Document:

EX-10.2

 Exhibit 10.2 

Execution Version 

SECOND INCREMENTAL TERM LOAN AMENDMENT 

SECOND INCREMENTAL TERM LOAN AMENDMENT, dated as of May 19, 2017 (this “Amendment”), by and among the lender party
hereto (the “Incremental Term Lender”), MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. (f/k/a M/A-COM Technology Solutions Holdings, Inc.), a Delaware corporation (the “Borrower”),
and GOLDMAN SACHS BANK USA (“GS”), as administrative agent (in such capacity, the “Administrative Agent”) under the Credit Agreement referred to below. 

RECITALS: 
 WHEREAS,
reference is hereby made to that certain Credit Agreement, dated as of May 8, 2014 (as amended by (i) that certain Incremental Amendment, dated as of February 13, 2015, (ii) that certain Incremental Term Loan Amendment, dated as of
August 31, 2016, (iii) that certain Second Incremental Amendment, dated as of March 10, 2017, (iv) that certain Amendment No. 4 to Credit Agreement, dated as of March 10, 2017, (v) that certain Refinancing Amendment, dated as of
March 10, 2017 and (vi) that certain Second Refinancing Amendment, dated as of the date hereof (the “Second Refinancing Amendment”), the “Credit Agreement”, and, as amended by this Amendment, the
“Amended Credit Agreement”), among the Borrower, each Lender from time to time party thereto and GS as the Administrative Agent, the Collateral Agent, the Swing Line Lender and an L/C Issuer (capitalized terms used but not defined
herein having the meanings provided in the Credit Agreement); 
 WHEREAS, subject to the terms and conditions of the Credit Agreement, the
Borrower may establish a Term Loan Increase with new and/or existing Term Lenders; 
 WHEREAS, the Borrower has requested that the
Incremental Term Lender extend credit to the Borrower in the form of New Term Loans in an aggregate principal amount of $100,000,000, which New Term Loans will be incurred pursuant to a Term Loan Increase and, upon the incurrence thereof, will be of
the same Class as the Initial Term Loans; and 
 NOW, THEREFORE, in consideration of the premises and agreements, provisions and
covenants herein contained, the parties hereto agree as follows: 
 Section 1.    New Term Commitments; New Term
Loans. 
 (a)    Subject to the terms and conditions set forth herein, the Incremental Term Lender agrees to make
Incremental Term Loans (as defined below) on the Second Incremental Term Loan Effective Date (as defined below) in an aggregate principal amount equal to the Incremental Term Commitment (as defined below). 

(b)    The Incremental Term Commitment shall be automatically and permanently reduced to $0 upon the making of the
Incremental Term Loans pursuant to clause (a) above. 
 (c)    The Borrower has elected to use clause (a) of
the definition of “Available Incremental Amount” to effectuate the Term Loan Increase contemplated hereby. 

 Section 2.    Defined Terms. As used in this Amendment,
the following terms shall have the meanings set forth below: 
 “Incremental Term Commitment” means the obligation of the
Incremental Term Lender to make an Incremental Term Loan to the Borrower pursuant to this Amendment in an aggregate amount not to exceed $100,000,000. 

“Incremental Term Loans” means the New Term Loans being made to the Borrower by the Incremental Term Lender in Dollars equal
to the Incremental Term Commitment on the Second Incremental Term Loan Effective Date (for the avoidance of doubt, after giving effect to the Second Refinancing Amendment). 

Section 3.    Terms and Conditions. Pursuant to Section 2.14 of the Credit Agreement: 

