EXHIBIT 10.2.10
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is entered into as of
[_______], 2000 (the "Effective Date") by and between CONDOR SYSTEMS, INC., a
California corporation (the "Company"), and KENT E. HUTCHINSON (the "Employee").
WHEREAS, the Company wishes to assure that it will have the benefit of
the knowledge and experience of Employee on a full-time basis and Employee is
willing and able to provide such knowledge and experience; and
WHEREAS, Employee is willing to enter into an agreement to such end
upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts such employment with the Company, upon the terms and
conditions hereinafter set forth.
2. Term of Employment. Unless earlier terminated as provided in
Section 5, the Employee shall be employed by the Company under this Agreement
commencing on the Effective Date and ending on the third anniversary of the
Effective Date (the "Employment Period"). On the third and each succeeding
anniversary of the Effective Date, the Employment Period shall automatically be
extended for one additional year unless, not later than 30 days prior to such
anniversary, the Employee or the Company shall have given notice of his or its
intention not to extend the Employment Period. This Agreement will have no force
and effect until or unless the stockholders of the Company shall have approved
this Agreement pursuant to Section 8 of this Agreement.
3. Title and Duties.
(a) Employee shall have the titles and positions of Chairman
of the Board of Directors of the Company (the "Board"), President and
Chief Executive Officer of the Company.
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(b) In his capacities as Chairman of the Board, President and
Chief Executive Officer, Employee shall report to and be responsible to
the Board. Employee's duties and responsibilities shall be as specified
and delegated by the Board, but, in general, the Employee shall have
such authority and such responsibilities as are consistent with the
authority and responsibilities of a Chairman of the Board, President
and Chief Executive Officer of a corporation in a similar business and
industry.
(c) Throughout the Employment Period, the Employee shall
devote substantially all of his time, energy, skill and best efforts to
the performance of his duties hereunder in a manner which will
faithfully and diligently further the business and interests of the
Company. Subject to the preceding sentence, the Employee may serve, or
continue to serve, on the boards of directors of other entities and may
engage in appropriate civic or charitable activities as long as such
activities do not interfere or conflict with the performance of the
Employee's duties pursuant to this Agreement and his responsibilities
to the Company under this Agreement, and provided that any board of
directors position is disclosed to the Board in writing at least 10
days in advance of Employee's election to such board of directors
position. The Employee agrees to abide by the reasonable rules,
regulations, instructions, personnel practices and policies of the
Company and any reasonable changes in the foregoing which may be
adopted from time to time by the Company.
4. Compensation.
(a) Base Salary. The Company shall pay the Employee as
compensation a salary at the beginning rate of $350,000 per year (the
"Base Salary"), payable in accordance with the ordinary compensation
practices of the Company. The Compensation Committee of the Board shall
annually review the Base Salary for possible increase, in its sole
discretion; provided that the Base Salary shall never be decreased
after such an annual review.
(b) Bonus
(i) Employee shall be eligible to receive an annual
bonus (the "Bonus") of up to 200% of Base Salary for each
calendar year in accordance with the following:
(A) If EBITDA, as hereunder defined, for any
calendar year is less than the Floor EBITDA for such
year, the Company will pay the Employee no bonus.
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(B) If EBITDA for any calendar year is equal
to the Target EBITDA for such year, the Company shall
pay the Employee a bonus of 100% of the actual Base
Salary paid to the Employee during such calendar
year;
(C) If EBITDA for any calendar year is equal
to or greater than the Ceiling EBITDA for such year,
the Company shall pay the Employee an additional 100%
of the actual Base Salary (for a total of 200% of the
actual Base Salary) paid to the Employee during such
calendar year;
(D) If EBITDA for any calendar year is
greater than the Floor EBITDA for such year but is
less than the Target EBITDA for such year, the
Company will pay the Employee a bonus calculated by
linear interpolation, as described in Attachment I.
If EBITDA for any calendar year is greater than the
Target EBITDA for such year but is less than the
Ceiling EBITDA for such year, the Company will pay
the Employee a bonus calculated by linear
interpolation, as described in Attachment I;
(ii) Definitions. for purposes of this Section 4:
(A) "EBITDA" means, for each calendar year,
the EBITDA number achieved by the Company, as
determined annually for purposes of this Agreement by
the Compensation Committee of the Board.
