AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EXHIBIT
10.16
AMENDED
AND RESTATED EMPLOYMENT
AGREEMENT
THIS
AMENDED
AND RESTATED EMPLOYMENT
AGREEMENT
(the
“Agreement”),
dated
April 6, 2007
by
and between:
XXXXXX
INTERNATIONAL, LTD..,
a
Delaware corporation (the “Company”
or
the
“Employer”),
AND
XXXXXX
X. XXXXXX,
an
individual having an address at
0000
Xxxxxx Xxxxx
Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
“Employee”)
WHEREAS,
Executive is a research scientist in the field of design and development of
power units and propulsion system of all types, including combustion engines,
gas turbines, steam turbines and pulse detonation rocket engines; and
WHEREAS,
Executive is the inventor and designer of the Xxxxxx Spherical Rotary Valve
Combustion Engine and has been awarded eighteen U.S. patents and numerous
corresponding patents in various countries throughout the world;
and
WHEREAS,
the
Company and
the
Employee signed on October 23, 2006 (the “Effective
Date”),
an
employment agreement (the “Original
Employment Agreement”);
and
WHEREAS, the
parties wish to amend and restate the terms of the Original Employment
Agreement;
NOW
THEREFORE THIS AGREEMENT WITNESSETH THAT
in
consideration of the premises and the mutual covenants, agreements,
representations and warranties contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Employee and the Company hereby agree as follows:
Upon
the
effectiveness of this Agreement, the Original Employment Agreement shall become
null and void and of no further effect.
ARTICLE
1
EMPLOYMENT
1,.1 Employee
shall continue to be employed with the Company and Employee hereby affirms
and
accepts such employment by Employer for the Term (as defined in Article 3
below), and further agrees that commencing on the date hereof Employee shall
serve as the Chief Executive Officer and President of the Company, upon the
terms and conditions set forth herein.
1.2 The
Employer shall utilize its best efforts to cause its Board of Directors to
appoint the Employee as a member of the Employer’s Board of Directors commencing
on the date hereof throughout the Term.
ARTICLE
2
DUTIES
During
the Term, Employee shall serve Employer faithfully, diligently and to the best
of his ability, under the direction and supervision of the Board of Directors
of
Employer (“Board
of Directors”)
and
shall use his best efforts to promote the interests and goodwill of Employer
and
any affiliates, successors, assigns, parent corporations, subsidiaries, and/or
future purchasers of Employer. Employee shall render such services during the
Term at Employer’s principal place of business or at such other place of
business as may be determined by the Board of Directors, as Employer may from
time to time reasonably require of him, and shall devote all of his business
time to the performance thereof. Employee shall have those duties and powers
as
are assigned to him from time to time by the Board of Directors.
ARTICLE
3
TERM
The
term
of this Agreement (the “Term”)
has
commenced on the Effective Date, and will continue thereafter for a term of
five
(5) years, as may be extended or earlier terminated pursuant to the terms and
conditions of this Agreement. The Term is renewable upon the agreement of the
parties hereto.
ARTICLE
4
GOVERNANCE
AND COMPENSATION
4.1 Governance.
During the term of this Agreement, Employee agrees to vote all shares of the
Company’s Common Stock owned by him or as to which he had voting power to elect
to the Company’s Board of Directors at least two directors who qualify as
“independent directors” under the rules of the Securities Exchange Commission
and NASDAQ.
4.2 Compensation.
(a) In
consideration of Employee’s services to Employer, Employer shall pay to Employee
an annual salary (the “Salary”)
of
Three Hundred Thousand Dollars ($300,000.00), payable in equal installments
at
the end of each regular payroll accounting period as established by Employer,
or
in such other installments upon which the parties hereto shall mutually agree,
and in accordance with Employer’s usual payroll procedures, but no less
frequently than monthly. Notwithstanding
the above, the salary shall be established at One Hundred Eighty Three Thousand
Five Hundred Forty Nine Dollars ($183,549), until the
point
in time that Employer’s projected available working capital is sufficient to
fund (x) the Company’s operations, and; (y) payment of the total amount of
salary payments provided for in the Executive Employment Agreements as
determined in the sole discretion of the Company’s Board of Directors (the
“Full
Payment Date”).
