EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 28th day of April, 1998, by and between
XXXX X. XXXXXXXX (the "Employee") and AeroCentury Corp., a Delaware Corporation
(the "Company" or "ACY").
For ease of reference, this Agreement is divided into the following parts, which
begin on the pages indicated:
FIRST PART: TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS
DURING EMPLOYMENT (Sections 1-5, beginning on page 2)
SECOND PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION (Section 6, beginning on page 5)
THIRD PART: PARACHUTE PAYMENTS (Sections 7-8, beginning on page 6)
FOURTH PART: SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE (Sections
9-10, beginning on page 8)
FIRST PART: TERM OF EMPLOYMENT, DUTIES AND SCOPE, COMPENSATION AND BENEFITS
DURING EMPLOYMENT
Section 1. Term of Employment
(a) Basic Rule. The Company agrees to employ the Employee in the capacity of
Chief Operating Officer and Senior Vice President in the event either of the
following occur: (1) the Company terminates the Management Agreement currently
in effect between the Company and JetFleet Management Corp. ("JMC") (hereinafter
the "Management Agreement"); or (2) there is a "Change in Control" (as defined
below) in the Company. Employee's employment with the Company shall begin on the
date of the termination of the Management Agreement, or the date that the Change
in Control is completed (hereinafter "Effective Date of Employment"). Employee
shall have the option, at his sole discretion, to decline employment if (i)
there is a Change in Control or (ii) the termination of the Management Agreement
described in clause (1) above is not in connection with the acquisition of JMC
by the Company. However, if Employee declines employment in following a given
Change in Control, he shall not forfeit his employment rights with respect to
any subsequent Change in Control.
"Change in Control" shall mean the occurrence of any of the following events,
after the date on which this Agreement is executed:
(i) Any person or entity other than Employee or Xxxx X. Xxxxxxx is or
becomes the beneficial owner, directly or indirectly, of securities of the
company representing 25% or more of the combined voting power of the Company's
then-outstanding securities other than in connection with the issuance of
additional securities by the Compnay for capital-raising purposes;
(ii) There occurs a merger or consolidation of the Company with any other
corporation or entity, other than 1) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 85% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or 2) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person or entity acquires more than 85% or more
of the combined voting power of the Company's then outstanding securities; or
(iii) The Company sells or disposes of substantially all or a significant
portion of its assets in a series of transactions not recommended by JMC. For
purposes of this subsection, a sale of a "significant portion" of the assets of
the Company shall mean a sale or other disposition in a single transaction or a
series of related transactions of 25% or more of the assets (based on fair
market value) of the Company.
(b) Initial Term. The Company agrees to continue the Employee's employment, and
the Employee agrees to remain in employment with the Company, from the effective
date of employment, until the earliest of:
(1) December 31 of the fifth year following the effective date of employment; or
(2) The date of the Employee's death or when the Employee's employment
terminates pursuant to Subsections (b), (c), (d) or (e) below.
(c) Automatic Extensions. The term and provisions of this Agreement shall
automatically extend for additional one-year periods if Employee remains
employed on and after December 31 of the fifth year following the effective date
of employment, unless either party notifies the other in writing to the contrary
at least 180 days prior to the applicable December 31 that it, or he, does not
want the term to so extend.
(d) Termination By Company for Cause. The Company may terminate the Employee's
employment at any time for Cause shown. For all purposes under this Agreement,
"Cause" shall mean (1) a willful failure by the Employee to substantially
perform the Employee's duties under this Agreement, other than a failure
resulting from the Employee's complete or partial incapacity due to physical or
mental illness or impairment, (2) a willful act by the Employee that constitutes
gross misconduct and that is materially injurious to the Company, (3) a willful
breach by the Employee of a material provision of this Agreement or (4) a
material and willful violation of a federal or state law or regulation
applicable to the business of the Company that is materially and demonstrably
injurious to the Company. No act, or failure to act, by the Employee shall be
considered "willful" unless committed without good faith and without a
reasonable belief that the act or omission was in the Company's best interest.
