Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), by and between Schmitt Industries,
Inc., an Oregon corporation (the “Company”), and Regina Walker (“Executive”), is
entered into and effective this 21st day of October, 2019 (the “Effective
Date”).

RECITALS

A. The Company is engaged primarily in the business of designing, manufacturing
and selling high precision test and measurement products for a wide variety of
manufacturing, industrial and commercial applications, and Executive has
experience in such business.

B. The Company desires to employ and retain the unique experience, abilities,
and services of Executive as its Chief Financial Officer and Executive desires
to be employed by the Company, subject to the terms and conditions of this
Agreement

C. The Company will have a protectable interest in connection with Executive’s
employment with the Company. Executive will have access to trade secrets, as
that term is defined in ORS 646.461, or will have access to competitively
sensitive confidential business or professional information that otherwise would
not qualify as a trade secret, including product development plans, product
launch plans, marketing strategy, or sales plans.

D. The Company informed Employee that it intends to enforce the noncompetition
agreement and would provide additional consideration of Five Hundred ($500) as a
condition of Employee’s employment with the Company.

E. At least 72 hours before the first day of employment, the Company informed
Executive that it would require an arbitration agreement as a condition of
employment.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises, terms, covenants, and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:

1. EMPLOYMENT AND DUTIES.

(a) EMPLOYMENT. The Company hereby employs Executive, and Executive hereby
agrees to act, as Chief Financial Officer of the Company. As such, Executive
shall have responsibilities, duties, and authority reasonably accorded to,
expected of, and consistent with Executive’s position and Executive shall report
directly to the Chief Executive Officer (the “CEO”). Executive hereby accepts
this employment upon the terms and conditions herein contained and, subject to
Section l(c) hereof, agrees to devote her best efforts and substantially all of
her business time and attention to promote and further the business of the
Company.

(b) POLICIES. Executive shall faithfully adhere to, execute, and fulfill all
lawful policies established by the Company.

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(c) OTHER ACTIVITIES. Executive shall not, during the period of her employment
hereunder (the “Term”), be engaged in any other business activity pursued for
gain, profit, or other pecuniary advantage if such activity interferes in any
material respect with Executive’s duties and responsibilities hereunder. The
foregoing limitations shall not be construed as prohibiting Executive from
(i) making personal investments in such form or manner as will neither require
her services in the operation or affairs of the companies or enterprises in
which such investments are made nor subject Executive to any conflict of
interest with respect to her duties to the Company, (ii) serving on any civic or
charitable boards or committees, or (iii) serving, with the written approval of
the Board, as a director of one or more corporations, in each case so long as
any such activities do not significantly interfere with the performance of
Executive’s responsibilities under this Agreement. In addition, Executive shall
comply with the restrictions listed in Section 3 of this Agreement.

(d) PLACE OF PERFORMANCE. Executive shall not be required by the Company or in
the performance of her duties to relocate her primary residence.

2. COMPENSATION. For all services rendered by Executive, the Company shall
compensate Executive as follows:

(a) BASE SALARY. As of the Effective Date, the base salary payable to Executive
shall be One Hundred Eighty Thousand Dollars ($180,000) per year, payable on a
regular basis in accordance with the Company’s standard payroll procedures, but
not less than monthly.

(b) RESTRICTED STOCK AWARD. Upon execution of this Agreement, Executive shall be
awarded 15,625 shares of restricted common stock (the “Restricted Stock Award”)
under the Company’s equity incentive plan. The Restricted Stock Award will be
fully vested upon execution of this Agreement.

(c) RETENTION BONUS. Executive shall be paid a retention bonus of Thirty
Thousand Dollars ($30,000) on the one-year anniversary of this agreement,
subject to Executive’s continuous employment. Additionally, Executive shall be
entitled to participate in future success pools that the Company may create in
connection with the disposition of any Company assets.

(d) BONUS COMPENSATION. Executive shall be eligible for each of the following
bonuses from the Company:

(i) Payable upon achieving Performance Based objectives determined by the CEO
and Compensation Committee, an RSU bonus up to an amount equivalent to Thirty
Thousand Dollars ($30,000);

(ii) Discretionary bonuses to Executive determined by the CEO and Compensation
Committee and approved by the Board.

