SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: May 17, 1997
(Date of earliest event reported)
Aeroflex Incorporated
(Exact name of registrant as specified in its charter)
Delaware 1-8037 11-1974412
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
35 South Service Road, Plainview, New York 11803
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (516) 694-6700
(Former name of former address, if changed since last report.)
<PAGE>
Item 5. Other Events
In May 1997, Registrant executed and delivered an amendment to the
employment agreement between the Registrant and Harvey R. Blau, its Chairman of
the Board, an amendment to the employment agreement between the Registrant and
Michael Gorin, its President and an amendment to the employment agreement
between the Registrant and Leonard Borow, its Executive Vice President. Each
such amendment, among other things, extended to December 31, 2002 the term of
each such employment agreement.
In May 1997, Registrant also executed and delivered a Deferred
Compensation Agreement between the Registrant and Harvey R. Blau. The Deferred
Compensation Agreement is subject to the approval of the shareholders of the
Registrant. In connection with the Deferred Compensation Agreement, Mr. Blau has
elected to defer all bonus compensation for the Registrant's fiscal year
commencing July 1, 1997 and ending June 30, 1998, and has further elected to
receive such bonus compensation in the form of the Registrant's common stock,
par value $.10 per share.
In addition, in March 1997, Registrant executed and delivered an
employment agreement between Registrant and Carl Caruso, its Vice President -
Manufacturing.
Item 7. Financial Statements and Exhibits
(c) Exhibits
10.1 Amendment No. 1 to Employment Agreement between Aeroflex
Incorporated and Harvey R. Blau
10.2 Amendment No. 1 to Employment Agreement between Aeroflex
Incorporated and Michael Gorin
10.3 Amendment No. 1 to Employment Agreement between Aeroflex
Incorporated and Leonard Borow
10.4 Deferred Compensation Agreement between Aeroflex Incorporated
and Harvey R. Blau
10.5 Employment Agreement between Aeroflex Incorporated and Carl
Caruso
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Aeroflex Incorporated
By:__________________________
Michael Gorin
President
Amendment No. 1
to
Employment Agreement
This Amendment No. 1 dated as of February 5, 1997 to the Employment
Agreement (the "Employment Agreement") dated as of July 1, 1994 between Aeroflex
Incorporated, a Delaware corporation , with its principal office located at 35
South Service Road, Plainview, NY 11803 (the "Company") and Harvey R. Blau, who
resides at 125 Wheatley Road, Old Westbury, NY 11568 (the "Executive").
WHEREAS, the Company and the Executive entered into the Employment
Agreement and now desire to modify certain of the terms and provisions thereof;
NOW, THEREFORE, it is agreed as follows:
1. The Employment Agreement is hereby amended as follows:
(a) Section 2(b) of the Employment Agreement is hereby amended and
restated as follows:
"(b) Term of Employment. The Term of Employment shall commence on
the date above written and shall terminate on December 31, 2002, and,
unless either Party gives written notice to the other that it does not
want the Term to continue, the Term of Employment shall thereafter
automatically extend for successive periods of one year."
(b) Section 9(e)(iii) of the Employment Agreement is hereby amended
and restated as follows:
"(iii) In the event of Termination Without Cause, the Executive
shall be entitled to, for the remainder of the Term of Employment at
the time of termination:
(A) Base Salary at the rate in effect on the date of his
termination;
(B) last previously awarded Annual Bonus, payable in
accordance with Company's regular payroll practices; and
(C) benefits under any employee benefit plans of the Company
in which he participated or, as to any plans in which his continued
participation is precluded, the after-tax cost to the Executive of
equivalent benefits."
(c) Section 9(f) of the Employment Agreement is hereby amended and
restated as follows:
<PAGE>
"(f) Termination Following Change in Control. In the event there
shall be a Change in Control of the Company or of any person directly
or indirectly presently controlling the Company, the Executive may,
within six months of his becoming aware of such event, terminate his
employment with the Company. Upon such termination, the Executive
shall receive immediately in a lump sum an amount equal to three times
the sum of (i) his Base Salary at the rate in effect on the date of
his termination plus (ii) the amount of last previously awarded Annual
Bonus, but in no event an amount greater than is deductible under
Section 280G of the Internal Revenue Code of 1986, as amended, such
amount to be determined by the Company's independent auditors."
2. All capitalized terms used herein, unless otherwise defined herein,
are used herein as defined in the Employment Agreement. Except as expressly
provided herein, all terms and provisions of the Employment Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as
of the date first above written.
