Exhibit 10.1
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as
of the 1st day of May 2005, by and between ENGINEERED SUPPORT SYSTEMS, INC.,
a Missouri corporation (hereinafter called "ESSI"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇. (hereinafter called "Consultant").
WHEREAS, immediately prior to the effectiveness of this Agreement,
Consultant was employed by ESSI as its executive Chairman of the Board
pursuant to an Employment Agreement, dated November 1, 2004, and over the
last twenty-three (23) years has held various other senior officer positions
with ESSI and its subsidiaries;
WHEREAS, Consultant has gained invaluable experience and knowledge
of ESSI's business as a result of Consultant's association with ESSI;
WHEREAS, Consultant wishes to retire from active employment with
ESSI;
WHEREAS, effective upon the execution of this Agreement, Consultant
is terminating his employment with ESSI; and
WHEREAS, ESSI is desirous of retaining the services of Consultant
as a consultant and Consultant is willing to provide consulting services to
ESSI, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the promises
and agreements herein contained, the parties agree as follows:
1. Duties of Consultant. ESSI hereby engages Consultant to provide
--------------------
consulting and advisory services pertaining to the business and operations
of ESSI. The parties agree that, during the Term (as hereinafter defined) of
this Agreement, Consultant shall serve as the non-executive Chairman of the
Board of ESSI and shall perform such duties and responsibilities as are
incident to such position, including the duties and responsibilities set
forth on Schedule A attached hereto, and also provide such services as may
from time to time be reasonably requested by ESSI's Board of Directors.
2. Term. The initial term of this Agreement shall be for the period
----
commencing May 1, 2005 and ending on April 30, 2006 (the "Initial Term").
This Agreement shall be automatically renewed for an additional one (1) year
period commencing on May 1, 2006 and ending on April 30, 2007 (the "Second
Term") upon the same terms and conditions providied for herein unless
terminated by Consultant upon the giving of written notice of termination to
ESSI at least thirty (30) days prior to the expiration of the Initial Term.
Thereafter, this Agreement shall be automatically renewed for successive one
(1) year periods on the last day of the Second Term and any renewal term
thereafter upon the same terms and conditions provided for herein unless
terminated by either party upon the giving of written notice of termination
to the other party at least thirty (30) days prior to the expiration of the
Second Term or any further renewal term, as the case may be. The Initial
Term of this Agreement as extended through the Second
Term and any further renewal term is hereinafter referred to as the "Term."
This Agreement may be terminated prior to the expiration of the Initial
Term, the Second Term or any further renewal term of this Agreement upon the
occurrence of any of the following events:
(a) Upon the death of Consultant during any period that this
Agreement is in effect.
(b) By Consultant, upon not less than thirty (30) days nor more
than one hundred twenty (120) days written notice to ESSI.
(c) In the event of Consultant's "disability," which for purposes
hereof shall mean Consultant's failure substantially to discharge
Consultant's duties under this Agreement for ninety (90) consecutive days or
one hundred twenty (120) days in any calendar year, whether or not
consecutive, as a result of an injury, disease, sickness or other physical
or mental incapacity. A determination of Consultant's disability shall be
made by a qualified licensed physician chosen by ESSI subject to
Consultant's approval, which approval shall not be unreasonably withheld. In
the event ESSI and Consultant cannot agree on the choice of a physician,
then such physician shall be chosen by the ▇▇▇▇ of the St. Louis University
School of Medicine, St. Louis, Missouri, or if said ▇▇▇▇ is unwilling or
unable to do so, by the ▇▇▇▇ of another medical school of recognized
national repute. The cost of such determination shall be borne by ESSI, and
in the absence of fraud or bad faith, shall be binding on all parties
hereto.
