Exhibit 10.7
EMPLOYMENT AGREEMENT
This
EMPLOYMENT AGREEMENT (“Agreement”), effective July
1, 2006, is entered into by and between SYS Technologies, a
California corporation, with its principal office at
5050 Murphy Canyon Road, Suite 200, San Diego,
California 92123 (“Company”), and Ken Regan,
(“Employee”), collectively the
“Parties.” The Parties hereto desire to enter into
an employment arrangement and in order to accomplish that
purpose and in consideration of the terms, covenants and
conditions hereinafter set forth, the Parties hereby enter
into this Agreement.
SECTION 1
EMPLOYMENT; TERM; DUTIES
1.1
Employment .
Upon the terms and conditions hereinafter set forth, the Company
employs Employee, and Employee hereby accepts employment, as
President & Chief Operating Officer, Defense Solutions
Group.
1.2
Term .
Employee’s employment hereunder shall be for a term (the
“Term”) commencing on the date this Agreement is
effective and ending on June 30, 2008, unless the Agreement
terminates sooner pursuant to Section 4 below; provided, however,
that the Agreement shall renew automatically for successive periods
of one (1) year unless the Company or Employee provides written
notice to the other Party of a desire to change, modify, amend or
terminate the Agreement at least thirty (30) days prior to the
then-current expiration date of the Agreement. If the Company
elects not to renew this Agreement at the conclusion of the Term,
Employee will be eligible for severance benefits pursuant to and in
accordance with subsections 4.2 or 4.4.
1.3
Duties .
During the Term, Employee shall perform such duties for the Company
as are prescribed by applicable job specifications, the Bylaws of
the Company and such other or additional duties, consistent with
such Bylaws, as may be assigned to him/her from time to time by the
Chief Executive Officer (“CEO”), or the Board of
Directors of the Company. Employee shall devote his/her best
efforts, attention and energies to the performance of his/her
duties hereunder. This employment is full-time and exclusive.
Employee may not work for any other company or enterprise during
the Term of this Agreement such that such employment would conflict
or interfere with his/her obligations to the Company under this
Agreement. Employee must advise the CEO in writing prior to
undertaking any employment in addition to his/her employment with
the Company.
SECTION 2
COMPENSATION
2.1
Base Salary .
For all services rendered by Employee hereunder and all covenants
and conditions undertaken by both Parties pursuant to this
Agreement, the Company shall pay, and Employee shall accept, as
compensation, an annual base salary (“Base Salary”) of
Two Hundred and Ten Thousand Dollars ($210,000). This Base Salary
shall be payable in accordance with the normal payroll practices of
Company, less required deductions pursuant to state and federal
law, and less any amounts to be deducted pursuant to agreement
between the Parties.
2.2
Incentive Compensation .
The Employee shall also be paid such bonuses and/or other
compensation as may be determined from time to time by the CEO, or
the Board of Directors as they, in their sole discretion, may
determine based upon the performance of the employee and/or of the
Company.
2.3
Performance and Salary Review .
Employee's performance will be reviewed periodically, usually on an
annual basis. Adjustments to salary or other compensation, if any,
will be made by the CEO, or the Board of Directors as is then
appropriate.
SECTION 3
BENEFITS/BUSINESS EXPENSES
3.1
Benefits .
During the Term, Employee shall be entitled to participate in such
life, health, accident, disability and hospitalization insurance
plans, pension plans and retirement plans as the Company makes
available to the employees of the Company as a group.
3.2
Business Expenses .
Employee will be reimbursed for all reasonable, out-of-pocket
business expenses incurred in the performance of his/her duties on
behalf of Company. To obtain reimbursement, expenses must be
submitted promptly with appropriate supporting documentation in
accordance with Company’s policies and
procedures.
SECTION 4
TERMINATION; RESIGNATION; CHANGE OF CONTROL; DEATH;
DISABILITY
4.1
Termination of Employment With Cause .
If (a) Employee fails to meet the performance standards
established for his/her position and does not remedy such
shortcomings within 30 days after written notice from the Company
of such failure; or (b) Employee breaches any material
provision of this Agreement; or (c) Employee has been
convicted of any felony; or (d) Employee commits any act of
fraud, misappropriation of funds or embezzlement; or
(e) Employee fails to report to work for three
(3) consecutive business days without informing his/her
superior; or (f) Employee commits any act, or fails to take
any action, the effect of which is to bring the Company into
disrepute with any of its customers, including, but not limited to
a material violation of the Company Code of Ethics, the Company
shall have the right, upon written notice to the Employee, to
immediately terminate his/her employment (“Termination With
Cause”) hereunder, without any further liability or
obligation to him/her hereunder or otherwise in respect of his/her
employment, other than its obligation to pay unpaid Base Salary and
unused personal time accrued as of the date of
termination.
4.2
Termination of Employment Without Cause .
Notwithstanding any provision to the contrary herein, the Company
may at any time, in its sole and absolute discretion and for any or
no reason, terminate the employment of the Employee hereunder;
PROVIDED, that if such termination is not a Termination With Cause,
as defined by subsection 4.1, and such termination is not
caused by the death or Disability of the Employee, the Company
shall pay and/or provide the Employee as follows:
4.2.1
All accrued but unpaid Base Salary.
