Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of April
28, 2005 by and between National Technical Systems, Inc., a California
corporation ("Employer"), and Xxxx Xxx ("Employee").
RECITALS
A. Employee is a founder of Employer and has for many years served as
Chairman of its Board of Directors ("Chairman") and as its Chief Executive
Officer ("CEO"). Employer desires to retain the benefit of Employee's skill,
knowledge and experience in order to insure the continued successful operation
of its business and that of its operating subsidiaries and to provide for the
transition of Employee's responsibilities and duties as CEO to the new CEO and
for Employee's eventual retirement.
B. The Board of Directors of Employer (the "Board") has determined that it
is in Employer's best interest and that of its shareholders to secure the
services of Employee, to provide for the transition of Employee's
responsibilities and duties as CEO to the new CEO and for Employee's eventual
retirement and to resolve all compensation issues related thereto.
C. The parties are entering into this agreement to set forth the terms
under which Employee will render services as Chairman of the Board, and
thereafter as Chairman Emeritus. It is also the purpose of this Agreement to
address and resolve any potential severance compensation issues relating to
Employee's eventual separation from the Company, it being understood that the
compensation and benefits set forth herein shall be inclusive of any severance
benefits to which Employee might be entitled upon such separation.
AGREEMENT
In consideration of the mutual promises and covenants contained herein,
the parties agree as follows:
1. Background. Employee is currently employed by Employer as its
Chairman. Except as noted herein, this Agreement supersedes all prior written
and oral agreements between Employer and Employee and Employer's employment
manual as to Employee in their entirety.
2. Term. Employer agrees to employ Employee and Employee agrees to
serve Employer, in accordance with the terms of this Agreement, for a term
commencing on May 1, 2005 and ending on April 30, 2010, unless this Agreement is
earlier terminated in accordance with the provisions contained in subsections
6(a), (b), (c) or (d) (the "Term").
3. Duties of Employee.
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(a) During the Term, Employee shall continue to
serve as Chairman, provided that he is renominated by the Board of Directors
(the "Board") as a management slate nominee and is reelected by the shareholders
when his current term as a director of Employer ends in June 2005 and again in
2008. By its approval of this Agreement, the Board agrees (i) to nominate
Employee as a director on the management slate of Class III directors standing
for election at the June 2005 annual meeting of Employer's shareholders, and
(ii) to nominate Employee as a director on the management slate of Class III
directors standing for election at the 2008 annual meeting of Employer's
shareholders ("2008 Annual Meeting") if Employee has performed his duties as
Chairman during the preceding three year term in accordance with the provisions
of this Agreement and the Bylaws of Employer and has not engaged in any conduct
which has been determined in good faith by the Board to have been detrimental to
the interests of Employer and that such nomination is not otherwise determined
in good faith by the Board to breach its fiduciary duties and/or those of its
individual members. In the event Employee is not renominated as a director in
2008 or is not elected a director by the shareholders at either the 2005 or 2008
Annual Meeting of shareholders, or voluntarily resigns his position as Chairman,
Employee shall continue as an employee of Employer through the balance of the
Term with the title "Chairman Emeritus" and shall be entitled to continue to
receive all of the compensation and benefits described in Section 4 hereof for
the balance of the Term in accordance with the terms and conditions of this
Agreement.
(b) Employee shall perform and discharge the usual
and customary duties of the office of Chairman. In addition, during the Term,
Employee shall serve as president of E.C.T.R., chairman of the board of National
Quality Assurance and head of the corporate development office of Employer and
shall serve on the committee of the Board that will evaluate the CEO. In
addition, Employee shall support the CEO as requested from time-to-time by the
CEO. This support shall include such items as mentoring and coaching of the CEO
and/or his staff and shall include the transfer of "cultural" values to the CEO
and his staff that have contributed to the past successes of Employer.
