SALARY CONTINUATION AGREEMENT
This Agreement, made and entered into as of the 17th day of November, 1997,
by and between MONITOR AEROSPACE CORPORATION, a New York corporation, with
principal offices and place of business in the State of New York (hereinafter
referred to as the "Corporation") and R. XXXXX XXXXXXX, (hereinafter referred to
as the "Employee").
WHEREAS, the Employee is employed by the Corporation; and
WHEREAS, the Corporation recognizes the value of the service performed by
the Employee and wishes to encourage his continued employment; and
WHEREAS, the Employee wishes to be assured that he will be entitled to a
certain amount of additional compensation for some definite period of time from
and after his retirement from active service with the Corporation and his
beneficiary will be entitled to a death benefit from and after the Employee's
death, either while in the employ of the Corporation or within ten (10) years
after his retirement from the service of the Corporation; and
WHEREAS, the parties hereto wish to provide the terms and conditions upon
which the Corporation shall pay such additional compensation to the Employee
after his retirement, or death benefits to his beneficiary after the Employee's
death; and
WHEREAS, the parties hereto intend that this Agreement be considered an
unfunded arrangement, maintained primarily to provide deferred compensation
benefits for the Employee, who is a member of a select group of management or
highly compensated employees of the Corporation, for purposes of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
NOW THEREFORE, in consideration of the premises and of the mutual promises
herein contained, the parties hereto agree as follows:
1. DEFINITION OF TERMS.
(i) Accrued Benefit: Upon a termination of employment with the Corporation
(x) for any reason other than death, the Employee's Accrued Benefit shall
be equal to the total cash value which would have accumulated in a variable
universal life insurance policy issued by Penn Mutual Life Insurance Company,
if:
(a) such policy had been issued on the life of the Employee on the
Effective Date;
(b) On November 17th of each year beginning on the Effective Date, the
Corporation had paid a premium of $60,000 on such policy until the earlier
of the Employee's (x) termination of employment or (y) attainment of age
65;
(c) the Corporation had kept the policy in full force and effect up to
the date of the Employee's termination of employment without any
withdrawals or loans from the policy by the Corporation; and
(d) the Corporation had liquidated the accumulated cash value of such
policy on the date of such termination of employment.
(y) on account of the Employee's death while in the employment of the
Corporation and prior to the commencement of retirement, disability or
termination benefits, the Employee's Accrued Benefit shall be equal to the total
proceeds which would have been paid on account of the Employee's death from a
variable life insurance policy issued by Penn Mutual Life Insurance Company
assuming:
(a) such policy had been issued on the life of the Employee on the
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Effective Date;
(b) on November 17th of each year beginning on the Effective Date, the
Corporation had paid a premium of $60,000 on such policy until the
Employee's death;
(c) the Corporation had kept the policy in full force and effect up to
the date of the Employee's death without any withdrawals or loans from the
policy by the Corporation; and
(d) the Corporation had received payment from the policy immediately
following such Employee's death.
(ii) Cause: Termination of the Employee's employment by the Corporation
shall constitute a termination for "Cause" only if such termination is for one
of the following reasons: (a) conviction of a felony punishable by a prison
sentence of more than one year; (b) habitual use of drugs without a prescription
or habitual use of alcohol to the extent that any of such uses materially
interferes with the Employee's performance of his duties; or (c) prior to a
change in the ownership of 50% or more of the outstanding common stock of the
Corporation pursuant to a merger, consolidation, sale of treasury or newly
issued shares or another transaction having a similar effect, the refusal or
failure by the Employee to perform or discharge duties and responsibilities
appropriate to his position as President which are properly assigned to him by
the Board of Directors of the Corporation, which refusal or failure amounts to
an extended and gross neglect of his duties to the Corporation, provided,
however, that in the case of this clause (c), notice of termination may only be
given after the Employee is given a statement in writing describing in detail
such refusal(s) or failures at least ten (10) days before a duly called meeting
of the Board of Directors of the Corporation at which meeting Employee is
offered the opportunity to be present, and if present, is given the opportunity
to respond to the same.
(iii) Disability: Disability means a physical or mental illness or
incapacity which renders the Employee incapable of performing the duties of the
Employee's employment and which
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can be expected to result in death or to be of long-continued duration, as
determined by the Board of Directors of the Corporation on the basis of evidence
furnished by a licensed physician acceptable to it.
(iv) Effective Date: November 17, 1997
(v) Vested Accrued Benefit: Before the Employee attains age 65, the
Employee's Vested Accrued Benefit shall be equal to the sum of: (1) one-third
(1/3) of his Accrued Benefit on his employment termination date (the "VAC
Amount"), plus (2) two-thirds (2/3) of his Accrued Benefit on his employment
termination date multiplied by his Vested Percentage at his employment terminate
date. Upon the Employee attaining age 65, the Employee will be fully vested in
his Accrued Benefit.
