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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of _________, 1997
by and between International Aircraft Investors, a California corporation
("Employer") and Michael P. Grella ("Employee").
WITNESSETH:
WHEREAS, Employee has been employed by Employer in various
capacities, most recently as President, and Employer desires to obtain the
benefit of continued service by Employee, and Employee desires to render
services to Employer;
WHEREAS, the Board of Directors of Employer (the "Board") has
determined that because of Employee's substantial experience and business
relationships in connection with the business of aircraft leasing and
Employee's familiarity with the clientele served by Employer, it is in
Employer's best interest and that of its stockholders to secure the services of
Employee, to secure certain additional commitments from Employee and to
provide Employee certain additional benefits; and
WHEREAS, Employer and Employee desire to set forth in this
Agreement the terms and conditions of Employee's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the parties agree as follows:
1. Term. Employer agrees to employ Employee and
Employee agrees to serve Employer, in accordance with the terms of this
Agreement, for a term of three years, commencing as of _________, 1997 and
ending December 31, 2000, unless this Agreement is earlier terminated in
accordance with the provisions which follow; provided, however, that unless
Employer or Employee gives written notice to the other party to the contrary at
least 30 days prior to any anniversary of the date hereof, the term of this
Agreement shall automatically be extended for an additional term of one (1)
year on such anniversary date. The term of this
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Agreement shall include any automatic extensions pursuant to the preceding
sentence.
2. Services and Exclusivity of Services. So long as
this Agreement shall continue in effect, Employee shall devote his full
business time, energy and ability exclusively to the business, affairs and
interests of Employer and its subsidiaries and matters related thereto, shall
use Employee's best efforts and abilities to promote Employer's interests, and
shall perform the services contemplated by this Agreement in accordance with
policies established by and under the direction of the Board.
Employee agrees to serve without additional remuneration in
such official capacities for one or more direct or indirect subsidiaries of
Employer as the Board may from time to time request, subject to appropriate
authorization by the subsidiary or subsidiaries involved and any limitations
under applicable law. Employee agrees to faithfully and diligently promote the
business, affairs and interests of Employer and its subsidiaries.
Without the prior express written authorization of the Board,
Employee shall not, directly or indirectly, during the term of this Agreement:
(a) render services to any other person or firm for compensation or (b) engage
in any activity competitive with or adverse to Employer's business, whether
alone, as a partner, or as an officer, director, employee or significant
investor of or in any other entity; provided, however, that Employee may
continue to own an investment in Great Lakes Holdings, which is the parent of
Northern Lakes Financial Corp. and Northern Lakes Equity, which are special
purposes companies that each own one B 727-200 aircraft on lease to Sun Country
Airlines, Inc. (An investment of greater than 10% of the outstanding capital
or equity securities of an entity shall be deemed significant for these
purposes.)
Employee may make and manage personal business investments of
his choice and serve in any capacity with any civic, educational or charitable
organization without seeking or obtaining approval by the Board, provided that
such activities and services do not substantially interfere or conflict with
the performance of duties hereunder or create any conflict of interest with
such duties. An investment that exceeds 10% of the
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equity securities or capitalization of a competitor, supplier or customer of
Employer shall be deemed to constitute such a conflict. Employee shall not
serve in any of such capacities for any business enterprise unless such service
is expressly authorized by the Board in advance.
3. Specific Position; Duties and Responsibilities.
Employer and Employee agree that, subject to the provisions of this Agreement,
Employer will employ Employee and Employee will serve Employer as a senior
officer for the duration of this Agreement. The specific position in which
Employee shall initially serve shall be President. Employee agrees to observe
and comply with the rules and regulations of Employer as adopted by the Board
respecting the performance of Employee's duties and agrees to carry out and
perform orders, directions and policies of Employer and its Board as they may
be, from time to time, stated either orally or in writing. Employee shall have
such corporate power and authority as shall reasonably be required to enable
the discharge of duties in any office that may be held.
