EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into by and between
Stellex Aerospace Holdings, Inc. (the "Company") and ▇▇▇▇▇▇▇ ▇. Call
("Employee"), as of the 1st day of June, 1998.
I. EMPLOYMENT.
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions hereinafter set forth, from June 1,
1998, to and including June 30, 2002.
II. DUTIES.
A. Employee shall serve during the course of his employment as President
and Chief Executive Officer of the Company and Stellex Aerospace, an indirect
subsidiary of the Company ("Stellex Aerospace") and shall have such other
duties, responsibilities, and titles on behalf of the Company or any of its
direct or indirect subsidiaries as the Board of Directors of the Company shall
determine from time to time. In the event that at any time during the term of
this Agreement Employee serves as a Director of the Company or any of its direct
or indirect subsidiaries, Employee shall not participate as a Director in any
actions taken, determinations made, or instructions given by the Board of
Directors that relate to Employee's employment with the Company or any aspect of
this Agreement.
B. Employee shall perform all duties incident to the position of President
and Chief Executive Officer as may from time to time be requested by the Board
of Directors. At all
times, Employee shall devote his full time and best efforts, knowledge and
experience to performing his duties hereunder, shall perform such duties in a
diligent and competent manner and shall act in conformity with the written and
oral policies of the Company and within the limits, budgets and business plans
set by the Company. Employee will at all times during the term of his employment
with the Company strictly adhere to and obey all of the rules and regulations in
effect from time to time relating to the conduct of employees of the Company.
Employee further agrees that to the best of his ability and experience he will
at all times loyally and conscientiously perform all duties and obligations
whether expressly or implicitly required of him by the terms of this Agreement.
Nothing herein shall preclude Employee from participating as an advisor or board
member of an outside organization (whether corporate or other form of
organization) which is not in competition with the Company or its subsidiaries
or affiliates, as long as it does not materially detract from Employee's
performance of duties for the Company.
C. For the term of this Agreement, Employee shall report to the Board of
Directors of the Company.
III. COMPENSATION.
A. Base Salary. The Company will pay to Employee a base salary at the rate
of $300,000 per year effective as of June 1, 1998. Such salary shall be earned
monthly and shall be payable in periodic installments no less frequently than
monthly in accordance with the Company's customary payroll practices. Amounts
payable shall be reduced by standard withholding and other authorized
deductions. The Board of Directors will review Employee's
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base salary annually and, in their sole discretion, may increase such base
salary as of the first day of January of each year during the term of this
Agreement. The Board of Directors may also, in their sole discretion, increase
Employee's base salary in the event Employee's responsibilities are
significantly increased by reason of changes in the Company's size and
complexity.
B. Annual Incentive Bonus. Employee shall be eligible for an annual
incentive bonus, beginning with the Company's 1998 fiscal year, pursuant to the
terms set forth on Exhibit A hereto.
C. Savings and Retirement Plans. During the term of this Agreement,
Employee shall be entitled to participate in all savings and retirement plans,
practices, policies and programs applicable generally to other peer executives
of Stellex Aerospace.
D. Welfare Benefit Plans. Employee and/or his family, as the case may be,
shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by Stellex
Aerospace (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of Stellex Aerospace.
E. Expenses. Employee shall be entitled to receive prompt reimbursement for
all reasonable employment expenses incurred by him in accordance with the
policies, practices and procedures as in effect generally with respect to other
peer executives of Stellex Aerospace.
F. Fringe Benefits. Employee shall be entitled to fringe benefits in
accordance with the plans, practices, programs and policies as in effect
generally with respect to other peer executives of Stellex Aerospace.
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G. Special Allowances and Benefits. Employee shall be entitled to the
following special expense allowances and benefits:
1) Automobile. Reimbursement of up to $1,400 per month for automobile
expenses.
2) Country Club. Reimbursement of up to $600 per month for dues for
membership in a local country club of Employee's choice.
3) Deferred Compensation Plan. Employee shall continue to participate
in the Stellex Aerospace deferred compensation plan on substantially the
same terms as reflected in the Deferred Compensation Agreement and related
Insurance Agreement executed on June 29, 1988 and August 23, 1989,
respectively.
H. Vacation. Employee shall be entitled to four (4) weeks paid vacation per
calendar year, subject to a maximum vacation accrual at any time of two (2)
weeks as of the end of the calendar year.
