Mr. Jeffrey Reichard W353 N6318 Marina Drive Oconomowoc, WI 53066 Dear Jeff:
Exhibit
10.3
January
21, 2011
Xx.
Xxxxxxx Xxxxxxxx
X000
X0000 Xxxxxx Xxxxx
Xxxxxxxxxx,
XX 00000
Dear
Xxxx:
On behalf
of the Board of Directors of ZBB Energy Corporation (“ZBB”), I am delighted to
invite you to join our family of companies as the Vice President of Electronics
Development of ZBB, as the President of DCDC Acquisition Company LLC (to be
renamed Tier Electronics LLC) (“Tier”), as a member of the Board of Directors of
ZBB and as a member of the Board of Directors of Tier. This letter
agreement sets forth the terms your employment.
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1.
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Term of
Employment: ZBB will employ you for the period
commencing as of January 21, 2011 and, subject to earlier termination
as set forth herein, ending on January 21, 2014 (the “Term of
Employment”).
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2.
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Position:
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During
the Term of Employment, you will serve as ZBB’s Vice President of
Electronics Development and Tier’s President and report to the President
and Chief Executive Officer of ZBB. Until such time as the
principal and interest balance under that certain Promissory Note (the
“Note”) dated as of the date hereof in the original principal amount of
$1,350,000 made by Tier for the benefit of Tier Electronics LLC (to be
renamed TE Holdings Group, LLC) (“TE”) is paid in full, included in your
duties as President of Tier will be all hiring and termination decisions
with respect to Tier employees, subject to hiring and termination policies
applicable to ZBB and Tier employees generally as communicated to you by
ZBB’s President and Chief Executive Officer, and excluding hiring and
termination decisions governed by the terms and conditions of employment
agreements under which the applicable employee reports to a party or
parties other than the President of Tier. Your services to ZBB
and Tier will be performed in Menomonee Falls, Wisconsin during the Term
of Employment. You acknowledge, however, that you may be
required to travel in connection with the performance of your duties
hereunder; provided, that
you shall not be required to travel more than thirty (30) days during any
calendar year or more than ten (10) days during any thirty (30) day
period.
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During
the Term of Employment, you may accept a position on the board of
directors of any company that does not directly compete with the business
of Tier or ZBB, provided such position is approved in advance by ZBB’s
Board of Directors. It is understood that you are currently a
member of the board of directors of for-profit companies and a member of
the board of directors or advisory board for non-profit and other industry
or economic associations previously disclosed to ZBB, which memberships
shall not be prohibited by the terms hereof, provided that such
memberships will not interfere in any way with the fulfillment of your
duties as Vice President of Electronics Development of ZBB, as President
of Tier, as a director of ZBB and as a director
Tier.
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Xx.
Xxxxxxx Xxxxxxxx
January
21, 2011
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2
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Nothing
contained in this letter will be construed as conferring upon you any
right to remain employed by ZBB or any of its subsidiaries or affiliates
or affect the right of ZBB or any of its subsidiaries or its affiliates to
terminate your employment at any time for any reason or no reason, subject
to the obligations of ZBB as set forth
herein.
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3.
Salary:
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During
the Term of Employment, you will be entitled to an annual salary of
$200,000, payable in accordance with ZBB’s normal salaried payroll
practices. The Board of Directors of ZBB will review, at least
annually, your overall compensation with a view to increasing it if, in
the sole judgment of the Board of Directors, the performance of Tier or
your services merit such an increase. Your salary will not be
reduced during the Term of Employment without your prior written
consent.
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ZBB
shall be entitled to withhold from amounts to be paid to you hereunder any
federal, state, or local withholding or other taxes or charges which it is
required to withhold under applicable
law.
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4.
Options:
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Effective
as of the date of your appointment set forth in Section 1, above, the
vesting of the option to acquire 230,000 shares of the $.01 par value
common stock of ZBB awarded to you pursuant to the terms and conditions of
that certain stock option award agreement dated as of the date hereof
between ZBB and you as an inducement for you to accept ZBB’s offer of
employment shall commence in accordance with the vesting schedule set
forth in such stock option award
agreement.
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5.
Travel
Expenses:
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Expenses
for company travel will be reimbursed in accord with ZBB’s travel
policy.
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6.
