Exhibit No. 10.8

 

EXECUTION COPY

 

Retention Agreement – Howard Skurka

 

Set forth below are the agreed terms of employment of Howard Skurka (“Skurka”)
by TransDigm, Inc. (“TransDigm”), conditioned on and effective as of the closing
(the “Closing”) of the acquisition of substantially all of the assets of Skurka
Engineering Company (the “Skurka Assets”) by TransDigm or a subsidiary of
TransDigm (the TransDigm affiliate to which the Skurka Assets are assigned, the
“Company”).

 

1. Skurka will serve as the President of the Company on a full time basis, with
responsibilities commensurate with those titles and as directed by the CEO of
TransDigm or his designee. Skurka acknowledges that his employment by TransDigm
is employment “at will” and may be terminated by Skurka or TransDigm at any
time, with or without reason, subject to the provisions of the Severance
Agreement between Skurka and Skurka Engineering Co. and any other agreements
between the parties.

 

2. Skurka’s base compensation will be at least $165,000 per year. Skurka will be
entitled to health coverage, vacation and other benefits (“Benefits”)
commensurate with his position and consistent with the policies established by
TransDigm from time to time.

 

3. Skurka will be awarded on the date of the Closing options to purchase 600
shares of common stock of TD Holding Corporation at an exercise price equal to
fair market value to be determined by the Board of Directors of TD Holding
Corporation, but in no event greater than $1,400 per share. Skurka will be
required to sign TD Holding Corporation’s forms of option agreement with respect
to each of the time-vesting and performance-vesting options (the “Option
Agreements”) attached as Exhibit A, and all options will be subject to the terms
of TD Holding Corporation’s stock option plan and the Option Agreements.

 

4. Skurka will on the date of the Closing execute a non-competition agreement in
the form attached as Exhibit B.

 

5. Skurka will be eligible for an annual discretionary bonus awarded by the
Board of Directors of TransDigm based on the performance of the Company,
Skurka’s performance and other factors taken into account by the Board of
Directors, with the target amount of each such bonus to be $55,000. The
foregoing bonus is in TransDigm’s sole discretion and there is no guaranty that
any bonus will be paid.

 

6. Skurka will be eligible for an annual non-discretionary performance bonus
(“Target EBITDA Bonus”), the terms of which are set forth on Exhibit C.

 

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The parties have executed this Agreement below to indicate their agreement to
the foregoing terms and conditions.

 

TRANSDIGM, INC.        

By:

 

/s/ Gregory Rufus

      /s/ Howard Skurka

Title:

 

Chief Financial Officer

      HOWARD SKURKA

Date:

 

December 31, 2004

     

Date:

  December 31, 2004

 

TD HOLDING CORPORATION

By:

 

/s/ Gregory Rufus

Title:

 

Chief Financial Officer

Date:

 

December 31, 2004

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EXHIBIT A

 

OPTION AGREEMENTS

 

(see attached)

 

Exh. A-1

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EXHIBIT B

 

NONCOMPETITION AGREEMENT

 

(see attached)

 

Exh. B-1

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EXHIBIT C

 

TERMS OF TARGET EBITDA BONUS

 

(see attached)

 

Exh. C-1

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TERMS OF TARGETED EBITDA BONUS

 

BACKGROUND

 

Company and Skurka desire to set forth the terms and conditions upon which
Skurka may receive an aggregate of up to $1,450,000 as consideration for
services to be rendered in causing Company to achieve certain specified
performance goals.

 

1. CERTAIN DEFINITIONS

 

The following definitions apply:

 

“Acquisition” is defined in Paragraph 2.1(f).

 

“Bonuses” is defined in Paragraph 2.1.

 

“Business” means the principal operating business of Company, i.e., the design,
manufacture, sale and servicing of specialized electric motors.

 

“Calculation Period” means the applicable period for which EBITDA is to be
computed for purposes of determining whether a Bonus is payable for such period.