4. Compensation.
(a) Base Compensation.
During the term of this Agreement, Employer agrees to pay
Employee a base salary at the rate set forth below, payable in equal twice
monthly installments. From the effective date of this Agreement through
_____________, Employee's base salary shall be $140,000 per year. Thereafter,
Employee's base salary shall be determined by the Board of Directors for each
subsequent 12-month period and the Board of Directors shall notify Employee of
his base salary in advance of the applicable period. Employee's base salary in
each successive 12-month period shall not be less than the preceding 12-month
period. The Board of Directors will retain a qualified compensation consultant
to determine a competitive base salary range for the position. The Board of
Directors will then set the Employee's base salary at an appropriate level
based on the advice of the compensation consultant and the result of the
Employee's annual performance review.
(b) Bonus.
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Employee shall be eligible to participate in Employer's
current long-term and annual bonus programs and any other incentive programs
hereafter established for senior officers of Employer. The bonus amounts (the
"Bonus") shall be determined each calendar year at the time of the annual
salary review and shall be based on Employee's performance against a mutually
agreed upon written performance criteria. The Bonus program for the first year
shall be as follows and for subsequent years shall in no event be less than the
preceding 12-month period.
% of Employee's % of Employer's
Base Compensation Target Pretax Income
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50% 100%
75% 120%
100% 140%
125% 159%
The Bonus shall be calculated on a pro rata basis between the bonus percentages
set forth above. If the Employer's consolidated pretax income is greater than
160% of Target Pretax Income, Employee shall be entitled to such other or
additional Bonus as the Employer's Board of Directors may deem appropriate.
The Employer's consolidated pretax income shall be calculated in accordance
with generally accepted accounting principles, except that consolidated pretax
income shall be calculated prior to any deductions for any bonuses payable to
any employees. "Target Pretax Income" means the targeted consolidated pretax
income for a fiscal year established by the Board of Directors. The Bonus for
any fiscal year shall be payable on or before the date 60 days after the end of
such fiscal year and shall be payable one-half in cash and one- half in Common
Stock of Employer, valued at the closing price of the Common Stock of Employer
on NASDAQ on the date three business days after the Employer publicly discloses
its financial results for the fiscal year.
(c) Additional Benefits.
Employee shall also be entitled to all rights and benefits for
which Employee is otherwise eligible under any bonus plan, incentive,
participation or extra compensation plan, pension plan, profit-sharing plan,
life, medical, dental, disability, or insurance plan or policy or other plan or
benefit
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that Employer or its subsidiaries may provide for Employee or (provided
Employee is eligible to participate therein) for senior officers or for
employees of Employer generally, as from time to time in effect, during the
term of this Agreement (collectively, "Additional Benefits"). The Additional
Benefits shall be provided at the level commensurate with the office held at
the time.
(d) Perquisites.
Employee shall be entitled to paid vacation in accordance with
Employer's policies which are applicable to other executive employees of
Employer. Commencing with this Agreement, the annual paid vacation shall be
four (4) weeks.
During the term of this agreement, Employer shall provide
Employee a vehicle or vehicle allowance in accordance with Employer's
automobile policy as from time to time in effect.
(e) Limited Benefit Succession.
If Employee's full-time services are terminated hereunder,
other than pursuant to Section 5(c), and Employee is no longer eligible for
Additional Benefits because of such termination, Employee (or in event of
death, such person or persons as Employee shall have directed in writing or, in
the absence of a designation, the estate of Employee (the "Beneficiary")) shall
be entitled to and Employer shall provide benefits substantially equivalent to
those benefits in the nature of health and welfare type benefits to which
Employee was entitled immediately prior to such termination, but shall not be
entitled to option, equity, appreciation, profit sharing, deferred
compensation, savings, bonus, participation, pension, extra compensation and
other incentive plan benefits except to the extent otherwise expressly provided
in any then outstanding awards to such Employee, but in each case (1) only for
the period (if any) during which Employee (or (if expressly entitled thereto)
Beneficiary, as the case may be) remains entitled to receive Base Salary, (2)
only to the extent that Employee or such Beneficiary is not entitled to
comparable benefits from another employer or provider, and (3) subject to any
other express limitations elsewhere in this Agreement or any applicable plan.
