurrence, specifying the “Good Reason” with reasonable particularity and,
within thirty (30) calendar days after such notice, the Company shall not have
cured or eliminated the problem or thing giving rise to such “Good Reason”;
provided, however, that no more than two cure periods shall be provided during
any twelve-month period of a breach of clauses (a), (b) or (c)
above. Upon such termination, the Company shall pay to Executive the
amount set forth in Section 4.6(c). “Change in Control” shall mean
the acquisition, by any person or entity other than the Company and/or any
officers or directors of the Company as of the date of this Agreement, of
securities of the Company (in one or more transactions) having 50% or more of
the total voting power of all the Company’s securities than
outstanding.
4.5 By Company Without
“Cause”. The Company may terminate Executive’s employment
hereunder without “Cause” by giving at least thirty (30) days written notice to
Executive. Upon such termination, the Company shall pay to Executive the amount
set forth in Section 4.6(c); provided, however, that if
such notice is given more than 18 months after a Change in Control, the Company
shall pay to Executive only the amount set forth in Section 4.6(b).
4.6 Compensation Upon
Termination. In the event that Executive’s employment
hereunder is terminated, the Company shall pay to Executive the following
compensation:
(a) Payment Upon Death or
Disability. In the event that Executive’s employment is
terminated pursuant to Sections 4.1 or 4.2, the Company shall no longer be under
any obligation to Executive or his legal representatives pursuant to this
Agreement except for: (i) the Base Salary due Executive pursuant to Section 3.1
hereof through the date of termination; (ii) all earned and previously approved
but unpaid Bonuses for any year prior to the year of termination; (iii) all
valid expense reimbursements, and (iv) all accrued but unused vacation
pay.
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(b) Payment Upon Termination by
the Company For “Cause”. In the event that the Company
terminates Executive’s employment hereunder pursuant to Section 4.3, the Company
shall have no further obligations to the Executive hereunder, except for: (i)
the Base Salary due Executive pursuant to Section 3.1 hereof through the date of
termination, (ii) all valid expense reimbursements and (ii) all unused vacation
pay through the date of termination required by law to be paid.
(c) Payment Upon Termination by
Company Without Cause or by Executive for Good Reason. In the
event that Executive’s employment is terminated pursuant to Sections 4.4 or 4.5,
the Company shall have no further obligations to Executive hereunder except for:
(i) the Base Salary due Executive pursuant to Section 3.1 hereof through the end
of the Term payable in accordance with Section 3.1; (ii) all earned and
previously approved but unpaid Bonuses; (iii) all valid expense reimbursements;
and (iv) all accrued but unused vacation pay.
(d) In the
event that Executive’s employment is terminated pursuant to Sections 4.4 or 4.5,
any compensation paid or payable to Executive from sources other than the
Company will offset or terminate the Company’s obligation to pay to Executive
the full amounts pursuant to this Agreement. In addition, the Company
shall not be obligated to pay medical, life, disability and other benefits from
the date Executive becomes eligible to be covered under another program by
reason of employment or consultancy elsewhere.
5. Protection of Confidential
Information; Non-Competition.
5.1 Acknowledgment. Executive
acknowledges that:
(a) As a
result of his current and prior employment with the Company, Executive has
obtained and will obtain secret and confidential information concerning the
business of the Company and its subsidiaries (referred to collectively in this
Section 5 as the “Company”), including, without limitation, financial
information, proprietary rights, trade secrets and “know-how,” customers and
sources (“Confidential Information”).
(b) The
Company will suffer substantial damage which will be difficult to compute if,
during the period of his employment with the Company or thereafter, Executive
should enter a business competitive with the Company or divulge Confidential
Information.
(c) The
provisions of this Agreement are reasonable and necessary for the protection of
the business of the Company.
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5.2 Confidentiality. Executive
agrees that he will not at any time, during the Employment Term or thereafter,
divulge to any person or entity any Confidential Information obtained or learned
by him as a result of his employment with the Company, except (i) in the course
of performing his duties hereunder, (ii) with the Company’s prior written
consent; (iii) to the extent that any such information is in the public domain
other than as a result of Executive’s breach of any of his obligations
hereunder; or (iv) where required to be disclosed by court order, subpoena or
other government process. If Executive shall be required to make
disclosure pursuant to the provisions of clause (iv) of the preceding sentence,
Executive promptly, but in no event more than 48 hours after learning of such
subpoena, court order, or other government process, shall notify, confirmed by
mail, the Company and, at the Company’s expense, Executive shall: (a)
take all reasonably necessary and lawful steps required by the Company to defend
against the enforcement of such subpoena, court order or other government
process, and (b) permit the Company to intervene and participate with counsel of
its choice in any proceeding relating to the enforcement thereof.
