Document:

Exhibit

Exhibit 10.30

ONE GAS, INC.
ANNUAL OFFICER INCENTIVE PLAN 
Effective January 1, 2019

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ARTICLE I
PURPOSE
1.1    Purpose of the Plan.  The ONE Gas, Inc. Annual Officer Incentive Plan (the “Plan”) is a performance-based annual bonus program.  The purpose of the Plan is to provide cash-based incentive compensation to those officers who, in the opinion of ONE Gas, Inc. (the “Company”), contribute significantly to the growth and success of the Company; and to align the interests of those who hold positions of major responsibility in the Company with the interests of Company shareholders.  
ARTICLE II
DEFINITIONS
Unless context otherwise indicates, the following definitions shall be applicable:
2.1    “Award” shall mean a right granted to a Participant pursuant to Article IV of the Plan to receive a cash payment from the Company based upon achievement of the Participant’s Performance Goal(s) during the relevant Performance Period and subject to the Committee’s discretion pursuant to Section 6.2 of the Plan.
2.2    “Base Wages Earned” shall mean the Participant’s base salary earned for the fiscal year of the Company, before deductions for taxes or benefits and deferrals of compensation pursuant to any Company sponsored plans.  Base Wages Earned does not include bonuses, shift differential, benefits, overtime, or any other type of pay other than base salary.
2.3    “Board” shall mean the Board of Directors of the Company.
2.4    “Change of Control” shall mean the occurrence of any of the following:
(a)An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the then outstanding Shares or the combined voting power of the Company’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred pursuant to this Section 2.4(a), Shares or Voting Securities which are acquired in a “Non-Control Acquisition” (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control.  A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any company or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned or controlled, directly or indirectly, by the Company (for purposes of this definition, a “Related Entity”), (ii) the Company or any Related Entity, or (iii) any Person in connection with a “Non-Control Transaction” (as hereinafter defined);
(b)The individuals who, as of November 18, 2016, are members of the Board of Directors (the “Incumbent Board”), cease for any reason to constitute at least a majority of the members of the Board of Directors; or, following a Merger which results in a Parent Company, the board of directors of the ultimate Parent Company; provided, however, that if the election, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a 

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result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors (a “Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(c)The consummation of:
(1)A merger, consolidation or reorganization with or into the Company or in which securities of the Company are issued (a “Merger”), unless such Merger is a “Non‐Control Transaction.” A “Non-Control Transaction” shall mean a Merger where:
(A)the stockholders of the Company, immediately before such Merger, own directly or indirectly immediately following such Merger at least fifty percent (50%) of the combined voting power of the outstanding voting securities of (x) the company resulting from such Merger (the “Surviving Company”) if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Company is not Beneficially Owned, directly or indirectly by another Person (a “Parent Company”), or (y) if there is one or more Parent Companies, the ultimate Parent Company;
(B)the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such Merger constitute at least a majority of the members of the board of directors of (i) the Surviving Company, if there is no Parent Company, or (ii) if there is one or more Parent Companies, the ultimate Parent Company; and
(C)no Person other than (1) the Company, (2) any Related Entity, (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such Merger was maintained by the Company or any Related Entity, or (4) any Person who, immediately prior to such Merger had Beneficial Ownership of thirty percent (30%) or more of the then outstanding Voting Securities or Shares, has Beneficial Ownership of thirty percent (30%) or more of the combined voting power of the outstanding voting securities or common stock of (i) the Surviving Company if there is no Parent Company, or (ii) if there is one or more Parent Companies, the ultimate Parent Company.
(2)A complete liquidation or dissolution of the Company; or
(3)The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Related Entity or under conditions that would constitute a Non-Control Transaction with the disposition of assets being regarded as a Merger for this purpose or the distribution to the Company’s stockholders of the stock of a Related Entity or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Shares or Voting Securities if: (1) such acquisition occurs as a result of the acquisition of Shares or Voting Securities by the Company which, by reducing the number of Shares or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this subparagraph) as a result of 

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the acquisition of Shares or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Shares or Voting Securities which increases the percentage of the then outstanding Shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur, or (2) (A) within five business days after a Change in Control would have occurred (but for the operation of this subparagraph), or if the Subject Person acquired Beneficial Ownership of twenty percent (20%) or more of the then outstanding Shares or the combined voting power of the Company’s then outstanding Voting Securities inadvertently, then after the Subject Person discovers or is notified by the Company that such acquisition would have triggered a Change in Control (but for the operation of this subparagraph), the Subject Person notifies the Board of Directors that it did so inadvertently, and (B) within two business days after such notification, the Subject Person divests itself of a sufficient number of Shares or Voting Securities so that the Subject Person is the Beneficial Owner of less than twenty percent (20%) of the then outstanding Shares or the combined voting power of the Company’s then outstanding Voting Securities.
Notwithstanding any provisions to the Plan to the contrary, with respect to an Award subject to Section 409A of the Code that provides for payment upon a Change in Control, then no Change in Control shall be deemed to have occurred upon an event described in this Section 2.4 unless the event would also constitute a “change in ownership” of the Company, a “change in effective control” of the Company, or a “change in ownership of a substantial portion of the Company’s assets” under Section 409A of the Code.
2.5    “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time; references to particular sections of the Code include references to regulations and rulings thereunder and to successor provisions.
2.6    “Committee” shall mean the Executive Compensation Committee of the Board.
2.7    “Company” shall mean ONE Gas, Inc., its divisions and subsidiaries, or, any successor thereto by merger, consolidation, liquidation or other reorganization.
2.8    “Disability” shall mean a physical or mental infirmity which impairs the Participant's ability to perform substantially his or her duties for a period of one-hundred eighty (180) consecutive days. With respect to any Award that is subject to Section 409A of the Code that provides for payment due to a Participant’s Disability, the Committee may not find that a Disability exists with respect to such Participant unless, in the Committee’s opinion, such Participant is also “disabled” within the meaning of Code Section 409A.
2.9    “Employee” shall mean an active full-time employee of the Company, and shall exclude independent contractors, or leased or temporary employees. Employees included in other annual cash incentive plans (including but not limited to participants in the ONE Gas, Inc. Annual Employee Incentive Plan) shall not be considered as Employees for the purpose of this Plan.  Except as otherwise specifically provided in this Plan, separated and retired employees shall not be considered as Employees for purposes of this Plan.
2.10    “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
2.11    “GAAP” shall mean generally accepted accounting principles set forth in the opinions, statements and pronouncements of the Financial Accounting Standards Board (or predecessors or successors thereto or agencies with similar functions) or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination and in any event applied in a manner consistent with the application thereof used in the preparation of the Company’s financial statements.

