EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into July
17, 1998 by and between XxXxxxx Aircraft Holdings, Inc. (the "Company") and R.
Xxxx XxXxxxx ("Executive") based on the following facts:
A. Executive is currently employed by the Company in the capacity as
Chief Executive Officer ("CEO") and is a key executive of the Company.
B. The Company desires to employ Executive for the term of this Agreement
on the terms and conditions specified in this Agreement; Executive
desires to be employed and to perform the services described herein
pursuant to the terms of this Agreement.
C. The Compensation Committee of the Board of Directors (the "Committee")
has recommended that Executive be employed pursuant to the terms of
this Agreement and the Board of Directors of the Company (the "Board")
has approved the recommendation of the Committee.
Based on the foregoing facts and circumstances and for good and valuable
consideration, receipt of which is hereby acknowledged, the Company and
Executive agree as follows:
1. TERM OF AGREEMENT. Except as otherwise provided herein, the term of
this Agreement shall commence effective July 1, 1998 and shall
continue through June 30, 2001 (the "Term").
2. DUTIES. Executive agrees to be employed as the CEO of the Company
during the Term and to devote his full business time and attention to
the Company. Executive may devote such of his time as reasonable to
his personal investments and to civic and/or charitable activities.
Executive may serve as a director or trustee of any other corporation
or trust with the consent of the Board, which consent will not
unreasonably be withheld. Executive's duties shall not be diminished,
nor will the responsibilities be decreased from those currently in
effect. The Company will not assign duties to the CEO inconsistent
with those attendant to the position of a Chief Executive Officer and
a director of the Company. Except as specified by the terms of this
Agreement, the powers and duties of Executive may be more specifically
determined by the Board from time to time.
3. COMPENSATION. During the Term, Executive shall receive the following
compensation and benefits:
A. SALARY. During the first year of the Term, the Company shall pay
Executive an annual base salary of $310,000 payable on the
regular payroll dates for employees of the Company; for each
subsequent year during the Term, Company shall pay Executive an
annual salary in an amount at least equal to the sum of (i)
Executive's annual base salary for the preceding year, plus (ii)
an additional amounts as favorable to Executive as pay increases
paid by the Company for other executives of the Company;
B. BONUS. During the Term, the Company shall pay Executive bonus
payments annually (said bonus payments, together with Executive's
salary as provided in Section 3.A., being sometimes collectively
referred to herein as "Compensation"), as a percentage of his
annual base salary in effect at the time of the payment of such
bonus payment based upon the Company's achievement of mutually
agreed performance goals as set forth in the Company's operation
plan approved by the Board for such year. For the calendar year
1998, the bonus payment shall be based upon the Company's
achievement of earnings before taxes, depreciation and
amortization ("EBITDA") as specified in Executive's Employment
Agreement dated September 1, 1994 (the 1994 Employment Agreement)
and at the percentages specified in the chart below; provided,
however, no portion the bonus shall be based upon EBITDA of any
business for any period prior to the date such business was
acquired by the Company. During each subsequent year during the
Term, the bonus payments shall be based upon the Company's
achievement of earnings per share ("EPS") as determined pursuant
to generally accepted accounting principles ("GAAP") consistently
applied and followed in connection with the preparation of the
Company's audited financial statements, as follows:
Level of Achievement as a Bonus as a Percentage of
Percentage of Performance Goal Annual Base Salary
EPS equals 80% 55%
EPS equals 90% 65%
EPS equals 100% 75%
EPS equals 110% 85%
EPS equals 120% 100%
Said bonus shall be deemed earned on a pro rata basis throughout the year;
C. INCENTIVE STOCK OPTIONS. Pursuant to the Company 1993 Share
Incentive Plan (the "Plan"), the Company shall from time to time
make awards to Executive and Executive shall receive options to
purchase shares of the Company's Common Stock subject to the
terms of the Plan. The Executive is hereby awarded options to
purchase 50,000 shares at the Designated Current Price, specified
below (the "1998 Award"). As used herein, "Designated Current
Price" means the closing price of the Company's Common Stock on
the Nasdaq National Market on July 16, 1998 as notified to the
Holder by the Company in a separate writing, based upon the price
therefor as reported in the Wall Street Journal issue dated July
17, 1998. Subject to earlier vesting as provided in the Option
Agreement, the options granted pursuant to this Section 3.C.
shall vest 1/2 on July 31, 1998, and1/2on July 31, 1999;
D. AVTECH BONUS. In consideration for the services performed by
Executive in the Company's acquisition of Avtech Corporation on
June 26, 1998, the Company shall concurrent with the execution of
this Agreement pay to Executive $500,000.
E. EXECUTION BONUS. To induce Executive to enter into this
Employment Agreement, Company shall concurrent with the execution
of this Agreement, pay Executive $250,000.
