EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “ Agreement
”) is made and entered into as of September 1, 2007 (the
“ Effective Date ”) by and between
Precision Aerospace Components, Inc., a Delaware corporation (the
“ the Company ”), and Andrew S. Prince
(the “ Executive ”).
1.
POSITION
a.
Title; Office . Executive has been employed by and
served as the President and Chief Executive Officer of the Company
since January 19, 2007 (the “ Employment Date
”). Executive’s office will be located at the
Company’s headquarters at 2200 Arthur Kill Road, Staten
Island, New York.
b.
Duties . Executive shall report to the
Company’s Board of Directors (the “ Board of
Directors ”) and shall perform such duties as the
Board of Directors may from time to time require, consistent with
the general level and type of duties and responsibilities
customarily associated with the position of Chief Executive
Officer. For as long as Executive is a member of the Board of
Directors, during the term of this Agreement, Executive shall serve
as a member of the Board of Directors without additional
consideration other than what is provided in this Agreement.
c.
Other Obligations . Executive agrees to the
best of Executive’s ability and experience that he will at
all times loyally and conscientiously perform all of the duties and
obligations required of Executive pursuant to the terms of this
Agreement, and will do so to the reasonable satisfaction of the
Board of Directors. During the term of Executive’s
employment, Executive may engage in other activities while he
manages the Company provided that such activities neither
unreasonably interfere with his management of and duties to the
Company nor adversely reflect on the Company’s reputation.
Executive shall notify the Board of Directors if an outside
activity would be expected to take more than ten hours of normal
work time during the month on a regular basis.
2.
EMPLOYMENT TERM
The Company hereby agrees to employ Executive, and Executive hereby
agrees to be employed by the Company, subject to the terms and
conditions of this Agreement, for a term commencing on the
Employment Date and continuing until September 1, 2008 unless
sooner replaced or terminated as provided in Section 5 below
( the “ Employment Term
” ) . This Agreement shall be deemed to
be renewed for additional one-year terms after its initial term (or
any subsequent renewal term), unless either party delivers written
notice of its intent not to renew this Agreement.
3.
COMPENSATION
a.
Base Salary . During the Employment Term, Executive
will be paid an annual salary of two hundred thousand dollars and
no cents ($200,000.00).
Executive’s salary will be payable in equal weekly
installments pursuant to the Company’s regular payroll
practices (or in the same manner as other employees of the
Company), and shall be subject to the usual, required withholding
of income and employment taxes. Executive’s annual
salary of two hundred thousand dollars and no cents ($200,000.00),
together with any changes thereto, shall be referred to in this
Agreement as “ Base Salary .” Base
Salary will be subject to review by, and change at, the sole
discretion of the Board of Directors, acting or through a
Compensation Committee of the Board of Directors if it so chooses
(the “ Compensation Committee ”).
b.
Incentive and Past Service Bonus . During the
Employment Term, Executive will be eligible for incentive bonuses
based on the achievement of specified financial or other
performance objectives as determined by the Compensation Committee
each year (or such other period as determined by the Compensation
Committee) in its sole discretion (the “ Incentive
Bonus ”). The first of these bonuses shall
include elements that result from Executive’s prior actions
enabling the Company to attain its present position. The
initial bonus elements shall be as follows:
(i) Cash bonuses and/or other form of consideration received
bonuses not to exceed 50% of pretax income are to be calculated and
paid upon the achievement of the following:
1.
1% of net sales from the Freundlich subsidiary greater than 10
Million dollars for the 12 month period ending on August 30, 2008
(the “Anniversary Date”)
payable at the time of filing of the Company’s 10 Q for the
third quarter 2008.
2.
2% of net equity or 1% of debt raised by the Company or its
subsidiaries; this shall include any such funding which refinances
existing credit obligations of the Company or its subsidiaries, but
shall not include the extension of existing obligations or lines of
credit; payable at the time of first funding from the financing.
(Recognizing the unique role Mr. Prince is presently playing within
the Company.)
3.
3% of net pretax consolidated profits in excess of prior year
pretax consolidated profits for the 12 month period ending on the
Anniversary Date payable at the time of filing of the
Company’s 10 Q for the third quarter 2008.
4.
2% of any sale price of a major asset of the Company payable in
form of consideration received for sale of asset – e.g. if
either the Freundlich operation or any other direct subsidiary or
subsidiary of a subsidiary or the Company as a whole is sold either
in one or more asset sales, stock sales or mergers.
5.
In any event total cash bonus or form of consideration received not
to exceed 50% of pretax income.
ii) Stock Options that will be calculated, valued and vest as
follows:
1.
Options to acquire seven percent (7%) of the fully diluted shares
of the company’s common stock if all presently existing
convertible debt and equity securities and warrants and options
were converted (all such post 150:1 reverse split shares being
59,993,397). The options shall be issued in two tranches.
One tranche shall be exercisable through the 60 th
day
after the 150:1 reverse split and its exercise price shall be the
price of the stock on its date of issuance; the other tranche shall
be exercisable, if the first tranche has not been exercised, upon
the 60 th day after the 150:1 reverse split and its
price shall be the price of the company’s common stock on the
60 th day subsequent to the 150:1 reverse split.
The options shall have a duration of 7 years subsequent to
their vesting date.
2.
The per share exercise price of the options shall be share price
of the Company’s common stock 60 business days
subsequent to the commencement of trading of the shares of the
company’s common stock after the effectiveness of the150:1
reverse split
3.
The options shall vest as follows, even if the issuance date is
delayed to accommodate the occurrence of the 150:1 reverse
split:
a.
28% immediately upon the earlier of the signing of this agreement
or September 1, 2007; plus.
b.
6% per month on the last day of each of the successive 12 months
commencing with September 30, 2007; or
c.
Immediately in the event of a change of control of the Company.
"Change in Control" means the occurrence during the Term of any of
the following: (i) the sale, lease, transfer, conveyance, or other
disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all of
the assets of the Company and its Subsidiaries taken as a whole to
any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than a principal owner of the Company or a
related party of a principal; (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person"
(as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in
Rule 13(d)(3) and Rule 13(d)(5) under the Exchange Act of the
Company.
c.
Employee Benefits
During the Employment Term, Executive shall be eligible to
participate in the employee benefits plans currently and hereafter
maintained from time to time by the Company in its sole
discretion, including family group health insurance and a 401(k)
savings plan, provided the Company in its sole discretion elects to
adopt such plans. In the event Executive does not avail
himself of such health insurance, he shall be paid the premiums
which would have been paid by the Company had he and his spouse
participated in the plan Executive shall be entitled to 20
days of vacation per calendar year accrued at the rate of 1.67 days
per month in addition to Company paid holidays. Executive
may, at his election, carry over or be paid for all or any portion
of his unused vacation. Additionally, if Executive obtains a
disability insurance policy at a cost that is
acceptable to the Company, the Company shall reimburse the
Executive for the associated disability insurance premiums incurred
by the Executive during the Employment Term. The Company reserves
the right, at its discretion, to cancel or change the employee
benefit plans and programs it offers to its employees and
consequently to Executive at any time. Executive will be
given a copy of, and must abide by, the Company’s employee
handbo
