EMPLOYMENT AGREEMENT
Exhibit
10.5
THIS
EMPLOYMENT AGREEMENT
(this
“Agreement”),
is
entered into on October 18, 2006, by and between H2Diesel, Inc., a Delaware
corporation its successors and assigns (collectively the “Company”),
and
Xxxxx X. Xxxxxxxxx (the “Executive”).
WHEREAS,
the
Company desires to employ Executive, and Executive desires to be employed by
the
Company, upon the terms and conditions hereinafter set forth.
NOW,
THEREFORE,
in
consideration of the covenants herein contained, and other good and valuable
consideration, the receipt and adequacy of which are hereby forever
acknowledged, the parties, with the intent of being legally bound hereby, agree
as follows:
1. Term
.
Subject
to Section 5 hereof, the term of this Agreement shall commence on October 18,
2006 (the “Effective
Date”)
and
shall end on December 31, 2009 (the “Initial
Term”);
provided, however, that the term of this Agreement shall automatically be
extended beyond the Initial Term for a one year period, effective on December
31, 2009 (the “Renewal
Term”)
unless
the Company notifies the Executive or the Executive notifies the Company by
a
date which is 270 days prior to the expiration of the Initial Term that the
Company or the Executive, as the case may be, desires not to extend the Initial
Term. This Agreement shall continue for successive one-year Renewal Terms unless
and until the Company gives 270 days’ notice to the Executive or the Executive
gives 270 days’ notice to the Company that the Company or the Executive, as the
case may be, desires not to extend term of this Agreement beyond the end of
the
then-current Renewal Term. The term of this Agreement, whether during the
Initial Term or any Renewal Term, shall be referred to as the “Term.”
2. Position
and Responsibilities.
2.1 Position.
Executive will be employed by the Company to render services to the Company
in
the position of President and Chief Executive Officer. In that capacity, the
Executive shall solely, under supervision of the Chairman of the Board (the
“Chairman”)
and
the Board of Directors of the Company (the “Board”),
have
responsibility for the overall management and operation of the Company’s
businesses, affairs, operations, and administration and perform other duties
reasonably assigned to the Executive from time to time by the Chairman or the
Board provided the duties relate to the business of the Company and are
consistent with the Executive’s position as President and Chief Executive
Officer, as well as Executive’s background and experience. The Executive shall
diligently perform all such services. The Executive shall report directly to
the
Chairman. Executive shall, in all material respects, abide by all material
and
written Company rules, policies, and practices as adopted or modified, from
time
to time, in the Company’s sole discretion, and of which the Executive is made
aware, and Executive shall attempt to use his best efforts in the performance
of
his duties hereunder.
2.2 Other
Activities.
While employed by the Company, Executive shall devote substantially all of
his business time, attention, and skill to perform his assigned duties,
services, and responsibilities hereunder, and shall act at all times in the
furtherance of the Company’s business and interests. Executive shall not, during
the term of this Agreement engage, directly or
indirectly,
in any other business activity (whether
or not pursued for pecuniary advantage) which materially interferes with
Executive’s duties and responsibilities hereunder or create a conflict of
interest with the Company. The foregoing limitations shall not prohibit
Executive from making and managing his personal and family investments in such
form or manner as will neither require Executive’s services in the operation or
affairs of the companies or enterprises in which such investments are made
nor
materially interfere with the performance of the Executive’s duties hereunder.
The Company acknowledges that Executive will from time-to-time serve on the
boards of corporations, advisory committees, trade organizations, philanthropic
organizations or other entities. Accordingly, the foregoing limitations shall
not prohibit Executive from serving on the boards of corporations, advisory
committees, trade organizations, philanthropic organizations or other entities,
provided that such service does not create a material conflict of interest
with
the Company. Notwithstanding the foregoing, the Company acknowledges and accepts
that the Executive has an ongoing consulting obligation to the San Diego Unified
Port District of San Diego, California, through December 31, 2006. The Company
further acknowledges that the Executive’s fulfillment of this obligation will
not cause him to be in breach of the Agreement.
2.3 No
Conflict.
Executive represents and warrants that Executive’s execution of this
Agreement, Executive’s employment with the Company, and the performance of
Executive’s proposed duties under this Agreement shall not violate any
obligations Executive may have to any other employer, person, or entity,
including but not limited to any obligations with respect to non-competition
and
not disclosing any proprietary or confidential information of any other person
or entity.
3. Compensation
and Benefits.
3.1 Base
Salary.