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(f) Overall Qualification.
Employer reserves the right to modify, suspend or discontinue
any and all of the above referenced benefit plans, practices, policies and
programs at any time (whether before or after termination of employment)
without notice to or recourse by Employee so long as (i) such action is taken
generally with respect to other similarly situated persons and does not single
out Employee, and (ii) Employer makes provision that all benefits accrued to
Employee to the date such plan is terminated will be paid to Employee.
5. Termination. The employment of Employee by Employer,
shall be terminated prior to expiration of the term of this Agreement only as
provided in this Section 5 or Section 6:
(a) Disability.
In the event that Employee shall fail, because of illness,
incapacity or injury which is determined to be total and permanent by
a physician selected by Employer or its insurers and acceptable to
Employee or Employee's legal representative (such agreement as to
acceptability not to be withheld unreasonably) to render for three
consecutive months or for shorter periods aggregating 75 or more
business days in any twelve (12)-month period, the services
contemplated by this Agreement, Employee's employment hereunder may be
terminated by written notice of termination from Employer to Employee.
Thereafter, Employer shall continue for the then remaining term of
this Agreement to pay Base Salary to Employee at a rate and time and
in an amount and manner equal to (i) the Base Salary payable
immediately prior to the termination, minus (ii) the amount of any
cash payments to Employee under the terms of any Employer's disability
insurance. Thereafter, no further salary shall be paid.
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(b) Death.
In the event of Employee's death during the term, Employee's
Base Salary and any other right or benefit which does not by its terms
end at the death of Employee shall be paid to the Beneficiary for the
then remaining term of this Agreement. This Agreement in all other
respects will terminate upon the death of Employee, except as
otherwise expressly provided in Section 4(f).
(c) For Cause.
Employee's employment hereunder shall be terminated and all of
his rights to receive Base Salary, Bonus and (subject to the terms of
any plans relating thereto) Additional Benefits hereunder in respect
of any period after such termination, shall terminate upon a
determination by the Board, acting in good faith based upon actual
knowledge at such time, that Employee is engaging or has engaged in
willful misconduct, or has willfully violated any law, rule or
regulation or has been convicted of a felony. Notwithstanding the
foregoing, Employee shall not be terminated for cause pursuant to this
Section 5(c) unless and until Employee has received notice of a
proposed termination for cause and Employee has had an opportunity to
be heard before at least a majority of the members of the Board.
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(d) Without Cause.
Notwithstanding any other provision of this Section 5, the
Board shall have the right to terminate Employee's employment with
Employer at any time, but any such termination other than as expressly
provided in Section 5(c) herein shall be without prejudice to
Employee's rights to receive Base Salary and the Additional Benefits
provided under this Agreement for the remainder of the term. If
Employee is so terminated without cause, Employee may elect to receive
a lump sum payment representing the present value of aggregate unpaid
Base Salary discounted to present value at a rate of 7% per annum in
lieu of all rights of Employee, including any rights to Additional
Benefits hereunder, all of which shall terminate upon the payment of
such lump sum amount.
(e) Exclusive Remedy. Employee agrees that the payments
expressly provided and contemplated by this Agreement shall constitute
the sole and exclusive obligation of Employer in respect of Employee's
employment with and relationship to the Company and that the payment
thereof shall be the sole and exclusive remedy for any termination of
Employee's employment. Employee covenants not to assert or pursue any
other remedies, at law or in equity, with respect to any termination
of employment.
