EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as of
February 1, 2000, by and between VitriSeal, Inc., a Nevada corporation (the
"Company"), and Dancor, Inc., a Delaware corporation (the "Subsidiary"), on the
one hand, and Xxxx X. Xxxx ("Executive"), on the other.
ARTICLE I
DUTIES AND TERM
1.1 EMPLOYMENT. In consideration of their mutual covenants and other good
and valuable consideration, the receipt, adequacy and sufficiency of which is
hereby acknowledged, the Company agrees to hire Executive, and Executive agrees
to remain in the employ of the Company, upon the terms and conditions herein
provided.
1.2 POSITION AND RESPONSIBILITIES.
(a) Executive shall serve as the Executive Vice President and General
Manager of the Subsidiary (or in a capacity and with a title of at least
substantially equivalent quality) reporting directly to the President of the
Subsidiary. Executive agrees to perform services not inconsistent with his
position as shall from time to time be assigned to him by the President of the
Subsidiary.
(b) Executive further agrees to serve, if elected, as a director of
the Subsidiary and as an officer or director of any other subsidiary or
affiliate of the Company.
(c) During the period of his employment hereunder, Executive shall
devote substantially all of his business time, attention, skill and efforts to
the faithful performance of his duties hereunder.
(d) During the period of Executive's employment hereunder, the
Company will lease an executive office suite in the Detroit, Michigan area for
Executive and will pay the reasonable expenses of such office in accordance with
a budget to be submitted by Executive to the Company and approved by the Board
of Directors of the Company prior to the incurrence of any expenses.
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1.3 TERM. The term of Executive's employment under this Agreement shall
commence on the date first above written and shall continue, unless sooner
terminated, until January 31, 2004.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as a
director, officer or member of any committee of the Board of the Subsidiary or
the Company or of the Board of Directors of any other subsidiary or affiliate of
the Company, the Company shall compensate Executive as follows:
2.1 BASE SALARY. The Company shall pay to Executive an annual base salary
commencing February 1, 2000 of not less than $175,000.00 (the "Base Salary")
during the first full calendar year of this Agreement. The Base Salary shall be
reviewed annually by the Board or a committee designated by the Board and the
Board or such committee may, in its discretion, increase the Base Salary.
2.2 INCENTIVE PAYMENT. During the period of Executive's employment under
this Agreement, the Executive shall be eligible to participate in an incentive
compensation program implemented by the Board (the "Annual Incentive Bonus").
2.3 ADDITIONAL BENEFITS. Executive shall be entitled to participate in all
employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit-sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and group disability
benefits, travel or accident insurance plans) and to receive fringe benefits,
such as dues and fees of professional organizations and associations, which are
from time to time available to the Company's executive personnel; PROVIDED,
HOWEVER, there shall be no duplication of termination or severance benefits, and
to the extent that such benefits are specifically provided by the Company to
Executive under other provisions of this Agreement, the benefits available under
the foregoing plans and programs shall be reduced by any benefit amounts paid
under such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement. Notwithstanding the
foregoing, the Company may terminate or reduce benefits under any benefit
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plans and programs to the extent such reductions apply uniformly to all Senior
Executives entitled to participate therein, and Executive's benefits shall be
reduced or terminated accordingly. Specifically, without limitation, Executive
shall receive the following benefits:
(a) HEALTH INSURANCE. The Company will provide health insurance to
the Executive and his family in the same manner and with the same coverage as
that provided to other similarly situated executives in the Company.
(b) DISABILITY BENEFITS. In the event of Executive's failure
substantially to perform his duties hereunder on a full-time basis for a period
not exceeding 180 consecutive days or for periods aggregating not more than 180
days during any 12-month period as a result of incapacity due to physical or
mental illness, the Company shall continue to pay the Base Salary to Executive
during the period of such incapacity, but only in the amounts and to the extent
that disability benefits payable to Executive under Company-sponsored insurance
policies are less than Executive's Base Salary. Additionally, during the term of
this Agreement, including any renewals hereof, the Company shall procure and
maintain, at its own expense, a long-term disability insurance policy for the
benefit of Executive in the event of Executive's total disability (as defined in
Section 6.1).
(c) REIMBURSEMENT OF BUSINESS EXPENSES. The Company shall, in
accordance with standard Company policies, pay, or reimburse Executive for all
reasonable travel expenses for travel outside the Detroit area on Company
business as well as office, telephone and other miscellaneous expenses incurred
in the Detroit area by Executive in performing his obligations under this
Agreement.
(d) VACATIONS. Executive shall be entitled to 20 business days
excluding Company holidays, of paid vacation during each year of employment
hereunder. Executive may accrue and carry forward no more than 10 unused
vacation days from any particular year of his employment under this Agreement to
the next.
(e) STOCK OPTIONS. Executive shall be entitled to a total of 500,000
options on the common stock of the Company exercisable at $2.00 per share
pursuant to that Non-statutory Option Agreement attached hereto as Exhibit "A."
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ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 DEATH OR RETIREMENT OF EXECUTIVE. Executive's employment under this
Agreement shall automatically terminate upon the death or retirement (as defined
in Section 6.1) of Executive.
