Exhibit 10.2.3
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 XXXXXX XXXX, 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 Vice President of
Business Development 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remain in effect, in accordance with its terms, until it is superceded by this
Agreement.
3. Title and Duties.
(a) The Employee shall have the title and position of Vice President
of Business Development 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 $185,000 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:
2
(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
30% 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 55% of the actual
Base Salary paid to the Employee during such calendar year.
(iii) Definitions. for purposes of this Section 4:
3
(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).
4
(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
Vice President of Business Development of the Company, whether
5
managerial or supervisory, are materially diminished without the
prior consent of the Employee.
(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
6
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, 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
7
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), 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.
8
(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
(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
9
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 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
10
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 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.
11
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 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.
12
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/ Xxxx X. Xxxxxxx
---------------------------------
Title: Chief Financial Officer
---------------------------
EMPLOYEE:
/s/ Xxxxxx Xxxx
------------------------------------
Xxxxxx Xxxx
13