In consideration of the services to be rendered under this Agreement, the
Company shall pay Executive an initial base salary of Twenty Thousand Dollars
($20,000.00) per month (“Base
Salary”)
in
accordance with the Company’s standard payroll practices. Such Base Salary shall
be subject to such withholding or deductions as may be mutually agreed between
the Company and Executive or as required by law. Executive’s Base Salary will be
reviewed annually, and may be adjusted (upward, but not downward) at the
discretion of the Compensation Committee of the Board.
3.2 Stock
Options.
In
consideration of the services to be rendered under this Agreement:
(a)
The
Company hereby grants to the Executive options to purchase 800,000 shares of
the
Company’s Common Stock at a price of $1.50 per share, of which 200,000 options
shall vest on the date hereof and the remainder shall vest in annual tranches
as
follows (collectively, the “Time Based Options”):
Options
to purchase 200,000 shares shall vest on the first anniversary of the Effective
Date;
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Options
to purchase 200,000 shares shall vest on the second anniversary of the Effective
Date; and
Options
to purchase 200,000 shares shall vest on the third anniversary of the Effective
Date.
(b)
The
Company hereby grants to the Executive options to purchase up to 1,200,000
shares of the Company’s Common Stock at a price of $1.50 per share which options
shall vest in annual tranches if certain annual performance targets (the
“Performance Targets”) to be mutually established in good faith by the Executive
and the Compensation Committee of the Board (the “Compensation Committee”) are
met, as more fully set forth below (collectively, the “Performance Options”):
Options
to purchase up to 400,000 shares shall vest in respect of the fiscal year
ending
December 31, 2007 if the Performance Targets for such year are met;
Options
to purchase
up to 400,000 shares shall vest in respect of the fiscal year ending December
31, 2008 if the Performance Targets for such year are met; and
Options to purchase up to 400,000 shares shall vest in respect of the fiscal year ending December 31, 2009 if the Performance Targets for such year are met.
It
is
contemplated by the parties that the Company may be acquired by an existing
publicly traded entity by means of a reverse merger. In the event of such a
merger, the Company shall require such publicly traded to assume the Time Based
Options and the Performance Options and to provide that they will be converted
to an equivalent number of options for the common stock of such publicly traded
company.
Commencing
with the fiscal year ending December 31, 2007, the Performance Targets for
each
fiscal year shall be established by the Compensation Committee not later than
February 28 of such fiscal year. The Compensation Committee shall determine
whether the Performance Targets for the preceding fiscal year have been met
not
later than seven days after the date that the Company’s audited financial
statements in respect of such fiscal year become available. If such Performance
Targets are determined to have been met, the Performance Options in respect
of
such fiscal year shall be deemed to be vested as of such date of determination.
The Time Based Options and the Performance Options shall be more fully
documented in one or more Stock Option Agreement(s) containing customary terms
and conditions and shall expire on the tenth (10th)
anniversary of the Effective Date.
3.3 Equity
Compensation.
To the extent that the Board and the stockholders of the Company approve
an equity compensation or incentive plan (the “Plan”),
the
Executive shall be eligible to participate in such plan. The amount of any
equity awards to the Executive and terms and conditions thereof shall be
determined not less frequently than annually by a committee of the Board
appointed pursuant to the Plan, or by the Board, in its discretion and pursuant
to the Plan.
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3.4 Benefits.
Executive shall be entitled to participate in the pension and health,
welfare and disability benefit plans and perquisites that the Company generally
makes available to its employees or other executives, at a level commensurate
with his position (the “Executive
Benefits”).
3.5 Vacation.
During
the Term, Executive shall be entitled to vacation each year in accordance with
the Company’s policies in effect from time to time, but in no event less than
four (4) weeks paid vacation per calendar year. The Executive shall also be
entitled to such periods of sick leave as is customarily provided by the Company
for its senior executive employees. Such vacation time and sick time can be
carried over from year to year; provided that the Executive may not take in
excess of six weeks of vacation in any calendar year without the express prior
consent of the Board.
3.6 Business
Expenses.
Throughout the term of Executive’s employment hereunder, the Company shall
reimburse Executive for all reasonable and necessary travel, entertainment,
promotional, and other business expenses that may be incurred by Executive
in
the course of performing Executive’s duties. Such expenses shall be reimbursed
by the Company in accordance with policies and practices adopted, from time
to
time, by the Company concerning expense reimbursement for employees and shall
be
reimbursed upon timely presentation to the Company of an itemized expense
statement with respect thereto, including substantiation of expenses incurred
and such other documentation as may be required by the Company’s reimbursement
policies from time to time and in accordance with Internal Revenue Service
guidelines.
3.7 Bonus
Plan.
The Executive shall be eligible to participate in an annual cash bonus
plan established by the Compensation Committee (the “Bonus
Plan).