3.2 BY EXECUTIVE. Executive shall be entitled to terminate his employment
under this Agreement by giving Notice of Termination (as defined in Section 6.1)
to the Company:
(a) For good reason (as defined in Section 6.1);
(b) At any time commencing with the date six months following the
date of a change in control (as defined in Section 6.1) and ending with the date
12 months after the date of such change in control (a "Change in Control
Resignation"); and
(c) At any time without good reason.
3.3 BY COMPANY. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination (as defined in
Section 6.1) to Executive:
(a) In the event of Executive's total disability (as defined in
Section 6.1);
(b) For cause (as defined in Section 6.1); and
(c) At any time without cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment hereunder is terminated in accordance with the
provisions of Article III hereof, except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.4 hereof:
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4.1 UPON TERMINATION FOR DEATH OR DISABILITY. If Executive's employment
hereunder is terminated by reason of his death or total disability, the Company
shall:
(a) Pay Executive (or his estate) or beneficiaries any Base Salary
which has accrued but not been paid as of the termination date (the "Accrued
Base Salary");
(b) Pay Executive (or his estate) or beneficiaries for unused
vacation days accrued as of the termination date in an amount equal to his Base
Salary multiplied by a fraction the numerator of which is the number of accrued
unused vacation days and the denominator of which is 360 (the "Accrued Vacation
Payment");
(c) Reimburse Executive (or his estate) or beneficiaries for expenses
incurred by him prior to the date of termination which are subject to
reimbursement pursuant to this Agreement (the "Accrued Reimbursable Expenses");
(d) Provide to Executive (or his estate) or beneficiaries any accrued
and vested benefit required to be provided by the terms of any Company-sponsored
benefit plans or programs (the "Accrued Benefits"), together with any benefits
required to be paid or provided in the event of Executive's death or total
disability under applicable law;
(e) Pay Executive (or his estate) or beneficiaries any Annual
Incentive Bonus with respect to a prior fiscal year (which at this time is the
calendar year) which has accrued but has not been paid, plus a portion of the
Annual Incentive Bonus for the year in which Executive's employment is
terminated hereunder computed at the end of the fiscal year and pro rated to
reflect the portion of the fiscal year that Executive was employed by the
Company (collectively, the "Accrued Annual Incentive Bonus"); and in addition,
(f) Executive (or his estate) or beneficiaries shall have the right
to exercise all vested unexercised stock options outstanding at the termination
date in accordance with terms of the plans and agreements pursuant to which such
options or warrants were issued.
4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE OTHER THAN FOR
GOOD REASON. If Executive's employment is terminated by the Company for Cause,
or if Executive terminates his employment with the Company other than (x) upon
Executive's death or total disability, (y) for good
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reason, or (z) pursuant to a Change In Control Resignation (as defined in
Section 3.2(b), the Company shall:
(a) Pay Executive the Accrued Base Salary;
(b) Pay Executive the Accrued Vacation Payment;
(c) Pay Executive the Accrued Reimbursable Expenses;
(d) Pay Executive the Accrued Benefits, together with any benefits
required to be paid or provided under applicable law;
(e) Pay Executive any Annual Incentive Bonus with respect to a prior
fiscal year which has accrued but has not been paid; and in addition
(f) Executive shall have the right to exercise vested options in
accordance with Section 4.1(f).
4.3 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD
REASON OR PURSUANT TO A CHANGE IN CONTROL RESIGNATION. If Executive's employment
is terminated (i) by the Company Without Cause, or (ii) by Executive for Good
Reason, or (iii) pursuant to a Change in Control Resignation, the Company shall:
(a) Pay Executive the Accrued Base Salary;
(b) Pay Executive the Accrued Vacation Payment;
(c) Pay Executive the Accrued Reimbursable Expenses;
(d) Pay Executive the Accrued Benefits, together with any benefits
required to be paid or provided under applicable law;
(e) Pay Executive the Accrued Annual Incentive Bonus for both prior
and partial years;
(f) Pay Executive commencing on the 30th day following the
termination date 12 monthly payments equal to one-twelfth of Executive's Base
Salary in effect immediately prior to the time such termination occurs;
(g) Maintain in full force and effect, for Executive's and his
eligible beneficiaries' continued benefit, until the first to occur of (x) his
attainment of alternative employment or (y) 12 months following the termination
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date of his employment hereunder the employee benefits provided pursuant to
Company-sponsored benefit plans, programs or other arrangements in which
Executive was entitled to participate as a full-time employee immediately prior
to such termination in accordance with Section 2.4 hereof, subject to the terms
and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition
(h) All previously unvested stock options shall immediately vest and
Executive shall have the right to exercise all unexercised stock options in
accordance with Section 4.1(f).
ARTICLE V
RESTRICTIVE COVENANTS
5.1 CONFIDENTIALITY.
(a) Executive covenants and agrees to hold in strictest confidence,
and not disclose to any person without the express written consent of the
Company, any and all of the Company's proprietary information, as defined in
Subparagraph (c) below, except as such disclosure may be required in connection
with his employment hereunder. This covenant and agreement shall survive this
Agreement and continue to be binding upon Executive after the expiration or
termination of this Agreement, whether by passage of time or otherwise, so long
as such information and data shall remain proprietary information.
