CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement"), is made and entered
into as of the 3 day of September, 1998, by and among FIELDS AIRCRAFT SPARES,
INC., a Utah corporation (the "Company"), and XXXXXXXXX X. XXXXXX an individual
("Luhnow"), with reference to the following facts:
X. Xxxxxx is currently employed, on a full-time basis, as an
officer and employee of the Company.
B. It has been mutually agreed and accepted that Luhnow's
current employment be terminated, and that Luhnow agree to enter into this
Consulting Agreement.
WHEREFORE, in consideration of the foregoing recitals and the
agreements and covenants contained herein and other valuable consideration, the
parties agree as follows:
1. TERMINATION OF EMPLOYMENT; COMMENCEMENT OF CONSULTING.
Luhnow and the Company hereby agree that, effective as of
September 22, 1998 (the "Effective Date"), Luhnow's employment as an officer and
a full-time employee of the Company shall terminate. Prior to such termination,
Luhnow intends to use all accrued vacation and sick leave. From and after the
Effective Date, Luhnow shall be retained as a consultant to the Company, on the
terms and for the period provided herein.
2. TERM OF CONSULTING AGREEMENT.
The term of this Agreement shall commence on the Effective
Date, and shall continue for six (6) months until March 22, 1999 (the "Term"),
unless sooner terminated as provided herein.
3. DUTIES OF LUHNOW.
Luhnow shall consult with and advise the senior management of
the Company regarding (i) potential acquisitions, including evaluation and
negotiation of such acquisitions and (ii) the manufacturing operations of the
Company (the "Services"). Luhnow may, with the consent of the Company, provide
such Services by telephone. The Services shall be provided at the request of the
Company; provided, however, that Luhnow shall not be required to devote more
than forty (40) hours per month during the Term to providing the Services. In
addition, Luhnow acknowledges that the Company shall have no obligation to
actually utilize the Services, provided that the Company makes payment to Luhnow
as provided herein.
1
4. COMPENSATION FOR SERVICES.
4.1. Consulting Fees. As consideration for providing the
Services, Luhnow shall receive a consulting fee of Sixteen Thousand Six Hundred
Sixty-Six Dollars and Sixty-Seven Cents ($16,666.67) per month for the first
three (3) months of the Term, representing payment in full for the Services
during the Term, payable in arrears on or before the last day of each month,
commencing October 21, 1998.
4.2. Termination of Benefits. Luhnow acknowledges that, as a
consultant, Luhnow shall not be a member or entitled to participation in any
insurance, health or other employee benefit programs of the Company in effect as
of the Effective Date.
4.3. Employee Stock Options. In connection with the
termination of Luhnow's employment as an officer and full-time employee of the
Company, 20,000 of the options held by Luhnow will fully vest on January 16,
1999 and will be exercisable by Luhnow until January 15, 2000; provided,
however, that such 20,000 options shall immediately vest upon the death of
Luhnow. All remaining options will terminate effective September 22, 1998.
4.4. Reimbursement of Expenses. The Company agrees to
reimburse Luhnow for all expenses incurred by Luhnow (i) prior to the date
hereof in accordance with applicable Company policies regarding such
reimbursement, and (ii) for expenses actually and reasonably incurred by Luhnow
during the Term in performing the Services, provided that such expenses are
approved by the Company in advance.
4.5. Office Space. The Company agrees to provide Luhnow with
office space and reasonable support services, including telephone service,
consistent with Luhnow's status, during the Term, at no cost to Luhnow.
5. TERMINATION. This Agreement may only be terminated by Company for
cause. As used herein, "cause" shall mean:
5.1. Failure to Provide Services. Luhnow's failure or refusal
to provide the Services hereunder, which failure or refusal continues for thirty
(30) days following written notice from the Company; or
5.2. Other Breach of Agreement. Luhnow's material breach of
any other term or provision of this Agreement.
