EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT (the “Agreement”)
is made and entered into as of September 30, 2008 (the “Effective
Date”) by and between Precision Aerospace Components, Inc., a Delaware
corporation (the “the
Company”), and Xxxxxx X. Xxxxxx (the “Executive”).
|
1.
|
POSITION
|
a. Title;
Office. Executive has been employed by and is serving as the
President and Chief Executive Officer of the Company. Executive’s
office will be located at the Company’s headquarters at 0000 Xxxxxx Xxxx Xxxx,
Xxxxxx Xxxxxx, Xxx Xxxx.
b. Duties. Executive shall report
to the Company’s Board of Directors (the “Board of
Directors”) and shall perform such duties as the Board of Directors may
from time to time require, consistent with the general level and type of duties
and responsibilities customarily associated with the position of Chief Executive
Officer. For as long as Executive is a member of the Board of
Directors, during the term of this Agreement, Executive shall serve as a member
of the Board of Directors without additional consideration other than what is
provided in this Agreement.
c. Other Obligations. Executive agrees to the
best of Executive’s ability and experience that he will at all times loyally and
conscientiously perform all of the duties and obligations required of Executive
pursuant to the terms of this Agreement, and will do so to the reasonable
satisfaction of the Board of Directors. During the term of
Executive’s employment, Executive may engage in other activities while he
manages the Company provided that such activities neither unreasonably interfere
with his management of and duties to the Company nor adversely reflect on the
Company’s reputation. Executive shall notify the Board of Directors
if an outside activity would be expected to take more than ten hours of normal
work time during the month on a regular basis.
|
2.
|
EMPLOYMENT
TERM
|
The Company hereby agrees to employ
Executive, and Executive hereby agrees to be employed by the Company, subject to
the terms and conditions of this Agreement, for a term commencing on the
Effective Date and continuing until September 30, 2009 unless sooner replaced or
terminated as provided in Section 5 below (the “Employment
Term”). This Agreement
shall be deemed to be renewed for additional one-year terms after its initial
term (or any subsequent renewal term), unless either party delivers written
notice of its intent not to renew this Agreement.
|
3.
|
COMPENSATION
|
a. Base Salary. During
the Employment Term, Executive will be paid an annual salary of two hundred ten
thousand dollars and no cents ($210,000.00). Executive’s salary will
be payable in equal weekly installments pursuant to the Company’s regular
payroll practices (or in the same manner as other employees of the Company), and
shall be subject to the usual, required withholding of income and employment
taxes. Executive’s annual salary of two hundred ten thousand dollars
and no cents ($210,000.00), together with any changes thereto, shall be referred
to in this Agreement as “Base
Salary.” Base Salary will be subject to review by, and change
at, the sole discretion of the Board of Directors, acting or through a
Compensation Committee of the Board of Directors if it so chooses (the “Compensation
Committee”).
b. Incentive
Bonus. During the Employment Term, Executive will be eligible
for incentive bonuses based on the achievement of specified financial or other
performance objectives as determined by the Compensation Committee each year (or
such other period as determined by the Compensation Committee) in its sole
discretion (the “Incentive
Bonus”). The initial bonus elements shall be as
follows:
(i) Cash
bonuses and/or other form of consideration received bonuses not to exceed 50% of
pretax income, calculated without including expenses for non cash compensation,
are to be calculated and paid upon the achievement of the
following:
|
1.
|
1%
of net sales from Freundlich subsidiary greater than 10 Million dollars
for the 12 month period ending on September 30, 2009 (the “Anniversary
Date”) payable at the time of filing of the Company’s 10 Q for the third
quarter 2009.
|
|
2.
|
2%
of net equity
or 1% of debt raised by the Company or its subsidiaries; this shall
include any such funding which refinances existing credit obligations of
the Company or its subsidiaries, but shall not include the extension of
existing obligations or lines of credit; payable at the time of first
funding from the financing. (Recognizing the unique role Xx. Xxxxxx is
presently playing within the
Company.)
|
|
3.
|
3%
of net pretax consolidated profits in excess of prior year pretax
consolidated profits for the 12 month period ending on the Anniversary
Date payable at the time of filing of the Company’s 10 Q for the third
quarter 2008.
|
|
4.
|
2%
of any sale price of a major asset of the Company payable in form of
consideration received for sale of asset – e.g. if either the Freundlich
operation or any other direct subsidiary or subsidiary of a subsidiary or
the Company as a whole is sold either in one or more asset sales, stock
sales or mergers.
