EMPLOYMENT AGREEMENT
AGREEMENT dated December 16, 1998 between XXXXXX AUGUST,
residing at 0 Xxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000 ("Executive"), and CPI
AEROSTRUCTURES, INC., a New York corporation having its principal office at 000X
Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000, ("Company");
WHEREAS, in July 1998, the Company and Executive agreed that
the Employment Agreement dated September 15, 1995 between the parties would
remain in full force and effect at least until December 31, 1998 and that, in
the interim, the parties would attempt to negotiate a new agreement for a
three-year term commencing January 1, 1999; and
WHEREAS, the Company desires to continue the employment of
Executive and Executive desires to continue his present employment with the
Company, pursuant to the terms and conditions herein set forth, superseding all
prior agreements between the Company, its subsidiaries and/or predecessors and
Executive;
IT IS AGREED:
1. Employment, Duties and Acceptance.
1.1 General. The Company shall continue to employ Executive as
its Chairman of the Board ("Chairman"), President and Chief Executive Officer
("CEO") under the terms hereof. All of Executive's powers and authority in any
capacity shall at all times be subject to the direction and control of the
Company's Board of Directors. The Board may assign to Executive such management
and supervisory responsibilities and executive duties for the Company or any
subsidiary of the Company, including serving as an executive officer and/or
director of any subsidiary, as are consistent with Executive's status as
Chairman, President and CEO. The Company and Executive acknowledge that
Executive's functions and duties as Chairman, President and CEO include
establishing policies and strategies for the Company's overall business and
operations, including plans for growth and strategic alliances.
1.2 Full-Time Position. Executive accepts such employment and
agrees to devote substantially all of his business time, energies and attention
to the performance of his duties hereunder. Nothing herein shall be construed as
preventing Executive from making and supervising personal investments, provided
they will not interfere with the performance of Executive's duties hereunder or
violate the provisions of Section 6.4 hereof.
1.3 Location. Executive may, in his sole discretion, perform
his obligations under this Agreement off the premises of the Company. The
Company shall provide Executive with such computer and other equipment required
for such purposes and shall reimburse Executive for any reasonable expenses
related to his being off premises.
1.4 Board of Directors Position. If, during the term hereof,
Executive is nominated to serve as a director of the Company but fails to be
elected, he shall nonetheless be invited to attend each meeting of the Board of
Directors of the Company through the remainder of the term hereof.
2. Compensation and Benefits.
2.1 Salary. The Company shall pay to Executive a salary ("Base
Salary") at the annual rate of $300,000 per annum. Executive's compensation
shall be paid in equal, periodic installments in accordance with the Company's
normal payroll procedures.
2.2 Bonus. In addition to Base Salary, Executive shall be paid
a bonus ("Bonus") equal to 4% of the Company's consolidated net income for each
year during the Employment Term, as determined by reference to the Company's
audited financial statements for such year. The Bonus with respect to any year
shall be paid on or prior to April 15 of the following year.
2.3 Benefits. Executive shall be entitled to such medical,
life, disability and other benefits as are generally afforded to other senior
executives of the Company, subject to applicable waiting periods and other
conditions.
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2.4 Vacation. Executive shall be entitled to such paid
vacation days in each year during the Employment Term and to a reasonable number
of other days off for religious and personal reasons in accordance with
customary Company policy.
2.5 Automobile. The Company shall continue to lease a luxury
class automobile (reasonably satisfactory to Executive) for Executive during the
term of this Agreement to be used in connection with the business of the
Company.
2.6 Expenses. The Company shall pay or reimburse Executive for
all transportation, hotel and other expenses reasonably incurred by Executive on
business trips and for all other ordinary and reasonable out-of-pocket expenses
actually incurred by him in the conduct of the business of the Company against
itemized vouchers submitted with respect to any such expenses and approved in
accordance with customary procedures.
2.7 Life Insurance. During the Employment Term, as defined
below, the Company shall continue to maintain the insurance policy on the life
of Executive in favor of his named beneficiary or his estate in a minimum amount
of $500,000.
3. Term. The term of Executive's employment hereunder shall commence as
of January 1, 1999 and shall continue until December 31, 2001 (as it may be
extended, the "Employment Term"), unless sooner terminated as herein provided.
The Employment Term shall be automatically renewed for successive one year
periods unless terminated by the Company or Executive by written notice to the
other party at least thirty (30) days before the end of the Employment Term or
any renewal thereof.
4. Termination.
4.1 Death. If Executive dies during the term of this
Agreement, Executive's employment hereunder shall terminate and the Company
shall pay to Executive's estate the amount set forth in Section 4.7.