AEROFLEX INCORPORATED
By: /s/ Charles Badlato
Name: Charles Badlato
Title:Treausrer
/s Harvey R. Blau
Harvey R. Blau
Amendment No. 1
to
Employment Agreement
This Amendment No. 1 dated as of February 5, 1997 to the Employment
Agreement (the "Employment Agreement") dated as of July 1, 1994 between Aeroflex
Incorporated, a Delaware corporation , with its principal office located at 35
South Service Road, Plainview, NY 11803 (the "Company") and Michael Gorin, who
resides at 112B East Long Beach Road, Nissequogue, NY 11780 (the "Executive").
WHEREAS, the Company and the Executive entered into the Employment
Agreement and now desire to modify certain of the terms and provisions thereof;
NOW, THEREFORE, it is agreed as follows:
1. The Employment Agreement is hereby amended as follows:
(a) Section 2(b) of the Employment Agreement is hereby amended and restated
as follows:
"(b) Term of Employment. The Term of Employment shall commence on
the date above written and shall terminate on December 31, 2002, and,
unless either Party gives written notice to the other that it does
not want the Term to continue, the Term of Employment shall thereafter
automatically extend for successive periods of one year."
(b) Pursuant to Section 3 of the Employment Agreement, the Base Salary for
the Executive is hereby increased to $288,806 effective as of January 1, 1997,
payable in accordance with the regular payroll practices of the Company.
(c) Section 9(e)(iii) of the Employment Agreement is hereby amended and
restated as follows:
"(iii) In the event of Termination Without Cause, the Executive
shall be entitled to, for the remainder of the Term of Employment
at the time of termination:
(A) Base Salary at the rate in effect on the date of his
termination;
(B) last previously awarded Annual Bonus, payable in accordance
with Company's regular payroll practices; and
(C) benefits under any employee benefit plans of the Company in which
he participated or, as to any plans in which his continued
participation is precluded, the after-tax cost to the Executive of
equivalent benefits."
<PAGE>
(d) Section 9(f) of the Employment Agreement is hereby amended and restated
as follows:
"(f) Termination Following Change in Control. In the event there
shall be a Change in Control of the Company or of any person directly
or indirectly presently controlling the Company, the Executive may,
within six months of his becoming aware of such event, terminate his
employment with the Company. Upon such termination, the Executive
shall receive immediately in a lump sum an amount equal to three times
the sum of (i) his Base Salary at the rate in effect on the date of his
termination plus (ii) the amount of last previously awarded Annual Bonus,
but in no event an amount greater than is deductible under Section 280G
of the Internal Revenue Code of 1986, as amended, such amount to be
determined by the Company's independent auditors."
2. All capitalized terms used herein, unless otherwise defined herein, are
used herein as defined in the Employment Agreement. Except as expressly provided
herein, all terms and provisions of the Employment Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
date first above written.
AEROFLEX INCORPORATED
By: /s/ Charles Badlato
Name: Charles Badlato
Title:Treausrer
/s/ Michael Gorin
Michael Gorin
Amendment No. 1
to
Employment Agreement
This Amendment No. 1 dated as of February 5, 1997 to the Employment
Agreement (the "Employment Agreement") dated as of July 1, 1994 between Aeroflex
Incorporated, a Delaware corporation , with its principal office located at 35
South Service Road, Plainview, NY 11803 (the "Company") and Leonard Borow, who
resides at 125 Rodeo Drive, Oyster Bay Cove, NY 11791 (the "Executive").
WHEREAS, the Company and the Executive entered into the Employment
Agreement and now desire to modify certain of the terms and provisions thereof;
NOW, THEREFORE, it is agreed as follows:
1. The Employment Agreement is hereby amended as follows:
(a) Section 2(b) of the Employment Agreement is hereby amended and restated
as follows:
"(b) Term of Employment. The Term of Employment shall commence
on the date above written and shall terminate on December 31, 2002, and,
unless either Party gives written notice to the other that it does
not want the Term to continue, the Term of Employment shall thereafter
automatically extend for successive periods of one year."
(b) Pursuant to Section 3 of the Employment Agreement, the Base Salary for
the Executive is hereby increased to $288,806 effective as of January 1, 1997,
payable in accordance with the regular payroll practices of the Company.
(c) Section 9(e)(iii) of the Employment Agreement is hereby amended and
restated as follows:
"(iii) In the event of Termination Without Cause, the Executive
shall be entitled to, for the remainder of the Term of Employment
at the time of termination:
(A) Base Salary at the rate in effect on the date of his
termination;
(B) last previously awarded Annual Bonus, payable in accordance with
Company's regular payroll practices; and
(C) benefits under any employee benefit plans of the Company in
which he participated or, as to any plans in which his continued
participation is precluded, the after-tax cost to the Executive of
equivalent benefits."