4.2.2
Reimbursement of normal incidental employee expenses as of the date
of the termination as and when such amount is due and payable
hereunder in accordance with subsection 3.2.
4.2.3
Company shall pay twelve (12) severance payments (“Severance
Payments”) payable monthly to Employee equivalent to
one-twelfth (1/12) of the Base Salary in effect as of the date of
such termination (the “Termination Date”) for a period
of twelve months from the Date of Termination (the
“Severance Period”), provided that Employee and the
Company execute an appropriate mutual general release before
Employee has any entitlement to the Severance Payments. Company
will also pay the premiums on the COBRA insurance coverages during
the Severance Period, provided that Employee qualifies for such
coverages and timely elects COBRA coverage. The Company may, at its
option, pay for and acquire insurance which will provide the
Severance Payments and such benefits during the Severance
Period.
4.2.4
All stock options issued to Employee or earned but not yet issued
prior to the Termination Date shall immediately become fully
vested.
4.2.5
Accrued but unused personal leave shall be paid out in accordance
with legal requirements. No personal leave or other benefits shall
continue to accrue during the Severance Period.
4.2.6
Notwithstanding the foregoing, if any amounts due to Employee
pursuant to this Agreement are determined to be “Parachute
Payments” as such term is defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”),
and the regulations promulgated thereunder, then the total
compensation paid to Employee pursuant to this Agreement, together
with any other payment or the value of any benefit received or to
be received by Employee which is treated as a Parachute Payment
shall not exceed 2.99 times Employee’s Base Amount (as such
term is defined in Section 280G of the Code). In the event a
reduction of the payments set forth in this Agreement is required
pursuant to this Section, Employee may select the compensation
which will be reduced in order to fall within the 2.99 times Base
Amount limitation.
4.3
Resignation .
4.3.1
If Employee resigns (except as set forth in subsections 4.3.2
or 4.4 below), this Agreement shall immediately terminate and the
Company shall have no further liability or obligation to Employee
hereunder, including any severance payments, or otherwise in
respect of his/her employment, other than its obligation to pay
unpaid Base Salary and unused personal leave accrued as of the date
of resignation.
4.3.2
Resignation with Cause .
If Employee resigns his/her employment because (a) his/her
position or duties are modified by the Company to such an extent
that his/her duties are substantially no longer consistent with the
position for which he/she was employed pursuant to this Agreement,
or (b) there has been a material breach by the Company of a
material term of this Agreement which continues uncured following
fourteen (14) days after written notice by Employee to the Company
of such breach, then Employee will be entitled to the severance
benefits set forth in subsection 4.2, consistent with the
terms of said provision.
4.4
Change In Control .
In the event of a Change in Control (as that term is defined
below), Company shall immediately take all necessary measures,
consistent with the Company’s Stock Option Plans, to
accelerate the vesting of any unvested options held by the Employee
under such Plans so that such options will be treated as vested
options during the Change in Control. In addition, employment
separation, as provided in this section, that occurs as a result of
a Change in Control shall result in Severance Payments on the same
terms set forth in subsection 4.2 above, except that the Severance
Period shall be eighteen (18) months. Such Change In Control
Severance Payments will be made in the event of:
(a)
Employee’s
involuntary dismissal or discharge by the Company, other than
pursuant to subsections 4.1, 4.3.1, or 4.5, or
(b)
Employee’s
voluntary resignation, other than pursuant to subsection 4.3,
following (i) a change in his/her position with the Company
(or Parent or Subsidiary employing Employee) which materially
reduces his/her duties and responsibilities or the level of
management to which he/she reports, (ii) a reduction in
Employee’s level of compensation as of the date of the
Change in Control (including base salary and fringe benefits),
or (iii) a relocation of Employee’s place of employment
by more than fifty (50) miles, provided and only if such
change, reduction, or relocation is effected by the Company
without Employee’s express consent.
4.4.1
For purposes of this Agreement, a “Change in Control”
shall mean: (i) the acquisition, by one person or a group, of stock
of the Company that causes such person or group to own more than
50% of the total fair market value or total voting power of the
stock of such Company; (ii) either: (1) the acquisition, by
one person or a group, of ownership of 35% or more of the total
voting power of the stock of the Company; or (2) the
replacement of a majority of the members of the Board with
directors whose appointment or election is not endorsed by the
existing Board; AND (iii) the acquisition of assets from the
Company that have a total gross fair market value of 40% or more of
the total gross fair market value of all assets of the Company
prior to the acquisition.
4.5
Termination Due to Death or Disability .
This Agreement will immediately terminate upon Employee’s
death. This Agreement will terminate upon Employee’s
Disability (as defined below), when consistent with state and
federal law. In the event of Employee’s termination due to
death or Disability, Employee, or Employee’s heirs, personal
representatives or estate, as the case may be, will be entitled to
receive only the standard entitlements and those benefits available
under any applicable Company plan or