The
Executive’s bonus in respect of the fiscal year ending December 31, 2007 shall
be targeted to a maximum of 50% of the Executive’s Base Salary and thereafter be
set by the Compensation Committee. Commencing with the fiscal year ending
December 31, 2007, the Bonus Plan and the performance targets (the “Bonus
Plan Targets”)
for
each fiscal year shall be mutually established in good faith by the Compensation
Committee in consultation with the Executive not later than February 28 of
such
fiscal year. The Compensation Committee shall determine whether the Bonus Plan
Targets for the preceding fiscal year have been met not later than seven days
after the date that the Company’s audited financial statements in respect of
such fiscal year become available and the bonus in respect of such fiscal year,
if earned, shall be payable promptly after such determination. Any bonus paid
under this Section shall be paid at the next regularly scheduled pay period
and
subject to required withholdings.
3.8 Relocation
Expenses The
Executive hereby agrees to relocate once within 50 miles of the Company’s
executive offices, which will be established at a location to be determined
by
the Board, currently anticipated to be at or adjacent the Company’s initial
bio-fuel production plant. The Company will reimburse the Executive in an amount
of up to $50,000 for all reasonable and necessary actual out-of-pocket
relocation expenses paid or incurred by the Executive. Relocation expenses
shall
include expenses incurred in connection with the following:
(a) physical
packing, moving and unpacking of household goods;
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(b) storage
of household goods, if necessary;
(c) real
estate brokerage and closing costs and reasonable attorney’s fees (if any) in
connection with the purchase and / or sale of a residence;
(d) the
physical transport of the Executive’s personal vehicles to the Executive’s new
residence;
(e) travel,
meals, and lodging expenses for the Executive and his immediate family in
transit from Houston, TX to the Executive’s new residence; and
(e) travel,
meals, and lodging expenses for the Executive and his immediate family for
two
house hunting trips not to exceed a total of ten days.
4. Nondisclosure
of Confidential and Proprietary Information.
At all times before and after the termination of Executive’s service (for
any reason by the Company or by Executive), Executive agrees to keep all
Confidential or Proprietary Information in strict confidence and secrecy, and
not to disclose or use the Confidential or Proprietary Information in any way
outside of Executive’s assigned responsibilities for the Company. “Confidential
or Proprietary Information” means any non-public information or idea (whether or
not a trade secret) relating to the business of the Company that is not
generally known outside the Company or not generally known in the industry
or by
persons engaged in businesses similar to that of the Company (including
information which may be available from sources outside the Company, but not
in
the form, arrangement, or compilation in which it exists within the Company)
that the Company considers confidential, including, but not limited to: (i)
customer lists and records of current, former, and prospective customers; (ii)
special needs and characteristics of current, former, or prospective customers;
(iii) present or future business plans; (iv) trade secrets, proprietary, or
confidential information of any customer or other entity to which the Company
owes an obligation not to disclose such information; (v) marketing, financing,
business development, or strategic plans; (vi) sales methods, practices, and
procedures; (vii) personnel information; (viii) research and development data
and projections; (ix) information or data concerning the Company’s competitive
position in its various lines of business; (x) existing, new, or envisioned
products, programs, services, methods, techniques, processes, projects, or
systems; and (xi) sales, pricing, billing, costs, and other financial data
and
projections. All documents containing this information will be considered
Confidential or Proprietary Information whether or not marked with any
proprietary or confidential notice or legend. Notwithstanding the foregoing,
nothing herein shall prohibit the Executive from disclosing any information:
(1)
in connection with performance of his duties hereunder as he deems in good
faith
to be necessary or desirable; (2) if compelled pursuant to the order of a court
or other governmental or legal body having jurisdiction over such matter; or
(3)
if such information has otherwise become public through no wrongful act of
the
Executive. In the event Executive is compelled by order of a court or other
governmental or legal body to communicate or divulge any such information,
knowledge or data, he shall promptly notify the Company.
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5.
Termination; Rights and Obligations on Termination.
The
Executive’s employment under this Agreement may be terminated in any one of the
followings ways:
(a) Death.
The death of Executive shall immediately and automatically terminate the
Executive’s employment under this Agreement. If Executive dies while employed by
the Company, any vested options may be exercised on or before the option’s
expiration date. Any option that remains unexercised after this period shall
be
forfeited. Upon the Executive’s death, the Executive’s legal representative
shall receive: (1) any compensation earned but not yet paid, including and
without limitation, any bonus if declared or earned but not yet paid for a
completed fiscal year, any amount of Base Salary earned but unpaid, any accrued
vacation pay, and any unreimbursed business expenses, which amounts shall be
promptly paid in a lump sum, and (2) any other amounts or benefits owing to
the
Executive under the then applicable employee benefit plans, long term incentive
plans or equity plans and programs of the Company which shall be paid or treated
in accordance with the terms of such plans and programs (subsections (1) and
(2)
shall be collectively referred to as, the “Accrued
Amounts”).