Notwithstanding anything to the contrary contained herein, upon 30 days prior
written notice from the CEO to Employee of Employer's intention to modify or
terminate any or all of the duties of Employee under this Agreement, other than
those that directly relate to his office as Chairman or Chairman Emeritus, the
independent directors on the Board of Directors, as determined in accordance
with the federal securities laws (the "Independent Directors"), shall, within
such 30-day period, meet separately with the CEO and with Employee, if Employee
expresses a desire to meet with the Independent Directors, and provide each of
the CEO and Employee with the opportunity to present his reasons why such
termination or modification is or is not warranted. Following the Independent
Directors' meetings with the CEO and Employee, the Independent Directors shall,
in their sole discretion, determine whether under the circumstances such
modification or termination is in the best interests of Employer. Termination or
modification of Employee's duties shall require the affirmative vote of 75% of
the Independent Directors. Any such modification or termination shall not reduce
or modify any other compensation, benefits or rights of Employee under this
Agreement unless the termination of Employee's duties relates to subsection 6(c)
below, Employer may not significantly expand or change the location of the
duties to be performed by Employee under this Agreement without the prior
consent of Employee. In addition, Employer may not remove Employee as Chairman
during the Term if he has been reelected as a director at the 2005 and 2008
annual meetings of shareholders of Employer, except in connection with any
termination of his employment pursuant to Section 6 of this Agreement. If
Employee is serving
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as Chairman Emeritus because he was not elected as a director at either the 2005
or 2008 annual meetings of shareholders of Employer, Employer may not remove
Employee as Chairman Emeritus during the Term, except in connection with any
termination pursuant to Section 6.
(c) Employee agrees to devote such amount of his
working time and attention as his duties under this Agreement may require, and
he may devote such time for personal, charitable, investment and professional
activities that does not substantially interfere with the services to be
rendered by him hereunder.
4. Compensation.
(a) Total Compensation. During the Term, Employer
agrees to pay Employee annual compensation consisting of $125,000 in base salary
for services as Chairman or Chairman Emeritus ("Base Salary") and $175,000 as a
retirement benefit ("Retirement Benefit"). Employee's compensation shall be
earned and payable in accordance with Employer's usual and customary payroll
practices as in effect from time to time. Any increase in Base Salary during the
Term shall be as determined from time-to-time in the sole discretion of the
Board of Directors. Base Salary and Retirement Benefit are hereinafter referred
together as "Total Compensation."
(b) Bonus or Incentive Compensation. Employee will
receive an annual cash bonus each year in an amount equal to 75% of the amount
of the bonus paid to the CEO for the same period, if any, and payable at the
same time as payment of the CEO's bonus. Employee shall also be entitled to a
$30,000 bonus each fiscal year during the Term that Employer achieves at least
$1,000,000 in pre-tax net income, determined in accordance with generally
accepted accounting principles consistently applied by Employer (the "Benchmark
Amount") during the fiscal year in which the bonus is to be accrued, payable in
equal installments within 45 days after the end of each fiscal quarter of said
year. Employee hereby undertakes to repay to Employer the full amount of the
aggregate bonus payments within 30 days following the date of Employer's audited
financial statements, in the event that Employer fails to achieve the Benchmark
Amount. In the event that Employer is, or substantially all of its assets are,
acquired in a transaction in which the per share purchase price payable to the
shareholders of Employer or to Employer is at least $10.00, Employer's
obligations hereunder to pay any bonus to Employee shall cease, except to the
extent that a bonus has accrued and is unpaid, cease on the date of the closing
of the acquisition. In the event that for any reason Employer eliminates the
position of CEO, or after a change of control (for less than $10.00/share) the
operating structure of Employer materially changes such that there is no longer
a chief executive officer of Employer or the business unit that was Employer,
Employee's bonus shall be an amount equal to 75% of the bonus received by the
employee whose duties are substantially similar in scope to those that are
currently performed by the CEO.
(c) Stock Options. Stock option grants to
Employee, if any, shall be as determined from time to time in the sole
discretion of the Board.
(d) Additional Benefits. Employee shall also be
entitled to participate in any pension plan, life, medical, dental, disability,
or other insurance plan of the Employer as from time to time may be in effect
during the term of this Agreement (the
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"Company Plans") that Employer may provide generally for senior management-level
employees of Employer (collectively, "Additional Benefits"); provided, however,
that Employee shall be entitled to receive a medical expense allowance in an
amount not to exceed $27,450 annually; provided, further, however that while
this Agreement remains in force, in the event Employee is ineligible to
participate in the Company Plans, Employer will provide for Employee, at
Employer's expense, participation in medical, accident and health, income
continuation and life insurance benefits on terms and in amounts not less
beneficial to Employee than those provided by the Company Plans, in effect on
the date hereof, subject to a determination of Employee's eligibility under said
programs in accordance with their respective terms. Said coverage will be in
existence as of the commencement of the Term and will continue during the Term.
