Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made as of the 27th day of March,
2006, by and between Duane E. Shooltz, a Massachusetts resident, (“Employee”)
and Omega Flex, Inc., a Pennsylvania corporation (the “Company”), whose
principal office is located at 451 Creamery Way, Exton, Pennsylvania 19341-2509.

 

RECITALS

 

A.           Employee desires to be employed by the Company as Senior Vice
President & General Manager of the Company’s TracPipe® division, and the Company
desires to employ Employee in such capacity.

 

B.           Employee and the Company desire to embody in this Agreement the
terms and conditions under which Employee shall be employed;

 

AGREEMENTS

 

NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Employee and the Company,
intending to be legally bound hereby, agree as follows:

 

1.

DEFINITIONS

 

 

For the purposes of this Agreement, the following definitions shall apply:

 

 

1.1

“Cause” shall have the meaning as set forth in Section 9.1.

 

1.2         “Company” shall mean Omega Flex, Inc., a Pennsylvania corporation
and its subsidiaries;

 

1.3         “Confidential Information” shall mean any information relating
directly or indirectly to the business of the Company which is not generally
known to the public and which the Company protect as confidential or
proprietary, including without limitation inventions, improvements, concepts,
structures, formulae, techniques, processes, apparatus, know-how, trade secrets,
plans, records and data, customer lists, cost or pricing data, marketing plans,
financial data and financial results of operation, and knowledge about the
general business affairs of the Company; whether conveyed in written, graphic,
aural, physical or electronic form; provided, however, Confidential Information
does not include information which Employee can demonstrate:

 

 

 

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(a)         was known to or was in the possession of Employee prior to
disclosure by the Company,

 

(b)         was generally available or becomes generally available to the public
without breach by Employee of this Agreement, or

 

(c)         was properly provided to Employee by an independent third party who
has or had no obligation of confidentiality to the Company;

 

1.4         “Effective Date” shall mean the date first above written, regardless
of when this Agreement is executed by the parties;

 

 

1.5

“Employee” shall have the meaning set forth in the preamble of this Agreement;

 

1.6

“No Solicitation Period” shall have the meaning as set forth in Section 7.2;

 

1.7

“Person” shall mean any natural person or any corporation, partnership, joint
venture, trust, firm or other entity; and

 

1.8

“Restricted Period” shall have the meaning as set forth in Section 7.1.

 

2.

REPRESENTATIONS AND WARRANTIES

 

 

2.1

Employee Representations. Employee represents and warrants the following:

 

(a)     Employee possesses general business knowledge, experience and
capabilities regarding the design, manufacture, fabrication, assembly,
distribution and sale of flexible metal hose products;

 

(b)     To the best of Employee’s knowledge, such business knowledge, experience
and capabilities is not a trade secret of, or otherwise proprietary or belonging
to any other Person; is not subject to any non-disclosure agreement that would
prevent Employee from utilizing such knowledge, experience and capabilities for
the benefit of the Company in the performance of his duties under this
Agreement; and is not the subject of a patent or a currently pending patent
application; and;

 

(c)     Employee is not subject to any agreement, or aware of any restriction,
that would prevent him from accepting employment with the Company under the
terms of this Agreement.

 

2.2        Company Representation. The Company represents and warrants that it
has no desire or expectation that Employee will provide to the Company or
utilize in the performance of his duties under this Agreement, any information
that is confidential or proprietary to any other Person.

 

 

 

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3.

EMPLOYMENT, DUTIES AND RESPONSIBILITIES OF EMPLOYEE

 

3.1        Performance of Job Duties. Employee is employed as a full time
employee of the Company for the term of this Agreement. Employee will be
assigned as the Senior Vice President & General Manager of the Company’s
TracPipe® flexible gas piping division, to perform such duties and services as
are described in Exhibit A attached hereto and incorporated herein by reference.
Employee’s title is subject to the formal ratification of the Company’s Board of
Directors. During the term of this Agreement, Employee shall devote his full
time and attention and his best efforts to the conduct of the business of the
Company and the performance of his duties under this Agreement, and shall not
engage in any other business activity; provided that Employee shall not be
prevented from investing his personal assets in such manner as will not require
significant services on the part of Employee. Employee specifically acknowledges
and agrees that he will be required to spend significant periods of time at, and
travel to and work at the offices of the Company in Exton, Pennsylvania for the
first year of the term of this Agreement. Employee further agrees that he will
relocate his personal residence to the Exton, Pennsylvania area within 1 year
after the Effective Date, and the Company shall provide a relocation transition
payment to Employee in connection with such relocation.