I. The Company reserves the right to modify, suspend or discontinue any and
all of the plans, practices, policies and programs referred to in Sections III-C
through F above at any time without recourse by Employee so long as such action
is taken generally with respect to other similarly situated peer executives and
does not single out Employee.
IV. TERMINATION.
A. Death or Disability. Employee's employment shall terminate automatically
upon Employee's death. If the Company determines that the Disability of Employee
has occurred (pursuant to the definition of Disability set forth below), it may
terminate Employee's
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employment by giving written notice in accordance with Section XIX. For purposes
of this Agreement, "Disability" shall mean a physical or mental impairment which
substantially limits a major life activity of Employee and which renders
Employee unable to perform the essential functions of his position, with or
without reasonable accommodation, for a period of 120 consecutive days or for
successive periods aggregating more than 180 days in any twelve-month period.
The Company reserves the right to make the determination of disability under
this Agreement based upon information supplied by Employee and/or his medical
personnel, as well as information from medical personnel (or others) selected by
the Company or its insurers.
B. Cause. The Company may terminate Employee's employment for Cause. For
purposes of this Agreement, "Cause" shall be determined by the Board of
Directors based upon the information then known to the Company, and shall mean
any of the following: (i) Employee's material breach of any provision of this
Agreement; (ii) Employee's failure or neglect to perform the duties of his
position with the Company including, but not limited to, material or repeated
failure to implement or achieve the Company's reasonable business plan; (iii)
Employee's development or pursuit of interests adverse to the Company or any of
its direct or indirect subsidiaries or parent companies or their affiliates;
(iv) Employee's insubordination; (v) Employee's willful misconduct, dishonesty,
gross negligence, theft, fraud or other illegal conduct; (vi) Employee's conduct
which reflects adversely upon, or remarks disparaging of, the Company or its
affiliates or subsidiaries, or its or their Boards, officers, or directors;
(vii) Employee's violation of any fiduciary duty or duty of loyalty to the
Company; or (viii) any other material reason which would justify a reasonably
prudent employer in terminating an employee's employment in similar
circumstances. In the event of circumstances described in clause (i) or
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(viii) above, the Company will give Employee ten (10) days advance written
notice of the Company's intent to terminate Employee's employment due to
circumstances described in clause (i) or (viii) above, and offer Employee the
opportunity to meet with the Board of Directors to discuss whether such
circumstances justify termination.
C. Other than Cause or Death or Disability. The Company may terminate
Employee's employment at any time, with or without cause.
D. Obligations of the Company upon Termination.
1. Death or Disability. If Employee's employment is terminated by reason of
Employee's Death or Disability, this Agreement shall terminate without further
obligations to Employee or his legal representatives under this Agreement, other
than for (a) payment of the sum of (i) Employee's annual base salary through the
date of termination to the extent not theretofore paid and (ii) any compensation
previously deferred by Employee (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (i) and (ii) shall
be hereinafter referred to as the "Accrued Obligations"), which shall be paid to
Employee or his estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the date of termination; (b) payment to Employee or his estate
or beneficiary, as applicable, of any amounts due pursuant to the terms of any
applicable welfare benefit plans, and (c) payment to Employee or his estate or
beneficiary, as applicable, of any incentive bonus earned for the fiscal year
ending prior to the date of termination, to the extent not theretofore paid
("Accrued Bonus"), in a lump sum within the time specified in Exhibit A hereto.
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2. Cause. If Employee's employment is terminated by the Company for Cause,
this Agreement shall terminate without further obligations to Employee other
than for the timely payment of Accrued Obligations. If it is subsequently
determined that the Company did not have Cause for termination under this
Section IV-D-2, then the Company's decision to terminate shall be deemed to have
been made under Section IV-D-3 and the amounts payable thereunder shall be the
only amounts Employee may receive for his termination.
3. Other than Cause or Death or Disability. If the Company terminates
Employee's employment other than for Cause or for Death or Disability, this
Agreement shall terminate without further obligations to Employee other than (a)
the timely payment of Accrued Obligations, (b) continuation of Employee's base
salary for the lesser of (i) the remainder of the term of this Agreement or (ii)
one (1) year, (c) a lump sum payment in lieu of benefits continuation in the
amount of $5,000, to be paid to Employee within thirty (30) days of the date of
termination, and (d) the timely payment of any Accrued Bonus. The Company shall
make any salary continuation payments to Employee in the Company's normal
payroll cycles and shall deduct standard withholdings and other authorized
deductions.
