EXHIBIT 10.3
 
EMPLOYMENT AGREEMENT

Employment Agreement (“Agreement”) effective as of April 9, 2007, by and between
Advanced Automation Group LLC (the “Company” or “Employer”), a Delaware limited
liability company, and Shaotang Chen (the “Executive”) (collectively the Company
and the Executive are referred to as the “Parties”).

INTRODUCTION
 
WHEREAS, the Employer and the Executive wish to enter into this Agreement to set
forth the terms and conditions of the Executive’s employment by the Company.

Accordingly, in consideration of the mutual covenants and agreement set forth
herein and the mutual benefits to be derived herefrom, and intending to be
legally bound hereby, the Company and the Executive agree as follows:

1. Employment

1.1 Duties. The Company shall employ the Executive on the terms and conditions
set forth in this Agreement, as Research & Development Director (“R&D
Director”). As R&D Director, Executive will be responsible for managing research
and development of new generation of precision motor servo controllers for
industrial automation. The Executive accepts such employment with the Company
and shall perform and fulfill such other duties as are assigned to him hereunder
consistent with his status as a senior executive of the Company, devoting his
best efforts and substantially all of his professional time and attention (which
shall constitute no less than forty (40) working hours per week) to accomplish
the performance and fulfillment of his duties hereunder and to the advancement
of the best interests of the Company, subject only to the direction, approval,
and control of the Company’s specific directives of the Board of Managers of the
Company and Executive’s superiors (collectively, “Senior Management”).

1.2 Place of Performance. In connection with his employment by the Company, the
Executive shall be based in the Detroit, Michigan metropolitan area, except for
required travel on Company business.

2. Term of Employment.

The term of employment of the Executive shall begin on the date entered above
and shall continue for eighteen (18) months, unless earlier terminated as set
forth herein. The Executive understands and agrees that neither his job
performance nor promotions, commendations, bonuses or the like from the Company
give rise to or in any way serve as the basis for modification, amendment or
extension, by implication or otherwise, of his term of employment with the
Company.
 
 
 

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3. Compensation.

3.1 Base Salary. During the term of this Agreement the Executive shall receive a
minimum annual salary (the “Base Salary”) payable in installments at such times
as the Company customarily pays its other senior executive employees and
calculated as follows:

3.1.1 The Base Salary to be paid to Executive shall be $95,000 on annualized
basis;

3. 1.2 The Executive’s Base Salary will be subject to review and adjustments
will be made based upon the Company’s normal performance review practices.

3.2 Bonus. During the term of this Agreement, the Executive may receive a bonus,
which the Compensation Committee of the Company’s Board of Managers shall
determine annually and which shall be based on the same criteria and/or formulae
as are used in determining the bonuses and non-salary distributions paid to
similarly situated employees.
3.3 Health Insurance and Other Benefits. During the term of this Agreement, the
Executive shall be provided all employee benefits provided by the Company to its
management and all other Company salaried employees, including without
limitation, all medical insurance and life insurance plans or arrangements and
shall be entitled to participate in all pension, profit sharing, stock option
and any other employee benefit plan or arrangement established and maintained by
the Company, all subject, however, to the Company rules and policies then in
effect regarding participation therein. During the term of this Agreement, the
benefits provided to Executive, as described in the preceding sentence, shall
not be reduced except in accordance with the general reduction of such benefits
applicable to all salaried employees generally, but then only to the extent that
such benefits are reduced for such other salaried employees.

4. Reimbursement of Expenses.

The Executive shall be reimbursed for all items of travel, entertainment and
miscellaneous expenses which the Executive reasonably incurs in connection with
the performance of his duties hereunder, provided that (a) all expenses over
$500 are approved by Senior Management prior to being incurred, (b) the
Executive submits to the Company on proper forms provided by the Company such
statements and other evidence supporting such expenses as the Company may
reasonably require and (c) such expenses meet the Company’s policy concerning
such matters.
 
 
 

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5. Vacations.

The Executive shall be entitled to not less than three (3) weeks of paid
vacation in any calendar year (prorated in any Year during which the Executive
is employed hereunder for less than the entire Year).