 

3.2        Company’s Obligations. Except as provided in Section 9, the Company
may not during the term of this Agreement, without Employee’s prior consent:

 

 

(a)

terminate or demote Employee;

 

(b)          reduce Employee’s salary, bonus or perquisites (except for employee
benefit programs that are generally available to all employees); or

 

(c)          narrow the scope of Employee’s duties or otherwise detrimentally
change Employee’s job description.

 

4.

TERM OF AGREEMENT

 

This Agreement shall go into effect as of the Effective Date and shall terminate
3 years following the Effective Date, unless terminated earlier as provided in
Section 9. This Agreement shall automatically be extended for additional one (1)
year terms upon the expiration of the three-year term, unless the Company gives
Employee at least three (3) months’ prior written notice of its intention not to
extend the Agreement. The Company’s rights and obligations upon issuing such
prior written notice of its intention not to extend the Agreement are set forth
in Section 9.6, below.

 

5.

COMPENSATION OF EMPLOYEE

 

As compensation and consideration for the performance by Employee of his
obligations under this Agreement, Employee shall be entitled to the following
(subject to the provisions of Section 9 hereof):

 

 

 

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5.1        Base Salary. During the term of this Agreement, the Company shall pay
to Employee a gross base salary totaling Two Hundred Twenty Thousand Dollars
($220,000.00) per annum. This base salary shall be payable in regular intervals
in accordance with the Company’s standard payroll practices and shall be subject
to such withholding and other normal employee deductions as may be required by
law or the Company’s standard employee benefit plans. Employee’s base salary may
be increased during the term of this Agreement by the President of the Company,
subject to review and approval by the Company’s Compensation Committee of the
Board of Directors. It is anticipated that the base salary will be reviewed by
the President on the anniversary of the Effective Date of this Agreement each
year during the term hereof.

 

5.2        Additional Employee Benefits and Perquisites. In addition to the
annual base salary, Employee shall receive all benefits and perquisites of
current Company employees, as may be determined from time to time by the
Company’s Board of Directors or its designee, but not limited to:

 

(a)          Bonus Plan. During the term of this Agreement, the Company will
offer Employee participation in a bonus program as set forth in Exhibit B
attached hereto.

 

(b)          Benefits. Employee shall be eligible to participate during the term
of this Agreement in such life insurance, health, dental, short- and long-term
disability and medical insurance benefits, retirement, and such other employee
benefit plans and programs for the benefit of the employees of the Company, as
may be maintained from time to time, in each case to the extent and in the
manner available to other officers of the Company, and subject to the terms and
provisions of such plan or programs.

 

(c)          Vacation. Employee shall be entitled to twenty (20) days of paid
vacation during each calendar year and to all paid holidays of the Company.

 

(d)          Expenses. The Company shall reimburse Employee for reasonable
out-of-pocket expenses incurred by Employee in connection with the business of
the Company and in performance of his duties under this Agreement, upon his
presentation to the Company of an itemized accounting of such expenses with
reasonable supporting data, subject, however, to the Company’s policies relating
to business-related expenses as in effect from time to time.

(e)          Auto Allowance. The Company will pay to Employee an amount equal to
$600.00 for the first 12 months during the term of this Agreement as an
allowance against the purchase or lease of an automobile for his use in
connection with performing the Duties. Employee will be responsible for all
costs of operating and maintaining the automobile, including fuel, insurance,
taxes, and maintenance.

 

5.3        Phantom Stock. During the term of this Agreement, the Company will
offer to Employee the opportunity to participate in the Omega Flex Phantom Stock
Plan, substantially in the form attached hereto as Exhibit C. The Company will
grant to Employee in accordance with the Plan, units of phantom stock in the
amounts set forth in Exhibit D, and which will vest in four equal annual
increments beginning on the first anniversary of the grant thereof.

 

 

 

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5.4          Transition Bonus. Employee shall be paid a transition bonus of
Thirty Thousand Dollars ($30,000.00) to assist Employee in the transition from
his prior employment, payable upon Employee’s relocation to the Exton,
Pennsylvania area (before September 1, 2007).

 

 

6.

CONFIDENTIALITY

 

6.1          Confidentiality. Employee acknowledges that during the course of
his employment with the Company he will, from time to time, observe, obtain,
receive, or otherwise become aware of Confidential Information. Employee hereby
agrees to keep and hold all Confidential Information in confidence. Employee
also agrees that he will not publish or disclose to any Person, or use for the
benefit of himself or any third party, any items of Confidential Information,
except:

(a)          to the Company’s directors, auditors, attorneys, or to employees or
agents with a need for such information, or

 

(b)          to a third party pursuant to a valid confidentiality agreement
executed to further a valid business purpose of the Company, or

 

(c)          as required in the conduct of Company business, or as authorized in
writing by the Company.

