January 18, 1999
Xx. Xxxxxx X. Xxxx
President and Chief Operating Officer
Xxxx Pacific Shipyards Corporation
0000 00xx Xxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Dear Xx. Xxxx:
This letter, when countersigned by you, shall serve as an employment agreement
("Agreement") between you and Xxxx Pacific Shipyards Corporation ("Xxxx"),
wherein the parties agree as follows.
1. You shall continue to hold the position of President and Chief Operating
Officer of Xxxx and perform the duties associated with that job through the
term of your employment pursuant to this letter.
2. Subject to the provisions of Paragraphs 9, 10 and 11, Xxxx shall employ
you for a period of one year ("Term") commencing the 1st day of January,
1999 (the "Effective Date").
3. You will at all times conduct yourself in Todd's best interests and will
perform on a full-time basis, competently, diligently and to the best of your
abilities, the duties and services commonly associated with your position, and
such other duties appropriate to a senior executive position as may be
assigned. Xxxx reserves the right to change such job description
responsibilities assigned to you at any time and from time to time during the
Term of this Agreement. You shall report directly to the Chief Executive
Officer of the parent corporation and your principal place of employment shall
be Todd's headquarters in Seattle, Washington, located at 0000 00xx Xxx. XX,
Xxxxxxx, Xxxxxxxxxx 00000, subject to travel incident to your duties on behalf
of Xxxx. Except as otherwise authorized by Xxxx, you agree to be present in
the Greater Seattle Area at all times during the five-day work week.
4. In exchange for your services, Xxxx shall pay to you during the Term of
this Agreement an annual gross salary at the rate of One Hundred Seventy-Three
Thousand and 00/100 Dollars ($173,000) per annum in installments in accordance
with Todd's usual payroll practices ("Base Salary"). In addition, during
the Term of this Agreement, you shall be entitled to participate in such major
medical, hospital, life insurance and other benefit programs, to the extent
you are eligible under those plans, as Xxxx from time to time shall keep in
effect for its senior executives (the "Benefits"). Xxxx reserves the right
to change any one or more of such Benefits as it determines to be necessary or
appropriate. You shall be entitled to reimbursement of the ordinary and
necessary expenses incurred in connection with your performance of the
services contemplated by this Agreement, subject to such reporting
requirements as are in effect at Xxxx.
5. You are eligible to receive a cash bonus on July 1, 1999 for the fiscal
year 1999 ("Bonus"), subject to the attainment of certain corporate fiscal
objectives. The Bonus shall be in an amount equal to a percentage of your
Base Salary determined by the Board of Directors of Xxxx, which percentage, if
corporate objectives are met, shall not be less than twenty percent (20%) and
not more than fifty percent (50%) ("Applicable Percentage"). The Applicable
Percentages for the July 1, 1999 Bonus, for which you are eligible, shall be
determined in accordance with the schedule set forth below:
If the pre-tax profit of Xxxx Pacific Then the Applicable
Shipyards Corporation for the fiscal year Percentage of your
ending March 31, 1999 is between Base Salary shall be:
$ 0 - $200,000 20%
200,000 - 400,000 23%
400,000 - 600,000 26%
600,000 - 800,000 29%
800,000 - 1,000,000 32%
1,000,000 - 1,200,000 35%
1,200,000 - 1,400,000 38%
1,400,000 - 1,600,000 41%
1,600,000 - 1,800,000 44%
1,800,000 - 2,000,000 47%
above 2,000,000 50%
The "pre-tax profit" to be used in calculating the applicable Percentage
shall include appropriately accrued expenses for cash bonuses and other
incentive compensation. For bonus purposes, excluded from Company "pre-tax
profits" will be any settlement amounts received by Xxxx from the Washington
State Ferry System ("WSF") pursuant to the Request for Equitable Adjustment
("REA"), as the REA settlement amounts (if any) were not included in the
Company's budget; provided however that properly recognized REA revenue (if
any) will be included in "pre-tax profit" for the 1999 fiscal year in an
amount equal to the following formula: (a) properly recognized REA revenue,
multiplied by (b)(i) the 1999 fiscal year Jumbo Xxxx XX project costs divided
by: (ii) the total Jumbo Xxxx XX project costs. To qualify for the Bonus, you
must be a full-time employee on the last day of the fiscal year.