(b) Upon expiration or termination of this Agreement for any reason,
Executive shall immediately turnover to the Company any "Proprietary
Information." Executive shall have no right to retain any copies of any material
qualifying as Proprietary Information for any reason whatsoever after expiration
or termination of his employment hereunder without the express written consent
of the Company.
(c) For purposes of this Agreement, "Proprietary Information" means
and includes the following: the identity of clients or customers or potential
clients or customers of the Company or its affiliates; any written, typed or
printed lists, or other materials identifying the clients or customers of the
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Company or its affiliates; Research & Development programs, plans and
discoveries; product development, marketing, and plans; any business plans or
strategic contracts, partnerships or alliances; any financial or other
information supplied by clients or customers of the Company or its affiliates;
any and all data or information involving the Company, its affiliates, programs,
methods or contacts employed by the Company or its affiliates in the conduct of
their business; any lists, documents, manuals, records, forms or other materials
used by the Company or its affiliates in the conduct of their business; any
descriptive materials describing the methods and procedures employed by the
Company or its affiliates in the conduct of their business; and any other secret
or confidential information concerning the Company's or its affiliates' business
or affairs. The terms "list," "document" or their equivalents, as used in this
Subparagraph (c), are not limited to a physical writing or compilation but also
include any and all information whatsoever regarding the subject matter of the
"list" or "documents," whether or not such compilation has been reduced to
writing. "Proprietary Information" shall not include any information which: (i)
is or becomes publicly available through no act or failure of Executive; (ii)
was or is rightfully learned by Executive from a source other than the Company
before being received from the Company; or (iii) becomes independently available
to Executive as a matter of right from a third party. If only a portion of the
Proprietary Information is or becomes publicly available, then only than portion
shall not be Proprietary Information hereunder.
(d) Executive acknowledges that he is the Executive Vice President of
the Board of the Company and in such capacity he will be a representative of the
Company with respect to clients and potential clients of the Company. Executive
also acknowledges that he has had and will continue to have access to
confidential information about the Company, its affiliates, and their clients
and that "Proprietary Information" acquired by him at the expense of the Company
is for use in its business. Executive has substantial experience in the
management of entrepreneurial companies and possesses special, unique,
extraordinary skills and knowledge in this field. Executive's management and
financial services to the Company are special, unique and extraordinary and the
success or failure of the Company is dependent upon his discharge of his duties
and obligations. Accordingly, by execution of this Agreement, and subject to
Subparagraph (c) hereof, Executive agrees that during his employment with the
Company and for a period of two years immediately after termination of his
employment with the Company (the "Non-Competition Period"), he shall not violate
the provisions of Section 5.2.
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5.2 COMPETITION.
(a) During the Non-Competition Period specified in Section 5.1(d),
Executive shall not:
(i) Except as a passive investor in publicly-held companies, and
except for investments held as of the date hereof, directly or indirectly own,
operate, mange, consult with, control, participate in the management or control
of, be employed by, maintain or continue any interest whatsoever in any company
that directly competes with the Company or any parent corporation, subsidiary
corporation, or affiliated entity or company (hereinafter referred to as an
"Affiliate") in the United States; or
(ii) Directly or indirectly solicit any business of a nature that
is directly competitive with the business of the Company or an Affiliate from
any individual or entity that obtained such products or services from the
Company or its Affiliates at any time during his employment with the Company; or
(iii) Directly or indirectly solicit any business of a nature
that is directly competitive with the business of the Company or an Affiliate
from any individual or entity solicited by him on behalf of the Company or its
Affiliates; or
(iv) Employ, or directly or indirectly solicit, or cause the
solicitation of, any employees of the Company or its Affiliates who are in the
employ of the Company or its Affiliates on the termination date of his
employment hereunder for employment by others.
(b) Executive expressly agrees and acknowledges that:
(i) The Company and its Affiliates have protected business
interests throughout North America, Europe, and Asia and that competition with
and against such business interests would be harmful to the Company and/or its
Affiliates;
(ii) This covenant not to compete is reasonable as to time and
geographical area and does not place any unreasonable burden upon him;
(iii) The general public will not be harmed as a result of
enforcement of this covenant not to compete;
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(iv) He has had the opportunity to review this covenant not to
compete with his own independent legal counsel; and
(v) He understands and hereby agrees to each and every term and
condition of to this covenant not to compete (including, without limitation, the
provisions of Section 5.4).
(c) If Executive's employment hereunder is terminated without cause
or for Change of Control, the provisions of this Section 5.2 shall not apply.
5.3 NON-DISPARAGEMENT. During the term of this Agreement and the
Non-Competition Period, neither Executive nor the Company shall disparage the
other, and neither shall disclose to any third party the conditions of
Executive's employment with the Company except as may be required (i) pursuant
to applicable law or regulations, including the rules and regulations of the
Securities and Exchange Commission, (ii) to effectuate the provisions of
employee plans or programs and insurance policies, or (iii) as may be otherwise
contemplated herein or unless such information becomes publicly available
without fault of the party making such disclosure.
