EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of June 1, 1998 by and between
Hi-Shear Technology Corporation, a Delaware corporation (hereinafter referred to
as the "Company"), and Xxxxxx X. Xxxxxx (hereinafter referred to as "Executive")
under the following terms and conditions:
RECITALS:
WHEREAS, the Company and Executive are parties to that certain Employment
Agreement dated June 1, 1993, the term of which expired as of May 31, 1998;
WHEREAS, the Company and Executive desire to set forth the terms and
conditions on which (i) the Company shall continue to employ Executive, (ii)
Executive shall continue to render services to the Company, and (iii) the
Company shall compensate Executive for such services; and
WHEREAS, in connection with the continued employment of Executive by the
Company, the Company desires to restrict Executive's rights to compete with the
business of the Company.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts
employment with the Company upon the terms and conditions hereinafter set forth.
2. TERM.
2.1 The term of this Agreement (the "Term") shall be for a period
commencing on the Effective Date (as defined in Section 2.3 below) of this
Agreement and shall continue through May 31, 2003, unless sooner terminated as
provided in Paragraph 6. This five-year period, as the same may be extended
hereafter by agreement of the parties or terminated pursuant hereto, is
hereinafter referred to as the "Term".
2.2 For purposes of extending the term of the relationship between the
Company and Executive, the parties agree to enter into good faith negotiations
within sixty (60) days prior to the end of the Term. In the event that the
parties are unable to reach an agreement by the end of the Term, this Agreement
shall be automatically terminated on May 31, 2003.
2.3 The effective date of this Agreement shall be June 1, 1998 (the
"Effective Date").
3. COMPENSATION.
3.1 For all services rendered by Executive under this Agreement, the
Company shall pay or cause one or more of its subsidiaries to pay Executive
during the term hereof a salary at the rate of $270,000 per year, subject to
adjustment as described below. The Company shall pay such compensation to
Executive semi-monthly in accordance with its standard practice for payment of
compensation to its employees. In addition, Executive shall be eligible for
salary increases as may be determined annually by the Compensation Committee of
the Board of Directors.
22
3.2 As additional compensation, Executive shall be eligible to
participate in the executive bonus pool program established by the Board and
administered by the Compensation Committee.
3.3 All compensation shall be subject to customary withholding tax and
other employment taxes as are required with respect to compensation paid by a
corporation to an employee.
4. DUTIES AND RESPONSIBILITIES.
4.1 Executive shall, during the Term of this Agreement, devote his
full attention and expend his best efforts, energies, and skills, on a full-time
basis, to the business of the Company and any corporation controlled by the
Company (each, a "Subsidiary"). For purposes of this Agreement, the term the
"Company" shall mean the Company and all Subsidiaries. The Company agrees that
the devotion of reasonable amounts of time to business activities separate from
and outside the scope of the business of the Company will not violate the terms
of this Agreement, on the conditions that (i) such activities are not corporate
opportunities of the Company; and (ii) such activities do not interfere with the
performance of Executive's duties hereunder.
4.2 During the Term of this Agreement, Executive shall serve as the
President and Chief Operating Officer or in such other capacity as determined by
the Board of Directors or its Executive Committee, if any. In the performance of
all of his responsibilities hereunder, Executive shall be subject to all of the
Company's policies, rules, and regulations applicable to its employees of
comparable status and shall report directly to, and shall be subject to, the
direction and control of the Board of Directors of the Company and shall perform
such duties as shall be assigned to him by the Board of Directors or its
Executive Committee. In performing such duties, Executive will be subject to and
abide by, and will use his best efforts to cause other employees of the Company
to be subject to and abide by, all policies and procedures developed by the
Board of Directors or its Executive Committee.
4.3 Without first obtaining the written permission of the Board of
Directors of the Company, Executive will not authorize or permit the Company to
engage the services of, or engage in any business activity with, or provide any
financial or other benefit to, any affiliate of Executive. The phrase "affiliate
of Executive" as used in this Section shall mean and include Executive's family
by blood or marriage (including, without limitation, parents, spouse, siblings,
children and in-laws), and any business or business entity which is directly or
indirectly owned or controlled by Executive or any member of the Executive's
family or in which Executive or any member of the Executive's family has any
direct or indirect financial interest whatsoever.