5.3. Termination Upon Death or Disability. In addition, this
Agreement shall automatically terminate upon Luhnow's death or permanent
disability. As used herein, "permanent disability" shall mean Luhnow's
substantial inability to perform the Services, as determined by a physician
reasonably acceptable to the Company, which
2
inability continues for more than thirty (30) consecutive days, or for more than
forty-five (45) days during the Term.
6. OBLIGATIONS OF LUHNOW - PROPERTY RIGHTS; NON-COMPETITION.
6.1. Definitions. As used in this Agreement, the following
definitions shall apply:
(a) "Confidential Information" means any and all
information disclosed to Luhnow or which Luhnow gains knowledge of as a
consequence of or through Luhnow's employment by or consulting with the Company
(including information conceived, originated, discovered or developed by Luhnow)
about Company's products, processes, and services, including information
relating to research, development, inventions, manufacture, purchasing,
accounting, engineering, marketing, merchandising, selling, trade secrets, or
customer lists, which information the Company maintains as confidential.
(b) "Conflicting Organization" means any person,
business, company or organization engaged in or about to become engaged in a
business or activity which is substantially similar to, or would reasonably be
deemed to compete with, the business of the Company.
6.2. Non-Disclosure. Except as required in Luhnow's duties to
Company and then only with Company's prior written consent, Luhnow will not,
directly or indirectly, use for Luhnow's own benefit or the benefit of others,
or disseminate, disclose, lecture upon or publish articles concerning, any
Confidential Information either during or at any time after the term of this
Agreement.
6.3. Obligation to Return Confidential Information. All
documents, papers, notes, notebooks, memoranda, computer files, and other
written or electronic records of any kind made by Luhnow during and in
connection with Luhnow's employment by Company or consulting with the Company,
shall remain the property of Company at all times. Upon the termination of
Luhnow's consulting with Company, all documents, papers, notes, notebooks,
memoranda, computer files and other written or electronic records in Luhnow's
possession, whether prepared by Luhnow or others will be left with Company.
6.4. Non-Competition. Luhnow shall not, either directly or
indirectly:
(a) During the term of this Agreement, own an
interest in, operate, join, control, participate in, or be connected as an
officer, agent, consultant, independent contractor, partner, shareholder, or
principal of, any Conflicting Organization. Ownership of less than five percent
(5%) of the common stock or equity interest of a public corporation shall not be
deemed in violation of this provision.
3
(b) During the term of this Agreement, undertake
planning for or organization of any Conflicting Organization or any business
activity materially competitive with Company's business or combine with other
agents or representatives of Company for the purpose of organizing any such
Conflicting Organization or materially competitive business activity.
(c) During the term of this Agreement, and for a
period of three (3) years thereafter, directly or indirectly, or by action in
concert with others, induce or influence or seek to induce or influence, any
person who is engaged as an officer, consultant, agent, independent contractor,
or otherwise by Company to terminate his or her employment or engagement.
7. RELEASES.
7.1. As a material inducement to the Company to enter into
this Agreement, Luhnow hereby releases the Company and its subsidiaries,
affiliates, successors, assigns, officers, directors, shareholders, employees,
and agents from any and all claims, demands, causes of action, obligations, and
liabilities, whether known or unknown, and whether suspected or unsuspected,
that now exist or may hereafter exist, with the exception of the obligations,
representations and warranties of the Company contained in this Agreement,
arising out of any facts or circumstances existing, occurring, or commencing on
or prior to the date of this Agreement, including without limitation those
claims arising out of Luhnow's employment with the Company and/or Luhnow's
resignation or termination therefrom, including, but not limited to any claim
that the Company discriminated against Luhnow on the basis of Luhnow's race,
sex, religion, national origin, handicap, ancestry or age, that the Company or
any employee thereof engaged in sexual harassment of Luhnow, that the Company
violated any promise or agreement either express or implied with Luhnow, or that
the Company has terminated Luhnow for any illegal reason or in an illegal
fashion, or by reason of any act or omission concerning any matter, cause or
thing, including without limiting the generality of the foregoing any rights or
claims arising under statutes including the Employee Retirement Income Security
Act of 1974, Title VII of the Civil Rights Act of 1964 and the Civil Rights Act
of 1991, the Americans with Disabilities Act, the Age Discrimination in
Employment Act of 1967, 29 U.S.C. ss. 621, et seq., the California Fair
Employment and Housing Act, California Labor Code ss. 970, or any claim for
severance pay, bonus or incentive payments, vacation pay, sick leave, holiday
pay, life insurance, health insurance and medical insurance, pension benefits or
any claim of discrimination, which could have been alleged by Luhnow.