(vi) Vested Percentage. The Employee's Vested Percentage shall be
determined in accordance with the following schedule:
Completed Years
of Vesting Service Vested Percentage
------------------ -----------------
Less than 2 0%
2 10
3 20
4 55
5 100
(vii) Vesting Service: Vesting Service means the Employee's period(s) of
employment with the Corporation measured from the Effective Date to the date the
Employee retires or terminates employment with the Corporation. Vesting Service
shall include the period of any absence, including, but not limited to, a leave
of absence authorized by the Corporation, an absence due to Disability, or
military leave, prior to termination of his employment with the Corporation.
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2. BENEFIT PAYMENTS UPON TERMINATION OF EMPLOYMENT OR DEATH:
(i) Termination of Employment by Corporation Without Cause: In the
event that the Employee's employment is terminated by the Corporation
without Cause before the Employee has attained age 65, the Corporation
shall pay to the Employee the amount of the Employee's Benefit as of his
termination of employment, in equal monthly installments over a period of
ten (10) years, commencing in the Corporation's sole discretion, either (x)
on the last day of the month following the termination of the Employee's
employment, or (y) on the last day of the month following the Employee's
attainment of age 65, the balance of the Employees Accrued Benefit.
(ii) Termination of Employment by Employee Before Age 65: In the event
of the Employee's termination of employment with the Corporation before he
has attained age 65, for any reason other than Disability, death, by the
Corporation without Cause or for Cause, the Corporation shall pay the
amount of the Employee's Vested Accrued Benefit as of his termination of
employment, in (i) a lump sum within thirty (30) days after such
termination to the extent of the VAC Amount, and (ii) equal monthly
installments over a period of ten (10) years, commencing on the last day of
the month following the Employee's attainment of age 65, the balance of the
Employee's Vested Accrued Benefit.
(iii) Disability: If the Employee's employment with the Corporation is
terminated due to Disability, the Corporation shall pay to the Employee an
amount equal to the Employee's Accrued Benefit as of the date of his
termination of employment, commencing upon the last day of the month in
which the determination of Disability is made, in equal monthly
installments over a period of ten (10) years.
(iv) Retirement: If the Employee's employment with the Corporation is
terminated after the Employee attains age 65, the Corporation shall pay to
the Employee an amount equal to the Employee's Accrued Benefit as of the
date of his termination of employment, in equal monthly installments over a
period of ten (10) years, commencing on the last day of the month following
the termination of Employee's employment.
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(v) Termination of Employment by Corporation for Cause: If the
Employee's employment is terminated by the Corporation for Cause, the VAC
Amount shall be paid to the Employee in a lump sum within thirty (30) days
after such termination and no further benefit, whether vested or not
vested, will be payable to the Employee by the Corporation under this
Agreement.
(vi) Death of Employee Prior to Retirement: In the event of the
Employee's death while in the employment of the Corporation, the
Corporation shall pay the amount of the Employee's Accrued Benefit: (a) to
any beneficiary designated in writing by the Employee in accordance with
the provisions of paragraph 4 of this Agreement or, if no such designation
is effective; (b) to the Employee's spouse, provided that she survives the
Employee by at least 24 hours, or (c) if there be no such spouse, to the
Employee's estate. Any such payment(s) to a beneficiary so designated by
the Employee or to the Employee's spouse shall be made in equal monthly
installments over a ten (10) year period. Any such payment to the
Employee's estate shall be made in a lump sum. Once payment to a
beneficiary or spouse has begun, should such beneficiary or the Employee's
spouse die before receiving the full amount of the Employee's Accrued
Benefit, the remainder thereof shall be paid to the successor person or
persons so designated by the Employee in writing or, if no such designation
is effective, in a lump sum to the estate of such deceased beneficiary or
spouse, as the case may be.
(vii) Death of Employee After Payments Have Begun: In the event of the
Employee's death after benefit payments have begun, but prior to the
completion of all such payments due and owing hereunder, the Corporation
shall continue to make such payments in equal monthly installments over the
remainder of the ten (10) year period that would have been applicable had
the Employee survived. Such continuing payments shall be made: (a) to any
beneficiary designated in writing by the Employee in accordance with the
provisions of paragraph 4 of this Agreement or, if no such designation is
effective; (b) to the Employee's spouse, provided that she survives the
Employee by at least 24 hours, or if there be no such spouse; or (c) to the
Employee's estate. Anything herein to the contrary notwithstanding, any
such payment to the Employee's estate shall be made in a lump sum. Once
payments to a beneficiary or spouse have begun, should such
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beneficiary or the Employee's spouse die before receiving the full amount
of the Employee's benefit payments hereunder, the remainder thereof shall
be paid to the successor person or persons so designated by the Employee in
writing or, if no such designation is effective, in a lump sum to the
estate of such deceased beneficiary or spouse, as the case may be.
