EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is
made and entered into effective as of the third day of November,
1997 (the "Effective Date") by and between Vanguard Airlines,
Inc., a Delaware corporation (the "Company") and Xxxxxx X. Xxxxx,
an individual ("Employee").
R E C I T A L S:
A. The Company is engaged in the business of owning and
operating an air carrier certificated by the U.S. government to
engage in the provision of air transportation services in the
common carriage of persons, property and mail (the "Compan y
Business"). The Company is based in Kansas City, Missouri and
provides scheduled passenger service in the United States.
B. The Company hereby agrees to employ Employee and
Employee hereby agrees to accept such employment engagement with
the Company in accordance with the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises
and covenants as
contained herein, the parties hereto, intending to be legally
bound, agree as follows:
1. Employment.
Subject to the terms and conditions hereinafter set forth,
the Company hereby agrees to employ Employee, and Employee hereby
agrees to be employed by Company, during the two-year period (the
"Employment Term") beginning on June 15, 1997 (the "Commencement
Date"), and ending on June 15, 1999. The Employment Term may be
terminated pursuant to the provisions of Section 4 or Section 5
hereof.
2. Duties.
Employee shall be employed in the capacity of Chairman of
the Board, President and Chief Executive Officer of the Company.
Employee shall have such duties as may reasonably be assigned to
him by the Board of Directors of the Company. Employee shall
perform such duties diligently and to the best of his ability,
and shall comply with the Company's business conduct policies as
in effect from time to time. Employee's responsibilities
include, but are not limited to, the following actions: (a)
supervise, operate, and manage the overall operations of the
Company Business, including by way of illustration but not
limitation, decisions regarding (i) airline schedules and routes;
(ii) regulation of the Company Business by governmental
authorities, (iii) aircraft and other equipment and real estate
acquisitions and/or leases, (iv) formulation, implementation, and
administration of strategies, policies, and practices, (v)
formulation, implementation, and administration of budgets,
business and financial plans, (vi) hiring, firing, and
supervising employees and consultants, and (vii) setting
compensation and benefit programs for employees. Except as
otherwise set forth herein, during the Employment Term, Employee
shall devote his entire working time, attention and energy to the
business of the Company, and shall not be engaged in any other
business activity that, in any significant way, conflicts with or
interferes with Employee's performance of his duties hereunder,
except as authorized by the Board of Directors of the Company.
3. Compensation and Benefits.
(a) Salary. During the Employment Term, the Company shall
pay Employee for his services hereunder a base salary at the rate
of $200,000 per annum, for the Employment Term and, subject
further to upward adjustment in accordance with the Company's
salary review practices and procedures in effect from time to
time. Such salary shall be payable semi-monthly in accordance
with the regular payroll policies of the Company in effect from
time to time. Upon each anniversary of this Agreement, Employee
shall participate in any performance bonus plan that may be
adopted by the Company's Board of Directors.
(b) Benefits. During the Employment Term, Employee shall be
entitled to participate in, to the extent Employee is eligible
under the terms thereof, all benefit plans and programs that are
generally provided from time to time by the Company to its
executive personnel, including an incentive compensation plan, a
pension or profit sharing plan, a stock purchase plan, a bonus
plan, a group benefit plan and a medical plan. Subject to the
rights of Employee set forth in Sections 4 and 5 hereof, nothing
herein shall preclude the Company from terminating or amending
any employee benefit plan or program.
(c) Options. The Company hereby agrees to grant options to
purchase 3,386,980 shares of Common Stock, par value $.001 per
share, of the Company to Employee (the "Employee Options"). The
terms of the grant of the Employee Options to Employee shall be
as follows:
(i) the exercise price for the Employee Options shall
be $0.50 per share (the "Exercise Price");
(ii) payment of the exercise price per share is due in
full upon exercise of all or any part of each installment that
has accrued to you;
(iii) in the event this Agreement is terminated before
the end of the Employment Term for any of the reasons set forth
in Sections 4(a), 4(d), or 4(e), all unvested options shall lapse
and become void; and
(iv) the Employee Options shall vest as follows:
(A) in equal quarterly increments during the
Employment Term commencing with the commencement of employment of
Employee with the Company, with such vesting to be effective upon
the last day of each calender quarter, (B) one-half of any
"unvested" Employee Options shall vest upon the death or
permanent disability of Employee, (C) all of the unvested options
shall vest upon the merger of the Company into or with another
person, unless (X) the Company is the surviving entity and (Y)
this Agreement remains in full force and effect, or (D) all of
the unvested options shall vest upon the sale of all or
substantially all of the assets or stock of the Company to
another person.
