EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is effective as of April 1,
1996 between Interlink Electronics ("Employer") and David J. Arthur
("Executive").
Recitals
A. Executive is and has been employed by Employer as its Senior Vice
President of Operations and Manufacturing. Through such experience, he has
acquired background in and knowledge of Employer's business and the
industry in which it is engaged.
B. Employer desires assurance of the continued association and
services of Executive in order to retain his experience, skills, abilities,
background, and knowledge, and is therefore willing to engage his services
on the terms and conditions set forth below.
C. Executive desires to continue in the employ of Employer and is
willing to do so on those terms and conditions.
NOW, THEREFORE, in consideration of the above recitals and of the
mutual promises and conditions in this Agreement, it is agreed as follows:
Agreement
1. Executive's Duties and Authority. Employer shall employ Executive
as Senior Vice President of Operations and Manufacturing.
2. Reasonable Time and Effort Required. During his employment,
Executive shall devote such time, interest, and effort to the performance
of this Agreement as may be fairly and reasonably necessary.
3. Covenant Not to Compete During Employment Term. During the
employment term, Executive shall not, directly or indirectly, whether as a
partner, owner, employee, creditor, shareholder, or otherwise, promote,
participate, or engage directly or indirectly in any activity or other
business competitive with Employer's business.
4. Nonsolicitation of Customers. In order to protect Employees trade
secrets and confidential information following termination of this
Agreement, Executive agrees not to directly or indirectly solicit, divert
for any reason or take away any customers, business or patronage of
Employer by using, disclosing or communicating directly or indirectly any
of Employer's trade secrets and confidential information, as described more
fully in Section 13 of this Agreement.
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5. Term of Employment. Subject to earlier termination as provided in
this Agreement, Executive shall be employed for a term of two years
beginning on April 1, 1996.
6. Executive's Compensation.
6.1. Salary. Employer shall pay a Basic Salary to Executive at
the rate of $116,715 per year, payable in equal semi-monthly installments.
The Basic Salary payable to Executive under this section may be subject to
increase by an annual inflation adjustment as determined by the Board of
Directors.
6.2. Incentive Compensation. In addition to the Basic Salary
provided for above, Executive shall be entitled to participate in
Employer's management incentive compensation program as set out in Exhibit
A hereto.
6.3. Stock Options. Executive shall be eligible to participate in
the 1988 Stock Option Plan and the 1993 Stock Incentive Plan, in accordance
with the provisions of those Plans, and any awards currently held by
Executive under either or both of such Plans shall continue in full force
and effect.
6.4. Benefits. During the employment term, Executive shall be
entitled to receive all other benefits of employment generally available to
Employer's other executive and managerial employees when and as he becomes
eligible for them, including group health and life insurance benefits and
an annual vacation of four weeks.
7. Expenses. During the employment term, Employer shall reimburse
Executive for reasonable out-of-pocket expenses incurred in connection with
Employer's business, including, travel expenses, food, lodging while away
from home, telephone expenses, and automobile expenses, subject to such
policies as Employer may from time to time reasonably establish for its
employees. Executive shall submit written proof of any expense for which
reimbursement is claimed as Employer may require.
8. Indemnification by Employer. Employer shall, to the maximum extent
permitted by law, indemnify and hold Executive harmless against expenses,
including reasonable attorney's fees judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding arising by reason of Executive's employment by Employer.
Employer shall advance to Executive any expense incurred in defending any
such proceeding to the maximum extent permitted by law.
9. Termination.
9.1. Involuntary Termination. Employer may terminate this
Agreement for any reason on nine months' written notice.
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9.2. Termination for Cause. Employer may terminate this Agreement
at any time if Executive fails to perform his responsibilities under this
Agreement in any material respect and does not cure such failure within
thirty (30) days after receipt of written notice thereof, breaches any
provision of this Agreement, commits any material act of dishonesty, is
convicted of or pleads nolo contendere to a crime, discloses confidential
information, engages in the use, possession, purchase, sale or transfer of
any drug that is not legally obtainable, or any drug that is legally
obtainable but has been obtained illegally, or is under the influence of
alcohol at any time while on Employer's business or premises, is guilty of
gross carelessness or misconduct, or unjustifiably neglects his duties
under this Agreement, or acts in any way that has a direct, substantial,
and adverse effect on Employer's business or reputation.
Executive may terminate this Agreement at any time if Employer
materially breaches this Agreement and fails to cure such breach within
thirty (30) days after receipt of written notice thereof.
9.3. Termination on Resignation. Executive may terminate this
Agreement by giving Employer three months' written notice of resignation.
9.4. Termination on Retirement. This Agreement shall be
terminated by Executive's voluntary retirement, which retirement shall be
effective on the last day of any fiscal year, provided that day occurs
after Executive's 60th birthday, and provided three months, prior written
notice of the retirement shall have been given by Executive to Employer.
9.5. Termination on Disability or Death. If Executive is unable
due to mental or physical illness or injury to perform the essential
functions of his job with or without reasonable accommodations under this
Agreement, this Agreement shall be then terminated. Also, if Executive dies
during the initial term or during any renewal term of this Agreement, this
Agreement shall be terminated.
10. Disability Insurance. Employer shall obtain and maintain
disability insurance covering Executive, to the extent such insurance is
available at reasonable cost, during the term of this Agreement.
11. Agreement Survives Employer's Combination or Dissolution. This
Agreement shall not be terminated by Employer's voluntary or involuntary
dissolution or by any merger in which Employer is not the surviving or
resulting corporation, or on any transfer of all or substantially all of
Employer's assets. In the event of any such merger or transfer of assets,
the provisions of this Agreement shall be binding on and inure to the
benefit of the surviving business entity or the business entity to which
such assets shall be transferred.