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4.2 Disability. The Company, by written notice to Executive,
may terminate Executive's employment hereunder if Executive shall fail because
of illness or incapacity to render, for six consecutive months, services of the
character contemplated by this Agreement. Upon such termination, the Company
shall pay to Executive the amount set forth in Section 4.7.
4.3 By Company for "Cause". The Company, by written notice to
Executive, may terminate Executive's employment hereunder for "Cause". As used
herein, "Cause" shall mean: (a) the refusal or failure by Executive to carry out
specific directions of the Board which are of a material nature and consistent
with his status as Chairman, President and CEO, or the refusal or failure by
Executive to perform a material part of Executive's duties hereunder; (b) the
commission by Executive of a material breach of any of the provisions of this
Agreement; (c) fraud or dishonest action by Executive in his relations with the
Company or any of its subsidiaries or affiliates ("dishonest" for these purposes
shall mean Executive's knowingly or recklessly making of a material misstatement
or omission for his personal benefit); or (d) the conviction of Executive of a
felony under federal or state law. Notwithstanding the foregoing, no "Cause" for
termination shall be deemed to exist with respect to Executive's acts described
in clauses (a) or (b) above, unless the Company shall have given written notice
to Executive specifying the "Cause" with reasonable particularity and, within
thirty calendar days after such notice, Executive shall not have cured or
eliminated the problem or thing giving rise to such "Cause;" provided, however,
no more than two cure periods need be provided during any twelve-month period.
Upon such termination, the Company shall pay to Executive the amount set forth
in Section 4.7.
4.4 By Company Without "Cause". The Company may terminate
Executive's employment hereunder without "Cause" by giving at least 30 days
written notice to Executive. Upon such termination, the Company shall pay to
Executive the amount set forth in Section 4.7.
4.5 By Executive for "Good Reason". The Executive, by written
notice to the Company, may terminate Executive's employment hereunder if a "Good
Reason" exists. For purposes of this Agreement, "Good Reason" shall mean the
occurrence of any of the following circumstances without the Executive's prior
written consent: (a) a substantial and material
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adverse change in the nature of Executive's title, duties or responsibilities
with the Company that represents a demotion from his title, duties or
responsibilities as in effect immediately prior to such change; (b) Executive is
removed from service as a director of the Company; (c) material breach of this
Agreement by the Company; (d) a failure by the Company to make any payment to
Executive when due, unless the payment is not material and is being contested by
the Company, in good faith; (e) (i) any person or entity other than the Company
and/or any officers or directors of the Company as of the date of this Agreement
acquires securities of the Company (in one or more transactions) having 30% or
more of the total voting power of all the Company's securities then outstanding
and (ii) the Board of Directors of the Company does not authorize or otherwise
approve such acquisition; or (f) a liquidation, bankruptcy or receivership of
the Company. Notwithstanding the foregoing, no Good Reason shall be deemed to
exist with respect to the Company's acts described in clauses (a), (c) or (d)
above, unless Executive shall have given written notice to the Company
specifying the Good Reason with reasonable particularity and, within thirty
calendar days after such notice, the Company shall not have cured or eliminated
the problem or thing giving rise to such Good Reason; provided, however, that no
more than two cure periods shall be provided during any twelve-month period of a
breach of clauses (a), (c) or (d) above. Upon such termination the Company shall
pay to Executive the amount set forth in Section 4.7
4.6 By Executive Without Reason. The Executive may terminate
his employment hereunder by giving at least 75 days written notice to the
Company. Upon such termination, the Company shall pay to Executive the amount
set forth in Section 4.7.
4.7 Compensation Upon Termination. In the event that
Executive's employment hereunder is terminated, the Company shall pay to
Executive the following compensation:
(a) Payment Upon Death or Disability or by
Executive Without Reason. In the event that Executive's employment is terminated
pursuant to Sections 4.1, 4.2 or 4.6, the Company shall pay to Executive (or his
executor, administrator or personal representative), (i) the Base Salary due
Executive pursuant to Section 2.1 hereof through the date of termination; (ii)
any Bonus which would have become payable under Section 2.2 for the year in
which the
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employment was terminated prorated by multiplying the full amount of the Bonus
by a fraction, the numerator of which is the number of "full calendar months"
worked by Executive during the year of termination and the denominator of which
is 12 (a "full calendar month" is a month in which the Executive worked at least
two weeks); (iii) all earned and previously approved but unpaid Bonuses for any
year prior to the year of termination; (iv) all valid expense reimbursements,
and (v) all accrued but unused vacation pay.
(b) Payment Upon Termination by the Company For
"Cause". In the event that the Company terminates Executive's employment
hereunder pursuant to Section 4.3, the Company shall pay to Executive his Base
Salary, all valid expense reimbursements and all unused vacation pay required by
law through the date of termination.