3. OFFSET FOR OBLIGATIONS TO CORPORATION AND WITHHOLDING.
If, at such time as the Employee or his designated beneficiary, spouse or
estate, becomes entitled to benefit payments hereunder, the Employee has any
debt, obligation or other liability owing to the Corporation, the Corporation
may offset the amount owing it against the amount of benefits otherwise
distributable hereunder. The Corporation shall withhold from payments made
hereunder, the amounts, if any, of federal, state and local withholding or other
taxes or withholding items as required by law.
4. BENEFICIARY DESIGNATION.
Subject to compliance with the provisions of ERISA to the extent
applicable, the Employee shall have the right, at any time, to submit a written
designation of primary and secondary beneficiaries to whom payment under this
Agreement shall be made in the event of his death prior to complete distribution
of the benefits due and payable under this Agreement. Each beneficiary
designation shall become effective only when receipt thereof is acknowledged in
writing by the Corporation.
5. NON-COMPETITION.
(a) In consideration of the foregoing agreements of the Corporation and of
the payments to be made by the Corporation pursuant thereto, the Employee hereby
agrees that during the term of Executive's employment with the Corporation and
for one year after he ceases to be employed by the Corporation, Employee shall
not engage directly in competition with the Corporation in any business in which
the Corporation, its subsidiaries or affiliates was engaged or
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planning to engage at the time when his employment terminated. Direct
competition shall include, without limitation, any role as a sponsor,
consultant, employee or partner which aids or abets any business to compete
directly or to prepare for direct competition with the Corporation, its
subsidiaries or affiliates in any business in which any of them is engaged or
planning to engage.
(b) In the event of any breach by the Employee of the agreements and
covenants contained herein, the Board of Directors of the Corporation shall
direct that any unpaid balance of any payments to the Employee under this
Agreement be suspended, and shall thereupon notify the Employee of such
suspension, in writing. Thereupon, if the Board of Directors of the Corporation
shall determine that said breach by the Employee has continued for a period of
one (1) month following notification of such suspension, all rights of the
Employee and his beneficiaries under this Agreement, including rights to further
payments hereunder, shall thereupon terminate. The exercise by the Corporation
of any right or remedy under this paragraph shall not be a waiver of or preclude
the exercise of any other right or remedy the Corporation may have against the
Employee, and any forbearance by the Corporation in exercising any right or
remedy hereunder shall not be a waiver of or preclude the later exercise of such
right or remedy.
6. NO TRUST CREATED. Nothing contained in this Agreement, and no action
taken pursuant to its provisions by either party hereto shall create, or be
construed to create, a trust of any kind, or a fiduciary relationship between
the Corporation and the Employee, his designated beneficiary, other
beneficiaries of the Employee or any other person.
7. BENEFITS PAYABLE ONLY FROM GENERAL CORPORATE ASSETS: UNSECURED GENERAL
CREDITOR STATUS QF EMPLOYEE.
a. The payments to the Employee or his designated beneficiary or any other
beneficiary hereunder shall be made from assets which shall continue, for all
purposes, to be a part of the general, unrestricted assets of the Corporation;
no person shall have any interest in any such assets by virtue of the provisions
of this Agreement. The Corporation's obligation hereunder shall be an unfunded
and unsecured promise to pay money in the future. To the extent that any person
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acquires a right to receive payments from the Corporation under the provisions
hereof, such right shall be no greater than the right of any unsecured general
creditor of the Corporation; no such person shall have nor require any legal or
equitable right, interest or claim in or to any property or assets of the
Corporation.
b. In the event that, in its discretion, the Corporation purchases an
insurance policy or policies insuring the life of the Employee (or any other
property), to allow the Corporation to recover the cost of providing benefits,
in whole or in part, hereunder, neither the Employee, his designated beneficiary
nor any other beneficiary shall have any rights whatsoever therein or in the
proceeds therefrom. The Corporation shall be the sole owner and beneficiary of
any such insurance policy and shall possess and may exercise all incidents of
ownership therein. No such policy, policies or other property shall be held in
any trust for the Employee or any other person nor as collateral security for
any obligation of the Corporation hereunder.