For
purposes of this provision, the term “Executive Employment Agreements” shall be
the employment agreements in effect, as amended by and between the Employer
and
each of the following executives: Xxxxxx X. Xxxxxx and Xxxxxxx
Xxxxxx.
2
(b) In
addition to the Salary, Employer shall issue to Employee a Stock Option to
purchase 1,000,000 shares of the Employer’s common stock, at an exercise price
equal to Employer’s common stock fair market value as of the date of issuance,
as determined by the independent members of the Board (the “Stock
Option”).
The
Stock Option shall vest (i.e., become exercisable) in three equal installments,
as follows: One third of the Stock Options shall vest on April
30,
2007 and the balance in two equal installments on October 23, 2008 and
2009.
Employee
must be continuously a full-time employee of the Company through the time he
exercises part or all of the Stock Option, except, however, in the event this
Agreement is terminated by the Employee for a Good Reason, as defined in Article
10.1 and 10.2 below, or by the Employer without Cause, in which cases the Stock
Option shall immediately and fully vest upon such termination provided further
that the events surrounding any such termination have not been the subject
of
any claim, proceeding or lawsuit by either the Employee or the Company in which
further case the Stock Option shall only vest upon final adjudication,
determining that such termination was a valid termination by the Employee for
Good Reason or by the Employer without Cause. The Stock Option shall be deemed
a
non-qualified stock option (i.e., not an ISO). The Stock Option will be issued
out of the Employer’s stock incentive plan, and subject to such incentive plan.
(c) Employee
hereby acknowledges that the Stock Option and the shares issuable upon the
exercise thereof shall be “restricted securities” as such term is defined under
Rule 144, unless and until an effective registration covering these shares
takes
place, promulgated under the Securities Act of 1933, as amended (the
“1933
Act”);
that
the Employee hereby represents that he shall accept such compensation and has
no
present intent to distribute or transfer such securities; that such securities
shall bear the appropriate restrictive legend providing that they may not be
transferred except pursuant to the registration requirements of the 1933 Act
or
pursuant to exemptions there from, and; the Employee further acknowledges that
he may be required to hold such securities for an indeterminable amount of
time.
(d)
Employee
shall not be entitled to any other compensation from the Company unless
unanimously approved by the independent directors of the Board.
4.3 Benefits
Upon
the
Full Payment Date, and thereafter during
the
Term, Employee shall be entitled to participate in all medical, dental, life
insurance and other executive benefit plans, including vacation, sick leave,
retirement accounts and other executive benefits provided by Employer. Such
participation shall be subject to the terms of the applicable plan documents
and
Employer’s generally applicable policies. In addition, upon
Full
Payment Date, Employer
shall pay the premiums for: (A) Executive’s disability insurance; and (B) life
insurance in the amount of $2,000,000. The beneficiary of the life insurance
policy shall be Xxxxxxxxxx Xxxxxx, Employee’s spouse. Employee also agrees to
cooperate with the Company in obtaining for the benefit of the Company “key man”
life insurance on Employee’s life in the amount of at least $2,000,000. The
amount of such insurance shall be approved by the independent directors of
the
Board.
4.4 Expense
Reimbursement
Employer
shall reimburse Employee for reasonable and necessary expenses incurred by
him
on behalf of Employer in the performance of his duties hereunder during the
Term, including any and all travel and entertainment expenses related to the
Employer’s business in accordance with Employer's then customary policies,
provided that such expenses are adequately documented.
3
4.5
Bonus
In
addition to the compensation payable under Section 4.1, Employee shall be
entitled to receive during the Term an annual bonus, the amount of which shall
be determined by the unanimous vote of the independent members of the Board
of
Directors (“Bonus”).