(d) Section 9(f) of the Employment Agreement is hereby amended and restated
as follows:
<PAGE>
"(f) Termination Following Change in Control. In the event there shall be
a Change in Control of the Company or of any person directly or indirectly
presently controlling the Company, the Executive may, within six months of
his becoming aware of such event, terminate his employment with the
Company. Upon such termination, the Executive shall receive immediately
in a lump sum an amount equal to three times the sum of (i) his Base
Salary at the rate in effect on the date of his termination plus (ii)
the amount of last previously awarded Annual Bonus, but in no event an
amount greater than is deductible under Section 280G of the Internal
Revenue Code of 1986, as amended, such amount to be determined by the
Company's independent auditors."
2. All capitalized terms used herein, unless otherwise defined herein,
are used herein as defined in the Employment Agreement. Except as expressly
provided herein, all terms and provisions of the Employment Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
date first above written.
AEROFLEX INCORPORATED
By: /s/ Charles Badlato
Name: Charles Badlato
Title:Treausrer
/s/ Leonard Borow
Leonard Borow
DEFERRED COMPENSATION AGREEMENT
Deferred Compensation Agreement dated as of May __, 1997 between Aeroflex
Incorporated, a Delaware corporation, with its principal office located at 35
South Service Road, Plainview, NY 11803 (the "Company") and Harvey R. Blau, who
resides at 125 Wheatley Road, Old Westbury, NY 11568 (the "Executive").
WHEREAS, the Company and the Executive entered into an Employment Agreement
dated as of July 1, 1994 (the "Employment Agreement"), pursuant to which the
Executive receives compensation from the Company;
WHEREAS, the Company and the Executive wish to provide that the Executive
may, at his election, defer certain of the compensation payable to Executive
pursuant to the terms of the Employment Agreement.
NOW, THEREFORE, it is agreed as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the meanings provided in the Employment Agreement.
2. DEFERRED COMPENSATION.
(a) Not later than the later of (i) the last day of each Fiscal Year of the
Company prior to a Fiscal Year with respect to which an Annual Bonus is payable
to Executive in accordance with Section 4 of the Employment Agreement and (ii)
five (5) days from the date of this Agreement, Executive may elect in writing to
defer all or any portion of such Annual Bonus for such Fiscal Year, as Executive
desires.
(b) At the same time as the Executive elects to defer compensation under
this Agreement, the Executive shall elect whether such deferred compensation
shall be payable in cash or in the Company's common stock, par value $.10 per
share ("Common Stock"), or a combination thereof. In the event that the
Executive determines that all or a portion of his deferred compensation shall
be paid in Common Stock of the Company, the Common Stock shall be valued at its
Fair Market Value on 31st trading day of the Fiscal Year next succeeding the
Fiscal Year for which such Annual Bonus was deferred (each such 31st day, a
"Valuation Date"). For the purposes of the foregoing, "Fair Market Value" shall
mean the average market price of the Common Stock on the New York Stock
Exchange consolidated reporting system for the 30 consecutive trading days
immediately preceding the applicable Valuation Date. If no sales shall have
been reported on the New York Stock Exchange consolidated reporting system on
such dates, Fair Market Value shall be determined by the Committee in
accordance with the Treasury Regulations applicable to incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended.
<PAGE>
(c) All amounts deferred under this Agreement above shall be one hundred
percent (100%) vested and non-forfeitable at all times. Payments of said
deferred compensation shall begin upon the earliest to occur of (i) the failure
to the stockholders of the Company to approve this Agreement by the affirmative
vote of a majority of such stockholders at the annual or special meeting of the
stockholders next succeeding the date of this Agreement, (ii) termination of
the Executive's employment in accordance with Section 9 of the Employment
Agreement, (iii) in the event of any emergency or necessity as shall be solely
determined by the Board of Directors or (iv) an adverse change of financial
condition of the Company deemed to be perceived inability to pay the amounts
deferred pursuant to this Agreement. Amounts payable to the Executive pursuant
to this Agreement shall be in addition to any amounts payable to the Executive
pursuant to Section 9 of the Employment Agreement.
(d) In order to meet its contingent deferred obligation hereunder, the
Company may (i) each year set aside or earmark funds in an amount equal to the
total cash amount allocated and deferred for such year and (ii) purchase or
otherwise allocate shares of Common Stock in an amount equal to the amount
designated by the Executive pursuant to Section 2(b) hereof.
(e) Funds set aside or earmarked to meet the Company's contingent cash
deferred obligation hereunder may be kept in cash, or invested and reinvested
in the discretion of the Company. To the extent that such funds are kept in
cash, they shall be deemed to accrue interest at the rate of five (5%) percent
per annum.
(f) Investments of funds set aside or earmarked for the Company's
contingent deferred obligation hereunder may be made in stock, bonds or other
securities; provided, however, that except as provided in Section 2(d), no
portion of such funds shall be invested in any securities of the Company.