4.4 To induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that (a) the Executive is not a party or
subject to any employment agreement or arrangement with any other person, firm,
company, corporation or other business entity, (b) the Executive is subject to
no restraint, limitation or restriction by virtue of any agreement or
arrangement, or by virtue of any law or rule of law or otherwise which would
impair the Executive's right or ability (i) to enter the employ of the Company,
or (ii) to perform fully his duties and obligations pursuant to this Agreement,
and (c) to the best of Executive's knowledge no material litigation is pending
or threatened against any business or business entity owned or controlled or
formerly owned or controlled by Executive.
5. RESTRICTIVE COVENANTS.
5.1 Executive acknowledges that (i) he has a major responsibility for
the operation, administration, development and growth of the Company's business,
(ii) the Company's business is or may become national or international in scope,
(iii) his work for the Company has brought him and will
23
continue to bring him into close contact with confidential information of the
Company and its customers, and (iv) the agreements and covenants contained in
this Section 5.1 are essential to protect the business interest of the Company
and that the Company will not enter into this Agreement but for such agreements
and covenants. Accordingly, the Executive covenants and agrees as follows:
5.l(a) Except as otherwise provided for in this Agreement, during the
Term of this Agreement and, if this Agreement is terminated for any reason
during the Term, for two (2) years following such date of termination (the
"Termination Period"), the Executive shall not, directly or indirectly, compete
with respect to any services or products of the Company which are either offered
or are being developed by the Company as of the date of termination; or, without
limiting the generality of the foregoing, be or become, or agree to be or
become, interested in or associated with, in any capacity (whether as a partner,
shareholder, owner, officer, director, Executive, principal, agent, creditor,
trustee, consultant, co-venturer or otherwise) any individual, corporation,
firm, association, partnership, joint venture or other business entity, which
competes with respect to any services or products of the Company which are
either offered or are being developed by the Company as of the data of
termination; provided, however, that the Executive may own, solely as an
investment, not more than one percent (1%) of any class of securities of any
publicly held corporation in competition with the Company whose securities are
traded on any national securities exchange in the United States of America, and
may retain his ownership interest in those entities referred to in Section 4.1
above.
5.1(b) During the term of this Agreement and, if applicable, during
the Termination Period, the Executive shall not, directly or indirectly, (i)
induce or attempt to influence any executive of the Company to leave its employ,
(ii) aid or agree to aid any competitor, customer or supplier of the Company in
any attempt to hire any person who shall have been employed by the Company
within the one (1) year period preceding such requested aid, or (iii) induce or
attempt to influence any person or business entity who was a customer or
supplier of the Company during any portion of said period to transact business
with a competitor of the Company in Company's business.
5.1(c) During the Term of this Agreement, the Termination Period, if
applicable, and thereafter, the Executive shall not disclose to anyone any
information about the affairs of the Company, including, without limitation,
trade secrets, trade "know-how", inventions, customer lists, business plans,
operational methods, pricing policies, marketing plans, sales plans, identity of
suppliers or customers, sales, profits or other financial information, which is
confidential to the Company or is not generally known in the relevant trade, nor
shall the Executive make use of any such information for his own benefit.
5.2 If the Executive breaches, or threatens to commit a breach of
Section 5.1 (the "Restrictive Covenants"), the Company shall have the following
rights and remedies, each of which shall be enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to the
Company at law or in equity.
5.2(a) The Executive shall account for and pay over to the Company all
compensation, profits, and other benefits, after taxes, which inure to
Executive's benefit which are derived or received by the Executive or any person
or business entity controlled by the Executive resulting from any action or
transactions constituting a breach of any of the Restrictive Covenants.
5.2(b) Notwithstanding the provisions of subsection 5.2(a) above, the
Executive acknowledges and agrees that in the event of a violation or threatened
violation of any of the provisions of Section 5.1, the Company shall have no
adequate remedy at law and shall therefore be entitled to enforce each such
provision by temporary or permanent injunctive or mandatory relief obtained in
any court of competent jurisdiction without the necessity of proving damages,
posting any bond or other
24
security, and without prejudice to any other rights and remedies which may be
available at law or in equity.
5.3 If any of the Restrictive Covenants, or any part thereof, is held
to be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid or unenforceable portions. Without limiting the generality of the
foregoing, if any of the Restrictive Covenants, or any part thereof, is held to
be unenforceable because of the duration of such provision or the area covered
thereby, the parties hereto agree that the court making such termination shall
have the power to reduce the duration and/or area of such provision and, in its
reduced form, such provision shall then be enforceable.