5.4 REMEDIES. Executive expressly agrees and acknowledges that this
covenant not to compete is necessary for the protection of the Company and its
affiliates because of the nature and scope of their business and his position
with the Company. Further, Executive acknowledges that any breach of this
covenant not to compete would result in irreparable damage to the Company, and
in the event of his breach of this covenant not to compete, money damages will
not sufficiently compensate the Company for its injury caused thereby, and that
the remedy at law for any breach or threatened breach of Sections 5.1, 5.2 and
5.3 will be inadequate and, accordingly agrees, that the Company shall, in
addition to all other available remedies (including without limitation, seeking
such damages as it can show it has sustained by reason of such breach), be
entitled to injunctive relief or specific performance and that in addition to
such money damages he may be restrained and enjoined from any continuing breach
of this covenant not to compete without any bond or other security being
required of any court. Executive further acknowledges and agrees that if the
covenant not to compete herein is deemed to be unenforceable and/or the
Executive fails to comply with this Article V, the Company has no obligation to
provide any compensation or other benefits described in Article IV hereof.
5.5 OWNERSHIP OF INVENTIONS.
(a) During the employment by the Company, Executive will have access
to trade secrets, data, know-how, knowledge or other confidential
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information originated in the Company or disclosed to the Company by others
under agreements to hold the same confidential (collectively referred to as
"Confidential Information"). Executive acknowledges that Confidential
Information includes any information not readily available to the public, and
includes not only technical information but also business information. In
addition, Executive may, during the period of employment, create, make, develop
or conceive inventions, discoveries, concepts, ideas, designs, works of
authorship, developments, information, improvements, or trade secrets, whether
patentable or not, and whether solely or jointly with others, which may or may
not also constitute Confidential Information (collectively referred to as
"Inventions"). Executive agrees that all works of authorship to which Executive
contributes shall be considered "works made for hire" and shall be the sole
property of the Company.
(b) Executive agrees that Executive will neither utilize any
Confidential Information for Executive's own benefit or for the benefit of
anyone except the Company, nor disclose, disseminate, lecture upon or publish
articles about any Confidential Information to any one outside the Company, or
to any officer or employee of the Company not also having access to Confidential
Information, at any time either during or after employment by the Company.
(c) Executive agrees to disclose promptly, in writing to Executive's
Supervisor, Company's Counsel and Chief Executive Officer, any Inventions that
Executive may make, develop or conceive, solely or jointly, during the period of
employment by the Company, or by its predecessors, successors in business,
subsidiaries, parents or affiliates. All such Inventions shall be and remain the
property of the Company. Executive hereby assigns to the Company all Executive's
rights, titles and interests in and to any such Inventions, whether or not such
Inventions may be reduced to practice during the period of Executive's
employment, and to execute all patent or copyright applications, assignments and
other documents, and to take all other steps necessary, to vest in the Company
the entire right, title and interest in and to those Inventions and in and to
any patents or copyrights obtainable therefor in the United States and in
foreign countries, all at the Company's expense, but for no consideration to
Executive in addition to Executive's salary or wages. Executive agrees to keep
adequate records of all Inventions and make such records available to the
Company.
(d) If the Company chooses to prosecute applications for patents or
copyrights for any such Inventions, the Company shall assume the entire expense
of preparing, filing and prosecuting such applications, through counsel
appointed by the Company; provided, however, that the Company is under no
obligation to prosecute such applications. Executive agrees to cooperate with
the
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Company and do whatever is necessary or appropriate to obtain patents,
copyrights or other legal protections for Inventions. If Executive is
incapacitated or refuses to so cooperate for any reason, Executive hereby
authorizes the Company to act as Executive's agent and to take whatever actions,
or execute whatever documents, may be needed to carry out this Agreement.
(e) All records and other material pertaining to Confidential
Information, whether developed by Executive or others, shall be and remain the
property of the Company. Upon termination of Executive's employment with the
Company, all documents, records, notebooks and other material of any kind
pertaining to or containing Confidential Information then in Executive's
possession, or under Executive's control, whether prepared by Executive or
others, will be returned to the Company unconditionally.
(f) Executive shall not be obligated to assign any Invention which
relates to or would be useful in any business or activities in which the Company
is engaged if such Invention was conceived and reduced to practice by Executive
prior to Executive's employment with the Company, provided that all such
Inventions are listed at the time of employment on the attached Exhibit "B." If
no entry is made on Exhibit "B," then such entry shall be deemed to be "none,"
whether or not Exhibit "B" is signed by Executive. Except as listed on Exhibit
"B," Executive will not assert any rights to any Inventions, as having been made
or acquired by Executive prior to being employed by the Company.
(g) Executive shall not be obligated to assign any Invention which
may be wholly conceived by Executive after Executive leaves the employ of the
Company, except that Executive is so obligated if such Invention shall involve
the utilization of Confidential Information of the Company, or any Invention not
related to the business activities of the Company.
(h) Notwithstanding anything in this Agreement to the contrary,
Executive shall not be obligated to assign to the Company and of Executive's
rights in an Invention that the Executive developed entirely on Executive's own
time without using the Company's equipment, supplies, facilities or Confidential
Information, except for those Inventions that either: (i) relate, at the time of
conception or reduction to practice of Invention, to either the Company's
business, or actual or demonstrably anticipated research or development of the
Company, or (ii) result from any work performed by the Executive for the
Company. THIS AGREEMENT DOES NOT APPLY TO ANY INVENTION WHICH QUALIFIES FULLY
UNDER THE PROVISIONS OF CALIFORNIA LABOR CODE SECTION 2870 OR ANY OTHER
SUBSTANTIALLY EQUIVALENT LAW IN THE STATE IN WHICH THE EXECUTIVE IS EMPLOYED.