 

“Cause” means that Skurka has:

 

(a) performed any willful act or acts of dishonesty or been convicted of any
felony;

 

(b) failed to substantially perform Skurka’s duties as President (other than
failure resulting from Skurka’s Unavailability due to Disability);

 

(c) violated or failed to comply in any material respect with Company’s
expressly communicated rules, regulations or policies, as in effect from time to
time, persisting for a reasonable period following the delivery to Skurka of
written notice specifying the details of any alleged failure to perform, which
failure has resulted in demonstrable and material injury and damage to Company;

 

(d) materially breached this Agreement and failed to cure the results of such
breach within a reasonable time after written notice thereof; or

 

(e) been incarcerated for more than 10 business days.

 

An event specified in (b) or (c) will not constitute “Cause” unless and until
Company provides Skurka with written notice of such event setting forth in
reasonable detail the specifics of such event and such event has not been cured.
Action or inaction by Skurka will not be considered “willful” unless done or
omitted by Skurka intentionally or not in good faith and without reasonable
belief that Skurka’s action or inaction was in the best interests of Company,
and will not include failure to act by reason of total or partial Unavailability
due to Disability.

 

Terms - 1

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“Date of Termination” means:

 

(a) if Skurka’s employment is terminated by Company for Cause, or by Employee
for Good Reason, the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be;

 

(b) if Skurka’s employment is terminated by Company other than for Cause or
Unavailability, the date on which Company notifies Skurka of such termination;
and

 

(c) if Skurka’s employment is terminated by reason of death or Unavailability,
the date of death of Skurka or the effective date, of the Unavailability, as the
case may be.

 

“Disability” means Skurka’s inability to substantially render to Company
services as the President and Chief Operating Officer of Company for more than
60 days out of any consecutive 180-day period because of mental or physical
illness or incapacity, as determined in good faith by Employer.

 

“Draft Report” is defined in Paragraph 2.4.

 

“EBITDA” shall be derived from Company’s financial statements and calculated in
accordance with GAAP and Skurka Engineering Company’s historical accounting
practices and Schedule A attached hereto.

 

“GAAP” means United States generally accepted accounting principles as in effect
from time to time.

 

“Good Reason” means:

 

(a) a material diminution in Skurka’s duties, responsibilities or title;

 

(b) relocation of Company’s principal executive offices or Skurka’s primary
place of employment outside of Ventura County, California; or

 

(c) Company’s material breach of this Agreement.

 

“Independent Accountants” is defined in Paragraph 2.3.

 

“Skurka Review Period” is defined in Paragraph 2.2.

 

“Stretch EBITDA” means the cumulative amount of EBITDA of the Business of $5.7
million through the 12 months ending September 30, 2005, $12.6 million through
the 24 months ending September 30, 2006 and $20.2 million through the 36 months
ending September 30, 2007.

 

“Target EBITDA” means the cumulative amount of EBITDA of the Business of
$4.9 million through the 12 months ending September 30, 2005, $10.2 million
through the 24 months ending September 30, 2006 and $16 million through the 36
months ending September 30, 2007.

 

Terms - 2

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“Unavailability” means Skurka’s inability to substantially render to Company
services as the President of Company by reason of Disability or other
incapacity, or by reason of any statute, law, ordinance, regulation, order,
judgment or decree, except for an instance that would constitute Cause.

 

2. CALCULATION AND PAYMENT COMPANY

 

2.1 Bonus Payment. Subject to the requirements and calculations set forth below,
Company will pay to Skurka in cash the amounts reflected in the following table
(the “Bonuses”). Company will pay any amount owed to Skurka within 10 days after
such amount is finally determined in accordance with the procedures set forth in
this Agreement.