6. Termination of Employment.

6.1 Severance upon Termination without Cause. If the Executive’s employment is
terminated by the Company without Cause (as defined below) (the date of
termination is referred to as the “Termination Date”), then the Company shall
pay the Executive in lieu of other damages, an amount (the “Severance Payments”)
equal to his then current Base Salary payable in installments at the same time
the Company pays salary to its other senior executive employees for four (4)
weeks (the “Severance Period”). The Company shall have no liability to make any
Severance Payments as provided for in this paragraph unless (i) the Executive
executes a Separation Agreement and General Release in a form satisfactory to
the Company, and (ii) Executive complies with all provisions in Section 8
(Restrictive Covenants). In addition, (i) any Company stock options not vested
at the time of termination shall immediately terminate and (ii) the Company
shall maintain during the Severance Period all employee benefit plans and
programs which the Executive participated in immediately prior to such
termination other than bonus, Commission, incentive compensation and similar
plans based on performance, provided Executive’s participation is permissible
under the general terms and provisions of such plans. If Executive is terminated
for Cause, he shall receive only those amounts earned but not distributed under
the relevant plan, program or practice of the Company.

6.2 Voluntary Termination; Termination for Cause. If Executive’s employment with
the Company is terminated for “Cause” by the Company (as defined below) or if
the Executive voluntarily terminates his employment with the Company at any
time, then (i) all payments of compensation by the Company to Executive
hereunder will terminate immediately (except as to amounts already earned), and
(ii) Executive will only be eligible for severance benefits in accordance with
the Company’s established policies as then in effect.

7. Definitions.

7.1 Cause. For purposes of this Agreement, “Cause” shall mean: (i) the
Executive’s continued substantial violations of his employment duties (other
than a failure resulting from the Executive’s in ability to perform his duties
because of illness or other physical or mental incapacity (based on a medical
report provided to the Company) after the Executive has received written demand
for performance from the Company’s Chief Executive Officer or Board which sets
forth the factual basis for the Company’s belief that the Executive has not
substantially performed his duties; (ii) the Executive engaging in
illegal conduct that was or is reasonably likely to be materially injurious to
the business or reputation of the Company or its affiliates; (iii) the
Executive’s violation of a federal or state law or regulation materially
applicable to the Company’s Business; (iv) the Executive’s material breach of
the terms of any confidentiality agreement or invention assignment agreement
between the Executive and the Company; or (v) the Executive being convicted of,
or entering a plea of nolo contendere to, a felony (other than a traffic
violation) or committing any act of moral turpitude, dishonesty or fraud
against, or the misappropriation of material property belonging to, the Company
or its affiliates.
 
 
 

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8. Restrictive Covenants.

8.1 Covenant Not to Compete. Executive recognizes that the Company is engaged in
a highly competitive business, personal contact is of primary importance in
securing new customers and in retaining the accounts and goodwill of present
customers and protecting the Business of the Company. The Executive, therefore,
agrees that during the Employment Period and (x) during the Severance Period if
Executive is receiving Severance Payments or (y) after Executive’s employment is
terminated for Cause, for one (1) year following the Termination Date (either of
such periods of time is referred to as the “Restricted Period”), he will not,
with respect to the Company’s Business (i) accept employment or render service
to any Person that is engaged in a business directly competitive with the
Company’s Business or (ii) enter into or take part in or lend his name, counsel
or assistance to any business, either as proprietor, principal, investor,
partner, director, officer, executive, consultant, advisor, agent, independent
contractor, or in any other capacity whatsoever, for any purpose that would be
competitive with the Company’s Business (all of the foregoing activities are
collectively referred to as the “Prohibited Activity”). For these purposes, the
Company’s Business shall mean (i) design, manufacturing and sales of precision
servo motor controllers for industrial automation, and (ii) any other business
engaged in by the Company on the Termination Date.

8.2 Non-Disclosure of Information. The Executive shall:

8.2.1 Never, directly or indirectly, disclose to any person or entity for any
reason, or use for his own personal benefit, any “Confidential Information” as
hereinafter defined; and

8.2.2 At all times take all reasonable precautions necessary to protect from
loss or disclosure by Executive or his subordinates any and all documents or
other information containing, referring, or relating to such Confidential
Information. Upon termination of employment with the Company for any reason, the
Executive shall promptly return to the Company any and all documents or other
tangible property containing, referring, or relating to such Confidential
Information, whether prepared by him or others.

8.2.3 Notwithstanding any provision to the contrary in Section 8, this paragraph
shall not apply to information which the Executive is called upon by legal
process (including, without limitation, by subpoena or discovery requirement) to
disclose or any information which has become part of the public domain or is
otherwise publicly disclosed through no fault or action of the Executive.
 
 
 

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8.2.4 For purposes of this Agreement, “Confidential Information” shall mean any
information relating in any way to the business of the Company disclosed to or
known to the Executive as a consequence of, result of, or through the
Executive’s employment by the Company which may consist of, but not be limited
to, technical and non-technical information about the Company’s proprietary
products, processes, programs, concepts, forms, business methods, data, any and
all financial and accounting data, employees, marketing, customers, customer
lists, and services and information corresponding thereto acquired by the
Executive during the term of the Executive’s employment by the Company.
Confidential Information shall not include any of such items which are published
or are otherwise part of the public domain, or freely available from trade
sources or otherwise.