(B) "Floor EBITDA" means, for any applicable
calendar year, a projected EBITDA established
annually for purposes of this Agreement by the
Compensation Committee of the Board, together with
the Employee; provided that the 2000 Floor EBITDA
shall be $16,100,000.
(C) "Target EBITDA" means, for any
applicable calendar year, a projected EBITDA
established annually for purposes of this Agreement
by the Compensation Committee of the Board, together
with the Employee; provided that the 2000 Target
EBITDA shall be $17,600,000.
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(D) "Ceiling EBITDA" means, for any
applicable calendar year, a projected EBITDA
established annually for purposes of this Agreement
by the Compensation Committee of the Board, together
with the Employee; provided that the 2000 Ceiling
EBITDA shall be $18,700,000.
(c) Reimbursement of Expenses. The Company shall pay or
reimburse the Employee for all reasonable travel and other expenses
(including country club membership annual fees) incurred by the
Employee in the performance of his obligations under this Agreement,
provided that the Employee properly accounts for such expenses in
accordance with the policies and procedures of the Company.
(d) Vacation. The Employee shall be entitled to a number of
paid vacation days in each calendar year as determined by the Company
from time to time for its employees in accordance with Company policy
(prorated for any calendar year in which the Employee is employed under
this Agreement for less than the entire year).
(e) Fringe Benefits and Perquisites. The Company, at its
expense, shall provide the Employee with: (i) a term life insurance
policy in the amount of $2 million for the benefit of such beneficiary
or beneficiaries as may be designated from time to time by the
Employee, (ii) a split-dollar life insurance policy to be owned by the
Employee in the amount of $1 million on terms comparable to those of
Employee's existing policy as of the date of this Agreement, (iii)
group life insurance at the levels commensurate with the Employee's
position in the Company but no less than the level of benefits existing
on the date of this Agreement, (iv) medical and dental insurance at the
levels commensurate with the Employee's position in the Company but no
less than the level of benefits existing on the date of this Agreement
and of a kind not materially different from that provided by Employee's
most recent previous employer, and (v) disability insurance, provided
that the aggregate annual premium for such insurance is not in excess
of $25,000. In addition, the Employee shall be eligible during the
Employment Period (x) to receive an automobile allowance in the amount
of $1,250 per month or to obtain a leased car of the Employee's choice
(at his option), and (y) to participate in and receive benefits under
any other plan or arrangement made available by the Company to its
employees, consistent with past practice, except for the Company's ESOP
and other stock-based plans, subject to and on a basis consistent with
the terms, conditions and overall administration of such plans and
arrangements.
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(f) Relocation Expenses. The Company will pay all costs
associated with the relocation of the Employee to a location within
reasonable proximity of the Company's current location at 2133
Samaritan Drive, San Jose, CA in accordance with the following:
(i) The Company will reimburse Employee for all
reasonable costs associated with the sale of his current home
located at 17 Cobtail Way, Simsbury, CT.
(ii) The Company will reimburse Employee for all
reasonable moving and/or storage of goods costs associated
with his move from his current home to a location within
reasonable proximity of the Company's present office. The
Company will similarly reimburse Joan Hutchinson for all
reasonable moving and/or storage of goods costs associated
with this move.
(iii) The Company will pay to Employee an amount or
amounts sufficient to provide Employee with reasonable
temporary living expenses for Employee and his family in
connection with Employee's relocation to an area within
reasonable proximity of the Company's current office.
(iv) If the sale of Employee's current home located at
17 Cobtail Way, Simsbury, CT does not yield a minimum sale
price of $1.3 million, the Company will pay to Employee the
difference between the final sale price and $1.3 million.
(v) To the extent that the Company is financially
able to do so, the Company will provide to the Employee the
opportunity to receive an interest-free bridge loan (if so
required and requested by the Employee) to assist in his
financing a bid for the purchase of a new home in an area
within reasonable proximity of the Company's current office.