 

Calculation

Period Ending

September 30,

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Cumulative

Target EBITDA*

If it is at least:

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Minimum

Bonus**

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Cumulative

Stretch EBITDA*

If it is at least:

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Maximum

Bonus**

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2005    $ 4,900,000    $ 100,000    $ 5,700,000    $ 150,000 2006    $
10,200,000    $ 300,000    $ 12,600,000    $ 450,000 2007    $ 16,000,000    $
400,000    $ 20,200,000    $ 850,000

 

* No bonus will be payable under this Agreement for any period in which the
Cumulative Target EBITDA has not been met, but if there is a shortfall for any
period or periods that is made up in subsequent periods, the Bonus for such
subsequent period will be payable. For example, if EBITDA was $4,500,000 in
2005, no Bonus would be payable in 2005, but if EBITDA was $5,700,000, such that
2005 and 2006 Cumulative EBITDA was $10,200,000, the $300,000 Bonus for 2006
would be payable.

 

** Amounts between indicated dollar amounts will be prorated based on the
following formula for the relevant Calculation Period:

 

Prorated Bonus = Minimum Bonus plus ((Maximum Bonus — Minimum Bonus) / (Stretch
EBITDA — Target EBITDA) x (Actual Cumulative EBITDA — Target EBITDA)

 

For example, if in 2006 the Actual Cumulative EBITDA is $11,000,000, the bonus
would be $350,000 = $300,000 + (($450,000 – $300,000)/($12,600,000 –
$10,200,000) x ($11,000,000 – $10,200,000))

 

Similarly, if for any reason under this Agreement an event occurs that causes
the EBITDA calculations to be made before the end of the applicable Calculation
Period, appropriate and equitable pro rations will be made to reflect the then
anticipated EBITDA results for the Calculation Period in question.

 

(a) Termination; Resignation. Notwithstanding any other provision in this
Agreement to the contrary, if Skurka (i) has been terminated by the Company for
Cause or

 

Terms - 3

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(ii) voluntarily resigns without Good Reason, Skurka will not be entitled to
Bonus payments for the fiscal year in which the Date of Termination occurs. If
Skurka’s employment is terminated for any reason other than Cause or without
Good Reason, Skurka will be entitled to payment of a pro-rated Bonus based on
the number of days Skurka was employed for the fiscal year in which the Date of
Termination occurs.

 

(b) Operate Business Separately. During the period that the Bonus payments are
being determined, TransDigm will maintain books and records and an accounting
system as if it were a separate entity, reasonably sufficient for the purpose of
determining the EBITDA of the Company and making all other determinations
necessary for determination of the payments hereunder.

 

(c) Working Capital. TransDigm will, upon its approval and in its sole
discretion, make funds available to the Company as needed for working capital,
for capital expenditures and for other reasonable purposes consistent with the
Company’s approved operating plan and approved subsequent forecast.

 

(d) Effect of Acquisition. If at any time the Business is expanded by an
acquisition, through purchase of assets, merger, consolidation or additions to
the historical product lines of the Business not now planned (an “Acquisition”),
the records of the Business will be maintained in a manner that will enable the
calculations contemplated hereby to be unaffected by the Acquisition and/or
appropriate and mutually agreed upon adjustments in the Target and Stretch
EBITDA levels and methods of calculation under this Agreement to accomplish such
result.

 

(e) No Contrary Agreements. The Company does not have and will not enter into
any agreement, arrangement or understanding that would prevent or delay prompt
payments when due under this Agreement.

 

(f) Right of Offset. The Company and TransDigm shall have the right to offset
against the Bonus payments for any amounts finally determined due by Skurka in
accordance with the procedures set forth in that certain Asset Purchase
Agreement dated as of the date hereof or any other agreement contemplated hereby
or thereby.

 

(g) Operating Decisions. Operating decisions with respect to the conduct of the
Business will be made by Skurka, subject to the overall supervision of the
Company’s board of directors.

 

(h) Payments in Addition. All payments under this Paragraph 2 are in addition to
any other compensation, bonus, incentive, or other arrangements that may be
owing to Skurka under any other plan or arrangement.