12. Rights and Obligations After Notice of Termination. If Executive
gives notice of termination of this Agreement under Section 9.3, or if it
becomes known that Executive's employment will otherwise terminate, during
the three-month period prior to the termination date, Employer may, in its
sole discretion and subject to its other obligations under this Agreement,
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relieve Executive of his duties under this Agreement and assign Executive
other reasonable duties and responsibilities to be performed until the
termination becomes effective.
13. Disclosure of Confidential Information and Trade Secrets
Prohibited. Executive acknowledges that in the course of his employment, he
will have access to confidential information and trade secrets relating to
Employer's business. Confidential information and trade secrets include but
are not limited to inventions, processes, designs, improvements, programs,
specifications, techniques, data relating to creation, manufacture and
marketing of any product or product concept, customer and prospective
customer names and addresses, sales records, vendor names and addresses,
financial data, information provided by third parties that Employer is
required to keep confidential, and any other proprietary information of
Employer. Except as required in the course of his employment by Employer,
Executive will not, without Employer's prior written consent, either during
his employment by Employer or after termination of that employment,
directly or indirectly disclose to any person or entity any such
confidential information or trade secrets, except that marketing and sales
information, such as customer names and addresses, will not constitute
confidential information and trade secrets five years after termination of
Executive's employment. Executive agrees to exercise the highest degree of
care in safeguarding confidential information and trade secrets against
loss, theft or inadvertent disclosure and to comply with all Employer's
policies and procedures related to protection of confidential information
and trade secrets.
14. Ownership of Inventions and Improvements.
14.1. Employer Ownership. Executive agrees that all inventions,
discoveries, improvements, trade secrets, formulae, techniques, processes
and know-how, whether or not patentable, and whether or not reduced to
practice, that are conceived or developed during Executive's employment by
Employer, either alone or jointly with others, shall be owned exclusively
by Employer, and Executive hereby assigns to Employer all Executive's
right, title and interest in all such intellectual property, and Executive
agrees that Employer shall be the sole owner of all domestic and foreign
patents or other rights pertaining thereto, and further agrees to execute
all documents that Employer reasonably determines to be necessary or
convenient for use in applying for, prosecuting, perfecting, or enforcing
patents or other intellectual property rights, including without
limitation, the execution of any assignments, patent applications, or other
documents that may be requested by Employer. This provision is intended to
apply only to the extent permitted by applicable law.
14.2. Statutory Limitation on Assignment. Executive understands
that Employer is hereby advising Executive that any provision in this
Agreement requiring Executive to assign rights in any invention does not
apply to an invention which qualifies fully under the provisions of Section
2870 of the California Labor Code. That section provides as follows:
"(a) Any provision in an employment agreement which provides that
an employee shall assign, or offer to assign, any of his or her rights in-
an invention to his or her employer shall not apply to an invention that an
employee developed entirely on his or her own time without
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using the employer's equipment, supplies, facilities, or trade secret
information, except for those inventions that either:
"(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer; or
"(2) Result from any work performed by the employee for the
employer.
"(b) To the extent a provision in an employment agreement
purports to require an employee to assign an invention otherwise excluded
from being required to be assigned under subdivision (a), the provision is
against the public policy of this state and is unenforceable."
By signing this Agreement, Executive acknowledges that this paragraph shall
constitute written notice of the provisions of Section 2870.
15. Integration. This Agreement contains the entire Agreement between
the parties and supersedes all prior oral and written agreements,
understandings, commitments, and practices between the parties, including
all prior employment agreements, whether or not fully performed by
Executive before the date of this Agreement. No amendments to this
Agreement may be made except by a writing signed by both parties.
16. Choice of Law and Forum. The construction, performance and
enforcement of this Agreement shall be construed in accordance with the
laws of California. Any proceeding to interpret or enforce this Agreement
shall be conducted in Ventura County, California.
17. Notices. Any notice to Employer required or permitted under this
Agreement shall be given in writing to Employer, either by personal service
or by registered or certified mail, postage prepaid, addressed to the
president of Employer at its then principal place of business. Any such
notice to Executive shall be given in a like manner and, if mailed, shall
be addressed to Executive at his home address then shown in Employer's
files. For the purpose of determining compliance with any time limit in
this Agreement, a notice shall be deemed to have been duly given (a) on the
date of service, if served personally on the party to whom notice is to be
given, or (b) on the second business day after mailing, if mailed to the
party to whom the notice is to be given in the manner provided in this
section.
18. Severability. If any provision of this Agreement is held invalid
or unenforceable, the remainder of this Agreement shall nevertheless remain
in full force and effect. If any provision is held invalid or unenforceable
with respect to particular circumstances, it shall nevertheless remain in
full force and effect in all other circumstances.
19. Arbitration. Any claim or controversy arising out of or-related to
this Agreement shall be determined by final, binding arbitration in Ventura
County, California pursuant to the expedited commercial rules of the
American Arbitration Association, or as Employer and Executive may agree.
The costs of the arbitration shall be borne initially one-half by Employer
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and one-half by Executive. The arbitrator is authorized to determine the
prevailing party and to award the prevailing party reasonable attorneys'
fees and reimbursement for all other costs of arbitration incurred by the
prevailing party.
INTERLINK ELECTRONICS
By: E. MICHAEL THOBEN, III
-------------------------------
Title: Chairman, CEO & President
----------------------------
(Employer)
DAVID J. ARTHUR
- ----------------------------------
David J. Arthur
(Executive)
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