In connection with the foregoing release, Luhnow expressly
acknowledges and agrees that:
i. The foregoing release constitutes a voluntary
waiver of any and all rights and claims Luhnow has or may have against
the Company or any other party released in the foregoing release as of
the date of Luhnow's execution of this
4
Agreement under the federal Age Discrimination in Employment Act of
1967, as amended, 29 U.S.C. Section 621 et seq.;
ii. Luhnow has waived rights or claims pursuant to
the foregoing release in exchange for consideration received from the
Company, the value of which exceeds payment or remuneration to which
Luhnow was already entitled;
iii. Luhnow has been advised to consult with an
attorney concerning this Agreement, and the foregoing release, prior to
executing it;
iv. Luhnow has had in excess of 21 days to consider
the terms of this Agreement, and the foregoing release;
x. Xxxxxx may revoke this Agreement at any time
during the seven (7) day period following execution of this Agreement,
and this Agreement does not become effective or enforceable until the
revocation period has expired, which will be the Effective Date of this
Agreement.
7.2. The Company, for itself and its officers, directors and
shareholders, hereby releases Luhnow and the successors and assigns of Luhnow
from any and all claims, demands, causes of actions, obligations, and
liabilities, whether known or unknown, and whether suspected or unsuspected,
that now exist or may hereafter exist, arising out of any facts or circumstances
existing, occurring, or commencing on or prior to the date of this Agreement.
Notwithstanding the foregoing, nothing contained in this Section 7.2 will
release Luhnow from any claims, demands, causes of action, obligations, and
liabilities, whether known or unknown, and whether suspected or unsuspected,
that now exist or may hereafter exist, arising out of any obligations assumed by
Luhnow under the Stock Purchase Agreement, dated as of January 2, 1998, by and
among Fields Aircraft Spares, Inc. and certain selling shareholders, as well as
that certain Covenant Not to Compete agreement entered into by Luhnow pursuant
to such Stock Purchase Agreement. In addition, Luhnow hereby agrees to cooperate
in any investigation, trial preparation or defense of the pending sexual
harassment litigation. The Company agrees that, to the extent practicable, such
assistance and cooperation can be provided by telephone, and will be scheduled,
to the extent within the control of the Company, so as not to unreasonably
interfere with Luhnow's business activities.
7.3. Luhnow and the Company each specifically intend that this
Agreement operate as a full and complete waiver and release of any and all
unknown claims whatsoever. In connection herewith, Luhnow and the Company each
knowingly and expressly acknowledge and waive the benefits of Section 1542 of
the Civil Code of California, which provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
5
TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Luhnow and the Company acknowledge that they may have
sustained losses or have claims which are presently unknown and unsuspected.
Nevertheless, both parties agree and acknowledge that this Agreement has been
negotiated and agreed upon in light of this realization and, being fully aware
of this situation, each of the parties hereto intends hereby to release, acquit
and forever discharge the other party from and against all unknown claims,
including damages, losses and the results of losses which are presently unknown
and unanticipated, without exception.
7.4. Luhnow and the Company each covenant and agree not to
institute or cause to be instituted against the other any suits or action for
damages or any injunction for or by reason of any damage, loss, injury, claim,
demand, cause of action, obligation or liability that has been released by one
party to the other under the terms of subsections 7.1, 7.2 or 7.3 of this
section. Each party agrees to indemnify and hold harmless the other from any
claim or liability that the other may suffer or may be required to pay on
account of any breach of this subsection 7.4.