(vi) Upon request by Employee, the Company will
provide to the Employee a current statement of earnings,
including any anticipated bonus, if such information is
necessary for Employee's home mortgage application.
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(vii) The Company will pay to Employee, in addition to
all relocation payments otherwise required pursuant to this
Section 4(f) , an amount such that after payment by Employee
of all of Employee's applicable federal, state and local taxes
on such additional amount, Employee will retain an amount
sufficient to pay the total of Employee's applicable federal,
state and local taxes arising due to the payments under this
Section 4(f).
(g) Stock Awards. Subject to the approval of the Board, on the
Effective Date, Employee will be granted 1,020,000 Performance Options
and 510,000 Super Performance Options. Employee shall also be eligible
to receive additional equity-based incentive awards as may be approved
by the Board from time to time.
(h) The Company will use reasonable efforts to structure, if
financially practicable, a portion of Employee's cash compensation
awarded under Section 4(a) and Section 4(b) of this Agreement as a
non-qualified deferred compensation arrangement so as to replace any
post-retirement benefit which the Employee has forfeited or lost under
his prior employer's applicable benefit programs by reason of his
ceasing to be an employee of such prior employer.
(i) Withholding. All payments under this Agreement shall be
subject to withholding for applicable taxes.
5. Termination. The Employee's employment by the Company shall be
terminated upon the occurrence of any of the following:
(a) By Employee Without Cause. The Employee may terminate his
employment under this Agreement upon at least 120 days' prior notice to
the Board of the Company. Upon termination of his employment and upon
experiencing a "qualifying event", as defined in Section 4980B(f)(3) of
the Internal Revenue Code of 1986, as amended, COBRA coverage shall be
made available to the Employee in compliance with federal law.
(b) By Employee for Good Reason. The Employee may terminate
his employment under this Agreement after the Effective Date, upon at
least 30 days' prior notice to the Board of the Company, for Good
Reason. For purposes of this Agreement, "Good Reason" shall mean the
occurrence of the following:
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(i) the occurrence of a "Change in Control." For
purposes of this Agreement, a "Change in Control" shall mean
the occurrence of (x) the consolidation, reorganization or
merger of the Company with or into another corporation or
corporations or other legal entitie(s) not controlled by any
entity that is an affiliate of the Company immediately
following the Effective Date, or (y) the conveyance of all or
substantially all of the stock or assets of the Company to
another person or entity not controlled by any entity that is
an affiliate of the Company immediately following the
Effective Date; provided that a Change in Control shall not be
deemed to occur upon the occurrence of an initial public
offering of the Company's capital stock ("IPO"); or
(ii) the Employee's duties, authority or
responsibilities as Chairman of the Board, President and Chief
Executive Officer, whether managerial or supervisory, are
materially diminished without the prior consent of the
Employee.
(c) By the Company for Cause. The Company may terminate the
Employee's employment for Cause. "Cause" for purposes of this Agreement
shall mean Employee's (i) personal dishonesty; (ii) willful misconduct;
(iii) breach of fiduciary duty involving personal profit; (iv)
intentional failure to perform designated duties or willful refusal to
implement decisions of the Board made in good faith; (v) willful
violation, for personal financial gain, of any law, rule or regulation;
or (vi) material breach of any provision of this Agreement; provided,
however, that prior to any proposed Board action pursuant to
subparagraph (iv) the Board shall give the Employee reasonable
opportunity to respond and, if appropriate, to otherwise perform as
directed.
The Employee's right to compensation and other benefits from the
Company under this Agreement shall cease upon the Company's terminating the
Employee's employment under this Agreement for Cause. The provisions of this
Section 5(c) shall take precedence over the provisions of Section 5(a)
notwithstanding any prior notice by the Employee to the Company under Section
5(a).
(d) By the Company Without Cause. The Company may terminate
the Employee's employment under this Agreement without Cause therefor
at any time.
