EXHIBIT 10.5
EMPLOYMENT AGREEMENT
LMI AEROSPACE, INC., a Missouri corporation (the "Corporation"), and XXXXXX
X. XXXX ("Employee") hereby agree as follows:
1. Employment. The Corporation hereby employs Employee, and Employee
accepts employment from the Corporation, upon the terms and conditions
hereinafter set forth. Any and all employment agreements heretofore entered into
between the Corporation and Employee are hereby terminated and cancelled, and
each of the parties hereto mutually releases and discharges the other from any
and all obligations and liabilities heretofore or now existing under or by
virtue of any such employment agreements, it being the intention of the parties
hereto that this Agreement, effective immediately, shall supersede and be in
lieu of any and all prior employment agreements between them.
2. Term of Employment. The initial term of Employee's employment under this
Agreement shall commence on January 1, 2004 and shall terminate on December 31,
2005; provided, however, that this Agreement shall be automatically extended for
additional terms of one year each unless not later than October 31 of any year
beginning in 2005, either party has given written notice to the other party of
its or his intention not to extend the term of this Agreement; and provided,
further, that the term of employment may be terminated upon the earlier
occurrence of any of the following events:
(a) Upon the termination of the business or corporate existence of the
Corporation;
(b) At the Corporation's option, in the event the Corporation
determines that Employee is not performing the duties required of him
hereunder to the satisfaction of the Corporation;
(c) Upon the death of the Employee;
(d) At the Corporation's option, if Employee shall suffer a permanent
disability; (For the purposes of this Agreement, "permanent disability"
means any physical or mental impairment that renders the Employee unable
for a period of six (6) months or more to perform the essential job
functions of his position, even with reasonable accommodation, as
determined by a physician selected by the Corporation. The Employee
acknowledges and agrees that he shall voluntarily submit to a medical or
psychological examination for the purpose of determining his continued
fitness to perform the essential functions of his position whenever
requested to do so by the Corporation. If the Corporation elects to
terminate the employment relationship on this basis, the Corporation shall
notify the Employee or his representative in writing and the termination
shall become effective on the date that such notification is given;
(e) At the Corporation's option, upon ten (10) calendar days' written
notice to Employee, in the event of any breach or default by Employee of
any of the terms of this Agreement or of any of Employee's duties or
obligations hereunder. In lieu of providing ten (10) calendar days' advance
written notice, the Corporation, at its sole option, may terminate the
Employee's services immediately and pay him an amount that is equivalent to
ten (10) calendar days of his salary, less any deductions required by law;
(f) At the Corporation's option, without any advance notice, in the
event that the Employee engages in conduct which, in the opinion of the
Corporation, (1) constitutes dishonesty of any kind (including, but not
limited to, any misrepresentation of facts or falsification of records) in
Employee's relations, interactions or dealings with the Corporation or its
customers; (2) constitutes a felony; (3) potentially may or will expose the
Corporation to public disrepute or disgrace, or potentially may or will
cause harm to the customer relations, operations or business prospects of
the Corporation; (4) constitutes harassment or discrimination towards any
person associated with the Corporation, whether an employee, agent or
customer, based upon that person's race, color, national origin, sex, age,
disability, religion, or other protected status; (5) reflects disruptive or
disorderly conduct, including but not limited to, acts of violence,
fighting, intimidation or threats of violence against any person associated
with the Corporation, whether an employee, agent or customer, or possessing
a weapon while on the Corporation's premises or while acting on behalf of
the Corporation; (6) is indicative of abusive or illegal drug use while on
the Corporation's premises or while acting on the Corporation's behalf; or
(7) constitutes a willful violation of any governmental rules or
regulations; or
(g) At the Employee's option, after providing the Corporation with at
least thirty (30) calendar days advance written notice of his intention to
terminate the employment relationship.