With regard to those Inventions which Executive is
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not obligated to assign to the Company, Executive shall give the Company a right
of first refusal on any and all such Inventions and the right to meet any firm
offer of another for such Inventions. The Company must exercise such right of
first refusal within thirty (30) days of receipt of written notice from
Executive setting forth such offer.
ARTICLE VI
MISCELLANEOUS
6.1 DEFINITIONS. For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "Accrued Annual Incentive Bonus" - as defined in Section 4.1(e);
(b) "Accrued Base Salary" - as defined in Section 4.1(a);
(c) "Accrued Benefits" - as defined in Section 4.1(d);
(d) "Accrued Reimbursable Expenses" - as defined in Section 4.1(c);
(e) "Annual Vacation Payment" - as defined in Section 4.1(b);
(f) "Annual Incentive Bonus" - as defined in Section 2.2(b)
(g) "Base Amount" - as defined in Section 4.4(b);
(h) "Base Salary" - as defined in Section 2.1;
(j) "Board" - shall mean the Board of Directors of the Company;
(k) "Cause" shall mean the occurrence of any of the following:
(i) Executive's gross and willful misconduct which is injurious
to the Company;
(ii) Executive's engaging in fraudulent conduct with respect to
the Company's business or in conduct of a criminal nature that may have an
adverse impact on the Company's standing and reputation;
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(iii) The continued and unjustified failure or refusal by
Executive to perform the duties required of him by this Agreement which failure
or refusal shall not be cured within 15 days following (a) receipt of Executive
of written notice from the Board specifying the factors or events constituting
such failure or refusal, and (b) a reasonable opportunity for Executive to
correct such deficiencies;
(iv) Executive's use of drugs and/or alcohol in violation of then
current Company policy; or
(v) Executive's breach of his obligation under Section 1.2(c)
hereof which shall not be cured within 15 days after written notice thereof to
Executive.
(l) "Change In Control" shall mean and shall be deemed to have
occurred if:
(i) After the date of this Agreement, any "person" (as such term
is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor provision thereto) shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act or
any successor provision thereof) directly or indirectly of securities of the
Company representing 25% (excluding the issuance of shares in connection with
the pending acquisitions of Liquitek, Inc. and Thermoflow Corporation) or more
of the combined voting power of the Company's then outstanding securities
ordinarily having the right to vote at an election of directors; PROVIDED,
HOWEVER, that, for purposes of this Subparagraph, "person" shall exclude the
Company, its subsidiaries, any person acquiring such securities directly from
the Company, any employee benefit plan sponsored by the Company or from
Executive or any stockholder owning 25% or more of the combined voting power of
the Company's outstanding securities as of the date of this Agreement; or
(ii) Any stockholder of the Company owning fifteen percent or
more of the combined voting power of the Company's outstanding securities as of
the date of this Agreement shall become the beneficial owner (within the meaning
of Rule 13d-3 under the Exchange Act) directly or indirectly of securities of
the Company (other than through the acquisition of securities directly from the
Company or from Executive) representing 33 1/3% or more of the combined voting
power of the Company's then outstanding securities ordinarily having the right
to vote at an election of directors; or
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(iii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least 80% of
the Board; provided, however, that any person becoming a member of the Board
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least 80% of the members
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act or any successor provision thereto) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board; or
(iv) Approval by the stockholders of the Company and consummation
of (a) a reorganization, merger, consolidation, or sale or other disposition of
all or substantially all of the assets of the Company, in each case, with or to
a corporation or other person or entity of which persons who were the
stockholders of the Company immediately prior to such transaction do not,
immediately thereafter, own more than 60% of the combined voting power of the
outstanding voting securities entitled to vote generally in the election of
directors of the reorganized, merged, consolidated or purchasing corporation
(or, in the case of a non-corporate person or entity) were not members of the
Incumbent Board at the time of the execution of the initial agreement providing
for such reorganization, merger, consolidation or sale, or (b) a liquidation or
dissolution of the Company.
(m) "Change In Control Resignation" - as defined in Section 3.2(b);
(n) "Continued Benefits" - as defined in Section 4.3(g);
(o) "Expiration" shall mean the expiration of Executive's employment
hereunder in accordance with Section 1.3;
(p) "Good Reason" shall mean the occurrence of any of the following:
(i) The Company's failure to elect or reelect or to appoint or
reappoint Executive to offices, titles or positions carrying comparable
authority, responsibilities, dignity and importance to that of Executive's
offices and positions as of February 1, 2000;
(ii) Material change by the Company in Executive's function,
duties or responsibilities (including reporting responsibilities) which would
cause Executive's position with the Company to become of less dignity,
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responsibility and importance than those associated with his functions, duties
or responsibilities as of February 1, 2000; or
(iii) Other material breach of this Agreement by the Company,
which breach is not cured within 15 days after written notice thereof is
received by the Company.