(e) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION. Executive shall be
entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:

(i) REIMBURSEMENT FOR EXPENSES. The Company shall provide reimbursement to
Executive for business travel and other out-of-pocket expenses reasonably
incurred by Executive in the performance of her services under this Agreement.
All reimbursable expenses shall be appropriately documented in reasonable detail
by Executive upon submission of any request for reimbursement and shall be in a
format and manner consistent with the Company’s expense reporting policy. Such
expenses shall be submitted to the Company’s CEO for approval or to such other
officer of the Company as the Board may from time to time direct.

 

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(ii) PAID TIME OFF. Paid time off in accordance with the applicable policy of
the Company as in effect from time to time, but no less favorable to Executive
than the policy of the Company in effect on the Effective Date.

(iii) OTHER EXECUTIVE PERQUISITES. The Company shall provide Executive with
other executive perquisites as may be made available to or deemed appropriate
for Executive by the Board or a committee of the Board and participation in all
other Company-wide employee benefits (including group insurance, pension,
retirement, and other plans and programs) as are available to the Company’s
executive officers from time to time.

3. NON-COMPETITION AGREEMENT.

(a) NON-COMPETITION. Except with the written approval of the Board, which
approval may be requested by Executive, Executive shall not, during the period
of her employment by or with the Company, and during the Non-compete Period (as
hereinafter defined) for any reason whatsoever, directly or indirectly, for
herself or on behalf of or in conjunction with any other person:

(i) OTHER ACTIVITIES. Engage, as an officer, director, shareholder, owner,
principal, partner, lender, joint venturer, employee, independent contractor,
consultant, advisor, or sales representative, in any Competitive Business within
the Restricted Territory;

(ii) SOLICITATION OF EMPLOYEES. Call upon any person who is, at that time,
within the Restricted Territory, an employee of the Company or any of its
subsidiaries, in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company or any of
its subsidiaries;

(iii) SOLICITATION OF CUSTOMERS. Call upon any person or entity that is, at that
time, or that has been, within one (1) year prior to that time, a customer of
the Company or any of its subsidiaries, within the Restricted Territory for the
purpose of soliciting or selling products or services in direct competition with
the Company or any of its subsidiaries within the Restricted Territory;

(iv) SOLICITATION OF ACQUISITION CANDIDATES. Call upon any prospective
acquisition candidate (that is, a business that the Company may have an interest
in acquiring), on Executive’s own behalf or on behalf of any person, which
candidate was, to Executive’s knowledge after due inquiry, either called upon by
the Company, or for which the Company made an acquisition analysis, for the
purpose of acquiring such candidate.

(b) CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings ascribed to them:

(i) COMPETITIVE BUSINESS shall mean any Person that is engaged in designing,
manufacturing and selling high precision test and measurement products for
manufacturing, industrial and commercial applications or any other business in
which the Company is engaged;

(ii) PERSON shall mean any individual, corporation, limited liability company,
partnership, firm, or other business of whatever nature;

(iii) RESTRICTED TERRITORY shall mean North America, Europe and China; and

 

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(iv) SUBSIDIARY shall mean the Company’s consolidated subsidiaries, including
corporations, partnerships, limited liability companies, and any other business
organization in which the Company holds at least a fifty percent (50%) equity
interest.

(v) NON-COMPETE PERIOD shall mean the longer of (i) the one (1) year period
immediately following the termination of Executive’s employment with the Company
or (ii) the time during which Severance Payments (defined below) are being made
by the Company to Executive in accordance with this Agreement; provided,
however, that if the Executive’s employment is terminated by the Company without
Good Cause, Executive terminates her employment with Good Reason, or Executive
terminates her employment after a Change in Control pursuant to
Section 4(b)(vi)(B), then the Non-compete Period shall be eliminated immediately
following the termination of her employment with the Company.

(c) ENFORCEMENT. Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenants, and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Executive agrees that the foregoing
covenants may be enforced by the Company in the event of breach by her, by
injunctions and restraining orders.

