Exhibit 10.3
AMENDMENT NO. 6 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 6 TO THE EMPLOYMENT AGREEMENT (this "Amendment") made as of
the 21st day of November, 2006 by and between AEROFLEX INCORPORATED, a Delaware
corporation (hereinafter the "Company") and LEONARD BOROW (hereinafter the
"Executive").
WITNESSETH:
WHEREAS, the Company and Executive entered into an Employment Agreement
dated March 1, 1999, as amended subsequently by Amendment Agreements dated
September 1, 1999 and August 13, 2001, November 8, 2001, May 13, 2004 and August
17, 2005 (hereinafter the "Employment Agreement"); and
WHEREAS, the Company and Executive desire to further modify the said
Employment Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 1(l) shall be amended and restated in its entirety to read as
follows, effective as of the date hereof:
"(l) `Retirement' shall mean the voluntary termination of Borow's
employment by Borow with eligibility to receive a benefit under
the terms of Aeroflex's Supplemental Executive Retirement Plan as
then in effect, other than a termination due to Disability or
death, or for Good Reason."
2. A new sentence shall be added at the end of Section 9(b), which shall
read in its entirety as follows, effective as of the date hereof:
"Notwithstanding the foregoing, if, in the mutual good faith
determination and agreement of Borow and Aeroflex, such
lifetime benefits may not be provided without subjecting Borow
to any tax, interest or penalty imposed under Section
409A(a)(1)(B) of the Code (or any regulation or any guidance
promulgated thereunder or with respect to), then on the second
anniversary of the later of (a) a termination of employment or
(b) a termination of the Consultancy Period, in lieu of such
lifetime benefits, Borow shall receive a lump sum payment
equal to the discounted net present value (as of the date of
such payment in good faith and agreed to by Borow and
Aeroflex) of such lifetime benefits Borow and his Spouse would
otherwise have been entitled to receive under this Section.
The interest rate used to determine the present value of any
such payment shall be the mid-term Applicable Federal Rate
1
compounded semi-annually for the month in which such payment
occurs.
Notwithstanding any other provisions of the Agreement to the
contrary, if Borow has received a lump sum payment of his and
his Spouse's lifetime retiree medical benefits under either
Section 10(g)(ii)(C) or Section 10(h)(iii), Aeroflex shall no
longer be responsible for the provision of such benefits under
this Section 9(b)."
3. Section10(g)(ii)(B) shall be amended and restated in its entirety to
read as follows, effective as of the date hereof:
"(B) annual bonuses for the remainder of the Employment Term
(including, without limitation, a prorated bonus for any
partial Fiscal Year) equal to the average of the three highest
annual bonuses awarded to Borow during the ten Fiscal Years
(or portions thereof) preceding the termination of Borow's
employment as an employee (including, without limitation, any
bonus awarded to Borow in the year of termination, which is
unpaid as of the date of termination), such bonuses to be paid
at the same time annual bonuses are regularly paid by Aeroflex
to Borow;"
4. Section 10(g)(ii)(C) shall be amended and restated in its entirety to
read as follows, effective as of the date hereof:
"(C) continued medical reimbursement, as described in Section
9(b) above for the lesser of: (a) two years after any
termination of employment or (b) the remainder of the
Employment Term; provided however, that if, in the mutual good
faith determination and agreement of Borow and Aeroflex, such
medical reimbursement may be provided without subjecting Borow
to any tax, interest or penalty imposed under Section
409A(a)(1)(B) of the Code (or any regulation or any guidance
promulgated thereunder or with respect to), then the period of
medical reimbursement shall continue for the remainder of the
Employment Term, without regard to the two year period
referred to above. Upon the expiration of the relevant period
referred to above, Borow shall receive the lifetime medical
benefits in accordance with Section 9(b) above;"
5. Section 10(g)(ii)(E) shall be amended and restated in its entirety to
read as follows, effective as of the date hereof:
"(E) continued participation in all employee benefit plans or
programs available to Aeroflex employees generally in which
2
Borow was participating on the date of termination of his
employment until the end of the Employment Term; provided;
however, that (x) if Borow is either precluded from continuing
his participation in any employee benefit plan or program as
provided in this clause (E) or if Borow's continued
participation would subject Borow to any tax, interest or
penalty imposed under Section 409A(a)(1)(B) of the Code (or
any regulation or any guidance promulgated thereunder or with
respect to), then Borow shall be entitled to the after-tax
economic equivalent of the benefit foregone under the plan or
program in which he is unable to participate until the end of