F. CONTINUATION BONUS. So long as Executive is employed by the
Company on January 1, 1999, Company shall pay to Executive on
January 2, 1999 the sum of $150,000.
G. BENEFITS. During the Term, the Company shall provide to
Executive, his spouse and his eligible dependents and maintain in
full force and effect throughout the Term, group insurance
(including conversion features) and benefits, including life,
major medical, dental, vision and the related benefits as have
been provided to Executive, his spouse and his eligible
dependents during the immediately preceding year (the "Health
Care Benefits"). Without limiting the Health Care Benefits
provided in the foregoing sentence, the Company shall provide to
Executive life insurance with a death benefit of not less than $1
million. Without limiting the Health Care Benefits to be provided
to Executive, the Company may provide the Health Care Benefits
pursuant to group insurance plans if available to the Company on
such basis;
H. PROFIT SHARING PLAN. The Company agrees that Executive will be a
participant, on the same basis as other executives, in any profit
sharing or other deferred compensation or qualified retirement
plan adopted or maintained during the Term;
I. TRAVEL. The Company shall reimburse or pay directly all
business-related travel, entertainment and other expenses of
Executive at a level of accommodation as provided to Executive
during the immediately preceding year;
J. VACATION. Executive shall provide Executive annually not less
than four weeks of paid vacation but not less than the amount of
vacation provided to employees of the Company or any of its
subsidiaries with tenure equal to that of Executive.
4. TERMINATION. The Company may terminate the employment of Executive at
any time with or without "Cause." Except as provided in Section 4C, in
the event that the Company terminates the employment of Executive
without Cause, the Company shall be obligated to pay Executive
compensation and provide benefits pursuant to Section 3.A, 3.B and 3.G
for eighteen months. Executive's right to receive Compensation and
Health Care Benefits from the Company pursuant to the foregoing
sentence, shall not be diminished by Executive's receipt of
compensation in connection with employment by any person or entity
other than the Company. In the event of termination for Cause,
Executive shall not be entitled to Compensation following the last
date of Executive's employment by the Company.
A. FOR CAUSE. As used in this Agreement, "Cause" shall mean (i) any
material act of dishonesty constituting a felony (of which
Executive is convicted or pleads guilty) which results or is
intended to result directly or indirectly in substantial gain or
personal enrichment to Executive at the expense of the Company,
or (ii) after notice of breach delivered to Executive specifying
in reasonable detail and a reasonable opportunity for Executive
to cure the breaches specified in the notice, the Board, acting
by a two thirds vote, after a meeting held for the purpose of
making such determination and after reasonable notice to
Executive and an opportunity for him together with his counsel to
be heard before the Board, determines, in good faith, other than
for reasons of physical or mental illness, Executive willfully
and continually fails to substantially perform his duties
pursuant to this Agreement and such failure results in
demonstrable material injury to the Company. The following shall
not constitute Cause: (i) Executive's bad judgment or negligence,
(ii) any act or omission by Executive without intent of gaining
therefrom directly or indirectly a profit to which Executive was
not legally entitled, (iii) any act or omission by Executive with
respect to which a determination shall have been made that
Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement of payment of expenses under the
By-Laws of the Company or the laws of the State of Delaware as in
effect at the time of such act or omission.
B. The Company may terminate this Agreement without Cause at any
time by giving Executive 90 days notice, subject to Executive's
right to receive Compensation and Health Care Benefits as
provided in this Section 4.
C. COMPENSATION UPON TERMINATION FOLLOWING A CHANGE OF CONTROL. In
addition to the rights and benefits accruing to Executive as
otherwise described in this Agreement, in the event that (i) a
Change of Control shall have occurred while Executive is employed
hereunder and (ii) the Executive's employment hereunder shall be
involuntarily terminated for any reason other than Cause, death
or disability or Executive shall terminate his employment
hereunder for Good Reason, then the Company shall make the
following payments to Executive within 15 days following the date
of such termination of employment (the "Termination Date") (in
the case of (i) and (ii) below) and provide the following
benefits to Executive after the Termination Date (in the case of
(iii), (iv), (v), (vi) and (vii) below), subject in each case to
any applicable payroll or other taxes required to be withheld and
subject to the provisions of Section 5 relating to limitations on
parachute payments:
(1) The Company shall pay Executive a lump sum amount in cash
equal to $1 less than three times the sum of (a) Executive's
average base salary and (b) Executive's average bonus, in
each case, during the five calendar years immediately
preceding the Termination Date.
(2) The Company shall pay Executive a lump sum amount in cash
equal to accrued but unpaid salary and bonus through the
Termination Date, and unpaid salary with respect to any
vacation days accrued but not taken as of the Termination
Date.