If employment is terminated for any of the reasons set forth in
paragraphs (c) through (g) of this section, Employee shall be entitled to
receive only the Base Salary (as that term is hereinafter defined) accrued
but unpaid as of the date of the termination and shall be ineligible to
receive any additional compensation or severance pay. If, on the other
hand, employment is terminated by the Corporation during the term of this
Agreement for any reason other than those set forth in paragraphs (c)
through (g) of this section, the Corporation shall provide severance pay to
Employee in an amount based upon his length of service with the
Corporation. Specifically, the Corporation shall provide Employee with six
(6) months of Base Salary if he has less than five (5) years of service
with the Corporation as of the date of his termination and with twelve (12)
months of Base Salary if he has five (5) or more years of service with the
Corporation as of the date of his termination. Such severance pay shall be
paid in equal monthly installments, unless the Corporation, within its sole
discretion, elects to pay the present value of the severance pay in a lump
sum within thirty (30) calendar days of the termination.
If employment is terminated in conjunction with a change in the control of
the Corporation or in conjunction with the sale of substantially all of the
operating assets of the Corporation, the Corporation will provide Employee with
severance pay under the circumstances specified within this paragraph. For the
purposes of this Agreement, a change in control is defined as the acquisition of
more than fifty percent (50%) of the stock of the Corporation by a group of
shareholders or an entity which acquires control of the Corporation (a
"Purchaser"). If the change in control or the sale results in the involuntary
termination of Employee or results in the Employee electing to terminate his
employment for a good reason as determined by the Corporation (such as the
Purchaser refusing to offer full time employment to Employee on terms comparable
to those provided by the Corporation prior to the acquisition or the Purchaser
requiring Employee to move to a new location), the Corporation shall provide
Employee with severance pay in an amount that is equal to two times his annual
Base Salary and shall pay Employee any reasonably anticipated Performance Bonus
for the fiscal year in which he was terminated on a prorated basis. If Employee
voluntarily terminates his employment without a good reason (as determined by
the Corporation) within thirty (30) days after the change in control or the
sale, the Corporation shall provide Employee with six (6) months of Base Salary
if he has less than five (5) years of service with the Corporation as of the
date of his termination and with twelve (12) months of Base Salary if he has
five (5) or more years of service with the Corporation as of the date of his
termination. The severance pay provided for in this paragraph shall be paid in
equal monthly installments, unless the Corporation, within its sole discretion,
elects to pay the present value of the severance pay in a lump sum within thirty
(30) calendar days of the termination.
Notwithstanding anything to the contrary, the amount of severance pay
provided under this Agreement shall not under any circumstances exceed the
limitations set forth in ss. 280G of the Internal Revenue Code of 1986.
3. Compensation.
(A) During the period from January 1, 2004 to December 31, 2005, the
Corporation shall compensate Employee for Employee's services rendered hereunder
by paying to Employee an annual salary (the "Base Salary") of Two Hundred Forty
Thousand Dollars ($240,000.00), less any authorized or required payroll
deductions. Payment of this salary will be made in accordance with the payroll
policies of the Corporation in effect from time to time.
(B) With respect to each complete fiscal year of the Corporation during
which (i) the Employee is employed under the terms of this Agreement as of the
last day of such fiscal year, and (ii) the Corporation's "Annual Net Income" (as
that term is hereinafter defined) is more than Two Million Dollars
($2,000,000.00), the Corporation shall pay to Employee, in addition to the Base
Salary, an annual "Performance Bonus". The amount of the annual Performance
Bonus (if any) shall be equal to:
(1) one and five tenths of one percent (1.50%) of the Corporation's Annual
Net Income that is between Two Million Dollars ($2,000,000.00) and
Eight Million, Dollars ($8,000,000.00).
In the event the Corporation's Annual Net Income for any given fiscal year
is less than Two Million Dollars ($2,000,000.00), the Employee shall not be
entitled to a Performance Bonus with respect to such fiscal year.