Other
than the benefits described above, no further compensation or benefits shall
be
due or owing upon the Executive’s death.
(b) Disability.
If as a result of incapacity due to physical or mental illness or injury,
Executive shall have been absent from Executive’s duties hereunder for six (6)
consecutive months, then thirty (30) days after receiving written notice (which
notice may occur before or after the end of such six (6) month period, but
which
shall not be effective earlier than the last day of such six (6) month period),
the Company may terminate Executive’s employment hereunder provided Executive is
unable to substantially perform his duties hereunder at the conclusion of such
notice period (a “Disability”),
as
determined by a physician mutually selected by the parties hereto. In the event
the Executive’s employment is terminated as a result of Disability, Executive
shall receive from the Company, in a lump-sum payment due within ten (10) days
of the effective date of termination, an amount equal to the sum of the Base
Salary that would have been paid to Executive through the end of the then
remaining Term if the Executive were not disabled or for six (6) months,
whichever is less (assuming that Executive would have received no further
increases in his Base Salary). The Executive shall also be entitled to the
Accrued Amounts. Additionally, if Executive is terminated due to a Disability,
the next unvested tranche of Performance Options will vest if the applicable
Performance Targets are actually met. Any vested options may be exercised on
or
before the option’s expiration date. Any option that remains unexercised after
this period shall be forfeited. Other than the benefits described above, no
further compensation or benefits shall be due or owing upon the Executive’s
termination due to a Disability.
(c) Cause.
The Company may terminate this Agreement immediately upon written notice
to Executive for “Cause,” which shall mean: (i) the Executive’s willful,
material, and irreparable breach of this Agreement; (ii) Executive’s willful
misconduct in the performance of any of his material duties and responsibilities
hereunder that has a material adverse effect on the Company; (iii) Executive’s
intentional and continued non-performance (other than by reason of disability
or
incapacity) of any of the Executive’s material duties and responsibilities
hereunder which
continues for ten (10) days after receipt by Executive of written notice from
the Company except when Executive is diligently working to cure such
non-performance and the cure requires greater than ten (10) days; (iv)
Executive’s material and willful dishonesty or fraud with regard
6
to
the
Company (other than good faith expense account disputes) that has a material
adverse effect on the Company (whether to the business or reputation of the
Company; or (v) Executive’s conviction of a felony (other than as a result of
vicarious liability or a traffic related offense). For purposes of this
paragraph, no act, or failure to act, on Executive’s part shall be considered
“willful” unless done or omitted to be done, by him not in good faith and
without reasonable belief that his action or omission was in the best interests
of the Company. In the event of the Executive’s termination of employment by the
Company for Cause the Executive shall receive the Accrued Amounts and the
Executive may exercise his vested options for a period of thirty (30) days
following termination for Cause.
Notwithstanding
the foregoing, following the Executive’s receipt of written notice from the
Company of any of the events described in subsections (i) through (iv) above,
the Executive shall have ten (10) days in which to cure the alleged conduct
(if
curable), except when Executive is diligently working to cure such
non-performance and the cure requires greater than ten (10) days.
(d) Without
Cause.
At any time after Executive’s commencement of employment, the Company may,
without Cause, terminate the Executive’s employment, effective thirty (30) days
after written notice is provided to Executive. In the event Executive is
terminated by the Company without Cause, Executive shall receive from the
Company within ten (10) days after such termination, in a lump sum payment,
an
amount equal to the sum of the Base Salary and bonus, if any, that would have
been paid to Executive through the end of the then remaining Term if the
Executive had not been terminated or for twelve (12) months, whichever is less
(assuming that Executive would have received no further increases in his Base
Salary). For the purpose of this paragraph all applicable Bonus Plan targets
will be deemed to have been achieved. The Executive shall also receive the
Accrued Amounts. Additionally, if Executive is terminated by the Company without
Cause, all of the unvested Time Based Options will vest and the next tranche
of
unvested Performance Options will vest as if the applicable Performance Targets
had been meet. Any vested options may be exercised on or before the option’s
expiration date. Any option that remains unexercised after this period shall
be
forfeited.
(e) Resignation
for Good Reason.