5.3 Documents. Upon
termination of his employment with the Company, Executive will promptly deliver
to the Company all memoranda, notes, records, reports, manuals, drawings,
blueprints and other documents (and all copies thereof) relating to the business
of the Company and all property associated therewith, which he may then possess
or have under his control; provided, however, that Executive shall be entitled
to retain copies of such documents reasonably necessary to document his
financial relationship with the Company.
5.4 Non-competition. During
the Term and for a period of two (2) years thereafter, Executive, without the
prior written permission of the Company, shall not, anywhere in the
world, (i) be employed by, or render any services to, any person, firm or
corporation engaged in the contract production of aircraft parts or any other
business which is directly in competition with any “material” business conducted
by the Company or any of its subsidiaries at the time of termination (as used
herein “material” means a business which generated at least 10% of the Company’s
consolidated revenues for the last full fiscal year for which audited financial
statements are available) (“Competitive Business”); (ii) engage in any
Competitive Business for his or its own account; (iii) be associated with or
interested in any Competitive Business as an individual, partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee, consultant,
advisor or in any other relationship or capacity; (iv) employ or retain, or have
or cause any other person or entity to employ or retain, any person who was
employed or retained by the Company while Executive was employed by the Company
(other than Executive’s personal secretary and assistant); or (v) solicit,
interfere with, or endeavor to entice away from the Company, for the benefit of
a Competitive Business, any of its customers or other persons with whom the
Company has a contractual relationship. Notwithstanding the
foregoing, nothing in this Agreement shall preclude Executive from investing his
personal assets in any manner he chooses, provided, however, that Executive may
not, during the period referred to in this Section 5.4, own more than 4.9% of
the equity securities of any Competitive Business.
5.5 Injunctive
Relief. If Executive commits a breach, or threatens to commit
a breach, of any of the provisions of Sections 5.2 or 5.4, the Company shall
have the right and remedy to seek to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed by Executive that the services being rendered hereunder
to the Company are of a special, unique and extraordinary character and that any
such breach or threatened breach will cause irreparable injury to the Company
and that money damages will not provide an adequate remedy to the
Company. The rights and remedies enumerated in this Section 5.5 shall
be in addition to, and not in lieu of, any other rights and remedies available
to the Company under law or equity. In connection with any legal
action or proceeding arising out of or relating to this Agreement, the
prevailing party in such action or proceeding shall be entitled to be reimbursed
by the other party for the reasonable attorneys’ fees and costs incurred by the
prevailing party.
5.6 Modification. If
any provision of Sections 5.2 or 5.4 is held to be unenforceable because of the
scope, duration or area of its applicability, the tribunal making such
determination shall have the power to modify such scope, duration, or area, or
all of them, and such provision or provisions shall then be applicable in such
modified form.
5.7 Survival. The
provisions of this Section 5 shall survive the termination of this Agreement for
any reason, except in the event Executive is terminated by the Company without
“Cause,” or if Executive terminates this Agreement with “Good Reason,” in either
of which events, clauses (i), (ii) and (iii) of Section 5.4 shall be null and
void and of no further force or effect. The non-renewal of this
Agreement at the end of the Term shall not be a termination by the Company
without “Cause”.
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6. Miscellaneous
Provisions.
6.1 Notices. All
notices provided for in this Agreement shall be in writing, and shall be deemed
to have been duly given when (i) delivered personally to the party to receive
the same, or (ii) when mailed first class postage prepaid, by certified mail,
return receipt requested, addressed to the party to receive the same at his or
its address set forth below, or such other address as the party to receive the
same shall have specified by written notice given in the manner provided for in
this Section 6.1. All notices shall be deemed to have been given as
of the date of personal delivery or mailing thereof.
If to
Executive:
Xxxxxxx
XxXxxxxxx
00 Xxxxxx
Xxxxx
Xxxxxxx,
XX 00000
If to the
Company:
|
|
CPI
Aerostructures, Inc.
|
00
Xxxxxxxxx Xxxx.
Xxxxxxxx,
Xxx Xxxx 00000
Attn: Xxxxxx
X. Xxxx
With a
copy in either case to:
Xxxxxxxx
Xxxxxx
The
Chrysler Building
000
Xxxxxxxxx Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attn: Xxxxx
Xxxx Xxxxxx, Esq.
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6.2 Entire Agreement;
Waiver. This Agreement sets forth the entire agreement of the
parties relating to the employment of Executive and is intended to supersede all
prior negotiations, understandings and agreements. No provisions of
this Agreement may be waived or changed except by a writing by the party against
whom such waiver or change is sought to be enforced. The failure of
any party to require performance of any provision hereof or thereof shall in no
manner affect the right at a later time to enforce such provision.
6.3 Governing
Law. All questions with respect to the construction of this
Agreement, and the rights and obligations of the parties hereunder, shall be
determined in accordance with the law of the State of New York applicable to
agreements made and to be performed entirely in New York.
6.4 Binding Effect;
Nonassignability. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company. This
Agreement shall not be assignable by Executive, but shall inure to the benefit
of and be binding upon Executive’s heirs and legal representatives.