(d) By ESSI, for "cause," immediately upon written notice to
Consultant. For purposes of this Agreement, "cause" shall mean (i)
Consultant's breach or violation of or failure to perform any of the
material terms and conditions of this Agreement or such other conduct or
action by Consultant which materially and adversely affects the business or
reputation of ESSI as determined by ESSI's Board of Directors, which shall
include specifically, but not by way of limitation, intentional or negligent
conduct or activity inconsistent with or proscribed by federal or state
criminal statute or regulation or express ESSI policy pertaining to a
contract with the United States Government or the violation of any other
ethics or other corporate policy of ESSI, or (ii) any act of dishonesty or
disloyalty or breach of trust against ESSI.
(e) By ESSI, without cause, by written notice to Consultant at any
time.
Upon termination of this Agreement by ESSI without cause,
Consultant shall be entitled to receive (i) all compensation and benefits
hereunder through the later of the expiration of the Second Term or the
renewal term in effect on the effective date of the termination, and (ii)
such other consideration as is expressly provided in this Agreement. Upon
termination of this Agreement for any of the reasons specified in
subparagraphs (a) through (d), above, Consultant shall be entitled to
receive all compensation and benefits hereunder through the effective date
of termination and such other consideration as is expressly provided in this
Agreement.
3. Independent Contractor. In furnishing the consulting services
----------------------
described herein, Consultant shall not be an employee or agent of ESSI for
any purpose, but shall act in the capacity of an independent contractor.
Accordingly, ESSI shall not exercise any control over the performance of the
consulting duties provided by Consultant, nor shall ESSI be liable for any
acts or omissions of Consultant. The hours Consultant is to work shall be
entirely within
2
Consultant's control and ESSI shall rely upon Consultant to work that number
of hours which Consultant deems reasonably necessary to perform Consultant's
duties hereunder. It is not contemplated by either party that Consultant's
duties shall be performed on a full-time basis. All final decisions with
respect to the business operations of ESSI shall be the responsibility of
and shall be made by ESSI. ESSI shall report all payments made to Consultant
hereunder on such statements and forms as are required in regard to
non-employee compensation.
4. Consulting Fee. In consideration of the services rendered by
--------------
Consultant hereunder, ESSI agrees to pay Consultant a consulting fee of
Sixty-Two Thousand Five Hundred and no/100 Dollars ($62,500.00) per month,
payable in advance on the first day of each month that this Agreement is in
effect.
5. Other Compensation.
------------------
(a) In the event of the death of Consultant during the Term of this
Agreement, ESSI agrees to pay to Consultant's designated beneficiary
twenty-four (24) consecutive equal monthly installments of Fifty-Two
Thousand Five Hundred Dollars ($52,500.00) each, commencing on the first day
of the first month following the death of Consultant and on the first day of
each month thereafter for twenty-three (23) months.
(b) In the event of the disability of Consultant as hereinbefore
provided during the Term of this Agreement, ESSI agrees to pay to Consultant
consecutive equal monthly installments of Fifty-Two Thousand Five Hundred
Dollars ($52,500.00) each, commencing on the first day of the first month
following the month in which Consultant becomes disabled, and on the first
day of each month thereafter until Consultant returns to providing services
hereunder (if at all) as hereinafter provided, but in no event shall such
payments continue for more than sixty (60) consecutive months. If Consultant
returns to providing services hereunder to ESSI within said period of sixty
(60) consecutive months or less and receives a written opinion of a
physician selected in the manner as provided in subparagraph 2(c) hereof
that Consultant is capable of performing his duties hereunder, then the
sixty-month period will commence to run again in the event Consultant shall
later become disabled.
(c) In the event Consultant terminates this Agreement pursuant to
subparagraph 2(b), or this Agreement is terminated by ESSI without cause, or
either party determines not to renew the Term of this Agreement for any
reason, then in any of such events, ESSI agrees to pay to Consultant
twenty-four (24) consecutive equal monthly installments of Fifty-Two
Thousand Five Hundred Dollars ($52,500.00) each, commencing on the first day
of the first month following the effective date of the termination of this
Agreement and on the first day of each month thereafter for twenty-three
(23) months.