Each
year’s Bonus shall be paid to the Employee within 110 days of the Employer’s
calendar year end.
4.6 Other
Compensation
Commencing
upon the Full Payment Date, Employer shall provide Employee with an automobile
for his exclusive use throughout the Term, including costs for gasoline,
maintenance and comprehensive insurance including an “umbrella”
policy.
ARTICLE
5
OTHER
EMPLOYMENT
During
the Term, Employee shall devote all of his business and professional time and
effort attention, knowledge, and skill to the management, supervision and
direction of Employer’s business and affairs as Employee’s highest professional
priority. Employer shall be entitled to all benefits, profits or other
remuneration arising from or incidental to all work, services and advice
performed or provided by Employee. Nothing
in this Agreement shall preclude Employee from:
(a)
|
serving
as a director or member of a committee of any organization or corporation
involving no conflict of interest with the interests of Employer,
provided
that Employee must obtain the prior written approval of the independent
members of the Board;
|
(b)
|
serving
as a consultant in his area of expertise (in areas other than in
connection with the business of Employer), to government, industrial,
and
academic panels provided that only de minimis time shall be devoted
thereto and Employee must obtain the prior written approval of the
independent members of the Board consent of Employer and where it
does not
conflict with the interests of Employer, provided that such written
consent shall not be unreasonably withheld, delayed or conditioned;
and
|
(c)
|
managing
his personal investments or engaging in any other non-competing business;
provided that such activities do not materially interfere with the
regular
performance of his duties and responsibilities under this
Agreement.
|
ARTICLE
6
CONFIDENTIAL
INFORMATION/INVENTIONS
6.1 Confidential
Information
Employee
shall not, in any manner, for any reasons, either directly or indirectly,
divulge or communicate to any person, firm or corporation, any confidential
information concerning any matters not generally known in the internal
combustion engine industry (the “Engine
Industry”)
or
otherwise made public by Employer which affects or relates to Employer’s
business, finances, marketing and/or operations, research, development,
inventions, products, designs, plans, procedures, or other data (collectively,
“Confidential
Information”)
except
in the ordinary course of business or as required by applicable law. Without
regard to whether any item of Confidential Information is deemed or considered
confidential, material, or important, the parties hereto stipulate that as
between them, to the extent such item is not generally known in the Engine
Industry, such item is important, material, and confidential and affects the
successful conduct of Employer’s business and goodwill, and that any breach of
the terms of this Section 6.1 shall be a material and incurable breach of this
Agreement. Confidential Information shall not include: information in the public
domain other than because of a breach of this Agreement.
4
6.2 Documents.
Employee further agrees that all documents and materials furnished to Employee
by Employer and relating to Employer’s business or prospective business are and
shall remain the exclusive property of Employer. Employee shall deliver all
such
documents and materials, and all copies thereof and extracts there from, to
Employer upon demand therefore and in any event upon expiration or earlier
termination of this Agreement.
6.3 Inventions
and Intellectual Property. The Company’s rights in patents, ideas, inventions,
and intellectual property rights with respect to the CSRV engine only, shall
be
as set forth in the License Agreement executed by the parties on April 6, 2007,
as such agreement may be amended (the “License
Agreement”).
The
Company shall have no rights to any intellectual property developed by Employee
that (i) do not relate to the CRSV System technology.
6.4 Disclosure.
During the Term, Employee will promptly disclose to the Board of Directors
full
information concerning any interest, direct or indirect, of Employee (as owner,
shareholder, partner, lender or other investor, director, officer, executive,
consultant or otherwise) or any member of his immediate family in any business
that is reasonably known to Employee to purchase or otherwise obtain services
or
products from, or to sell or otherwise provide services or products to, Employer
or any of their suppliers or customers.