|
|
5.
|
In
any event total cash bonus or form of consideration received not to exceed
50% of pretax income, calculated without including expenses for non-cash
compensation expenses.
|
ii) Stock
Option or other equity plan that will be calculated valued and vest pursuant to
a plan to be developed within the first six months of the Effective date of this
Agreement Such incentive award shall take into account the
Executive's positions, duties and responsibilities at the Company.
c. Employee
Benefits
During the Employment Term, Executive
shall be eligible to participate in the employee benefits plans currently and
hereafter maintained from time to time by the Company, in its sole discretion,
including family group health insurance and a 401(k) savings plan, provided the
Company in its sole discretion elects to adopt such plans. In the
event Executive does not avail himself of such health insurance, he shall be
paid the premiums which would have been paid by the Company had he and his
spouse participated in the plan Executive shall be entitled to 20 days of
vacation per calendar year accrued at the rate of 1.67 days per month in
addition to Company paid holidays. Executive may, at his election,
carry over or be paid for all or any portion of his unused
vacation. Additionally, if Executive obtains a disability insurance
policy or a term life insurance policy on his life, up to $500,000, each at a
cost that is acceptable to the Company, the Company shall reimburse the
Executive for the associated disability or life insurance premiums incurred by
the Executive during the Employment Term. The Company reserves the
right, at its discretion, to cancel or change the employee benefit plans and
programs it offers to its employees and consequently to Executive at any
time. Executive will be given a copy of, and must abide by, the
Company’s employee handbook and employee benefit plan documents which will
describe more fully these and other benefits of Executive’s employment, as well
as the personal policies and procedures which apply to employment with the
Company.
2
|
4.
|
EXPENSE
REIMBURSEMENT
|
Executive
will be authorized to incur ordinary, necessary and reasonable travel,
entertainment and other business expenses in connection with Executive’s duties
and in accordance with the Company policy. The Company shall also
reimburse Executive for reasonable out-of-pocket travel and living expenses
incurred by Executive to commute to and work from the Company’s headquarters, up
to a maximum amount of $3,000 per month. Executive shall receive
reimbursement for out-of-pocket continuing professional education fees and
expenses required to maintain Executive’s CLE requirements for the New York Bar
and for out-of-pocket Bar licensing fees. Executive shall also be
entitled to receive reimbursement for attorney’s fees for services incurred for
review and advice regarding this Agreement, up to a maximum amount of one
thousand dollars ($1,000.00). All expenses subject to reimbursement
shall require Executive to present appropriate supporting documentation and
receipts in accordance with the Company’s standard reimbursement
policy.
|
5.
|
TERMINATION OF
EMPLOYMENT
|
This Agreement and the Executive’s
employment may be terminated as provided in this Section 5, subject to the
respective continuing obligations of the Company and the Executive under
Sections 5, 6, 7, 8, 9, 10 and 11 below. The date this Agreement and
the Executive’s employment with the Company are terminated in accordance with
this Section 5 is herein referred to as the “Termination Date.”
|
a.
|
Termination by the
Company
|
|
(i)
|
For
Cause: The Company may terminate the Executive’s
employment immediately for “Cause” which means serious misconduct or
cause, which will include:
|
|
1)
|
The
Executive’s material breach of any of the Executive’s duties under this
Agreement, or the Executive’s failure or refusal to satisfactorily perform
his or her duties, responsibilities, and obligations as an executive of
the Company, for reasons other than
disability;
|
|
2)
|
Any
dishonesty or other breach of the duty of loyalty to the Company by the
Executive, which adversely affects the
Company;
|
3
|
3)
|
Indictment
of the Executive of any crime related to or arising from the operation of
the Company’s business, or conviction of (or guilty plea or plea of nolo contendere
regarding) a felony;
|
|
4)
|
Indictment
by the Executive of any other intentional act which the Company reasonably
concludes would be likely to injure the reputation, business or regulatory
status of the Company;
|
|
5)
|
The
existence of any court order or settlement agreement prohibiting the
Executive’s continued employment with the
Company;
|
|
6)
|
Any
violation of the Company’s policies, procedures, or standards with respect
to equal employment opportunity, prohibition of unlawful discrimination or
harassment;
|
|
7)
|
Abuse,
misuse, or misappropriation of the Company’s property or business
opportunities.
|
|
(ii)
|
Without
Cause: The Company may terminate the Executive’s
employment without Cause upon one hundred and eighty (180) days written
notice to the Executive.