(a)    The terms of the Incremental Term Loans shall be identical to the terms of the Initial Term Loans (for the
avoidance of doubt, after giving effect to the Second Refinancing Amendment) for all purposes under the Credit Agreement and the other Loan Documents (other than with respect to upfront fees, original issue discount and arrangement, structuring or
similar fees payable in connection therewith), the Incremental Term Loans shall be of the same Class as the Initial Term Loans (for the avoidance of doubt, after giving effect to the Second Refinancing Amendment) and the Incremental Term Loans
shall be subject to the provisions of the Credit Agreement and the other Loan Documents on the same basis as the Initial Term Loans (for the avoidance of doubt, after giving effect to the Second Refinancing Amendment). From and after the Second
Incremental Term Loan Effective Date, each reference to an “Initial Term Loan” or “Initial Term Loans” in the Amended Credit Agreement (in each case, for the avoidance of doubt, after giving effect to the Second Refinancing
Amendment) shall be deemed to include the Incremental Term Loans, each reference to a “Term Lender” in the Amended Credit Agreement (for the avoidance of doubt, after giving effect to the Second Refinancing Amendment) shall be deemed to
include the Incremental Term Lender and related terms will have correlative meanings mutatis mutandis (in each case, unless the context otherwise requires). 

(b)    The Incremental Term Lender, by delivering its signature page to this Amendment on the Second Incremental Term Loan
Effective Date, (i) confirms that it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.01(a) or Section
6.01(b) of the Credit Agreement, as the case may be, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Amendment and to make the Incremental Term Loans;
(ii) confirms that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into
this Amendment and to make the Incremental Term Loans; (iii) irrevocably appoints the Administrative Agent to act on its behalf as the Administrative Agent under the Loan Documents and authorizes the Administrative Agent to take such actions on
its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms thereof, together with such actions and powers as are reasonably incidental thereto; and (iv) agrees that it will perform in accordance with their
terms all of the obligations which by the terms of the Amended Credit Agreement are required to be performed by it as a Term Lender. 

  
 2 

 Section 4.    Conditions to Effectiveness. This Amendment and the
obligation of the Incremental Term Lender to make the Incremental Term Loans shall become effective on the date hereof (such date, the “Second Incremental Term Loan Effective Date”) upon satisfaction (or, with respect to Sections
4(a)(ii), (iii) and (iv) only, waiver by the Administrative Agent) of each of the following conditions: 

(a)    The Administrative Agent shall have received the following, each of which shall be originals, facsimiles or copies
in .pdf form by electronic mail (followed promptly by originals): 
 (i)    (A) the Borrower’s
executed counterpart signature page to this Amendment and (B) the Incremental Term Lender’s executed counterpart signature page to this Amendment; 

(ii)    each Guarantor’s executed counterpart signature page to the acknowledgment attached to this
Amendment; 
 (iii)    a customary opinion from Ropes & Gray LLP, counsel to the Loan Parties;

 (iv)    such certificates of good standing or status (to the extent that such concepts exist) from the
applicable secretary of state (or equivalent authority) of the jurisdiction of organization of each Loan Party, a certificate of customary resolutions or other customary action of each Loan Party, a customary certificate of a Responsible Officer of
each Loan Party and an incumbency certificate of each Loan Party evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Amendment and the other Loan
Documents to which such Loan Party is a party or is to be a party on the Second Incremental Term Loan Effective Date; 

(v)    a Loan Notice (without any representation therein as to the satisfaction of conditions in
Section 4.02 of the Amended Credit Agreement) relating to the funding of the Incremental Term Loans on the Second Incremental Term Loan Effective Date; 

(vi)    copies of recent Uniform Commercial Code, tax and intellectual property Lien searches and copies of
judgment searches, in each case, in each jurisdiction reasonably requested by the Administrative Agent in respect of the Loan Parties; 

(vii)    a certificate from the chief financial officer of the Borrower attesting to the Solvency of the
Borrower and its Restricted Subsidiaries, on a consolidated basis, on the Second Incremental Term Loan Effective Date after giving effect to the incurrence of the Incremental Term Loans; and 

(viii)    a certificate from the chief financial officer of the Borrower certifying that, on the Second
Incremental Term Loan Effective Date after giving Pro Forma Effect to the incurrence of the Incremental Term Loans, the Total Net First Lien Leverage Ratio will be less than or equal to 3.50 to 1.00. 