Benefits:
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During
the portion of the Term of Employment beginning on the effective date of
your appointment set forth in Section 1, above, and ending on May 31,
2011, ZBB will provide you with, and you will be eligible for, medical,
dental, vision and life insurance benefits under UnitedHealthcare
Insurance Company Policy Number G/GA779840BW as sponsored by TE
immediately prior to such effective date and other employee benefits
identical to those provided by TE to you immediately prior to such
effective date; provided, that
ZBB shall have the right, in its sole discretion, to limit such benefits
in order to comply with all applicable laws and regulations governing the
employee benefit plans of ZBB’s controlled group; and during the remainder
of the Term of Employment, ZBB will provide you with, and you will be
eligible for, all benefits of employment generally made available to the
senior executives of ZBB (collectively, the “Benefit Plans”), subject to
and on a basis consistent with the terms, conditions and overall
administration of such Benefit Plans. You will be considered for
participation in Benefit Plans which by the terms thereof are
discretionary in nature (such as stock option plans) on the same basis as
other executive personnel of ZBB of similar
rank. Notwithstanding the foregoing, you may elect either to
participate in ZBB’s health Benefit Plan or obtain other health
insurance. If you elect to obtain other health insurance, ZBB
will pay the monthly premiums for such insurance up to an amount equal to
$900 per month paid either directly by ZBB to the insurance provider, or
reimbursed to you on a monthly basis as soon as practicable following your
submission to ZBB of proof of payment of each monthly premium
payment. You will be solely responsible for the payment of
monthly premiums in excess of this amount. ZBB’s payment of
such premiums shall constitute an “accident or health plan” for the
purposes of Section 106 of the Internal Revenue Code of 1986, as
amended.
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Xx.
Xxxxxxx Xxxxxxxx
January
21, 2011
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On
a pre-tax basis, ZBB will provide a policy comparable to other ZBB
executives or reimburse you for the payment of premiums for a long-term
disability insurance policy from an insurance carrier mutually acceptable
to ZBB and you. To the extent that ZBB reimburses you for the
payment of premiums, such premiums will be paid either directly by ZBB to
the insurance provider, or reimbursed to you as soon as practicable
following your submission to ZBB of proof of payment of each premium
payment. You will be solely responsible for the payment of
annual premiums in excess of this amount. ZBB’s payment of such
premiums shall constitute an “accident or health plan” for the purposes of
Section 106 of the Internal Revenue Code of 1986, as
amended.
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We
also offer you six (6) weeks of vacation per calendar
year.
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7.
Benefits Upon
Termination:
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Without
giving effect to the timing of the payment of your base salary for 2011 as
set forth in Section 3, above, in the event that (a) ZBB terminates your
employment for any reason other than “Cause” or “Disability”, or
(b) you terminate your employment with ZBB for “Good Reason”, you
will be entitled to a severance payment in an amount equal to the greater
of (i) 12 months of your annual base salary as then in effect, or (ii) the
remaining number of complete months in the scheduled term set forth in
Section 1, above, of your annual base salary as then in effect, paid in
accordance with ZBB’s normal salaried payroll practices as then in
effect. In the event your employment with ZBB is terminated due
to “Disability,” you will be entitled to a severance payment in an amount
equal to your base salary as then in effect from the date of termination
through the date on which benefits under ZBB’s long-term disability policy
begin, but in no event longer than 90 days, paid in accordance with ZBB’s
normal salaried payroll practices as then in effect. The
definitions of “Cause”, “Disability” and “Good Reason” are attached as
Exhibit A
to this letter agreement. In each case, this severance benefit
will be contingent on your execution of a release in a form acceptable to
ZBB which is not withdrawn or otherwise revoked within the applicable
statutory and/or regulatory time periods or otherwise. You will
also be entitled to all accrued and unpaid benefits under any Benefit
Plans in which you participate through the date of
termination. For purposes of this Section 7, as of the
effective date of any termination of your employment described in clause
(a) or clause (b) above, the greater of (A) 12 months following such date,
or (B) the number of complete months remaining in the scheduled term set
forth in Section 1, above, as of such date shall be referred to as the
“Severance Period”.
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Xx.