(d) REASONABLE RESTRAINT. It is agreed by the parties that the foregoing
covenants in this Section 3 impose a reasonable restraint on Executive in light
of the activities and business of the Company (including the Company’s
subsidiaries) on the date of the execution of this Agreement and the current
plans of the Company (including the Company’s subsidiaries); but it is also the
intent of the Company and Executive that such covenants be construed and
enforced in accordance with the changing activities, business, and locations of
the Company (including the Company’s subsidiaries) throughout the term of this
covenant, whether before or after the date of termination of the employment of
Executive. For example, if, during the term of this Agreement, the Company
(including the Company’s subsidiaries) engages in new and different activities,
enters a new business, or establishes new locations for its current activities
or business in addition to or other than the activities or business enumerated
above or the locations currently established therefor, then Executive will be
precluded from soliciting the customers or employees of such new activities or
business or from such new location and from directly competing with such new
business within the Restricted Territory through the term of these covenants.

(e) OTHER ACTIVITIES. It is further agreed by the parties that, in the event
that Executive shall cease to be employed hereunder and enters into a business
or pursues other activities not in competition with the Company (including the
Company’s subsidiaries), or similar activities or business in locations, the
operation of which, under such circumstances, does not violate this Section 3,
and in any event such new business, activities, or location are not in violation
of this Section 3 or of Executive’s obligations under this Section 3, if any,
Executive shall not be chargeable with a violation of this Section 3 if the
Company (including the Company’s subsidiaries) shall thereafter enter the same,
similar, or a competitive (i) business, (ii) course of activities, or
(iii) location, as applicable.

(f) SEPARATE COVENANTS. The covenants in this Section 3 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time, or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent that the court deems reasonable,
and the Agreement shall thereby be reformed.

 

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(g) INDEPENDENT AGREEMENT. All of the covenants in this Section 3 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of Executive against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of such covenants; except as
provided in Section 4(d) below. It is specifically agreed that the Non-compete
Period following termination of employment as defined in this Section 3, during
which the agreements and covenants of Executive made in this Section 3 shall be
effective, shall be computed by excluding from such computation any time during
which Executive is in violation of any provision of this Section 3.

4. AT-WILL EMPLOYMENT. Executive’s employment with the Company shall be at-will.
The Executive may terminate her employment at any time for any reason (subject
to the notice requirements provided in this Agreement) and the Company may
terminate Executive’s employment with the Company at any time and for any reason
(subject to the severance provisions of this Agreement). This at-will employment
relationship cannot be changed except by written authorization by the Board.

5. TERMINATION; RIGHTS ON TERMINATION. Executive’s employment under this
Agreement may be terminated in any one of the followings ways:

(a) BY THE COMPANY. Upon 30 days’ notice, the Company may terminate Executive’s
employment for without good cause upon the approval of a majority of the members
of the Board, excluding Executive if Executive is a member of the Board.

(b) TERMINATION BY THE COMPANY FOR GOOD CAUSE. The Company may terminate
Executive’s employment upon ten (10) days prior written notice to Executive for
“Good Cause,” which shall mean any one or more of the following: (A) Executive’s
willful and material breach of this Agreement which has not been cured by the
Executive within thirty (30) days following written notice of such breach from
the Company; (B) Executive’s gross negligence in the performance or intentional
nonperformance (continuing for thirty (30) days after receipt of written notice
of need to cure) of any of Executive’s material duties and responsibilities
hereunder; (C) Executive’s willful dishonesty, fraud, or misconduct with respect
to the business or affairs of the Company, which materially and adversely
affects the operations or reputation of the Company; (D) Executive’s conviction
of a felony crime involving dishonesty or moral turpitude; or (E) a confirmed
positive illegal drug test result. In the event of a termination by the Company
for Good Cause, Executive shall have no right to any severance compensation.

(c) RESIGNATION BY EXECUTIVE. Executive may, without cause, terminate her own
employment under this Agreement, effective thirty (30) days after written notice
is provided to the Company or such earlier time as any such resignation may be
accepted by the Company. If Executive resigns or otherwise terminates her
employment, Executive shall receive no severance compensation.

