OCEAN THERMAL ENERGY CORPORATION Employment Agreement
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OCEAN
THERMAL ENERGY CORPORATION
This Employment
Agreement (“Agreement”) is effective January 1, 2011
and is entered into by and between Ocean Thermal Energy
Corporation, a Delaware corporation having an office at 000 Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxx (hereinafter referred to as
“Company”), and Xxxxxx X. Xxxxxxx, an individual whose
address is [private] (“Executive”).
In consideration of
the premises and the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, the Company
and Executive hereby agree as follows:
1. Employment
Company agrees to
employ Executive and Executive agrees to enter the employment of
the Company upon the terms and subject to the conditions herein
provided.
2. Effective
Date
This Agreement is
effective immediately upon the date first written above (the
“Effective Date”).
3. Location
Executive’s
principal office shall be located in Company’s corporate
offices at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxx.
4. Duties
and Responsibilities
(a)
The Company hereby
agrees that Executive shall serve as Chief Executive Officer
(“CEO“) of the Company and its subsidiaries, reporting
directly to the Company’s Board of Directors
(“Board”). In this capacity, Executive shall be
responsible for the daily operation and management of all of the
Company’s business affairs and personnel.
(b)
During the term of
this Agreement, Executive shall devote substantially full time and
attention to the execution of the duties and responsibilities
hereunder. Notwithstanding the above, Executive may hold a seat on
the board of directors of one or more other companies, engage in
passive personal investments and in other business, industry, civic
and charitable activities that do not materially conflict with the
business affairs of Company or materially interfere with the
performance of Executive’s duties and responsibilities
hereunder.
5. Compensation
(a)
Salary. The Company
acknowledges the compensation provided to the Executive hereunder
is significantly less than would normally be commanded by the
Executive or other such executives with similar experience and
credentials for these services. Executive shall be paid a base
annual salary (“Salary”) of $350,000 payable in
bi-weekly installments beginning the Effective Date; provided,
however, that in consequence of the Company’s limited
immediate available cash resources and as an accommodation thereto
(the “Accommodation”), except as otherwise provided
herein, Executive shall receive for the period beginning the
Effective Date and continuing until the Company’s first
financial close on a project with a capital cost of $25 million or
more (“Financial Close”), $180,000 per annum. Within
five (5) business days of such first Financial Close, the Executive
shall be paid the sum of $350,000, as a bonus, plus the difference
between the amount that otherwise would have been paid to the
Executive absent the Accommodation and the amount received by the
Executive pursuant to the Accommodation.
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(b)
Salary Adjustment. The Board
will review Executive’s compensation on an annual basis and
consider whether to increase (but not decrease) the
Executive’s Salary. Any increased Salary granted by the Board
shall become the new Salary until subsequently increased by the
Board.
(c)
Share Award. The Company may
make an award of the Company’s Common Stock to the Executive
in such number of shares, at such time or times, and subject to
such terms and conditions as the Board shall in its sole and
absolute discretion determine.
(d)
Options. Immediately upon the
Company’s adoption of a stock plan (the “Plan”),
as an additional retention incentive, the Company shall issue to
Executive a five-year option, including provision for a
“cashless exercise,” to purchase one million
(1,000,000) shares of the Company’s Common Stock (the
“Option”) pursuant to the terms of the Plan, which
Option shall constitute, to the extent allowable under Section 422
of the Internal Revenue Code (the “Code”), an Incentive
Stock Option. One-half of the Option shares shall vest one
year from the grant date, and twenty-five percent of the Option
shares shall vest on the second and third year anniversary dates of
the grant date, respectively; provided, however, that all of the
Option shares shall vest immediately upon an Exit. The term
“Exit,” as used herein, shall mean a Change in Control,
as defined in Exhibit A attached hereto, or, any issuance of
preferred stock by the Company. The Option will be issued pursuant
to the Plan and in accordance with the following
terms:
I.
The Option shall
not be exercisable after the expiration of five (5) years from the
grant date (the “Option Term”).
II.
In the event
Executive’s employment is terminated by the Company for any
reason other than for Cause, all unvested portions of the Option
shall immediately vest and the entire Option will remain valid
throughout the Option Term; and
III.