(q) "Non-Competition Period" - as defined in Section 5.1(d);
(r) "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision of this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provisions so
indicated. Each Notice of Termination shall be delivered at least 60 days prior
to the effective date of termination;
(s) "Proprietary Information" - as defined in Section 5.1(c);
(t) "Retirement" shall mean normal retirement at age as determined by
the Board;
(u) "Senior Executives" shall mean the chief executive officer and
the four (4) most highly compensated executive officers of the Company
determined in accordance with the rules and regulations of the Securities and
Exchange Commission under the Exchange Act;
(v) "Termination" shall mean the termination of Executive's
employment hereunder other than upon expiration of the term of such employment
in accordance with Section 1.3;
(w) "Total Disability" shall mean Executive's failure substantially
to perform his duties hereunder on a full-time basis for a period exceeding 180
consecutive days or for periods aggregating more than 180 days during any
twelve-month period as a result of incapacity due to physical or mental illness.
If there is a dispute as to whether Executive is or was physically or mentally
unable to perform his duties under this Agreement, such dispute shall be
submitted for resolution to a licensed physician agreed upon by the Board and
Executive, or if an agreement cannot be promptly reached, the Board and
Executive each shall promptly select a physician, and if these physicians cannot
agree, the physicians shall promptly select a third physician whose decision
shall be binding on all parties. If such a dispute arises, Executive shall
submit to such examinations and shall provide such information as such
physician(s) may request, and the determination of the physician(s) as to
16
Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.
6.2 KEY MAN INSURANCE. The Company shall have the right, in its sole
discretion, to purchase "key man" insurance on the life of Executive. The
Company shall be the owner and beneficiary of any such policy. If the Company
elects to purchase a policy, Executive shall take such physical examinations and
supply such information as may be reasonably requested by the insurer.
6.3 MITIGATION OF DAMAGES; NO SET-OFF; DISPUTE RESOLUTION.
(a) Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by Executive as the result of employment by another
employer after the date of termination of his employment hereunder or otherwise.
The Company's obligation to make the payments provided for in this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim or action which the Company may have against Executive.
(b) If there shall be any dispute between the Company and Executive
(i) in the event of any termination of Executive's employment by the Company,
whether such termination was for Cause, or (ii) in the event of any termination
of employment by Executive, whether Good Reason existed, or (iii) otherwise, the
dispute shall be resolved in accordance with the dispute resolution procedures
set forth in Exhibit "C" hereto, the provisions of which are incorporated as a
part hereof, and the parties hereto hereby agree that such dispute resolution
procedures shall be the exclusive method for resolution of disputes under this
Agreement. In the event of a dispute hereunder as to whether a termination by
the Company was for Cause or by the Executive for Good Reason, until there is a
resolution and award as provided in Exhibit "C," the Company shall pay all
amounts, and provide all benefits, to Executive and/or Executive's family or
other beneficiaries, as the case may be, that the Company would be required to
pay or provide hereunder as though such termination were by the Company without
Cause or by Executive for Good Reason and shall pay the reasonable legal fees
and expenses of counsel for Executive in connection with such dispute
resolution; provided, however, that the Company shall not be required to pay any
disputed amounts or any legal fees and expenses pursuant to this Subparagraph
(b) except upon receipt of a written undertaking by or on behalf of Executive
(and/or Executive's family or
17
other beneficiaries, as the case may be) to repay, without interest or penalty,
as soon as practicable after completion of the dispute resolution (A) all such
amounts to which Executive (or Executive's family or other beneficiaries, as the
case may be) is ultimately adjudged to not be entitled with respect to the
payment of such disputed amount(s) and (B) in addition, in the case of legal
fees and expenses, a proportionate amount of legal fees and expenses
attributable to any of Executive's claim(s) or any of Executive's defenses or
counter-claim(s), if any, which shall have been found by the dispute resolver to
have been frivolous or without merit.
6.4 SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon
any successor to the Company and shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.
6.5 MODIFICATION; NO WAIVER. This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto. No term or
condition of this Agreement shall be deemed to have been waived, nor shall there
be any estoppel against the enforcement of any provision of this Agreement,
except by written instrument by the party charged with such waiver or estoppel.
No such written waiver shall be deemed a continuing waiver unless specifically
stated therein, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition
for the future or as to any other term or condition.
6.6 SEVERABILITY. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. If, in any
judicial proceeding, a court shall refuse to enforce one or more of the
covenants or agreements contained herein because the duration thereof is too
long, or the scope thereof is too broad, it is deemed reduced to the extent
necessary to permit the enforcement of such covenants or agreements.
6.7 NOTICES. All the notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at the following addresses:
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If to the Company, to it at:
Vitriseal, Inc.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: President
With a copy to:
Xxxxx X. Xxxxxxx
Xxxxxx, Xxxxxxx & Xxxxxxx
0 Xxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
If Executive, to him at:
Xxxx X. Xxxx.
0000 Xxxxxxx Xxxx Xxxx
Xxxx Xxxxxxxxxx, XX 00000
6.8 ASSIGNMENT. This Agreement and any rights hereunder shall not be
assignable by either party without the prior written consent of the other party
except as otherwise specifically provided for herein.
6.9 ENTIRE UNDERSTANDING. This Agreement (together with the Exhibit
incorporated as a part hereof) constitutes the entire understanding between the
parties hereto and no agreement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
6.10 EXECUTIVE'S REPRESENTATIONS. Executive represents and warrants that
neither the execution and delivery of this Agreement nor the performance of his
duties hereunder violates the provisions of any other agreement to which he is a
party or by which he is bound.