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2.12    “Maximum Award Opportunity” shall mean an amount equal to a percentage of Base Wages Earned to be awarded to a Participant with respect to a single Performance Period upon achieving the maximum level of performance respecting a Performance Goal as established by the Committee pursuant to Article 5 of the Plan, provided however that no payment to a Participant in respect of any Performance Period under this Plan shall exceed $4 million.
2.13    “ONEOK Group” shall mean ONEOK, Inc. and any of its direct or indirect subsidiaries.
2.14    “Participant” shall mean an Employee of the Company who is eligible to participate in the Plan under the eligibility provisions of Article IV.
2.15    “Performance Goal” shall mean performance objectives established by the Committee for each Performance Period for the purpose of determining the extent to which a Participant will receive an Award for such Performance Period.  Each Performance Goal selected for a particular Performance Period shall include  any one or more of the following performance criteria, either individually or in any combination, applied to the Company as a whole, to a Subsidiary, to a business unit of the Company or any Subsidiary, to an affiliate of the Company or any Subsidiary or to any individual, measured either annually or cumulatively over a period of time, on an absolute basis or relative to an identified index or peer group, and, where applicable, may be measured on a pre-tax or post-tax basis, in the aggregate or on a per- share basis and on an absolute basis or as a percentage change over a period of time:
(i)    increased revenue;
(ii)    net income measures, including without limitation, income after capital costs, and income before or after taxes;
(iii)    stock price measures, including without limitation, growth measures and total stockholder return;
(iv)    market share;
(v)    earnings per share (actual or targeted growth);
(vi)    earnings before interest, taxes, depreciation, and amortization;
(vii)    economic value added;
(viii)    cash flow measures, including without limitation, net cash flow, and net cash flow before financing activities;
(ix)    return measures, including without limitation, return on equity, return on average assets, return on capital, risk adjusted return on capital, return on investors’ capital and return on average equity;
(x)    operating measures, including without limitation, operating income, funds from operations, cash from operations, after-tax operating income, sales volumes, production volumes, and production efficiency;
(xi)    expense measures, including but not limited to, finding and development costs, overhead costs, and general and administrative expense;

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(xii)    margins;
(xiii)    shareholder value;
(xiv)    reserve addition;
(xv)    proceeds from dispositions;
(xvi)    total market value; and
(xvii)    corporate value criteria or standards including, without limitation, ethics, environmental and safety compliance.
2.16    “Performance Period” shall mean the period designated by the Committee and communicated to each Participant over which the attainment of the Performance Goal(s) will be measured for purposes of determining payment of an Award or, for an Employee who is first hired as an employee after the first day of such period and who becomes a Participant during such period, such portion of the period as determined by the Committee.
2.17    “Plan” shall mean the ONE Gas, Inc. Annual Officer Incentive Plan.
2.18    “Retirement” shall mean a voluntary termination of employment of the Participant with the Company by the Participant if at the time of such termination of employment the Participant has completed both five (5) years of service with the Company and attained age fifty (50).  For this purpose, “years of service” means the number of full years of service of a Participant, based on such Participant’s period of continuous employment with the Company; provided that a Participant shall receive service credit for continuous service provided to members of the ONEOK Group as if that service had been rendered to the Company if there is no break in service between the Participant’s service with a member of the ONEOK Group and the Participant’s service with the Company.
2.19    “SEC Rule 16b-3” shall mean Rule 16b-3 of the Securities and Exchange Commission promulgated under the Exchange Act, as such rule or any successor rule may be in effect from time to time.
2.20    “Subsidiary” shall mean any entity that is directly or indirectly controlled by the Company; as determined by the Committee.
ARTICLE III
PLAN ADMINISTRATION
3.1    The Committee.  The Plan will be administered by a committee appointed by the Board consisting of two or more directors, each of whom is a “non-employee director” within the meaning of SEC Rule 16b-3(the “Committee”).  The Committee may adopt rules and regulations for carrying out the Plan and may designate such other committee or committees, in its discretion, to administer the Plan with respect to Participants who are not subject to Section 16 of the Exchange Act.  The interpretation and construction of any provision of the Plan by the Committee shall be final and conclusive.  The Committee may consult with counsel, who may be counsel to the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel.  In accordance with and subject to the provisions of the Plan, the Committee will have full authority and discretion with respect to Awards made under the Plan, including without limitation the following: (a) selecting the officers for participation in the Plan; (b) establishing the terms of each Award; (c) determining the time or times when Awards will be granted; and (d) establishing the restrictions and other conditions to which the payment of Awards may be subject.  Except as provided 

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in Section 3.2 and Article X, the Committee will have no authority under the Plan to amend or modify, in any manner, the terms of any outstanding Award; provided, however, that the Committee shall have the authority to reduce or eliminate the compensation or other economic benefit due pursuant to an Award upon the attainment of the Performance Goals included in such Award.  Each determination, interpretation, or other action made or taken by the Committee pursuant to the provisions of the Plan will be conclusive and binding for all purposes and on all persons.
3.2    Adjustments.  The Committee may provide in any Award that any evaluation of performance may include or exclude the impact, if any, on reported financial results of any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) changes in tax laws, accounting principles or other laws or provisions, (d) reorganization or restructuring programs, (e) acquisitions or divestitures, (f) foreign exchange gains and losses or (g) gains and losses that are treated as unusual in nature or that occur infrequently under Accounting Standards Codification Topic 225.
ARTICLE IV
PARTICIPATION
The Participants for any Performance Period shall be those officers who are granted Awards by the Committee under the Plan for such Performance Period.
ARTICLE V
PERFORMANCE GOALS
Prior to the beginning of each Performance Period, or not later than ninety (90) days following the commencement of the relevant Performance Period (or, in the case of a Performance Period for a period of time of less than 12 months’ duration, no later than by the end of the first 25% of such period), the Committee shall establish and communicate in writing to each Participant the specific Performance Goals which must be achieved for each Participant to receive an Award payment for such Performance Period.
For an Employee who is first hired as an employee and who becomes a Participant after the first day of the Performance Period, the Performance Goals and other criteria as set forth in this Article V shall be established by the Committee and communicated to the Participant upon their selection for participation in the Plan.
ARTICLE VI
PAYMENT OF AWARDS
6.1    Performance Period Payments.  The Committee shall make a determination as soon as practicable after appropriate financial and other data respecting the Performance Goal(s) respecting the applicable Performance Period, or such portion of  the applicable Performance Period as  the Committee shall determine, whether the Performance Goal(s) have been achieved and the amount of the Award payment for each Participant, provided, however, that in no event will an Award payment payable under this Plan exceed the Maximum Award Opportunity for any Performance Period.  The Committee shall certify the foregoing determinations in writing. Payment of each Award in a cash lump sum, less applicable withholding taxes pursuant to Article IX of the Plan, shall be made as soon as practicable after certification by the Committee, provided, however, that any such payment shall be made no later than March 15 of the year immediately following the year in which the applicable Performance Period expires.