8.2.5 Upon termination of this Agreement for any reason, the Executive shall
return to a designated officer of the Company all equipment and/or tangible
property then in the Executive’s possession or custody which belongs or relates
to the Company, including, without limitation, copies or reproductions of
correspondence, memoranda, reports, notebooks, drawings, photographs, data base,
or any other documents or electronically stored information which constitutes
Confidential Information.

8.3 Trade Secrets - Intellectual Property Rights. Executive shall provide the
Company with any copyrightable work, trade secrets and other protectable
intellectual property that are related to the Company’s Business and that are
developed or produced by Executive while in the employment of the Company
pursuant to this Agreement (collectively, “Work Product”).

8.3.1 All Work Product shall be considered works made for hire and shall be the
exclusive property of the Company and the Company shall be considered the author
and/or creator of such work for worldwide copyright purposes and renewals and
extensions thereof. The Company may request, at its own cost and expense, that
Executive assist the Company in obtaining worldwide patent, copyright and other
property rights for the Work Product.

8.3.2 If Executive’s rights in the Work Product cannot be assigned to the
Company, the Executive waives enforcement of all such rights against the
Company. The Executive further agrees to join in any action, at the Company’s
sole cost and expense, to enforce or to procure a waiver of such rights.

8.3.3 If the rights of the Work Product cannot be waived or the Work Product is
not deemed a “work for hire”, the Executive hereby grants the Company and its
assigns a worldwide royalty-free license to reproduce, distribute, modify,
publicly display, sublicense and assign such rights in all media or distribution
technologies now known and hereinafter developed or devised.
 
 
 

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8.3.4 The Executive hereby appoints the Company as his attorney in fact to
execute and file any patent, copyright or other lawful application with respect
to the Work Product.

8.4 Conflict of Interest. Executive shall exercise good judgment and maintain
high ethical standards in the course of his dealings so as to preclude the
possibility of a conflict between the interest of the Company and his own
personal interest. Executive, therefore, has an obligation to avoid any
activity, agreement, personal interest, or other relationship or situation
which: (i) conflicts with the Company’s best interest; (ii) interferes with
Executive’s responsibility to serve the Company to the best of Executive’s
ability; or (iii) gives the appearance of self dealing.

8.4.1 This policy requires that Executive shall not have any relationship, nor
engage in any activity that might impair the independence or judgment in the
execution of Executive’s duties. Executive shall not have any direct or indirect
personal financial interests in suppliers of property, goods or services that
would affect his decisions or actions on the Company’s behalf. Executive shall
not accept gifts, benefits, or unusual hospitality that would be reasonably
likely to influence Executive in the performance of his duties.

8.4.2 If any possible conflict of interest situation arises, the Executive is
responsible to immediately disclose the facts to the Board of Managers of the
Company so that an evaluation may determine whether a problem exists and, if so,
to eliminate it.

8.5 Nonsolicitation. During the term of this Agreement and during the Restricted
Period, Executive shall not, directly or indirectly, induce, attempt to induce,
or aid others in inducing any of Company’s employees to accept employment or
affiliation with another firm, partnership, association, or company.

8.6 Injunctive Relief/Legal Remedies. The Parties agree that the remedy at law
for any breach by Executive of this Agreement, and specifically the provisions
of Section 8 (“Restrictive Covenants”), will be inadequate and that the Company
or any of its subsidiaries or other successors or assigns shall be entitled to
injunctive relief without bond. Such injunctive relief shall not be exclusive,
but shall be in addition to any other rights and remedies Company or any of its
subsidiaries or their successors or assigns might have for such breach.

8.6.1 The Employee acknowledges: (i) that compliance with the restrictive
provisions contained in Section 8 is necessary to protect the business and
goodwill of the Company and its subsidiaries, and (ii) that a breach of this
Agreement will result in irreparable and continuing damage to the Company, for
which monetary damages may not provide adequate relief. Consequently, Employee
agrees that in the event of a breach or threatened breach of any of the
restrictive covenants described herein, the Company, at its discretion, shall be
entitled to seek both: (i) a preliminary and/or permanent injunction in order to
prevent such damage, or continuation of such damage, and (ii) monetary damages
as determinable. Nothing herein, however, shall be construed to restrict and/or
prohibit the Company from pursuing any and all other remedies; the employee
acknowledges that all remedies are cumulative.
 