Employer's liability to Employee for any breach of this subsection will be
limited to the amount of premiums payable by Employee to obtain the benefits and
coverage contemplated herein.
(e) Automobile. During the Term, Employee shall
receive the same monthly automobile allowance as the highest monthly automobile
allowance provided from time to time to any other employee of Employer.
(f) Office and Secretary. During the Term,
Employer shall provide Employee with the exclusive use of an office and the use
of a secretary (which may be on a shared basis, but which Secretary shall be
available to work for Employee a minimum of 25 hours per week) at the principal
executive offices of Employer.
(g) Dues for Professional Societies. During the
Term, Employer will reimburse Employee for dues and membership fees paid by
Employee in appropriate professional societies in which he participates in an
amount not to exceed $800 annually.
(h) Country Clubs. During the Term, Employee shall
continue to be the named member of the Spanish Hills Country Club. If, during
the Term, Employee elects to join another country club, he shall be responsible
for paying the membership fee and all monthly dues.
(i) Executive Transition Support. During the Term,
Employer shall reimburse Employee for the costs for any appropriate educational
programs and attendance at appropriate professional meetings, in accordance with
past practices, so long as such educational programs and/or professional
meetings relate to Employer's business. Specifically, and without limitation of
the foregoing, Employer will reimburse Employee for costs of attending
educational programs relating to chief executive career transition (e.g., "Next
Step" Program).
(j) Annual Membership in Two Airline Clubs. During
the Term, Employer shall reimburse Employee for his annual membership fees for
airline clubs in an amount not to exceed $500 annually.
5. Employer-Employee Relationship After Expiration of the Term.
Upon expiration of the Term, Employee shall cease to be Chairman,
but shall remain a director of Employer until expiration of his then term as a
director. The Board may, but
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shall not be obligated to, nominate Employee as a director for an additional
term or terms. Employee may, at his option, retain the title of "Chairman
Emeritus" following the termination of Employee's services as a director. As
Chairman Emeritus, Employee shall, until his death, remain an employee of
Employer and shall be entitled to the following:
(a) Compensation. If Employer is still a publicly
traded company, Employee shall be entitled to receive compensation equal to the
compensation paid from time to time to non-employee directors of Employer
(irrespective of attendance at meetings). If Employer ceases to be publicly
traded, Employee's annual compensation shall be equal to the annual compensation
of non-employee directors during the last year Employer's stock was publicly
traded. Employee shall not be entitled to any other compensation after
expiration of the Term.
(b) Benefits. Employee shall continue to
participate in any accidental and health insurance, medical savings, and/or
medical reimbursement plans offered to senior executives of Employer, provided,
however, that he shall be entitled to receive a medical expense allowance in an
amount not to exceed $27,450 annually.
(c) Furniture. If Employee desires, he may have
his office furniture and art relocated to his home office or to another
location.
(d) Club Membership. Upon the earlier of the
expiration of the Term or the termination of Employee's employment with
Employer, Employee shall be entitled to purchase from Employer the membership in
the Spanish Hills Country Club described in subsection 4(h) for a price equal to
the then value of that membership on the books of Employer. Employer shall pay
Employee a bonus in an amount equal to that book value plus the grossed up
amount necessary to cover the taxes on such bonus. Employer shall pay Employee
this sum concurrently with his purchase of the membership.
(e) Palm Desert Condominium. If Employer elects at
any time after the date of this Agreement to sell its Palm Desert condominium,
including all furnishings, it shall provide Employee written notice of its
intent to sell and the appraised market value thereof, as determined by an
independent appraiser. Employee shall have the exclusive right for a 90 day
period after receipt of such notice to purchase the condominium before Employer
lists the condominium for sale or offers to sell it to any other person.
Employee's purchase price for the condominium shall be its appraised market
value at that time, reduced by the amount of the broker's commission saved by
Employer, which shall be deemed to be 5% of the purchase price, and $20,000,
which represents past improvements to the condominium paid personally by
Employee. All transactional costs incurred by Employee relating to the sale,
other than his attorneys fees, shall be paid by or reimbursed to Employee by
Employer.
