EXHIBIT 10.50
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of October
10, 2001, by and among TSET, Inc., a Nevada corporation (the "Company"), Xxxxxxx
X. Xxxxxx (the "Executive") and The Pangaea Group LLC, an Oregon limited
liability company ("The Pangaea Group").
RECITALS:
A. The Company and the Executive entered into that certain Employment
Agreement dated April 16, 1999 (the "Employment Agreement") pursuant to which
the Executive was hired as the Company's Chairman of the Board of Directors and
Chief Executive Officer.
B. Pursuant to the Employment Agreement, the Executive received a signing
bonus of one hundred thousand (100,000) fully-vested, restricted shares of the
Company's common stock, $0.001 par value per share (the "Common Stock") that was
issued to the Executive's nominee, The Pangaea Group. In addition, the Executive
received nine hundred thousand (900,000) shares of Common Stock that vested at
the rate of one hundred (100,000) shares of Common Stock per month over a nine
(9) month period and were issued to the Executive's nominee, The Pangaea Group.
(The one million (1,000,000) shares of Common Stock described in this paragraph
B are individually and collectively referred to herein as the "Shares.")
C. The Company and the Executive entered into that certain Letter
Agreement dated April 10, 2001 (the "Letter Agreement") amending the Employment
Agreement.
D. Pursuant to the Letter Agreement, the Executive received one hundred
twenty-five thousand (125,000) fully vested options to purchase shares of Common
Stock and two hundred twenty-five thousand (225,000) options that vest upon the
achievement of certain performance objectives of the Company more fully
described therein. (The three hundred fifty thousand (350,000) options described
in this paragraph D are individually and collectively referred to herein as the
"Options.")
E. Certain facts have recently come to the attention of the Company and
the Executive that among other things, the Board of Directors of the Company
never validly approved the Employment Agreement.
F. Accordingly, the Company and the Executive have agreed that the
Employment Agreement and the Letter Agreement are null and void from their
inception. As a consequence, the Company and the Executive have decided that the
Executive and his nominee, The Pangaea Group, shall return all of the Shares and
Options granted to the Executive pursuant to the Employment Agreement and the
Letter Agreement.
G. The Company and the Executive acknowledge that the parties hereto will
be filing federal and state tax returns, as applicable, and will be relying on
the effectiveness of this Agreement.
H. Except for the obligations created hereunder, the Executive desires to
fully and completely release the Company from any and all liabilities and
obligations with respect to any prior grants of Common Stock and/or Options
pursuant to the Employment Agreement and/or the Letter Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the mutual agreements, covenants and
premises set forth herein for certain other good and valuable consideration, the
receipt and adequacy are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. INCORPORATION OF RECITALS. The foregoing recitals are true and
correct and are incorporated by this reference.
2. ACKNOWLEDGMENT THAT EMPLOYMENT AGREEMENT AND LETTER AGREEMENT ARE
NULL AND VOID. The Company and the Executive hereby agree and acknowledge that
the Company's Board of Directors never validly approved the Employment Agreement
and the Letter Agreement. Therefore, the Company and the Executive hereby agree
and acknowledge that all of the provisions of the Employment Agreement and the
Letter Agreement, including, without limitation, the "evergreen" provision of
Section 3(b) of the Employment Agreement, shall be null and void from their
inception.
3. RESIGNATION AS CHAIRMAN AND CHIEF EXECUTIVE OFFICER. Simultaneously
with the execution of this Agreement, the Executive shall resign as Chairman of
the Board of Directors and as Chief Executive Officer of the Company and deliver
a resignation letter, substantially in the form of Exhibit "A" attached hereto.
The Company and the Executive hereby agree that the Executive shall remain as a
director of the Company for the remainder of his term.
4. VOID SHARES AND OPTIONS. The Company and the Executive hereby agree
that the issuance of the Shares and Options granted to the Executive is void as
of the effective dates of the Employment Agreement and the Letter Agreement,
respectively, and that such Shares and Options shall be treated as if they were
never issued or granted, as the case may be. However, the Company and the
Executive hereby agree that the Executive shall retain the fifty thousand
(50,000) options that the Executive received on April 9, 2001 in connection with
the Executive's service as a director of the Company and the two hundred
thousand (200,000) options that the Executive received on May 3, 2001 in
connection with the Executive's service as Chairman of the Board of Directors in
the years 1999 and 2000.