5.4 The parties hereto intend to and hereby confer jurisdiction to
enforce the Restrictive Covenants upon the courts of any jurisdiction within the
geographical scope of such Restrictive Covenants. In the event that the courts
of any one or more of such jurisdictions shall hold such Restrictive Covenants
wholly unenforceable by reason of the breadth of such scope or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of any
other jurisdictions within the geographical scope of such Restrictive Covenants,
as to breaches of such covenants in such other respective jurisdictions, the
above covenants as they relate to each jurisdiction being, for this purpose,
severable into diverse and independent covenants.
6. TERMINATION.
6.1 The Company may terminate the Executive's employment under this
Agreement at any time for Cause. "Cause" shall exist for such termination if
Executive (i) is adjudicated guilty of illegal activities of consequence by a
court of competent jurisdiction, (ii) commits any act of fraud or intentional
misrepresentation, (iii) has, in the reasonable judgment of the Company's Board
of Directors, engaged in serious misconduct, which conduct has, or would if
generally known, materially adversely affect the good will or reputation of the
Company and which conduct the Executive has not cured or altered to the
satisfaction of the Board of Directors within ten (10) days following notice by
the Board of Directors to the Executive regarding such conduct, or (iv) has made
any material misrepresentation to the Company under Sections 4 and 5 hereof.
6.2 If the Company terminates the Executive's employment under this
Agreement pursuant to the provisions of Section 6.1 hereof, the Executive shall
not be entitled to receive any compensation following the date of such
termination.
6.3 The Company may terminate this Agreement without notice if the
Executive is unable due to mental or physical illness or injury to perform
Executive's duties in a normal and regular manner for a period of six
consecutive months. The termination shall be effective as of the end of the
calendar month in which the disability period ends.
Upon termination because of disability, the Executive shall be entitled to
receive compensation for 24 months for the date of such termination (such
payments to be diminished, however, by the extent to which the Executive
receives compensation during such 24 month period from any disability insurance)
in an amount equal to the monthly compensation paid Executive for the month
prior to such termination.
6.4 If the Executive dies during the initial term or during any
renewal terms of this Agreement, this Agreement shall be terminated on the last
day of the calendar month in which the death occurred.
25
6.5 If Executive's employment with the Company is terminated for any
reason other than: (i) the death or permanent disability of the Executive, (ii)
pursuant to the provisions of Section 6.1 above, or (iii) the Executive's
voluntary termination, the Executive shall continue to receive compensation for
36 months from the date of such termination (provided, however, that (1)
payments by the Company shall be diminished by the extent to which the Executive
receives compensation during such 36-month period from a third party employer,
and (2) total compensation shall not in any event equal or exceed three times
the entire compensation received by Executive during the one-year period
immediately preceding the date of such termination) in an amount equal to the
monthly compensation paid Executive for the month prior to such termination.
7. EXPENSES.
7.1 Executive shall be entitled to reimbursement of all reasonable
expenses actually incurred in the course of his employment. Executive shall
submit to the Company a standardized expense report form, provided by the
Company, and shall attach thereto receipts for all expenditures.
7.2 The Company shall reimburse Executive within fifteen (15) days
after submission by Executive of his expense report.
7.3 In recognition of the requirements for business travel, the
Company shall provide Executive with the use of a Cadillac Seville or other
automobile of equivalent cost of Executive's choice. The automobile may be
purchased by the Executive at the end of the lease term or renewal of a new
lease for $1.00.
8. THE COMPANY'S AUTHORITY
Executive agrees to observe and comply with the reasonable rules and
regulations of the Company as adopted by the Company's Board of Directors or
Executive Committee either orally or in writing, with respect to the performance
of his duties and the carrying out and performance of the orders, directions,
and policies of the Board of Directors as stated by the Board of Directors to
the Executive from time to time, either orally or in writing.
9. PAID VACATION; SICK LEAVE; INSURANCE.
9.1 Executive shall be entitled to a paid vacation each year equal to
eight (8) weeks per year.
9.2 The Executive shall be entitled to reasonable periods of paid sick
leave during the Term of this Agreement in accordance with the Company's policy
regarding such sick leave.
9.3 The Company shall provide Executive, at the Company's full
expense, participation in group medical, dental, and life insurance plans of the
Company as may be provided by the Company from time to time, subject to and to
the extent that, the Executive is eligible under such benefit plans in
accordance with their respective terms. Coverage under the Company's group
medical, dental and life insurance plans at the Company's full expense will be
extended to Executive for five (5) years after the termination of this Agreement
except in the case of termination under Section 6.1 above.