In the event
Executive’s employment is voluntarily terminated by Executive
all unvested portions of the Option are forfeited and the remaining
time to exercise the vested portion of the Option remains
valid.
IV.
Notwithstanding any
provision in this Section 5(d) to the contrary, the Option will be
granted subject to the requirements of Section 422 of the Code, and
to the extent that the Option fails to satisfy such provision, the
Option will be treated as a stock option that is not an incentive
stock option.
6. Plan
Registration
With respect to any
Plan under which Executive is granted shares of Company Common
Stock, or options to purchase shares of Company Common Stock, at
any time when such stock is publicly traded, prior to such time as
shares become vested (e.g., in the case of an award of restricted
stock) or options granted to Executive under the Plan are first
exercisable, if such shares must be registered in order to be sold,
the Company shall have registered the interests in the Plan and the
shares of Company’s Common Stock reserved thereunder prior to
the date on which the shares vest or the options first become
exercisable, in accordance with all applicable securities
laws.
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7. Bonuses
(a)
Project Bonus. At the time of
contract signing by all parties to any energy services agreement;
power purchase agreement; build, own, operate and transfer
agreement; or other similar or related agreement or agreements,
where such agreement, or such agreements in the aggregate, provide
for $25 million or more in revenue to the Company, the Company will
pay the Executive a cash bonus equal to 100% of the
Executive’s Salary in effect at the time of such signing plus
500,000 shares of the Company’s Common
Stock.
(b)
Other Bonuses. The Executive
will also be entitled to other annual bonuses consisting of cash,
stock, restricted stock, options stock appreciation rights
(“SARS”) or other forms of awards based upon his
performance and Company’s overall achievement of its
corporate goals. The types and amounts of such awards, if any,
shall be determined solely in the discretion of and upon the
recommendation of the Board; provided, however, that the present
value of all such awards to the Executive in a year shall be
adjusted, as necessary, to equal an amount not less than the
present value of all such awards given to the executive employee of
the Company receiving the highest present value of all similar
awards in a year multiplied by a fraction, the numerator of which
shall be the Executive’s Salary for the year and the
denominator of which shall be such other executive’s annual
base salary for the year.
8. Executive
Benefits
During
Executive’s employment with the Company:
(a)
Executive will be
entitled to four (4) weeks paid vacation time during each
twelve-month period, with such vacation accruing until used. Any
vacation time not used at the end of the Executive’s
employment shall be paid out in cash equivalent based on the
Executive’s Salary in effect at the time of the
Executive’s termination and shall be paid not later than
thirty (30) days thereafter; provided, however, that such amount
shall be forfeited in the event that the Executive is terminated
for Cause.
(b)
The Company will
pay the health care, prescription drug, dental and/or vision
insurance premiums for coverage of the Executive, his spouse and
dependents under the standard Company plan or plans, if any, in
effect from time to time during Executive’s employment with
the Company.
(c)
Provided the
Company obtains a policy of group life insurance and Executive
complies with and satisfies all underwriting and other requirements
of the insurer, the Company will pay the life insurance premiums
for a term life insurance policy with a death benefit equal to four
(4) times the Executive’s Salary in effect at the time the
Executive first becomes eligible for such
insurance.
(d)
The Company shall
provide Executive with a monthly automobile allowance of $1,000.00,
which amount shall be taxable to the Executive.
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(e)
Wherever possible,
Executive will be entitled to travel First Class, or Business Class
if available, for all methods of travel on Company business or at
the convenience or request of the Company, on the carrier of his
choice. At the request of the Executive, the Company will purchase
the tickets on behalf of Executive in advance of such travel. Upon
submission to the Company of usual and customary documentation,
Executive will be reimbursed within five (5) business days for all
reasonable out of pocket expenses that are incurred in connection
with job related activities, as well as travel on behalf of the
Company. The Executive will be provided with a Company credit card
for use in business-related travel and other business expenses,
which uses the Executive shall support with appropriate
documentation as to their business purpose.
