Exhibit 10.3

 

SETTLEMENT AGREEMENT

 

THIS AGREEMENT is dated as of June 30, 2009, between Hi-Shear Technology
Corporation (“HSTC”) and United Space Alliance, LLC (“USA”).

 

WHEREAS, HSTC and USA are parties in the case of HSTC v. USA, Case
No. 05-2000-CA-024754 in the Circuit Court for the Eighteenth Judicial Circuit,
in and for Brevard County, Florida (“Case No. 24754’); and

 

WHEREAS, HSTC has filed a complaint against Pacific Scientific Energetic
Materials Company (“Pac Sci”) in Case No. 05-2004-CA-022186 in the Circuit Court
of the Eighteenth Judicial Circuit, in and for Brevard County, Florida (“Case
No. 22186”), and Case No. 22186 remains pending in that Court; and

 

WHEREAS, appellate proceedings arising out of Case No. 24754 are currently
pending in the Florida Fifth District Court of Appeal and in the United States
Supreme Court; and

 

WHEREAS, USA has initiated collection efforts against HSTC under the law and
procedure of the State of California (“California Collection Proceedings”); and

 

WHEREAS, the parties desire to avoid the time and expense of further litigation
and wish to resolve all disputes with one another; and

 

WHEREAS, on or before May 29, 2009, the parties reached a verbal agreement on
the settlement amount to be paid by HSTC, which is memorialized in Paragraph 1
of this Agreement;

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is acknowledged by HSTC and USA, the parties agree as follows:

 

1.             Payment—HSTC shall pay USA the total sum of $1,600,000 in four
separate installments of $400,000. The first $400,000 payment is due and payable
on the Effective Date, which shall be defined as the later of June 30, 2009, or
the date of complete execution of this Agreement. The second $400,000 payment is
due and payable on September 30, 2009. The third $400,000 payment is due and
payable on December 31, 2009. The fourth and last payment is due and payable on
March 31, 2010. No interest shall be charged on the unpaid balance to be paid to
USA in this Agreement. HSTC may prepay the amount owed under this Agreement at
any time. All payments under this agreement shall be by wire transfer in
accordance with the wiring instructions attached to this Agreement as Exhibit A.
The initial payment shall be tendered to counsel for HSTC on the Effective Date.
Subsequent payments shall be made to arrive on the due date.

 

2.             Default—HSTC shall be in default of this Settlement Agreement if
(A) HSTC fails to make any payment when due under Paragraph 1 of this Agreement;
or (B) HSTC sustains a major adverse change in its financial condition, defined
as an increase in HSTC’s debt by $1,000,000 over the amount of debt on HSTC’s
financial statements as of March 19, 2009. In

 

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the event of a default by HSTC and a failure to cure the default within five
calendar days of receipt of a written notice of default, USA shall be entitled
to immediate entry of a Final Judgment in the amount of all sums remaining to be
paid pursuant to Paragraph 1 of this Agreement. USA shall be entitled to
post-judgment interest at the prevailing statutory rate on the Final Judgment
entered pursuant to this provision. HSTC waives any defenses to levy, execution,
and collection efforts on that Final Judgment if entered.

 

3.             General Release of HSTC—USA hereby releases and forever
discharges HSTC, and its employees, officers, agents, predecessors, successors,
insurers, legal representatives, assigns, member companies, directors,
shareholders, advisory board and members thereof, parents, subsidiaries and
affiliates, from any and all actions, causes of action, claims, damages,
executions, liens, judgments and demands whatsoever, in law or in equity, for,
upon or by reason of any matter, cause, damage, loss, or injury of any nature
occurring prior to the Effective Date, including but not limited to all matters
which were or could have been asserted in Case No. 24754, and any obligations
arising thereunder. This release extends and applies to, and also covers and
includes, all unknown, unforeseen, unanticipated and unsuspected matters,
causes, injuries, damages, loss and liability, and the consequences thereof, as
well as those now disclosed and known to exist.

 

4.            General Release of USA—HSTC hereby releases and forever discharges
USA, and its employees, officers, agents, predecessors, successors, insurers,
legal representatives, assigns, member companies, directors, shareholders,
advisory board and members thereof, parents, subsidiaries and affiliates, from
any and all actions, causes of action, claims, damages, executions, liens,
judgments and demands whatsoever, in law or in equity, for, upon or by reason of
any matter, cause, damage, loss, or injury of any nature occurring prior to the
Effective Date, including but not limited to all matters which were or could
have been asserted in Case No. 24754, and any obligations arising thereunder.
This release extends and applies to, and also covers and includes, all unknown,
unforeseen, unanticipated and unsuspected matters, causes, injuries, damages,
loss and liability, and the consequences thereof, as well as those now disclosed
and known to exist.

 

5.             Mutual Limited Carve Out—The parties represent that as of the
Effective Date, each has received no notification of any contemplated or pending
U.S. Governmental investigation, claim, or action related to any purchase orders
between the parties for products made for use in connection with the Space
Shuttle program. However, notwithstanding anything herein to the contrary, the
mutual releases in Paragraphs 3 and 4 of this Agreement shall not preclude
either party from seeking indemnity in the event of a subsequent U.S.
Governmental action related to purchase orders that were not involved in, are
independent of, and unrelated to, any matters that were or could have been
asserted in Case No. 24754.

