Exhibit 10.3
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT (the “
Agreement ”) is made as of December 30,
2005 by and between Timothy Looney, an individual (“
Executive ”) and Irvine Sensors Corporation, a
Delaware corporation (“ ISC ”) and its
subsidiaries. For the purposes of this Agreement, ISC and its
subsidiaries shall be collectively referred to herein as the
“ Company. ”
1. Duties and
Responsibilities .
A. Executive shall serve as a Vice
President of ISC and the President of Optex Systems, Inc. (“
Optex ”) or such other title or position as may
be mutually agreed to by the Company and Executive. Executive shall
report to and perform the duties and responsibilities assigned to
him by the Board of Directors of ISC (the “
Board ”) and ISC’s Chief Executive
Officer, or such other person as may be designated by the Board.
Executive shall have primary responsibility for the formulation,
implementation and execution of strategic policies relating to the
Optex’s business operations, financial objectives, market
growth and compliance with applicable laws and regulations, and
shall have overall responsibility for the formulation of the
business plan for Optex for each fiscal year to be submitted for
Board approval.
B. Executive agrees to devote his
full time and attention to the Company, to use his best efforts to
advance the business and welfare of the Company, to render his
services under this Agreement fully, faithfully, diligently,
competently and to the best of his ability.
C. Executive shall be based at the
Company’s office located in Richardson, Texas, but Executive
shall be required to travel to other geographic locations in
connection with the performance of his executive duties.
2. Commencement Date .
Executive’s employment shall commence on January 3, 2006
(the “ Commencement Date ”).
3. Employment Term .
Executive’s employment shall commence as of the Commencement
Date and shall end upon the second year anniversary of the
Commencement Date (the “ Employment Term
”).
4. Cash Compensation
.
A. Executive’s initial base
salary shall be $180,000 per year payable in accordance with the
Company’s standard payroll schedule. Executive’s
compensation shall be subject to periodic review by the Company,
but the base salary shall not be reduced below the amount stated in
this Agreement during the Employment Term.
B. The Company shall deduct and
withhold from the compensation payable to Executive any and all
applicable Federal, State and local income and employment
withholding taxes and any other amounts required to be deducted or
withheld by the Company under applicable statutes, regulations,
ordinances or orders governing or requiring the withholding or
deduction of amounts otherwise payable as compensation or wages to
employees.
C. Executive shall be eligible to
participate in all incentive stock option Programs that are made
available to the Company’s executive officers and for which
Executive qualifies, except for the Company’s deferred
compensation plan and employee stock bonus plan.
5. Expense Reimbursement
. In addition to the compensation specified in Section 3,
Executive shall be entitled, in accordance with the reimbursement
policies in effect from time to time, to receive reimbursement from
the Company for reasonable business expenses incurred by Executive
in the performance of Executive’s duties hereunder, provided
Executive furnishes the Company with vouchers, receipts and other
details of such expenses in the form required by the Company,
sufficient to substantiate a deduction for such business expenses
under all applicable rules and regulations of federal and state
taxing authorities.
6. Fringe Benefits
.
A. Executive shall, throughout the
Employment Period, be eligible to participate in all group term
life insurance plans, group health plans, accidental death and
dismemberment plans and other executive perquisites that are made
available to the Company’s executive officers and for which
Executive qualifies pursuant to the requisite plan
requirements.
B. Executive shall earn vacation
time during the Employment Period as the Company makes available to
its management level employees generally. Vacation shall accrue and
be taken pursuant to the Company’s vacation benefit policy
and subject to an accrual cap at any give time equal to eight
weeks.
7. Employment Termination
. Upon termination, the Executive will have no rights to any
unvested benefits or any other compensation or payments except as
stated in this Section 7.
A. Termination for Cause . In
the event the Company terminates Executive’s employment prior
to the expiration of the Employment Term for Cause (as defined
below), Executive shall receive his wages through the termination
date, his accrued but unused vacation, reimbursement of his
outstanding expenses incurred in compliance with Section 5
above, and any portion of his other compensation earned through the
termination date.
B. Termination Upon Death or
Disability . In the event the Company terminates
Executive’s employment prior to the expiration of the
Employment Term as a result of a Long-Term Disability (as defined
below) or upon Executive’s death, the Company shall pay
Executive or his estate, his wages earned through the termination
date, reimbursement of his outstanding expenses incurred in
compliance with Section 5 above, his accrued but unused
vacation, any portion of his other compensation earned through the
termination date, and the Company shall continue Executive’s
base salary for a period of at least three months following the
termination date. For the purposes of this Agreement, a “
Long-Term Disability ” shall mean a long-term
disability that after consideration and implementation of
reasonable accommodations (provided that no accommodation that
imposes undue hardship on the Company will be required ),
renders or will render Executive unable to perform his essential
job functions for a period longer than four months. The
determination of Executive’s Long-Term Disability shall be
made by Executive’s attending physician unless the Board
disagrees with such determination, in
which case Executive’s
Long-Term Disability shall be determined by a majority of three
physicians qualified to practice medicine in the State of the
Executive’s residence, one to be selected by each of the
Executive (or his authorized representative) and the Board and the
third to be selected by such two designated physicians.
