EXHIBIT 10.1


 


 


EMPLOYMENT
AGREEMENT


 


OF


 


WAYNE A. CASE


 


This
Employment Agreement (“Agreement”) is made this 1st day of January, 2004, by
and between Schmitt Industries, Inc., an Oregon corporation (“Schmitt”), and
Wayne A. Case (“Case”).


 


In consideration of the promises and mutual covenants
set forth in this Agreement, Schmitt and Case promise and agree as follows:


 


1.             Term of Employment.   Schmitt hereby employs Case, and Case hereby
accepts employment with Schmitt, on and subject to the terms and conditions
provided in this Agreement for a period of three (3) years commencing on the
date hereof and ending on December 31, 2006 (the “Term”), unless earlier
terminated pursuant to Section 5.


 


2.             Scope of Duties.


 


2.1          Duties.   Case shall serve as the President and Chief
Executive Officer (“CEO”) of Schmitt, and, subject to the policies of Schmitt’s
Board of Directors (“Board”) as enacted from time to time, shall be responsible
for all of Schmitt’s management and day-to-day operations.  Case shall report directly to Schmitt’s
Board of Directors.  Subject to all of
Schmitt’s then-current budgets, business plans and policies, Case shall have
the authority to conduct, and the responsibility for, all of Schmitt’s
operations and day-to-day business activities including, but not limited to,
the following:


 


2.1.1       In conjunction with the Board, the development,
achievement, administration and reporting of current and long-range strategic
objectives, plans, budgets and policies;


 


2.1.2       The achievement of immediate and long-term forecasts and
goals established by the Board from time to time; and,


 


2.1.3       The supervision, development, identity and coordination
of Schmitt’s management team.


 


2.2          Facilities and Staff.             Case will be furnished
with such facilities, services, staff and working conditions, consistent with
Schmitt’s current practices, as are suitable to his position and appropriate
for the performance of his duties.


 


2.3          Full Time and Attention.    Case will loyally and
conscientiously devote substantially all of his business and professional time,
attention and energies (exclusive of periods of sickness and disability and
such normal holiday and vacation periods as have been established by Schmitt)
to the affairs of Schmitt.  Notwithstanding
the above:


 


2.3.1       Case may expend a reasonable amount of time for
educational, professional or charitable activities; and


 


2.3.2       This Agreement shall not be interpreted to prohibit Case
from making passive personal investments or conducting private business
affairs, as long as those activities do not materially interfere with the
services required under this Agreement.


 


2.4          Competitive Activities.   During the Term of his employment
hereunder, unless specifically authorized by the Board of Directors, Case shall
not, directly or indirectly, either as an officer, director, investor,
employee, consultant, agent, independent contractor, principal, partner,
shareholder, or in any other capacity whatsoever, engage or participate in any
business activities or business entity that is, in any way, competitive with
any of the business of Schmitt.


 


2.5          Indemnification and Insurance.   During the Term of his employment
hereunder, Case will receive the full benefit of the indemnification provisions
for officers and directors that are then contained in Schmitt’s Articles of
Incorporation and Bylaws, and shall be a named insured under Schmitt’s
Director’s and Officer’s liability insurance policy, as such indemnification
provisions and insurance policies are in effect from time to time.


 

















 


 


3.             Compensation and Expenses.


 


3.1          Compensation.   During the term of this Agreement, Schmitt
will pay Case an initial base salary of $162,315.12 per year, payable at such
times and in such increments as are consistent with Schmitt’s usual policies.  Any proposed salary change will be
determined by the Compensation Committee of the Board; provided, however, that
Case’s salary shall never be less than the amount set forth above, unless
agreed to in writing by Case.  Case
shall also be eligible for bonuses as may be determined by the Compensation
Committee.


 


3.2          Expenses.   Schmitt will reimburse Case for all
reasonable travel, entertainment and miscellaneous expenses incurred by him in
connection with the performance of his duties under this Agreement.  Such reimbursement will be made in
accordance with general policies and procedures of Schmitt in effect from time
to time relating to reimbursement.  The
Company, at its expense, shall provide Case with an automobile and shall reimburse
him for all expenses in connection therewith.


 


3.3          Taxes and Withholding.   Schmitt shall withhold or deduct from sums
due to Case hereunder all amounts required by applicable state or federal law.


 


4.             Benefits.


 


4.1          Vacation.   During the term of this Agreement, Case
will be entitled to at least 25 days of vacation per year, to be taken and
accounted for in accordance with Schmitt’s policies for same in effect from
time to time, or such additional time as is in accordance with Schmitt’s
published rules regarding vacation.


 


4.2          Group Benefits.   Case shall participate in any pension,
insurance or other employee benefit plan that is maintained by Schmitt from
time to time for employees similarly situated.


