Document:

Exhibit 10.4

 

EXECUTION COPY

 

TRANSACTION BONUS AND NONCOMPETITION

AGREEMENT

 

This Transaction Bonus and Noncompetition Agreement (this “Agreement”), dated as of the 30th day of April, 2018, is by and between KLX Inc., a Delaware corporation (the “Company”), and Roger M. Franks (the “Executive”).

 

WHEREAS, the Executive is employed as the Company’s General Counsel, Vice President — Law and Human Resources pursuant to the terms and conditions of that certain Amended and Restated Employment Agreement, dated as of December 22, 2015 (the “Employment Agreement”); and

 

WHEREAS, in an effort to (i) reward the Executive for his efforts towards the success of the Company and the return to shareholders, (ii) incentivize the Executive to facilitate the successful and satisfactory consummation of the transactions contemplated under that certain Agreement and Plan of Merger, by and among the Company, The Boeing Company and Kelly Merger Sub, Inc., dated as of April 30, 2018 (the “Transaction”), and (iii) retain the Executive’s services as the Company’s General Counsel, Vice President — Law and Human Resources through the consummation of the Transaction, the Company wishes to enter into this Agreement and provide for the compensation specified herein to be paid to the Executive in connection with the consummation of the Transaction, subject to all of the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree to the following:

 

1.                                      Transaction Bonus.

 

a)                                     Transaction Bonus. Subject to the conditions set forth in this Agreement, upon the consummation of the Transaction, the Executive shall receive a lump sum cash payment in an amount equal to $3,330,000 (the “Transaction Bonus”).

 

b)                                     Tax Withholding. Payment of the Transaction Bonus hereunder shall be subject to all applicable income and employment taxes and any other amounts that the Company is required by any applicable law to deduct and withhold therefrom.

 

c)                                      Other Benefits. The Transaction Bonus is a special incentive payment to the Executive and shall not be taken into account in computing the amount of salary or compensation for purposes of determining any bonus, incentive, pension, retirement, death or other benefit under any other bonus, incentive pension, retirement, insurance or other employee benefit plan of the Company, unless such plan or agreement expressly provides otherwise.

 

d)                                     Conditions.

 

i)                                         Continued Employment. Unless directed otherwise by the Company in writing, the Executive shall continue to perform the Executive’s regular and customary duties and responsibilities to the Company and its affiliates through the date of consummation of the

 

 

Transaction. In the event of the Executive’s termination of employment prior to the consummation of the Transaction, the Executive shall forfeit the Executive’s right to receive the Transaction Bonus hereunder.  Notwithstanding the foregoing, if the Executive’s employment is terminated prior to the consummation of the Transaction by the Company for any reason other than for “Cause”, by the Executive for “Good Reason”, or due to the Executive’s death or “Incapacity” (in each case, as such term is defined in the Employment Agreement), the Executive shall be entitled to receive the Transaction Bonus, subject to Section 1(d)(ii) of this Agreement.

 

ii)                                      Consummation of Transaction. In the event that the Transaction is abandoned or is otherwise not consummated for any reason on or prior to December 31, 2019, this Agreement and the Executive’s rights and obligations hereunder, including, without limitation, the Executive’s obligations under Section 2(a) of this Agreement, shall be null and void and without any further legal force or effect whatsoever.

 

e)                                      Code Section 280G. The Executive and the Company each agree that the “Accounting Firm” (within the meaning of Section 4(h)(vi)(A) of the Employment Agreement), for purposes of making all calculations and determinations with respect to Sections 280G and 4999 of the United States Internal Revenue Code of 1986, as amended, will be made by Golden Parachute Tax Solutions, LLC, or such other independent public accountant as may be selected by the Executive in the Executive’s sole discretion, whose determination will be conclusive and binding for all purposes upon the Executive and the Company.

 

2.                                      Noncompetition.

 

a)                                     Noncompetition. In consideration of the benefits hereunder, the Executive agrees that during the Executive’s employment with the Company and for a period of three (3) years thereafter in the event that the Executive’s employment is terminated in accordance with Section 4(f) of the Employment Agreement, the Executive will not engage in any employment, consulting, or other activity in any business directly competitive with the Company’s operations and services as of the date of the Executive’s termination of employment, without the Company’s written consent, which consent shall not be unreasonably withheld; provided, however, that nothing in this Section 2(a) shall preclude the Executive from serving as a director of any corporation or a partner or investor in a private equity firm.