(d) Expense Reimbursement. The Company shall reimburse
Employee or directly pay all of the reasonable expenses incurred
by Employee in connection with the scope of his assignment as set
forth in this Agreement, including by way of illustration but not
limited, as follows:
(a) all ordinary and necessary travel, lodging,
entertainment, and related expenses;
(b) the cost of renting an apartment as a temporary
living expense in Kansas City, Missouri and leasing or renting a
car in Kansas City, Missouri; and
(c) the cost to move Employee's family and household
goods to the Kansas City area.
The foregoing terms regarding the Employee Options shall, if the
parties hereto mutually so agree, be set forth in a separate
agreement (the "Stock Option Agreement"). The Stock Option
Agreement shall contain all usual and customary provisions,
including the foregoing terms.
4. Termination of Engagement.
This Agreement shall be terminated and the employment
relationship between the Company and Employee shall cease upon
the occurrence of any of the following events:
(a) by Employee for any reason, upon 30 days prior written
notice;
(b) by the Company for any reason, upon 30 days prior
written notice;
(c) by any party upon the expiration of the Employment
Term;
(d) by the Company upon the death or permanent disability
of Employee or his resignation as the President and Chief
Executive Officer of the Company;
(e) by the Company for "Cause," which for purposes of this
Section 4 shall mean any of the following: (i) Employee's breach
of or failure to comply with or observe any of the material
terms, conditions or agreements contained in this Agreement,
which breach or failure to comply has not been cured within 30
days following written notice by the Company to Employee setting
forth in detail the specific nature of such breach or failure to
comply, or if such breach or failure to comply cannot be cured
within such 30 day period, Employee has not, (A) within such 30
day period, commenced actions to cure such breach or failure to
comply and diligently pursued such actions and (B) actually cured
such breach or failure to comply within 90 days following such
initial written notice by the Company to Employee, (ii) Employee
shall be adjudged by a court of competent jurisdiction as guilty
of (A) any willful or grossly negligent act which causes material
harm to the Company, (B) any criminal act which causes material
harm to the Company, (C) any act involving moral turpitude which
causes material harm to the Company, or (D) any fraud upon the
Company, or (iii) Employee shall be guilty of habitual
absenteeism, chronic alcoholism or other form of chronic
addiction.
5. Termination Obligations of the Company.
(a) In the event of termination of this Agreement by the
Company under Section 4(c) because of the expiration of the
Employment Term, the Company shall have the following obligations
to Employee:
(i) any unpaid portion of the Employee salary earned
through the date of termination shall be paid by the Company to
Employee;
(ii) any unreimbursed expenses owed by the Company to
Employee for expenses incurred through the date of termination
shall be paid by the Company to Employee;
(iii) the Employee Options shall be fully vested;
(iv) Employee shall be offered full-time employment
with the Company upon mutually satisfactory terms usual and
customary in the airline industry for companies of comparable
operations as the Company; provided, however, that the Company
and Employee shall enter into a written employment agreement (the
"Xxxxx Employment Agreement") which shall, for purposes of
illustration but not limitation, contain the following
provisions:
(1) he shall have the officer title of Chief
Executive Officer, President, and member of the Board of
Directors of the Company;
(2) he shall have duties at least as
expansive as the Services set forth in Section 2 of this
Agreement;
(3) he shall have an annual base salary and
annual bonus as mutually agreed upon and usual and customary in
the airline industry for companies of comparable operations as
the Company;
(4) a term and severance arrangement as
mutually agreed upon and usual and customary in the airline
industry companies of comparable operations as the Company.
(b) In the event of termination of this Agreement by the
Company under Sections 4(a), 4(d), or 4(e), the Company shall
have the following obligations to Employee:
(i) any unpaid portion of the Employee's salary earned
through the date of termination shall be paid by the Company to
Employee;
(ii) any unreimbursed expenses owed by the Company to
Employee for expenses incurred through the date of termination
shall be paid by the Company to Employee;
(iii) Employee Options that have not vested as of the
date of termination shall lapse and become void.
(c) In the event of termination of this Agreement by the
Company under Section 4(b), the Company shall have the following
obligations to Employee:
(i) any unpaid portion of the Employee's salary earned
through the date of termination shall be paid by the Company to
Employee;
(ii) any unreimbursed expenses owed by the Company to
Employee for expenses incurred through the date of termination
shall be paid by the Company to Employee; and
(iii) Company shall pay to Employee as a severance
payment the lesser of (x) $100,000 or (y) the aggregate remaining
amount to be paid to Employee at his current salary through the
remainder of the Employment Term.