 
 

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8.6.2 If any legal action arises to enforce the Company’s trade secrets, the
prevailing party shall be entitled to recover any and all damages, as well as
all costs and expenses, including reasonable attorney’s fees incurred in
enforcing or attempting to enforce the Company’s trade secrets.

9. Arbitration. 

9.1 Any and all disputes, controversies and claims arising out of, or relating
to, this Agreement, or with respect to the interpretation of this Agreement, or
the rights or obligations of the Parties and their successors and permitted
assigns, whether by operation of law or otherwise, shall be settled and
determined by arbitration in New York, New York, pursuant to the then existing
rules of the American Arbitration Association (“AAA”), for commercial
arbitration. Each party shall pay their own legal fees. The losing party shall
pay the fees and costs imposed by the AAA; if neither party clearly prevails in
the arbitration, the parties shall request that the AAA appointed arbitrator
apportion the AAA’s fees and costs between the parties.

9.2 The Parties covenant and agree that the decision of the AAA shall be final
and binding and hereby waive their right to appeal therefrom.

9.3 The arbitrator(s) will apply New York law to the merits of any dispute or
claim, without reference to rules of conflicts of law. The arbitration
proceedings will be governed by federal arbitration law and by then existing
rules of the AAA, without reference to arbitration law. Executive and the
Company hereby consent to the personal jurisdiction of the state and federal
courts located in New York, New York for any action or proceeding arising from
or relating to this Agreement or relating to any arbitration in which the
Parties are participants.

9.4 THE EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. THE EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE
AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH
THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE,
BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF THE EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES
TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO ADMINISTRATIVE
CLAIMS.
 
 
 

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10. Miscellaneous.

10.1 Notices. Any notice, demand or communication required or permitted under
this Agreement shall be in writing and shall either be hand-delivered to the
other party or mailed to the addresses set forth below by registered or
certified mail, return receipt requested, or sent by overnight express mail or
courier or facsimile to such address, if a party has a facsimile machine. Notice
shall be deemed to have been given and received (i) when hand-delivered or after
three (3) business days when deposited in the U.S. Mail, (ii) when transmitted
and received by facsimile or sent by express mail properly addressed to the
other party. The addresses are:
To the Company:

Advanced Automation Group LLC
1685 Hamlin Road
Rochester Hills, Michigan 48309
 
To the Executive:

Shaotang Chen
4201 Frostwood Court
Troy, Michigan 48098
 
The foregoing addresses may be changed at any time by either party by notice
given in the manner herein provided.

10.2 Integration; Modification. . This Agreement, the Letter Agreement dated as
of March __, 2007 by and among Harbin Electric, Inc, Shelton Technology LLC,
Executive and Xiaogang Luo ( the “Master Agreement”) and the License Agreement
dated as of March __, 2007 by and between the Company, Shelton Technology LLC,
Executive and Xiaogang Luo constitute the entire understanding and agreement
between the Company and the Executive regarding its subject matter, and
supersedes all prior negotiations and agreements or interpretations, whether
oral or written. This Agreement may not be modified except by written agreement
signed by the Executive and a duly authorized officer of the Company. In the
event of any conflict between the terms of this Agreement and the terms of the
Master Agreement, the terms of the Master Agreement shall govern.

10.3 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties, including and their respective heirs, executors,
successors and assigns, except that this Agreement may not be assigned by the
Executive.

10.4 Waiver of Breach. No waiver by either party of any condition or of the
breach by the other of any term or covenant contained in this Agreement, whether
conduct or otherwise, in any one (1) or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or the breach of any other term or covenant set
forth in this Agreement. Moreover, the failure of either party to exercise any
right hereunder shall not bar the later exercise thereof with respect to other
future breaches.
 
 
 

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10.5 Governing Law. This Agreement shall be governed by the internal laws of the
State of New York.

10.6 Headings. The headings of the various sections and paragraphs have been
included herein for convenience only and shall not be considered in interpreting
this Agreement.

10.7 Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one (1) and the same instrument.

10.8 Due Authorization. The Company represents that all corporate action
required to authorize the execution, delivery and performance of this Agreement
has been duly taken.
 
IN WITNESS WHEREOF, this Agreement has been executed by the Executive and on
behalf of the Company by its duly authorized officer on the day and year first
above written.

       
ADVANCED AUTOMATION GROUP, LLC
 
   
   
  By:   /s/ Tianfu Yang  

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Chaiman and Chief Executive Officer      
April 9, 2007
Date

 

       
EXECUTIVE:
 
   
   
            /s/ Shaotang Chen  

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Shaotang Chen      
April 9, 2007
Date

 
 
 

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