6. Severance Pay
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(a) In the event that the Employee's employment under this
Agreement is terminated pursuant to the provisions of Section 5(b) or
5(d), or if the employee's Employment Period is not renewed by the
Company pursuant to Section 2, as severance pay the Employee shall be
paid the greater of (i) 200% of (A) the Employee's then-current Base
Salary plus (B) the Employee's most recently paid bonus at the date of
Employee's termination and (ii) $1,400,000. Such severance pay shall be
paid in a lump sum to an escrow account at a bank designated by the
Company, and thereafter shall be paid to the Employee in eight equal
installments on the last business day of each of the eight fiscal
quarters following the quarter during which Employee's employment is
terminated, beginning with such fiscal quarter; provided that the
escrow agreement will provide that all payments of Employee's severance
pay will cease if Employee breaches any of the provisions of Section 7
of this Agreement. Employee shall also be entitled to continued
eligibility to participate in all health, medical and dental benefit
plans of the Company for which Employee was eligible immediately prior
to the effective time of the termination of Employee's employment, or
comparable coverage, for two years, or, if sooner, until comparable
health insurance coverage is available to Employee in connection with
subsequent employment or self-employment. In addition, the termination
of the Employee's employment shall not accelerate the vesting of
unvested Options or Stock Appreciation Rights (as such terms are
defined in the 1999 Management Incentive Plan) held by the Employee (if
any).
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(b) In the event that the Employee's employment under this
Agreement is terminated upon the death or disability of the Employee,
then the Employee will not be entitled to the severance benefits set
forth in Section 6(a); however, the Company will pay to the Employee or
the Employee's spouse (if she is then living) the Employee's
then-current Base Salary in accordance with the Company's normal pay
practices until the earlier of (i) the end of the sixth calendar month
following Employee's termination of active service, or (ii) such time
as the Employee's spouse (or a trust for her benefit) has received
proceeds from the insurance policy described in Section 4(e)(i). Any
Base Salary paid after the death or disability of the Employee pursuant
to clause (i) above shall be repaid to the Company upon the receipt of
the insurance proceeds described in clause (ii) by the Employee's
spouse (or by a trust for her benefit). The Company shall also pay to
Employee or Employee's spouse the pro rata portion of Employee's bonus
for the year during which the death or disability of the employee
occurs which payment shall not be subject to repayment. As of the date
of the death or disability of Employee, all benefits for the Employee
pursuant to section 4(c), (d) and (e) of this Agreement shall cease.
Options and Stock Appreciation Rights held by the Employee (if any)
shall expire on the dates upon which such Option and Stock Appreciation
Rights would have expired had it not been for the termination of
Employee's employment or service. The Employee shall have the right to
exercise such Options and Stock Appreciation Rights prior to such
expiration to the extent such were exercisable at the date of such
termination of employment or service and shall not have been exercised.
In addition, the termination of the Employee's employment shall not
accelerate the vesting of any unvested Options or Stock Appreciation
Rights held by the Employee (if any).
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(c) If the Employee terminates his employment pursuant to
Section 5(a) and continues to provide services to the Company, or if
the Employee's employment under this Agreement is terminated pursuant
to Section 5(c), the Company shall continue to pay the Employee his
then-current Base Salary in equal monthly installments until the
termination of his active service with the Company if the Employee
resigns pursuant to Section 5(a), or until the date of his termination
if the Employee's employment is terminated pursuant to Section 5(c). As
of the effective date of Employee's termination pursuant to Section
5(a) or Section 5(c), Employee shall be entitled to no bonus or
benefits pursuant to this Agreement, and the Employee's right to
exercise an Option or a Stock Appreciation Right (if any) shall
terminate, and such Option or Stock Appreciation Right shall expire, on
the day of such termination of employment or service. In addition, the
Company or its designee shall have the right to purchase all or a
portion of the vested Options and/or Shares (as defined in the 1999
Management Incentive Plan) acquired upon the exercise of Options (if
any) by the Employee at a per share price equal to the lower of (i) the
price paid by Employee for such Shares which have been issued or which
are issuable under vested but unexercised Options and (ii) the fair
market value (as determined in accordance with Section 2.07 of the
Investors Agreement dated as of April 1999 by and between the Company
and the several Shareholders (as defined therein) from time to time
parties thereto) of such Shares which have been issued or which are
issuable under vested but unexercised Options on the date of purchase,
less the exercise price in the case of vested Options. The Company or
its designee shall also have the right to purchase all or a portion of
any other Shares previously purchased by the Employee (if any), at a
per share price equal to the fair market value (as determined in
accordance with Section 2.07 of the Investors Agreement dated as of
April 1999 by and between the Company and the several Shareholders (as
defined therein) from time to time parties thereto) of the Shares on
the date of purchase by the Company. If the Company elects to exercise
its right under this Section 6(c), the Company shall deliver written
notice (a "Purchase Notice") to the Employee to such effect within 30
days of a termination of Employee's employment. For purposes of this
Section 6(c), the "date of purchase" shall mean the third business day
following the receipt of notice by the Employee that the purchase right
is to be exercised. Payment of the purchase price may be made in cash
or by certified check; provided that if the terms of any agreement to
which the Company is a party, or any of the indentures governing any
debt securities issued by the Company or any of its subsidiaries would
prohibit the Company from effecting such payment, payment may be
effected through a promissory note having such commercially reasonable
terms and interest rate as may be determined by the Company it is
reasonable discretion, provided that in any event such note shall
become due at such time as the prohibitions described above shall
lapse.