At any time after Executive’s commencement of employment, the Executive
may resign for Good Reason (as defined below) effective thirty (30) days after
written notice is provided to the Company. Upon the Executive’s termination of
employment for Good Reason, the Executive shall be entitled to all payments
and
benefits as if his employment was terminated by the Company without Cause as
provided in subsection (d) above. For purposes of this Agreement, Good Reason
means: (i) any
adverse change in the Executive’s position, title or reporting relationship or a
material diminution of his duties, responsibilities or authority or the
assignment to Executive of duties or responsibilities that are inconsistent
with
the Executive’s position; (ii) the
failure by the Company to continue in effect any material compensation or
benefit plan or arrangement in which Executive participates unless an equitable
and substantially comparable arrangement (embodied in a substitute or
alternative plan) has been made with respect to such plan or arrangement, or
the
failure by the Company to continue Executive’s participation therein (or in such
substitute or alternative plan or arrangement) on a basis not less favorable,
both in terms of the amount of benefits provided and the level of participation
relative to other participants, as existed at the time of the Executive’s
termination of employment; (iii) any
material breach of this Agreement (or any other written
7
agreement
entered into between the Executive and the Company) by the Company; (iv) failure
of any successor to the Company (whether direct or indirect and whether by
merger, acquisition, consolidation or otherwise) to assume in a writing
delivered to Executive upon the assignee becoming such, the obligations of
the
Company hereunder;
or (v)
the Company requires the Executive to relocate to a location greater than 100
miles from his new residence established pursuant to paragraph 3.8; provided,
however, that the Company shall not require such relocation if the Executive
can
commute to his principal office via a non-stop commercial flight and the Company
agrees to reimburse the Executive for the cost of weekly round trip
airfare.
Notwithstanding
the foregoing, following the Company’s receipt of written notice from the
Executive of any of the events described in subsections (i) through (iv) above,
the Company shall have ten (10) days in which to cure the alleged conduct (if
curable).
(f) Change
in Control of the Company.
In the event that a Change of Control (as defined below) in the Company
shall occur during the Term of this Agreement, and within 12 months thereafter
the Executive’s employment shall be terminated without Cause pursuant to Section
5(d) above or for Good Reason pursuant to Section 5(e) above, then the
Executive’s severance compensation will be as set forth above for termination
without Cause or Good Reason, as the case maybe; provided, however, that all
unvested Time Based Options and Performance Options will vest and remain
exercisable for the balance of the option term. The Company shall have no
further liability under this Agreement.
For
purposes of this Agreement, the term “Change of Control” shall
mean:
(i) approval
by the stockholders of the Company of (x) a reorganization, merger,
consolidation or other form of corporate transaction or series of transactions
(other than the issuance by the Company of equity securities to investors
whether in private placements or public offerings (an “Equity
Offering”)),
in
each case, with respect to which persons who were the stockholders of the
Company immediately prior to such reorganization, merger or consolidation or
other transaction do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors
of
the reorganized, merged or consolidated company’s then outstanding voting
securities, in substantially the same proportions as their ownership immediately
prior to such reorganization, merger, consolidation or other transaction, or
(y)
a liquidation or dissolution of the Company or (z) the sale of all or
substantially all of the assets of the Company (unless such reorganization,
merger, consolidation or other corporate transaction, liquidation, dissolution
or sale is subsequently abandoned). For the purpose of this Agreement
“substantially all’ shall mean the assets of the Company from which was
generated 75% of the Company’s revenues or 60% of the of the Company’s net
income during the prior fiscal year;
(ii) individuals
who, as of the Effective Date of this Agreement, constitute the Board (the
“Incumbent
Board”)
cease
for any reason to constitute at least a majority of the Board, provided that
any
person becoming a director subsequent to the Effective Date of this Agreement
whose election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors 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 the directors of the
Company)
8
shall
be,
for purposes of this Agreement, considered as though such person were a member
of the Incumbent Board; or
(iii) the
acquisition (other than from the Company) by any person, entity or “group”,
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the “Securities
Exchange Act”),
of
beneficial ownership within the meaning of Rule 13-d promulgated under the
Securities Exchange Act of more than 50% of either the then outstanding shares
of the Company’s common stock or the combined voting power of the Company’s then
outstanding voting securities entitled to vote generally in the election of
directors (hereinafter referred to as the ownership of a “Controlling
Interest”)
excluding, for this purpose, any acquisitions by (1) the Company or its
subsidiaries, (2) any person, entity or “group” that as of the Effective Date of
this Agreement owns beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act) of a Controlling Interest, (3)
any employee benefit plan of the Company or its subsidiaries, or (4) any
acquisition in one or more Equity Offerings.
(g) Resignation
without Good Reason or Retirement by Executive.
The Executive may resign without Good Reason or retire upon 90 days’
written notice, and upon such termination of employment he shall receive the
Accrued Amounts.
(h) Superseding
Agreement.