(g) In the event that amounts become payable in accordance with this
Agreement, (i) to the extent that the Executive has elected that such amounts
shall be paid in cash, said payment shall be in an amount equal to the value,
determined as of the date of such event, of all deferred amounts plus all
amounts earned or deemed earned thereon, and shall be made as soon as feasible
in one lump sum and (ii) to the extent that the Executive has elected that any
such amounts shall be paid in Common Stock, the Company shall deliver to the
Executive the total number of shares of Common Stock determined by dividing the
amount of Annual Bonus which the Executive deferred and elected to have paid in
Common Stock in respect of any Fiscal Year by the Fair Market Value of the
Common Stock on the Valuation Date for each respective Fiscal Year calculated
in accordance with Section 2(b) hereof, and shall be delivered as soon as
feasible after such number of shares of Common Stock have been determined.
(h) Nothing contained herein shall be deemed to create a trust
relationship. Funds invested hereunder shall continue for all purposes to be
part of the general funds of the Company, subject to the claims of creditors of
the Company, and no entity or person other than the Company shall, by virtue of
<PAGE>
the provisions of this Agreement, have any interest in such funds. To the
extent that Executive acquires a right to receive payments from the Company
under this Agreement, such right shall be non-forfeitable and secured to the
full extent that the law will allow.
(i) Subject to the approval of this Agreement by the affirmative vote of a
majority of such stockholders at the annual or special meeting of the
stockholders next succeeding the date of this Agreement, Executive hereby
elects (i) to defer all of the Annual Bonus payable to him in respect of the
Fiscal Year ending June 30, 1998 and (ii) that such deferred compensation shall
be payable to Executive in Common Stock.
3. EFFECT OF AGREEMENT ON OTHER BENEFITS. The existence of this Agreement
shall not prohibit or restrict the Executive's entitlement to participate fully
in the executive compensation, employee benefit and other plans or programs of
the Company in which senior executives are eligible to participate.
4. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors, heirs (in
the case of the Executive) and assigns. No rights or obligations of the Company
under this Agreement may be assigned or transferred by the Company except that
such rights or obligations may be assigned or transferred pursuant to (a) a
merger or consolidation in which the Company is not the continuing entity or (b)
sale or liquidation of all or substantially all of the assets of the Company,
provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
the Employment Agreement and this Agreement, either contractually or as a matter
of law. The Company further agrees that, in the event of a sale of assets or
liquidation as described in the preceding sentence, it will use its best efforts
to cause such assignee or transferee expressly to assume the liabilities,
obligations and duties of the Company hereunder.
5. ENTIRE AGREEMENT. Except to the extent otherwise provided herein, this
Agreement contains the entire understanding and agreement between the Parties
concerning the subject matter hereof and supersedes any prior agreements,
whether written or oral, between the Parties concerning the subject matter
hereof.
6. AMENDMENT OR WAIVER. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by both the Executive
and an authorized officer of the Company other than the Executive. No waiver by
either Party of any breach by the other Party of any condition or provision
contained in this Agreement to be performed by such other Party shall be deemed
a waiver of a similar or dissimilar condition or provision at the same or any
prior or subsequent time. Any waiver must be in writing and signed by the
Executive or an authorized officer of the Company other than the Executive, as
the case may be.
7. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
<PAGE>
8. SURVIVORSHIP. The respective rights and obligations of the Parties
hereunder shall survive any termination of the Executive's employment with the
Company to the extent necessary to the intended preservation of such rights and
obligations as described in this Agreement.
9. BENEFICIARIES/REFERENCES. The Executive shall be entitled to select (and
change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
the Executive's death by giving the Company written notice thereof. In the event
of the Executive's death or of a judicial determination of his incompetence,
reference in this Agreement to the Executive shall be deemed to refer to his
beneficiary, and if the Executive shall not have designated a beneficiary, his
Spouse.
10. GOVERNING LAW/JURISDICTION. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of New York, without
reference to principles of conflict of laws.
11. NOTICES. Any notice given to either Party shall be in writing and shall
be deemed to have been given when delivered either personally, by fax, by
overnight delivery service (such as Federal Express) or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give such notice of.
If to the Company or the Board:
Aeroflex Incorporated
35 South Service Road
Plainview, NY 11803
Attention: Michael Gorin FAX: (516) 694-4823
If to the Executive:
Harvey R. Blau
125 Wheatley Road
Old Westbury, NY 11568
12. HEADINGS. The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
AEROFLEX INCORPORATED
By: /s/ Charles Badlato
Name: Charles Badlato
Title:Treausrer
/s/ Harvey R. Blau
Harvey R. Blau
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made and entered into as of February 5,
1997, between Aeroflex Incorporated, a Delaware corporation, with its principal
office located at 35 South Service Road, Plainview, NY 11803 (together with its
successors and assigns permitted under this Agreement, the "Company"), and Carl
Caruso, who resides at 5 Flamingo Drive, Smithtown, NY 11787 (the "Employee").