 

b)                                     Reformation. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 2 is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state.

 

c)                                      Equitable Relief and Other Remedies. The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of this Section 2 would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to seek equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages or the posting of a bond or other security.  In the event of a material violation by the Executive of this Section 2, in addition

 

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to any remedies which may then be available under applicable law or any agreement between the Executive and the Company, any then outstanding equity awards granted to the Executive under any equity compensation plan of the Company or otherwise, whether vested or unvested, shall be subject to immediate forfeiture and cancellation by the Company without any consideration being paid therefor.

 

3.                                      Impact of Termination of Employment.  Upon the Executive’s termination of employment pursuant to Section 4(f) of the Employment Agreement, in addition to the payments described in Section 4(f) of the Employment Agreement, the Company shall provide the Executive with Company-paid customary and market outplacement services for a period of twelve (12) months or until the Executive obtains substantially comparable employment, whichever is shorter.

 

4.                                      General.

 

a)                                     Survival of Provisions. The obligations contained in this Agreement shall survive the termination of the Executive’s employment with the Company and shall be fully enforceable thereafter.

 

b)                                     No Right to Continued Employment. Nothing in this Agreement shall confer upon the Executive any right to continued employment with the Company or its affiliates or to interfere in any way with the right of the Company or its affiliates to terminate the Executive’s employment at any time.

 

c)                                      Code Section 409A Compliance. Although the Company does not guarantee the tax treatment of any payment hereunder, the intent of the parties is that payments under this Agreement be exempt from, or comply with, Section 409A of the Code and the regulations and guidance promulgated thereunder and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted in a manner consistent therewith.

 

d)                                     Governing Law; Jurisdiction. This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of Florida, without giving effect to the choice of law principles thereof. Each of the parties agrees that any dispute between the parties shall be resolved only in the courts of the State of Florida or the United States District Court for the Southern District of Florida and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, each of the parties hereto irrevocably and unconditionally (a) submits in any proceeding relating to this Agreement or the Executive’s employment by the Company or any affiliate, or for the recognition and enforcement of any judgment in respect thereof (a “Proceeding”), to the exclusive jurisdiction of the courts of the State of Florida, the court of the United States of America for the Southern District of Florida, and appellate courts having jurisdiction of appeals from any of the foregoing, and agrees that all claims in respect of any such Proceeding shall be heard and determined in such Florida State court or, to the extent permitted by law, in such federal court, (b) consents that any such Proceeding may and shall be brought in such courts and waives any objection that the Executive or the Company may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agrees not to plead or claim the same, (c) WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING

 

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OUT OF OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT BY THE COMPANY OR ANY AFFILIATE OF THE COMPANY, OR THE EXECUTIVE’S OR THE COMPANY’S PERFORMANCE UNDER, OR THE ENFORCEMENT OF, THIS AGREEMENT, (d) agrees that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, and (e) agrees that nothing in this Agreement shall affect the right to effect service of process in any other manner permitted by the laws of the State of Florida. Each party shall be responsible for its own legal fees incurred in connection with any dispute hereunder.

 

e)                                      Severability. In the event that any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision never existed.

 

f)                                       Non-Assignment; Successors. This Agreement is personal to each of the parties hereto. Except as provided in this Section 4(f), no party may assign or delegate any rights or obligations hereunder without first obtaining the advanced written consent of the other parties hereto. Any purported assignment or delegation by the Executive in violation of the foregoing shall be null and void ab initio and of no force and effect. The Company may assign this Agreement to a person or entity that is an affiliate of the Company or to any successor to all or substantially all of the business and/or assets of the Company, which assumes in writing, or by operation of law, the obligations of the Company hereunder.

 

g)                                      Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

 

h)                                     No Obligation; Company Discretion. No provision of this Agreement shall be interpreted to impose an obligation on the Company to accept, agree to or otherwise consummate the Transaction. The decision to consummate the Transaction, and all terms and conditions of such transaction, including the amount, timing and form of consideration to be provided in connection therewith, shall be within the sole and absolute discretion of the Company.