6.5 Severability. Should
any provision of this Agreement become legally unenforceable, no other provision
of this Agreement shall be affected, and this Agreement shall continue as if the
Agreement had been executed absent the unenforceable provision.
6.6 Section
409A. This Agreement is intended to comply with the provisions
of Section 409A of the Internal Revenue Code (“Section 409A”). To the
extent that any payments and/or benefits provided hereunder are not considered
compliant with Section 409A, the parties agree that the Company shall take all
actions necessary to make such payments and/or benefits become
compliant.
IN
WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
CPI
AEROSTRUCTURES, INC.
/s/
Xxxxxx X. Xxxx
By: Xxxxxx X. Xxxx
Chief
Executive Officer
/s/ Xxxxxxx
XxXxxxxxx
XXXXXXX XXXXXXXXX
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SCHEDULE
A
Bonus: Based on our common
understanding of the significance of your participation in the budgeting process
of the Company, your bonus shall be based on specific revenue and earnings
before interest, taxes, depreciation and amortization (“EBITDA”) goals, which
shall allow you to earn a target annual bonus equal to thirty-five percent (35%)
of your annual base salary for the year ending December 31, 2010 and forty-five
percent (45%) of your annual base salary for the years ending December 31, 2011
and 2012 if, in each year, a 10% annual increase is achieved. The
Company’s auditors will determine EBITDA after taking into account all necessary
provisions and the accrual of all bonuses, including your own bonus, and
excluding all extraordinary items. Twenty-five percent (25%) of the
bonus amount will be determined by revenues (the “revenue bonus”) and
seventy-five percent (75%) by EBITDA (the “EBITDA bonus”).
EBITDA
Bonus
At 100%
of EBITDA target (i.e., 10% growth), your EBITDA bonus will equal 100% of 75% of
(a) 35% of base salary for the year ending December 31, 2010, and (b) 45% of
base salary for the years ending December 31, 2011 and 2012.
7. Should
EBITDA fall short or exceed EBITDA target, your EBITDA bonus will decrease or
increase based on the grid, below. For example, if there is a 50%
increase in EBITDA, the EBITDA bonus would equal 150% of 75% of (a) 35% of base
salary for the year ending December 31, 2010, and (b) 45% of base salary for the
years ending December 31, 2011 and 2012; and if there is a 10% decrease in
EBITDA, the EBITDA bonus would equal 25% of 75% of (a) 35% of base salary for
the year ending December 31, 2010, and (b) 45% of base salary for the years
ending December 31, 2011 and 2012.
8. If the
decrease in EBITDA is 15% or more, no EBITDA bonus will be paid.
9. Notwithstanding
the foregoing, if EBITDA for the year preceding the year for which the EBITDA
bonus is to be determined is less than $1 million, then the EBITDA bonus will be
calculated by comparing the current year’s EBITDA to the EBITDA of the first
preceding year in which EBITDA was in excess of $2 million.
Revenue
Bonus
1. At 100%
of revenue target (i.e., 10% growth), your revenue bonus will equal 100% of 25%
of (a) 35% of base salary for the year ending December 31, 2010, and (b) 45% of
base salary for the years ending December 31, 2011 and 2012.
2. Should
revenue fall short or exceed revenue target, your revenue bonus will decrease or
increase based on the grid, below. For example, if there is a 50%
increase in revenue, the revenue bonus would equal 150% of 25% of (a) 35% of
base salary for the year ending December 31, 2010, and (b) 45% of base salary
for the years ending December 31, 2011 and 2012; and if there is a 10% decrease
in revenue, the revenue bonus would equal 25% of 25% of (a) 35% of base salary
for the year ending December 31, 2010, and (b) 45% of base salary for the years
ending December 31, 2011 and 2012.
3. If the
decrease in revenue is 15% or more, no revenue bonus will be paid.
General
1. Both
bonuses will be adjusted pro rata if EBITDA and/or revenues fall in between two
grid percentages.
2. The first
$75,000 of bonus
would be paid in cash. The balance would be paid half in cash and
half in shares of the Company’s common stock, valued at the VWAP for the five
trading days ending two trading days before issuance. They will be
issued under the Company’s Performance Equity Plan 2009.
3. The
Company and executive to mutually agree on how to handle all
acquisitions.
Grid
|
Growth
|
Bonus
|
|
Decrease
greater than 15%
|
No
bonus
|
|
Decrease
10%
|
75%
Decrease
|
|
Decrease
5%
|
50%
Decrease
|
|
Flat
|
25%
Decrease
|
|
Increase
5%
|
10%
Decrease
|
|
Increase
10%
|
Baseline
bonus
|
|
Increase
15%
|
5%
Increase
|
|
Increase
25%
|
10%
Increase
|
|
Increase
50%
|
50%
Increase
|
|
Increase
100% or greater
|
75%
Increase
|
9