W I T N E S S E T H
WHEREAS, the Company has determined that it is in the best interests
of the Company and its shareholders to enter into an employment agreement
setting forth the obligations and duties of both the Company and the Employee
(this "Agreement"); and
WHEREAS, the Company wishes to assure itself of the continued
services of the Employee for the period hereinafter provided, and the Employee
is willing to be employed by the Company for said period, upon the terms and
conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Employee (individually a
"Party" and together the "Parties") agree as follows:
1. DEFINITIONS.
(a) "Base Salary" shall mean the annual salary to which the Employee
is entitled pursuant to Section 3 below.
(b) "Beneficiary" shall mean the person or persons named by the
Employee pursuant to Section 21 below or, in the event that no such person is
named or survives the Employee, his estate.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Bonus" shall mean any bonus to which the Employee is entitled
pursuant to Section 4 below.
(e) "Cause" shall mean:
(i) the Employee's conviction of a felony involving moral
turpitude,
(ii) the Employee's willful gross misconduct in carrying out
his duties under this Agreement, or
(iii) a breach by the Employee of the provisions of Section 9
or Section 10 below.
(f) "Change in Control" shall mean:
(i) a change in control as such term is presently defined in
Regulation 240.12b-2 under the Securities Exchange Act of 1934 ("Exchange Act");
(ii) if during the Term of Employment any "person" (as such term
is used in Section 13(d) and 14(d) of the Exchange Act) other than the Company
or any person who on the date of this Agreement is a director or officer of the
Company, becomes the "beneficial owner" (as defined in Rule 13(d)-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
20% of the voting power of the Company's then outstanding securities; or
<PAGE>
(iii) if during the Term of Employment individuals who at the
beginning of such period constitute the Board cease for any reason other than
death, disability or retirement to constitute at least a majority thereof.
(g) "Compensation Committee" shall mean the Compensation Committee
of the Board.
(h) "Disability" shall mean the illness or other mental or physical
disability of the Employee resulting in his failure to perform substantially his
duties under this Agreement for a period of six or more consecutive months or an
aggregate of nine months in any 12-month period.
(i) "Fiscal Year" shall mean the fiscal year of the Company, which is
the 12-month period beginning each July 1 and ending on the next succeeding June
30.
(j) "Good Reason" shall mean:
(i) reduction in the Employee's Base Salary,
(ii) the loss by the Employee of his position,
(iii) a significant diminution of the Employee's duties or
responsibilities or the assignment to him of duties or responsibilities
inconsistent with his position,
(iv) a material reduction in any plan or program of the Company
in which the Employee participates unless such reduction affects the senior
management of the Company generally, or
(v) the Employee must, in carrying out his duties and
responsibilities under this Agreement, spend significant time outside Long
Island or New York City.
(k) "Spouse" shall mean, during the Term of Employment, the woman who
as of the relevant date is legally married to the Employee.
(l) "Term of Employment" or "Term" shall mean the period specified in
Section 2(b) below.
<PAGE>
2. TERM OF EMPLOYMENT, POSITIONS AND DUTIES.
(a) Employment of Employee. The Company hereby employs the Employee,
and the Employee hereby accepts employment with the Company, in the position and
with the duties and responsibilities set forth below, and upon such other terms
and conditions as are hereinafter stated.
(b) Term of Employment. The Term of Employment shall commence on the
date above written, and shall terminate on the third anniversary subsequent to
said date and, unless either Party gives written notice to the other that it
does not want the Term to continue, the Term of Employment shall thereafter
automatically extend for successive periods of one year.
(c) Title and Duties. Until the date of termination of his employment
hereunder, the Employee shall be employed as an executive officer of the
Company. If the Board so requests, the Employee shall serve as a member of the
board of a subsidiary or affiliate of the Company.
(d) Time and Effort. The Employee agrees to devote his full business
time and attention and his best efforts and abilities to the affairs of the
Company. Nothing shall preclude the Employee from (i) serving on the boards of a
reasonable number of other corporations, trade associations and/or charitable
organizations, (ii) engaging in charitable activities and community affairs or
(iii) managing his personal investments and affairs; provided, however, that
such activities do not materially interfere with the proper performance of his
duties and responsibilities specified in Section 2(c) above.
3. BASE SALARY.
(a) The Employee shall receive from the Company an initial annual
Base Salary, payable in accordance with the regular payroll practices of the
Company, of $180,000. During the Term of Employment, the Compensation Committee
shall review the Base Salary no less often than annually for increase as of each
July 1 beginning with July 1, 1997; provided, however, that increases shall not
be less than the increases in the Consumer Price Index for the New York and
Northeastern New Jersey Region, as published by the United States Department of
Labor, Bureau of Labor Statistics using June 1996 as the basedate, determined
and payable as provided in Section 3(b) below.