6. Termination. The compensation and other benefits provided to
Employee pursuant to this Agreement, and the employment of Employee by Employer,
shall be terminated only as provided in this Section 6:
(a) Death. If Employee's employment hereunder is
terminated by reason of Employee's death, this Agreement shall terminate without
further
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obligations to Employee (or Employee's heirs or legal representatives) under
this Agreement, except for (1) payment of the sum of (A) the Total Compensation
through the date of termination to the extent not theretofore paid and (B) any
compensation previously deferred by Employee (together with any accrued interest
or earnings thereon) which shall be paid to Employee's estate or beneficiary
(who shall be Employee's wife, Xxxxxxxx, if she survives Employee
("Beneficiary")), as applicable, in a lump sum in cash within ten days after the
date of termination or any earlier time required by applicable law; (2) payment
to Employee's estate or Beneficiary, as applicable, of any amount due pursuant
to the terms of any applicable benefit plan; (3) after the end of the calendar
year of Employee's death, payment of a prorated portion, based on the number of
weeks during the year in which Employee was employed by Employer, of incentive
compensation or bonus, if any, that would be payable in respect of such year
(based on the criteria applicable for that year); and (4) a lump sum cash
payment equal to the Retirement Benefit that Employee would have been entitled
to receive during the period beginning on the date of his death and ending on
the last day of the Term, discounted to the present value of such sum. This
payment shall be made to the representatives of Employee's estate within 90 days
after the date of his death accompanied by a written explanation of how Employer
calculated the payment amount.
(b) Disability. The Board may determine that
Employee has become permanently disabled if Employee shall fail, because of
illness or incapacity, substantiated by appropriate medical authority, to render
services of the character contemplated by this Agreement over a period of six
consecutive months. If the Board determines that Employee is permanently
disabled, it may terminate Employee's employment by delivering ten days written
notice of termination to Employee or his legal representative. Upon such
termination, Employer shall have no further obligations to Employee (or
Employee's heirs or legal representatives) under this Agreement, except for (1)
payment of the sum of (A) the Total Compensation through the date of termination
to the extent not theretofore paid and (B) any compensation previously deferred
by Employee (together with any accrued interest or earnings thereon), which
shall be paid to Employee or Employee's estate or beneficiary, as applicable, in
a lump sum in cash within ten days after the date of termination or any earlier
time required by applicable law; (2) payment to Employee or Employee's
representative, as applicable, of any amount due pursuant to the terms of any
applicable benefit plan; (3) after the end of the calendar year of Employee's
disability, payment of a prorated portion, based on the number of weeks during
the year in which Employee was employed by Employer, of incentive compensation
or bonus, if any, that would be payable in respect of such year (based on
criteria applicable for that year); and (4) a lump sum cash payment equal to the
Retirement Benefit that Employee would have been entitled to receive during the
period beginning on the date of termination and ending on the last day of the
Term, discounted to the present value of such sum. This payment shall be made
within 90 days after the date of the termination of Employee's employment under
this subsection (b) accompanied by a written explanation of how Employer
calculated the payment amount.
(c) For Cause. Employer shall be entitled to
terminate Employee's employment hereunder and all of his rights to receive Total
Compensation (except as accrued and unpaid to the date of termination) and
Additional Benefits hereunder (subject to the terms of any plans relating
thereto) in respect of any period after such termination shall terminate upon a
determination by Employer, acting in good faith, that Employee (1) has committed
a
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material act of dishonesty against Employer, (2) has been convicted of a felony
involving moral turpitude or (3) has committed a material breach of subsections
8(d) or (e) of this Agreement. Prior to making any determination that would
result in Employee's termination under this subsection (c), Employer shall
provide 30 days advance written notice of the alleged actions which would
provide cause for Employee's termination and Employee shall be given an
opportunity to appear before the Board to refute the allegation at least 15
business days prior to the effective date of any such proposed termination.
Employer shall provide Employee five days written notice of termination if it
elects to proceed with the termination of Employee after any such appearance.
(d) Resignation. If Employee's employment
hereunder shall cease due to Employee's resignation as a director, all of his
rights to receive (1) Total Compensation, other than the amount accrued to the
date of termination, (2) Additional Benefits (subject to the terms of any plans
relating thereto), (3) those benefits and rights set forth in subsections (e)
through (k) of Section 4, and (4) incentive compensation, if any, that would be
payable in respect of the year in which such resignation occurred, shall
immediately cease. A change in Employee's title from "Chairman" to "Chairman
Emeritus" shall not by itself constitute a "resignation."