This
Agreement shall be terminated immediately and automatically if the parties
enter
into another employment agreement which supersedes this Agreement. In the event
the parties enter into a superseding agreement, no severance pay or other
compensation shall be due to Executive with respect to the termination of this
Agreement.
6. Use
and Return of Company Property.
Executive acknowledges the Company’s proprietary rights and interests in its
tangible and intangible property. Accordingly, Executive agrees that upon
termination of Executive’s employment with the Company, for any reason, and at
any time, Executive shall deliver to the Company all Company property,
including: (a) all documents, contracts, writings, disks, diskettes, computer
files or programs, computer-generated materials, information, documentation,
or
data stored in any medium, recordings and drawings pertaining to trade secrets,
proprietary or confidential information, or other inventions and works of the
Company; (b) all records, designs, plans, sketches, specifications, patents,
business plans, financial statements, accountings, flow charts, manuals,
notebooks, memoranda, lists, and other property delivered to or compiled by
Executive, by or on behalf of the Company or any of its representatives,
vendors, or customers which pertain to the business of the Company, all of
which
shall be and remain the property of the Company, and shall be subject, at all
times, to its discretion and control; (c) all equipment, devices, products,
and
tangible property entrusted to Executive by the Company; and (d) all
correspondence, reports, records, notes, charts, advertisement materials, and
other similar data pertaining to the business, activities, or future plans
of
the Company, in the possession or control of Executive, shall be delivered
promptly to the Company without request by it. Executive shall certify to the
Company, in writing, within five (5) days of any request by the Company, that
all such materials have been returned to the Company. Notwithstanding the
foregoing, the Executive may retain his rolodex and similar address and
telephone directories (whether in writing or electronic format).
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6.1
Non-competition.
At all times while the Executive is employed by the Company and for a
period of: (i) two (2) years after any termination of the Executive’s employment
for Cause or the Executive’s termination of his employment without Good Reason;
(ii) one (1) year after any termination of the Executive’s employment by the
Company without Cause or the Executive’s termination for Good Reason; and (iii)
one (1) year following the non-renewal of this Agreement, the Executive shall
not, directly or indirectly, engage in or have any interest in any person
(whether as an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that directly or indirectly (or through
any
affiliated entity) competes with the Company’s Business (as defined below);
provided that such provision shall not apply to the Executive’s ownership of
securities of the Company or the acquisition by the Executive, solely as an
investment, of securities of any issuer that is registered under Section 12(b)
or 12(g) of the Securities Exchange Act and that are listed or admitted for
trading on any United States national securities exchange or that are quoted
on
the National Association of Securities Dealers Automated Quotations System,
or
any similar system or automated dissemination of quotations of securities prices
in common use, so long as the Executive does not control, acquire a controlling
interest in or become a member of a group which exercises direct or indirect
control of, more than five percent of any class of capital stock of such issuer.
For purposes of this Section
6.1,
the
term “Business” shall mean the Business and any other business in which the
Company is engaged prior to the delivery of a notice of termination by the
Company or the Executive hereunder and which business the Company is engaged
at
the date of termination of the Executive’s employment.
6.2 Non-Solicitation.
At all times while the Executive is employed by the Company and for a period
of:
(i) two (2) years after any termination of the Executive’s employment for Cause
or the Executive’s termination of his employment without Good Reason; (ii) the
lesser of one (1) year or the remainder of the Term after any termination of
the
Executive’s employment by the Company without Cause or the Executive’s
termination for Good Reason; and (iii) one (1) year following the non-renewal
of
this Agreement, the Executive shall not, directly or indirectly, for himself
or
for any other person (a) employ or attempt to employ or enter into any
contractual arrangement with any employee or former employee of the Company,
or
(b) call on or solicit any of the actual or targeted prospective customers
or
suppliers of the Company on behalf of any person in connection with any business
that competes with the Business of the Company nor shall the Executive make
known the names and addresses of such customers or suppliers or any information
relating in any manner to the Company’s trade or business relationships with
such customers or suppliers, other than in connection with the performance
of
Executive’s duties under this Agreement.
6.3 Reasonable
Restrictions.
Executive hereby acknowledges and agrees that the limits on his ability to
engage in activities that are competitive with the Company, as defined above,
are warranted in order to protect the Company’s trade secrets and Confidential
or Proprietary Information, and further, are warranted to protect the Company
in
developing and maintaining its reputation, goodwill, and status in the
marketplace. Executive specifically agrees that the time period, geographic
scope, and nature of the restrictions set forth in Sections 6.1 and 6.2 are
reasonable and necessary to protect the Company’s legitimate business interests
and do not impose any limitations greater than those necessary to protect those
interests.
10
6.4.
Remedies.