5. GRANT OF OPTIONS. The Company shall grant to the Executive upon the
execution of this Agreement, an option to purchase from the Company fifty
thousand (50,000) shares of the Company's Common Stock (the "Chairman Option")
in consideration for the Executive's service, prior to his resignation, as
Chairman of the Board of Directors of the Company in the year 2001. The exercise
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price per share of the Chairman Option shall be the closing price of the
Company's Common Stock as of the date of this Agreement. The Chairman Option
shall be fully vested and exercisable upon the date of grant.
6. RETURN OF CERTIFICATES. The Executive shall return, or cause to be
returned, all certificates representing the Shares simultaneously with the
execution of this Agreement.
7. PAYMENT TO EXECUTIVE. In consideration of the Executive's agreement
to resign as Chairman of the Board of Directors and Chief Executive Officer of
the Company, and in consideration of the Executive's agreement to be bound by
the nondisclosure provisions in Section 8 and the assignment of inventions
provisions in Section 9, the Company shall pay the Executive Three Hundred
Eighty Thousand Dollars (US $380,000.00) in the aggregate, payable in (i) an
initial payment of Thirty Thousand Dollars (US $30,000.00) (the "Initial
Payment") (and Nine Thousand Three Hundred Thirty-Two Dollars and 69/100 (US
$9,332.69) which shall be for all unpaid reimbursable expenses previously
incurred by the Executive through the date hereof and submitted to the Company),
and (ii) Three Hundred Fifty Thousand Dollars (US $350,000.00) pursuant to the
terms of that certain Promissory Note, substantially in the form of Exhibit "B"
attached hereto (the "Promissory Note"). The Initial Payment shall be payable
within sixty (60) days of the date hereof in cash. In the event the Company does
not make the Initial Payment within such sixty (60) day period, such Initial
Payment shall bear interest at the IRS Midterm Rate plus five percent (5%). The
parties agree that failure to make the Initial Payment within such sixty (60)
day period does not constitute a breach of this Agreement. In addition, in the
event the Company fails to make any installment payment of principal or interest
due under the Promissory Note which is not promptly paid by the tenth (10th)
calendar day following the applicable due date, the Company shall grant to the
Executive a three (3) year, fully vested and immediately exercisable option to
purchase ten thousand (10,000) shares of the Company's Common Stock at a
purchase price per share equal to the closing price of the Company's Common
Stock as of the date such installment payment was due.
8. NONDISCLOSURE. Except as expressly permitted by the Company or in
the discharge of his duties as a director of the Company, the Executive shall
not at any time from the date hereof disclose, directly or indirectly, to any
person, firm, corporation, partnership, association or other entity any
proprietary or confidential information relating to the Company or any
information concerning the Company's financial condition or prospects, the
Company's customers, the design, development, manufacture or selling of the
Company's products or the Company's methods of operating its business
(collectively "Confidential Information"). Confidential Information shall not
include information that, at the time of disclosure, (a) is known or available
to the general public by publication (including, without limitation, the public
disclosure of information pursuant to the Company's reporting obligations under
applicable federal and state securities laws) or otherwise through no act or
failure to act on the part of the Executive in violation of this Section 8, (b)
already known to the Executive or became known or was derived by the Executive
by some demonstrable means other than as a result of the Executive's access
thereto, (c) rightfully received from a third party without similar restrictions
and without breach of this Agreement, or (d) independently developed by the
Executive without any utilization of the Confidential Information.
Notwithstanding any other provision of this Agreement, the Executive may
disclose Confidential Information as is required to be disclosed in order to (i)
comply with any requirement imposed by judicial or administrative process or any
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governmental or court order, (ii) comply with or discharge any fiduciary duty of
the executive, (iii) ensure the Company's compliance with all disclosure
obligations arising under federal and state securities laws and other laws,
rules, and regulations applicable to the Company, or (iv) enforce the
Executive's rights under this Agreement and the Promissory Note. Subject to the
foregoing exceptions and permitted uses of Confidential Information, the
Executive acknowledges and agrees that the Confidential Information is a
valuable, special and unique asset of the Company's business.