 

i)                                         Entire Agreement; Amendment. Except as specifically contemplated herein, this Agreement constitutes the entire agreement by the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior agreements or understandings between the Executive and the Company with respect to the subject matter hereof, whether written or oral. Notwithstanding the foregoing, except to the extent specifically contemplated herein, nothing herein is intended to supersede any employment agreement, or any incentive, equity, compensation or benefit arrangement between the Executive and the Company; provided, however, that to the extent that there is any conflict between any such agreement or arrangement and this Agreement, the terms of this Agreement shall control. This Agreement may be amended or modified only by a written instrument executed by the Executive and the Company.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

	
 
    	
 
    
	
 
    	
EXECUTIVE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Roger M. Franks
    
	
 
    	
Roger M. Franks
    

 

Transaction Bonus Agreement Signature Page

 

 

	
 
    	
KLX INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas P. McCaffrey
    
	
 
    	
Name:
    	
Thomas P. McCaffrey
    
	
 
    	
Title:
    	
President and Chief   Operating Officer
    

 

Transaction Bonus Agreement Signature PageExhibit 10.5

 

Employment Agreement Amendment

 

WHEREAS, KLX, Inc., a Delaware corporation (the “Company”), and Amin J. Khoury (“Executive”) (collectively, the “Parties”) have previously entered into that certain Amended and Restated Employment Agreement, dated as of May 25, 2017 (the “Agreement”);

 

WHEREAS, the parties desire to amend the Agreement pursuant to the terms of this Employment Agreement Amendment (this “Amendment”) for the primary purposes of (i) conditioned upon the Closing (as defined below), eliminating the Consulting Agreement in all respects, including the Executive’s obligations thereunder to provide substantial services and the Company’s obligations thereunder to provide compensation and benefits, (ii) reflecting the transactions contemplated by the Agreement and Plan of Merger dated as of April 30, 2018, by and among The Boeing Company, a Delaware corporation (“Parent”), Kelly Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent, and the Company (the “Merger Agreement”), which, if consummated, will result in the “Closing”, and (iii) reflecting the spin-off of a portion of the Company, as contemplated in the Merger Agreement, into a corporation organized under the laws of the State of Delaware (“ESG SpinCo”), which, if consummated, will result in the “Spin-off”.

 

WHEREAS, the parties desire that capitalized terms used but not otherwise defined in this Amendment shall have the meanings set forth in the Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants, commitments and agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Parties intending to be legally bound hereby agree to amend the Agreement as follows:

 

1.             Amended Provisions.  The Agreement is hereby amended as follows:

 

(a)           Effective immediately prior to the Spin-Off, Section 3.3 of the Agreement is hereby amended and replaced in its entirety with the following:

 

“Performance. During the Employment Term, Executive shall use his business judgment, skill and knowledge to the advance of the Company’s interests and to the discharge of his duties and responsibilities hereunder; provided, however, that Executive shall be required only to devote so much time as Executive determines is reasonably necessary to discharge his duties as Chairman of the Board and Chief Executive Officer, and, subject to the provisions of Section 5 below, Executive may engage in other business activities during the employment Term, including, without limitation, serving as an employee, director or consultant of B/E aerospace, Inc., a Delaware corporation, or its successor (‘B/E’), or of ESG SpinCo, an entity the Company plans to create under a Distribution Agreement dated as of [·] by and between KLX Inc., a corporation formed under the laws of the State of Delaware and KLX Energy Services Holdings, Inc. a corporation formed under the laws of the State of Delaware.”

 

 

(b)           Effective immediately prior to the Closing, Section 4.7 of the Agreement is hereby amended by removing the phrase “and during the ‘Consulting Period’ (as defined in Section 6.5 hereof)”.  The remaining portions of Section 4.7 shall remain unchanged.

 

(c)           Effective immediately prior to the Spin-Off, Section 5.4 shall is hereby amended by inserting the phrase “, or ESG SpinCo.” at the end of the last sentence therein. The remaining portions of Section 5.4 shall remain unchanged.

 

(d)           Effective immediately prior to the Spin-Off, Section 6.1.1 of the Agreement is hereby amended and replaced in its entirety with the following:

 

“Termination Date.  The term ‘Termination Date’ shall mean the date on which Executive’s employment with the Company and its subsidiaries and affiliates terminates for any reason.”

 

(e)           Effective immediately prior to the Closing, Section 6.4.2 of the Agreement is hereby amended by replacing clause (iii) in its entirety with the following:

 

“(iii) a lump-sum equal to the sum of (A) the Termination Amount calculated using rates in effect on the Change of Control Date, plus (B) seven million, five hundred thousand dollars ($7,500,000.00);”.