Xxxxxxx Xxxxxxxx
January
21, 2011
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If
you terminate your employment with ZBB for “Good Reason” or if ZBB
terminates your employment without “Cause”, and if you elect to continue
your health insurance coverage under the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”) following such termination, then ZBB shall
pay your monthly premium under COBRA until the earlier of: (a) the
last day of Severance Period, or (b) the date on which you are offered or
obtain health insurance coverage in connection with new employment or
self-employment. If you are not eligible for COBRA coverage
because you have waived health insurance coverage, then, subject to the
dollar limits above, ZBB shall pay your monthly premium for long-term
disability conversion coverage until the earlier of: (i) the last day
of the Severance Period, or (ii) the date on which you are offered or
obtain long-term disability insurance coverage in connection with new
employment or self-employment.
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If
you terminate your employment with ZBB other than for “Good Reason” or ZBB
terminates your employment for “Cause”, you will be entitled to the
payment of any accrued but unpaid base salary through the date of
termination, plus all accrued and unpaid benefits under any Benefit Plans
in which you participate through the date of termination. In
either case, you will not be entitled to any severance payment and you
will not be entitled to the payment of the premiums specified
above.
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As
a condition to your appointment, you will be required to enter into a
restrictive covenant agreement. If you breach the provisions of
the restrictive covenant agreement, then you shall forfeit any unpaid
severance payments and COBRA and long-term disability conversion coverage
premiums as of the time of ZBB’s determination of the breach, and you
shall repay to ZBB any severance payments and COBRA and long-term
disability conversion coverage premiums you have received as of the time
of ZBB’s determination of the breach as soon as practicable after ZBB
provides a written demand for payment to
you.
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Upon
the termination, for whatever reason, of your employment with ZBB, you
will be entitled to keep the cell phone number used by you immediately
prior to the effective date of such termination; provided, that
you agree to pay when due all transfer fees and other costs associated
with the transfer of such cell phone number to you
personally.
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You
hereby represent and warrant that you are not bound by any employment or
confidentiality agreement or other obligation or commitment, whether
contractual or otherwise, that would be inconsistent, or place you in a
position of conflict, with your position as Vice President of Electronics
Development of ZBB, your position as President of Tier or this letter
agreement.
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Xx.
Xxxxxxx Xxxxxxxx
January
21, 2011
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As
a condition to your appointment, you will also be required to submit to a
formal background check and a drug test and the results must be
satisfactory to ZBB’s Board of
Directors.
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8. Miscellaneous
Provisions:
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You
hereby covenant and agree, upon the termination, for whatever reason, of
your employment with ZBB, to resign as a member of the Board of Directors
of Tier, effective as of the effective date of such termination of
employment.
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You
hereby covenant and agree, upon the earlier to occur of (a) the first
anniversary of the date of the payment in full of the principal and
interest balance under the Note, or (b) the termination, for whatever
reason, of your employment with ZBB, to resign as a member of the Board of
Directors of ZBB, effective as of the effective date of such earlier
occurrence, pursuant to the signed resignation attached hereto as Exhibit B.
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This
letter agreement shall be binding upon any successor (whether direct or
indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of ZBB’s business
and/or assets. For all purposes under this Agreement, the term
“ZBB” shall include any successor to ZBB’s business and/or assets which
becomes bound by this letter
agreement.
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This
letter agreement and all of your rights hereunder shall inure to the
benefit of, and be enforceable by, your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.
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Notices
and all other communications contemplated by this letter agreement shall
be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by overnight courier or U.S. registered or
certified mail, return receipt requested and postage
prepaid. In the case of notices to you, notices shall be
addressed to you at the home address which you most recently communicated
to ZBB in writing. In the case of notices to ZBB, notices shall
be addressed to its corporate headquarters, and all notices shall be
directed to the attention of its
Secretary.
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No
provision of this letter agreement shall be modified, waived or discharged
unless the modification, waiver or discharge is agreed to in writing and
signed by you and by an authorized officer of ZBB (other than
you). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this letter agreement by
the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another
time.
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No
other agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth
or referenced in this letter agreement have been made or entered into by
either party with respect to the subject matter hereof. This
letter agreement and the other agreements, representations and
understandings expressly set forth or referenced herein contain the entire
understanding of the parties with respect to the subject matter
hereof.
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Xx.
Xxxxxxx Xxxxxxxx
January
21, 2011
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Any
termination of this letter agreement shall not release either ZBB or you
from our respective obligations to the date of termination nor from the
provisions of this letter agreement which, by necessary or reasonable
implication, are intended to apply after termination of this letter
agreement.