 

2.2 Report of Cumulative EBITDA. As soon as practicable after the end of
each Calculation Period (and no later than ten days after filing of TransDigm’s
Form 10-K with the Securities and Exchange Commission, if such filing is
required, and if such filing is not required, no later than ten days after
completion of TransDigm’s audit and approval of the audit report by TransDigm’s
Board of Directors), the Company will deliver to Skurka a draft report, prepared
in accordance with this Agreement, reflecting the Company’s Cumulative EBITDA
through the end of such period (the “Draft Report”). The costs and expenses
associated with

 

Terms - 4

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the preparation of the Draft Reports will be borne by the Company. Skurka will
have 30 days to review the Draft Report (such 30-day period, through the close
of business on the 30th day, being referred to herein as the “Skurka Review
Period”). The Company will cooperate with Skurka in this review of and will make
available to Skurka and Skurka’s representatives and agents all information and
data relating to the preparation of the Draft Report as Skurka may reasonably
request.

 

2.3 Resolution of Disputes. If Skurka disagrees with the determination of
Cumulative EBITDA as shown in the Draft Report before the Skurka Review Period
expires, Skurka will notify the Company of the matters with which Skurka
disagrees before the Skurka Review Period expires, and the parties will use
their best efforts to resolve any differences promptly. If the Company and
Skurka are unable to resolve any disagreements that they may have with respect
to the Draft Report’s determination of Cumulative EBITDA within 30 days after
Skurka notifies the Company of the disagreement, then within ten days after such
second 30-day period expires, the disputed matters will be referred for final
determination to a nationally recognized accounting firm that does not have an
existing relationship with the Company, as the parties mutually designate (the
“Independent Accountants”). The scope of the Independent Accountants’ review
will be limited to the matters on which the Company and Skurka disagree. Skurka
on the one hand, and the Company, on the other, will bear the costs and expenses
of the Independent Accountants in proportion to the amount, if any, by which the
final determination of the Bonus for such period differs from the Bonus based on
the calculation in the Draft Report.

 

2.4 Binding Effect. The Draft Report, with any revisions pursuant to the
Independent Accountants’ determination, will be binding on Skurka and the
Company upon (a) the Company’s failure to deliver to Skurka a notice of
disagreement before the Company Review Period expires, (b) resolution of any
disagreement by mutual agreement of the parties after a timely notice of
disagreement has been delivered to Skurka, or (c) notification by the
Independent Accountants of their final determination of the items of
disagreement submitted to them.

 

[END]

 

Terms - 5

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SCHEDULE A

 

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) shall
be calculated as follows:

 

Net Income, plus Income Tax Expense, Interest Expense, Depreciation Expense,
Amortization Expense, Extraordinary Losses and Transaction-Related Expenses,
minus Interest Income and Income Tax Refunds Paid to the Company.

 

In calculating EBITDA direct charges billed to the Company’s corporate parent
but directly relating to services consumed by the Company may be charged to the
Company, including legal and insurance expenses; provided, that such charges
will not include nonoperational expenses not historically utilized by Skurka
Engineering Company and/or charges or income due to changes in accounting
methodologies. Such costs must be reasonable in amount for services reasonably
required by the business and actually furnished to the Company. No charges to
the Company for general corporate overhead allocations (including any audits
related to the Company’s status as a subsidiary of a public company) will be
made.

 

EBITDA will be calculated:

 

(a) by adjusting EBITDA to add back the expense of any Bonuses paid under this
Agreement;

 

(b) by adjusting EBITDA to add back any charges attributable to equity
incentives granted to officers or employees of the Company; and

 

(c) by adjusting EBITDA for any expenses related to the consummation of
TransDigm’s or the Company’s acquisition of the assets of Skurka Engineering
Company, including attorneys’, accountants’ and financial advisors’ fees.

 

If mutually desired, Skurka and the Company may agree to calculate EBITDA (or
any component thereof) in accordance with the Company’s accounting practices and
financial systems; provided that if EBITDA (or any component thereof) is
increased or decreased in connection with such calculation, the Cumulative
Target EBITDA and Cumulative Stretch EBITDA levels will be adjusted accordingly.

 

Terms - 6