6. Change in Control. If a "Change in Control" of
Employer (or any successor), as defined below, occurs during the term of this
Agreement and if, within one year after the Change in Control Employee's
employment hereunder is terminated for any reason other than pursuant to
Section 5(c) hereof or Employee terminates his employment hereunder for "good
reason", as defined below, then the Base Salary and all of the other benefits
to which Employee is entitled under Section 4 hereof shall continue to the
expiration of the term of this Agreement.
For purposes of the foregoing provisions, "Change in Control"
shall mean the occurrence of any of the following: (i) approval by the
shareholders of Employer of the dissolution or liquidation of Employer; (ii)
approval by the shareholders of Employer of an agreement to merge or
consolidate, otherwise reorganize, with or into one or more entities, as a
result of
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which less than 50% of the outstanding voting securities of the surviving or
resulting entity immediately after the reorganization are, or will be, owned,
directly or indirectly, by shareholders of the Employer immediately before such
reorganization (assuming for purposes of such determination that there is no
change in the record ownership of Employer's securities from the record date
for such approval until such reorganization and that such record owners hold no
securities of the other parties to such reorganization, but including in such
determination any securities of the other parties to such reorganization held
by affiliates of Employer); (iii) approval by the shareholders of Employer of
the sale, lease, conveyance or other disposition of all or substantially all of
Employer's business and/or assets to a person or entity which is not a
wholly-owned subsidiary of Employer; (iv) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), but excluding any person described in and satisfying the conditions of
Rule 13d-1(b)(1) thereunder), other than a person who is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of more than 20% of the
outstanding shares of Common Stock of Employer at the date of this Agreement
(or an affiliate, successor, heir, descendent or related party of or to any
such person), becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Employer representing
more than 25% of the combined voting power of Employer's then outstanding
securities entitled to then vote generally in the election of directors of
Employer; or (v) a majority of the Board of Directors of Employer not being
comprised of Continuing Directors. For purposes of this clause, "Continuing
Directors" are persons who were (A) members of the Board of Directors of
Employer on the date of this Agreement or (B) nominated for election or elected
to the Board of Directors of Employer with the affirmative vote of at least a
majority of the directors who were Continuing Directors at the time of such
nomination or election.
For purposes of the foregoing provisions, "good reason" shall
mean: (i) the assignment to Employee of any duties inconsistent in any respect
with Employee's position (including status, offices and reporting
requirements), authority, duties or responsibilities as of the date immediately
preceding the Change in Control of Employer or any other action by Employer
which
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results in a diminishment in such position, authority, duties or
responsibilities, excluding for this purpose an isolated and insubstantial
action not taken in bad faith and not intended to be inconsistent with this
Agreement and which is remedied by Employer promptly after receipt of notice
thereof given by Employee; (ii) any reduction in salary or percentages of
compensation available as target incentives, or any material change in fringe
benefits or perquisites not agreed to by Employee; (iii) the cessation of
Employee's eligibility to participate in any stock-based compensation plans
maintained by Employer for executives prior to the Change in Control of
Employer; (iv) Employer requiring Employee to be based in any office or
location other than one within 30 miles of the office at which Employee is
based at the time of the Change in Control of Employer, except for travel
reasonably required in the performance of Employee's responsibilities; and (v)
failure of any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of Employer to expressly assume this Agreement.
7. Business Expenses. During the term of this
Agreement, to the extent that such expenditures satisfy the criteria under the
Internal Revenue Code for deductibility by Employer (whether or not fully
deductible by Employer) for federal income tax purposes as ordinary and
necessary business expenses, Employer shall reimburse Employee promptly for
reasonable business expenditures, including travel, entertainment, parking,
business meetings and professional dues made and substantiated in accordance
with policies, practices and procedures established from time to time by the
Board and incurred in pursuit and furtherance of Employer's business and good
will.
8. Indemnity. To the fullest extent permitted by
applicable law and the bylaws of Employer, as from time to time in effect,
Employer shall indemnify Employee and hold Employee harmless for any acts or
decisions made in good faith while performing services for Employer. To the
same extent, Employer will pay and, subject to any legal limitations, advance
all expenses, including reasonable attorneys' fees and costs of court approved
settlements, actually and necessarily incurred by Employee in connection with
the defense of any action, suit or
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proceeding and in connection with any appeal thereon, which has been brought
against Employee by reason of Employee's service as an officer or agent of
Employer or of a subsidiary of Employer.