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6.2    Discretionary Downward Adjustments.  At any time after an Award has been granted but before the Award has been paid, the Committee, in its sole and absolute discretion, may reduce or eliminate the Award granted to any Participant for any reason or for no reason, including, without limitation, the Committee’s judgment that the Performance Goals have become an inappropriate measure of achievement, additional Performance Goals are necessary to measure achievement, change in the employment status, position or duties of the Participant, unsatisfactory performance of the Participant, or the Participant’s service for less than the entire Performance Period.
ARTICLE VII
TERMINATION OF EMPLOYMENT
7.1    Termination Due to Death, Disability, or Retirement.  In the event a Participant’s employment with the Company and all Subsidiaries is terminated by reason of death, Disability, or Retirement prior to the payment date of an Award or during a Performance Period, the Participant (or the Participant’s estate) (subject to the Committee’s discretion as allowed by Sections 3.2 and 6.2 of the Plan) shall be entitled to a distribution of the Award on the payment date that would otherwise have been payable to the Participant pursuant to Article VI of the Plan after the completion of the Performance Period, pro-rated based upon a fraction, the numerator of which is the number of full days worked on active payroll in an incentive-eligible position during the applicable Performance Period and the denominator of which is the number of days in such Performance Period (or the number of days remaining in such Performance Period after the individual is assigned to an incentive-eligible position), as determined by the Committee.  In the event no Award is payable under Article 6 upon completion of the Performance Period, no amount will be payable to a Participant.
7.2    Termination for Reasons Other than Death, Disability, or Retirement.  In the event a Participant’s employment is terminated with the Company and all Subsidiaries prior to the end of the Performance Period for any reason other than death, Disability, or Retirement, the Participant’s Award for such Performance Period shall be immediately forfeited and the Participant shall have no right to any payment thereafter; provided, however, that under such circumstances the Committee may, in its sole  discretion, pay the  Participant an  amount not  to  exceed a  percentage of  the  amount earned according to the terms of the Award equal to the portion of the Performance Period through the Participant’s termination.  In the event no Award is payable under Article VI upon completion of the Performance Period, no amount will be payable to a Participant.
ARTICLE VIII
CHANGE OF CONTROL
If a Change of Control occurs, then notwithstanding any other provisions of the Plan, each outstanding Award shall be deemed to have achieved a level of performance equal to the actual performance level achieved as of the occurrence of such Change of Control as determined by the Committee.  In determining whether a performance level is achieved in this circumstance, the Committee may make any adjustment in the Performance Goals by measuring such criteria over the period commencing on the first day of the Performance Period and ending on the date of the Change of Control, instead of over the entire Performance Period.  In the event of a Change of Control, payment of an award shall be made as soon as practicable, but in no event later than 60 days following such Change of Control.

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ARTICLE IX
PAYMENT OF WITHHOLDING TAXES
All distributions under the Plan are subject to withholding of all applicable taxes.  The Company may condition the delivery of benefits under the Plan on satisfaction of the applicable withholding obligations and is entitled to withhold and deduct from the payment made pursuant to an Award or from future wages of the Participant (or from other amounts that may be due and owing to the Participant from the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all federal, state, and local withholding and employment-related tax requirements attributable to any payment made pursuant to an Award.
ARTICLE X
AMENDMENT; MODIFICATION; TERMINATION
The Committee or the Board may suspend or terminate the Plan or any portion thereof at any time and for any reason in its sole discretion.  The Board may amend the Plan from time to time in such respects as the Board may deem advisable in order that Awards under the Plan will conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no amendments to the Plan will be effective without the approval of the shareholders of the Company if shareholder approval of the amendment is then required for payments under the Plan to continue to qualify as performance-based compensation pursuant to Section 162(m) of the Code.  Any termination, suspension, or amendment of the Plan may adversely affect any outstanding Award without the consent of the affected Participant.  Any payments pursuant to Awards outstanding upon termination of the Plan may continue to be made in accordance with the terms of the Awards, subject to the authority of the Committee pursuant to Articles III and IX of the Plan.
ARTICLE XI
NON-FUNDED, UNSECURED OBLIGATION
11.1    Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company whatsoever, including, without limitation, any specific funds, assets, or other property which the Company, in its sole discretion, may set aside in anticipation of a liability under the Plan.  A Participant shall have only a contractual right to the cash, if any, payable under the Plan (subject to the authority of the Committee pursuant to Article III), unsecured by any assets of the Company, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company shall be sufficient to pay any benefits to any person.  To the extent that a Participant acquires a right to receive such a cash payment under the Plan, such right shall be no greater than the right of any unsecured, general creditor of the Company.
11.2    No portion of any amount payable to Participants under the Plan shall be held by the Company in trust or escrow or any other form of asset segregation.
ARTICLE XII
EFFECTIVE DATE; DURATION OF THE PLAN
The Plan was approved by the Board on November 18, 2016.  The Plan became effective upon approval by the shareholders at the Company’s 2017 annual meeting of the shareholders on May 25, 2017.  The Plan is hereby amended and restated effective January 1, 2019.  The terms of the Plan as it existed on December 31, 2018 shall continue to apply to Awards granted prior to January 1, 2019.  The terms of this amended and restated Plan shall apply to Awards granted on or after January 1, 2019.  The Plan shall remain in effect until such time as the Plan is terminated as provided in Article X.  

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ARTICLE XIII
MISCELLANEOUS
13.1    Employment.  The Plan does not constitute a contract of employment and nothing in the Plan will interfere with or limit in any way the right of the Company to terminate the employment or otherwise modify the terms and conditions of the employment of any Employee or Participant at any time, nor confer upon any Employee or Participant any right to continue in the employ of the Company.
13.2    Restrictions or Transfer.  Except pursuant to testamentary will or the laws of descent and as otherwise expressly permitted by the Plan, no right or interest of any Participant in an Award will be assignable or transferable, or subjected to any lien, during the lifetime of the Participant, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise.
13.3    Governing Law.  Except in connection with other matters of corporate governance and authority (all of which shall be governed by the laws of the Company’s jurisdiction of incorporation), the validity, construction, interpretation, administration, and effect of the Plan and any rules, regulations, and actions relating to the Plan will be governed by and construed exclusively in accordance with the internal, substantive laws of the State of Oklahoma, without regard to the conflict of law rules of the State of Oklahoma or any other jurisdiction.
13.4    Clawbacks.  Awards made pursuant to the Plan are subject to recovery pursuant to the Company’s compensation recovery policy then in effect.  To the extent required by applicable laws, rules, regulations or securities exchange listing requirements and the company’s compensation recovery policy then in effect, the Company shall have the right, and shall take all actions necessary, to recover any amounts paid to any individual under this Plan.
13.5    Code Section 409A.  The Plan and all Awards granted hereunder are intended to comply with, or otherwise be exempt from, Code Section 409A.  The Plan and all Awards shall be administered, interpreted, and construed in a manner consistent with Code Section 409A or an exemption therefrom.  Should any provision of the Plan, any Award hereunder, or any other agreement or arrangement contemplated by the Plan be found not to comply with, or otherwise be exempt from, the provisions of the Code Section 409A, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Committee, and without the consent of the Participant, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Code Section 409A.  Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation or tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Plan during the six-month period immediately following the Employee’s separation from service shall instead be paid on the first business day after the date that is six months following the Executive’s termination date (or death, if earlier), with interest from the date such amounts would otherwise have been paid at the short-term applicable federal rate, compounded semi-annually, as determined under Section 1274 of the Code, for the month in which payment would have been made but for the delay in payment required to avoid the imposition of an additional rate of tax on the Employee under Section 409A.  Any payments to be made under this Plan upon a termination of employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A.  Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Plan comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Employee on account of non-compliance with Section 409A.

