EXHIBIT 10.16
Tier One
AGREEMENT REGARDING
TERMINATION OF EMPLOYMENT CONTRACT
This Agreement Regarding Termination of Employment Contract
("Agreement") is entered into as of this 21st day of December, 2001 by and
between Zvi (Xxxxx) Xxxxxxxx ("Executive"), on the one hand, and Aura Systems,
Inc., a Delaware corporation ("Company"), on the other hand (collectively, the
"Parties").
RECITALS
WHEREAS, Executive has been employed by the Company as Chief
Executive Officer, pursuant to an employment agreement with the Company dated
March 5, 1998 (the "Employment Agreement");
WHEREAS, Executive and the Company wish to voluntarily
terminate Executive's Employment Agreement and make Executive an at-will
employee of the Company effective December 21, 2001;
WHEREAS, pursuant to the terms of the Employment Agreement
Executive is entitled to receive a severance payment upon such termination of
the Employment Agreement; and
WHEREAS, the Company and Executive has determined that it
would be in the best interest of Executive, the Company and its shareholders to
offer Executive a buyout of the Employment Agreement and the severance package
set forth herein, in exchange for covenants and agreements contained herein and
in lieu of any severance payment Executive would otherwise be entitled to
receive under the Employment Agreement.
WHEREAS, Executive and the Compensation Committee of the Board
of Directors have negotiated the terms and conditions of this Agreement, which
Agreement has been approved by the Board of Directors of the Company.
NOW THEREFORE, in consideration of the promises and mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are expressly acknowledged, the Parties agree
and promise as follows:
1. TERMINATION OF EXECUTIVE'S EMPLOYMENT AGREEMENT.
Pursuant to this Agreement, Executive's Employment Agreement with
the Company is terminated effective December 21, 2001 (the "Term
Date"). Executive shall continue as an at-will employee of the Company
until the Company or Executive terminates such at-will relationship
(the "Separation Date").
2. BUYOUT AND SEVERANCE PAYMENT.
In consideration of Executive's covenants and agreements
contained herein, the Company shall pay Executive as a severance
benefit (the "Severance Benefit") the following:
A. Tier One Buy-Out Stock Option
The Company shall grant to the Executive an option to purchase
that number of shares of Common Stock of the Company (the "Stock")
equal to the quotient of (x) three (3) times the Executive's Base
Salary (as defined in the Employment Agreement) divided by (y) $0.32
multiplied by (z) two (2), (the "Buy-Out Stock Option"), which option
shall have an exercise price equal to $0.55 per share. The Buy-Out
Stock Option shall vest and become exercisable over a ten (10) year
period from the date of grant, with (i) one-third (1/3) of the total
shares represented by the Buy-Out Stock Option (the "Option Shares")
vesting and becoming exercisable after the expiration of six (6)
months from the date of this Agreement (the "First Vesting Date"), and
(ii) two-thirds (2/3) of the Option Shares vesting twelve (12) months
after the First Vesting Date. The Buy-Out Stock Option shall be
exercisable, to the extent vested, for the full ten (10) year term of
the option without regard to the Executive's status as an employee of
the Company. The Buy-Out Stock Option shall be subject to such other
terms as evidenced by a stock option agreement entered into between
Executive and the Company and attached hereto. The Company shall grant
the Buy-Out Stock Option pursuant to a shareholder-approved option
plan (a "Company Option Plan"), and to the extent of any shortfall
where no additional Stock is available for grant of options under any
Company Option Plan, then in the form of a warrant to purchase Stock,
outside of any Company Option Plan; provided, however, that if the
Company shall grant the Executive a warrant, the Executive shall be
entitled to receive any piggyback registration rights customarily
offered to similarly situated holders of warrants to purchase Stock.
B. Medical Benefits
Executive shall receive continued medical benefits for a period
of three (3) years following termination of employment or be entitled
to receive a payment in the form of cash in lieu of such continuation
of medical benefits; provided, that the Company shall not be obligated
to pay a premium or incur any costs related to the provision of such
continued coverage in excess of one thousand dollars ($1,000.00) per
month for such three (3) year period. The medical benefits shall be
substantially similar to the medical benefits Executive received from
the Company prior to termination of employment.
C. Limitation of Benefits
Except for (i) the Severance Benefit and (ii) Executive's salary
and all other compensation through the Separation Date, including any
earned but unpaid vacation pay, Executive shall not be entitled to
receive any other compensation or benefits of any sort including,
without limitation, salary, vacation, bonuses, stock options,
short-term or long-term disability benefits, health care coverage and
any severance Executive might otherwise be entitled to received under
the Employment Agreement from the Company, its affiliates, or their
respective partners, principals, officers, directors, shareholders,
managers, employees, agents, representatives, or insurance companies,
or their respective predecessors, successors or assigns at any time.
3. NO DISPARAGEMENTS.
Executive and the Company agree that neither Executive nor the
Company shall make any oral or written, public or private, statements
that are disparaging of Executive or the Company, its affiliates, or
their respective partners, principals, officers, directors,
shareholders, managers, employees, agents, representatives, or their
respective predecessors, successors or assigns at any time; provided,
however, nothing in this Section 3 shall preclude Executive or the
Company from making truthful factual statements regarding Executive or
former officers, directors or employees of the Company.