(f)
For each thirty-day
period that the Executive is required to spend anywhere other than
the Executive’s principal office as set forth in Section 3
hereof, the Company will provide a minimum of two (2) round-trip
First Class, or Business Class when available, airfare tickets for
Executive and/or Executive’s spouse or dependents to travel
between such location and the Executive’s principal office as
set forth in Section 3 hereof. The Executive shall be responsible
for any income taxes attributable to the provision of airfare
tickets, as applicable.
9. Executive
Kidnapping and Medical Evacuation Program(s)
The Company will
provide at no cost to Executive, an Executive Kidnapping and
Medical Evacuation program(s) and/or insurance policy, under which
Executive will be provided coverage subject to such policies,
terms, conditions and limitations as the Board shall approve in its
sole discretion.
10. Term
of Employment
The term of
employment hereunder shall be for a period of five (5) years
commencing from the Effective Date (the “Term”).
Commencing on the fifth anniversary of the Effective Date and on
each successive one (1) year anniversary date thereafter, the term
of employment hereunder shall be extended for a period of one (1)
year (“Renewal Term”) unless either party gives the
other notice of termination at least one hundred (100) days prior
to the end of the Term or any Renewal Term. In such event,
employment will terminate at the end of the Term or Renewal Term
during which such notice was given.
(a)
Termination. Company may
terminate Executive’s employment during the Term or any
Renewal Term for any reason, but if such termination is for any
reason other than for Cause, such termination shall be in
accordance with the provisions of Section 12 hereof. If Executive
is terminated for Cause, then Executive shall be paid within thirty
(30) days of such termination the unpaid portion of
Executive’s Salary then earned and due to Executive, and all
compensation otherwise payable to Executive, including any and all
unvested Plan awards and vested but unexercised Plan awards, under
this Agreement shall be forfeited. As used herein,
“Cause” means final conviction of a
felony.
(b)
Notice. Should the Company
terminate Executive’s employment for Cause, no advance notice
from the Company will be required, and all of the Executive’s
unvested Plan awards and vested Plan awards that have not been
exercised as of the date of the termination will be forfeited
immediately.
(c)
Shares and Options. Should the
Company elect not to renew this Agreement after the Term or any
Renewal Term, or should Executive voluntarily terminate his
employment, then Executive shall retain the vested portion of any
Plan award and the unvested portion will expire immediately upon
Executive’s termination of employment. In each such case, all
vested Plan awards shall be non-forfeitable and shall retain their
original expiration date.
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11. Change
in Control
The provision for a
Change in Control Payment as described in Exhibit A attached hereto
shall be applicable to Executive so long as Executive is employed
by Company and thereafter, to the extent provided in such Exhibit
A.
12. Severance
Other than in the
case of a timely noticed non-renewal of Executive’s
employment hereunder pursuant to Section 10, if Executive’s
employment is terminated by Company without Cause for any reason
during the Term or Renewal Term, Executive shall be entitled to
receive from Company (i) a cash severance payment equal to three
times the amount of the Executive’s then applicable Salary,
if the termination occurs on or before the third anniversary of the
Effective Date, (ii) a cash severance payment equal to the unpaid
portion of the Executive’s then applicable Salary for the
remainder of the Term or Renewal Term plus an amount equal to twice
the Executive’s then applicable Salary, if the termination
occurs after the third anniversary of the Effective Date but before
the fifth anniversary of the Effective Date, or (iii) a cash
severance payment equal to the unpaid portion of the
Executive’s then applicable Salary for the remainder of the
Term or Renewal Term if the termination occurs after the fifth
anniversary of the Effective Date (each, a “Severance
Payment”). In the event that the Executive is terminated by
Company without cause, then all of Executive’s outstanding
Plan awards shall immediately and fully vest. Other than any Change
in Control Payment to which Executive may also be entitled in
accordance with Section 11; any bonus to which Executive may be
entitled under Section 7; or any payment or benefit to which
Executive may be entitled under any separate agreement between
Executive and the Company, the Company shall have no further
obligation to Executive in the event of Executive’s
termination by the Company without Cause beyond those obligations
described in this Section 12. If the Company fails to make any
payment when due under this Section 12, and Executive initiates
arbitration pursuant to Section 17 to enforce his rights under this
Agreement, and Company is found to have violated this Agreement,
then Company shall be obligated to pay Executive, in addition to
the Severance Payment and other sums owed under this Agreement, an
additional payment (“Enforcement Payment”) equal to the
Severance Payment plus the sum of all of the costs incurred by
Executive, including attorneys’, fees, to enforce this
Agreement. It is explicitly agreed that the Enforcement Payment is
a reasonable estimate of the value of time and expense that would
be incurred by the Executive to enforce this Agreement and in no
case shall be considered a penalty. Any payments due under this
Section 12 shall be paid by wire transfer to a bank account
specified by Executive no later than three (3) business days after
the Executive’s termination, except that the Enforcement
Payment shall be due and payable in the same manner to Executive
within ten (10) days of the date the Company is found to have
violated this Agreement.