(3) The Company shall continue to provide Executive Health Care
Benefits on terms no less favorable to Executive and his
dependents covered thereby (including with respect to any
costs borne by Executive) than the greater of (i) the
coverage provided on the date of the Charge of Control or
(ii) the coverage provided by the Company immediately prior
to the Termination Date. Such benefits shall be provided for
the beginning on the Termination Date and ending on the
first to occur of (i) the date of Executive's employment
(including self-employment) in a position providing
substantially the same or greater benefits as Executive's
assignment with the Company on the Termination Date, or (ii)
the second anniversary of the Termination Date.
(4) The Company shall pay to Executive a lump sum amount in cash
equal to the invested portion of the Company's contributions
to Executive's account under any of the Company's plans that
are "qualified" under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), to which the Company
makes contributions to employee accounts in effect as of the
Termination Date (the "Savings Plan"), plus an amount in
cash equal to two times an amount equal to the amount of the
Company's annual contribution on behalf of Executive
pursuant to the Savings Plans as in effect on the date of
the Change of Control or the Termination Date, whichever is
greater. For purposes of this Section, the Company's
matching contributions to the Savings Plans shall be deemed
to be at the maximum percentage contribution to which
Executive could be entitled under the Savings Plans.
In addition, within five days following the Termination
Date, Executive shall be paid in cash as amount equal to the
Company's matching contributions determined pursuant to the
Savings Plans as in effect on the date of the Change of
Control or the Termination Date, whichever is greater, which
would have accrued to the benefit of Executive had he
continued his participation in, and elected to make the
maximum contributions under, the Savings Plans for the
period of 24 months from the Termination Date or until
December 31 of the year in which Executive would reach age
65, whichever is the shorter period. The benefits received
by Executive pursuant to this Section are in addition to any
benefits that were vested prior to the Termination Date in
accordance with the terms of the Savings Plans.
(5) Within five days following the Termination Date, the Company
shall pay to Executive (i) an amount in cash equal to the
vested and invested amounts that have been credited to
Executive's account or accounts under any deferred
compensation plan that the Company maintains for its
employees as of the Termination Date whether or not then
vested, plus (ii) an amount equal to the total amount
required to be, or actually, credited to Executive's
account, including interest equivalents, for the year in
which the Termination Date occurs.
(6) Within five days following the Termination Date, the Company
shall select and engage at Company's expense a nationally
recognized executive placement firm reasonably satisfactory
to Executive to provide outplacement consulting services to
Executive until the first to occur of the date of
Executive's employment (including self-employment) and the
second anniversary of the Termination Date.
(7) Notwithstanding anything set forth in this Section 4(C), if
the benefits payable pursuant to this Agreement, either
alone or together with other payments which the Executive
has the right to receive either directly or indirectly from
the Employer or any of its Affiliates, would constitute an
excess parachute payment (the "Excess Payment") under
Section 280G of the Code, the Executive hereby agrees that
the benefit payable pursuant to this Agreement shall be
reduced (but not below zero) by the amount necessary to
prevent any such payments to the Executive from constituting
an Excess Payment, as determined by such independent public
accounting firm with a national reputation as the Employer
shall select.
Executive is not required to seek other employment or otherwise mitigate
the amount of any payments to be made by the Company pursuant to this Agreement.
As used in this Agreement, "Change of Control" shall mean an event
involving the Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), assuming that
such Schedule, Regulation and Act applied to the Company, provided that such a
Change of Control shall be deemed to have occurred at such time as: (i) any
"person" (as that term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) (other than an Excluded Person (as defined below)) becomes, directly or
indirectly, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of securities representing 20% or more of the combined voting power for
election of members of the Board of Directors of the then outstanding voting
securities of the Company or any successor of the Company, excluding any person
whose beneficial ownership of securities of the Company or any successor is
obtained in a merger or consolidation not included in paragraph (iii) below;
(ii) during any period of two consecutive years or less, individuals who at the
beginning of such period constituted the Board of Directors of the Company
cease, for any reason, to constitute at least a majority of the Board, unless
the appointment, election or nomination for election of each new member of the
Board (other than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the Company) was
approved by a vote of at least two-thirds of the members of the Board of
Directors then still in office who were members of the Board at the beginning of
the period or whose appointment, election or nomination was so approved since
the beginning of such period; (iii) there is consummated any merger,
consolidation or similar transaction to which the Company is a party as a result
of which the persons who were equity holders of the Company immediately prior to
the effective date of the merger or consolidation shall have beneficial
ownership of less than 50% of the combined voting power for election of members
of the Board of Directors (or equivalent) of the surviving entity or its parent
following the effective date of such merger or consolidation; (iv) any sale or
other disposition (or similar transaction) (in a single transaction or series of
related transactions) of (x) 50% of more of the assets or earnings power of the
Company or (y) business operations which generated a majority of the
consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been completed) of the
Company and its subsidiaries immediately prior thereto, other than a sale, other
disposition, or similar transaction to an Excluded Person or to an entity of
which equityholders of the Company beneficially own at least 50% of the combined
voting power; (v) any liquidation of the Company. For purposes of this
definition of Change of Control, the term "Excluded Person" shall mean and
include (i) any corporation beneficially owned by shareholders of the Company in
substantially the same proportion as their ownership of shares of the Company
and (ii) the Company.