(e) DEATH OF EXECUTIVE. The employment of Executive shall terminate immediately
upon Executive’s death. In the event of such termination, all options to
purchase Common Stock of the Company held by Executive shall thereupon vest and
shall be exercisable for the maximum period of time, up to their full term, that
will not cause Executive with respect to such options to be subject to any
excise tax under Section 409A of the Internal Revenue Code of 1986, as amended
(“Section 409A”) notwithstanding the termination of employment. All restricted
stock and/or restricted stock units (or comparable forms of equity compensation,
if any) held by the Executive which, as of the date of the death of Executive,
are not then subject to any performance conditions for vesting, shall be fully
vested and shall not be subject to any risk of forfeiture or repurchase as of
the date of Executive’s death. The payment described in this Section, if
payable, will be paid within ten (10) days after the Executive’s death.

 

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(f) DISABILITY OF EXECUTIVE. The Company may terminate Executive’s employment in
the event the Executive is disabled. The Executive shall be disabled if the
Executive is unable to engage in any substantial gainful activity by reason of a
medically determined physical or mental impairment expected to last at least
twelve consecutive months or result in death, or if the Executive is determined
to be disabled under a Company disability plan with a similar definition of
disability. In the event of such termination, all options to purchase Common
Stock of the Company held by Executive shall thereupon vest and shall be
exercisable for the maximum period of time, up to their full term, that will not
cause Executive with respect to such options to be subject to any excise tax
under Section 409A notwithstanding the termination of employment. All restricted
stock and/or restricted stock units (or comparable forms of equity compensation,
if any) held by the Executive which, as of the date of the disability of
Executive, are not then subject to any performance conditions for vesting, shall
be fully vested and shall not be subject to any risk of forfeiture or repurchase
as of the date of Executive’s termination due to disability (as defined in this
paragraph)

(h) TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE OR BY EXECUTIVE WITH GOOD
REASON. The Company may terminate Executive’s employment without Good Cause upon
the approval of a majority of the members of the Board, excluding Executive if
Executive is a member of the Board. Executive may terminate her employment under
this Agreement for Good Reason upon thirty (30) days prior notice to the
Company.

(i) RESULT OF TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE OR BY EXECUTIVE WITH
GOOD REASON. Should the Company terminate Executive’s employment without Good
Cause or should Executive terminate her employment with Good Reason, the Company
shall pay to Executive, on a monthly basis for six (6) months after such
termination, on such dates as would otherwise be paid by the Company, an amount
equal to the average of the monthly base salary and bonus paid to Executive for
the two (2) prior full fiscal years. In addition, the Company will pay, on a
monthly basis for six (6) months, the Company-paid portion of insurance premiums
for coverage under the health and welfare programs of the Company in effect on
the date of termination. The amounts payable under the two preceding sentences
are the “Severance Payments” contemplated by this Agreement and shall commence
on the first payroll date following Executive’s “separation from service” from
the Company within the meaning of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and shall be treated as a series of separate
payments under Treasury Regulations Section 1.409A-2(b)(2)(iii). Further, if the
Company terminates Executive’s employment without Good Cause or Executive
terminates her employment with Good Reason, (1) all options to purchase Common
Stock of the Company held by Executive shall vest thereupon and shall be
exercisable for the maximum period of time, up to their full term, that will not
cause Executive with respect to such options to be subject to any excise tax
under Section 409A notwithstanding the termination of employment, (2) all
restricted stock and/or restricted stock units (or comparable forms of equity
compensation, if any) held by Executive which, as of the effective date of the
termination of Executive, are not then subject to any performance conditions for
vesting, shall be fully vested and shall not be subject to any risk of
forfeiture or repurchase as of the date of termination, and (3) Executive shall
be entitled to receive all other unpaid benefits due and owing through
Executive’s last day of employment. Further, any termination by the Company
without Good Cause or by Executive for Good Reason shall operate to eliminate
the Non-compete Period set forth in Section 3.

(ii) DEFINITION OF GOOD REASON. Executive shall have “Good Reason” to terminate
employment upon the occurrence of any of the following events, without
Executive’s written approval: (1) Executive suffers a material reduction in
authority, responsibilities, or duties as provided herein; (2) Executive’s
annual base salary as set forth in this Agreement is reduced in excess of
fifteen percent (15%); (3) Executive is required to render her primary
employment services from a location more than 25 miles from the Company’s
headquarters at the time Executive began her employment with the Company;
(4) the Company takes steps to deny Executive a reasonable opportunity to
maintain Executive’s total compensation (i.e., base salary plus bonus and any
other annual cash incentive

 

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compensation) compared to the previous fiscal year (provided total compensation
may take into account performance of the Company and the past compensation
practices of the Company) or (5) the Company breaches a material provision of
this Agreement. In order for an event to justify termination for Good Reason,
the Executive must give written notice to the Company of such event within 90
days of its first occurrence and the Company must have 30 days to cure, if
possible.