13. Ownership
of Information
All documents,
drawings, memoranda, notes, records, file correspondence, manuals,
models, specifications, computer programs, E-mail, voice mail,
electronic databases, maps, and all other writings or materials of
any type embodying any information pertaining to the business of
Company which Executive has developed, utilized or had access to
during his employment with Company, are and shall be the sole and
exclusive property of Company. Upon termination of
Executive’s employment with Company for any reason, Executive
shall promptly deliver this property and all copies thereof to
Company.
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14. Non-Solicitation
During the term of
Executive’s employment and for a period of two (2) years
thereafter, Executive will not, directly or indirectly, solicit or
contact any employee of Company with a view to inducing or
encouraging such employee to leave the employ of Company for the
purpose of being hired by Executive or an employer affiliated with
Executive. Executive agrees that money damages would not be a
sufficient remedy for any breach of this Section 14 by Executive,
and that, in addition to all other remedies to which the Company
may be entitled, the Company shall be entitled to injunctive or
other equitable relief as a remedy for any such breach or
threatened breach. Nothing in this Agreement shall be construed as
prohibiting the Company from pursuing any other remedies that may
be available to it, whether at law or in equity, for any breach or
threatened breach hereof by Executive, including the recovery of
damages. In addition, Executive agrees that the Company shall be
entitled to recover from the Executive its reasonable
attorneys’ fees incurred in connection with obtaining any
relief.
15. D&O
Insurance and Indemnification
As soon as
practicable, the Company shall purchase a directors and officers
liability insurance policy, the terms of which shall be approved by
the Board, and will provide Executive with directors and officers
liability insurance necessary to protect Executive from any and all
expenses, obligations, liabilities, actions, suits or proceedings
that may occur as the result of Executive’s employment by the
Company. In addition, if at any time Executive is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that
Executive is or was a director, officer, executive or agent of
Company and/or of any of its affiliates, or is or was serving at
the request of Company as a director, officer, executive or agent
of any other corporation, partnership, joint venture, trust,
executive benefit plan or other enterprise, Company shall indemnify
Executive and hold Executive harmless against expenses (including
court costs and reasonable attorneys’ fees), judgments,
fines, penalties, amounts paid in settlement and any other
liabilities actually and reasonably incurred by Executive in
connection with such action, suit or proceeding to the full extent
permitted by law. Expenses (including court costs and reasonable
attorneys’ fees) incurred by Executive in appearing at,
participating in, or defending any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative
or investigative, shall be paid by Company at reasonable intervals
in advance of the final disposition of such action, suit or
proceeding promptly following receipt of Executive’s written
claim, including supporting documentation. The indemnification
provided under this Section 15 shall apply whether or not the
negligence of any party is alleged or proved. Nothing in this
Section 15 shall be deemed to provide Executive with a right to
indemnification in excess of the authority of the Company to
provide indemnification granted by applicable law, and all
limitations on indemnification set forth in such law shall be
deemed to govern this Section 15.
16. Miscellaneous
(a)
All payments
required to be made by Company hereunder shall be subject to any
withholding pursuant to any applicable law or
regulation.
(b)
This Agreement is
binding upon, and shall inure to the benefit of, the parties hereto
and their respective successors, heirs, administrators, executors
and assigns.
(c)
This Agreement,
including any exhibits hereto, contains the entire agreement
between the parties concerning the subject matter hereof; any prior
or contemporaneous agreements or understandings, oral or written,
not contained in this Agreement, are superseded and of no effect;
and this Agreement may not be amended or modified except by a
writing signed by both parties.