|
|
b.
|
Resignation. The
Executive may terminate his employment at any time and for any reason upon
one hundred and eighty (180) days written notice to
the Company. Upon receiving such notice, the Company may, in
its sole discretion, opt not to have the Executive provide active
employment services during some or all of the notice period, and place him
on a paid leave of absence for some or all of the notice period, or
accelerate the effective date of the Executive’s
resignation. In either case, unless the Company waives the
notice period as described below, the Company will provide not less than
one hundred and eighty (180) days of notice pay. If the Company
exercises either of the preceding options, such exercise shall not convert
the resignation to a termination by the
Company.
|
|
c.
|
Termination
in the Event of Death or Disability. The term of the
Executive’s employment under this Agreement shall terminate in the event
of his death or Disability. “Disability” means a physical or
mental condition of the Executive, which renders him unable to perform the
essential functions of his or her position, with or without reasonable
accommodation, for a period of six months in any 12 month
period.
|
|
d.
|
Compensation
Upon Termination.
|
|
(i)
|
If
the Company terminates the Executive’s employment for Cause pursuant to
Section 5(a)(i), or as a result of the Executive’s death or Disability
pursuant to Section 5(c), the Company will only be obligated to pay the
Executive his regular payroll period Base Salary payments earned or
accrued through the Termination Date, plus any other compensation and
reimbursements to the extent they were earned or accrued up through the
Termination Date. Such Base Salary, compensation, and
reimbursements will be paid to the Executive in one lump sum payment as
soon as practicable following the Termination Date. In the
event the Company terminates the Executive’s employment in the event of
the Executive’s Death or Disability pursuant to Section 5(c) the Company
shall also (i) in the case of disability, pay 3 months, of the Executive’s
regular payroll period Base Salary payments and (ii) shall consider paying
such additional bonuses which would have been earned by the Executive from
the conclusion of events put in process during his tenure had he not had
an untimely demise or disability.
|
4
|
(ii)
|
If
the Executive’s employment is terminated pursuant to subsections 5(a)(ii)
or 5(b), then, during the notice period and until the Termination Date,
the Executive shall receive his regular payroll period Base Salary
payments earned and accrued (including payment for accrued vacation)
through the Termination Date, plus any other compensation and
reimbursements to the extent they were earned and accrued up through the
Termination Date if he continues to render services in accordance
herewith; provided, however, the Company may, in its sole discretion, opt:
(i) not to have the Executive provide active employment services during
some or all of the notice period, and may place him on a paid leave of
absence for some or all of the notice period and pay him during that time;
or (ii) accelerate the effective date of termination, and provide 180 days
pay in lieu of notice.
|
|
(iii)
|
Notwithstanding
any other provision of this Agreement and in addition thereto if the
Executive is terminated, or the Executives contract is not renewed within
12 months of any Change of Control of the Company and such event is not
occasioned by any occurrence set forth in sub-section 5(a), the Executive
shall be entitled to one year salary payable at the time of termination or
non-renewal.
|
A "Change in Control" shall mean
the occurrence during the Term of any of the following: (i) the sale, lease,
transfer, conveyance, or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than a principal owner of the Company or a related party of a
principal; (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company; (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13(d)(3) and Rule 13(d)(5) under the Exchange Act of the Company.
|
(iv)
|
The
Company’s obligation under this Agreement or otherwise to provide the
Executive with paid leave, notice pay, pay in lieu of notice, post
termination salary continuation, pay during a notice period, or any other
payment other than for wages earned because of the Executive’s provision
of services, shall, other than in the event of the Executive’s Death or
disability which precludes such action, be contingent upon the Executive’s
execution of a Separation Agreement and comprehensive Release of Claims in
a form drafted by and satisfactory to the
Company.
|
5
|
6.
|
CONFIDENTIAL
INFORMATION
|
a. Executive
agrees that during the Employment Term or at any time thereafter, (i) Executive
shall not use for any purpose other than the duly authorized business of the
Company, or disclose to any third party, any information relating to the
Company, or any of the Company’s affiliated companies which is non-public
information (“Confidential Information”), including any trade secret or any
written (including in any electronic form) or oral communication incorporating
Confidential Information in any way (except as may be required by law or in the
performance of Executive’s duties under this Agreement consistent with the
Company’s policies); and (ii) Executive will comply with any and all
confidentiality obligations of the Company to a third party, whether arising
under a written agreement or otherwise. Information shall not be
deemed Confidential Information which (x) is or becomes generally
available to the public other than as a result of a disclosure by Executive or
at his direction or by any other person who directly or indirectly receives such
information from Executive, or (y) is or becomes available to
Executive on a non-confidential basis from a source which is entitled to
disclose it to Executive.