6. Securities Compliance. Consultant agrees to comply fully and
---------------------
faithfully with regulations of the Securities and Exchange Commission
pertaining to transactions by him in ESSI's securities and specifically, to
report to ESSI all intended, contemplated and consumated transactions
involving ESSI's securities in accordance with the ESSI's policies and such
regulations as from time to time in effect.
3
7. Covenants of Consultant.
-----------------------
(a) So long as this Agreement shall remain in effect and at all
times after the termination of this Agreement, for whatever reason,
Consultant covenants, warrants and agrees that Consultant will not (except
as required in Consultant's duties to ESSI hereunder), in any manner,
directly or indirectly, actually or attempt to:
Disclose or divulge to any person, entity, firm or company
whatsoever, or use for Consultant's own benefit or for the benefit
of any third person or concern, or for any reason inconsistent with
the purpose of this Agreement or inconsistent with Consultant's
confidential and fiduciary relationship with ESSI, any trade
secrets, formulae, devices, know-how, management and business
methods, techniques, opportunities, customer information, supplier
information, business or financial plans or other information or
data of ESSI, without regard to whether all of the foregoing
matters will otherwise be deemed confidential, material or
important, the parties hereto stipulating that as between them, the
same are important, material and confidential and greatly affect
the effective and successful conduct of the business and the
goodwill of ESSI, and the parties further stipulate that any breach
or evasion of the terms of this subparagraph (a) shall be a
material breach of this Agreement, provided that the foregoing
restrictions shall not apply (x) with respect to matters that are
or become generally known to the public without breach of this
Agreement or any other agreement or instrument by which Consultant
is bound, or (y) where Consultant is required by law, governmental
regulation, or court order to disclose such matters.
(b) So long as this Agreement shall be in effect and during such
period of time after the termination of this Agreement that the Consultant
is receiving compensation from ESSI hereunder, Consultant covenants,
warrants, and agrees that Consultant will not (except as required in
Consultant's duties hereunder), in any manner, directly or indirectly,
actually or attempt to:
(i) Solicit, divert, take away or interfere with any of
the customers, trade, business, patronage, consultants or agents of ESSI, or
in any manner engage in any conduct or activity, including but not limited
to, verbal representations or declarations that would or could be construed
or intended as a disparagement of ESSI's interests;
(ii) Engage within the United States or anywhere outside
of the United States where the Employer conducts business, directly or
indirectly, either personally or as an owner, consultant, partner,
associate, officer, manager, agent, advisor, consultant or otherwise, or by
means of any corporate or other entity or device, in any business which is
"competitive" (as hereinafter defined) with the business of ESSI.
(c) For purposes hereof, a business will be deemed competitive if
it involves the manufacture or sale of high-tech integrated military
electronics, support equipment for government or commercial use, logistics
services for all branches of the United States armed forces and foreign
militaries that do business with ESSI, homeland security forces and other
4
governmental and intelligence agencies, or any other business which is in
any manner competitive, during or as of the date of cessation of
Consultant's employment, with any business then being conducted by ESSI or
as to which ESSI has then formulated definitive plans to enter.
Notwithstanding the foregoing, Consultant may own up to one percent (1%) of
the outstanding securities of a corporation or other business entity that is
"competitive" with the business of ESSI if such entity's securities are
traded on a national securities exchange or on the over-the-counter market.
Consultant agrees that during the Term of this Agreement, and for the term
of the restrictive covenants set forth herein, he will promptly communicate
to ESSI the identity of all companies, persons or concerns with whom
Consultant is considering employment, association or other relationship
along with other information as to the products and services of such
company, person or concern sufficient in detail to permit ESSI to make a
determination as to whether or not competition exists. In order to preserve
its rights under this Agreement, ESSI may advise any third party with whom
Consultant may consider, establish or contract a relationship of the
existence of the terms of this Agreement, and Consultant authorizes and
consents to such disclosure, and ESSI shall have no liability for so acting.
(d) All of the covenants on behalf of Consultant contained in this
Paragraph 7 shall be construed as agreements independent of any other
provision of this Agreement, and the existence of any claim or cause of
action against ESSI, whether predicted on this Agreement or otherwise, shall
not constitute a defense to the enforcement by ESSI of these covenants.