 


5.             Termination.


 


5.1          Termination.   Notwithstanding the Term of this Agreement,
Case’s employment with Schmitt may be terminated upon the occurrence of any one
of the following events.  With respect
to Sections 5.1.2, 5.1.3 and 5.1.7, the determination to terminate Case under
those provisions must be made in good faith by all of the directors (except
Case if he is at the time a director):


 


5.1.1       The conviction of Case for any crime that is a felony
under applicable law;


 


5.1.2  Fraud by Case in the performance of his duties
or in his reporting to the management of Schmitt;


 


5.1.3       At Schmitt’s option, if any one of the following
conditions occurs and persists after Schmitt has given Case prior written
notice of its intent to terminate his employment with the specific reasons
therefore, and Case fails to correct the specified problems within a period of
30 days of the effective date of the notice:


 


(A)          Chronic alcoholism, drug abuse, or addiction;


 


(B)           Material failure of Case to apply his full-time
attention and best efforts to the business of Schmitt; or


 


(C)           Material breach by Case of any of the terms and conditions of this Agreement.


 


5.1.4       The death of Case;


 


5.1.5       At Case’s option, in the event of the insolvency of
Schmitt;


 


5.1.6       At Case’s option, with or without cause, by Case giving
Schmitt not less than 90 days prior written notice of termination; or


 


5.1.7       At Schmitt’s option, without cause, by Schmitt giving
Case written notice of termination.


 

















 


5.2          Effect of Termination.


 


5.2.1       If Case’s employment under this Agreement is terminated
pursuant to Section 5.1.7, Case shall be entitled to receive, for the entire
Payment Period (as defined below), (i) the equivalent monthly salary in effect
immediately prior to termination to that set forth in Section 3.1.1; and,
(ii) participation for the balance of the entire Payment Period to extent
eligible in all relevant employee benefit programs to which he would have been
entitled if he had continued to serve as President and CEO of Schmitt during
the Payment Period.  All payments
required to be made to Case pursuant to this Section 5.2.1 shall continue to be
made regardless of whether Case secures other employment with any other
employer.  For purposes of this section,
the term “Payment Period” shall mean a period commencing on the date Case is
terminated pursuant to Section 5.1.7 and ending on the date that is three (3)
years after the date of this Agreement.


 


5.2.2       If Case’s employment under this Agreement is terminated
for any other reason than that set forth in Sections 5.1.4 or 5.1.7, Case shall
(i) have no rights to compensation or reimbursement for salary or bonus for any
period subsequent to the date of such termination, (ii) have no right to
participate in any employee benefit programs under Section 4 for any period
subsequent to the date of such termination; provided that Schmitt will
remain obligated to meet any obligations that it may have under COBRA, and
(iii) have no right to any bonus that would have been payable on a date
subsequent to Case’s termination date.


 


5.3          Effect of Merger, Dissolution or
Transfer of Assets.   In the event of any voluntary
or involuntary dissolution of Schmitt, any merger or consolidation of Schmitt
with a third party whereby Schmitt is not a surviving entity, or any sale of
all or substantially all of the assets of Schmitt to any third party and in the
further event that the surviving or acquiring entity declines to assume this
Agreement and/or Case’s employment is terminated by Schmitt or the surviving
entity within 90 days of the effective date thereof, such nonassumption or
termination will be deemed to have taken place pursuant to section 5.1.7 and
Case shall be entitled to the benefits set forth in section 5.2.1.


 


6.             Inventions.   Inventions made or conceived entirely or partially by Case while
employed by Schmitt will be the property of Schmitt.  As used in this Section, the term “inventions” includes all
creations, whether or not patentable or copyrightable, and all ideas, reports,
or other creative works, including, without limitation, computer programs,
manuals and related material, which relate to the existing or proposed business
of Schmitt or any other business or research and development effort conducted
by Schmitt.  All of Case’s inventions
which are copyrightable shall be works for hire.  Case will cooperate with Schmitt to patent or copyright all inventions
by executing all documents tendered by Schmitt for such purpose.  Case hereby grants to Schmitt a power of
attorney coupled with an interest, whereby Schmitt may execute and deliver any
and all documents necessary to so patent or copyright any inventions in Case’s
name, place and stead as if such execution and delivery were done by him, with
such power of attorney accruing in the event that he fails to cooperate as
required by the preceding sentence. 
Notwithstanding the above, this provision does not apply to any
invention which was developed solely on Case’s own time and not using any of
Schmitt’s equipment, supplies, facilities or information, unless (a) the
invention relates directly to the business of Schmitt or to Schmitt’s actual or
demonstrably anticipated research or development, or (b) the invention results
from any work performed by Case for Schmitt. 
The obligations contained in this Section shall survive the termination
of this Agreement.