b. Upon the
termination of this Agreement, or upon the Company's earlier request, Executive
will deliver to the Company all of the Company's property or Confidential
Information that Executive may have in his possession or control, including, but
not limited to, all electronically stored information and passwords to access
such property and any and all copies of such property, material or
databases.
|
7.
|
CERTAIN
RESTRICTIONS
|
a. Competitive Activity. Executive agrees that,
during the Employment Term and continuing until the expiration of one year
following the termination of Executive’s employment with the Company for any
reason, Executive will not, without the prior written consent of the Board of
Directors, directly or indirectly, as an employee, agent, consultant, advisor,
owner, manager, lender, officer, director, partner, stockholder, or otherwise,
engage in any Competitive Activity, or have any such relationship with any
person or entity that engages in any Competitive Activity; provided, however,
that nothing in this Agreement will prohibit Executive from owning a passive
investment of less than one percent of the outstanding equity securities of any
the Company listed on any national securities exchange so long as Executive has
no other relationship with such the Company in violation of this
Agreement. “Competitive
Activity” means being engaged in any business engaged in the aerospace
fastener distribution business or any other business which is competitive with
the existing or planned business of the Company or planned business of the
Company which it had taken action to implement and had not abandoned at any time
during the Employment Term.
6
b. Agreement Not to Solicit
Employees. Executive agrees that, during the Employment Term
and continuing until the expiration of one year following the termination of
Executive’s employment with the Company for any reason, Executive will not,
either directly or indirectly, on Executive’s own behalf or in the service or on
the behalf of others solicit, divert, or hire away, or attempt to solicit,
divert, or hire away any person then employed by the Company, nor encourage
anyone to leave the Company’s employ.
c. Agreement Not to Solicit
Customers. Executive agrees that, during the Employment Term
and continuing until the expiration of one year following the termination of
Executive’s employment with the Company for any reason, Executive will not,
either directly or indirectly, on Executive’s own behalf or in the service or on
behalf of others, solicit, divert, or appropriate, or attempt to solicit,
divert, or appropriate, to any business that engages in Competitive Activity (i)
any person or entity whose account with the Company was sold or serviced by or
under Executive’s supervision during the twelve months preceding the termination
of such employment, or (ii) any person or entity whose account with the Company
has been directly solicited by the Company within the year preceding the
termination of employment.
d. Reasonableness. Executive
and the Company agree that the covenants set forth in this Agreement are
appropriate and reasonable when considered in light of the nature and extent of
the Company’s business. Executive further acknowledges and agrees
that (i) the Company has a legitimate interest in protecting the Company’s
business activities and its current, pending, and potential trade secrets; (ii)
the covenants set forth herein are not oppressive and contain reasonable
limitations as to time, scope, and activity; (iii) the covenants do not harm in
any manner whatsoever the public interest; (iv) Executive’s chosen profession,
trade, or business is in finance and executive management (the “Profession”)
(v) the Competitive Activity is only a very small or limited part of the
Profession, and Executive can work in many different jobs in Executive’s
Profession besides the Competitive Activity; (vi) the covenants set forth herein
do not completely restrain Executive from working in Executive’s Profession, and
Executive can earn a livelihood in Executive’s Profession without violating any
of the covenants set forth herein; (vii) Executive has received and will receive
substantial consideration for agreeing to such covenants, including without
limitation the consideration to be received by Executive under this Agreement;
(viii) if Executive were to work for a competing the Company that engages in
Competitive Activity, there would be a substantial risk that Executive would
inevitably disclose trade secrets to that the Company; (ix) the Company competes
with other companies that engage in Competitive Activity, and if Executive were
to engage in prohibited activities, it would harm the Company; (x) the Company
expends considerable resources on hiring, training, and retaining its Executives
and if Executive were to engage in prohibited activities during the restricted
period, it would harm the Company; and (xi) the Company expends considerable
resources acquiring, servicing, and retaining its customers, vendors, investors,
lenders and other key business relationships and if Executive were to engage in
prohibited activities during the restricted period, it would harm the
Company.