(e) It is the intention of the parties to restrict the activities
of Consultant under this Paragraph 7 to the extent necessary for the
protection of the legitimate business interests of ESSI, and the parties
specifically covenant and agree that should any of the clauses or provisions
set forth herein, under any set of circumstances not now foreseen by the
parties, be held by a court of competent jurisdiction to be illegal, invalid
or unenforceable under present or future laws effective during the Term of
this Agreement, then and in that event, it is the intention of the parties
hereto that, in lieu of each such clause or provision there shall be
substituted or added, and there is hereby substituted or added, as a part of
this Agreement a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be legal, valid and
enforceable.
8. Expenses.
--------
(a) During the Term of this Agreement, ESSI will pay directly, or
reimburse Consultant, for reasonable and necessary expenses incurred by
Consultant in the interest of the business of ESSI. All such expenses paid
by Consultant, will be reimbursed by ESSI upon presentation by Consultant,
from time to time, of an itemized account of such expenditures, to the
extent necessary to permit the deductibility thereof for Federal income tax
purposes in accordance with the from time to time policy(ies) of ESSI.
9. Automobile. During the Term of this Agreement, ESSI shall pay to
----------
or on behalf of Consultant a car allowance as from time to time determined
by ESSI, but in no event less than One Thousand Eight Hundred Dollars
($1,800.00) per month.
5
10. Documents. Consultant agrees that all documents, instruments,
---------
drawings, plans, contracts, proposals, records, notebooks, invoices,
statements and correspondence, whether in print or electronic form or
otherwise and including all copies thereof, relating to the business of ESSI
shall be the property of ESSI, and upon the termination of this Agreement,
for whatever reason, all of the same then in Consultant's possession,
whether prepared by Consultant of others, will be left with or immediately
delivered to ESSI.
11. Additional Benefits. For the duration of the Consultant's life
-------------------
and the life of the Consultant's spouse, Consultant (or his spouse, as the
case may be) shall be entitled to participate, in accordance with the
eligibility requirements thereof, in ESSI's medical and dental insurance
benefits programs which now exist or may hereafter be established by ESSI.
During the Term of this Agreement, Consultant shall be entitled to
participate, in accordance with the eligibility requirements thereof, in
ESSI's life insurance, accidental death and disability income benefits
programs which now exist or that may be established hereafter by ESSI.
Participation by Consultant in the foregoing benefits programs shall be on
the same basis as executives of ESSI who are entitled to participate in
same.
At the option of ESSI, ESSI can provide Consultant that portion of
the cost of coverage of self-funded medical benefits for which ESSI has
assumed responsibility pursuant to the immediately preceding paragraph, if
any, in the following manner: Consultant shall first pay the full cost of
such coverage and ESSI will reimburse Consultant for such costs with an
appropriate tax gross up, so that Consultant will not incur any net cost for
ESSI's portion.
12. Administrative Support. So long as this Agreement shall be in
----------------------
effect, ESSI will make available part-time administrative support in order
to assist Consultant with the performance of his duties hereunder.
13. Remedies. It is agreed that any breach or violation of any of
--------
the terms of Paragraphs 6 and 7 of this Agreement by Consultant will result
in immediate and irreparable injury to ESSI and will authorize recourse to
injunction and/or specific performance as well as to all other legal or
equitable remedies to which ESSI may be entitled. Consultant represents and
acknowledges that the enforcement of a remedy by way of injunction will not
prevent Consultant from earning a livelihood. No remedy conferred by any of
the specific provisions of this Agreement is intended to be exclusive of any
other remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at law or in equity. The election of any one or more remedies by ESSI shall
not constitute a waiver of the right to pursue other available remedies at
any time or cumulatively from time to time.
14. Severability. All agreements and covenants herein contained are
------------
severable, and in the event any of them shall be held to be invalid or
unenforceable by any court of competent jurisdiction, this Agreement shall
continue in full force and effect and shall be interpreted as if such
invalid agreement or covenant were not contained herein.