 

6.2        Exclusive Property. Employee acknowledges and agrees that all
Confidential Information is the exclusive property of the Company. All
Confidential Information, including without limitation, business records, papers
and other documents kept or made by Employee during his employment with the
Company and relating to the business of the Company shall be and remain the
property of the Company. Upon the termination of his employment with the Company
or upon the request of the Company at any time, Employee shall promptly deliver
to the Company, and shall retain no copies of, any Confidential Information,
including without limitation, any written materials, records and documents made
by Employee.

 

6.3        Exceptions for Governmental or Judicial Orders. Employee shall have
no liability under this Section 6 due to his disclosure of Confidential
Information made pursuant to judicial or governmental order, provided Employee
(if allowed under applicable law) notifies the Company as soon as possible and
in any event prior to such disclosure, and cooperates with the Company in the
event the Company elects to legally contest and avoid such disclosure.

 

6.4        Survival of Section. The provisions of this Section 6 shall survive
the termination or expiration of this Agreement for any reason whatsoever.

 

7.

EXCLUSIVITY / NON-COMPETITION

 

7.1          Exclusivity / Non-Competing Employment. During the period of time
while Employee is employed by the Company and for a period of one (1) year
following Employee’s separation of employment with the Company (the “Restricted
Period”), Employee shall not, directly or indirectly, be employed by, own an
interest in, contract for services with, manage,

 

 

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operate, join, control, lend money, or render financial business, technical or
other assistance to, or participate in, or be connected in any way with, any
Person that at such time is engaged in, or plans to engage in, the design,
manufacture, fabrication, assembly, distribution or sale of corrugated stainless
steel hose, whether as a director, officer, employee, partner, stockholder,
consultant or otherwise.

 

7.2          No Solicitation. During the period of time while Employee is
employed by the Company and for the period of 3 years following Employee’s
separation of employment with the Company (the “No Solicitation Period”),
Employee shall not, whether for his own account or for the account of any other
Person, intentionally solicit, endeavor to entice away from the Company, or
otherwise interfere with the relationship of the Company with, any Person who is
at that time, or was within the most recent twelve-month period prior to such
contact by Employee, a customer, agent, distributor, wholesaler, or end-user of
the Company.

 

7.3        No Interference. During the No Solicitation Period, Employee shall
not, whether for his own account or for the account of any other Person,
intentionally solicit, endeavor to entice away from the Company, or otherwise
interfere with the relationship of the Company with, any Person who is employed
by the Company during the No Solicitation Period.

 

7.4        Stock Ownership. Nothing in this Agreement shall prohibit Employee
from acquiring or holding any securities of any company listed on a national
securities exchange or quoted on the automated quotation system of the National
Association of Securities Dealers, Inc., provided that at any time during the
Restricted Period, Employee and members of his immediate family do not own more
than five percent (5%) of any voting securities of any company engaged in the
same type of business as the Company.

 

7.5        Territorial Scope. The prohibitions in Sections 7.1, 7.2 and 7.3
shall extend to any geographical place where the Company is doing business while
Employee is employed by the Company.

 

7.6        Survival of Section. The provisions of this Section 7 shall survive
the termination or expiration of this Agreement for any reason whatsoever.
Employee expressly acknowledges and agrees that the compensation provided to him
under this Agreement and during his subsequent employment with the Company, is
adequate exchange for the restrictive covenants set forth in this Section 7; and
that he further agrees that he will not raise a defense of lack of consideration
in any suit or proceeding brought by the Company seeking the enforcement of the
foregoing covenants.

 

8.

REMEDIES

 

8.1        Specific Performance. Employee hereby acknowledges that any breach by
Employee of his obligations under Sections 6 or 7 of this Agreement, or both of
them, may result in material and irreparable injury to the Company for which
there in no adequate remedy at law, and that it will not be possible to measure
damages for such a breach. Therefore, Employee agrees that in the event of such
a breach by Employee or threat thereof, the Company shall be entitled to obtain
a temporary restraining order, a preliminary injunction, a permanent injunction

 

 

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or other equitable relief restraining Employee from engaging in activities
prohibited by Sections 6 or 7, or both of them, of this Agreement. Employee
further acknowledges that in the event of such a breach or threat thereof, the
Company shall be entitled to obtain such other or further relief as may be
required to specifically enforce any of the covenants of this Agreement.
Employee hereby agrees and consents that such injunctive or other relief may be
sought in any state or federal court of competent jurisdiction in the County of
Chester, Commonwealth of Pennsylvania, or in the state and county in which such
violation may occur or in any other court having jurisdiction, at the election
of the Company. Employee agrees to and hereby does submit to in personam
jurisdiction before each and every such court for the foregoing purposes.