(e) No additional Benefits. Employee shall receive
no severance pay or retirement benefits upon termination of his employment other
than as provided in this Section 6.
7. Business Expenses. During the term of this Agreement, to the
extent that such expenditures (a) satisfy the criteria under the Internal
Revenue Code of 1986, as amended, for deductibility by Employer (whether or not
fully deductible by Employer) for federal income tax purposes as ordinary and
necessary business expenses, and (b) are reviewed and approved by the Audit
Committee of the Board, or another process established by the Audit Committee,
Employer shall reimburse Employee promptly for usual and customary business
expenditures incurred in pursuit and in furtherance of Employer's business which
are documented in accordance with procedures established from time to time by
Employer.
8. Miscellaneous.
(a) Notices. Any notice or other communication
provided for in this Agreement shall be in writing and shall be deemed sent if
sent as follows:
If to Employer: National Technical Systems, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
If to Employee: Dr. Xxxx Xxx
00000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
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or at such other address as a party may from time to time in writing designate.
Each such notice or other communication shall be effective (i) if given by
telecommunication, when transmitted to the applicable number so specified in (or
pursuant to) this subsection 8(a) and an appropriate answerback or confirmation
of delivery is received, (ii) upon receipt, if given by U.S. certified mail,
return receipt requested, addressed as aforesaid or (iii) one day after being
deposited with a reputable overnight courier, addressed as aforesaid.
(b) Entire Agreement: Amendments. This Agreement
contains the entire agreement of the parties relating to the subject matter
hereof. 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.
(c) 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.
(d) Confidentiality; Proprietary Information.
Employee agrees to not make use of 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, except to the extent such use or disclosure is
(1) necessary to the performance of this Agreement and reasonably determined by
Employee to be in furtherance of Employer's best interests or (2) required by
applicable law. The provisions of this subsection 8(d) shall survive the
termination, for any reason, of this Agreement.
(e) 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 software, plans, formulas, patterns,
devices, secret inventions, processes, customer lists, contracts, and
compilations of information, records and specifications, which are owned by
Employer or by its affiliates 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 as Employee may reasonably believe
to be for its benefit. All records, files, documents, drawings, specifications,
software, 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 written consent
of the Board. Upon termination of employment, Employee agrees to deliver
promptly to Employer all Documents in the possession or under the
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control of Employee. The provisions of this subsection 9(e) shall survive the
termination, for any reason, of this Agreement.
(f) 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.
(g) Withholding Deductions. All compensation
payable hereunder, including Total Compensation and other benefits, shall be
subject to applicable taxes, withholding and other required, normal or elected
employee deductions.
(h) Remedies. Employee expressly agrees that
Employer shall be entitled to the remedies of injunction, specific performance
and other equitable relief to prevent any violation of subsection 8(d) and (e)
of this Agreement. This subsection 8(h) shall not be construed as a waiver of
any other rights or remedies which Employer may have for damages or otherwise.
Any action brought to enforce the provisions set forth in this subsection 8(h)
shall be brought in the Los Angeles County Superior Court. Employee, by his
execution of this Agreement, hereby submits to the jurisdiction of the Los
Angeles Superior Court.
(i) Arbitration. Except as otherwise provided in
this Agreement, any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in Los Angeles
County, California, as follows:
(j) Judicial Arbitration and Mediation Services,
the Company. The arbitration shall be administered by Judicial Arbitration and
Mediation Services, the Company ("JAMS") in its Los Angeles County office.
(i) Arbitrator. The arbitrator shall be a retired superior court
judge of the State of California affiliated with JAMS.
(ii) Provisional Remedies and Appeals. Each of the parties reserves
the right to file with the Los Angeles County Superior Court an application for
temporary or preliminary injunctive relief, writ of attachment, writ of
possession, temporary protective order and/or appointment of a receiver on the
grounds that the arbitration award to which the applicant may be entitled may be
rendered ineffectual in the absence of such relief.
(iii) Enforcement of Judgment. Judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
award of the arbitrator shall be binding, final, and nonappealable.