8. NO CONTRACT OF EMPLOYMENT. Nothing contained herein shall be construed
to be a contract of employment for any term of years, nor as conferring upon the
Employee the right to continue to be employed by the Corporation in his present
capacity, or in any capacity. It is expressly understood by the parties hereto
that this Agreement relates only to the payment of' deferred compensation for
the Employee's services, after termination of his employment with the
Corporation, and is not intended to be an employment contract. Employee and the
Corporation agree that the Employment Agreement dated as of December 1, 1995, as
amended, between the Corporation and the Employee remains in full force and
effect and that this Agreement effectuates, in part, the provisions of the
Employment Agreement.
9. BENEFITS NOT TRANSFERABLE. Except as expressly permitted herein, neither
the Employee, his designated beneficiary, nor any other beneficiary under this
Agreement shall have any power or right to transfer, assign, anticipate,
hypothecate or otherwise encumber any part or all of the amounts payable
hereunder. No such amounts shall be subject to seizure by any creditor of any
such beneficiary, by a proceeding at law or in equity, nor shall such amounts be
transferable by operation of law in the event of bankruptcy, insolvency or death
of the Employee, his designated
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beneficiary, or any other beneficiary hereunder. Any such attempted assignment
or transfer shall be void.
10. DETERMINATION OF BENEFITS.
(i) Claim: A person who believes that he is being denied a benefit to which
he is entitled under the Plan (hereinafter referred to as a "Claimant") may file
a written request for such benefit with the Corporation, setting forth his
claim. The request must be addressed to the President of the Corporation at its
then principal place of business.
(ii) Claim Decision: Upon receipt of a claim, the Corporation shall advise
the Claimant that a reply will be forthcoming within ninety (90) days and shall,
in fact, deliver such reply within such period. The Corporation may, however,
extend the reply period for an additional ninety (90) days for reasonable cause.
If the claim is denied in whole or in part, the Corporation shall adopt a
written opinion, using language calculated to be understood by the Claimant,
setting forth:
(a) The specific reason or reasons for such denial;
(b) The specific reference to pertinent provisions of this Agreement
on which such denial is based;
(c) A description of any additional material or information necessary
for the Claimant to perfect his claim and an explanation why such material
or such information is necessary.
(d) Appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and
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(e) The time limits for requesting a review under subsection (iii) and
for review under subsection (iv) hereof.
(iii) Request for Review: Within sixty (60) days after the receipt by the
Claimant of the written opinion described above, the Claimant may request in
writing that the Secretary of the Corporation review the determination of the
Corporation. Such request must be addressed to the Secretary of the Corporation,
at its then principal place of business. The Claimant or his duly authorized
representative may, but need not, review the pertinent documents and submit
issues and comments in writing for consideration by the Corporation. If the
Claimant does not request a review of the Corporation's determination by the
Secretary of the Corporation within such sixty (60) day period, the Claimant
shall be barred and estopped from challenging the Corporation's determination.
(iv) Review of Decision: Within sixty (60) days after the Secretary's
receipt of a request for review, he will review the Corporation's determination.
After considering all-materials presented by the Claimant, the Secretary will
render a written opinion, written in a manner calculated to be understood by the
Claimant, setting forth the specific reasons for the decision and containing
specific references to the pertinent provisions of this Agreement on which the
decision is based. If special circumstances require that the sixty (60) day time
period be extended, the Secretary will so notify the Claimant and will render
the decision as soon as possible, but no later than one hundred twenty (120)
days after receipt of the request for review.
11. AMENDMENT. The Corporation may terminate or amend this Agreement at any
time, except that no such termination or amendment shall adversely affect the
amount previously credited to the account of the Employee hereunder and the
rights of the Employee hereunder with respect to such account.
12. INUREMENT. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, and the Employee, his
successors, heirs, executors, administrators and beneficiaries. In addition, the
Corporation hereby covenants and agree that it will
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not merge, consolidate or reorganize with any other company or organization
unless and until the other company or organization agrees to assume all
obligations of the Corporation hereunder.
13. NOTICE. Any notice, consent or demand required or permitted to be given
under the provisions of this Agreement shall be in writing, and shall be signed
by the party giving or making the same. If such notice, consent or demand is
mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as show on the
records of the Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand. Either party may change the address to which notice
is to be sent by giving notice of the change of address in the manner aforesaid.
14. GOVERNING LAW. This Agreement, and the rights of the parties hereunder,
shall be governed by and construed in accordance with the laws of the State of
New York.
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IN WITNESS WHEREOF, the parties have executed this Agreement, in duplicate,
as of the day and year first above written.
WITNESS: EMPLOYEE:
/s/ /s/ R. Xxxxx Xxxxxxx
------------------------------- -------------------------------
R. XXXXX XXXXXXX
-------------------------------
(type or print name)
MONITOR AEROSPACE CORPORATION
ATTEST: By: /s/
----------------------------
/s/ Title:
------------------------------- -------------------------
Secretary
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