6. Subject to the provisions of this Paragraph 6, you are eligible to
receive a cash bonus based upon the settlement amounts received by Xxxx
pursuant to the REA.
(a) Such REA bonus ("REA Bonus") shall be in an amount equal to:
(1) the REA proceeds in excess of the sum of: (a) the aggregate
contractual amount (including the total Indefinite Quantity Work pool)
contemplated by that certain WSF Xxxx XX Class Ferry Contract #00-4464 by and
between WSF and Xxxx, dated as of January 30, 1995 (the "Base Contract") and
(b) the amounts, if any, accrued towards an REA settlement provided such
accrual occurs before a Change in Control; multiplied by
(2) the quotient of (x) 60,000 divided by (y) the total number of issued and
outstanding shares of Xxxx parent's common stock upon the inception of this
Agreement.
(b) The REA Bonus shall be available to you only if all of the following
occur:
(1) a Change in Control (as defined below) occurs before the receipt by Xxxx
of the REA settlement amount;
(2) you are offered and accept employment with the entity that assumes
control of Xxxx in accordance with Paragraph 7;
(3) if the fair market value of Xxxx parent's common stock exceeds the xxxxx
xxxxx of your Stock Options (as defined below), you exercise all of your Stock
Options which meet this condition;
(4) you sell all of your Xxxx parent's common stock before a Change in
Control; and
(5) upon payment to Xxxx by WSF of the final amounts owed to Xxxx under the
REA settlement, you have, in the reasonable opinion of Xxxx, actively
assisted Xxxx in facilitating the REA settlement.
7. For purposes of this Agreement, a Change in Control means any one of the
following events:
(a) A sale or other transfer of all or substantially all of the assets of
Xxxx to an entity which is not an Affiliate of Xxxx;
(b) A merger or other consolidation of Xxxx into another corporation or
corporations which is not an Affiliate of Xxxx.
As used herein, an entity is an "Affiliate" of Xxxx if it is controlled by,
or is under common control with, Xxxx.
8. In the event of a Change in Control, and should you not be offered
employment of a type which is substantially similar to your employment under
this Agreement by the entity assuming control of Xxxx, you shall continue to
be employed by the parent of Xxxx or, in the event of a sale of the assets of
Xxxx, you shall continue to be employed by Xxxx, at the Base Salary rate for
the duration of the one year period commencing on the Effective Date. Upon
the termination of such one year period, the term of your employment shall end
and you shall receive severance pay equal to your Base Salary in the amount of
One Hundred Seventy-Three Thousand and 00/100 Dollars ($173,000); provided,
however, that during such one year period and at any point thereafter, you
agree to actively assist Xxxx in facilitating the resolution of the REA
settlement (the extent and manner of such assistance and participation to be
determined by the CEO of Todd's parent). For purposes of Paragraphs 8 and 9,
"substantially similar" employment shall mean employment for which the
compensation, benefits and job duties are similar to the Base Salary, Benefits
and job duties contemplated by this Agreement.
9. In the event of a Change in Control, and should you be offered
employment of a type which is substantially similar to your employment under
this Agreement, by the entity assuming control of Xxxx or purchasing
substantially all of the assets of Xxxx, this Agreement shall immediately
terminate and you shall be entitled solely to (i) a pro rata share of the
Bonus, in full or in part, in accordance with Paragraph 5 if the conditions of
that paragraph are met; and (ii) the REA Bonus in accordance with Paragraph 6
of this Agreement if the conditions in that paragraph are met. Provided,
however, that for a reasonable period after such termination, you agree to
actively assist Xxxx in facilitating the resolution of the REA settlement (the
extent and manner of such assistance and participation is to be determined by
the CEO of Todd's parent).