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13.6    Successors.  The Plan will be binding upon and inure to the benefit of the successors of the Company and the Participants.

11Exhibit 10.1

 

NORTECH SYSTEMS INCORPORATED

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”), effective as of February 27, 2019 (the “Effective Date”), is made by and between Nortech Systems Incorporated, a Minnesota corporation (the “Company”), and Jay D. Miller (“Executive”), collectively referred to as the “parties.”

 

Recitals

 

WHEREAS, the Company currently employs Executive as Interim President under agreement dated effective January 1, 2019 (“Existing Employment Agreement”), and the Company and Executive desire to terminate the Existing Employment Agreement as of the Effective Date of this Agreement;

 

WHEREAS, the Company desires to employ Executive as President and Chief Executive Officer, and Executive desires to accept employment upon the terms and conditions set forth herein;

 

WHEREAS, Executive represents that Executive is not subject to any other agreement (including but not limited to a non-competition agreement, non-solicitation agreement, or confidentiality agreement) that Executive will violate by working with the Company or in the position for which the Company has hired Executive and no conflict of interest or a breach of Executive’s fiduciary duties will result by working with and performing duties for the Company;

 

WHEREAS, Executive acknowledges that during the course of his employment, Executive will have access to and be provided with confidential and proprietary information and trade secrets of the Company that are invaluable to the Company and vital to the success of the Company’s business;

 

WHEREAS, the Company and Executive desire to protect such proprietary and confidential information and trade secrets from disclosure to third parties or unauthorized use to the detriment of the Company; and

 

WHEREAS, the Company and Executive desire to set forth in this Agreement, the terms, conditions, and obligations of the parties with respect to such employment

 

NOW, THEREFORE, in consideration of the foregoing recitals, premises and mutual covenants herein contained, and intending to be legally bound hereby, the Company and Executive hereby agree as follows:

 

1.                                      Definitions.

 

1.1.                            “Accountants” means an accounting firm selected by the Company, which is reasonably acceptable to Executive and whose consent shall not be unreasonably withheld.

 

 

1.2.                            “Board” means the Board of Directors of the Company.

 

1.3.                            “Cause” means (a) Executive engages in gross negligence or intentional misconduct in the performance of Executive’s duties for the Company or any of its subsidiaries, (b) Executive embezzles or willfully misappropriates assets of the Company or any of its subsidiaries,  (c) Executive is convicted of, or enters a plea of guilty or nolo contendere with respect to, a felony, a crime involving moral turpitude, or any other crime that materially adversely affects the Company’s business, or (d) Executive’s engaging in business activities in violation of Executive’s obligations in Section 4 (including but not limited to Executive’s refusal or failure to perform Executive’s duties), violation of Executive’s obligations in Section 10, and/or breach of any restrictive covenant set forth in Section 11 of this Agreement.

 

1.4.                            “Change of Control” means (a) (1) any person or group other than the group consisting of Curtis Squire, Inc. and members of the Kunin family (together, the “Kunin Group”) is at any time the beneficial owner of thirty percent (30%) or more of the equity securities of the Company entitled to vote for the election of directors (the “Voting Securities”), and (2) such other person or group then owns a greater percentage of the Voting Securities than the Kunin Group or (b) the sale or disposition of all or substantially all of the Company’s assets (including a plan of liquidation) or a merger or consolidation of the Company with or into another corporation except for a merger whereby the shareholders of the Company prior to the merger own more than fifty percent (50%) of the equity securities entitled to vote for the election of directors of the surviving corporation immediately following the transaction.

 

1.5.                            “Code” means the Internal Revenue Code of 1986, as amended.

 

1.6.                            “Covered Payments” means the payments or benefits provided or to be provided by the Company or its affiliates to Executive or for Executive’s benefit pursuant to the terms of this Agreement or otherwise.

 

1.7.                            “Disability” means if by reason of any mental, sensory, or physical impairment, Executive is unable to perform the essential functions of Executive’s duties hereunder with reasonable accommodations, unless any such accommodations would impose an undue hardship on the Company’s business. The written medical opinion of an independent medical physician mutually acceptable to Executive and the Company will determine if Executive has a Disability.

 

1.8.                            “Excise Tax” means the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or any similar tax imposed by state or local law or any interest or penalties with respect to such taxes.

 

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1.9.                            “Good Reason” means (a) any involuntary and material reduction in the amount or type of compensation paid to Executive or material reduction in benefits inconsistent with benefit reductions taken by other members of Company’s senior management; (b) any involuntary and material diminution of Executive’s reporting responsibilities, titles and offices, and removal of Executive from such position which has the effect of materially diminishing Executive’s responsibility and authority; (c) the Board requiring the Executive to be based at any office or location other than facilities within 50 miles of Minneapolis, Minnesota; or (d) any material breach by the Company of any contract entered into between the Executive and the Company or an affiliate of the Company, including this Agreement, which in any such event is not remedied by Company within 30 days after receipt of notice thereof given by the Executive within 90 days after such event occurs; provided, that any refusal of the Company to agree to other business activities of Executive pursuant to Section 4.3 will not constitute Good Reason.

 

1.10.                     “Parachute Payments” means parachute payments within the meaning of Section 280G of the Code.

 

2.                                      Employment. Subject to the terms and provisions set forth in this Agreement, the Company hereby employs Executive as the President and Chief Executive Officer of the Company.