9. Miscellaneous.
(a) Succession; Survival.
This Agreement shall inure to the benefit of and shall be
binding upon Employer, its successors and assigns, but without the
prior written consent of Employee this Agreement may not be assigned
other than in connection with a merger or sale of substantially all
the assets of Employer or a similar transaction in which the successor
or assignee assumes (whether by operation of law or express
assumption) all obligations of Employer hereunder including without
limitation those in Section 6 hereof in respect of such successor or
assignee. The obligations and duties of Employee hereunder are
personal and otherwise not assignable. Employee's obligations and
representations under this Agreement will survive the termination of
Employee's employment, regardless of the manner of such termination.
(b) Notices.
Any notice or other communication provided for in this
Agreement shall be in writing and sent if to Employer to its office at:
International Aircraft Investors
3655 Torrance Boulevard
Suite 410
Torrance, California 90503
Attention: Chairman of the Board
or at such other address as Employer may from time to time in writing
designate, and if to Employee at such address as Employee may from
time to time in writing designate (or Employee's business address of
record in the absence of such designation). Each such notice or other
communication shall be effective (i) if given by telecommunication,
when transmitted to the applicable number so specified in (or
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pursuant to) this Section 9(b) and an appropriate answerback is
received, (ii) if given by mail, three days after such communication
is deposited in the mails with first class postage prepaid, addressed
as aforesaid or (iii) if given by any other means, when actually
delivered at such address.
(c) Entire Agreement; Amendments.
This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and it supersedes any prior
agreements, undertakings, commitments and practices relating to
Employee's employment by Employer. No amendment or modification of
the terms of this Agreement shall be valid unless made in writing and
signed by Employee and, on behalf of Employer, by an officer expressly
so authorized by the Board.
(d) Waiver.
No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof or of
any other right, nor shall any single or partial exercise preclude any
further or other exercise of such right or any other right.
(e) Choice of Law.
This Agreement, the legal relations between the parties and
any action, whether contractual or non-contractual, instituted by any
party with respect to matters arising under or growing out of or in
connection with or in respect of this Agreement, the relationship of
the parties or the subject matter hereof shall be governed by and
construed in accordance with the laws of the State of California
applicable to contracts made and performed in such State and without
regard to conflicts of law doctrines, to the extent permitted by law.
(f) Agreement to Mediate Dispute.
If any dispute, controversy or claim (collectively, a
"Dispute") under, arising out of, in connection with, or relating to
this Agreement or the respective obligations of
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the parties hereto including, without limitation, any Dispute
involving an alleged breach of this Agreement shall arise,
representatives of the parties hereto shall meet and attempt to
resolve the Dispute. If they cannot resolve the Dispute within 15
days, the parties shall, in good faith, attempt to select a third
party to mediate the Dispute. The cost and expenses of the person
selected to mediate the Dispute shall be paid by Employer.
(g) Attorneys' Fees in Action on Contract.
If any litigation shall occur between Employee and Employer
which litigation arises out of or as a result of this Agreement or the
acts of the parties hereto pursuant to this Agreement, or which seeks
an interpretation of this Agreement. The prevailing party shall be
entitled to recover all costs and expenses of such litigation,
including reasonable attorneys' fees and costs.
(h) Waiver of Jury Trial. EMPLOYER AND EMPLOYEE HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE
EMPLOYMENT RELATIONSHIP BETWEEN THEM OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR SUCH RELATIONSHIP.