(iv) Discovery. The parties may obtain discovery in aid of the
arbitration to the fullest extent permitted under law, including California Code
of Civil Procedure Section 1283.05. All discovery disputes shall be resolved by
the arbitrator.
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(v) Consolidation. Any arbitration hereunder may be consolidated by
JAMS with the arbitration of any other dispute arising out of or relating to the
same subject matter when the arbitrator determines that there is a common issue
of law or fact creating the possibility of conflicting rulings by more than one
arbitrator. Any disputes over which arbitrator shall hear any consolidated
matter shall be resolved by JAMS.
(vi) Power and Authority of Arbitrator. The arbitrator shall not
have any power to alter, amend, modify or change any of the terms of this
Agreement nor to grant any remedy which is either prohibited by the terms of
this Agreement, or not available in a court of law.
(vii) Governing Law. All questions in respect of procedure to be
followed in conducting the arbitration as well as the enforceability of this
Agreement to arbitrate which may be resolved by state law shall be resolved
according to the law of the State of California. Any action brought to enforce
the provisions of this Section shall be brought in the Los Angeles County
Superior Court. All other questions in respect to this Agreement, including but
not limited to the interpretation, enforcement of this Agreement (other than the
right to arbitrate), and the rights, duties and liabilities of the parties to
this Agreement shall be governed by California law.
(k) Waiver of Jury Trial. In the event that any
dispute shall arise between Employee and Employer and notwithstanding the
provisions of (i) above, litigation ensues, WITH RESPECT TO ANY LITIGATION
ARISING OUT OF THIS AGREEMENT, THE PARTIES EXPRESSLY WAIVE ANY RIGHT THEY MAY
HAVE TO A JURY TRIAL AND AGREE THAT ANY SUCH LITIGATION SHALL BE TRIED BY A
JUDGE WITHOUT A JURY. Notwithstanding the foregoing, in the event there is a
Change of Control, as hereinafter defined, the above jury trial waiver shall
become void and of no effect.
For purposes of this Agreement, a "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), hereinafter a "Person," of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 25% or more of the combined voting power of the then outstanding voting
securities of Employer entitled to vote generally in the election of directors
(the "Outstanding Employer Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall not constitute
a Change of Control: (A) any acquisition by a Person who is on the date of this
Agreement the beneficial owner of 25% or more of the Outstanding Employer Voting
Securities, (B) any acquisition directly from Employer, (C) any acquisition by
Employer, (D) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Employer or any corporation controlled by Employer,
or (E) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (iii) of this subsection
8(k); or
(ii) Individuals who, as of the date of this Agreement, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this
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Agreement whose election, or nomination for election by Employer's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of Employer
(a "Business Combination"), in each case, unless, following such Business
Combination (A) all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Employer Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such Business Combination owns
Employer or all or substantially all of Employer's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Outstanding
Employer Voting Securities (B) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or related trust)
of Employer or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 25% or more of the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and (C)
at least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(iv) Approval by the shareholders of Employer of a complete
liquidation or dissolution of the Employer.
(l) 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. 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.
(m) Successor and Assigns. This Agreement shall be
binding upon and inure to the benefit of Employer and any successor of Employer.
This Agreement shall not be terminated by the voluntary or involuntary
dissolution of Employer or by any merger, reorganization or other transaction in
which the Employer is not the surviving or resulting corporation or upon any
transfer of all or substantially of the assets of Employer in the event of any
such merger or transfer of assets. The provisions of this Agreement shall be
binding upon and shall inure to the benefit to the surviving business entity or
the business entity to which
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such assets shall be transferred in the same manner and to the same extent that
Employer would be required to perform it if no such transaction had taken place.
This Agreement may not be assigned by Employee. This Agreement shall inure to
the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators and heirs.
(n) Attorneys' Fees in Action on Contract. If any
litigation shall occur between Employee and Employer which arises out of or as a
result of 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.
(o) Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to each party hereto.
[The following page is the signature page.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
"EMPLOYER"
National Technical Systems, Inc.,
a California corporation
By: /s/ Xxxxxxx XxXxxxxx
-------------------------------------
President and Chief Operating Officer
"EMPLOYEE"
/s/ Xxxx Xxx
-----------------------------------------
Dr. Xxxx Xxx
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