 

3.                                      Agreement Term. This Agreement shall commence on the Effective Date so long as all contingencies of Executive’s offer of employment have been satisfied, and shall continue, unless sooner terminated in accordance with this Agreement, until February 28, 2021 (the “Initial Period”); provided, however, this Agreement may be extended for an additional period of up to one year by the parties’ mutual written agreement at or before one hundred twenty (120) days prior to expiration of the Initial Period (the “Extended Period” and together with the Initial Term, the “Agreement Period”) During the Agreement Period, Executive’s employment may be terminated by the Company with or without Cause, subject to the provisions of Section 6 of this Agreement, and Executive may resign or otherwise terminate his employment with the Company at any time, with or without notice. Notwithstanding the provisions of this Section, the provisions of Sections 8, 9, 10, 11 and 12 shall survive the termination of Executive’s employment (for any reason) and remain in full force and effect thereafter.

 

4.                                      Positions, Responsibilities and Duties.

 

4.1.                            Positions. During the period of Executive’s employment with the Company, Executive shall be employed and serve as the President and Chief Executive Officer of the Company. Executive shall report to the Board of Directors.  Executive shall also serve without additional compensation as a member of the Board of Directors of the Company, and, if so requested by the Company, as an officer or director of any subsidiary or affiliate of the Company.

 

4.2.                            Duties. Executive shall have the duties, responsibilities and authority normally associated with the office and position of President and Chief Executive Officer and as otherwise established by the Company’s Board from time to time. During the Agreement Period, subject to the provisions of Section 4.3, Executive shall devote substantially all of his business time, during

 

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normal business hours, to the business and affairs of the Company and Executive shall use his best efforts to perform faithfully and efficiently the duties and responsibilities contemplated by this Agreement. Executive shall perform his duties, responsibilities and functions to the Company to the best of his abilities in a diligent and business-like manner.

 

4.3.                            Permitted Activities. Notwithstanding the provisions of Section 4.2, Executive shall be allowed, to the extent such activities do not substantially interfere with the performance by Executive of his duties and responsibilities hereunder, to serve on corporate, civic or charitable boards or committees.  Executive will notify the Chairman of the Board of Directors the Company in advance of the extent and nature of any such activities, and any such activities will be permitted only upon the approval of the Company, which will not be unreasonably withheld.

 

5.                                      Compensation and Other Benefits.

 

5.1.                            Annualized Base Salary.  Executive shall receive an annualized base salary payable in accordance with the Company’s normal payroll practices of $400,000 (gross) through the first anniversary of the Effective Date. The Board may, in its sole discretion, increase the Base Salary at any time and may not decrease the Base Salary without Executive’s written consent.  Executive Base Salaries are increased in accordance with the Company’s executive compensation review process and subject to approval by the Company’s Compensation Committee, subject to adjustment only as provided in this Section 5.1.

 

5.2.                            Incentive Bonus. During the Agreement Period, Executive shall be eligible to participate in the Incentive Bonus Plan in effect for officers and executives of the Company (the “Incentive Bonus Plan”), under which Executive will receive a performance-based bonus the amount of which, if any, will be determined and paid based upon satisfaction of criteria determined for each calendar year for officers and executives by the Compensation Committee. During the Agreement Period, Executive’s stated payout percentage under the Incentive Bonus Plan will be up to 50% of Base Salary, prorated for the portion of the fiscal year during which Executive is employed by the Company.  Goals for each year to be set during the first quarter, except for 2019 goals which will be set at the end of the first quarter Any bonus amounts payable to Executive under the Incentive Bonus Plan shall be paid at the same time as annual bonuses are paid to the Company’s other executive officers after the end of the year in which the bonus was earned, but no later than April 15 following the end of that year.

 

For the plan year of 2019, the Company shall guarantee 50% of the bonus ($100,000.00) for which Executive is eligible provided the Executive remains employed by the Company at the time payment is due.

 

5.3.                            Equity Incentive Plans. During the Agreement Period, Executive shall be eligible to participate in the Company’s equity incentive plans maintained by the Company from time to time (the “Company Equity Plans”). On the Effective Date, Executive shall receive: (a) a grant of 100,000 Equity Appreciation Right Units under the Company’s Restated Equity Appreciation Rights Plan, (b) a grant of 25,000 restricted shares of the Company’s Common Stock, and (c) a non-qualified stock option to purchase 125,000 shares of Common Stock under the 2017 Stock Incentive Plan, with an exercise price per share equal to the fair market value of the Common

 

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Stock on the Effective Date, a term of ten years and vesting in equal annual installments over five years with the first of such installments vesting on the first anniversary of the date of grant and each additional installment vesting on each anniversary thereafter.  Notwithstanding anything stated in any other agreement between the Company and Executive that may be construed to the contrary, upon a Change of Control: (x) any incentive grants under the Company Equity Plans will vest immediately, and (y) any stock options held by Executive under the Company Equity Plans will be exercisable for the remainder of their term.

 

5.4.                            Benefit Plans. During the Agreement Period, Executive shall be eligible to participate in all pension, 401(k) and other employee benefit plans, policies and programs for the benefit of senior executive officers. The Company reserves the right to modify, suspend or discontinue any Benefit Plans at any time without notice to or recourse by Executive, so long as such action is taken generally with respect to other similarly situated executives employed by the Company.

 

5.5.                            Perquisites. During the Agreement Period, Executive shall receive the perquisites described in Exhibit A (that is attached to this Agreement and incorporated herein).

 

5.6.                            Expense Reimbursement.  During and in respect of the Agreement Period, Executive shall be entitled to receive reimbursement for reasonable business expenses incurred by Executive in performing his duties and responsibilities hereunder, including travel, parking, business meetings and professional dues, incurred and substantiated in accordance with the policies and procedures established from time to time by the Company for senior executives of the Company.

 

6.                                      Termination.

 

6.1.                            Termination Due to Death.  Upon Executive’s death, Executive’s estate or his legal representative, as the case may be, shall be entitled to: (a) any Base Salary earned but unpaid as of the date of death; (b) any other payments and/or benefits which Executive or Executive’s legal representative is entitled to receive under any of the Benefit Plans; and (c) the bonus earned under the Incentive Bonus Plan for the fiscal year in which Executive’s death occurred, prorated for the portion of such fiscal year through the date of death and payable at the same time as annual bonuses are paid to the Company’s other executive officers, but no later than April 15 following the end of year in which the bonus was earned.

 

6.2.                            Termination Due to Executive’s Disability.  If Executive’s condition meets the definition of Disability above, the Company may terminate Executive’s employment upon written notice. If terminated by the Company as herein provided, the Company shall pay to Executive: (a) any Base Salary earned but unpaid as of the date of  Executive’s termination due to Disability; (b) Base Salary in effect at the time of the termination for a period of twelve (12) months or the remaining term under this Agreement, whichever is shorter, (c) any other payments and/or benefits which Executive or Executive’s legal representative is entitled to receive under any of the Benefit Plans; and (d) vesting of any unvested incentive grants granted under the Company Equity Plans that are scheduled to vest within twelve (12) months following the date of Disability.