  
 3 

 (b)    Immediately before and immediately after giving effect to this
Amendment, no Event of Default shall exist. 
 (c)    Immediately before and immediately after giving effect to this
Amendment, the representations and warranties of the Borrower and each other Loan Party contained in Article V of the Credit Agreement or in any other Loan Document shall be true and correct in all material respects; provided that, to the
extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date; provided, further, that, any representation or warranty that is
qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct in all respects. 

(d)    The Borrower shall pay a closing fee to the Incremental Term Lender on the Second Incremental Term Loan Effective
Date as fee compensation for such Incremental Term Lender’s Incremental Term Commitment in an amount equal to 0.50% of the aggregate principal amount of the Incremental Term Loans made by the Incremental Term Lender on the Second Incremental
Term Loan Effective Date, payable to the Incremental Term Lender out of the proceeds of the Incremental Term Loans on the Second Incremental Term Loan Effective Date. 

(e)    The Administrative Agent shall have received payment of all expenses required to be paid or reimbursed by any Loan
Party under or in connection with this Amendment, including those expenses set forth in Section 12 hereof, in each case, to the extent invoiced in reasonable detail prior to the date hereof. 

Other than the conditions set forth in this Section 4, there are no other conditions (express or implied) to the
Second Incremental Term Loan Effective Date. For purposes of determining compliance with the conditions specified in this Section 4, the Incremental Term Lender shall be deemed to have consented to, approved or accepted or
to be satisfied with, each document or other matter required hereunder to be consented to or approved by or acceptable or satisfactory to the Incremental Term Lender under this Amendment unless the Administrative Agent shall have received notice
from the Incremental Term Lender prior to the Second Incremental Term Loan Effective Date specifying its objection thereto. 

Section 5.    Loan Notice. The Incremental Term Lender and the Administrative Agent agree that the
Borrower’s delivery of a Loan Notice for Incremental Term Loans that are Eurocurrency Rate Loans at any time on or prior to the Second Incremental Term Loan Effective Date (in lieu of such delivery with three (3) Business Days’
advance notice) is effective notice of such Borrowing. 
 Section 6.    Representations and Warranties. Each
of the Loan Parties represents and warrants to the Administrative Agent and the Incremental Term Lender that this Amendment has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable
against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law. 

  
 4 

 Section 7.    Counterparts. This Amendment may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of
this Amendment by facsimile transmission or other electronic imaging means (including in .pdf format) shall be effective as delivery of a manually executed counterpart of this Amendment. 

Section 8.    Governing Law and Waiver of Right to Trial by Jury. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. The jurisdiction and waiver of right to trial by jury provisions in Sections 10.15 and 10.16 of the Credit Agreement are incorporated herein by reference mutatis mutandis. 

Section 9.    Headings. The headings of this Amendment are for purposes of reference only and shall not limit
or otherwise affect the meaning hereof. 
 Section 10.    Reaffirmation. 

(a)    The Borrower hereby expressly acknowledges the terms of this Amendment and acknowledges that the Incremental Term
Loans constitute Obligations under the Amended Credit Agreement, and reaffirms, as of the date hereof, (i) the covenants and agreements contained in each Loan Document to which it is a party, as in effect immediately after giving effect to this
Amendment and the transactions contemplated hereby, and (ii) its grant of Liens on the Collateral to secure the Obligations pursuant to the Collateral Documents to which it is a party. 

(b)    Each Guarantor, by signing the acknowledgment attached to this Amendment, in its capacity as a Guarantor under the
Guaranty to which it is a party, acknowledges and agrees that the Incremental Term Loans constitute Obligations under the Amended Credit Agreement and that the guarantee contained in the Guaranty is, and shall remain, in full force and effect
immediately after giving effect to this Amendment and reaffirms, as of the date hereof, (i) the covenants and agreements contained in each Loan Document to which it is a party, as in effect immediately after giving effect to this Amendment and
the transactions contemplated hereby, and (ii) its grant of Liens on the Collateral to secure the Obligations pursuant to the Collateral Documents to which it is a party. 