Notwithstanding anything contained herein to the contrary, in the event the sum
of the Employee's Performance Bonus with respect to a fiscal year plus the
Employee's benefit under all performance/production incentive programs of the
Corporation in which the Employee is entitled to a bonus ("Incentive Benefit")
for such fiscal year exceeds Ninety Thousand Dollars ($90,000.00), the amount of
the Employee's Performance Bonus for such year shall be reduced so that the sum
of the Performance Bonus and the Incentive Benefit equals Ninety Thousand
Dollars ($90,000.00).
For purposes of the calculation of the Performance Bonus, the Corporation's
"Annual Net Income" means the consolidated net profit of the Corporation and its
subsidiaries, for a given fiscal year, as determined by the firm of independent
certified public accountants providing auditing services to the Corporation,
using generally accepted accounting principles consistently applied, and
calculated without regard to (a) any bonus paid to the Corporation's Chairman of
the Board and any formula bonuses paid pursuant to employment contracts, (b)
federal and state income tax, and (c) any income or loss attributable to any
other corporation or entity (including the assets of a corporation or entity
that constitute an operating business) acquired by or merged into the
Corporation subsequent to the effective date of this Agreement. The Corporation
shall pay to Employee any Performance Bonus due the Employee hereunder not later
than fifteen (15) days after the receipt by the Corporation of its annual
audited financial statements, which the Corporation expects to receive within
ninety (90) days after the end of each fiscal year of the Corporation.
(C) In addition to the Base salary and Performance Bonus (if any),
Employee shall be entitled to receive such bonus compensation as the Board of
Directors of the Corporation may authorize from time to time.
(D) The Corporation retains the right to modify or adjust the manner in
which the Performance Bonus is calculated in the event that the Corporation
either acquires the assets of another entity, or any portion thereof, or sells
its assets, or any portion thereof, to another entity.
4. Duties of Employee.
(A) Employee shall serve as President and Chief Executive Officer of the
Corporation or in such other positions as may be determined by the Board of
Directors of the Corporation, and Employee shall perform such duties on behalf
of the Corporation and its subsidiaries by such means, at such locations, and in
such manner as may be specified from time to time by the officers or Board of
Directors of the Corporation.
(B) Employee agrees to abide by and conform to all rules established by
the Corporation applicable to its employees.
(C) Employee acknowledges that he is being employed as a full-time
employee, and Employee agrees to devote so much of Employee's entire time,
attention and energies to the business of the Corporation as is necessary for
the successful operation of the Corporation and shall endeavor at all times to
improve the business of the Corporation. Employee shall not accept any business
commitments other than with the Corporation without the advance written consent
of the Corporation's President.
5. Expenses. During the period of Employee's employment, except as
otherwise specifically provided in this Agreement, the Corporation will pay
directly, or reimburse Employee for, all items of reasonable and necessary
business expenses approved in advance by the Corporation if such expenses are
incurred by Employee in the interest of the business of the Corporation. The
Corporation shall also reimburse Employee for automobile expenses incurred by
Employee in the performance of Employee's duties hereunder. The amount of such
reimbursement shall be in accordance with the automobile expense reimbursement
policy adopted (and as it may be modified from time to time) by the
Corporation's Board of Directors. All such expenses paid by Employee will be
reimbursed by the Corporation upon presentation by Employee, from time to time
(but not less than quarterly), of an itemized account of such expenditures in
accordance with the Corporation's policy for verifying such expenditures.
6. Fringe Benefits.
(A) Employee shall be entitled to participate in any health, accident
and life insurance program and other benefits which have been or may be
established by the Corporation for salaried employees of the Corporation.
(B) Employee shall be entitled to an annual vacation without loss of
compensation for such period as may be determined by the Board of Directors of
the Corporation.
(C) The Corporation shall furnish to the Employee during the term of his
employment an automobile selected by the Corporation to aid the Employee in the
performance of his duties. Upon agreement of the Corporation and the Employee,
the Corporation may, in lieu of the automobile, provide the Employee with a Five
Thousand Dollar ($5,000.00) annual automobile allowance.