ARTICLE
7
COVENANT
NOT TO COMPETE
7.1 No
Competitive Activities. Except as expressly permitted in Article 5 above, during
the Term, Employee shall not engage in any activities that are competitive
with
the actual or prospective business of the Company, including without limitation:
(a) engaging directly or indirectly in any business substantially similar to
any
business or activity engaged in (or proposed to be engaged in) by Employer,
including and not limited to business that relates to internal combustion
engines; (b) engaging directly or indirectly in any business or activity
competitive with any business or activity engaged in (or proposed to be engaged
in) by Employer; (c) soliciting or taking away any executive, employee, agent,
representative, contractor, supplier, vendor, customer, franchisee, lender
or
investor of Employer, or attempting to so solicit or take away; (d) interfering
with any contractual or other relationship between Employer and any executive,
employee, agent, representative, contractor, supplier, vendor, customer,
franchisee, lender or investor; or (e) using, for the benefit of any person
or
entity other than Employer any Confidential Information of
Employer.
7.2 Results
of Termination. In the event that the employment of Employee is terminated
for
Cause, or if Employee terminates his employment with Company without Good
Reason, then the foregoing covenant prohibiting competitive activities shall
survive the termination of this Agreement, and shall extend, and shall remain
enforceable against Employee, for the period of two (2) years following the
date
of termination of employment. In addition, during the two-year period following
such termination, neither Employee nor Employer shall make or permit the making
of any negative statement of any kind concerning Employer or their affiliates,
or their directors, officers or agents or Employee.
5
ARTICLE
8
SURVIVAL
Except
as
otherwise provided, Employee agrees that the provisions of Articles 6, 7, 8
and
9 shall survive expiration or earlier termination of this Agreement for any
reasons whether voluntary or involuntary, with or without Cause, and shall
remain in full force and effect thereafter.
ARTICLE
9
INJUNCTIVE
RELIEF
Employee
acknowledges and agrees that the covenants and obligations of Employee set
forth
in Articles 6 and 7 with respect to non-competition, non-solicitation,
confidentiality and Employer’s property relate to special, unique and
extraordinary matters and that a violation of any of the terms of such covenants
and obligations will cause Employer irreparable injury for which adequate
remedies are not available at law. Therefore, Employee agrees that if Employee
breaches this Agreement than Employer shall be entitled to apply for an
injunction, restraining order or such other equitable relief as a court of
competent jurisdiction as limited by Section 13.3 may deem necessary or
appropriate to restrain Employee from committing any violation of the covenants
and obligations referred to in this Article 9. Employee shall have the right
to
appeal from such injunction or order and to seek reconsideration, These
injunctive remedies are cumulative and in addition to any other rights and
remedies Employer may have at law or in equity.
ARTICLE
10
TERMINATION
10.1 Termination
by Employee. Employee shall be entitled to terminate this Agreement, for any,
or
no reason, upon providing a 60 days’ written notice. Employee may terminate this
Agreement for Good Reason at any time upon 30 days’ written notice to Employer,
provided the Good Reason has not been cured within such period of time.
10.2 Good
Reason. In this Agreement, “Good
Reason”
means,
without Employee’s prior written consent, the occurrence of any of the following
events, unless Employer shall have fully cured all grounds for such termination
within thirty (30) days after Employee gives notice thereof:
(i) any
reduction in his then-current Salary or benefits, other than in connection
a
percentage pay cut that is applicable to all senior executives and which is
the
same percentage for all such persons or in connection with a general reduction
in benefits;
(ii)
|
any
material failure to timely grant, or timely honor, the Stock Option
set
forth in Article 4.2;
|
(iii)
|
failure
to pay or provide required
expenses;
|
The
written notice given for Good Reason by Employee to Employer shall specify
in
reasonable detail the reason for termination, and such termination notice shall
not be effective until thirty (30) days after Employer’s receipt of such notice,
during which time Employer shall have the right to respond to Employee’s notice
and cure the breach or other event giving rise to the termination.