4. Termination by Employee. If Employee's employment is terminated by
Employee, this Agreement shall terminate without further obligations to Employee
other than for the timely payment of Accrued Obligations.
5. Exclusive Remedy. Employee agrees that the payments contemplated by this
Agreement shall constitute the exclusive and sole remedy for any termination of
his
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employment and Employee covenants not to assert or pursue any other
remedies, at law or in equity, with respect to any termination of employment.
V. CONFIDENTIAL AND PROPRIETARY INFORMATION.
A. Employee, in the performance of Employee's duties on behalf of the
Company, shall have access to, receive and be entrusted with confidential,
proprietary information, including but in no way limited to inventions,
improvements, technical developments, trademarks, designs, formulae, processes,
computer programs, know-how, techniques, data, trade secrets, discoveries,
copyrightable works, financial data, and other information or documents
regarding the business or technology of the Company and its subsidiaries and
affiliates, including but not limited to drawings, computer programs or portions
thereof, computer data, blueprints, process specifications, customer lists,
price data, relationships with employees, manner of operations, business plans,
and other documents owned or at any time in the future developed by the Company
or its subsidiaries or affiliates or its or their agents or consultants, or used
presently or at any time in the future in the course of its or their business
that is not otherwise part of the public domain (collectively, the "Proprietary
Information"). All such Proprietary Information is considered secret and will be
available to Employee in confidence. Except in the performance of duties on
behalf of the Company, Employee shall not, directly or indirectly for any reason
whatsoever, disclose or use any such Proprietary Information, unless such
Proprietary Information ceases (through no fault of Employee's) to be
confidential because it has become part of the public domain. All records,
files, drawings, documents, equipment and other tangible items, wherever
located, relating in any way to the Proprietary Information or otherwise to the
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Company's or its subsidiaries or affiliates' business, which Employee prepares,
uses or encounters, shall be and remain the Company's or its subsidiaries or
affiliates' sole and exclusive property and shall be included in the Proprietary
Information. Upon termination of this Agreement by any means, or whenever
requested by the Company, Employee shall promptly deliver to the Company any and
all of the Proprietary Information, not previously delivered to the Company,
that may be or at any previous time has been in Employee's possession or under
Employee's control.
B. Employee hereby acknowledges that the sale or unauthorized use or
disclosure of any of the Company's Proprietary Information by any means
whatsoever and any time before, during or after Employee's employment with the
Company shall constitute Unfair Competition. Employee agrees that Employee shall
not engage in Unfair Competition either during the time employed by the Company
or any time thereafter.
VI. OWNERSHIP AND ASSIGNMENT OF PROPRIETARY INFORMATION.
A. Employee shall disclose to the Company all Proprietary Information which
he may conceive or make during his employment, either solely, jointly, or in
common with others, and which (1) are developed, either in whole or in part, by
use of the Company's or its subsidiaries' or affiliates' equipment, supplies,
facilities or Proprietary Information, or (2) are related to the Company's or
its subsidiaries' or affiliates' business at the time of conception or reduction
to practice, or (3) are related to the Company's or its subsidiaries' or
affiliates' actual or demonstrably anticipated research or development at the
time of conception or reduction to
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practice, or (4) result from any work Employee performs for the Company or its
subsidiaries or affiliates.
B. Employee agrees to assign to the Company complete ownership of all
Proprietary Information which he conceives under the circumstances listed in
Section VI-A above, and as well as complete ownership of all patent
applications, patents, trademarks, and copyrights (United States and foreign)
which the Company may desire to secure with respect to such Proprietary
Information. Employee further agrees, both during his employment and thereafter,
to cooperate with the Company in procuring such patents, trademarks, and
copyrights, including execution of all documents necessary or incidental to such
processes.
C. Employee acknowledges that he has read the California ▇▇▇▇▇▇ Act
attached hereto as Exhibit B and understands that under its provisions Employee
may retain ownership of inventions that he may make entirely on his own time and
in a manner not described in Section VI-A above. Employee agrees, however, to
disclose to the Company all inventions that he conceives during his employment,
including any invention which he desires to retain as his own property, so that
the Company may determine if such invention qualifies under the law for
retention as Employee's property. The Company will treat any such disclosed
information as confidential unless such information (1) was previously known to
the Company, (2) is disclosed in patents or other publications, (3) has been
imparted to the Company by third parties, or (4) is well known to the trade to
which it relates. Employee understands that this paragraph applies even if he
works outside of California.