Executive hereby acknowledges and agrees that the services Executive has
rendered and will continue to render to the Company are of a special and unique
character, which gives this Agreement a peculiar value to the Company, and
further acknowledges and agrees that the loss of those services to a direct
competitor or the direct competition by Executive against the Company cannot
be
reasonably or adequately compensated for by damages in an action at law.
Executive further acknowledges and agrees that any material breach by Executive
of any provision of Sections 4 or 6 of this Agreement shall cause irreparable
harm to the Company, which harm cannot be reasonably or adequately compensated
for by damages in an action at law. Accordingly, without prejudice to the rights
and remedies otherwise available to the Company, Executive agrees that, in
addition to any other right or remedy the Company may have, upon adequate proof
of a material breach the Company shall be entitled to a temporary restraining
order and to a preliminary and permanent injunction enjoining or restraining
the
breach of this Agreement by Executive, without the necessity of proving the
inadequacy of monetary damages or the posting of any bond or security. Executive
acknowledges and agrees that the preceding remedies shall be in addition to
any
and all other rights available to the Company at law or in equity. The failure
of the Company to promptly institute legal action upon any breach of this
Agreement shall not constitute a waiver of that or any other breach
hereof.
7. Indemnification;
Insurance.
7.1 Indemnification
of Executive.
Except as otherwise provided by applicable law, while the Executive is
employed by the Company and thereafter while potential liability exists (but
in
no event less than three (5) years after termination), in the event Executive
is
made a party to any threatened, pending, or contemplated action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by the Company against Executive), by reason of the fact that
Executive is or was performing services under this Agreement, then the Company
shall indemnify Executive to the fullest extent permitted by applicable law
against all expenses (including attorneys’ fees), judgments, fines, and amounts
paid in settlement, as actually and reasonably incurred by Executive in
connection therewith. In the event that both Executive and the Company are
made
a party to the same third party action, complaint, suit, or proceeding, the
Company will engage competent legal representation, and Executive will use
the
same representation, provided that if counsel selected by the Company shall
have
a conflict of interest that prevents such counsel from representing Executive,
then the Company may engage separate counsel on Executive’s behalf, and subject
to the provisions of this Section
7,
the
Company will pay all attorneys’ fees of such separate counsel.
7.2 Insurance
Provided by Company.
As soon as practicable after the Effective Date, the Company shall obtain a
directors and officers liability insurance policy covering all directors and
officers of the Company, including Executive, which insurance policy shall
provide adequate insurance coverage for each of such persons, as shall be
approved by the Board. The Executive shall be entitled to such coverage while
employed and thereafter while potential liability exists.
8. Assignment;
Binding Effect.
Executive shall have no right to assign this Agreement to another party other
than by will or by the laws of descent and distribution. This Agreement may
be
assigned or transferred by the Company only to an acquirer of all or
substantially all of the assets of the Company, provided such acquirer promptly
assumes all of the obligations hereunder
11
of
the
Company in a writing delivered to the Executive and otherwise complies with
the
provisions hereof with regard to such assumption. Nothing in this Agreement
shall prevent the consolidation, merger, or sale of the Company or a sale of
any
or all or substantially all of its assets. Subject to the foregoing restriction
on assignment by Executive, this Agreement shall be binding upon, inure to
the
benefit of, and be enforceable by the parties hereto and their respective heirs,
legal representatives, successors, and assigns.
9. Additional
Provisions.
9.1 Damages.
Nothing contained herein shall be construed to prevent the Company or the
Executive from seeking and recovering from the other damages sustained by either
or both of them as a result of its or his breach of any term or provision of
this Agreement. In the event that either party hereto brings suit for the
collection of any damages resulting from, or the injunction of any action
constituting, a breach of any of the terms or provisions of this Agreement,
then
the party found to be at fault shall pay all reasonable court costs and
attorneys’ fees of the other.
9.2 Amendments;
Waivers; Remedies.
This Agreement may not be amended, and no provision of this Agreement may
be waived, except by a writing signed by Executive and by a duly authorized
representative of the Company. Failure to exercise any right under this
Agreement shall not constitute a waiver of such right. Any waiver of any breach
of this Agreement shall not operate as a waiver of any subsequent breaches.
All
rights or remedies specified for a party herein shall be cumulative and in
addition to all other rights and remedies of the party hereunder or under
applicable law.
9.3 Notices.
Any
notice under this Agreement must be in writing and addressed to the Company
or
to Executive at the corresponding address below. Notices under this Agreement
shall be effective upon: (a) hand delivery, when personally delivered; (b)
written verification of receipt, when delivered by overnight courier or
certified or registered mail; or (c) acknowledgment of receipt of electronic
transmission, when delivered via electronic mail or facsimile. Executive shall
be obligated to notify the Company, in writing, of any change in Executive’s
address. Notice of change of address shall be effective only when done in
accordance with this Section
9.3.
|
Company’s
Notice Address:
|
H2Diesel,
Inc.