(iv) one-half of those shares of the Employee Options
that have not vested as of the date of termination shall lapse
and become void and the remaining one-half of the Employee
Options shall fully vest and the Company's purchase option shall
lapse. Employee shall have 90 days from the date of termination
to exercise Employee Options.
(v) the expenses associated with moving Employee and
Employee's family including all household goods to San Diego,
California shall be paid by the Company.
6. Registration Rights.
Employee shall, with respect to the shares received upon
exercise of the Employee Options be granted unlimited piggy-back
registrations, with any cut-backs of shares to be registered
pursuant to the applicable registration statement to be done on a
pro-rata basis among all of the Sellers of Common Stock of the
Company pursuant to the applicable registration statement. A
specific Registration Rights Agreement containing all usual and
customary provisions shall be entered into among Employee and the
Company.
7. Authorized Stock and Reservation of Shares.
(a) The Company's Restated Certificate of Incorporation, as
amended, authorizes the Company to issue up to 50,000,000 shares
of Common Stock. As of the date of this Agreement, there are
insufficient shares of Common Stock for Employee to exercise the
Employee Options. The Company shall use its best efforts to amend
the Company's Restated Certificate of Amendment, as amended, to
provide sufficient authorized capital stock to exercise Employee
Options or take such other action that provides for sufficient
authorized Common Stock for Employee to exercise Employee
Options.
(b) The Company shall use at all times hereforth its best
efforts to reserve and keep available solely for issuance and
delivery upon the exercise of any Employee Options, all such
shares of Common Stock or other shares of capital stock, from
time to time issuable upon the exercise of this Warrant.
8. Indemnification.
Neither the Company or Employee shall be liable for any of
the debts, liabilities or obligations of the other. Accordingly,
the Company will indemnify Employee and Employee will indemnify
the Company, and each will hold the other harmless from and
against any and all loss, cost, damage injury or expense
(including court costs and reasonable attorneys' fees) whatsoever
and howsoever arising which Employee or the Company (as the case
may be) or any of their respective agents, successors or assigns
incurs as a proximate result of (a) Employee or the Company (as
the case may be) being held liable for any debt, liability or
obligation of the Company or Employee (as the case may be) or (b)
any breach of this Agreement by the Company or Employee (as the
case may be).
In Employee's rendering of the Services hereunder and in his
capacity as officer, director, employee of the Company, the
Company shall, as and to the extent permitted by the General
Corporation Law of Delaware, indemnify Employee and hold Employee
harmless from and against any and all loss, cost, damage, injury
or expense (including court costs and reasonable attorneys' fees)
whatsoever and howsoever arising which Employee incurs relating
to his action under this Agreement and the status of Employee as
officer, director, employee of the Company. In addition, the
Company shall include Employee as beneficiary and covered person
in the Company's insurance policy to protect Employee relating to
his status as officer, director, employee, independent
contractor, and/or agent of the Company.
9. Notice.
All notices, requests, demands and other communications
hereunder shall be deemed duly given if delivered by hand or if
mailed by certified or registered mail with postage prepaid as
follows:
If to the Company:
Vanguard Airlines, Inc.
0000 Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Attention: Corporate Secretary
If to the Employee:
Xxxxxx X. Xxxxx
000 X. 00xx Xxxxxxx
Xxx. # 000
Xxxxxx Xxxx, XX 00000
or to any other address as either party may provide to the other
in writing.
10. Assignment.
This Agreement is personal and not assignable by the
Employee but it may be assigned by the Company without notice to
or consent of the Employee to, and shall thereafter be binding
upon enforceable by any other person which shall acquire or
succeed to substantially all of the business or assets of the
Company (and such person shall be deemed included in the
definition of the "Company" for all purposes of this Agreement)
but it is not otherwise assignable by the Company.
IN WITNESS WHEREOF, the Company and Employee have each
caused this Agreement to be duly executed in duplicate by its
respective duly authorized officer and each of the parties hereto
has executed this Agreement on the date and year first above
written.
WITNESS/ATTEST:
COMPANY:
VANGUARD AIRLINES, INC.
On Behalf of the Board of Directors,
By: ________________________
Name:
EMPLOYEE:
XXXXXX X. XXXXX
_____________________________
Xxxxxx X. Xxxxx