D. Employee agrees, during his employment and thereafter, to maintain and
make available to the Company, upon its request, complete and up-to-date written
records (including
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computer files, photographs, or drawings, where appropriate) of all Proprietary
Information which, during the course of his employment with the Company, he has
conceived or created, either in whole or in part.
VII. NON-COMPETITION.
Employee agrees that, during the term of this Agreement, he will not,
directly or indirectly, without the prior written consent of the Board of
Directors of the Company, provide consultative service with or without pay, own,
manage, operate, join, control, participate in, or be connected as a
stockholder, partner, or otherwise with, any business, individual, partner,
firm, corporation, or other entity which is then in competition with the
business of the Company or any subsidiary or affiliate of the Company. Employee
further acknowledges and agrees that by virtue of his position and duties with
the Company, including his access to the Proprietary Information of the Company
in discharging such duties, Employee's employment or participation with any
entity in competition with the Company or its subsidiaries or affiliates for a
period of one (1) year after termination of this Agreement would inevitably
require Employee to use or disclose the Company's Proprietary Information in
violation of this Agreement.
VIII. ANTISOLICITATION.
Employee promises and agrees that during the term of this Agreement, and
for a period of one (1) year after the termination or expiration of this
Agreement, he will not solicit or attempt to solicit customers of the Company or
any of its subsidiaries or affiliates, either directly or indirectly, to divert
their business to any individual, partnership, firm, corporation or other entity
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then in competition with the business of the Company, or any subsidiary or
affiliate of the Company.
IX. JOINING FORMER COMPANY EMPLOYEES.
Employee promises and agrees that for one (1) year following his
termination of employment other than pursuant to Section IV-C above or
Disability above or expiration of this Agreement, he will not enter into
business or work with any person who was employed with the Company or its
subsidiaries or affiliates, and who earned annually $25,000 or more as a Company
or subsidiary or affiliate employee during the last six months of his or her own
employment, in any business, partnership, firm, corporation or other entity then
in competition with the business of the Company or any subsidiary or affiliate
of the Company.
X. SOLICITING EMPLOYEES.
Employee promises and agrees that he will not, for a period of one (1) year
following termination of his employment or the expiration of this Agreement,
directly or indirectly solicit any of the Company or subsidiary or affiliate
employees who earned annually $25,000 or more as a Company or subsidiary or
affiliate employee during the last six months of his or her own employment to
work for any business, individual, partnership, firm, corporation, or other
entity then in competition with the business of the Company or any subsidiary or
affiliate of the Company.
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XI. REMEDIES.
It is expressly agreed that the Company will or would suffer irreparable
injury if Employee were to engage in any conduct or commit any act in violation
of Sections V - X above, and the Company would by reason of such violation be
entitled to injunctive relief in a court of appropriate jurisdiction. Employee
consents and stipulates to the entry of such injunctive relief in such a court
prohibiting him from engaging in any action in violation of this Agreement,
which relief shall be cumulative to other remedies at law or in equity and shall
not be construed as an exclusive remedy.
XII. SUCCESSORS.
A. This Agreement is personal to Employee and shall not, without the prior
written consent of the Company, be assignable by Employee.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by operation of law or
otherwise.
XIII. WAIVER.
No waiver of any breach of any term or provision of this Agreement shall be
construed to be, or shall be, a waiver of any other breach of this Agreement. No
waiver shall be binding unless in writing and signed by the party waiving the
breach.
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XIV. MODIFICATION.
This Agreement may not be amended or modified other than by a written
agreement executed by Employee and the Company and approved by the Board of
Directors.
XV. SAVINGS CLAUSE.
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable. In the event that a court of competent jurisdiction determines that
any provision or portion of this Agreement is unreasonable, arbitrary, against
public policy or otherwise unenforceable, such court shall enforce such
provision to the extent the court determines reasonable or in accordance with
public policy and to the maximum extent enforceable by law.
XVI. COMPLETE AGREEMENT.
This Agreement constitutes and contains the entire agreement and final
understanding concerning Employee's employment with the Company and the other
subject matters addressed herein between the parties. It is intended by the
parties as a complete and exclusive statement of the terms of their agreement.