The scope of this waiver is intended to be all- encompassing of any
and all disputes that may be filed in any court or that relate to the
subject matter of this Agreement, including without limitation,
contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims, to the maximum extent permitted by
law. Employer and Employee each acknowledge that this waiver is a
material inducement to enter into this Agreement, that each has
already relied on the waiver in entering into this Agreement, and that
each will continue to rely on the waiver in their related future
dealings. EMPLOYER AND EMPLOYEE FURTHER WARRANT AND REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT MODIFICATIONS TO OR EXTENSIONS OF
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THIS AGREEMENT. In the event of litigation, this Agreement may be
filed as a written consent to a trial by the court.
(i) Confidentiality; Proprietary Information.
Employee agrees to not make use of, divulge or otherwise
disclose, directly or indirectly any trade secret or other
confidential or proprietary information concerning the business
(including but not limited to its products, employees, services,
practices or policies) of Employer or any of its affiliates of which
Employee may learn or be aware as a result of Employee's employment
during the Term or prior thereto as stockholder, employee, officer or
director of or consultant to Employer, except to the extent such use
or disclosure is (i) necessary to the performance of this Agreement
and in furtherance of Employer's best interests, (ii) required by
applicable law, (iii) lawfully obtainable from other sources, or (iv)
authorized in writing by Employer. The provisions of this subsection
(h) shall survive the expiration, suspension or termination, for any
reason, of this Agreement.
(j) Trade Secrets.
Employee, prior to and during the term of employment, has had
and will have access to and become acquainted with various trade
secrets, consisting of customer lists, contracts, and compilations of
information, records and specifications, which are owned by Employer
and regularly used in the operation of their respective businesses and
which may give Employer an opportunity to obtain an advantage over
competitors, who do not know or use such trade secrets. Employee
agrees and acknowledges that Employee has been granted access to these
valuable trade secrets only by virtue of the confidential relationship
created by Employee's employment and Employee's prior relationship to,
interest in and fiduciary relationships to Employer. Employee shall
not disclose any of the aforesaid trade secrets, directly or
indirectly, or use them in any way, either during the term of this
Agreement or at any time thereafter, except as required in the course
of employment by Employer and for its benefit.
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All records, files, documents, specifications, equipment, and
similar items relating to the business of Employer or its affiliates,
including without limitation all records relating to customers (the
"Documents"), whether prepared by Employee or otherwise coming into
Employee's possession, shall remain the exclusive property of Employer
or such affiliates and shall not be removed from the premises of
Employer or its affiliates under any circumstances whatsoever without
the prior consent of a Senior Officer. Upon termination of
employment, Employee agrees to promptly deliver to Employer all
Documents in the possession or under the control of Employee.
(k) Severability.
If this Agreement shall for any reason be or become
unenforceable in any material respect by any party, this Agreement
shall thereupon terminate and become unenforceable by the other party
as well. In all other respects, if any provision of this Agreement is
held invalid or unenforceable, the remainder of this Agreement shall
nevertheless remain in full force and effect, and if any provision is
held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect
in all other circumstances, to the fullest extent permitted by law.
(l) Withholding; Deductions.
All compensation payable hereunder, including salary, Bonus
and other benefits, shall be subject to applicable taxes, withholding
and other required, normal or elected employee deductions.
(m) Section Headings.
Section and other headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
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(n) Counterparts.
This Agreement and any amendment hereto may be executed in one
or more counterparts. All of such counterparts shall constitute one
and the same agreement and shall become effective when a copy signed
by each party has been delivered to the other party.
(o) Representation By Counsel; Interpretation.
Employer and Employee each acknowledge that each party to this
Agreement has been represented by counsel in connection with this
Agreement and the matters contemplated by this Agreement.
Accordingly, any rule of law, including but not limited to Section
1654 of the California Civil Code, or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is expressly
waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of the parties.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
"EMPLOYER"
INTERNATIONAL AIRCRAFT INVESTORS
By
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Its Compensation Committee Chairman
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"EMPLOYEE"
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[name]
Michael P. Grella
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3655 Torrance Blvd., Suite 410
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Torrance, CA 90503
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[address]
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