 

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6.3.                            Termination by the Company Without Cause or by Executive for Good Reason. The Company may terminate Executive’s employment without Cause, or Executive may terminate his employment for Good Reason. In either such event, Executive shall be entitled to the following compensation:

 

6.3.1.                  Executive shall be entitled to receive Base Salary earned but unpaid as of the date of Executive’s termination, and any other payments and/or benefits which Executive is entitled to receive under any of the Benefit Plans. These payments will be made in compliance with Minnesota law or in any event within fourteen (14) days after termination.

 

6.3.2.                  Upon execution of a general release of claims against the Company in a form acceptable to the Company and after the expiration of any applicable rescission or revocation period, all before the end of the sixty (60) day period following Executive’s termination of employment, he will receive: (i) Base Salary in effect at the time of the termination for the longer of (a) the remainder of the Agreement Period following the termination of Executive’s employment with the Company or (b) a period of twelve (12) months (the “Without Cause Continuation Period”), in the manner and at such times as the Base Salary otherwise would have been payable to Executive; (ii) a prorated bonus earned by Executive under the Incentive Bonus Plan, calculated and due only through the Executive’s last day worked with the Company, payable at the same time as annual bonuses are paid to the Company’s other executive officers after the end of the year in which the bonus was earned, but no later than 180 days following the end of that year; and (iii) continuation at the Company’s then share of the expense for the lesser of (A) the Without Cause Continuation Period, or (B) until Executive obtains comparable replacement coverage, of medical and dental benefits in effect under COBRA as of the date of termination of employment. Notwithstanding the foregoing, certain payments under this paragraph (b) may be delayed pursuant to Section 7.2.

 

6.3.3.                  Notwithstanding anything stated in any other agreement between the Company and Executive that may be construed to the contrary, if Company terminates Executive’s employment without Cause, or Executive terminates his employment for Good Reason after the first anniversary of the Effective Date, then (i) the Company will cause any unvested portion of Executive’s stock options to vest immediately in full to the extent not already vested, and any such stock options will be exercisable for the full remaining portion of their term, and (ii) Executive’s Equity Appreciation Right Units will vest and be payable in full on the redemption date according to the terms thereof.

 

6.3.4.                  If the termination results in a loss of unvested benefits for Executive under any pension or profit-sharing plan and/or the Executive Life Insurance Plan, the Company will use its best efforts to provide benefits of comparable value to Executive during the Without Cause Continuation Period.”

 

6.4.                            Termination in Connection with Change of Control.  If Executive is an active and full-time employee at the time of a Change of Control and within twelve (12) months after the Change of Control, (i) Executive’s employment is involuntarily terminated by the Company or

 

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any successor employer resulting from the Change of Control for any reason other than death, Disability or Cause, or (ii) Executive resigns from the Company or any such successor for Good Reason, then Executive shall be entitled to the following compensation:

 

6.4.1.                  Executive shall be entitled to receive Base Salary earned but unpaid as of the date of Executive’s termination, and any other payments and/or benefits which Executive is entitled to receive under any of the Benefit Plans. These payments will be made in compliance with Minnesota law or in any event within fourteen (14) days after termination.

 

6.4.2.                  Upon execution of a general release of claims against the Company in a form acceptable to the Company and after the expiration of any applicable rescission or revocation period, all before the end of the sixty (60) day period following Executive’s termination of employment, he will receive: (i) Base Salary in effect at the time of the termination for the longer of (a) the remainder of the Agreement Period or (b) a period of twelve (12) months following the termination of Executive’s employment (the “COC Continuation Period”), in the manner and at such times as the Base Salary otherwise would have been payable to Executive; (ii) the maximum bonus payable under the Incentive Bonus Plan for the fiscal year in which the termination occurred, prorated for the portion of such fiscal year through the date of termination and payable within thirty (30) days after the date of termination of employment; and (iii) continuation at the Company’s then share of the expense for the lesser of (A) the COC Continuation Period, or (B) until Executive obtains comparable replacement coverage, of medical and dental benefits in effect under COBRA as of the date of termination of employment.  In addition, upon a Change of Control: (x) any incentive grants under the Company Equity Plans will vest immediately, and (y) any stock options held by Executive under the Company Equity Plans will be exercisable for the remainder of their term. Notwithstanding the foregoing, certain payments under this paragraph (b) may be delayed pursuant to Section 7.2.

 

6.4.3.                  If the termination results in a loss of unvested benefits for Executive under any pension or profit sharing plan and/or the Executive Life Insurance Plan, the Company will use its best efforts to provide benefits of comparable value to Executive during the COC Continuation Period.

 

6.5.                            Termination by the Company for Cause.  The Company may terminate Executive’s employment hereunder for Cause. In such event, Executive shall be entitled only to: (a) any Base Salary earned but unpaid through the date of such termination and (b) any other earned and vested payments and/or benefits that Executive is entitled to receive under any of the Benefit Plans.

 

6.6.                            Voluntary Resignation Without Good Reason.  If Executive voluntarily resigns during the Agreement Term without Good Reason, then Executive shall be entitled to: (a) Base Salary earned but unpaid as of the date of Executive’s termination; and (b) any other payments and/or benefits which Executive is entitled to receive under any of the Benefit Plans.

 

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7.                                      Severance Payment Limitations or Possible Delay Under Code Section 409A.

 

7.1.                            Notwithstanding any other provision of this Agreement, the Company and Executive intend that any payments, benefits or other provisions applicable to this Agreement comply with the payout and other limitations and restrictions imposed under Section 409A of the Code (“Section 409A”), as clarified or modified by guidance from the U.S. Department of Treasury or the Internal Revenue Service—in each case if and to the extent Section 409A is otherwise applicable to this Agreement and such compliance is necessary to avoid the penalties otherwise imposed under Section 409A.  In this regard, the Company and Executive agree that the payments, benefits and other provisions applicable to this Agreement, and the terms of any deferral and other rights regarding this Agreement, shall be interpreted and deemed modified if and to the extent necessary to comply with the payout and other limitations and restrictions imposed under Section 409A, as clarified or supplemented by guidance from the U.S. Department of Treasury or the Internal Revenue Service—in each case if and to the extent Section 409A is otherwise applicable to this Agreement and such compliance is necessary to avoid the penalties otherwise imposed under Section 409A.