7. Covenants of Employee.
(A) During the term of Employee's employment with the Corporation and
for all time thereafter Employee covenants and agrees that Employee will not in
any manner directly or indirectly, except as required in Employee's duties to
the Corporation, disclose or divulge to any person, entity, firm or company
whatsoever, or use for Employee's own benefit or the benefit of any other
person, entity, firm or company, directly or indirectly, any knowledge, devices,
information, techniques, customer lists, business plans or other data belonging
to the Corporation or developed by Employee on behalf of the Corporation during
his employment with the Corporation, without regard to whether all of the
foregoing matters will be deemed confidential, material or important, the
parties hereto stipulating, as between them, that the same are important,
material, confidential and the property of the Corporation, that disclosure of
the same to or use of the same by third parties would greatly affect the
effective and successful conduct of the business of the Corporation and the
goodwill of the Corporation, and that any breach of the terms of this
subparagraph (A) shall be a material breach of this Agreement.
(B) During the term of Employee's employment with the Corporation and
for a period of two (2) years or one (1) year with respect to subparagraph (iv)
below (the "Covenant Term") after cessation for whatever reason of such
employment (except as hereinafter provided in subparagraph (C) of this paragraph
7), Employee covenants and agrees that Employee will not in any manner directly
or indirectly:
(i) solicit, divert, take away or interfere with any of the
customers (or their respective affiliates or successors) of the
Corporation;
(ii) engage directly or indirectly, either personally or as an
employee, partner, associate partner, officer, manager, agent, advisor,
consultant or otherwise, or by means of any corporate or other entity or
device, in any business which is competitive with the business of the
Corporation. For purposes of this covenant a business will be deemed
competitive if it is conducted in whole or in part within any geographic
area wherein the Corporation is engaged in marketing its products, and if
it involves the manufacture of component parts for the aerospace industry
or any other business which is in any manner competitive, as of the date
of cessation of Employee's employment, with any business then being
conducted by the Corporation or as to which the Corporation has then
formulated definitive plans to enter;
(iii) induce any salesman, distributor, supplier, manufacturer,
representative, agent, jobber or other person transacting business with
the Corporation to terminate their relationship with the Corporation, or
to represent, distribute or sell products in competition with products of
the Corporation; or
(iv) induce or cause any employee of the Corporation to leave the
employ of the Corporation.
(C) The parties agree that the Covenant Term provided for in the
preceding subparagraph (B) shall be:
(i) reduced to six (6) months in the event all of the operating
assets or all of the common stock of the Corporation is sold to any entity
or individuals unaffiliated with the Corporation, its successors or
assigns; or
(ii) eliminated if the business currently operated by the
Corporation is terminated and the assets of the Corporation are
liquidated.
(D) All the covenants of Employee contained in this paragraph 7 shall be
construed as agreements independent of any other provision of this Agreement,
and the existence of any claim or cause of action against the Corporation,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Corporation of these covenants.
(E) It is the intention of the parties to restrict the activities of
Employee under this paragraph 7 only to the extent necessary for the protection
of legitimate business interests of the Corporation, and the parties
specifically covenant and agree that should any of the provisions set forth
therein, under any set of circumstances not now foreseen by the parties, be
deemed too broad for such purpose, said provisions will nevertheless be valid
and enforceable to the extent necessary for such protection.
8. Documents. Upon cessation of Employee's employment with the
Corporation, for whatever reason, all documents, records (including without
limitation, customer records), notebooks, invoices, statements or
correspondence, including copies thereof, relating to the business of the
Corporation then in Employee's possession, whether prepared by Employee or
others, will be delivered to and left with the Corporation, and Employee agrees
not to retain copies of the foregoing documents without the written consent of
the Corporation.