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(d)
Should one party
waive compliance by the other party to any term or provision of
this Agreement, such waiver shall be limited to the facts or
circumstances giving rise to the noncompliance and shall not be
deemed either a general waiver or modification with respect to the
term or provision, or part thereof, being waived, or as to any
other term or provision of this agreement, nor shall it be deemed a
waiver of compliance with respect to any other facts or
circumstances then or thereafter occurring.
(e)
Any notice given
hereunder shall be in writing and shall be deemed given when
actually received or two (2) business days after tender to an
overnight courier with a national reputation, duly addressed to the
party concerned at the address specified in the preamble of this
Agreement or such other address as a party shall provide in writing
from time to time to the other party.
(f)
In the event that
any provision or portion of this Agreement shall be determined to
be invalid or unenforceable for any reason, the remaining
provisions or portions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest
extent permitted by law. The respective rights and obligations of
the parties shall survive any termination of this Agreement to the
extent necessary to preserve such rights and
obligations.
17. Applicable
Law
This Agreement
shall be governed by and construed in accordance with the laws of
the Commonwealth of Pennsylvania, except to the extent that federal
laws supersede such laws, without regard to principles regarding
conflicts of laws. Executive and Company agree that if any claim,
action, dispute or controversy of any kind arises out of or relates
to this Agreement or concerns any aspect of performance by any
party under the terms of this Agreement, other than as may be
enforced by way of injunctive relief pursuant to Section 14, prior
to seeking any other remedies, the aggrieved party shall give
written notice to the other party describing the disputed issue.
Within ten (10) business days after the receipt of such a notice
the parties shall attempt to resolve the dispute amicably through
direct good faith negotiation. If the parties cannot so
resolve the matter, the parties shall apply to the American
Arbitration Association (“AAA”) for a single arbitrator
to be appointed to arbitrate the dispute in accordance with the AAA
rules applicable to employment disputes. Arbitration shall take
place in Lancaster, Pennsylvania. The decision of the AAA
arbitrator shall be final and binding on all parties. The parties
agree not to litigate the matter except to the extent necessary to
enforce the arbitration award. The costs and expenses of any
litigation to enforce the arbitration award shall be borne by the
non-prevailing party. Executive and Company hereby acknowledge that
they are waiving their rights to a jury trial with respect to any
matter within the scope of this Section 17. In addition, to the
extent that this Agreement permits any matter to be litigated,
Executive and Company irrevocably submit in any suit, action or
proceeding arising out of or relating to this Agreement to the
jurisdiction and venue of the United States District Court for the
Eastern District of Pennsylvania or, if such court has no
jurisdiction in the matter, then to the jurisdiction and venue of
the Court of Common Pleas for Lancaster County, Pennsylvania, and
each hereby waives any and all objections to jurisdiction or venue
that Company or Executive may have under the laws of Pennsylvania
or of the United States.
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18. Section
409A Compliance
This Agreement
shall be interpreted and performed so as to comply with any
applicable provisions of Section 409A of the Code (“Section
409A”) and the regulations and official guidance issued
pursuant thereto such as will avoid any inclusion of income by
Executive under Section 409A of any payment or benefit under this
Agreement or under any arrangement required to be aggregated with
this Agreement. Terms defined in this Agreement will have the
meanings given such terms under Section 409A if and to the extent
required to comply with Section 409A. Any payments that are due
within the “short term deferral period” as defined in
Section 409A or that are paid in a manner covered by Treas. Reg.
Section 1.409A-1(b)(9)(iii) will not be treated as deferred
compensation unless applicable law requires otherwise. Neither the
Company nor Executive will have the right to accelerate or defer
the delivery of any such payments or benefits except to the extent
specifically permitted or required by Section 409A. In any event,
the Company makes no representations or warranty and will have no
liability to the Executive or any other person, other than with
respect to payments made by the Company in violation of the
provisions of this Agreement, if any provisions of or payments
under this Agreement are determined to constitute deferred
compensation subject to Section 409A but not to satisfy the
conditions of that section. For purposes of this Agreement, a
termination of employment with the Company shall mean a
“separation from service” as defined in Section 409A.