9. INVENTIONS. Each Executive Invention (as defined below) belongs
exclusively to the Company. The Executive acknowledges that all of the
Executive's writing, works of authorship and other Executive Inventions are
works made for hire and the property of the Company, including any copyrights,
patents or other intellectual property rights pertaining thereto. If it is
determined that any such works are not works made for hire, the Executive hereby
assigns to the Company all of the Executive's right, title and interest,
including all rights of copyright, patent and other intellectual property
rights, to or in such Executive Inventions. The Executive covenants that he will
promptly:
(a) assign to the Company or to a party designated by the Company,
at the Company's request and without additional compensation, all of the
Executive's right to the Executive Invention for the United States and all
foreign jurisdictions;
(b) execute and deliver to the Company such applications,
assignments, and other documents as the Company may request in order to apply
for and obtain patents or other registrations with respect to any Executive
Invention in the United States and any foreign jurisdictions:
(c) sign all other papers necessary to carry out the above
obligations; and
(d) give testimony and render any other assistance, but without
expense to the Executive, in support of the Company's rights to any Executive
Invention.
For purposes of this Agreement, "Executive Invention" shall mean any idea,
invention, technique, modification, process or improvement (whether patentable
or not), any industrial design (whether registerable or not), any mask work,
however fixed or encoded, that is suitable to be fixed, embedded or programmed
in a semiconductor product (whether recordable or not), and any work of
authorship (whether or not copyright protection may be obtained for it) created,
conceived or developed by the Executive, either solely or in conjunction with
others, during the Executive's employment with the Company, that relates in any
way to, or is useful in any manner in, the business then being conducted or
proposed to be conducted by the Company, and any such item created by the
Executive, either solely or in conjunction with others, after the date hereof,
that is based upon or uses Confidential Information. Notwithstanding the
foregoing provisions of this Section 9, the exceptions and permitted uses in
clauses (a) through (d) and clauses (i) through (iv) of Section 8 hereof shall
also constitute exceptions to and permitted uses of the definition of Executive
Invention.
10. BOOKS AND RECORDS. All books, records and accounts of the Company,
whether prepared by the Executive or otherwise coming into the Executive's
possession, shall be returned to the Company within five (5) business days from
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the date hereof. The Company shall provide the Executive ready and full access
to all such books, records, and accounts as may be necessary and proper from
time to time, to enable the Executive's performance of all fiduciary duties owed
to the Company, to ensure the Company's compliance with all applicable laws,
rules, and regulations, and in order to comply with any requirement imposed by
judicial or administrative process or any governmental or court order.
11. INDEMNIFICATION OF THE COMPANY. Except with respect to the Company's
performance of all covenants and agreements of the Company set forth herein and
in the Promissory Note, and so long as the Company is in compliance with and is
timely performing all of its covenants and agreements to the Executive hereunder
and under the Promissory Note, the Executive shall indemnify and hold harmless
the Company, its officers, directors, employees, agents, counsel and
shareholders (individually, an "Indemnitee" and, collectively, the
"Indemnitees") against and from any loss, damage, injury, harm, detriment, lost
opportunity, liability, exposure, claim, demand, settlement, judgment, award,
fine, penalty, tax, fee, charge or expense (including attorneys' fees) that is
directly or indirectly suffered or incurred at any time by any Indemnitee, or to
which any Indemnitee otherwise becomes subject at any time, and that arises
directly or indirectly out of or by virtue of, or relates directly or indirectly
to any failure on the part of the Executive to observe, perform or abide by, or
any other breach of, any restriction, covenant, obligation, representation,
warranty or other provision contained in this Agreement.
12. INDEMNIFICATION OF THE EXECUTIVE. The Company shall indemnify the
Executive to the same extent as all other directors of the Company for as long
as the Executive serves as a director of the Company. For as long as the
Executive serves as a director of the Company, the Company hereby covenants that
it will immediately notify the Executive verbally and in writing upon the
Company receiving notice of the lapse or termination of the Company's director
and officer liability insurance policy or that the Company no longer will carry
such insurance.
13. BINDING NATURE. All of the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by the
parties and their respective legal representatives, successors and permitted
assigns, whether so expressed or not.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Confirmation of execution
by electronic transmission of a facsimile signature page shall be binding upon
any party so confirming.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada exclusive of conflicts or choice
of laws rules or comity.
16. ENFORCEABILITY. If any provision (or portion thereof) of this
Agreement is adjudged invalid or unenforceable by a court of competent
jurisdiction, the remaining provisions shall nevertheless continue in full force
and effect. In any such case, the provision deemed unenforceable shall be remade
or interpreted by the parties in a manner that such provision shall be
enforceable to preserve, to the maximum extent possible, the original intention
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and meaning thereof and such provision, as so modified or interpreted, shall
remain in full force and effect thereafter.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth above.
TSET, INC.