6.11 LIABILITY OF COMPANY WITH RESPECT TO INSURANCE POLICY. Executive has
selected the insurer and policy referred to in Section 2.4(a) hereof, and the
Company shall not have any liability to Executive (or his beneficiaries) should
the insurance company which issues the policy referred to therein fail or refuse
to pay (whether voluntarily or by reason of any order, injunction or otherwise)
thereunder or if any rights or elections otherwise available to Executive
thereunder are restricted or eliminated.
19
6.12 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed for all purposes by the laws of the State of Nevada applicable to
contracts executed and wholly performed within such state.
6.13 JOINT AND SEVERAL LIABILITY. All obligations of the Company to
Executive hereunder shall be the joint and several obligations of the Company
and Dancor.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
COMPANY:
VITRISEAL, INC., a Nevada corporation
By:
-----------------------------------
Xxxxxx X. Xxxxx,
Chief Executive Officer
By:
-----------------------------------
Xxxxxx X. Xxxxxx,
President
SUBSIDIARY:
DANCOR, INC., a Delaware corporation
By:
-----------------------------------
Xxxxxx X. Xxxxx,
Chief Executive Officer
By:
-----------------------------------
Xxxxxx X. Xxxxxx,
President
EXECUTIVE:
--------------------------------------
XXXX X. XXXX
20
EXHIBIT "A"
STOCK OPTION AGREEMENT
THIS AGREEMENT, hereinafter referred to as the "Option" or the "Agreement,"
is made this 1st day of February, 2000, between Vitriseal, Inc., a Nevada
corporation (the "COMPANY"), and Xxxx X. Xxxx, an individual (hereinafter
referred to as the "OPTIONEE").
The COMPANY hereby grants an option to purchase 500,000 shares of common
stock of the COMPANY (the "Shares") to the OPTIONEE at the price and in all
respects subject to the terms, definitions and provisions of the Agreement.
1. PURCHASE PRICE. The purchase price for the Shares is $2.00 per Share.
2. VESTING. The vesting schedule for the shares shall be as follows:
50,000 options shall vest on December 31, 2000; 100,000 options shall vest on
December 31, 2001; 150,000 options shall vest on December 31, 2002; and 200,000
options shall vest on December 31, 2003. The OPTIONEE is entitled to earlier
vesting of the options as follows: 15,000 options shall vest each time the
OPTIONEE obtains a signed license agreement for VitriSeal's wheel coating
process; and 20,000 options shall vest when each such license agreement is
"commercialized." "Commercialized," as used herein, shall mean when the Company
has received royalty revenue from any such license agreement equal to or
exceeding $5,000 per month for three consecutive months. Upon a "Change In
Control," or upon Executive's death or disability, as those terms are defined in
the Employment Agreement between the Company and the Executive dated February 1,
2000, all previously unvested stock options shall immediately vest and Executive
shall have the right to exercise all unexercised stock options in accordance
with Section 4.1(f) of the Employment Agreement or as otherwise stated in the
Employment Agreement.
3. EXERCISE OF OPTION TO PURCHASE.
3.1 RIGHT TO EXERCISE. The option to purchase the Shares shall be
exercisable by the OPTIONEE in full in accordance with the terms of this
Agreement and is exercisable on or before January 31, 2010.
3.2 METHOD OF EXERCISE. This Option shall be exercisable by a written
notice to The COMPANY which shall (i) contain such representations and
agreements as to the holder's investment intent with respect to such shares
1
of Common Stock as are required by law and as may be satisfactory to the
COMPANY's counsel; and (ii) be accompanied by a payment of $2.00 per share.
4. LIMITATIONS ON TRANSFERABILITY OF OPTION. This Option may be
transferred to family members of the OPTIONEE in accordance with the laws of
succession or to a trust created for the benefit of the OPTIONEE or his family
members at the OPTIONEE's discretion or to others upon the written consent of
the Board of Directors of the COMPANY. The terms of the Option shall be binding
upon the transferees of the OPTIONEE.
5. STOCK SUBJECT TO THE OPTION. The COMPANY shall set aside 500,000
shares of its Common Stock to cover the Shares to be issued upon exercise,
pending the exercise or expiration of the Option. If the Option should expire or
become unexercisable for any reason without having been exercised, the Shares
shall become immediately available to the COMPANY for any other use.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If all or any portion of
the Option is exercised subsequent to any stock dividend, split-up,
capitalization, combination or exchange of shares, merger, consolidation,
acquisition of property or stock, separation, reorganization, or other similar
change or transaction of or by the COMPANY, as a result of which shares of any
class shall be issued in respect of outstanding shares of the class covered by
the Option or shares of the class covered by the Option shall be changed into
the same or a different number of shares of the same or another class or
classes, the person or persons so exercising such an Option shall receive, for
the aggregate option price payable upon such exercise of the Option, the
aggregate number and class of shares equal to the number and class of shares he
or she would have had on the date of exercise had the shares been purchased for
the same aggregate price at the date the Option was granted and had not been
disposed of, taking into consideration any such stock dividend, split-up,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of property or stock, separation, reorganization, or other similar
change or transaction; provided, however, that no fractional share shall be
issued upon any such exercise, and the aggregate price paid shall be
appropriately reduced on account of any fractional share not issued.