It supersedes and replaces all prior negotiations and all agreements proposed or
otherwise, whether written or oral, concerning the subject matter hereof. Any
representation, promise or agreement not specifically included in this Agreement
shall not be binding upon or enforceable against either party. This is a fully
integrated agreement.
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XVII. GOVERNING LAW.
This Agreement shall be deemed to have been executed and delivered within
the State of California, and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with, and governed by, by the laws
of the State of California without regard to principles of conflict of laws.
XVIII. CONSTRUCTION.
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
XIX. COMMUNICATIONS.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid, addressed to Employee at
Stellex Aerospace, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or
addressed to the Company at Stellex Aerospace Holdings, Inc., c/o Stellex
Industries, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇. Either party
may change the address at which notice shall be given by written notice given in
the above manner.
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XX. EXECUTION.
This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be used
in lieu of the originals for any purpose.
XXI. EXTENSION.
Without in any manner obligating either party to extend the term of this
Agreement or to enter into a new employment agreement, the Company and Employee
agree that they will commence discussions respecting the possibility of
extending this Agreement on or about April 1, 2001, with a view toward resolving
their respective willingness to extend same and the terms of such extension, if
any, on or about June 30, 2001.
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
"COMPANY" "EMPLOYEE"
STELLEX AEROSPACE HOLDINGS, INC.
/s/ ▇▇▇▇▇▇▇ ▇. Call
-------------------------------
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. Call
-------------------------------
Its Vice Chairman
-------------------------------
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EXHIBIT A
ANNUAL INCENTIVE BONUS
Employee shall be eligible for an annual incentive bonus, beginning with
fiscal year 1998, based upon the Company's attainment of targeted annual EBITDA
pursuant to the following schedule:
Actual EBITDA Bonus as a
divided by Targeted Percentage of
EBITDA Base Salary (except as noted)
Less than 85% $40,000 Fixed Sum
Between 85% and 100% Prorated between (a) the percentage
derived by dividing 40,000 by
Base Salary at 85% of Target
EBITDA and (b) 40% of Base
Salary at 100% of Targeted
EBITDA
100% 40.0%
115% 50.0%
125% or greater 60.0%
[Interpolate between levels]
The target EBITDA shall be established annually by the Board of Directors no
later than January 1 of each fiscal year, subject to timely finalization of the
Company's and its subsidiaries' annual budget. As used herein, "EBITDA" shall
mean, for any period, determined for the Company in conformity with generally
accepted accounting principles consistently applied (i) the sum of the amounts
for such period of (A) net income (i.e., the net earnings or loss after taxes),
(B) depreciation and amortization expense, (C) interest expense, and (D)
federal, state, local, and foreign income taxes, minus (ii) extraordinary or
A-1
non-recurring gains. The Board of Directors may, in its sole discretion,
consider other appropriate adjustments to EBITDA. Within thirty (30) days after
completion of the Company's (or Stellex Industries, Inc.'s) audited financial
statements for the fiscal year, the Board of Directors shall determine the
eligibility and amount of any Incentive Bonus and shall pay such bonus to
Employee in a lump sum, less standard withholdings and authorized deductions.
For purposes of determining the annual incentive bonus for fiscal year 1998,
Employee's base salary for the year shall be considered to be $300,000.00.
A-2
EXHIBIT B
THE ▇▇▇▇▇▇ ACT
Sections 2870, 2871 and 2872 of the California Labor Code
2870. (a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either: (1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or (2) Result from any work
performed by the employee for the employer;
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
2871. No employer shall require a provision made void and unenforceable by
Section 2870 as a condition of employment or continued employment. Nothing in
this article shall be construed to forbid or restrict the right of an employer
to provide in contracts of employment for disclosure, provided that any such
disclosures be received in confidence, of all of the employee's inventions made
solely or jointly with others during the term of his or her employment, a review
process by the employer to determine such issues as may arise, and for full
title to certain patents and inventions to
B-1
be in the United States, as required by contracts between the employer and the
United States or any of its agencies.
2872. If an employment agreement entered into after January 1, 1980, contains a
provision requiring the employee to assign or offer to assign any of his or her
rights in any invention to his or her employer, the employer must also, at the
time the agreement is made, provide a written notification to the employee that
the agreement does not apply to an invention which qualifies fully under the
provisions of Section 2870. In any suit or action arising thereunder, the burden
of proof shall be on the employee claiming the benefits of its provisions.
B-2