(c) Payment Upon Termination by Company Without
Cause or Executive for Good Reason or Failure by Company to Renew Agreement. In
the event that Executive's employment is terminated, pursuant to Sections 4.4 or
4.5, or the Company shall (i) continue to pay to Executive (or in the case of
his death, the legal representative of Executive's estate or such other person
or persons as Executive shall have designated by written notice to the Company),
all payments, compensation and benefits required under Section 2 hereof through
December 31, 2001, and (ii) continue to maintain and pay for the same medical
insurance then covering Executive through June 30, 2003. Notwithstanding the
foregoing, if a "change of control" of the Company (as described in Section
4.5(e)(i)) occurs prior to a termination of Executive's employment pursuant to
Sections 4.4 or 4.5, or if the Company fails to renew the Employment Term for at
least one annual period after any such "change of control", then at the option
of Executive, in lieu of the above compensation and benefits, the Company shall
pay to Executive a lump sum payment on the date of termination equal to the
maximum amount allowable under Section 280G(b) of the Internal Revenue Code of
1986 without being considered an "excess parachute payment" thereunder.
4.8 Resignation as Member of Board. If Executive's employment
hereunder is terminated for any reason, then Executive shall, at the Company's
request, resign as a director of the Company and all of its subsidiaries,
effective upon the occurrence of such termination.
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5. Executive Indemnity. The Company agrees to indemnify Executive and
hold Executive harmless against all costs, expenses (including, without
limitation, reasonable attorneys' fees) and liabilities (other than settlements
to which the Company does not consent, which consent shall not be unreasonably
withheld) (collectively, "Losses") reasonably incurred by Executive in
connection with any claim, action, proceeding or investigation brought against
or involving Executive with respect to, arising out of or in any way relating to
Executive's employment with the Company or any subsidiary or Executive's service
as a director of the Company or any subsidiary; provided, however, that the
Company shall not be required to indemnify Executive for Losses incurred as a
result of Executive's intentional misconduct or gross negligence (other than
matters where Executive acted in good faith and in a manner he reasonably
believed to be in and not opposed to the Company's best interests). Executive
shall promptly notify the Company of any claim, action, proceeding or
investigation under this paragraph and the Company shall be entitled to
participate in the defense of any such claim, action, proceeding or
investigation and, if it so chooses, to assume the defense with counsel selected
by the Company; provided that Executive shall have the right to employ counsel
to represent him (at the Company's expense) if the Company's counsel would have
a "conflict of interest" in representing both the Company and Executive. The
Company shall not settle or compromise any claim, action, proceeding or
investigation without Executive's consent, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be
required if the settlement entails only the payment of money and the Company
fully indemnifies Executive in connection therewith. The Company further agrees
to advance any and all expenses (including, without limitation, the reasonable
fees and expenses of counsel) incurred by the Executive (in accordance with the
foregoing) in connection with any such claim, action, proceeding or
investigation, provided, however, that Executive shall repay such advances if
indemnification is found not to have been available hereunder. This Section
shall survive the termination of this Agreement for any reason.
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6. Protection of Confidential Information; Non-Competition.
6.1 Acknowledgment. Executive acknowledges that:
(a) As a result of his current and prior
employment with the Company, Executive has obtained and will obtain secret and
confidential information concerning the business of the Company and its
subsidiaries (referred to collectively in this Section 6 as the "Company"),
including, without limitation, financial information, proprietary rights, trade
secrets and "know-how," customers and sources ("Confidential Information").
(b) The Company will suffer substantial damage which
will be difficult to compute if, during the period of his employment with the
Company or thereafter, Executive should enter a business competitive with the
Company or divulge Confidential Information.
(c) The provisions of this Agreement are
reasonable and necessary for the protection of the business of the Company.
6.2 Confidentiality. Executive agrees that he will not at any
time, during the Employment Term and for a period of one year thereafter,
divulge to any person or entity any Confidential Information obtained or learned
by him as a result of his employment with the Company, except (i) in the course
of performing his duties hereunder, (ii) with the Company's prior written
consent; (iii) to the extent that any such information is in the public domain
other than as a result of Executive's breach of any of his obligations
hereunder; or (iv) where required to be disclosed by court order, subpoena or
other government process. If Executive shall be required to make disclosure
pursuant to the provisions of clause (iv) of the preceding sentence, Executive
promptly, but in no event more than 48 hours after learning of such subpoena,
court order, or other government process, shall notify, the Company and, at the
Company's expense, Executive shall: (a) take all reasonably necessary and lawful
steps required by the Company to defend against the enforcement of such
subpoena, court order or other government process, and (b) permit the Company to
intervene and participate with counsel of its choice in any proceeding relating
to the enforcement thereof.