Section 11.    Effect of Amendment; References to the Credit Agreement; Miscellaneous. Except as expressly set
forth herein, this Amendment (a) shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or the Agents under the Credit Agreement or any other Loan Document, and
(b) shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or any other Loan Document, all of which
are ratified and affirmed in all respects and shall continue in full force and effect as amended by this Amendment (as applicable). All references to the Credit Agreement in any document, instrument, agreement, or writing shall from and after the
Second Incremental Term Loan Effective Date be deemed to refer to the Amended Credit Agreement, and, as used in the Amended Credit Agreement, the terms “Agreement,” “herein,” “hereafter,” “hereunder,”
“hereto” and words of similar import shall mean, from and after the Second Incremental Term Loan Effective Date, the Amended Credit Agreement. 

  
 5 

 Section 12.    Expenses. The Borrower agrees to reimburse the
Administrative Agent for its reasonable out-of-pocket expenses in connection with this Amendment to the extent required under Section 10.04 of the Amended Credit
Agreement. 
 [Signature Pages Follow] 

  
 6 

 IN WITNESS WHEREOF, each of the undersigned has caused its duly authorized officer to
execute and deliver this Amendment as of the date first written above. 
  

					
	MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Senior Vice President and Chief
		 		 	Financial Officer

  
 [Second Incremental Term
Loan Amendment] 

 
					
	GOLDMAN SACHS BANK USA,
	as Administrative Agent
		
	By:	 	 /s/ Gabriel Jacobson

		 	Name	 	Gabriel Jacobson
		 	Title:	 	Authorized Signatory

  
 [Second Incremental Term
Loan Amendment] 

 
					
	MORGAN STANLEY SENIOR FUNDING, INC., as the Incremental Term Lender
		
	By:	 	 /s/ Andrew Earls

		 	Name:	 	Andrew Earls
		 	Title:	 	Authorized Signatory

  
 [Second Incremental Term
Loan Amendment] 

 
					
	Acknowledged and agreed with respect to Section 10(b) of the Amendment to which this acknowledgment is attached by:
	
	MACOM TECHNOLOGY SOLUTIONS INC.
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer and Senior Vice President
	
	MINDSPEED TECHNOLOGIES, LLC
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer
	
	NITRONEX, LLC
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer

  
 [Second Incremental Term
Loan Amendment] 

 
					
	BINOPTICS, LLC
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer
	
	MACOM METELICS, LLC
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer
	
	MACOM CONNECTIVITY SOLUTIONS, LLC
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer and Treasurer
	
	AMCC SALES CORPORATION
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer and Treasurer
	
	AMCC ENTERPRISE CORPORATION
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer and Treasurer

  
 [Second Incremental Term
Loan Amendment] 

					
	AMCC CHINA, INC.
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer and Treasurer
	
	VELOCE TECHNOLOGIES, LLC
	
	By: MACOM Connectivity Solutions, LLC, its sole member
		
	By:	 	 /s/ Robert McMullan

		 	Name:	 	Robert McMullan
		 	Title:	 	Chief Financial Officer and Treasurer

  
 [Second Incremental Term
Loan Amendment]Exhibit 10.1

 

EXECUTION COPY

 

NORTECH SYSTEMS INCORPORATED

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (“Agreement”), effective as of May 15, 2017 (the “Effective Date”), is made by and between Nortech Systems Incorporated, a Minnesota corporation (the “Company”); and Richard Wasielewski (“Executive”).

 

Recitals

 

WHEREAS, the Company and Executive are parties to that certain Employment Agreement, dated March 15, 2014 (the “Existing Employment  Agreement”), pursuant to which Executive is employed by the Company as the President and Chief Executive Officer of the Company;

 

WHEREAS, the Company and Executive are parties to that certain Change of Control Agreement, dated May 1, 2004 (the “Change of Control Agreement”), pursuant to which the Company provides economic security for Executive after a change of control of the Company;

 

WHEREAS, the Company and Executive desire to amend and restate each of the Existing Employment Agreement and the Change of Control Agreement into this Agreement; and the Company and Executive desire this Agreement to replace and supersede in its entirety each of the Existing Employment Agreement and the Change of Control Agreement;

 

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 which 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 and intentional misconduct in the performance of Executive’s duties for the Company or any of its subsidiaries, (b) Executive embezzles or willfully misappropriates for his personal use, 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 involving moral turpitude, or (d) Executive’s violation of Executive’s obligations in Section 10, and/or breach of

 

 

any restrictive covenant set forth in Section 11 of this Agreement; that in the case of the actions  in (a) and (d), is not cured within 30 calendar days after Executive’s receipt of written notice from the Company of the alleged Cause.