7
|
8.
|
INDEMNIFICATION
|
As an
officer and director of the Company, Executive shall be entitled to be
indemnified by the Company to the extent provided under the Company’s bylaws,
subject to applicable law, and to receive the benefits of any director and
officer liability insurance obtained by the Company from time to time, subject
to the terms, provisions and conditions of any such insurance.
|
9.
|
APPLICABLE LAW;
SEVERABILITY
|
This
Agreement shall be governed by the laws of the State of New York, without
reference to rules relating to conflicts of law. In the event that
any provision of this Agreement becomes or is declared by a court of competent
jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement
shall continue in full force and effect without said provision.
|
10.
|
DISPUTE
RESOLUTION
|
Executive
and the Company agree to arbitrate any dispute, claim, or controversy arising
out of this Agreement or Executive’s employment. The arbitration
shall be conducted by a single neutral arbitrator in accordance with the rules
issued by JAMS for resolution of employment disputes. The arbitration shall take
place in New York City. The Company will pay the fee for the
arbitration proceeding, as well as any other charges by JAMS. Executive
shall be entitled to indemnification against attorneys’ fees and costs to the
extent provided in the Delaware General Corporation Law Subchapter IV, Section
145. The arbitrator shall issue a written decision or award.
The decision or award of the arbitrator shall be final and binding upon the
Company and Executive. The arbitrator shall have the power to award any
type of relief that would be available in a court of competent
jurisdiction. Any award may thereafter be entered as a judgment in
any court of competent jurisdiction. Executive agrees that any relief to
which he is entitled arising out of said arbitration shall be limited to that
awarded by the arbitrator. Executive agrees to file any demand for
arbitration within the time limit established by the applicable statute of
limitations for the asserted claims. Failure to demand arbitration within
the prescribed time period shall result in waiver of any
claims. Executive agrees to waive any right he may have to a jury
trial with respect to any dispute or claim against the Company relating to this
Agreement, his employment, his termination from employment, or any terms and
conditions of his employment with the Company.
|
11.
|
SUCCESSORS AND
ASSIGNS
|
This
Agreement shall be binding upon the Company’s successors and assigns and upon
Executive’s heirs, executors, administrators, estate, successors and
assigns. For all purposes under this Agreement, the term “the
Company” shall include any successor to the Company’s business and/or assets,
which becomes bound by this Agreement. Executive may not assign this
Agreement, provided, however, this shall not preclude Executive from assigning
certain rights or property granted to him pursuant to this
agreement.
8
|
12.
|
NO INCONSISTENT
OBLIGATIONS
|
By
signing this Agreement and accepting this offer of employment, Executive
represents and warrants to the Company that Executive is under no obligations or
commitments, whether contractual or that otherwise, that are inconsistent with
Executive’s obligations set forth in this Agreement or otherwise restrict
Executive’s ability to enter into this Agreement or fully perform the services
required hereunder. Executive also represents and warrants that
Executive will not use or disclose, in connection with Executive’s employment by
the Company, any trade secrets or other proprietary information or intellectual
property in which Executive or any other person has any right, title, or
interest and that Executive’s employment by the Company as contemplated by this
Agreement will not infringe upon or violate the rights of any other person or
entity. Executive represents and warrants to the Company that
Executive has returned all property and confidential information belonging to
any prior employers.
|
13.
|
ENTIRE
AGREEMENT
|
This
Agreement and the Exhibits set forth the full and complete agreement between the
Company and Executive regarding the subject matter hereof and supersede any and
all prior representations or agreements between Executive and the Company, if
any, whether written or oral, except for the stock option agreements referenced
above. This Agreement may not be modified or amended except by a
written agreement, signed by Executive and a member of the Board of
Directors. No failure on the part of the Company or Executive to
exercise any power, right or privilege or remedy under this Agreement, and no
delay on the part of the Company or Executive in such exercise shall operate as
a waiver of such power, right, privilege or remedy; and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
further exercise thereof or any other power, right, privilege or
remedy. Any waiver must be in writing and executed by the
parties. The captions contained in this Agreement are for convenience
only and shall not be considered part of this Agreement. All
definitions used in this Agreement shall apply to the Exhibits to this Agreement
and other related documentation signed simultaneously.
IN WITNESS WHEREOF, the parties hereto
have executed this Employment Agreement as of the date written
above.
|
DATED:
|
XXXXXX
X. XXXXXX
|
||||
|
DATED:
|
|||||
|
By:
|
XXXXX
XXXXXXX
Director
|
9