 

7.2.                            In the event any portion of any payments due under Section 6.3.2 (in the event of termination by the Company without Cause or by Executive for Good Reason) or Section 6.4.2 (in the event of certain terminations after a Change of Control) would exceed the sum of the applicable limited separation pay exclusions as determined pursuant to Code Section 409A, then payment of the excess amount shall be delayed until the first regular payroll date of the Company following the six (6) month anniversary of the Executive’s date of termination (or the date of his death, if earlier), and shall include a lump sum equal to the aggregate amounts that Executive would have received had payment of this excess amount commenced as provided above following the date of termination. If Executive continues to perform any services for the Company (as an employee or otherwise) after the date of termination, such six month period shall be measured from the date of Executive’s “separation from service” as defined pursuant to Code Section 409A.

 

7.3.                            Executive does not have any right to make any election regarding the time or form of any payment due under Sections 6.3 or 6.4 or any other provision of this Agreement.

 

7.4.                            The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes, and other amounts required by applicable law to be withheld by the Company.

 

8.                                      Limitation on Parachute Payments.

 

8.1.                            Limitation.  Notwithstanding anything stated in this Agreement, or any other plan, arrangement or agreement to the contrary (including without limitation the Company’s 2017 Stock Incentive Plan), if any of the Covered Payments constitute Parachute Payments and would, but for this Section 8 be subject to the Excise Tax, then the Covered Payments shall be payable either (i) in full or (ii) reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax, whichever of the foregoing (i) or (ii) results in Executive’s receipt on an after-tax basis of the greatest amount of benefits after taking into account the applicable federal, state, local and foreign income, employment and excise taxes (including the Excise Tax).

 

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8.2.                            Possible Reduction.  If necessary, the Covered Payments shall be reduced in a manner that maximizes Executive’s economic position.  In applying this principle, the reduction shall be made in a manner consistent with the requirements of Section 409A of the Code, and where two economically equivalent amounts are subject to reduction but are payable at different times, such amounts shall be reduced on a pro rata basis but not below zero.

 

8.3.                            Accountants.  Any determination required under this Section 8 shall be made in writing in good faith by the Accountants, which shall provide detailed supporting calculations to the Company and Executive as required by the Company or Executive.  The Company and Executive shall provide the Accountants with such information and documents as the Accountants may reasonably request in order to make a determination under this Section 8.  The Company shall be responsible for all fees and expenses of the Accountants.

 

8.4.                            Overpayment or Underpayment.  It is possible that after the determinations and selections made pursuant to this Section 8 Executive will receive Covered Payments that are in the aggregate more than the amount provided under this Section 8 (“Overpayment”) or less than the amount provided under this Section 8.4 (“Underpayment”).

 

8.4.1.                  In the event that: (A) the Accountants determine, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or Executive which the Accountants believe has a high probability of success, that an Overpayment has been made or (B) it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved that an Overpayment has been made, then Executive shall pay any such Overpayment to the Company.

 

8.4.2.                  In the event that: (A) the Accountants, based upon controlling precedent or substantial authority, determine that an Underpayment has occurred or (B) a court of competent jurisdiction determines that an Underpayment has occurred, any such Underpayment will be paid promptly by the Company to or for the benefit of Executive.

 

9.                                      Successors.

 

9.1.                            The Executive.  This Agreement is personal to Executive and, without the prior express written consent of the Company, shall not be assignable by Executive, except that Executive’s rights to receive any compensation or benefits under this Agreement may be transferred or disposed of pursuant to testamentary disposition, intestate succession or pursuant to a domestic relations order. This Agreement shall inure to the benefit of and be enforceable by Executive’s heirs, beneficiaries and/or legal representatives.

 

9.2.                            The Company.  This Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns.

 

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10.                               Confidential Information.

 

10.1.                     Non-Disclosure. Executive acknowledges that the Company continually develops Confidential Information (as defined below), that Executive will obtain Confidential Information during employment with the Company, that Executive may develop Confidential Information for the Company, and that Executive may learn of Confidential Information during the course of employment. Executive will comply with the policies and procedures of the Company for protecting Confidential Information obtained from the Company and shall not use or disclose to any person, corporation or other entity (except as required by applicable law or for the proper performance of the regular duties and responsibilities of Executive for the Company) any Confidential Information obtained by Executive during employment with the Company, or other association with the Company. Executive understands that this restriction shall continue to apply to Confidential Information following termination of Executive’s employment, regardless of the reason for such termination.

 

The Company hereby advises Executive as follows under the federal Defend Trade Secrets Act:  An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that — (A) is made — (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.  In addition, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual — (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.  Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).

 

10.2.                     “Confidential Information.”  For purposes of this Agreement, “Confidential Information” means any and all information of the Company or concerning the business or affairs of the Company that is not generally known by others with whom any of them compete or do business, or with whom any of them plan to compete or do business. Confidential Information includes, without limitation, such information relating to: (i) the development, research, testing, marketing, strategies, and financial activities of the Company, (ii) the products and services, present and in contemplation, of the Company, (iii) inventions, processes, operations, administrative procedures, databases, programs, systems, flow charts, software, firmware and equipment used in the business of the Company, (iv) the costs, financial performance and strategic plans of the Company, (v) the people and organizations with whom the Company has or had business relationships and the substance of those relationships. Confidential Information also includes all information that the Company received belonging to others with any understanding, express or implied, that it would not be disclosed.  Failure to mark any of the Confidential Information as confidential or proprietary will not affect its status as Confidential Information.

 

10.3.                     Documents.  All documents, records, tapes and other media of every kind and description relating to the business, present or otherwise, of the Company and any copies, in whole or in part, thereof (“Documents”), whether or not prepared by Executive, shall be the sole and exclusive property of the Company. Executive shall safeguard all Documents and shall surrender to the Company at the time Executive’s employment terminates, or at such earlier time or times as

 

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the President, Chief Executive Officer, or Board or their designees may specify, all Documents, Confidential Information, and Company property in good working condition then in Executive’s possession or control.

 

10.4.                     Former Employer Information. Executive agrees that Executive will not, during Executive’s employment with the Company, improperly use or disclose any proprietary information or trade secrets or any other property of any former or concurrent employer or other person or entity and that Executive will not bring onto the premises of the Company any proprietary information belong to any such employer, person or entity.

 

11.                               Restrictive Covenants.  In return for the Company’s (i) promise to grant Executive access to certain of the Company’s Confidential Information, and (ii) the Company’s actual grant to Executive of access to certain of its Confidential Information, (iii) the opportunity for employment as the Company’s President and Chief Executive Officer, and (iv) the valuable pay and benefits in this Agreement that are intended, in part, to reward Executive for developing and protecting the Company’s Confidential Information, Executive makes the following commitments and Executive acknowledges these benefits constitute adequate and sufficient consideration for the restrictions in this Agreement.