the Employment Term (which shall be paid in one lump sum as
soon as administratively feasible after his termination of
participation), and (y) the "economic equivalent of the
benefit foregone" shall be deemed to be the lowest cost that
Borow would incur in obtaining such benefit on an individual
basis; further provided that if such benefit cannot be
obtained at any cost, Borow shall be entitled to a lump sum
payment equal to the aggregate benefit payments he would
reasonably be expected to receive through the end of the
Employment Term, and the valuation of such lump sum benefit
payment amount shall be equal to the discounted net present
value of such foregone benefits as determined in good faith by
Borow and Aeroflex. The interest rate used to determine the
present value of any such payment shall be the mid-term
Applicable Federal Rate compounded semi-annually for the month
in which such payment occurs; and"
6. Section 10(g)(ii)(F) shall be amended and restated in its entirety to
read as follows, effective as of the date hereof:
"(F) other benefits in accordance with applicable plans and
programs of the Aeroflex; provided however, that if such other
benefits would subject Borow to any tax, interest or penalty
imposed under Section 409A(a)(1)(B) of the Code (or any
regulation or any guidance promulgated thereunder or with
respect to), then Borow shall receive a lump sum payment,
which shall be valued in accordance with the principles set
forth in Section 10(g)(ii)(E) above."
7. Section 10(h) shall be amended and restated in its entirety to read as
follows, effective as of the date hereof:
"(h) Change in Control. Notwithstanding anything to the
contrary in this Section 10, upon a termination of Borow's
employment within the one-year period following a change in
Control for any reason other than Cause, Retirement, death or
disability, Borow shall be entitled to:
3
(i) a lump sum payment equal to the net present value of his
Salary for the remainder of the Employment Term at the Salary
amount in effect immediately before such termination (or, if
greater, at the Salary in effect immediately before the Change
in Control). The interest rate used to determine the present
value of these payments shall be the mid-term Applicable
Federal Rate compounded semi-annually for the month in which
the termination occurs;
(ii) a lump sum payment equal to the net present value of all
of the annual bonuses otherwise payable under Section
10(g)(ii)(B) for the remainder of the Employment Term
(including, without limitation, a prorated bonus for any
partial Fiscal Year) with each such bonus equal to the average
of the three highest annual bonuses awarded to Borow during
the ten Fiscal Years (or portions thereof) preceding such
termination (including, without limitation, any bonus awarded
to Borow in the year of his termination, which is unpaid as of
the date of the Change in Control). The interest rate used to
determine the present value of these payments shall be the
mid-term Applicable Federal Rate compounded semi-annually for
the month in which the termination occurs and such bonuses
shall be discounted to present value from the time such annual
bonuses would otherwise normally be paid by Aeroflex to Borow;
(iii) continued medical reimbursement, as described in Section
9(b) above for the lesser of: (a) two years after the later to
occur of a termination of employment or, if applicable, a
termination of the Consulting Period following a Change in
Control or (b) the remainder of the Employment Term; provided
however, that if, in the mutual good faith determination and
agreement of Borow and Aeroflex, such medical reimbursement
may be provided without subjecting Borow to any tax, interest
or penalty imposed under Section 409A(a)(1)(B) of the Code (or
any regulation or any guidance promulgated thereunder or with
respect to), then the period of medical reimbursement shall
continue for the remainder of the Employment Term, without
regard to the two year period referred to above. Upon the
expiration of the relevant period referred to above, Borow
shall receive the lifetime medical benefits in accordance with
Section 9(b) above;
(iv) a lump-sum payment equal to the then present value of the
excess, if any, of (x) the retirement benefit to which Borow
would have been entitled if he had remained employed under
this Agreement until age 70 over (y) the early retirement
benefit actually payable to him, both as calculated and
payable under the
4
SERP, provided such amount is not otherwise paid to Borow under
the terms of the SERP; and
(v) continued participation in all employee benefit plans or
programs available to Aeroflex employees generally in which
Borow was participating on the date of any termination of his
employment until the end of the Employment Term; provided;
however, that (x) if Borow is either precluded from continuing
his participation in any employee benefit plan or program as
provided in this clause or if Borow's continued participation
would subject Borow to any tax, interest or penalty imposed