(i) CHANGE IN CONTROL OF THE COMPANY.

(i) POSSIBILITY OF CHANGE IN CONTROL. Executive understands and acknowledges
that the Company may be merged or consolidated with or into another entity and
that such entity shall automatically succeed to the rights and obligations of
the Company hereunder or that the Company may undergo another type of Change in
Control. In the event such a merger or consolidation or other Change in Control
is initiated prior to the end of the Term, then the provisions of this
Section 4(b)(vi) shall be applicable.

(ii) TERMINATION SUBSEQUENT TO A CHANGE IN CONTROL. Notwithstanding anything to
the contrary herein, in the event that the Company, at any time within one
(1) year after a Change in Control, terminates Executive without Good Cause, the
Company shall pay to Executive a lump sum payment within thirty (30) days of the
termination date. The lump sum payment shall be equal to the sum of (x) the
average annual base salary and bonus paid to Executive for the two (2) prior
full fiscal years preceding the date of termination, and (y) the Company-paid
portion of insurance premiums for six (6) months of coverage under the health
and welfare programs of the Company in effect on the date of termination, in
each case less all applicable taxes, payroll deductions and withholdings
required by law. In addition, any unvested stock options and restricted stock
shall immediately be fully vested. Notwithstanding the preceding sentence, if
the independent accountants acting as auditors for the Company on the date of
the Change in Control determine that such single payment, together with other
compensation received by Executive, would constitute “excess parachute payments”
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended, and regulations thereunder, the single payment to Executive shall be
reduced to the maximum amount which may be paid without such payments in the
aggregate constituting “excess parachute payments.”

(A) EFFECTIVE DATE OF CHANGE IN CONTROL. For purposes of applying Section 4
hereof, the effective date of the Change in Control will be the closing date of
the transaction giving rise to the Change in Control.

(B) DEFINITION OF CHANGE IN CONTROL. A “Change in Control” shall mean the items
in (1)-(4) below and a transaction that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (“Exchange Act”), as amended, as in effect on
the date of this Agreement, or if Item 6(e) is no longer in effect, any
regulations issued by the Securities and Exchange Commission pursuant to the
Exchange Act, which serve similar purposes; provided that to constitute a Change
in Control the transaction must satisfy the requirements of Treasury Regulation
§1.409A-3(i)(5) relating to “change in the ownership or effective control of a
corporation, or a change in the ownership of a substantial portion of the assets
of a corporation”:

(1) TENDER OFFER. A tender offer or exchange offer is made where the intent of
such offer is to take over control of the Company, and such offer is consummated
for the equity securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding voting
securities;

 

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(2) MERGER OR CONSOLIDATION. The shareholders of the Company shall approve a
merger or consolidation, of the Company, or consummation of any such transaction
if shareholder approval is not obtained, other than any such transaction that
would result in at least fifty percent (50%) of the total voting power
represented by the voting securities of the surviving entity outstanding
immediately after such transaction being beneficially owned by the holders of
outstanding voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing holder relative to
other such continuing holders not substantially altered in the transaction; or

(3) LIQUIDATION OR SALE OF ASSETS. The shareholders of the Company shall approve
a plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the Company’s
assets to another person or entity, which is not a wholly owned subsidiary of
the Company.

(C) NOTIFICATION. Executive shall be notified in writing by the Company at any
time that the Company anticipates that a Change in Control may take place.

(D) SPECIFIED EMPLOYEE. Notwithstanding any provision of this Agreement to the
contrary, if Executive is a “specified employee” as defined in Section 409A of
the Code, Executive shall not be entitled to any payments or benefits the right
to which provides for a “deferral of compensation” within the meaning of
Section 409A, and which payment or provision is triggered by Executive’s
termination of employment (whether such payments or benefits are provided to
Executive under this Agreement or under any other plan, program or arrangement
of the Company), until the earlier of (i) the date which is the first business
day following the six-month anniversary of Executive’s “separation from service”
(within the meaning of Section 409A of the Code) for any reason other than death
or (ii) Executive’s date of death, and such payments or benefits that, if not
for the six-month delay described herein, would be due and payable prior to such
date shall be made or provided to Executive on such date. The Company shall make
the determination as to whether Executive is a “specified employee” in good
faith in accordance with its general procedures adopted in accordance with
Section 409A of the Code and, at the time of the Executive’s “separation of
service” will notify the Executive whether or not she is a “specified employee.”