 

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; (b) Individuals who, as of the Effective Date, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided, that any person becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or (c) 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” or “Disabled” 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.

 

1.9                               “Good Reason” means (a) any material reduction in the amount or type of compensation paid to the Executive or material reduction in benefits inconsistent with benefit reductions taken by other members of Company’s senior management; (b) any material diminution of Executive’s duties, responsibility or authority; (c) the Board requests Executive to engage in actions that would constitute illegal or unethical acts; (d) the Board requiring the Executive to be based at any office or location other than facilities within 50 miles of Minneapolis, Minnesota; or (e) any material breach 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.

 

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

 

1.11                        “Retirement” means the termination of Executive’s employment at the end of the Agreement Period described in Section 3 below.

 

2

 

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, and shall continue, unless sooner terminated in accordance with this Agreement, until December 31, 2018  (the “Initial Period”); provided, however, this Agreement may be extended for additional period of up to one year by the Parties’ mutual written agreement at least ninety (90) 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 3, the provisions of Sections 8, 9, 10, 11 and 12 shall survive the termination of Executive’s employment 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. In such positions, Executive shall have the duties, responsibilities and authority normally associated with the offices and positions of President and Chief Executive Officer and as otherwise established by the Company’s Board from time to time.  Executive shall report to the Board.

 

4.2                               Duties. During the Agreement Period, Executive shall devote substantially all of his business time, during normal business hours, to the business and affairs of the Company and Executive shall use his reasonable best efforts to perform faithfully and efficiently the duties and responsibilities contemplated by this Agreement.  Notwithstanding the foregoing, 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.

 

5.                                      Compensation and Other Benefits.

 

5.1                               Annualized Base Salary. During the Agreement Period, Executive shall receive an annualized base salary payable in accordance with the Company’s normal payroll practices of $300,000 per year, which the Board or the Board’s Compensation Committee will review for consideration of an increase on or before each annual anniversary date during the Agreement Period and which the Board may, in its sole discretion, increase each year (but not decrease without Executive’s consent, except if such salary reduction is imposed as part of a general reduction in compensation of senior management) (“Base Salary”).

 

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. 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 180 days following the end of that year.

 

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

 

3

 

“Company Equity Plans”). On the Effective Date, Executive shall receive a non-qualified stock option to purchase 75,000 shares under the 2017 Stock Incentive Plan, with an exercise price per share equal to the fair market value of the Common Stock on the Effective Date, a term of ten years and vesting in equal annual installments over three years. Executive shall be eligible to receive further incentive grants under the Company Equity Plans as determined in the Board’s sole discretion and pursuant to the terms and conditions as determined in the Board’s sole discretion. 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 immediately vest, 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, including the Executive Life Insurance Plan to the extent in effect for executives (together, the “Benefit Plans”). 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.

 

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; (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 180 days following the end of year in which the bonus was earned; and (d) vesting of any unvested incentive grants granted under the Company Equity Plans scheduled to vest over a period of twelve (12) months following the date of death.

 

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 scheduled to vest over a period of twelve (12) months following the date of Disability.

 

6.3                               Termination by the Company Without Cause or by Executive with Good Reason.  The Company may terminate Executive’s employment without Cause, or Executive may terminate his

 

4

 

employment Good Reason. In either such event, Executive shall be entitled to the following compensation:

 

(a) 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.

 

(b) Upon execution of a general release of claims against the Company in a form reasonably 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 with the Company (the “Without Cause Continuation Period”), in the manner and at such times as the Base Salary otherwise would have been payable to Executive; and (ii) the total amount of the bonus earned under the Incentive Bonus Plan for the full fiscal year in which the termination occurred, as if Executive had been employed on the last day of the fiscal year, 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. Notwithstanding the foregoing, certain payments under this paragraph (b) may be delayed pursuant to Section 7.2.