under Section 409A(a)(1)(B) of the Code (or any regulation or
any guidance promulgated thereunder or with respect to), then
Borow shall be entitled to the after-tax economic equivalent
of the benefit foregone under the plan or program in which he
is unable to participate until the end of the Employment Term
(which shall be paid in one lump sum as soon as
administratively feasible after his termination of
participation), and (y) the "economic equivalent of the
benefit foregone" shall be deemed to be the lowest cost that
Borow would incur in obtaining such benefit on an individual
basis; further provided that if such benefit cannot be
obtained at any cost, Borow shall be entitled to a lump sum
payment equal to the aggregate benefit payments he would
reasonably be expected to receive through the end of the
Employment Term, and the valuation of such lump sum benefit
payment amount shall be equal to the discounted net present
value of such foregone benefits as determined in good faith by
Borow and Aeroflex. The interest rate used to determine the
present value of any such payment shall be the mid-term
Applicable Federal Rate compounded semi-annually for the month
in which such payment occurs; and
(vi) other benefits in accordance with applicable plans and
programs of the Aeroflex; provided however, that if such other
benefits would subject Borow to any tax, interest or penalty
imposed under Section 409A(a)(1)(B) of the Code (or any
regulation or any guidance promulgated thereunder or with
respect to), then Borow shall receive a lump sum payment,
which shall be valued in accordance with the principles set
forth in Section 10(h)(v) above.
Notwithstanding the foregoing, if Borow is terminated
following a Change in Control prior to January 1, 2007, the
lump sum payments provided under Sections 10(h)(i), 10(h)(ii)
and 10(h)(iv) of this Agreement shall be made on January 2,
2007, provided however, that if Borow's employment is
terminated prior to January 2, 2007, Borow shall be entitled
to the benefits in
5
accordance with the provisions of Sections 10(g)(ii)(A),
10(g)(ii)(B) and 10(g)(ii)(D) until January 2, 2007 and the
payments under Sections 10(h)(i), 10(h)(ii) and 10(h)(iv) shall
then be made on January 2, 2007 (less the present value of any
payments actually made to Borow under this sentence prior to
January 2, 2007).
Payments under this Section 10(h) shall be in full
satisfaction of any payments or benefits Borow would otherwise
be entitled to under Section 10(g)."
8. Section 10(i) shall be added, which shall read in its entirety as
follows, effective as of the date hereof
"10(i) Notwithstanding the foregoing, if (a) Borow or his
estate is to receive payments or benefits under Section 10 for
any reason other than due to Borow's death, and (b) Borow is a
"specified employee" within the meaning of Code Section 409A
for the period in which the payment or benefits would
otherwise commence, and (c) such payment or benefit would
otherwise subject Borow to any tax, interest or penalty
imposed under Section 409A(a)(1)(B) of the Code (or any
regulation or any guidance promulgated thereunder or with
respect to) if the payment or benefit would commence within
six months of a termination of Borow's employment, then such
payment or benefit required under Section 10 shall not
commence until the first day which is at least six months
after the termination of Borow's employment. Such payments or
benefits, which would have otherwise been required to be made
over such six month period, shall be paid to Borow in one lump
sum payment or otherwise provided to Borow, as soon as
administratively feasible after the first day which is at
least six months after the termination of Borow's employment.
Thereafter, payments or benefits shall continue, if
applicable, for the relevant period set forth above."
9. Section 13(a) shall be amended and restated in its entirety to read as
follows, effective as of the date hereof:
"(a) General. Effective upon the end of the Employment Term
(but only if the Employment Term ends by reason of its
expiration or, if earlier, upon termination of Borow's
employment (i) by mutual agreement, (ii) by Retirement or
(iii) within the one-year period following a Change in Control
for any reason other than for Cause), Borow shall become a
consultant to Aeroflex, in recognition of the continued value
to Aeroflex of his extensive knowledge and expertise. Unless
earlier terminated, as provided in
6
Section 13(e), the Consulting Period shall continue for three
years."
10. Except as specifically provided in and modified by this Amendment, the
Employment Agreement is in all other respects hereby ratified and
confirmed and references to the Employment Agreement shall be deemed
to refer to the Employment Agreement as modified by this Amendment.
7
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the day and year first above written.
AEROFLEX INCORPORATED
By: /s/Harvey R. Blau
-------------------------------
Harvey R. Blau, Chairman
/s/Leonard Borow
-------------------------------
Leonard Borow
8