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6.3 Documents. Upon termination of his employment with the
Company, Executive will promptly deliver to the Company all memoranda, notes,
records, reports, manuals, drawings, blueprints and other documents (and all
copies thereof) relating to the business of the Company and all property
associated therewith, which he may then possess or have under his control;
provided, however, that Executive shall be entitled to retain copies of such
documents reasonably necessary to document his financial relationship with the
Company.
6.4 Non-competition. During the Employment Term and for a
period of one year thereafter, Executive, without the prior written permission
of the Company, shall not, anywhere in the world, (i) be employed by, or render
any services to, any person, firm or corporation engaged in any business
("Competitive Business") which is directly in competition with any "material"
business conducted by the Company or any of its subsidiaries at the time of
termination (as used herein "material" means the business generated at least 10%
of the Company's consolidated revenues for the last full fiscal year for which
audited financial statements are available); (ii) engage in any Competitive
Business for his or its own account; (iii) be associated with or interested in
any Competitive Business as an individual, partner, shareholder, creditor,
director, officer, principal, agent, employee, trustee, consultant, advisor or
in any other relationship or capacity; (iv) employ or retain, or have or cause
any other person or entity to employ or retain, any person who was employed or
retained by the Company while Executive was employed by the Company; or (v)
solicit, interfere with, or endeavor to entice away from the Company, for the
benefit of a Competitive Business, any of its customers or other persons with
whom the Company has a contractual relationship. Notwithstanding the foregoing,
nothing in this Agreement shall preclude Executive from investing his personal
assets in any manner he chooses, provided, however, that Executive may not,
during the period referred to in this Section 6.4, own more than 4.9% of the
equity securities of any Competitive Business.
6.5 Injunctive Relief. If Executive commits a breach, or
threatens to commit a breach, of any of the provisions of Sections 6.2 or 6.4,
the Company shall have the right and remedy to seek to have the provisions of
this Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by Executive that the services being rendered
hereunder to the Company are of a special, unique and extraordinary character
and that
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any such breach or threatened breach will cause irreparable injury to the
Company and that money damages will not provide an adequate remedy to the
Company. The rights and remedies enumerated in this Section 6.5 shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or equity. In connection with any legal action or proceeding
arising out of or relating to this Agreement, the prevailing party in such
action or proceeding shall be entitled to be reimbursed by the other party for
the reasonable attorneys' fees and costs incurred by the prevailing party.
6.6 Modification. If any provision of Sections 6.2 or 6.4 is
held to be unenforceable because of the scope, duration or area of its
applicability, the tribunal making such determination shall have the power to
modify such scope, duration, or area, or all of them, and such provision or
provisions shall then be applicable in such modified form.
6.7 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement for any reason, except in the event Executive
is terminated by the Company without "Cause, " or if Executive terminates this
Agreement with "Good Reason," in either of which events, this Section 6.4 shall
be null and void and of no further force or effect.
7. Miscellaneous Provisions.
7.1 Notices. All notices provided for in this Agreement shall
be in writing, and shall be deemed to have been duly given when (i) delivered
personally to the party to receive the same, or (ii) when mailed first class
postage prepaid, by certified mail, return receipt requested, addressed to the
party to receive the same at his or its address set forth below, or such other
address as the party to receive the same shall have specified by written notice
given in the manner provided for in this Section 7.1. All notices shall be
deemed to have been given as of the date of personal delivery or mailing
thereof.
If to Executive:
Xxxxxx August
0 Xxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
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If to the Company:
CPI Aerostructures, Inc.
000X Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Chief Financial Officer
With a copy in either case to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
7.2 Entire Agreement; Waiver. This Agreement sets forth the
entire agreement of the parties relating to the employment of Executive and is
intended to supersede all prior negotiations, understandings and agreements. No
provisions of this Agreement, may be waived or changed except by a writing by
the party against whom such waiver or change is sought to be enforced. The
failure of any party to require performance of any provision hereof or thereof
shall in no manner affect the right at a later time to enforce such provision.
7.3 Governing Law. All questions with respect to the
construction of this Agreement, and the rights and obligations of the parties
hereunder, shall be determined in accordance with the law of the State of New
York applicable to agreements made and to be performed entirely in New York.
7.4 Binding Effect; Nonassignability. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns of the
Company. This Agreement shall not be assignable by Executive, but shall inure to
the benefit of and be binding upon Executive's heirs and legal representatives.
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7.5 Severability. Should any provision of this Agreement
become legally unenforceable, no other provision of this Agreement shall be
affected, and this Agreement shall continue as if the Agreement had been
executed absent the unenforceable provision.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
CPI AEROSTRUCTURES, INC.
/s/ Xxxxxx X. Xxxx
---------------------------------------
By: Xxxxxx X. Xxxx, Vice President and
Chief Financial Officer
/s/ Xxxxxx August
---------------------------------------
XXXXXX AUGUST
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