Exhibit 10.4

 

NORTECH SYSTEMS INCORPORATED

 

Change of Control Agreement

 

This Change of Control Executive Severance Agreement is entered into as of
                          , by and between Nortech Systems Incorporated, a
Minnesota Corporation (the Corporation) and                            (the
Executive).

 

Preamble

 

The Executive is a key member of the management of the Corporation.  It is
desirable and in the best interests of the Corporation and its shareholders to
provide an inducement for the Executive to remain in the service of the
Corporation in the event of any proposed or anticipated Change of Control (as
hereinafter defined) in the Corporation, as well as to provide an orderly
transition.

 

The Corporation wishes to provide economic security for the Executive after a
Change of Control.

 

The following provisions have been approved by the Board of Directors of the
Corporation and apply only after a Change of Control.

 

1.     Agreement Duration

 

The Agreement will remain in force unless the Executive terminates his/her
employment, or the Corporation terminates the employment of the Executive prior
to a Change of Control.

 

2.    Change of Control

 

A Change of Control shall be deemed to have occurred if—

 

a.   A majority of the directors of the Corporation are not the persons for whom
election proxies have been solicited by the Board of the Corporation or, who are
then serving as directors appointed by the Board to fill vacancies on the Board
(caused by death or resignation, excluding removal), or to fill new
directorships; or

 

NORTECH SYSTEMS INCORPORATED

 

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b.   Forty-nine percent or more of the outstanding voting stock of the
Corporation is acquired or beneficially owned (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended, or any successor thereto) by
any person (excluding the Corporation, Executive, any member of the Board of
Directors, or group of persons acting in concert); or

 

c.   The shareholders of the Corporation approve an agreement to merge or
consolidate the Corporation with or into another corporation, sell or otherwise
dispose of all or substantially all of the assets of the Corporation.

 

3.     Agreement Life Cycle

 

The provisions of this Plan will remain in force for three years after a Change
of Control occurs, after which this Agreement shall terminate and be or no
further and effect.

 

4.     Amendment or Termination of the Agreement.

 

The Corporation may not amend or terminate this Agreement at any time prior to
or after a Change of Control.

 

5.    Constructive Involuntary Termination

 

Duties and responsibilities must remain the same in scope, dimension, and
activity as prior to any Change of Control.

 

A constructive voluntary distribution is deemed to have occurred if—

 

a.              The Executive is given diminished responsibilities, title, or
status.

 

b.              The Executive’s compensation is reduced.

 

c.               The Executive is not eligible for incentive compensation of any
kind for which he/she was eligible prior to the Change of Control, or the level
of this participation is reduced.

 

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d.              The Executive’s benefit coverage of any kind is reduced or
eliminated except as might apply to all other employees.  This would pertain to
qualified benefit plans as any nonqualified, supplemental benefit programs in
force at the time of the event.

 

e.               The Executive’s participation in the Corporation perquisite
program is reduced or eliminated.

 

f.                The Executive’s office position is changed to a location
greater than 50 miles from the location of the Executive’s office prior to the
Change of Control.

 

g.               The Executive’s employment is terminated after a Change of
Control.

 

6.    Termination for Cause

 

A successor corporation can terminate the Executive for cause.  The term “cause”
shall mean and be limited to an act or acts committed by the Executive
constituting a felony and that is substantially detrimental to the successor
corporation or its reputation.  A termination for cause will result in the
Executive receiving no benefit under the terms of this Agreement.

 

7.    Voluntary Termination

 

A voluntary termination will have occurred if the Executive resigns from the
successor corporation under conditions other than as specified in Sections 5 and
6 hereof. Such a termination will result in the Executive receiving no benefit
under the terms of this Agreement.

 

8.    Severance Award

 

If the Executive is involuntarily terminated after a Change of Control, the
following provisions apply:

 

a.              The Executive will continue to receive, in equal monthly
payments, the base salary and annual bonus in effect at the time of the
involuntary

 

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termination for a period of 36 months, or the Executive may elect to  receive an
equal lump sum payment.  It is not the intent that this  payment will constitute
a “parachute payment” as defined in Section  280G of the Internal Revenue Code
of 1986 (the Code).  Such   payment and/or other benefits or payments shall be
reduced to the  largest aggregate amount that will result in no portion thereof
being  subject to the excise tax imposed under Section 4999 of the Code (or  any
successor provision thereto) or being nondeductible to the Corporation for
federal income tax purposes pursuant to Section  280G of the Code (or any
successor thereto).  The Executive will  determine which payments or benefits
are to be reduced to conform  to this provision.

 

b.              The Executive will continue to participate until the end of
the   Agreement Life Cycle in any health, disability, and life insurance plan 
in which the Executive was participating prior to the termination as if  the
Executive was still an employee of the Corporation.  If the   Executive’s
participation in any of these plans is prohibited, the  Corporation at its sole
expense shall arrange to provide the   Executive with benefits substantially
similar to those which the   Executive is entitled to receive under such plans. 
The Executive shall remain responsible for that portion of the costs of such
plans for which the Executive was responsible prior to termination.

 

c.               The Executive will continue to participate until the end of
the   Agreement Life Cycle in any perquisite program (auto, country club, 
dining club physical, tax planning, etc.) in which the Executive was 
participating before the termination.  If this is not possible, the  
Corporation shall arrange at its sole cost to provide an equivalent  benefit. 
The Corporation may elect, but only with the Executive’s  consent, to substitute
a cash payment equivalent to the projected  value of the perquisite over the
Agreement Life Cycle.

 

9.    Legal Fees and Expenses

 

The Corporation shall also promptly reimburse the Executive for all legal fees
and expenses incurred by the Executive as a result of an involuntary termination
after a Change of Control, including but not limited to all such fees and
expenses incurred in contesting the termination or in seeking to enforce any
right or benefit provided by this Agreement.

 

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10.    Successors and Assigns

 

This Agreement shall be binding upon and inure to the benefit of the successors
of the Corporation.  The Executive shall have no right to assign, pledge, or
otherwise dispose of or transfer any interest in this Agreement or any part
thereof.

 

11.     Severability

 

If any portion of this Agreement is held to be invalid or unenforceable for any
reason, it is hereby agreed that such invalidity or unenforceability shall not
affect the other portions of this Agreement and that the remaining covenants,
terms, and conditions shall remain in full force and effect and any court of
competent jurisdiction may so modify the objectionable provisions as to make it
valid and enforceable.

 

12.    Governing Law

 

This Agreement shall be construed in accordance with the laws of the State of
Minnesota.

 

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

 

 

 

NORTECH SYSTEMS INOCORPORATED

 

 

 

 

 

By

 

 

 

President and Chief Executive Officer

 

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