(j) PAYMENTS TO TERMINATION DATE. Upon termination of Executive’s employment
under this Agreement for any reason provided above, Executive shall be entitled
to receive all compensation earned and all benefits and reimbursements due
through the effective date of termination. Additional compensation subsequent to
termination, if any, will be due and payable to Executive only to the extent and
in the manner expressly provided above. All other rights and obligations of the
Company and Executive under this Agreement shall cease as of the effective date
of termination (other than those expressly required under applicable law (such
as COBRA)), except that the Company’s obligations under Section 8 (relating to
indemnification of Executive) and Executive’s obligations under Section 3
(relating to non-competition), Section 5 (relating to return of Company
property), Section 6 (relating to inventions), Section 7 (relating to trade
secrets), and Section 9 (relating to prior agreements) shall survive such
termination in accordance with their terms.

(k) FAILURE TO PAY EXECUTIVE. If termination of Executive’s employment arises
out of the Company’s failure to pay Executive on a timely basis the amounts to
which she is entitled under this Agreement or as a result of any other breach of
this Agreement by the Company, as determined by a court of competent
jurisdiction or pursuant to the provisions of Section 14, the Company shall pay
all amounts and damages to which Executive may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses
and other costs incurred by Executive to enforce her rights hereunder. Further,
none of the provisions of Section 3 (relating to non-competition) shall apply in
the event Executive’s employment under this Agreement is terminated as a result
of a breach by the Company.

 

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(l) CONDITIONS PRECEDENT FOR PAYMENT OF SEVERANCE. In consideration for
Company’s obligations to make any payments to Executive pursuant to Section 4,
upon termination of Executive’s employment with Company for any reason other
than Executive’s death, Executive shall sign and not revoke a release in a form
satisfactory to the Company (the “Release”). Company shall present the Release
to Executive within ten (10) days of termination, and Executive shall have up to
forty-five (45) days to consider whether to sign the Release; in the event
Executive executes the Release, Executive shall have an additional eight
(8) calendar days in which to expressly revoke Executive’s execution of the
Release in writing. In the event that Executive fails to execute the Release
within the forty-five (45) days following termination, or in the event Executive
formally revokes the Executive’s Release within eight (8) calendar days of her
signing of the Release, then Executive shall not be entitled to any payments or
benefits under Section 4 of this Agreement. The Company shall make any payments
to Executive in accordance with the terms of Section 4 prior to Executive’s
failure to execute the Release within forty-five (45) days or prior to her
revocation; provided that if Executive does not sign the Release or if Executive
revokes the Release during any statutory revocation period, Executive shall
immediately reimburse Company for any and all such payments.

(m) DELAY IN SEVERANCE PAYMENTS. To the extent required under Section 409A, any
severance payments due under this Section 4 shall be delayed until the first
date such payment may be made in compliance with Section 409A(a)(2)(B).

6. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans,
financial statements, manuals, memoranda, lists, and other property delivered to
or compiled by Executive by or on behalf of the Company (or its subsidiaries) or
its representatives, vendors, or customers that pertain to the business of the
Company (or its subsidiaries) shall be and remain the property of the Company
and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials, and other
similar data pertaining to the business, activities, or future plans of the
Company (or its subsidiaries) that is collected by Executive shall be delivered
promptly to the Company without request by it upon termination of Executive’s
employment.

7. INVENTIONS. Executive shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment or
within one (1) year thereafter, and which are directly related to the business
or activities of the Company (or its subsidiaries) and which Executive conceives
as a result of her employment by the Company. Executive hereby assigns and
agrees to assign all her interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Executive shall execute any and all
applications, assignments, and other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company’s interest therein.

