Exhibit 10.1
------------
SETTLEMENT AGREEMENT, MUTUAL RELEASE
AND AMENDMENT OF OPTION AGREEMENT
This Settlement Agreement, Mutual Release and Amendment of Option
Agreement (this "Agreement") is entered into by and between Electronic Sensor
Technology Inc., a Nevada corporation ("EST"), on the one hand, and Xxxxxxx
Xxxxxxx, an individual residing in California ("Xxxxxxx"), on the other hand.
RECITALS
A. On May 16, 2005, EST and Xxxxxxx entered into an Offer Letter of
Employment (the "Employment Agreement") pursuant to which Xxxxxxx was offered
the position of president and chief executive officer of EST (the "Offices") and
was nominated to serve on EST's board of directors (the "Board"), and in
connection therewith was offered a restricted stock grant and an award of
options.
B. On May 26, 2005, the Board approved Xxxxxxx'x appointment to the
Offices and the Board.
C. On October 7, 2005, Xxxxxxx and EST executed a Notice of Grant
of Stock Options and Stock Option Agreement (collectively, the "Option
Agreement").
D. EST and Xxxxxxx now mutually desire to terminate the Employment
Agreement (other than Section 7 thereof, which shall survive) and amend the
Option Agreement.
TERMS
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is agreed by and between the
parties as follows:
1. Effective as of January 25, 2006 (such date, the "Effective
Date"), (i) EST shall terminate Xxxxxxx'x employment with EST "without cause;"
(ii) Xxxxxxx shall tender his resignation of the Offices and shall resign as a
member of the Board by delivering to the Chairman of the Board the resignation
attached hereto as Exhibit A; (iii) Xxxxxxx shall permanently vacate the offices
of EST and shall remove all personal effects from said offices; (iv) the
Employment Agreement (excluding Section 7 thereof, which shall survive) shall be
deemed to have been terminated by mutual agreement and neither party thereto
shall have any further rights or obligations thereunder (other than the rights
and obligations contained in Section 7); and (v) EST shall deliver to Xxxxxxx a
stock certificate representing the 75,000 shares of common stock of EST
referenced in paragraph 3 of the Employment Agreement.
2. EST will pay to Xxxxxxx (i) in accordance with its existing
payroll schedule accrued salary and accrued and unused vacation time, if any, in
each case to and including January 30, 2006, (ii) a total sum of $110,000.00
(less all federal, state and local employment withholding taxes, which EST will
withhold) which sum shall be payable in equal installments on each of the 13
biweekly payroll payment dates immediately following the Effective Date and
(iii) within four business days of the Effective Date, by check, a bonus in the
sum of $18,334.00 (less all federal, state and local employment withholding
taxes, which EST will withhold).
3. On the Effective Date, the vesting schedule set forth in the
Option Agreement shall be amended such that: (a) 200,000 Option Shares (as
defined in the Option Agreement) shall vest on May 26, 2006, (b) 150,000 Option
Shares shall vest on May 26, 2007 and (c) 150,000 Option Shares shall vest on
May 26, 2008. As the Employment Agreement contemplated a six-month accelerated
vesting of your Option Shares in the event of your termination without cause,
the Option Agreement is hereby amended to the extent necessary to
-2-
give effect to such six-month accelerated vesting. For the avoidance of doubt,
Xxxxxxx and EST acknowledge and agree that the effect of these amendments and
this Agreement is as follows: (a) the 200,000 Option Shares that would otherwise
vest on May 26, 2006 shall have vested on November 26, 2005, (b) the 150,000
Option Shares that would otherwise vest on May 26, 2007 shall vest on November
26, 2006 and (c) the 150,000 Option Shares that would otherwise vest on May 26,
2008 shall vest on November 26, 2007. In accordance with the terms of the Option
Agreement: (x) Xxxxxxx must exercise the 200,000 Option Shares that vested on
November 26, 2005 before the three-month anniversary of the Effective Date or
else such Option Shares will terminate and (y) all unvested Option Shares will
terminate.
4. Each of Xxxxxxx and EST waive all rights he or it, as the case
may be, have under Section 1542 of the Civil Code of the State of California.
Section 1542 provides as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
5. By waiving the provisions of Section 1542 of the Civil Code of
the State of California, Xxxxxxx and EST hereby irrevocably and unconditionally
release and forever discharge each other, and each of their officers, agents,
directors, supervisors, employees (individually or in their representative
capacities), representatives, and their successors and assigns and all persons
acting by, through, under, or in concert with any of them, from any and all
charges, complaints, claims, and liabilities of any kind or nature whatsoever,
known or unknown, suspected or unsuspected (hereinafter referred to as "claim"
or "claims") which they
-3-
at any time heretofore have or may have against the other regarding the
Employment Agreement, or that could have been asserted under the Employment
Agreement (excluding any claims brought pursuant to Section 7 of the Employment
Agreement) or at law, including, but not limited to, any and all claims against
EST related or in any manner incidental to Xxxxxxx'x employment with EST, any
and all claims by EST against Xxxxxxx for use or misuse of corporate funds
and/or facilities, the termination of that employment and Employment Agreement,
and any discrimination Xxxxxxx may claim to have encountered in connection with
his employment.