(d) The provisions of this Section 6 and Section 7 of this
Agreement shall survive any termination of this Agreement.
7. Non-Competition and Non-Solicitation
(a) Subject to Section 7(b) below, in consideration of his
employment hereunder and in view of the confidential position to be
held by the Employee hereunder, during the Employment Period and
through the two-year period commencing on the effective date of the
termination of Employee's employment hereunder, the Employee shall not,
directly or indirectly, be employed by, or act as a consultant or
lender to or in association with, or as a director, officer, employee,
partner, owner, joint venturer, member or otherwise of any person,
firm, corporation, partnership, limited liability company, association
or other entity that engages in the same business as, or competes with,
any business actually conducted by the Company or any or its
subsidiaries (other than beneficial ownership of up to 2% of the
outstanding voting stock of a publicly traded company that is or owns
such a competitor);
(b) In the event that the employee is terminated by the
Company for Cause or resigns without Good Reason, during the Employment
Period and through the one-year period commencing on the effective date
of the termination of Employee's employment hereunder, the Employee
shall not, directly or indirectly, be employed by, or act as a
consultant or lender to or in association with, or as a director,
officer, employee, partner, owner, joint venturer, member or otherwise
of any person, firm, corporation, partnership, limited liability
company, association or other entity that engages in the same business
as, or competes with, any business actually conducted by the Company or
any of its subsidiaries (other than beneficial ownership of up to 2% of
the outstanding voting stock of a publicly traded company that is or
owns such a competitor);
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(c) In consideration of his employment hereunder and in view
of the confidential position to be held by the Employee hereunder,
during the Employment Period and through the one-year period commencing
on the effective date of the termination of Employee's employment
hereunder, the Employee will not (i) induce or attempt to induce any
employee of the Company or any of its subsidiaries to leave the employ
of the Company or such subsidiary, or in any way interfere with the
relationship between the Company or any of it subsidiaries and any
employee thereof, (ii) hire directly or indirectly any person who is
then an employee of the Company or any of its subsidiaries, or (iii)
induce or attempt to induce any customer, supplier, licensee or other
business relation of the Company or any of its subsidiaries to cease
doing business with the Company or such subsidiary, or in any way
interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or such subsidiary;
provided, however, that the Employee will cease to be bound by this
Section 7(c) on the six-month anniversary of the effective date of the
termination of Employee's employment hereunder if his employment is
terminated without Cause;
(d) The Employee expressly agrees that the character, duration
and geographic scope of the provisions of this Section 7 are reasonable
in light of the circumstances as they exist on the date hereof. If any
competent court shall determine that the character, duration or
geographic scope of such provisions is unreasonable, then it is the
intention and the agreement of the Employee and the Company that this
Agreement shall be construed by the court in such a manner as to impose
only those restrictions on the Employee's conduct that are reasonable
in the light of the circumstances and that are necessary to assure to
the Company the benefits of this Section 7. The Employee agrees that
any breach of this Section 7 will cause the Company substantial and
irrevocable damage and therefore in the event of any such breach, in
addition to all other remedies which may be available, the Company
shall have the right to seek specific performance and injunctive
relief.