 

(c) Notwithstanding anything stated in any other agreement between the Company and Executive that may be construed to the contrary, (i) the Company will cause any unvested portion of Executive’s stock options to immediately vest 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.

 

(d)  Executive shall be entitled to receive the retirement benefits set forth on Exhibit B.

 

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 any successor employer resulting from the Change in 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:

 

(a) 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.

 

(b) Upon execution of a general release of claims against the Company in a form reasonably 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 eighteen (18) 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. Notwithstanding the foregoing, certain payments under this paragraph (b) may be delayed pursuant to Section 7.2.

 

5

 

(c) Executive shall be entitled to receive the retirement benefits set forth on Exhibit B.

 

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                               Retirement. In the event of Executive’s Retirement, Executive shall be entitled to: (a) any Base Salary earned but unpaid through the date of Retirement, (b) any other earned and vested payments and/or benefits that Executive is entitled to receive under any of the Benefit Plans, and (c) the retirement benefits set forth on Exhibit B attached hereto. In addition, upon Retirement, notwithstanding anything stated in any other agreement between the Company and Executive that may be construed to the contrary, (i) the Company will cause any unvested portion of Executive’s stock options to immediately vest 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.

 

6.7                               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.

 

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(b) (in the event of termination by the Company without Cause or by Executive for Good Reason) or Section 6.4(b) (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 Employer (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..

 

6

 

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).

 

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”).

 

(a) 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.

 

(b) 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

 

7

 

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.

 

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.

 

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.

 

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 the President or Chief Executive Officer, Board or their designees may specify, all Documents then in Executive’s possession or control.

 

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.

 

8

 

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, (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 engaged in or planning to become engaged in any business in the electronic manufacturing services or engineering services industries, operating in the United States, China, or Mexico. 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 or engineering services industries with whom Executive accepts employment, a consulting engagement, engagement as an independent contractor, partnership, 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 10, 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.

 

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. 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.

 

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.

 

9

 

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.

 

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:

 

Richard G. Wasielewski

 

 

 

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.

 

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

 

10

 

the parties with respect thereto. This Agreement replaces and supersedes the Existing Employment Agreement and the Change of Control Agreement, each of which shall be of no further force or effect.

 

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.

 

[Signature Page Follows]

 

11

 

[Signature Page to Employment Agreement]

 

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

 

	
 
    	
NORTECH SYSTEMS INCORPORATED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Paula M. Graff
    
	
 
    	
By: Paula M. Graff
    
	
 
    	
 
    
	
 
    	
Its: VP & CFO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Richard G.   Wasielewski
    
	
 
    	
 
    	
Richard G. Wasielewski
    

 

12

 

Exhibit A

 

Perquisites

 

·                  Club dues (up to annual cap of $1,500)

·                  Tax planning and return preparation (up to $2,500 annually)

·                  Annual Physical at the Mayo Clinic

·                  Auto Allowance of $650 per month

·                  Auto insurance reimbursement

·                  Cell phone provided by Company, or allowance of $90 per month

·                  Home office internet expense

 

13

 

Exhibit B

 

Retirement Benefits

 

The following benefits will be provided after termination of Executive’s employment in certain circumstances as set forth in the Agreement, subject to continued approval by the Nortech Board of Directors (the “Board”):

 

·                  Nortech shall reimburse Executive for up to $2,500 per year for financial planning and tax preparation services incurred during each such year; and such reimbursement shall be payable within 75 days after the end of such year.

·                  Nortech shall reimburse Executive for the annual cost of supplemental Medicare coverage provided during each year for Executive and spouse; and such reimbursement shall be payable within 75 days after the end of such year.

·                  Nortech shall reimburse Executive for the cost of an annual executive physical examination provided during each year at the Mayo Clinic; and such reimbursement shall be payable within 75 days after the end of such year.

 

14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00271-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00271-of-00352.parquet"}]]