6. The parties understand the word "claims" to include all actions,
claims, and grievances, whether actual or potential, contingent or matured,
known or unknown, suspected or unsuspected, or foreseen or unforeseen. All such
claims (including related attorneys' fees and costs) are forever barred by this
Agreement and without regard to whether those claims are based on any alleged
breach of a duty arising in contract or tort; or from any alleged unlawful act
without limitation and regardless of the forum in which it might be brought.
7. Xxxxxxx acknowledges and understands that this Agreement
includes a release of claims under the Age Discrimination in Employment Act
("ADEA"), 29 U.S.C. Sections 621-634, and that such a release is subject to
special waiver protection under 29 U.S.C. Sections 626(f). In accordance with
that section, Xxxxxxx specifically agrees that he knowingly and voluntarily
releases and waives any rights or claims of discrimination under the ADEA.
8. Xxxxxxx represents that he has carefully read this Agreement in
its entirety and that he has had an opportunity to consider fully the terms of
this Agreement for twenty-one (21) days, whether or not he has taken that time.
-4-
9. Xxxxxxx understands that he has seven (7) days after signing
this Agreement in which to revoke this Agreement.
10. The parties understand and agree that they have carefully read
and fully understand all of the provisions of this Agreement, that they have
retained the attorney of their choice who has explained to them the consequences
of entering into this Agreement and of being bound to each of the provisions of
this Agreement, including but not limited to a release of their claims, and that
they freely and voluntarily consent to be bound by the provisions contained
within this Agreement.
11. This Agreement and compliance with this Agreement shall not be
construed as an admission by EST of any liability whatsoever, or as an admission
by EST of any violation of the rights of Xxxxxxx, or any person, or violation of
any order, law, statute, duty, or contract whatsoever against Xxxxxxx or any
person. EST specifically disclaims any liability to Xxxxxxx or any other person
for any alleged violation of the rights of Xxxxxxx or any person, or for any
alleged violation of any order, law, statute, duty, or contract on the part of
EST, its employees or agents or related companies or their employees or agents.
12. The parties hereto represent and acknowledge that in executing
this Agreement, they do not rely and have not relied upon any representation or
statement made by any of the parties or by any of the parties' agents,
attorneys, or representatives with regard to the subject matter, basis, or
effect of this Agreement or otherwise, other than those specifically stated in
this written Agreement.
13. This Agreement shall be binding upon the parties hereto and upon
their heirs, administrators, representatives, executors, successors, and
assigns, and shall inure to the benefit of said parties and each of them and to
their heirs, administrators, representatives,
-5-
executors, successors, and assigns. Xxxxxxx expressly warrants that he has not
and will not transfer to any person or entity any rights, causes of action, or
claims released in this Agreement.
14. The parties shall each bear their own attorneys' fees and costs.
15. Should any provision of this Agreement be declared or be
determined by any court of competent jurisdiction to be illegal, invalid, or
unenforceable, the legality, validity, and enforceability of the remaining
parts, terms, or provisions shall not be affected thereby, and said illegal,
unenforceable, or invalid part, term, or provision shall be deemed not to be a
part of this Agreement.
16. Both the fact of this settlement and the terms of this Agreement
shall, to the extent permitted by law, be strictly confidential. Xxxxxxx
acknowledges that EST will be required to file a Current Report on Form 8-K with
the Securities and Exchange Commission in connection with Xxxxxxx'x resignation
of the Offices and his directorship. EST and Xxxxxxx agree that they will keep
completely confidential and will not, except as required by law, disclose to any
person, other than their financial advisors, legal advisors, and affiliate
companies, and Xxxxxxx'x immediate family, any understandings, agreements,
provisions and/or information contained herein. If asked about Xxxxxxx'x
employment, the parties shall be able to say that they worked out an agreement
to their mutual satisfaction.
17. This Agreement sets forth the entire agreement between the
parties hereto and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the
subject matter hereof.
18. The parties to this Agreement will each execute two originals of
the agreement. When fully executed, each party shall return one original
agreement to the other.
-6-
The Agreement may be executed in counterparts. Execution and delivery of a copy
of a signature to this Agreement by way of facsimile transmission shall
constitute execution and delivery for all purposes.
DATED: January 30, 2006 /s/ Xxxxxxx Xxxxxxx
---------------------------------
Xxxxxxx Xxxxxxx
DATED: January 31, 2006 ELECTRONIC SENSOR TECHNOLOGY INC.
By: /s/ Xxxxx Xxxx
---------------------------------
Xxxxx Xxxx, Chairman of the Board
-7-
Exhibit A
To: Xxxxx Xxxx
Chairman of the Board
Electronic Sensor Technology Inc.
I, Xxxxxxx Xxxxxxx, hereby resign, effective as of January 25, 2006, from the
office of President and Chief Executive Officer of Electronic Sensor Technology
Inc. and as a director of Electronic Sensor Technology Inc.
/s/ Xxxxxxx Xxxxxxx
-------------------
Xxxxxxx Xxxxxxx
Dated: January 30, 2006