10. Upon the occurrence of your death or a three month period of disability
that prevents you from complying with your obligations under this Agreement or
otherwise as an employee of Xxxx, your employment under this Agreement shall
be terminated and you shall be entitled to receive your Base Salary, Benefits,
Bonus in accordance with Paragraph 5 if the conditions of that paragraph are
met.
11. In the event you terminate your employment during the Term of this
Agreement without the prior written consent of Xxxx, or you are terminated for
cause, your Base Salary, Benefits and all other rights provided hereunder
shall terminate effective immediately and you shall no longer be eligible for
the Bonus or REA Bonus. For the purposes of this Paragraph 11, the phrase
"for cause" shall mean (i) your breach of any provision of this Agreement;
(ii) any act of dishonesty, willful misfeasance, repeated failure to perform
your duties or the commission of a crime involving moral turpitude; or (iii)
the appropriation or attempted appropriation of any material business
opportunity of Todd's including attempting to secure or securing any personal
profit in connection with any transaction entered into on behalf of Xxxx.
12. You represent and warrant that you are not under any contract which
would be breached by your becoming and remaining employed by Xxxx under the
provisions of this Agreement.
13. During the Term of this Agreement and thereafter, you shall not,
directly or indirectly, divulge, communicate or otherwise make available to
any person, corporation or government entity (except in performing your duties
hereunder), or use for your own or any other person or entities benefit, any
trade secret, confidential business information, or any other information of a
confidential nature of Xxxx or a related entity of Xxxx. While you are in the
employ of Xxxx, all documents or information compiled, held, used or received
by you shall remain the sole property of Xxxx and shall be delivered to Xxxx
upon your termination or at any earlier time so requested by Xxxx. Xxxx shall
have the right without the necessity of posting a bond or proving special
damages to enjoin any breach of this provision by you.
14. During the Term of this Agreement and for a period of two (2) years
thereafter, you agree not to:
(a) attempt to employ, hire, engage or otherwise associate with any person
employed by Xxxx or any successor to Xxxx during any part of the twelve (12)
months preceding your termination or the expiration of this Agreement;
(b) induce any employee to leave Xxxx or any successor to Xxxx;
(c) solicit or assist in the solicitation of the employment of any employees
on your own behalf or on behalf of any business; or
(d) be employed, consult, own or otherwise associate with any subcontractor
or supplier of Xxxx or any subcontractor or supplier of any successor to Xxxx.
As used herein, "successor" means any purchaser or acquirer of assets or
stock of Xxxx incident to a Change in Control. Paragraph 14 shall terminate
upon the withdrawal by Xxxx and any successor to Xxxx from the shipbuilding
and repair business in the State of Washington.
15. This Agreement and the Grant of Incentive Stock Options dated effective
as of June 24, 1994, July 17, 1995 and December 16, 1997 (the "Stock
Options"), contain the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, oral or written, between the parties hereto with respect to
the subject matter hereof. This Agreement may not be amended orally but only
by an agreement in writing signed by each of the parties to this letter. This
Agreement and the rights granted herein, including but not limited to the
provisions of Paragraph 13 and 14, may be assigned to any successor to Xxxx.
16. This Agreement shall be governed and construed in accordance with the
laws of the State of Washington without giving effect to any choice or
conflict of law, provision or rule (whether of the State of Washington or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Washington.
If you are in agreement with the forgoing, please sign this letter and return
the executed copy to the undersigned, whereupon the provisions hereof shall
constitute a binding agreement between you and Xxxx Pacific Shipyards
Corporation as of the date first written above.
Very Truly Yours,
XXXX PACIFIC SHIPYARDS CORPORATION
By: _____________________________
Xxxxxxx X. Xxxxx
Chief Executive Officer
Accepted and Agreed to:
By: ______________________________
Xxxxxx X. Xxxx
Xx. Xxxxxx X. Xxxx
January 18, 1999
DOCUMENT2