(b) The cost-of-living adjustment (COLA) with respect to the
Employee's Base Salary shall be made annually as follows:
The first calculation shall be made on or before August 1, 1997, with
respect to the period January 1, 1997 through June 30, 1997 with a lump-sum
payment for the COLA being made as soon as practicable. The same procedure shall
be followed each year thereafter with respect to the period commencing the July
1 of the preceding year through June 30 of the year in which the calculation is
being made. If the Employee's employment shall terminate during any annual
period referred to in this Section 3(b), then the cost-of-living increment
provided for herein shall be prorated accordingly.
<PAGE>
4. BONUSES.
During the Term of Employment, the Company may pay the Employee
bonuses as determined by the Board.
5. STOCK OPTIONS.
During the Term of Employment, the Employee shall be eligible to
receive stock option grants and similar awards under existing and future plans
or programs of the Company adopted and administered by the Compensation
Committee and approved by shareholders.
6. EXPENSES AND EXPENSE REIMBURSEMENT.
During the Term of Employment, the Employee shall be entitled to
prompt reimbursement by the Company for all reasonable out-of-pocket expenses
incurred by him in performing services under this Agreement, upon his submission
of such accounts and records as may be required by Company policy.
7. EMPLOYEE BENEFIT PLANS AND PROGRAMS.
The Employee shall participate in all employee benefit plans and
programs for which he is eligible and which are made available to the Company's
employees generally, as such plans or programs may be in effect from time to
time, including, without limitation, pension and other retirement plans
(excluding the Company's Supplemental Executive Retirement Plan), profit-sharing
plans, savings and similar plans, group life insurance, accidental death and
dismemberment insurance, travel accident insurance, hospitalization insurance,
surgical insurance, medical insurance, dental insurance, short-term and
long-term disability insurance, sick leave (including salary continuation
arrangements), vacations, holidays and any other employee benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the foregoing types of plans, whether funded or unfunded.
8. TERMINATION OF EMPLOYMENT.
(a) General. Except as otherwise provided in this Agreement, in the
event of termination of the Employee's employment under this Agreement, he, his
dependents or his Beneficiary, as may be the case, shall be entitled to receive
benefits under the Company's employee benefit plans described in Section 7
above, in accordance with the applicable terms and conditions of each plan, and
reimbursement of any business expenses incurred by the Employee but not yet paid
to him.
(b) Termination Due to Death. In the event that the Employee's
employment is terminated due to his death, for each year (and prorated for any
portion of a year) to the end of the Term then in effect, his Beneficiary shall
be entitled to the sum of (A) 50% of the Employee's Base Salary, at the rate in
effect on the date of his death, and (B) any Bonus previously awarded but not
yet paid to him, payable in accordance with the Company's regular payroll
practices.
<PAGE>
(c) Termination Due to Disability. In the event of Disability, the
Company or the Employee may terminate the Employee's employment. If the
Employee's employment is terminated due to Disability, he shall be entitled to
the benefits described in 8(b) above.
(d) Termination by the Company for Cause. In the event that the
Employee's employment is terminated for Cause, he shall be entitled to:
(i) his Base Salary through the date of termination of his
employment for Cause, and
(ii) any Bonus awarded but not yet paid to him.
The Employee shall be permitted to respond and defend himself before
the Board or a committee thereof within a reasonable time after written
notification of any proposed termination of his employment for Cause under
clauses (ii) and (iii) of Section 1(e) above.
(e) Termination Without Cause.
(i) Termination Without Cause shall mean:
(A) termination of the Employee's employment by the
Company other than due to death or Disability or for Cause, or
(B) termination by the Employee for Good Reason.
(ii) The Employee may not terminate his employment for Good
Reason unless:
(A) he has delivered a written notice to the Board within 12
months of his having actual knowledge of one of the events, described in Section
1(j) above, providing a basis for Good Reason, stating which one of those events
has occurred;
(B) within 30 days of the delivery of the notice, the
Company has not remedied such event and provided him with a written notice of
such remedy, and
(C) in the event the Company has not remedied such event as
provided in clause (B) above, the Employee notifies the Company in writing that
he is terminating his employment. The failure of the Employee to terminate for
Good Reason as to any one event described in Section 1(j) above shall not affect
his entitlement to terminate for Good Reason as to any other such event.
(iii) In the event of Termination Without Cause, the Employee
shall be entitled to receive any Bonus awarded but not yet paid to him, and, for
the remainder of the Term of Employment at the time of termination:
(A) Base Salary at the rate in effect on the date of his
termination, and
<PAGE>
(B) benefits under any employee benefit plans of the Company
in which he participated or, as to any plans in which his continued
participation is precluded, the after-tax cost to the Employee of equivalent
benefits.