By: /s/ Xxxxxxx Xxxxxxxx
Name: Xxxxxxx Xxxxxxxx
Title: Chief Financial Officer
/s/ Xxxxxxx X. Xxxxxx
---------------------
XXXXXXX X. XXXXXX
THE PANGAEA GROUP LLC
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
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EXHIBIT A
---------
Board of Directors
TSET, Inc.
000 Xxxxx Xxxxx Xxxxxx, XXX 000
Xxxx Xxxxxx, Xxxxxx 00000
Re: Resignation
Gentlemen:
I hereby tender my resignation as Chairman of the Board of Directors and Chief
Executive Officer of TSET, Inc., a Nevada corporation, effective as of the date
hereof. In addition, I hereby tender my resignation as Chairman of the Board of
Directors and any officer position I may hold of XxxxXxxxx.xxx, Inc., an Oregon
corporation and as Chairman of the Board of Directors and any officer position I
may hold of Kronos Air Technologies, Inc., a Nevada corporation., effective as
of the date hereof.
--------------------------------
Xxxxxxx X. Xxxxxx
Effective Date: October __, 2001
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EXHIBIT B
---------
PROMISSORY NOTE
---------------
$350,000.00 October ___, 0000
Xxxx Xxxxxx, Xxxxxx
FOR VALUE RECEIVED, TSET, INC., a Nevada Corporation (the "Borrower"),
hereby promises to pay to the order of XXXXXXX X. XXXXXX (the "Lender"), at
0000-X Xxxxxxxxx Xxxx, Xxxx Xxxxxx, Xxxxxx 00000, or such other place or places
as he may hereafter designate to the Borrower, in lawful money of the United
States of America, the original principal sum of Three Hundred Fifty Thousand
Dollars (US $350,000.00), together with accrued interest on the unpaid principal
balance hereof from the date of this Note until all amounts due and payable
hereunder are paid in full.
Except as otherwise provided herein, interest shall accrue as of the date
of this Note and shall be calculated on the entire principal sum outstanding
from time to time at the IRS Midterm Rate per annum. The entire principal amount
and all accrued interest shall be due and payable by the Borrower on June 30,
2006. The Borrower shall pay installments of principal and interest in an amount
equal to Twenty Thousand Dollars (US $20,000.00) in cash quarterly in arrears.
The first installment payment under this Note shall be due on March 31, 2002 and
each subsequent installment payment shall be due on the last day of each
corresponding quarter thereafter. Any installment of principal or interest due
under this Note which is not promptly paid by the tenth (10th) calendar day
following the applicable due date, such payment shall bear interest at the rate
of the IRS Midterm Rate plus five percent (5%) per annum commencing on the date
immediately following the day upon which the payment was due until the amount of
any such payment is paid to the Lender in full. In addition, in the event the
Borrower fails to make any installment payment of principal or interest due
under this Note which is not promptly paid by the tenth (10th) day following the
applicable due date, the Borrower shall grant to the Lender a fully vested and
immediately exercisable three (3) year option to purchase ten thousand (10,000)
shares of the Borrower's common stock, par value $0.001 per share (the "Common
Stock"), at a purchase price per share equal to the closing price of the
Borrower's Common Stock as of the date such installment payment was due. Failure
to make required quarterly installments will only be considered an Event of
Default (as defined herein) upon the failure by the Borrower to timely make
three (3) quarterly installments under this Note. Upon the occurrence of any
Event of Default, (as defined herein) by the Borrower of any term or provision
of this Note, all sums outstanding under this Note shall thereupon immediately
bear interest at the rate of the IRS Midterm Rate plus five percent (5%) per
annum until all outstanding amounts owing to the Lender under this Note have
been paid in full. The Borrower does not intend or expect to pay, nor does the
Lender intend or expect to charge, collect or accept, any interest greater than
the highest legal rate of interest which may be charged under any applicable
law. Should the acceleration hereof or any charges made hereunder result in the
computation or earning of interest in excess of such legal rate, any and all
such excess shall be and the same is hereby waived by the Lender, and any such
excess shall be credited by the Lender to the principal balance hereof.
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If any amount hereunder is payable on a day which is a Saturday, Sunday,
legal holiday or a day on which banking institutions in Lake Oswego, Oregon are
authorized or required by law or by local proclamation to close, the due date
thereof shall be extended to the next succeeding business day and interest
thereon shall accrue during the period of such extension at the rate provided
herein.