9. Remedies. In the event of the breach by Employee of any of the terms of
this Agreement, notwithstanding anything to the contrary contained in this
Agreement, the Corporation may terminate the employment of Employee in
accordance with the provisions of paragraph 2 of this Agreement. It is further
agreed that any breach or evasion of any of the terms of this Agreement by
Employee will result in immediate and irreparable injury to the Corporation and
will authorize recourse to injunction and/or specific performance as well as to
other legal or equitable remedies to which the Corporation may be entitled. In
addition to any other remedies that it may have in law or equity, the
Corporation also may require an accounting and repayment of all profits,
compensation, remuneration or other benefits realized, directly or indirectly,
as a result of such breaches by the Employee or by a competitor's business
controlled, directly or indirectly, by the Employee. No remedy conferred by any
of the specific provisions of this Agreement is intended to be exclusive of any
other remedy and each and every remedy given hereunder or now or hereafter
existing at law or in equity by statute or otherwise. The election of any one or
more remedies by the Corporation shall not constitute a waiver of the right to
pursue other available remedies. Employee expressly agrees to pay all reasonable
costs and attorneys' fees incurred by the Corporation in order to enforce the
Employee's obligations under this Agreement, regardless of whether litigation is
commenced or prosecuted to a judgment.
10. Severability. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any court
of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof,
shall continue in full force and effect and shall be interpreted as if such
invalid agreements or covenants were not contained herein.
11. Waiver or Modification. No waiver or modification of this Agreement or
of any covenant, condition or limitation herein shall be valid unless in writing
and duly executed by the party to be charged therewith, and no evidence of any
waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising out of
or affecting this Agreement, or the rights or obligations of the parties
hereunder, unless such waiver or modification is in writing, duly executed as
aforesaid, and the parties further agree that the provisions of this Paragraph
may not be waived except as herein set forth. Failure of the Corporation to
exercise or otherwise act with respect to any of its rights hereunder in the
event of a breach of any of the terms or conditions hereof by Employee shall not
be construed as a waiver of such breach nor prevent the Corporation from
thereafter enforcing strict compliance with any and all of the terms and
conditions hereof.
12. Assignability. The services to be performed by Employee hereunder are
personal in nature and, therefore, Employee shall not assign Employee's rights
or delegate Employee's obligations under this Agreement, and any attempted or
purported assignment or delegation not herein permitted shall be null and void.
13. Successors. Subject to the provisions of paragraph 12, this Agreement
shall be binding upon and shall inure to the benefit of the Corporation and
Employee and their respective heirs, executors, administrators, legal
administrators, successors and assigns.
14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered personally, by over-night courier, or by certified or registered mail,
return receipt requested, if to the Corporation, to:
Xxxxxx Xxxxxxxx, Chairman of the Board
LMI AEROSPACE, INC.
X.X. Xxx 000
Xx. Xxxxxxx, XX 00000-0000
and, if to Employee, to:
Xxxxxx X. Xxxx
or to such other address as may be specified by either of the parties in the
manner provided under this paragraph 14.
15. Construction. This Agreement shall be deemed for all purposes to have
been made in the State of Missouri and shall be governed by and construed in
accordance with the laws of the State of Missouri, notwithstanding either the
place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction.
16. Venue. The parties hereto agree that any suit filed arising out of or
in connection with this Agreement shall be brought only in the United States
District Court for the Eastern District of Missouri, unless that court lacks
jurisdiction, in which case such action shall be brought only in the Circuit
Court for St. Louis County, Missouri.
17. Disclosure of Existence of Agreement. To preserve the Corporation's
rights under this Agreement, the Corporation may advise any third party of the
existence of this Agreement and its terms, and the Employee specifically
releases and agrees to indemnify and hold the Corporation harmless from any
liability for doing so.
18. Opportunity to Review. Employee hereby represents and warrants that he
has had an opportunity to review this Agreement and ask the Corporation
questions about the Agreement, and understands the meaning and effect of each
paragraph of this Agreement.
The parties have executed this Agreement as of January 1, 2004.
LMI AEROSPACE, INC.
("Corporation")
By: ______________________________________
Xxxxxx Xxxxxxxx, Chairman of the Board
-------------------------------
Xxxxxx X. Xxxx
("Employee")