6
10.3 Termination
by Employer. Employer may terminate its employment of Employee under this
Agreement only with Cause and only by written notice to Employee For purposes
of
this Agreement, the term Cause for termination by Employer shall be (a) a
conviction of or plea of guilty or nolo
contendere by
Employee to a felony, or any crime involving fraud, securities laws violations,
embezzlement or moral turpitude; (b) the refusal by Employee to perform his
material duties and obligations hereunder or to follow the proper instructions
of the Board of Directors after a written warning with respect thereto; (c)
Employee’s willful or intentional misconduct in the performance of his duties
and obligations; (d) conduct that is known or that should have been known by
Employee to be detrimental to the best interests of the Company, as determined
by the independent members of the Board; (e) if Employee or any member of his
family makes any personal profit arising out of or in connection with a
transaction to which Employer is a party or with which it is associated without
making disclosure to and obtaining the prior written consent of the independent
members of the Board.; or (f) the entry by the Securities and Exchange
Commission or a self-regulatory organization of a consent decree relating to
a
securities law violation by Employee. The written notice given hereunder by
Employer to Employee shall specify that it is with Cause shall specify in
reasonable detail the cause for termination. For purposes of this Agreement,
“family” shall mean “immediate family” as defined in the rules of the Securities
and Exchange Commission. In the case of a termination for the causes described
in (a), (d) and (e) above, such termination shall be effective upon receipt
of
the written notice. In the case of the causes described in (b) and (c) above,
such termination notice shall not be effective until thirty (30) days after
Employee’s receipt of such notice, during which time Employee shall have the
right to respond to Employer’s notice and cure (if curable) the breach or other
event giving rise to the termination.
10.4 Upon
a
termination of this Agreement with Good Reason by Employee, Employer shall
pay
to Employee all accrued and unpaid compensation and expense reimbursement,
as of
the date of such termination and,
in the
case such termination takes place after the Full Payment Date, also
the
“Severance
Payment.”
The
Severance Payment shall be payable in a lump sum, subject to Employer’s
statutory and customary withholdings. The Severance Payment shall be paid by
Employer within thirty (30) business days of the expiration of any applicable
cure period. The Severance Payment shall equal the total amount of the Salary
payable to Employee under Section 4.2 of this Agreement for a period of three
years.
10.5 Termination
Upon Death. If Employee dies during the Term, this Agreement shall terminate,
except that Employee’s legal representatives shall be entitled to receive any
earned but unpaid compensation or expense reimbursement due hereunder through
the date of death, as well as a payment in an amount equal to the Severance
Payment,.
10.6
Termination
Upon Disability. If, during the Term, Employee suffers and continues to suffer
from a “Disability” (as defined below), then Employer may terminate this
Agreement by delivering to Employee ten (10) calendar days’ prior written notice
of termination based on such Disability, setting forth with specificity the
nature of such Disability and the determination of Disability by Employer.
For
purposes hereof, “Disability”
means
“permanent and total disability” as defined in Section 22(e)(3) of the Internal
Revenue Code. Upon any such termination for Disability, Employee shall be
entitled to receive any earned but unpaid compensation or expense reimbursement
due hereunder through the date of termination and,
in the
case such termination takes place after the Full Payment Date, also
the
Severance Payment.
ARTICLE
11
PERSONNEL
POLICIES, CONDITIONS, AND BENEFITS
During
the Term, Employee shall be entitled to vacation during each year of the Term
at
the rate of four (4) weeks per year. Within 30 days after the end of each year
of the Term, Employer shall elect to (a) carry over and allow Employee the
right
to use any accrued and unused vacation of Employee, or (ii) pay Employee for
such vacation in a lump sum in accordance with its standard payroll practices.