At the option of the Lender, all sums advanced hereunder together with
accrued interest thereon shall become immediately due and payable, without
notice or demand, upon the occurrence of any one or more of the following events
of default (an "Event of Default"): (a) failure to timely make three (3)
quarterly installments of principal and interest due under this Note; (b) the
commencement of any proceedings under any bankruptcy laws of any jurisdiction or
under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether in law or equity) is filed by or against the Borrower or for
all or any part of its property; or (c) in the event the Borrower receives cash
gross proceeds from a single or series of financings during the term of this
Note in an amount equal to or greater than Ten Million Dollars (US
$10,000,000.00). The Borrower's failure to timely make the Initial Payment, as
defined in Section 7 of the Agreement to which this Note is attached as Exhibit
B, shall be counted as one of the missed installments for purposes of the clause
(a) of this paragraph in determining the occurrence of an Event of Default.
The Borrower and any endorsers, sureties, guarantors, and assignors of
this Note (including any other persons ever liable for payment for any amounts
due hereunder) hereby jointly and severally waive notice, presentment, demand
for payment, protest, notice of protest and nonpayment or dishonor, diligence in
collecting amounts due hereunder, grace, and all other formalities of any kind
whatsoever, and consent to all extensions without notice for any periods of time
and partial payments, all without prejudice to the Lender. No failure, delay, or
omission by the Lender or any holder of this Note in exercising any right,
power, or remedy (collectively, "right") hereunder shall operate as a waiver or
relinquishment thereof, nor shall any single or partial exercise of any such
right preclude any other or further exercise thereof or the exercise of any
other right hereunder. The Lender's rights hereunder are cumulative and not
exclusive of any other rights provided at law or in equity.
The Lender shall have the right to assign this Note or payments of amounts
due hereunder. The Borrower shall have the right to assign this Note in whole or
in part as long as the Borrower remains liable for all sums due hereunder.
If this Note becomes in default and is placed in the hands of an
attorney, the Borrower agrees to pay any and all fees, costs, charges and
expenses incurred by the Lender, including, but not limited to, reasonable
attorney's fees; provided, however, that no such payments by the Borrower shall
be construed as interest or finance charges hereunder for purposes of
determining the maximum lawful rate of interest payable hereunder.
The principal amount of this Note may be prepaid in whole or in part at
any time prior to the maturity of this Note without premium, penalty, or fee.
Each prepayment of principal shall be credited first to accrued interest and
then to reduce the unpaid principal amount hereof. No partial prepayment of
principal shall act to suspend, postpone or waive any regularly scheduled
payment of interest due under this Note.
This Note shall be construed and enforced according to the laws of the
State of Nevada, excluding all principles of choice of laws, conflict of laws or
comity. Each person now or hereafter becoming obligated for the payment of the
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indebtedness evidenced by this Note hereby consents to personal jurisdiction and
venue in Clackamas County, Oregon, in the event of any litigation in any way
arising out of the loan evidenced hereby.
The terms of this Note may not be changed orally. This Note shall be
binding on the successors and assigns of the Borrower. The Borrower shall not
assign this Note nor delegate any of its obligations hereunder without the
Lender's prior written consent.
Any notice required or permitted hereunder shall be provided to the
Lender at the address first written above, and any similar notice to the
Borrower shall be provided to 000 Xxxxx Xxxxx Xxxxxx, XXX 000, Xxxx Xxxxxx,
Xxxxxx 00000 (unless the Borrower provides written notice to the Lender of any
different address). The Borrower shall notify the Lender in writing of the
street address of its physical offices, whether in Lake Oswego or elsewhere.
Notices provided hereunder shall be given in writing and shall be deemed given
when delivered in person, when sent by facsimile or other electronic
transmission (with confirmation of delivery or answerback to be attached), three
days after being sent via express or courier delivery, or ten (10) days after
being sent via registered or certified mail (return receipt requested), in all
cases with postage and delivery charges prepaid by the sender.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT WHICH IT MAY HAVE TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION BASED HEREON, OR ARISING OUT OF, UNDER OR IN ANY WAY CONNECTED WITH
THE DEALINGS BETWEEN THE LENDER AND THE BORROWER, THIS NOTE, OR ANY DOCUMENTS
EXECUTED IN CONNECTION HEREWITH, OR THE FINANCING CONTEMPLATED HEREBY, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY PARTY HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER EXTENDING THE LOAN EVIDENCED
BY THIS NOTE.
TSET, INC.
By:______________________________
Name:____________________________
Title:___________________________