 

8.2        Suspension of Payments. Employee hereby acknowledges that should an
alleged breach of Sections 6 or 7 of this Agreement, or both of them, occur, the
Company may suspend any payments due to Employee while any action it may bring
against Employee for injunctive and/or monetary relief is pending; provided,
however, in the event that the Company does not prevail in such action, it shall
pay to Employee the amount of the payments that were suspended with interest at
the prime rate as published in the Wall Street Journal from time to time, from
the date of the suspension until payment is finally made.

 

8.3        Remedies not Exclusive. The remedies of this Section shall be
cumulative and not exclusive, and shall be in addition to any other remedy which
the Company may have.

 

8.4        Survival of Remedies. This Section 8 shall survive the termination or
expiration of this Agreement for any reason whatsoever.

 

9.

TERMINATION OF EMPLOYMENT

 

Employee’s employment hereunder may be terminated without any breach of this
Agreement under the following conditions:

 

9.1        Termination by the Company for Cause. The Company may terminate this
Agreement and Employee’s employment with the Company with Cause prior to the
expiration of this Agreement by sending Employee written notice of such
termination for Cause. The date of such notice shall be the effective date of
the termination of this Agreement. If the Company terminates Employee’s
employment for Cause, Employee shall receive a severance payment in an amount
equal to one-twelfth his annual base salary at the rate effective on the date of
termination payable within 30 days of such termination. For purposes of this
Agreement, “Cause” shall mean (1) dishonesty or fraud resulting in damage to the
business of the Company; (2) embezzlement or theft of assets of the Company; (3)
breach of Employee’s representations and warranties set forth in Section 2,
above; (4) failure by Employee to perform the obligations set forth in Sections
3, 6 or 7, above; or (5) conviction for a felony resulting in damage to the
business of the Company. If the Company terminates this Agreement and Employee’s
employment for Cause, he shall not be entitled to any compensation or benefits
after the effective date of his termination, other than the severance provided
in this Section 9, and any bonus earned, but not yet paid, under this Agreement.

 

 

 

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9.2        Later Employment With Successor. Employee shall not be deemed to have
been terminated under this Agreement if he is offered employment on
substantially the same or better terms by any subsidiary of the Company, or by
any successor in interest or assignee of the Company, or by any purchaser of
substantially all of the Company’s assets.

 

9.3        Death. Notwithstanding anything to the contrary herein contained,
Employee’s employment and this Agreement shall terminate upon his death and
neither he nor his heirs shall be entitled to any compensation or benefits under
this Agreement after the effective date of his termination other than (i) any
bonus earned, but not yet paid, under this Agreement and (ii) any rights under
the Omega Flex Phantom Stock Plan, if any.

 

9.4        Disability. Notwithstanding anything to the contrary herein
contained, Employee’s employment and this Agreement shall terminate if he is
unable to substantially perform the duties required under this Agreement for a
period of 6 consecutive months, or for 180 days in any 9 month period, due to
any physical or mental illness, condition, disability or impairment.

 

9.5          Delivery of Material. Employee agrees that upon the expiration or
termination of this Agreement he will promptly deliver to the Company all
Confidential Information, and all documents, papers, materials and other
property of the Company which may then be in his possession or under his
control.

9.6          Non-Renewal of Agreement. If the Company elects not to renew this
Agreement at the expiration of the initial term or any subsequent renewal term,
then Employee shall receive a severance payment in an amount equal to his annual
base salary at the rate effective on the date of expiration payable in one lump
sum within 30 days of the expiration of this Agreement.

 

10.

NOTICES

 

All notices given hereunder shall be in writing and shall be deemed delivered
when served personally or on the third business day after being deposited in the
United states mail, certified or registered mail, postage prepaid, addressed as
follows;

 

 

 

 

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       If to the Company:

President

 

Omega Flex, Inc

 

451 Creamery Way

 

Exton, Pennsylvania 19341-2509

 

 

With a copy to:

Timothy P. Scanlan, Esq.

 

Omega Flex, Inc.

 

260 North Elm Street

 

Westfield, MA 01085

 

 

If to Employee:

Duane E. Shooltz

 

_____________________________

 

_____________________________

 

_____________________________

 

Any party may change its address for notices by communicating its new address in
writing to the other party.