As used in this Agreement, "Good Reason" shall mean the occurrence,
following a Change of Control, of any one of the following events without
Executive's consent: (i) the Company assigns Executive to any duties
substantially inconsistent with his position, duties, responsibilities, status
or reporting responsibility with the Company immediately prior to the Change of
Control, or assigns Executive to a position that does not provide Executive with
substantially the same or better compensation, status, responsibilities and
duties as Executive enjoyed immediately prior to the Change of Control; (ii) the
Company reduces the amount of Executive's base salary as in effect as of the
date of the Change of Control or as the same may be increased thereafter from
time to time, except for across-the-board salary reductions similarly affecting
all senior executives of the Company; (iii) the Company fails to pay Executive
an annual bonus consistent with this Agreement and bonuses consistent with past
practices are paid to any other senior executives of the Company; (iv) the
Company modifies Executive's annual bonus attributable to the performance
levels; (v) the Company changes the location at which Executive is employed by
more than 50 miles from the location at which Executive is employed as of the
date of this Agreement; or (vi) the Company breaches this Agreement in any
material respect, including without limitation failing to obtain a succession
agreement from any successor to assume and agree to perform this Agreement.
D. DEATH. In the event of Executive's death, the Company shall pay
to Executive's personal representative for a period of one year
following the death of Executive (i) Executive's annual base
salary and (ii) Executive's bonus and the Company shall provide
to Executive's widow and eligible dependents Health Care Benefits
for such one year period.
E. DISABILITY. The Company may terminate the Executive if the
Executive is unable for a period of 180 consecutive days to
perform his duties as a result of being "disabled" as defined in
this Section 4.E. "Disabled" shall mean (i) a determination by a
physician selected by Executive and approved by the Board that
Executive is suffering from total disability and (ii) the Company
has given Executive 30 days notice of potential termination and
within such 30 day period Executive has not returned to the full
time performance of his duties.
5. MITIGATION. Executive is not required to seek other employment or
otherwise mitigate the amount of any payments to be made by the
Company pursuant to this Agreement.
6. ASSIGNMENT. Neither Company nor Executive shall have the right to
assign its respective rights pursuant to this Agreement. The Company
shall require any proposed successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company, by agreement in form
and substance reasonably satisfactory to Executive, to expressly
assume and agree to perform this agreement in the same manner and to
the same extent that the Company would be required to perform it if no
such succession had taken place, concurrent with the execution of a
definitive agreement with the Company to engage in such transaction.
7. This Agreement shall be binding on the inure to the benefit of
Executive and his heirs and the Company and any permitted assignee.
The Company shall not engage in any transaction, including a merger or
sale of assets unless, as a condition to such transaction such
successor organization assumes the obligations of the Company pursuant
to this Agreement.
8. NOTICES.
If to Company: XxXxxxx Aircraft Holdings, Inc.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxxxx, XX 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
If to Executive: R. Xxxx XxXxxxx
00000 Xxx Xxxxxx Xxxx, Xxxx 000
Xxxxxx xxx Xxx, XX 00000
Fax: (000) 000-0000
9. FACSIMILE SIGNATURES, EXECUTION AND DELIVERY. This Agreement shall be
effective upon transmission of a signed facsimile by one party to the
other.
10. MISCELLANEOUS. This Agreement supersedes and, except as incorporated
herein, makes void any prior agreement between the parties (including
but not limited to the 1994 Employment Agreement), and sets forth the
entire agreement and understanding of the parties hereto with respect
to the matters covered hereby, except for changes in Compensation as
provided in this Agreement by action of the Committee and may not
otherwise be amended or modified except by written agreement executed
by the Company and the Executive. This Agreement shall be governed by
and construed in accordance with the laws of the State of California.
The Company has retained special counsel to review this Agreement and
consented to the firm of Spolin & Xxxxxxxxx advising Executive; this
Agreement has been authorized by resolution of the Compensation
Committee of the Board of Directors of the Company.
This Agreement has been executed on the date specified in the first paragraph.
XxXXXXX AIRCRAFT HOLDINGS, INC.
By: /s/ XXXXXXXX X. XXXXXXX
Authorized Signatory
EXECUTIVE
/s/ R. XXXX XXXXXXX
R. Xxxx XxXxxxx