 

6.             Dismissals—HSTC and USA shall immediately file an Agreement That
The Case Be Dismissed in the case of HSTC v. USA, Case No. 08-1369, in the
Supreme Court of the United States. HSTC and USA shall immediately file a Joint
Notice of Settlement and Joint Stipulation For Dismissal of HSTC’s appeal in
Case No. 5D08-4282 in the Florida Fifth District Court of Appeal. In
consideration for the dismissal of the appeal in Case No. 5D08-4282, USA and
HSTC agree to submit an Agreed Order setting aside the judgment that is the
subject of the appeal in Case No. 5D08-4282, and USA will immediately dismiss,
resolve, and withdraw all

 

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collection efforts and liens in the California Collection Proceedings and will
file or record with the appropriate California court, county, and secretary of
state, all documents necessary to do so as of public record. On the Effective
Date, or as soon thereafter as practicable, the parties will submit an Agreed
Order of Abatement of Case No. 24754. Upon the full payment of the amounts due
to USA under Paragraph 1 of this Agreement, and full satisfaction of the
parties’ obligations under this Agreement, the parties shall submit a Joint
Stipulation for Dismissal With Prejudice of Case No. 24754 and shall submit an
Agreed Order of Dismissal to be entered by the Court.

 

7.             Satisfaction of Judgment—HSTC shall immediately execute a
Satisfaction of Judgment regarding Paragraph 7 of the Corrected Final Judgment
rendered on March 23, 2007, Nunc Pro Tunc, May 18, 2006 in Case No. 24754 in a
form acceptable to counsel for USA.

 

8.             Pacific Scientific—HSTC shall immediately file a joint
stipulation of voluntary dismissal with prejudice or a notice of voluntary
dismissal with prejudice of Case No. 22186. If Pac Sci agrees, HSTC shall
execute a joint mutual release with Pac Sci.

 

9.             Survival of Provisions—The parties agree that the covenants and
agreements set forth herein will survive the execution of this Agreement.

 

10.           No Liability—The parties agree that this settlement and this
Settlement Agreement do not constitute an admission or concession of liability
by any party.

 

11.           Inventory of Component Parts—Hi-Shear is holding certain partially
completed Shuttle Parts along with related documentation for those parts. A list
of these parts is attached as Exhibit B. Within ninety days of the Effective
Date, USA has the option to decide whether to accept these parts. If USA decides
to accept these parts, USA shall provide written notice of its decision, and
then Hi-Shear will ship the parts and related documentation as USA may direct.
If USA decides to accept these parts, the cost of shipping the parts and related
documentation shall be at USA’s expense. If USA does not provide written notice
of a decision to accept these parts within ninety days of the Effective Date,
Hi-Shear may dispose of the parts as it sees fit.

 

12.           Settlement Documents—The dismissal papers, orders and satisfaction
of judgment required by paragraphs 5, 6 and 7 herein shall be prepared and
executed by the Effective Date and shall be considered to be incorporated by
reference herein. The parties agree to cooperate in the drafting and to execute
any instruments necessary to give full force and effect to this settlement.

 

13.           Notices—All notices to HSTC under this Agreement, including
notices of default, shall be made in writing by overnight courier to Ms. Jan L.
Hauhe, Chief Financial Officer, Hi-Shear Technology Corp., 24225 Garnier St.,
Torrance, CA 90505. All notices to USA under this Agreement shall be made in
writing by overnight courier to United Space Alliance, LLC, Attention: Rochelle
L. Cooper, 8550 Astronaut Boulevard, MS: USK-T21, Cape Canaveral, FL 32920.

 

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14.           Venue—The parties agree that the venue for any claims or disputes
concerning, relating to, or arising out of this Settlement Agreement shall be
Brevard County, Florida; provided, however, that nothing in this Paragraph 14
requires venue in Brevard County, Florida, for any subsequent indemnity action
by either of the parties if one arises as described in Paragraph 5 of this
Agreement.

 

15.           Governing Law—The parties agree that this Settlement Agreement and
all issues relating thereto shall be governed by the Law of Florida.

 

16.           Counterparts—This agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all once
together shall constitute one and the same agreement.

 

17.           Entire Agreement—This Agreement constitutes the entire Agreement
between the parties as to the subject matter herein, and may only be modified by
written amendment executed by both HSTC and USA.

 

Agreed to this 7th day of July, 2009 by:

 

HI-SHEAR TECHNOLOGY CORPORATION

 

UNITED SPACE ALLIANCE, LLC

 

 

 

By

/s/ Jan L. Hauhe

 

By

/s/ David A. Bolton

 

Jan L. Hauhe

(Name)

 

 

David A. Bolton

(Name)

 

its Chief Financial Officer

(Title)

 

 

Associate General Counsel

(Title)

 

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