8. Stockholder Approval. This Agreement shall be effective upon
submission to and approval by stockholders of the Company holding more than 75%
of the voting power of all outstanding common stock of the Company. In
connection with such submission and approval, the Company represents that it has
provided each stockholder with the disclosure required by Treasury Regulation
Section 1.280G-1-Q&A 7(d).
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9. Entire Agreement; Amendments. This Agreement (upon its
effectiveness), together with option and other agreements relating to stock of
the Company entered into substantially contemporaneously herewith (if any),
contain the entire understanding of the parties with respect to the matters set
out herein, merging and superseding all prior and contemporaneous agreements and
understandings between the parties with respect to such matters. This Agreement
may be amended only by a written instrument duly executed by all parties or
their respective heirs, successors, assigns or legal personal representatives.
10. No Conflicts; No Assignments.
(a) Employee represents and warrants to the Company that he is
not as of the date of this Agreement, and will not become during the
Employment Period, a party to any oral or written contract that
prohibits, or materially restricts or limits, or will prohibit or
materially restrict or limit the performance of his duties or the
fulfillment of his obligations as an employee and an officer of the
Company or under this Agreement.
(b) The Employee acknowledges that the services to be rendered
by him are unique and personal and, accordingly, that he shall not
assign any of his rights or delegate any of his duties or obligations
under this Agreement.
11. Waiver of Breach. Either party may, by written notice to the
other: (i) extend the time for the performance of any of the obligations or
other actions of the other, (ii) waive compliance with any of the covenants of
the other contained in this Agreement, and (iii) waive or modify performance of
any of the obligations of the other. However, mere forbearance or indulgence by
either party in any regard whatsoever shall not constitute a waiver of the
covenant or condition to be performed by the other party to which the same may
apply and, until complete performance of said covenant or condition, said party
shall be entitled to invoke any remedy available under this Agreement or by law
or in equity despite said forbearance or indulgence.
12. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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13. Arbitration; Governing Law. To the fullest extent permitted by
law, any dispute, claim or controversy of any kind including but not limited to,
tort, contract and statute arising under, in connection with or related to this
Agreement shall be resolved exclusively by binding arbitration in the State of
New York, in accordance with the rules of the American Arbitration Association.
The Company and the Employee hereby waive any objection to personal jurisdiction
or venue in any forum located in the State of New York. No claim, lawsuit or
action of any kind may be filed by either party to this Agreement; arbitration
is the exclusive dispute resolution mechanism between the parties. Judgment may
be entered on the arbitrator's award in any court of relevant jurisdiction. This
agreement shall be governed by and construed in accordance with the laws of the
State of New York as such laws are applied to agreements entered into and to be
performed entirely within New York by New York residents.
14. Severability. In the event that any provision of this Agreement,
or the application thereof to any person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect in
any jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement in that jurisdiction or the
application of that provision to any other person or circumstance or in any
other jurisdiction, and this agreement shall then be construed in that
jurisdiction as if such invalid, illegal or unenforceable provision had not been
contained in this Agreement, but only to the extent of such invalidity,
illegality or unenforceability.
15. Further Assurances. Each party shall perform such further acts
and execute and deliver such further documents as may be reasonably necessary to
carry out the provisions of this Agreement.
16. Enforcement. In the event either party hereto fails to perform any
of its obligations under this Agreement or in the event a dispute arises
concerning the meaning or interpretation of any provision of this Agreement, the
defaulting party or the party not prevailing in such dispute as the case may be,
shall pay the reasonable costs and expenses incurred by the other party in
enforcing or establishing its rights hereunder, including without limitation,
court costs and reasonable attorney's fees.
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IN WITNESS WHEREOF, the Company and the Employee have duly executed and
delivered this Employment Agreement as of the day and year first above written.
CONDOR SYSTEMS, INC.
By:_______________________
Title:
EMPLOYEE:
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Kent E. Hutchinson