8. TRADE SECRETS. Executive agrees that she will not, during or after the period
of employment under this Agreement, disclose the specific terms of the Company’s
relationships or agreements with its respective significant vendors or
customers, or any other significant and material trade secret of the Company,
whether in existence or proposed, to any person, firm, partnership, corporation,
or business for any reason or purpose whatsoever.

 

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9. INDEMNIFICATION. In the event Executive is made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company against
Executive), by reason of the fact that she is or was performing services under
this Agreement, then the Company shall indemnify Executive against all expenses
(including attorneys’ fees), judgments, fines, and amounts paid in settlement,
as actually and reasonably incurred by Executive in connection therewith to the
maximum extent permitted by applicable law; provided, however, the Executive
must deliver a written undertaking to the Company that if it is subsequently
determined by a court of law in a final, non-appealable judgment, that the
Executive was not entitled to indemnification under applicable law, then the
Executive will repay all amounts. The advancement of expenses shall be
mandatory. In the event that both Executive and the Company are made a party to
the same third-party action, complaint, suit, or proceeding, the Company agrees
to engage competent legal representation, and Executive agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Executive,
Executive may engage separate counsel and the Company shall pay all attorneys’
fees of such separate counsel. Further, while Executive is expected at all times
to use her best efforts to faithfully discharge her duties under this Agreement,
Executive cannot be held liable to the Company for errors or omissions made in
good faith if Executive has not exhibited gross, willful, and wanton negligence
and misconduct or performed criminal and fraudulent acts that materially damage
the business of the Company. Notwithstanding this Section 9, the provision of
any written indemnification agreement applicable to the directors or officers of
the Company to which Executive shall be a party shall apply rather than this
Section 9 to the extent inconsistent with this Section 9.

10. NO PRIOR AGREEMENTS. Executive hereby represents and warrants to the Company
that the execution of this Agreement by Executive and her employment by the
Company and the performance of her duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other person or
entity. Further, Executive agrees to indemnify the Company for any claim,
including, but not limited to, attorneys’ fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition,
invention, or secrecy agreement between Executive and such third party that was
in existence as of the date of this Agreement.

11. ASSIGNMENT; BINDING EFFECT. Executive understands that she is being employed
by the Company on the basis of her personal qualifications, experience, and
skills. Executive agrees, therefore, that she cannot assign all or any portion
of her performance under this Agreement. Subject to the preceding two
(2) sentences and the express provisions of Section 12 below, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective heirs, legal representatives, successors, and
assigns.

12. COMPLETE AGREEMENT. This Agreement is not a promise of future employment.
Executive has no oral representations, understandings, or agreements with the
Company or any of its officers, directors, or representatives covering the same
subject matter as this Agreement. This written Agreement is the final, complete,
and exclusive statement and expression of the agreement between the Company and
Executive and of all the terms of this Agreement, and it cannot be varied,
contradicted, or supplemented by evidence of any prior or contemporaneous oral
or written agreements. This written Agreement may not be later modified except
by a further writing signed by a duly authorized officer of the Company and
Executive, and no term of this Agreement may be waived except by writing signed
by the party waiving the benefit of such term. This Agreement hereby supersedes
any other employment agreements or understandings, written or oral, between the
Company and Executive.

 

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13. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:

 

To the Company:    Schmitt Industries, Inc.    2765 NW Nicolai Street   
Portland, Oregon 97210    Attention: Chief Executive Officer With a copy to:   
Schwabe Williamson & Wyatt    Attn: Jean Back    1211 SW Fifth Avenue Suite 1900
   Portland OR, 97204 To Executive:    Regina Walker    3485 Lakewood Street   
Lake Oswego, OR 97035

Notice shall be deemed given and effective when hand delivered or the first
business day after being deposited with a reputable, nationally recognized
overnight delivery service or when actually received. Either party may change
the address for notice by notifying the other party of such change in accordance
with this Section 13.

14. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The Section
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.