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The
validity, interpretation, construction and performance of this letter
agreement shall be governed by the laws of the State of Wisconsin (other
than provisions governing the choice of
law).
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The
invalidity or unenforceability of any provision or provisions of this
letter agreement shall not affect the validity or enforceability of any
other provision hereof, which shall remain in full force and
effect.
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This
letter agreement and all your rights and obligations hereunder are
personal to you and may not be transferred or assigned by you at any
time. ZBB may assign its rights under this letter agreement to
any entity that assumes ZBB’s obligations hereunder in connection with any
sale or transfer of all or a substantial portion of ZBB’s assets to such
entity.
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This
letter agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This letter agreement
may be executed in facsimile copy or by other electronic means with the
same binding effect as the
original.
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[Intentionally left
blank]
Xx.
Xxxxxxx Xxxxxxxx
January
21, 2011
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We feel
that this offer is exceptionally attractive and reflects the confidence we have
in your ability to guide the growth of Tier and to achieve a significant
enhancement of ZBB shareholder value. We very much look forward to
having you join us as ZBB’s Vice President of Electronics Development and as
Tier’s President. If you agree to the terms of this letter agreement,
please execute two (2) copies of the letter agreement below.
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With
warm regards,
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ZBB
ENERGY CORPORATION
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/s/
Xxxx X. Xxxxxxxxx
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Xxxx
X. Xxxxxxxxx
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President
and Chief Executive Officer
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Agreed
and accepted as of
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January
21, 2011.
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/s/ Xxxxxxx
Xxxxxxxx
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Xxxxxxx
Xxxxxxxx
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EXHIBIT
A
DEFINITIONS
Cause. Termination
of your employment with ZBB for “Cause” shall mean termination of your
employment with ZBB due to (1) any failure by you to substantially perform
your duties with ZBB or Tier (other than by reason of illness) which occurs
after ZBB has delivered to you a demand for performance which specifically
identifies the manner in which ZBB believes you have failed to perform your
duties, and you fail to resume performance of your duties on a continuous basis
within fourteen (14) days after receiving such demand, (2) your
commission of a material violation of any law or regulation applicable to ZBB or
any of its affiliates or subsidiaries or your activities in respect of ZBB or
any of its affiliates or subsidiaries, (3) your commission of any material
act of dishonesty or disloyalty involving ZBB or any of its affiliates or
subsidiaries, (4) any violation by you of a ZBB or Tier policy of material
import after written notice and reasonable opportunity to cure, (5) any act by
you of moral turpitude which is likely to result in material discredit to or
material loss of business, reputation or goodwill of ZBB or Tier, (6) your
chronic absence from work other than by reason of a serious health condition,
(7) your commission of a crime which substantially relates to the
circumstances of your position with ZBB or any of its affiliates or subsidiaries
or which has material adverse effect on ZBB or any of its affiliates or
subsidiaries, or (8) the willful engaging by you in conduct which is
demonstrably and materially injurious to ZBB or any of its affiliates or
subsidiaries. For purposes hereof, Tier shall be deemed an affiliate
of ZBB.
Disability. “Disability”
shall mean (1) you are unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, or (2) you have been, by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than
three months under any accident, disability or health plan.
Good
Reason. Termination of your employment with ZBB for “Good
Reason” shall mean the termination of your employment with ZBB within thirty
(30) days after any of the following: (1) a change in your position or
authority with ZBB which materially reduces your level of responsibility and/or
a reduction in your base salary (except to the extent the base salaries of
substantially all of the executive officers of ZBB are reduced proportionately),
(2) a notification by ZBB to you that your principal place of employment will be
relocated to an office or location that is more than 20 miles from the office or
location at which you were principally employed immediately after the date of
your appointment as Vice President of Electronics Development of ZBB and
President of Tier and that is no closer to your principal residence, or (3) a
material breach by ZBB of any term of this letter agreement following written
notice thereof and the failure of ZBB to cure such breach within ten days of
such written notice. Notwithstanding the above to the contrary, “Good
Reason” does not exist unless you object to any change, reduction, notification
or breach described above by written notice to ZBB within thirty (30) business
days after such change, reduction, notification or breach occurs, and ZBB fails
to cure such change, reduction or breach within ten (10) business days after
such notice is given.