00000
Xxxxx Xxxx 0, Xxxxx 00
Xxxx
Xxxxx, Xxxxxxx 00000
Attn.:
Xxx X. Xxxxx
Telephone:
000-000-0000
Facsimile:
|
|
Executive’s
Notice Address:
|
Xxxxx
Xxxxxxxxx
000
Xxxx Xxxxxx Xxxxx
Xxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
|
9.4 Severability.
If any provision of this Agreement shall be held by a court of competent
jurisdiction to be invalid, unenforceable, or void, such provision shall be
enforced to
12
the
fullest extent permitted by law, and the remainder of this Agreement shall
remain in full force and effect. In the event that the time period or scope
of
any provision is declared by a court of competent jurisdiction to exceed the
maximum time period or scope that such court deems enforceable, then such court
shall reduce the time period or scope to the maximum time period or scope
permitted by law.
9.5 Taxes.
All amounts paid under this Agreement (including, without limitation, Base
Salary) shall be reduced by all applicable state and federal tax withholdings
and any other withholdings required by any applicable jurisdiction.
9.6 Governing
Law.
The validity, interpretation, enforceability and performance of this
Agreement shall be governed by and construed in accordance with the laws of
the
State of Florida, without regard to conflict of laws principles that would
cause
the laws of another jurisdiction to apply.
9.7 Venue.
For the purposes of any suit, action, or other proceeding (collectively, a
“Proceeding”)
arising out of this Agreement or any transaction contemplated hereby, each
of
the parties hereto irrevocably submits to the exclusive jurisdiction of the
courts of the State of Florida located (i) in Palm Beach County and the Federal
Courts of the United States of America located in Palm Beach County, Florida,
or
(ii) the county in which the Company’s principal executive offices are located
at the time any such Proceeding is commenced.
9.8 Interpretation.
This Agreement shall be construed as a whole, according to its fair
meaning, and not in favor of or against any party. Sections and section headings
contained in this Agreement are for reference purposes only, and shall not
affect, in any manner, the meaning or interpretation of this Agreement. Whenever
the context requires, references to the singular shall include the plural and
the plural the singular.
9.9 Survival.
All of those portions of this Agreement that require performance by
Executive following termination of Executive’s employment hereunder shall
survive any termination of this Agreement.
9.10 Counterparts.
This Agreement may be executed in several counterparts (including by means
of telecopied signature pages), each of which shall be deemed an original but
all of which shall constitute one and the same instrument.
9.11 Authority.
Each party represents and warrants that such party has the right, power, and
authority to enter into and execute this Agreement and to perform and discharge
all of the obligations hereunder, and that this Agreement constitutes the valid
and legally binding agreement and obligation of such party and is enforceable
in
accordance with its terms.
9.12 Additional
Assurances.
The provisions of this Agreement shall be self-operative and shall not require
further agreement by the parties except as may be herein specifically provided
to the contrary; provided, however, that at the request of the Company,
Executive shall execute such additional instruments and take such additional
acts as the Company may deem necessary to effectuate this
Agreement.
13
9.13
Entire Agreement.
This Agreement is the final, complete, and exclusive agreement of the
parties with respect to the subject matter hereof and supersedes and merges
all
prior or contemporaneous representations, discussions, proposals, negotiations,
conditions, communications, and agreements, whether written or oral, between
the
parties relating to the subject matter hereof and all past courses of dealing
or
industry custom. No oral statements or prior written material not specifically
incorporated herein shall be of any force and effect, and no changes in or
additions to this Agreement shall be recognized unless incorporated herein
by
amendment, as provided herein (such amendment to become effective on the date
stipulated therein).
9.14 Executive
Acknowledgment.
Executive acknowledges that, before signing this Agreement, Executive was
advised of his right to consult with an attorney of his choice to review this
Agreement and that Executive had sufficient opportunity to have an attorney
review the provisions of this Agreement and negotiate its terms. Executive
further acknowledges that Executive had a full and adequate opportunity to
review this Agreement before signing it; that Executive carefully read and
fully
understood all the provisions of this Agreement before signing it, including
the
rights and obligations of the parties; and that Executive has entered into
this
Agreement knowingly and voluntarily.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
14
IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the date first above
written.
COMPANY:
H2DIESEL,
INC.
By:
/s/
Xxx Xxxxx
Name:
Xxx
Xxxxx
Title:
President
EXECUTIVE:
/s/
Xxxxx Xxxxxxxxx
Xxxxx
Xxxxxxxxx