 

11.1.                     Non-Solicitation. During the Agreement Period and for a period of two years after any termination of employment hereunder for any reason, Executive will not, directly or indirectly, (i) induce or attempt to induce any employee of the Company to leave the employ of the Company or to breach that person’s contract (if any) with the Company, (ii) in any way interfere with the relationships between the Company and any such employee of the Company, (iii) employ or otherwise engage as an employee, independent contractor or otherwise any such employee of the Company, or (iv) induce or attempt to induce any customer, supplier, licensee or other person or entity that has done business with the Company to cease doing business with the Company or in any way interfere with the relationship between any such customer, supplier, licensee or other business entity and the Company.

 

11.2.                     Non-Competition. During the Agreement Period and for a period of two years after any termination of employment hereunder for any reason, Executive will not engage in, manage, operate, or participate in the management or operation of, be employed by or render services or advice, or guarantee any obligation of, any person or entity operating in the United States, China, or Mexico that engages in, or is actively planning to become engaged in, researching, inventing, designing, manufacturing, developing, producing, marketing, promoting, selling, soliciting the sales of, supporting, or providing a product or service that competes with any product or service that the Company researched, invented, designed, manufactured, developed, produced, marketed, promoted, sold, supported, provided, or serviced in the course of its business during the 24-month period prior to the termination of Executive’s employment. Executive agrees that this covenant is reasonable with respect to its duration, geographical area and scope.

 

11.3.                     Notification of Restrictive Covenants. Executive acknowledges that the Company may serve notice upon any party in the electronic manufacturing services, medical device manufacturing or engineering services industries with whom Executive accepts employment, a consulting engagement, engagement as an independent contractor, partnership,

 

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joint venture or other association if the Company reasonably believes that Executive’s activities may constitute a violation of Executive’s obligations under Section 11.1 or 11.2 above. Such notice may inform the recipient that Executive is party to this Agreement and may include a copy of this Agreement or relevant portions thereof.

 

11.4.                     Injunctive Relief.  Executive acknowledges and agrees that the Company will have no adequate remedy at law, and would be irreparably harmed, if Executive breaches or threatens to breach any of the provisions of this Section 11.  Executive agrees that the Company shall be entitled to equitable and/or injunctive relief to prevent any breach or threatened breach of this Section 11, and to specific performance of each of the terms of such Section in addition to any other legal or equitable remedies that the Company may have. Executive further agrees that he shall not, in any equity proceeding relating to the enforcement of the terms of this Section 11, raise the defense that the Company has an adequate remedy at law.  The parties understand that both damages and injunctions will be proper modes of relief and are not to be considered as alternative remedies.

 

11.5.                     Special Severability.  The terms and provisions of this Section 11 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected. It is the intention of the parties to this Agreement that the potential restrictions on Executive’s future employment imposed by this Section 11 be reasonable in both duration and geographic scope and in all other respects. To the extent any provision of this Agreement is judicially determined to be unenforceable, a court of competent jurisdiction may reform any such provision to make it enforceable.  If for any reason any court of competent jurisdiction shall find any provisions of this Section 11 unreasonable in duration or geographic scope or otherwise, Executive and the Company agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

 

11.6.                     Tolling. The duration of the above restrictions in this Section 11.1 and Section 11.2 will be extended for a period equal to the duration of any breach or default of such covenant by Executive.

 

12.                               Miscellaneous.

 

12.1.                     Applicable Law & Venue.  This Agreement shall be governed by and construed in accordance with the laws of the state of Minnesota, applied without reference to principles of conflict of laws. The venue for any dispute relating to this Agreement shall be in the state and/or federal courts in Hennepin County, Minnesota.  Executive hereby (a) waives any objection that Executive might have now or hereafter to the foregoing jurisdiction and venue of any such litigation, action or proceeding, (b) irrevocably submits to the exclusive jurisdiction of any such court set forth above in any such litigation, action or proceeding, and (c) waives any claim or defense of inconvenient forum.

 

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12.2.                     Amendments.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

12.3.                     Indemnification.  The Company agrees that if Executive is made a party or is threatened to be made a party, or is required to appear as a witness to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he is or was an officer of the Company, whether or not the basis of such Proceeding is alleged action in an official capacity as an officer, employee or agent while serving as an officer, employee or agent, he shall be indemnified and held harmless by the Company (unless Executive’s actions or omissions constitute gross negligence or willful misconduct) to the fullest extent authorized by law, as the same exists or may hereafter be amended, against all costs and expenses incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if Executive has ceased to be an officer or agent, or is no longer employed by the Company and shall inure to the benefit of his heirs, executors and administrators. Executive agrees to fully cooperate with the Company should any Proceeding commence and for the duration of such Proceeding. On the Effective Date, the Company will cause Executive to be covered and named as an insured on its Director and Officer Liability Insurance policy, which the Company represents to be in force and in good standing at the time this Agreement is executed.

 

12.4.                     Notices.  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other parties or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

To the Company:

 

Nortech Systems Incorporated

7550 Meridian Circle N.

Suite # 150, Maple Grove, MN 55369

Attn: Chief Financial Officer

 

If to Executive:

 

Jay D. Miller

 

or to such other address as (a) indicated in the Company’s employment records, or (b) any party shall have furnished to the others in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee.

 

12.5.                     Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

 

12.6.                     Captions.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

 

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12.7.                     Counterparts.  This Agreement may be executed in one or more counterparts each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement.

 

12.8.                     Entire Agreement; Previous Agreements Superseded.  This Agreement contains the entire agreement between the parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto. There are no representations, understandings, or agreements by or between the parties which are not contained within the four corners of this Agreement.

 

12.9.                     Survivorship.  The respective rights and obligations of the parties hereunder shall survive any termination of Executive’s employment under this Agreement for any reason to the extent necessary to the intended provision of such rights and the intended performance of such obligations.

 

12.10.              Attorneys’ Fees and Costs.  In the event of any claim, controversy, or dispute arising out of or relating to this Agreement, or breach hereof, the prevailing party shall be entitled to recover reasonable attorneys’ fees and costs in connection with any court proceeding.

 

12.11.              No Waiver.  No term or condition of this Agreement will be deemed to have been waived nor shall there be any estoppel to enforce any provision hereof, except by a written instrument executed by the party charged with waiver or estoppel.  The Company’s delay, waiver or failure to enforce any of the terms of this Agreement or any similar agreement in one instance shall not constitute a waiver of its rights hereunder with respect to other violations of this or any other agreement.

 

12.12.              Termination of Existing Employment Agreement.  The Company and the Executive hereby agree that the Existing Employment Agreement shall terminate and be of no further force or effect as of the Effective Date of this Agreement.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement to be effective as of the date first set forth above.

 

	
 
    	
NORTECH   SYSTEMS INCORPORATED
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   David Kunin
    	
 
    
	
 
    	
Title:
    	
Chairman   of the Board of Directors
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
EXECUTIVE
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jay D. Miller

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