15. Waiver or Modification. No amendment, waiver or modification of
----------------------
this Agreement or of any covenant, condition or limitation herein contained
shall be valid unless in
6
writing and duly executed by the party to be charged therewith, and no
evidence of any amendment, waiver or modification shall be offered or
received in evidence in any proceeding, arbitration or litigation between
the parties hereto arising out of or affecting this Agreement, or the rights
or obligations of the parties hereunder, unless such amendment, waiver or
modification is in writing, duly executed as aforesaid, and the parties
further agree that the provisions of this paragraph may not be waived or
modified except as herein set forth. Failure of Consultant or ESSI to
exercise or otherwise act with respect to any rights granted hereunder in
the event of a breach of any of the terms or conditions hereof by the other
party, shall not be construed as a waiver of such breach, nor prevent
Consultant or ESSI from thereafter enforcing strict compliance with any and
all of the terms and conditions hereof.
16. Notices. All notices, requests, demands or other communication
-------
hereunder ("Notice") shall be in writing and shall be deemed given if
personally delivered or mailed by registered or certified mail, return
receipt requested, as follows:
If to ESSI, to:
Engineered Support Systems, Inc.
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CEO
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Consultant, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other addresses as to which the parties hereto give Notice in
accordance with this Paragraph 16.
17. Construction. This Agreement shall be governed by and construed
------------
and interpreted according to the laws of the State of Missouri,
notwithstanding the place of execution hereof, nor the performance of any
acts in connection herewith or hereunder in any other jurisdiction. For all
purposes hereof, reference to ESSI shall include each and every direct or
indirect subsidiary and affiliated entity of ESSI and shall further include
the surviving or continuing entity as a result of any merger, combination,
consolidation or reorganization to which ESSI is a party.
7
18. Assignability. The services to be performed by Consultant
-------------
hereunder are personal in nature and Consultant shall not assign his rights
or delegate his obligations under this Agreement without the prior written
consent of ESSI (which consent shall not be unreasonably withheld), and any
attempted or purported assignment or delegation not herein permitted shall
be null and void.
19. Successors. Subject to the provisions of Paragraph 18, this
----------
Agreement shall be binding upon and shall inure to the benefit of ESSI and
Consultant and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
20. Attorney's Fees and Costs. If any action at law or in equity is
-------------------------
brought to enforce or interpret any of the terms of this Agreement, the
prevailing party in such action shall be entitled to recover from the other
party the reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
21. Entire Agreement. This Agreement constitutes the sole and
----------------
entire agreement between the parties as to its subject matter and supercedes
and terminates any and all other agreements, understandings and
representations as to its subject matter (including, without limitation,
that certain Employment Agreement dated November 1, 2004 by and between ESSI
and Consultant), and the parties acknowledge and agree there are no other
agreements, understandings and/or representations of any kind whatsoever
remaining between them except as set forth herein.
[Remainder of Page Intentionally Left Blank - Signatures on Next Page]
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
"CONSULTANT" "ESSI"
ENGINEERED SUPPORT SYSTEMS, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------- -----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice Chairman & CEO
Acknowledged and approved
as to both form and substance:
/s/ S. ▇▇▇ ▇▇▇▇▇
----------------
S. ▇▇▇ ▇▇▇▇▇
Presiding Independent Director
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Chairman - Compensation Committee
9
SCHEDULE A
DUTIES OF THE NON-EXECUTIVE CHAIRMAN OF THE BOARD
o Direct and monitor the activities of the ESSI Board of Directors
(BOD).
o Recommend assignments of BOD members to standing and temporary
committees, and appoint committee chairmen.
o Establish, and review with ESSI management, agendas for BOD
meetings.
o Chair BOD and Outside Director meetings and select the secretary to
record the minutes for the meetings.
o Maintain visibility as the ESSI Chairman both to the investment
community, and to candidates for future ESSI acquisition.
o Provide broad corporate guidance.
10