(f) Termination Following Change in Control. In the event there shall
be a Change in Control of the Company or of any person directly or indirectly
presently controlling the Company, the Employee may, within six months of his
becoming aware of such event, terminate his employment with the Company. Upon
such termination, the Employee shall receive immediately in a lump sum the
benefit described in Section 8(e) above but in no event an amount greater than
is deductible under Section 280G of the Internal Revenue Code of 1986, as
amended, such amount to be determined by the Company's independent auditors.
(g) Voluntary Termination by the Employee. The Employee shall have
the right, upon 90 days' written notice to the Company, voluntarily to terminate
his employment, in which event the Employee's entitlements shall be the same as
if he had been terminated by the Company for Cause, as provided in Section 8(d)
above.
(h) No Mitigation; No Offset. In the event of termination of the
Employee's employment under this Section 8, he shall be under no obligation to
seek other employment or to offset or repay any amounts that he receives under
this Agreement by any payments that he receives from a subsequent employer.
(i) Nature of Payments. Any amounts due under this Section 8 are in
the nature of severance payments or liquidated damages or both, and shall fully
compensate the Employee and his dependents or Beneficiary, as the case may be,
for any and all direct damages and consequential damages that any of them may
suffer as a result of termination of the Employee's employment, and they are not
in the nature of a penalty.
9. CONFIDENTIAL INFORMATION.
(a) The Employee understands and hereby acknowledges that as a result
of his employment with the Company he will necessarily become informed of and
have access to certain valuable and confidential information of the Company and
any of its subsidiaries, joint ventures or affiliates, including without
limitation inventions, trade secrets, technical information, know-how, plans,
specifications, and identity of customers and suppliers, and that such
information even though it may be developed or otherwise acquired by the
Employee is the exclusive property of the Company to be held by the Employee in
trust and solely for the Company's benefit. Accordingly, the Employee hereby
agrees that he shall not at any time either during or subsequent to his
employment hereunder use, reveal, report, publish, transfer or otherwise
disclose to any person, corporation or other entity any of the Company's
confidential information without the prior written consent of the Company,
except to responsible officers and employees of the Company and other
responsible persons who are in a contractual or fiduciary relationship with the
Company or who have a need for such information for purposes in the interest of
the Company and except for such information that legally and legitimately is or
becomes of general public knowledge from authorized sources other than the
Employee.
<PAGE>
(b) Upon the termination of his employment with the Company for any
reason whatsoever, the Employee shall promptly deliver to the Company all
drawings, manuals, letters, notes, notebooks, reports and copies thereof and all
other materials including without limitation those of a secret or confidential
nature relating to the Company's business that are in the Employee's possession
or control.
10. COVENANT NOT TO COMPETE.
The Employee agrees that during the Term and for a period of two (2)
years after termination of his employment with the Company for any reason, he
shall not, within 50 miles of any location at which the Company, at the time of
his termination of employment, is conducting its business (or in such smaller
area or for such lesser period as may be determined by a court of competent
jurisdiction to be a reasonable limitation on the competitive activity of the
Employee), directly or indirectly:
(a) engage in a competitive line of business to that carried on by
the Company either for his own account or with or for anyone else,
(b) solicit or attempt to solicit business of any customers of the
Company or products or services the same or similar to those offered, sold,
produced or under development by the Company,
(c) otherwise divert or attempt to divert from the Company any
business whatsoever,
(d) solicit or attempt to solicit for any business endeavor any
employee of the Company,
(e) interfere with any business relationship between the Company
and any other person, or
(f) render any services as an officer, director, employee, partner,
consultant or otherwise to, or have any interest as a stockholder, partner,
lender or otherwise in, any person that is so engaged.
Notwithstanding anything to the contrary in this Section 10, the
provisions hereof shall not prevent the Employee from purchasing or owning up to
5% of the voting securities of any corporation the stock of which is publicly
traded.
11. INJUNCTIVE RELIEF.
The Parties specifically agree that any breach of any of the
provisions of Section 9 or Section 10 above shall constitute a material breach
of this Agreement. In the event of a breach or threatened breach by the Employee
of any of the provisions of Section 9 or Section 10 of this Agreement, the
Company shall be entitled to pursue any remedies available to the Company at law
or in equity, including, but not limited to, injunctive relief.
<PAGE>
12. WITHHOLDING TAXES.
All payments to the Employee or his Beneficiary shall be subject to
withholding on account of federal, state and local taxes as required by law. If
any payment hereunder is insufficient to provide the amount of such taxes
required to be withheld, the Company may withhold such taxes from any other
payment due the Employee or his Beneficiary. In the event that all cash payments
due the Employee are insufficient to provide the required amount of such
withholding taxes, the Employee or his Beneficiary, within five (5) days after
written notice from the Company, shall pay to the Company the amount of such
withholding taxes in excess of all cash payments due the Employee or his
Beneficiary.