However, if such Cause is reasonably curable, the Company shall not terminate
the Employee's employment hereunder unless the Company first gives notice of its
intention to terminate and of the grounds for such termination, and the Employee
has not, within sixty (60) days following receipt of notice, cured such Cause.
(e) Termination Company for Disability. The Company may terminate the Employee's
employment for Disability by giving the Employee written notice. For all
purposes under this Agreement, "Disability" shall mean that the Employee, at the
time the notice is given, has been unable to perform the Employee's duties under
this Agreement for a period of not less than twelve (12) consecutive months as a
result of the Employee's incapacity due to physical or mental illness. In the
event that the Employee resumes the performance of substantially all of the
Employee's duties under this Agreement before the termination of the Employee's
employment under this Section becomes effective, the notice of termination shall
automatically be deemed to have been revoked.
(f) Termination by Employee For Good Reason. The Employee may terminate his
employment with the Company for Good Reason. Termination shall be for "Good
Reason" if: (1) there is a material and adverse change in Employee's position,
duties, responsibilities, or status with Company; (2) there is a reduction in
Employee's salary or benefits then in effect, other than a reduction comparable
to reductions generally applicable to similarly situated employees of the
Company; or (3) the Company materially breaches this Agreement.
Section 2. Duties and Scope of Employment
(a) Position. The Company agrees to employ the Employee for the term of
employment under this Agreement in the position of Chief Operating Officer and
Senior Vice President. Employee shall be given such duties, responsibilities and
authorities as are appropriate to his position.
(b) Obligations. During the term of employment under this Agreement, the
Employee shall devote such business efforts and time to the business and affairs
of the Company as are needed to carry out his duties and responsibilities
hereunder, subject to the overall supervision of the Company's Board of
Directors. The foregoing shall not preclude the Employee from engaging in
appropriate civic, charitable or religious activities or from devoting a
reasonable amount of time to private investments or from serving on the boards
of directors of other entities, as long as such activities and service do not
interfere or conflict with the Employee's responsibilities to the Company. Nor
shall the foregoing preclude the Employee from engaging in any business
activities related to any business in which Employee held a management position
within thirty (30) days prior to the effective date of employment with the
Company.
Section 3. Compensation
(a) Base Salary. During the term of employment under this Agreement, the Company
agrees to pay the Employee as compensation for services a Base Salary at the
annual rate of $120,000, or at such higher rate as the Company may determine
from time to time. Such salary shall be payable in accordance with the standard
payroll procedures of the Company. Once the Company has increased such salary,
it thereafter shall not be reduced; provided, however, that such salary
(including any increases) may be reduced by the Company if the Employee commits
an act or omission that meets the definition of Cause, as defined in
Section 1(b).
The Base Salary specified in this Section 3, together with any increases in such
compensation that the Company may grant from time to time, and together with any
reductions made in accordance with this Section 3, is referred to in this
Agreement as "Base Compensation."
(b) Upon effectiveness of this Agreement under Section 1(a), the Company shall
pay XXXXXXXX a one-time cash bonus of $50,000.
Section 4. Employee Benefits
During the term of employment under this Agreement, the Employee shall be
eligible to participate in the employee benefit plans and executive compensation
and fringe benefit programs maintained by the Company, including (without
limitation) savings, pension or profit-sharing plans, deferred compensation
plans, stock option, incentive or other bonus plans, life, disability, health,
accident and other insurance programs, paid vacations, automobile and similar
plans or programs, subject in each case to the generally applicable terms and
conditions of the plan or program in question and to the discretion and
determinations of any person, committee or entity administering such plan or
program.
Section 5. Business Expenses and Travel
During the term of employment under this Agreement, the Employee shall be
authorized to incur necessary and reasonable travel, entertainment and other
business expenses in connection with the Employee's duties hereunder. The
Company shall reimburse the Employee for such expenses upon presentation of an
itemized account and appropriate supporting documentation, all in accordance
with generally applicable policies.