 

(f)            Effective immediately prior to the Closing, Section 6.5 of the Agreement and Exhibit B to the Agreement are hereby deleted in their entireties and replaced with “[RESERVED]”.

 

(g)           Effective immediately prior to the Closing, the following new provisions are added as Sections 18 through 20 immediately following Section 17 of the Agreement:

 

“18.  Post-Separation Cooperation.  Executive shall cooperate with the Company and its subsidiaries and affiliates in any disputes with third parties, internal investigation or administrative, regulatory or judicial proceeding (excluding any such proceeding in which Executive is an adverse party) as reasonably requested by the Company (including Executive being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities and commitments).  Executive shall not be entitled to any compensation with respect to the services contemplated by this Section 18 (though the Company shall reimburse Executive for reasonable travel expenses (including lodging and meals, upon submission of receipts)) and, for the avoidance of doubt, such services shall not constitute employment by Company or any of its affiliates.

 

 “19.  Trade Secrets.  Nothing in this Agreement is intended to conflict with the

 

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whistleblower provisions of any United States federal, state or local law or regulation, including but not limited to Rule 21F-17 of the Securities Exchange Act of 1934 or § 1833(b) of the Defend Trade Secrets Act of 2016.  Accordingly, nothing in this Agreement prohibits Executive from reporting possible violations of United States federal, state or local law or regulation to any United States federal, state or local governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or to an attorney, or from making other disclosures that are protected under the whistleblower provisions of federal law or regulation, or from disclosing trade secrets and other confidential information in the course of such reporting; provided, however, that Executive uses his reasonable best efforts to (a) disclose only information that is reasonably related to such possible violations or that is requested by such agency or entity, and (b) request that such agency or entity treat such information as confidential.  Executive does not need the prior authorization of the Company to make any such reports or disclosures and Executive is not required to notify the Company that he has made such reports or disclosures.  In addition, Executive has the right to disclose trade secrets and other confidential information in a document filed in a lawsuit or other proceeding, provided that the filing is made under seal and protected from public disclosure.

 

“20.  Third Party Beneficiaries. The Releasees (as defined in Exhibit C) are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Releases. Executive’s heirs or assigns also are intended third-party beneficiaries with respect to the separation benefits set forth in Section 6 in the event of Executive’s death. Except and to the extent set forth in the preceding two sentences, this Agreement is not intended for the benefit of any person or entity other than the Company and Executive, and no such other person or entity will be deemed to be a third party beneficiary hereof.”

 

(h)           Effective immediately prior to the Spin-Off, the reference to the employment agreement in Exhibit C shall be replaced with “that certain Employment Agreement, dated as of May 25, 2017, as amended from time to time, by and between Employee and the Company (the ‘Employment Agreement’).”

 

2.             Effect on Agreement.  All other provisions of the Agreement not addressed in this Amendment shall remain in full force and effect.  To the extent there is any conflict between the provisions in the Agreement and the provisions in this Amendment, this Amendment shall prevail and control. In the event either the Spin-off or Closing does not occur, the provisions of this Amendment otherwise effective upon the Spin-off or Closing, as applicable, shall have no force or effect.

 

3.             Reaffirmation of Restrictive Covenants.  Executive expressly acknowledges and reaffirms his understanding of, and agreement to comply with, all of his post-employment obligations under the Agreement, including, without limitation, the restrictive covenants and confidentiality provisions of Section 5 of the Employment Agreement, as amended herein (the “Restrictive Covenants”).  Nothing set forth in this Agreement shall in any way limit Executive’s obligations to comply with the Restrictive Covenants.

 

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4.             Counterparts. This Amendment may be executed in separate counterparts, each of which will be deemed to be an original and all of which taken together will constitute one and the same agreement.

 

*              *              *              *              *

 

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IN WITNESS WHEREOF, the Parties have executed this Amendment as of the dates set forth herein.

 

 

	
 
    	
KLX   INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas P. McCaffrey
    
	
 
    	
Name:
    	
Thomas   P. McCaffrey
    
	
 
    	
Its:
    	
President   and Chief Operating Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Amin J. Khoury
    
	
 
    	
Amin   J. Khoury
    

 

[Signature Page to Amendment of Employment Agreement]

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