C. Termination Without Cause
. Should the Company terminate Executive’s employment prior
to the expiration of the Employment Term other than (i) for
Cause; (ii) as a result of Executive’s death, or
(iii) as a result of a Long-Term Disability, the Company shall
have no further obligation under this Agreement, except as follows:
On his last day of employment., the Company shall pay to Executive
his wages earned through the termination date, his accrued but
unused vacation, reimbursement of his outstanding expenses incurred
in compliance with Section 5 above, and any portion of his
other compensation earned through the termination date.
Furthermore, the Company shall continue to pay Executive’s
base salary through the end of the Employment Term. Such payments
will be made at the Company’s usual and customary pay
intervals and will be subject to all appropriate deductions and
withholdings.
D. For Cause . For purposes
of this Section 7, “ Cause ” shall
mean that Executive has engaged in any one of the following:
(i) financial dishonesty, including, without limitation,
misappropriation of funds or property, or any attempt by Executive
to secure any personal profit related to the business or business
opportunities of the Company without the informed, written approval
of the Company’s Board of Directors;
(ii) Executive’s refusal for at least ten (10) days
to comply with reasonable directives of the Company’s Chief
Executive Officer or Board of Directors after receipt by Executive
of prior written notice from the Board specifying such
noncompliance; (iii) gross negligence or reckless or willful
misconduct in the performance of Executive’s duties;
(iv) the failure to perform, or continuing neglect in the
performance of, duties assigned to Executive for at least ten
(10) days after receipt by Executive from the Board of prior
written notice of such failure or neglect; (v) misconduct
which has a materially adverse effect upon the Company’s
business or reputation; (vi) the conviction of, or plea of
nolo contendre to, any felony or a misdemeanor involving moral
turpitude or fraud; (vii) continuing the material breach of
any provision of this Agreement for at least ten (10) days
after receipt by Executive from the Board of prior written notice
of such breach; of (viii) the violation of Company policies
including, without limitation, the Company’s policies on
equal employment opportunity and prohibition of unlawful
harassment. A termination as a result of a Change in Control shall
not constitute Cause.
E. Good Reason . The
Executive may terminate his employment under this Agreement for
Good Reason if (i) the Executive gives notice to the Company
setting forth in reasonable detail his grounds for termination for
Good Reason (“ Notice of Good Reason ”)
and (ii) thereafter, the Company fails to cure within ten
(10) days the action or inaction described in the Notice of
Good Reason. In the event the Executive terminates this Agreement
for Good Reason, the Executive shall be entitled to the payments
and benefits specified by Section 7(C). For purposes of this
Agreement, “ Good Reason ” shall mean,
without the Executive’s express written consent, the
occurrence of any one or more of the following events:
(i) a material breach of the
Agreement by the Company;
(ii) a change by the Company in the
Executive’s primary work location of more than fifty
(50) miles from Optex’s current offices as of the date
hereof in Richardson, Texas;
(iii) a material diminution of the
Executive’s principal duties as described in Section 1
above; or
(iv) a reduction by the Company in
the Executive’s Base Salary or other compensation without his
written consent.
(v) a change in Executive’s
primary reporting responsibilities such that Executive no longer
reports directly to the Chief Executive Officer of ISC.
F. Change in Control. For
purposes of this Section 7, “ Change In
Control ” shall mean any of the following
transactions effecting a change in ownership or control of the
Company:
(i) a merger, consolidation or
reorganization approved by the Company’s stockholders,
unless securities representing more than fifty percent
(50%) of the total combined voting power of the voting
securities of the successor corporation are immediately thereafter
beneficially owned, directly or indirectly and in substantially the
same proportion, by the persons who beneficially owned the
Company’s outstanding voting securities immediately prior to
such transaction, or
(ii) any stockholder-approved
transfer or other disposition of all or substantially all of the
Company’s assets, or
(iii) the acquisition, directly or
indirectly by any person or related group of persons (other than
the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Company), of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934
Act) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Company’s outstanding
securities pursuant to a tender or exchange offer made directly to
the Company’s stockholders.
In no event, however, shall a Change in Control
be deemed to occur in connection with any public offering of the
Common Stock.
G. Effect . In the event
there is a Change in Control, and Executive is terminated without
Cause within six months in conjunction with or within six months
immediately following the closing of such a Change in Control, on
his last day of employment with the Company, the Company shall pay
to Executive, his accrued but unused vacation, reimburse