 

11.

MISCELLANEOUS

 

11.1      Agreement is Non-Assignable. This Agreement is a personal service
contract and shall not be assignable by Employee or by the Company, except that
the Company may assign this Agreement to a Person which succeeds to the
Company’s rights and liabilities by merger, sale of assets as a going concern,
or consolidation with the Company.

 

11.2      Binding Effect. All rights and obligations and agreements of the
parties under this Agreement shall be binding upon and enforceable against, and
inure to the benefit of the parties and their personal representatives, heirs,
legatees and devises, and any Person succeeding by operation of law to their
rights under this Agreement, except that such personal representatives, heirs,
legatees, devises and other persons shall have no obligation to perform
Employee’s duties described in Section 3 hereof.

 

11.3      Representations. Employee represents to the Company that he has had an
opportunity to have this Agreement by an attorney of his own choosing, that he
has read this Agreement and understands the meaning and consequences of each
provision of this Agreement. Employee and the Company each represent and warrant
to each other that there are no restrictions, agreements or limitations on their
respective rights or ability to enter into and perform the terms of this
Agreement.

 

11.4      Further Assurances. Employee and the Company, as the case may be,
shall execute and deliver such further instruments and do such further acts and
things as may be required to carry out the terms or conditions of this Agreement
or as may be consistent with the intent and purpose of this Agreement.

 

 

 

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11.5      Rights of Third Parties. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.

 

11.6      Effect of Waiver. A waiver of, or failure to exercise, any rights
provided for in this Agreement, in any respect, shall not be deemed a waiver of
any further or future rights hereunder. Except for rights which must be
exercised within a specified time period under this Agreement, no rights herein
shall be considered as waived, whether intentionally or not, unless waived in a
writing signed by the party to be charged with the waiver.

 

11.7      Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts applicable to
contracts made and performed in that jurisdiction, without regard to the
principles of conflicts of laws.

 

11.8      Amendments. This Agreement may not be changed or amended except in
writing signed by all parties hereto.

 

11.9      Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, and such counterparts shall together
constitute but one and the same instrument.

 

11.10   Severability. If a court of competent jurisdiction declares that any
term or provision of this Agreement is invalid or unenforceable, then:

 

 

(a)

the remaining terms and provisions hereof shall be unimpaired, and

 

(b)          the invalid or unenforceable term or provision shall be deemed
replaced by a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.

 

11.11   Entire Agreement. This Agreement supersedes all prior agreements or
understandings, oral or written, between the parties hereto with respect to the
employment of Employee by the Company. This Agreement contains the entire
agreement of the parties with respect to the employment of Employee by the
Company, and the parties shall not be bound by any terms, conditions,
statements, covenants, representations or warranties, oral or written, not
herein contained.

 

[Signature page immediately follows.]

 

 

 

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

 

 

 

 

WITNESS:

EMPLOYEE:

 

 

 

 

 

 

By:/S/ Stephanie Salak-Barry    

By:/S/ Duane E. Shooltz                  

 

Duane E. Shooltz

 

 

 

COMPANY:

WITNESS:

OMEGA FLEX, INC.,

 

a Pennsylvania corporation

 

 

 

 

 

 

 

 

By:/S/ Stephanie Salak-Barry    

By:/S/ Kevin R. Hoben__________

 

Kevin R. Hoben,

 

President & Chief Executive Officer

 

 

 

 

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EXHIBIT A

 

DUTIES

 

Employee will be employed by the Company as the Senior Vice President & General
Manager of the Company’s TracPipe® division.

 

 

•

Employee will be responsible for the management of the day-to-day operations and
affairs of the TracPipe® business in North America, including manufacturing,
engineering, sales and marketing. Employee will report directly to the President
& CEO.

 

 

•

Functions such as Finance, Human Resources, Quality and R&D will support the
TracPipe® business, but will not report to Employee.

 

 

•

All technical and engineering personnel in the TracPipe® business will report on
a dotted line basis to the Chief Operating Officer.

 

 

•

Employee will also be responsible for

 

 

•

maintaining and growing the level of TracPipe® sales and gross margins;

 

 

•

maintaining and improving the TracPipe® division organization and personnel;

 

 

•

maintaining and improving an environment of compliance with applicable laws and
policies of the Company;

 

 

•

maintaining and improving an environment of continuous improvement; and

 

 

•

coordinating activities with other functions and divisions within the Company.

 

 

•

Employee will also perform all other duties, projects and tasks assigned by the
President or the Board of Directors from time to time.

 

 

 

 

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