 


7.             Nondisclosure of Confidential
Information.   Case acknowledges that during the term of this Agreement he will learn
and will have access to confidential information regarding Schmitt and its
affiliates, including without limitation (i) confidential or secret plans,
programs, documents, agreements or other material relating to the business,
services or activities, and (ii) trade secrets, market reports, customer
investigations, customer lists, files, accounts and other similar information
that is proprietary information (collectively referred to as “Confidential
Information”).  Case acknowledges that
such Confidential Information is a special, valuable and unique asset.  All records, file materials and Confidential
Information obtained by Case in the course of employment with Schmitt or its
affiliates or service as a director of Schmitt or its affiliates are
confidential and proprietary and shall remain the exclusive property of the
appropriate entity owning the same. 
Case will not for any reason use for his own benefit, or for the benefit
of any person with whom he may be associated, any Confidential Information or
disclose any such Confidential Information to any person for any reason or
purpose whatsoever without the prior written consent of Schmitt, unless such
Confidential Information previously shall have became public knowledge through
no action or omission of Case.  Case,
within three (3) days from the date upon which his employment with Schmitt is
terminated or otherwise upon the request of Schmitt, shall return to Schmitt
any and all documents and material that constitutes Confidential
Information.  The obligations contained
in this Section shall survive the termination of this Agreement.


 


8.             Specific Performance.   Schmitt and Case recognize that the services
rendered under this Agreement by Case are special, unique and of an
extraordinary character. Accordingly, in the event of any breach by Case of the
provisions of Section 6, 7 or 8 of this Agreement and in addition to any other
remedies available to Schmitt by law, Schmitt may specifically enforce Case’s
obligations under such sections.


 

















 


9.             Miscellaneous.


 


9.1          Assignability.   The rights and obligations of Schmitt under this
Agreement shall inure to the benefit of and be binding up the successors and
assigns of Schmitt.  The rights and obligations
of Case hereunder may not be assigned or alienated and any attempt to do so by
Case will be void.


 


9.2          Separability.   If any provision of this Agreement otherwise is deemed to be invalid or
unenforceable or is prohibited by the laws of the state or jurisdiction where
it is to be performed, this Agreement shall considered divisible as to such
provisions and such provision shall be inoperative in such state or
jurisdiction and shall not be part of the consideration moving from either of
the parties to the other.  The remaining
provisions of this Agreement shall be valid and binding and of like effect as
though such provision were not included.


 


9.3          Notice.   All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have duly given if personally delivered,
telexed or telecopied to, or, if mailed, when mailed to the other party by
certified mail, return receipt requested, at (a) in the case of Schmitt, the
location of its principal executive offices, or (b) in the case of Case, the
location of his principal residence or last known principal residence.


 


9.4          Jurisdiction and Venue.   The jurisdiction and venue of all actions
between the parties shall lie exclusively in Multnomah County, Oregon.


 


9.5          Governing Law.   The validity, performance, construction and
effect of this Agreement shall be governed by the laws of the State of Oregon,
without giving effect to the conflict of laws rules thereof.


 


9.6          Arbitration.   The parties shall settle by arbitration any
controversy or claim arising out of or relating to this Agreement, including
without limitation, the making, performance, or interpretation of this
Agreement.  The arbitration shall be
conducted in Portland, Oregon in accordance with the then-current Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
shall be held before a single arbitrator (unless otherwise agreed by the
Parties). The arbitrator shall be chosen from a panel of attorneys
knowledgeable in the fields of business and employment law in accordance with
the then-current Commercial Arbitration Rules of the American Arbitration
Association. If the arbitration is commenced, the Parties agree to permit
discovery proceedings of the type provided by the Oregon Rules of Civil
Procedure both in advance of, and during recesses of, the arbitration
hearings.  The Parties further agree
that the arbitrator shall have the authority to grant injunctive relief,
including preliminary injunctive relief, and that an arbitrator’s order for
such relief may be entered in and enforced by a federal or state court of
competent jurisdiction in Oregon. The prevailing Party shall be entitled to its
reasonable and actually incurred attorneys’ fees arising in connection with the
enforcement of its rights hereunder, as determined by the arbitrator. The
Parties agree that all facts and other information relating to any arbitration
arising under this Agreement shall be kept confidential to the fullest extent
permitted by law.  The prevailing Party
in any arbitration regarding this Agreement may enter the arbitration award in
a federal or state court of competent jurisdiction in Oregon.


 


9.7          Waiver; Amendment.   The waiver by any party to this Agreement
of a breach of any provision hereof by any party shall not be construed as a
waiver of any subsequent breach by any party. 
No provision of this Agreement may be terminated, amended, supplemented,
waived or modified other than by an instrument in writing signed by the party
against whom the enforcement of the termination, amendment, supplement, waiver
or modification is sought.


 


9.8          Advice of Counsel.   Case acknowledges that he has had sufficient opportunity to review this
Agreement with counsel of his choosing before signing.


 


9.9          Entire Agreement.   This Agreement constitutes the entire
agreement between the parties regarding the subject matter, and there are no
other understandings, either written or oral, which affect the terms hereof.  This Agreement may be supplemented, modified
or amended only by a subsequent written agreement between the parties.


 


	
  DATED the day and year first above written.

  	
   

  
	
   

  	
   

  
	
  SCHMITT INDUSTRIES, INC.

  	
   

  
	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Wayne A. Case