If and to the extent any portion of any payment, compensation or
other benefit provided to Executive in connection with
Executive’s separation from service (as defined in Section
409A) is determined to constitute “nonqualified deferred
compensation” within the meaning of Section 409A and
Executive is at such time a specified employee as defined in
Section 409A(a)(2)(B)(i) of the Code, as determined by the Company
in accordance with its procedures, by which determination Executive
hereby agrees to be bound, such portion of the payment,
compensation or other benefit will not be paid before the day that
is six months plus one day after the date of separation from
service (as determined under Section 409A) (the “New Payment
Date”). The aggregate of any payments that otherwise would
have been paid to Executive during the period between the date of
separation from service and the New Payment Date will be paid to
Executive in a lump sum on the first payroll date after such New
Payment Date, and any remaining payments will be paid on their
original schedule.
19. Excess
Parachute Payments
(a)
In the event that
the Executive is entitled to payments and/or benefits (i) in
connection with Executive's employment with the Company or
termination thereof or (ii) from the Company, any person whose
actions result in a change of ownership or effective control
covered by Section[Missing Graphic Reference]280G[Missing Graphic
Reference](b)(2) of the Code, or any person affiliated with the
Company or such person as a result of such change in ownership or
effective control (collectively the “Company
Payments”), and if such Company Payments will be subject to
the tax (the “Excise Tax”) imposed by Section 4999 of
the Code, the Company shall pay to or for the benefit of the
Executive at the time specified in subsection (c) below an
additional amount (the “Gross-Up Payment”) such that
the net amount retained by the Executive, after deduction of any
Excise Tax on the Company Payments and any U. S. federal, state,
and local income or payroll tax upon the Gross-Up Payment, but
before deduction for any U.S. federal, state, and local income or
payroll tax on the Company Payments, shall be equal to the Company
Payments. For purposes of calculating the Gross-Up Payment, the
Executive shall be deemed to pay income taxes at the highest
applicable marginal rate of federal, state or local income taxation
for the calendar year in which the Gross-Up Payment is to be
made.
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Subject to any
determinations made by the Internal Revenue Service (the
“IRS”), all determinations as to whether a Gross-Up
Payment is required and the amount of Gross-Up Payment and the
assumptions to be used in arriving at the determination shall be
made by the Company's independent certified public accountants,
appointed prior to any change in ownership (as defined under
Section 280G[Missing Graphic Reference](b)(2) of the Code) (the
“Accountants”), in accordance with the principles of
Section [Missing Graphic Reference]280G[Missing Graphic Reference]
of the Code. All fees and expenses of the Accountants will be borne
by the Company. Subject to any determinations made by the IRS,
determinations of the Accountants under this Agreement with respect
to (i) the initial amount of any Gross-Up Payment and (ii) any
subsequent adjustment of such payment shall be binding on the
Company and the Executive.
The Gross-Up
Payment calculated pursuant to this Section 19 shall be paid no
later than the thirtieth (30th) day following an event occurring
which subjects the Executive to the Excise Tax; provided, however,
that if the amount of such Gross-Up Payment or portion thereof
cannot be reasonably determined on or before such day, the Company
shall pay to the Executive the amount of the Gross-Up Payment no
later than 10 days following the determination of the Gross-Up
Payment by the Accountants. Notwithstanding the foregoing, the
Gross-Up Payment shall be paid to or for the benefit of the
Executive no later than 15 business days prior to the date by which
the Executive is required to pay the Excise Tax or any portion of
the Gross-Up Payment to any federal, state or local taxing
authority, without regard to extensions.
In the event that
the Excise Tax is subsequently determined by the Accountants to be
less than the amount taken into account hereunder at the time the
Gross-Up Payment is made, the Executive shall repay to the Company,
at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the prior Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and U.S. federal, state and
local income tax imposed on the portion of the Gross-Up Payment
being repaid by the Executive if such repayment results in a
reduction in Excise Tax or a U.S. federal, state and local income
tax deduction), plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the
Gross-up Payment to be refunded to the Company has been paid to any
U.S. federal, state and local tax authority, repayment thereof (and
related amounts) shall not be required until actual refund or
credit of such portion has been made to the Executive, and interest
payable to the Company shall not exceed the interest received or
credited to the Executive by such tax authority for the period it
held such portion. The Executive and the Company shall cooperate in
good faith in determining the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied. However, if agreement cannot
be reached, the Company shall decide the appropriate course of
action to pursue provided that the action does not adversely impact
any issues Executive may have with respect to his tax return, other
than the Excise Tax.