SECOND PART: COMPENSATION AND BENEFITS IN CASE OF ACTUAL OR CONSTRUCTIVE
TERMINATION
Section 6. Termination By Company Without Cause, Or By Employee For Good Reason
In the event that, during the term of this Agreement the Employee's employment
terminates in a Qualifying Termination, as defined in Subsection (a), the
Employee shall be entitled to receive the payments and benefits described in
Subsections (b), (c) and (d).
(a) Qualifying Termination. A Qualifying Termination occurs if:
(1) The Company terminates the Employee's employment (i) prior to a Change in
Control, for any reason other than Cause or Disability; or (ii) on or subsequent
to a Change in Control, for any reason; or
(2) The Employee terminates his employment with the Company (i) prior to a
Change in Control, for Good Reason or (ii) on or after a Change in Control, for
any reason.
(b) Severance (2 x payment). The Company shall pay to the Employee in a lump
sum, not less than 31 days nor more than 60 days following the date of the
employment termination, an amount equal to the following:
(1) Two hundred percent (200%) of the Employee's Base Salary in effect on the
date of the employment termination; plus
(2) Two hundred fifty thousand dollars ($250,000.00).
(c) Two Years of Life Insurance and Health Plan Coverage. The coverage described
in this Subsection (c) shall be provided for a "Continuation Period" beginning
on the date when the employment termination is effective and ending on the
earlier of (1) the second anniversary of the date when the employment
termination is effective or (2) the date of the Employee's death. During the
Continuation Period, the Employee (and, where applicable, the Employee's
dependents) shall be entitled to continue participation in the group term life
insurance plan and in the health care plan for employees maintained by the
Company as if the Employee were still an employee of the Company. The coverage
provided under this Subsection (c) shall run concurrently with and shall be
offset against any continuation coverage under Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended. Where applicable, the
Employee's compensation for purposes of such plans shall be deemed to be equal
to the Employee's compensation (as defined in such plans) in effect on the date
of the employment termination. To the extent that the Company finds it
undesirable to cover the Employee under the group life insurance and health
plans of the Company, the Company shall provide the Employee (at its own
expense) with the same level of coverage under individual policies.
(e) No Mitigation. The Employee shall not be required to mitigate the amount of
any payment or benefit contemplated by this Section 6, nor shall any such
payment or benefit be reduced by any earnings or benefits that the Employee may
receive from any other source.
THIRD PART: PARACHUTE PAYMENTS
Section 7. Gross-Up Payment
In the event it is determined that any payment or distribution of any type to or
for the benefit of the Employee, pursuant to this Agreement or otherwise, by the
Company, any Person who acquires ownership or effective control of the Company,
or ownership of a substantial portion of the assets of the Company (within the
meaning of section 260G of the Code and the regulations thereunder) or any
affiliate of such Person (the "Total Payments") would be subject to the excise
tax imposed by section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are collectively referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that, after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax, imposed upon the Gross-Up Payment, the Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.
Section 8. Determination by Accountant
All mathematical determinations and determinations as to whether any of the
Total Payments are "parachute payments" (within the meaning of section 280G of
the Code), in each case which determinations are required to be made under this
Section 8, including whether a Gross-Up Payment is required, the amount of such
Gross-Up Payment, and amounts relevant to the last sentence of this Section 8,
shall be made by an independent accounting firm selected by the Employee from
among the largest four accounting firms in the United States (the "Accounting
Firm"). The Accounting Firm shall provide to the Company and to the Employee its
determination (the "Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant
matter, within ten (10) days after termination of the Employee's employment, if
applicable, or at such earlier time following termination of employment as is
requested by the Employee (if the Employee reasonably believes that any of the
Total Payments may be subject to the Excise Tax). If the Accounting Firm
determines that no Excise Tax is payable by the Employee, it shall furnish the
Employee with a written statement that such Accounting Firm has concluded that
no Excise Tax is payable (including the reasons therefor) and that the Employee
has substantial authority not to report any Excise Tax on the Employee's federal
income tax return. If a Gross-Up Payment is determined to be payable, it shall
be paid to the Employee within ten (10) days after the Determination is
delivered to the Company or the Employee. Any determination by the Accounting
Firm shall be binding upon the Company and the Employee, absent manifest error.