15. MEDIATION/ARBITRATION. All disputes arising out of this Agreement shall be
resolved as set forth in this Section 15. If any party hereto desires to make
any claim arising out of the subject matter of this Agreement, including claims
under state or federal law related to the terms and conditions, or termination
of employment (“Claimant”), then such party shall first deliver to the other
party (“Respondent”) written notice (“Claim Notice”) of Claimant’s intent to
make such claim explaining Claimant’s reasons for such claim in sufficient
detail for Respondent to respond. Respondent shall have ten (10) business days
from the date the Claim Notice was given to Respondent to object in writing to
the claim (“Notice of Objection”), or otherwise cure any breach hereof alleged
in the Claim Notice. Any Notice of Objection shall specify with particularity
the reasons for such objection. Following receipt of the Notice of Objection, if
any, Claimant and Respondent shall immediately seek to resolve by good faith
negotiations the dispute alleged in the Claim Notice, and may, at the request of
either party, utilize the services of an independent mediator. If Claimant and
Respondent are unable to resolve the dispute in writing within ten (10) business
days from the date negotiations began, then without the necessity of further
agreement of Claimant or Respondent, the dispute set forth in the Claim Notice
shall be submitted to binding arbitration (except for claims arising out of
Sections 3 or 7 hereof), initiated by either Claimant or Respondent pursuant to
this Section. Such arbitration shall be conducted before a panel of three
(3) arbitrators in Portland, Oregon, in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association
(“AAA”) then in effect, provided that the parties may agree to use arbitrators
other than those provided by the AAA. The arbitrators shall not have the
authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. The arbitrators shall have the authority
to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), vesting and the removal of
restrictions on restricted stock and/or restricted stock units (or comparable
forms of equity compensation, if any) that, as of the effective date of the
termination of Executive, are not then subject to any performance conditions for
vesting, reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Executive was terminated without disability or without Good Cause, as defined in
Sections 4(b) and 4(c) hereof, respectively, or that the Company has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators’
award in any court having jurisdiction. The direct expense of any mediation or
arbitration proceeding and, to the extent Executive prevails, all reasonable
legal fees shall be borne by the Company.

 

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16. ORS 36.620 ACKNOWLEDGEMENT. I acknowledge that I have received and read or
have had the opportunity to read this Agreement. I understand that this
Agreement requires that disputes that involve the matters subject to this
Agreement be submitted to mediation or arbitration pursuant to this Agreement
rather than to a judge and jury in court.

17. NO PARTICIPATION IN SEVERANCE PLANS. Except as contemplated by this
Agreement, Executive acknowledges and agrees that the compensation and other
benefits set forth in this Agreement are and shall be in lieu of any
compensation or other benefits that may otherwise be payable to or on behalf of
Executive pursuant to the terms of any severance pay arrangement of the Company
or any affiliate thereof, or any other similar arrangement of the Company or any
affiliates thereof providing for benefits upon involuntary termination of
employment.

18. GOVERNING LAW. This Agreement shall in all respects be construed according
to the laws of the State of Oregon, notwithstanding the conflict of laws
provisions of such state.

19. COUNTERPARTS; FACSIMILE. This Agreement may be executed by facsimile and in
two (2) or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.

20. SECTION 409A.

(a) This Agreement is intended to satisfy the requirements of Section 409A of
the Code with respect to amounts subject thereto, and shall be interpreted and
construed consistent with such intent. Furthermore, if either party notifies the
other in writing that, based on the advice of legal counsel, one or more of the
provisions of this Agreement contravenes any regulations or Treasury guidance
promulgated under Section 409A of the Code or causes any amounts to be subject
to interest or penalties under Section 409A of the Code, the parties shall
promptly and reasonably consult with each other (and with their legal counsel),
and shall use their reasonable best efforts, to reform the provisions hereof to
(a) maintain to the maximum extent practicable the original intent of the
applicable provisions without violating the provisions of Section 409A of the
Code or increasing the costs to the Company of providing the applicable benefit
or payment and (b) to the extent practicable, to avoid the imposition of any
tax, interest or other penalties under Section 409A of the Code upon Executive
or the Company.

(b) This Agreement is intended, to the maximum extent possible, to meet the
short term deferral exception and/or be a separation pay plan due to an
involuntary separation from service under Treasury Regulation Sections
1.409A-1(b)(4) and 1.409A-1(b)(9)(iii) and therefore exempt from Code
Section 409A.

 

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

 

SCHMITT INDUSTRIES, INC. By:                                     
                                                             Name: Michael R.
Zapata Title:   Chief Executive Officer EXECUTIVE:

 

Regina Walker

 

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