In the event that
the Excise Tax is later determined by the Accountants or the IRS to
exceed the amount taken into account hereunder at the time the
Gross-Up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment to or for the benefit of the Executive in respect
of such excess (plus any interest or penalties payable with respect
to such excess) at the time that the amount of such excess is
finally determined.
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In the event of any
controversy with the IRS (or other taxing authority) with regard to
the Excise Tax, the Executive shall permit the Company to control
issues related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect the
Executive. In the event issues are interrelated, the Executive and
the Company shall in good faith cooperate so as not to jeopardize
resolution of either issue. In the event of any conference with any
taxing authority as to the Excise Tax or associated income taxes,
the Executive shall permit the representative of the Company to
accompany the Executive, and the Executive and the Executive's
representative shall cooperate with the Company and its
representative.
20. Counterparts
This Agreement may
be executed in counterparts, each of which shall be an original and
all of which together shall constitute one and the same
agreement.
IN WITNESS WHEREOF,
the Parties hereto have caused this Agreement to be executed on the
date first written above.
OCEAN
THERMAL ENERGY CORPORATION
Signature: /s/
Xxxxx X. Xxxxxxxxx
Printed Name: Xxxxx
X. Xxxxxxxxx
Title:
Director
EXECUTIVE
Signature: /s/
Xxxxxx Xxxxxxx
Printed Name:
Xxxxxx Xxxxxxx
10
EXHIBIT
A
Change in Control
If, within three
(3) months following the occurrence of a Change in Control (as
defined below), the Executive elects, by written notice to the
Company, to terminate his employment with the Company then, in
addition to any severance payments due under Executive’s
Employment Agreement with the Company, the Company shall pay to the
Executive, within 10 days after his termination of employment, a
lump sum cash payment in an amount equal to the Change in Control
Payment (as defined below). If the Executive’s employment is
terminated prior to the date he elects to terminate but there is
reasonable evidence that such termination (a) was at the request of
a third party who has taken steps reasonably calculated to effect a
Change in Control or (b) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this
paragraph, such termination shall be considered to have occurred
immediately following the Change in Control and the
Executive’s election to terminate his employment as of the
date of the Change in Control. As used herein, the following terms
shall mean:
(a) A
“Change in Control” shall be deemed to have occurred
upon: (i) the date of acquisition by any one person, or more than
one person acting as a group (as defined in Treasury Regulations
Section 1.409A-3(i)(5)(v)(B)), of stock of the Company that,
together with stock held by such person or group, constitutes more
than fifty percent (50%) of the total fair market value or total
voting power of the stock of the Company; provided, however, that
if any one person, or more than one person acting as a group, is
considered to own more than fifty percent (50%) of the total fair
market value or total voting power of the stock of the Company, the
acquisition of additional stock by the same person or persons shall
not be deemed to be a Change of Control; (ii) the date any one
person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) ownership of stock of
the Company possessing thirty percent (30%) or more of the total
voting power of the stock of the Company; or (iii) the date that
any one person, or more than one person acting as a group, acquires
(or has acquired during the 12-month period ending on the date of
the most recent acquisition by such person or persons) assets from
the Company that have a total gross fair market value of more than
forty percent (40%) of the total gross fair market value of all of
the assets of the Company immediately before such acquisition or
acquisitions; provided, however, that transfers of assets of the
Company of any value to a related person or entity as described in
Treasury Regulations Section 1.409A-3(i)(5)(vii)(B) shall not
result in a Change in Control. For purposes of (i) and (ii) above,
a person shall be deemed to be the beneficial owner of any shares
the person is deemed to own under the stock attribution rules of
Section 318(a) of the Code.
(b) “Change
in Control Payment” shall mean an amount equal to three (3)
times the Executive’s Salary in effect on the date of a
Change in Control.