13. INDEMNIFICATION.
The Company agrees to indemnify the Employee to the fullest extent
permitted by applicable law consistent with the Company's Certificate of
Incorporation and By-Laws as in effect on the effective date of this Agreement
with respect to any action or failure to act on his part while he was an
officer, director and/or employee (a) of the Company or any subsidiary thereof
or (b) of any other entity if his service with such entity was at the request of
the Company. This provision shall survive the termination of this Agreement.
14. EFFECT OF AGREEMENT ON OTHER BENEFITS.
The existence of this Agreement shall not prohibit or restrict the
Employee's entitlement to participate fully in the Employee compensation,
employee benefit and other plans or programs of the Company in which senior
Employees are eligible to participate.
15. ASSIGNABILITY; BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Employee) and
assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to (a) a merger or consolidation in
which the Company is not the continuing entity or (b) sale or liquidation of all
or substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company, as contained in this Agreement, either contractually or
as a matter of law. The Company further agrees that, in the event of a sale of
assets or liquidation as described in the preceding sentence, it will use its
best efforts to cause such assignee or transferee expressly to assume the
liabilities, obligations and duties of the Company hereunder. No obligations of
the Employee under this Agreement may be assigned or transferred by the
Employee.
16. REPRESENTATIONS.
The Parties respectively represent and warrant that each is fully
authorized and empowered to enter into this Agreement and that the performance
of its or his, as the case may be, obligations under this Agreement will not
violate any agreement between such Party and any other person, firm or
organization.
<PAGE>
17. ENTIRE AGREEMENT.
Except to the extent otherwise provided herein, this Agreement
contains the entire understanding and agreement between the Parties concerning
the subject matter hereof and supersedes any prior agreements, whether written
or oral, between the Parties concerning the subject matter hereof.
18. AMENDMENT OR WAIVER.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by both the Employee and an authorized
officer of the Company other than the Employee. No waiver by either Party of any
breach by the other Party of any condition or provision contained in this
Agreement to be performed by such other Party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Employee or an
authorized officer of the Company other than the Employee, as the case may be.
19. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
20. SURVIVORSHIP.
The respective rights and obligations of the Parties hereunder shall
survive any termination of the Employee's employment with the Company to the
extent necessary to the intended preservation of such rights and obligations as
described in this Agreement.
21. BENEFICIARIES/REFERENCES.
The Employee shall be entitled to select (and change, to the extent
permitted under any applicable law) a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Employee's death by
giving the Company written notice thereof. In the event of the Employee's death
or of a judicial determination of his incompetence, reference in this Agreement
to the Employee shall be deemed to refer to his beneficiary, and if the Employee
shall not have designated a beneficiary, his Spouse.
22. GOVERNING LAW/JURISDICTION.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of New York, without reference to principles of
conflict of laws.
<PAGE>
23. RESOLUTION OF DISPUTES.
(a) Arbitration/Litigation. Any disputes arising under or in
connection with this Agreement shall be resolved, in the Employee's discretion,
either:
(i) by arbitration, to be held in New York City, in accordance
with the commercial rules and procedures of the American Arbitration
Association, or
(ii) by litigation; provided, however, that the venue of such
litigation shall be in the state of New York.
(b) Costs. All costs, fees and expenses, including attorneys' fees,
of any arbitration or litigation in connection with this Agreement, including,
without limitation, attorney's fees of both the Employee and the Company, shall
be borne by, and be the obligation of, the Company unless the Company shall
substantially prevail, in which event the Employee shall be required to pay the
costs and expenses incurred by him relating to such arbitration or litigation.
The obligation of the Company under this Section 23 shall survive the
termination for any reason of this Agreement (whether such termination is by the
Company, by the Employee, upon the expiration of this Agreement or otherwise).
(c) Continuation of Payments. Pending the outcome or resolution of
any arbitration or litigation, the Company shall continue payment of all amounts
due the Employee under this Agreement without regard to any dispute.
24. NOTICES.
Any notice given to either Party shall be in writing and shall be
deemed to have been given when delivered either personally, by fax, by overnight
delivery service (such as Federal Express) or sent by certified or registered
mail, postage prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of.
If to the Company or the Board:
Aeroflex Incorporated
35 South Service Road
Plainview, NY 11803
Attention: Michael Gorin
FAX: (516) 694-4823
If to the Employee:
Carl Caruso
5 Flamingo Drive
Smithtown, NY 11787
(516) 724-1810
<PAGE>
25. HEADINGS.
The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
26. COUNTERPARTS.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.
Aeroflex Incorporated
Attest:/s/ Francesca Barilla By: /s/ Charles Badlato
/s/ Carl Caruso
Carl Caruso