As a result of uncertainty in the application of section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments not made by the Company and members of the
Company should have been made ("Underpayment"), or that Gross-Up Payments will
have been made by the Company and members of the Company that should not have
been made ("Overpayments"). In either such event, the Accounting Firm shall
determine the amount of the Underpayment or Overpayment that has occurred. In
the case of an Underpayment, the Company promptly shall pay, or cause to be
paid, the amount of such Underpayment to or for the benefit of the Employee. In
the case of an Overpayment, the Employee shall, at the direction and expense of
the Company, take such steps as are reasonably necessary (including the filing
of returns and claims for refund), follow reasonable instructions from, and
procedures established by, the Company, and otherwise reasonably cooperate with
the Company to correct such Overpayment; provided, however, that (1) Employee
shall not in any event be obligated to return to the Company an amount greater
than the net after-tax portion of the Overpayment that he has retained or
recovered as a refund from the applicable taxing authorities and (2) this
provision shall be interpreted in a manner consistent with the intent of
Section 7, which is to make the Employee whole, on an after-tax basis, from the
application of the Excise Tax, it being understood that the correction of an
Overpayment may result in the Employee repaying to the Company an amount that is
less than the Overpayment.
FOURTH PART: SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE
Section 9. Successors
(a) Company's Successors. The Company shall require any successor (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets, by an agreement in substance and form satisfactory to the
Employee, to assume this Agreement and to agree expressly to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform it in the absence of a succession. The Company's failure to
obtain such agreement prior to the effectiveness of a succession shall be a
breach of this Agreement and shall entitle the Employee to all of the
compensation and benefits to which the Employee would have been entitled
hereunder if the Company had involuntarily terminated the Employee's employment
without Cause or Disability, on the date when such succession becomes effective.
For all purposes under this Agreement, the term "Company" shall include any
successor to the Company's business and/or assets that executes and delivers the
assumption agreement described in this Subsection (a) or that becomes bound by
this Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees.
Section 10. Miscellaneous Provisions
(a) Waiver. No provision of this Agreement shall be modified, waived, or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver or any other condition or provision or of the same condition
or provision at another time.
(b) Whole Agreement. No agreements, representations, or understandings (whether
oral or written and whether express or implied) that are not expressly set forth
in this Agreement have been made or entered into by either party with respect to
the subject matter hereof.
(c) Choice of Law. The validity, interpretation, construction, and performance
of this Agreement shall be governed by the laws of the State of California.
(d) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(e) Arbitration. Except as otherwise provided in this Agreement, any dispute or
controversy arising out of the Employee's employment or the termination thereof,
including, but not limited to, any claim of discrimination under state or
federal law, shall be settled exclusively by arbitration in the San Francisco
Bay Area, California, in accordance with the then applicable Employment Dispute
Resolution rules of the American Arbitration Association. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
(f) Attorneys Fees. If any action is brought to enforce the rights and
obligations set forth herein, the prevailing party shall be entitled to receive
all of the fees and costs, including reasonable attorneys fees, incurred in the
action. Any fees and costs awarded under this provision shall be in addition to
any other relief awarded to the prevailing party.
(g) No Assignment of Benefits. The rights of any person to payments or benefits
under this Agreement shall not be made subject to option or assignment, either
by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this Subsection (g) shall be void.
(h) Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable taxes.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written. Employee has consulted (or has had the opportunity to consult)
with his own counsel prior to execution of this Agreement.
XXXX X. XXXXXXXX
/s/ Xxxx X. Xxxxxxxx
AEROCENTURY CORP.
By /s/ Xxxx X. Xxxxxxx
Its: President