8. MISCELLANEOUS.
8.1. Independent Contractor. The relationship between Luhnow
and the Company is that of independent contractor. This Agreement is not
authority for Luhnow to act for the Company as its agent or make commitments for
the Company. Luhnow agrees and acknowledges that he is not an employee of the
Company and that he is, in fact, an independent business. Luhnow further agrees
that he is responsible for paying all of the appropriate taxes, and for
appropriate insurance, including workers' compensation and general liability
insurance. Luhnow further agrees and acknowledges that he is not an employee or
officer of the Company, that he will not represent himself as an employee or
officer of the Company, and will support the Company's efforts to accurately
describe this relationship in any proceedings.
8.2. Entire Agreement. This Agreement, together with the
exhibits hereto and agreements expressly referenced herein, constitutes the
entire understanding between the parties, and supersedes all prior agreements
and negotiations, whether oral or written. There are no other agreements between
the parties, except as set forth herein. No supplement, modification, waiver or
termination of this Agreement shall be binding unless in writing and executed by
all parties hereto. The parties expressly agree that this Agreement supersedes
entirely any agreement, oral or written, relating to Luhnow's employment or
consulting with, or compensation by, the Company.
6
8.3. No Assignment; Binding Effect. Neither this Agreement nor
any rights, benefits or obligations hereunder, may be assigned by any party to
this Agreement without the prior express written consent of the other party.
Subject to the foregoing, this Agreement shall inure to the benefit of and be
binding upon all of the parties hereto and their respective executors,
administrators, successors and permitted assigns.
8.4. Headings; Construction. The headings of the Sections
contained in this Agreement are for reference purposes only, and shall not
affect the meaning or interpretation of this Agreement. The parties have been
advised by counsel in connection with this Agreement. This Agreement shall be
construed and interpreted in accordance with the plain meaning of its language,
and not for or against either party, and as a whole, giving effect to all of the
terms, conditions and provisions hereof.
8.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
8.6. Counterparts. This Agreement may be executed in two or
more counterparts, which shall together constitute one and the same agreement.
This Agreement has been negotiated and entered into in, and the obligations of
the parties hereto are to be performed entirely or primarily in, the County of
Los Angeles, State of California, regardless of the place of execution of any of
such counterparts.
8.7. Arbitration. The parties hereby agree that all disputes
or claims arising hereunder shall be submitted to arbitration in accordance with
the rules of the American Arbitration Association. Such arbitration shall take
place in Los Angeles, California. The parties expressly agree and acknowledge
that any award rendered in such arbitration shall be final, binding and
conclusive, and judgement may be entered in any court of competent jurisdiction
upon any such award. Nothing in this Section 8.7 shall limit or restrict the
right of the Company to seek injunctive relief, pursuant to Section 8.10 hereof.
8.8. Attorneys' Fees. In the event that any party to this
Agreement shall commence any arbitration, suit or action to interpret or enforce
this Agreement, the prevailing party in such action or arbitration shall recover
such party's costs and expenses incurred in connection therewith, including
attorney's fees and costs of appeal, if any.
8.9. No Third Party Benefit. Nothing contained in this
Agreement shall be deemed to confer any right or benefit on any person who is
not a party to this Agreement.
8.10. Injunctive Relief. Luhnow hereby expressly agrees and
acknowledges that a breach by Luhnow of any of Luhnow's obligations under
Section 6 hereof would result in severe and irreparable injury to the Company,
which injury could not
7
be adequately compensated by an award of money damages, and Luhnow therefore
agrees and acknowledges that the Company shall be entitled to injunctive relief
in the event of any such breach of this Agreement, or to enjoin or prevent such
a breach. Luhnow further expressly waives any requirement or obligation of the
Company to post any bond or provide any other security in connection with
obtaining such injunctive relief.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date, month and year first above written.
Fields Aircraft Spares, Inc.,
a Utah corporation
By: /s/ Xxxx X. Xxxxxx /s/ Xxxxxxxxx X. Xxxxxx
--------------------------- ---------------------------
Xxxxxxxxx X. Xxxxxx
Its: President
8