10. MISCELLANEOUS.
10.1 The Company may, from time to time, apply for and take out, in
its own name and at its own expense, life, health, accident, disability or other
insurance upon the Executive in any sum or sums that it may deem necessary to
protect its interests, and the Executive agrees to aid and cooperate in
26
all reasonable respects with the Company in procuring any and all such
insurance, including without limitation, submitting to the usual and customary
medical examinations, and by filling out, executing and delivering such
applications and other instruments in writing as may be reasonably required by
an insurance company or companies to which an application or applications for
such insurance may be made by or for the Company. In order to induce the Company
to enter this Agreement, the Executive represents and warrants to the Company
that to the best of his knowledge the Executive is insurable at standard (non-
rated) premiums.
10.2 This Agreement is a personal contract, and the rights and
interests of the Executive hereunder may not be sold, transferred, assigned,
pledged or hypothecated except as otherwise expressly permitted by the
provisions of this Agreement. The Executive shall not under any circumstances
have any option or right to require payment hereunder otherwise than in
accordance with the terms hereof. Except as otherwise expressly provided herein,
the Executive shall not have any power of anticipation, alienation or assignment
of payments contemplated hereunder, and all rights and benefits of the Executive
shall be for the sole personal benefit of the Executive, and no other person
shall acquire any right, title or interest hereunder by reason of any sale,
assignment, transfer, claim or judgment or bankruptcy proceedings against the
Executive; provided, however, that in the event of the Executive's death, the
Executive's estate, legal representative or beneficiaries (as the case may be)
shall have the right to receive all of the benefit that accrued to the Executive
pursuant to, and in accordance with, the terms of this Agreement.
10.3 The Company shall have the right to assign this Agreement to any
successor of substantially all of its business or assets, and any such successor
shall be bound by all of the provisions hereof.
11. NOTICES.
All notices, requests, demands and other communications provided for
by this Agreement shall be in writing and (unless otherwise specifically
provided herein) shall be deemed to have been given at the time when mailed in
any general or branch United States Post Office, enclosed in a registered or
certified postpaid envelope, addressed to the parties stated below or to such
changed address as such party may have fixed by notice:
TO THE COMPANY: Hi-Shear Technology Corporation
00000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attn: President
EXECUTIVE: Xxxxxx X. Xxxxxx
Hi-Shear Technology Corporation
00000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
COPY TO: Xxxxxxx X. Xxxxxxx, Esq.
JEFFERS, WILSON, XXXXX & XXXX
00000 Xxx Xxxxxx Xxx., Xxxxx 0000
Xxxxxx, XX 00000
12. ENTIRE AGREEMENT.
This Agreement supersedes any and all agreements, whether oral or
written, between the parties hereto, with respect to the employment of Executive
by the Company and contains all of the
27
covenants and agreements between the parties with respect to the rendering of
such services in any manner whatsoever. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements,
orally or otherwise, have been made by any party, or anyone acting on behalf of
any party, which are not embodied herein, and that no other agreement, statement
or promise with respect to such employment not contained in this Agreement shall
be valid or binding. Any modification of this Agreement will be effective only
if it is in writing and signed by the parties hereto.
13. PARTIAL INVALIDITY.
If any provision in this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way.
14. ATTORNEYS' FEES.
Should any litigation or arbitration be commenced between the parties
hereto or their personal representatives concerning any provision of this
Agreement or the rights and duties of any person in relation thereto, the party
prevailing in such litigation or arbitration shall be entitled, in addition to
such other relief as may be granted, to a reasonable sum as and for its or their
attorneys' fees in such litigation or arbitration which shall be determined by
the court or arbitration board.
15. ARBITRATION.
Any matter of disagreement arising under this Agreement shall be
submitted for decision to a panel of three neutral arbitrators with expertise in
the subject matter to be arbitrated. One arbitrator will be selected by each
party and the two arbitrators so selected shall select the third arbitrator. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association. The decision and award rendered by the arbitrators
shall be final and binding. Judgement upon the award may be entered in any court
having jurisdiction thereof. Any arbitration shall be held in Orange County,
California, or such other place which may be mutually agreed upon by the
parities.
16. GOVERNING LAW.
This Agreement will be governed by and construed in accordance with
the laws of the State of California.
17. BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective representatives, heirs, successors and
assigns.
18. WAIVER.
No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
19. CORPORATE APPROVALS.
The Company represents and warrants that the execution of this
Agreement by its corporate officer named below has been duly authorized by the
Board of Directors of the Company, is
28
not in conflict with any Bylaw or other agreement and will be a binding
obligation of the Company, enforceable in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date above written.
THE COMPANY: HI-SHEAR TECHNOLOGY CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------
EXECUTIVE: /s/ Xxxxxx X. Xxxxxx
--------------------
29