7. NOTICES. Each notice relating to this Agreement shall be in writing
and delivered in person or by certified mail to the proper address. Each notice
shall be deemed to have been given on the date it is received. Notices given
hereunder shall be addressed to the COMPANY at its principle place of business
and to OPTIONEE at his primary residence. Anyone to whom a notice may be given
under this Agreement may designate a specific address by notice to that effect.
2
8. BENEFITS OF AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon each successor of the COMPANY.
IN WITNESS WHEREOF, the COMPANY and the OPTIONEE have caused this Agreement
to be executed as of the day, month and year first above-written.
OPTIONEE:
-----------------------------------
Xxxx X. Xxxx
THE COMPANY:
VITRISEAL, INC.
By:
--------------------------------
Xxxxxx X. Xxxxx, Chief Executive Officer
By:
--------------------------------
Xxxxxx X. Xxxxxx, President
3
EXHIBIT "B"
LIST OF INVENTIONS
CREATED PRIOR TO EMPLOYMENT WITH THE COMPANY
1
EXHIBIT "C"
DISPUTE RESOLUTION PROCEDURES
A. If a controversy should arise which is covered by Section 6.3 of
Article VI, then not later than 12 months from the date of the event which is
the subject of dispute either party may serve on the other a written notice
specifying the existence of such controversy and setting forth in reasonably
specific detail the grounds thereof ("Notice of Controversy"); PROVIDED THAT, in
any event, the other party shall have at least 30 days from and after the date
of the Notice of Controversy to serve a written notice of any counterclaim
("Notice of Counterclaim"). The Notice of Counterclaim shall specify the claim
or claims in reasonably specific detail. If the Notice of Controversy or the
Notice of Counterclaim, as the case may be, is not served within the applicable
period, the claim set forth therein will be deemed to have been waived,
abandoned and rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight weeks.
D. If the parties agree to mediate the dispute but are thereafter unable
to agree within one (1) week on the format and procedures for the mediation,
then the effort to mediate shall cease, and the Period of Negotiation shall
terminate four weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").
F. A notice of intention to arbitrate ("Notice of Arbitration") shall be
served within 45 days of the termination of the Period of Negotiation. If the
Notice of Arbitration is not served within this period, the claim set forth in
the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.
G. The arbitration, including the Notice of Arbitration, will be governed
by the Commercial Rules of the American Arbitration Association except that the
terms of this Arbitration Agreement shall control in the event of any difference
or conflict between such Rules and the terms of this Arbitration Agreement. The
arbitration shall be scheduled to take place in San Diego, California.
H. The dispute resolver shall reach a decision on the merits on the basis
of applicable legal principles as embodied in the law of the State of
California.
1
I. There shall be one dispute resolver, regardless of the amount in
controversy. The dispute resolver will be empowered to render an award and
interim decisions and shall be a member of the bar of any of the fifty States of
the United States or of the District of Columbia. The dispute resolver shall be
promptly appointed pursuant to Rule 13 of the Commercial Rules of the American
Arbitration Association ("AAA"). If the dispute resolver has not been appointed
within 45 days of the AAA's initial transmission of lists of potential
arbitrators, then the AAA shall unilaterally designate the dispute resolver.
J. At the time of appointment and as a condition thereto, the dispute
resolver will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.
K. During the 30-day period following appointment of the dispute
resolver, either party may serve on the other a request for limited numbers of
documents directly related to the dispute. Such documents will be produced
within seven days of the request.
L. Following the 30-day period of document production, there will be a 45
day period during which limited depositions will be permissible. Neither party
will take more than five depositions, and no deposition will exceed three hours
of direct testimony.
M. Disputes as to discovery or prehearing matters of a procedural nature
shall be promptly submitted to the dispute resolver pursuant to telephone
conference call or otherwise. The dispute resolver shall make every effort to
render a ruling on such interim matters at the time of the hearing (or
conference call) or within five business days thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The dispute resolver will make every effort to commence the
hearing within 30 days of the conclusion of the deposition period and, in
addition, will make every effort to conduct the hearing on consecutive business
days to conclusion.
O. An award will be rendered, at the latest, within nine months of the
date of the Notice of Arbitration and within 30 days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision in
reasonably specific detail and shall also specify whether any claim (or defense
or counterclaim) of Executive is found to be frivolous or without merit and what
proportion, if any, of his legal fees and expenses which have been paid by the
Company Executive shall be required to repay to the Company in accordance with
Section 6.3(b). The award shall be final and nonappealable.
P. THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT THEY ARE WAIVING THEIR
RIGHTS TO A TRIAL IN A STATE OR FEDERAL COURT AND ARE ALSO WAIVING THEIR RIGHT
TO A JURY TRIAL.
VITRISEAL, INC., a Nevada corporation
By:
----------------------------------
Xxxxxx X. Xxxxx,
Chief Executive Officer
2
By:
----------------------------------
Xxxxxx X. Xxxxxx,
President
DANCOR, INC., a Delaware corporation
By:
----------------------------------
Xxxxxx X. Xxxxx,
Chief Executive Officer
By:
----------------------------------
Xxxxxx X. Xxxxxx,
President
-------------------------------------
XXXX X. XXXX
3