7
ARTICLE
12
INDEMNIFICATION
Employer
shall indemnify and defend the Executive to the fullest extent permitted by
the
laws of the State of Delaware and the Executive shall be entitled to the
protection of any insurance policies the Employer shall maintain generally
for
the benefit of its directors and officers, against all losses, claims, damages,
costs, charges, expenses, liabilities, judgments, or settlement amounts
whatsoever incurred or sustained by him in connection with any action, suit,
or
proceeding to which he may be made a party by reason of his being or having
been
an officer of the Employer (“D&O Policies”). The Board of Directors of the
Employer shall consult the Executive as to the terms and extent of coverage
under any D&O policies in force. It is understood and agreed however, that
the Employer will only indemnify the Executive for those matters that are within
the scope of the Executive’s employment with the Employer and not conducted in
bad faith, intentionally or with gross negligence. The Executive agrees to
immediately notify the Employer, in writing, in the event he becomes aware
that
he (or the Employer), is a party to any action, suit or proceeding. The
Executive further agrees not to enter into any settlement agreements concerning
any action, suit or proceeding without the express written consent of the
Employer.
ARTICLE
13
BENEFICIARIES
OF AGREEMENT
This
Agreement shall inure to the benefit of the parties hereto, their respective
heirs, successors and permitted assigns.
ARTICLE
14
GENERAL
PROVISIONS
13.1 No
Waiver. No failure by either party to declare a default based on any breach
by
the other party of any provisions of this Agreement, nor failure of such party
to act quickly with regard thereto, shall be considered to be a waiver of any
such breach, or of any future breach.
13.2 Modification.
No waiver or modification of this Agreement or of any covenant, condition,
or
limitation herein contained shall be valid unless in writing and duly executed
by the parties to be charged therewith.
13.3 Submission
to Jurisdiction; Consent to Service of Process. This Agreement shall be governed
in all respects, by the laws of the State of New Jersey, including validity,
interpretation and effect, without regard to principles of conflicts of law.
The
parties hereto irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the state and federal courts in the State of New
Jersey for any lawsuits, actions or other proceedings arising out of or related
to this Agreement and agree not to commence any lawsuit, action or other
proceeding except in such courts. The parties hereto further agree that service
of process, summons, notice or document by mail to their addresses set forth
above shall be effective service of process for any lawsuit, action or other
proceeding brought against them in any such court. The parties hereto
irrevocably and unconditionally waive any objection to the laying of venue
of
any lawsuit, action or other proceeding arising out of or related to this
Agreement in such courts, and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such lawsuit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.
8
13.4 Entire
Agreement. This Agreement embodies the whole agreement between the parties
hereto regarding the subject matter hereof and there are no inducements,
promises, terms, conditions, or obligations made or entered into by Employer
or
Employee other than contained herein and except for the License Agreement.
In
particular, this Agreement restates and amends the Original Employment
Agreement, and the parties confirm that they have no claims or demands from
each
other, regarding payments or other rights or liabilities, except as set forth
in
this Agreement.
13.5
Severability.
In the event a court of competent jurisdiction determines that a term or
provision contained in this Agreement is overly broad in scope, time,
geographical location or otherwise, the parties hereto authorize such Court
to
modify and reduce any such term or provision deemed overly broad in scope,
time,
geographic location or otherwise so that it complies with then applicable law.
13.6 Headings.
The headings contained herein are for the convenience of reference and are
not
to be used in interpreting this Agreement.
13.7 Independent
Legal Advice. Employer and Employee each acknowledge that he or it has obtained
legal advice concerning this Agreement.
13.8
No
Assignment. No party may pledge or encumber its respective interests in this
Agreement nor assign any of its rights or duties under this Agreement without
the prior written consent of the other party.
IN
WITNESS WHEREOF the parties have executed this Agreement as of the day and
year
first above written.
XXXXXX
INTERNATIONAL, LTD.
|
EXECUTIVE
|
|||
By:
|
/s/
Xxxxx X. Xxxx
|
/s/
Xxxxxx X. Xxxxxx
|
||
Xxxxx
X. Xxxx
Chief
Financial Officer
|
Xxxxxx
X. Xxxxxx
|
9