4. NON-COMPETITION.
A. For a period of three (3) years from the Separation Date,
Executive shall not, directly or indirectly, without the prior written
consent of the Company, provide consultative services or otherwise
provide services to (whether as an employee or a consultant, with or
without pay), own, manage, operate, join, control, participate in, or
be connected with (as a stockholder, partner, or otherwise), any
business, individual, partner, firm, corporation, or other entity that
is a competitor of the Company, its subsidiaries or affiliates in any
business now conducted, or conducted at any time through the
Separation Date, by the Company, its subsidiaries or affiliates (each
such competitor a "Competitor of the Company"). Executive and the
Company acknowledge and agree that the business of the Company extends
throughout the United States, Europe and Asia, and that the terms of
the non-competition agreement set forth herein shall apply throughout
the United States, Europe and Xxxx
X. Non-Solicitation of Customers and Suppliers. For a period of
three years from the Separation Date, Executive shall not, directly or
indirectly, influence or attempt to influence customers or suppliers
of the Company, or any of its subsidiaries or affiliates, to divert
their business to any Competitor of the Company.
C. Non-Solicitation of Employees. Executive recognizes that he
possesses and will possess confidential information about other
employees of the Company, its subsidiaries and affiliates, relating to
their education, experience, skills, abilities, compensation and
benefits, and inter-personal relationships with customers of the
Company, its subsidiaries and affiliates. Executive recognizes that
the information he possesses and will possess about these other
employees is not generally known, is of substantial value to the
Company, its subsidiaries and affiliates in developing their business
and in securing and retaining customers, and has been and will be
acquired by him because of his business position with the Company, its
subsidiaries and affiliates. Executive agrees that for a period of
three (3) years from the Separation Date, he will not, directly or
indirectly, solicit or recruit any employee of the Company, its
subsidiaries and affiliates for the purpose of being employed by him
or by any company on whose behalf he is acting as an agent,
representative or employee and that he will not convey any such
confidential information or trade secrets about other employees of the
Company, its subsidiaries and affiliates to any other person.
If Executive in any way violates the provisions of this Section
4, all Severance Benefits shall cease, including the continued vesting
of the Stock Options.
5. RETURN OF THE COMPANY'S DOCUMENTS AND PROPERTY.
Executive agrees to return all records, documents, proposals,
notes, lists, files and any and all other materials including, without
limitation, computerized and/or electronic information that refers,
relates or otherwise pertains to the Company, its affiliates, and/or
their respective partners, principals, officers, directors,
shareholders, managers, employees, agents, representatives, or
insurance companies, or their respective predecessors, successors or
assigns at any time. In addition, Executive shall return to the
Company all property or equipment that he has been issued during the
course of his employment or which he otherwise currently possesses.
Executive shall deliver to the Company before the Separation Date at
Executive's expense all of the Company's records, documents,
proposals, notes, lists, files and materials and property and
equipment that are in his possession. Executive is not authorized to
retain any copies of any such records, documents, proposals, notes,
lists, files or materials. Nor is he authorized to retain any other of
the Company's property or equipment.
6. PROPRIETARY INFORMATION.
Executive acknowledges that Executive has had or may have had
access to proprietary information, trade secrets, and confidential
material of the Company or its affiliates, including, but not limited
to, all ideas, information and materials, tangible or intangible, not
generally known to the public, relating in any manner to the business
of the Company, its personnel (including partners, principals,
employees and contractors), its clients or others with whom it does
business that Executive learned, acquired, or created, or helped to
create during the period of Executive's employment with the Company
("Proprietary Information"). Proprietary Information includes, but is
not limited to, all trade secrets, patents and pending patents,
documents, computer programs, source code, users manuals, algorithms,
compilations of technical, financial, legal or other data, client or
prospective client lists, names of suppliers, specifications, designs,
business or marketing plans, forecasts, financial information, work in
progress, and other technical or business information. Executive
agrees, without limitation in time or until such Proprietary
Information shall become public other than by Executive's unauthorized
disclosure, to maintain the confidentiality of such information and to
refrain from divulging, disclosing or using said Proprietary
Information for any other purpose. Executive acknowledges and affirms
that all existing Proprietary Information is the exclusive property of
the Company and Executive hereby assigns to the Company any and all
rights the Executive may have had or acquired (or hereinafter may have
or acquire) in any Proprietary Information. Executive further
acknowledges and agrees that the Company is the sole owner of such
Proprietary Information and Executive has no claim of ownership to
such Proprietary Information.
7. CONSULTING ARRANGEMENT.
For a period of one (1) year following the Separation Date,
Executive shall consult for the Company and make himself available to
the Company as reasonably needed and requested by the Company (the
"Consulting Period"). During the Consulting Period Executive shall
receive an amount equal to 85% of the Base Salary under Executive's
Employment Contract on a monthly basis. All such payments shall be
paid in accordance with normal payroll practices of the Company. In
the event that the Company and the Executive enter into an arrangement
subsequent to the date hereof whereby the Executive accepts a position
as an employee of the Company, the provisions of this Section 7 shall
be subject to appropriate modification.
8. COOPERATION IN LITIGATION.
Executive shall cooperate with the Company, its affiliates, and
each of their respective attorneys, barristers, solicitors or other
legal representatives (collectively, "Attorneys") in connection with
any claim, litigation, or judicial or arbitral proceeding which is now
pending or may hereinafter be brought against the Company or its
affiliates by any third-p arty. Executive's duty of cooperation shall
include, but not be limited to, (a) meeting with the Company's and/or
its affiliates' Attorneys by telephone or in person at mutually
convenient times and places in order to state truthfully his knowledge
of matters at issue and recollection of events; (b) appearing at the
Company's, its affiliates' and/or their Attorneys' request (and, to
the extent possible, at a time convenient to Executive that does not
conflict with the needs or requirements of his then-current employer)
as a witness at depositions or trials, without necessity of a
subpoena, in order to state truthfully Executive's knowledge of
matters at issue; and (c) signing at the Company's, its affiliates'
and/or their Attorneys' request declarations or affidavits that
truthfully state matters of which Executive has knowledge. The Company
and/or its affiliates shall promptly reimburse Executive for his
actual and reasonable travel or other expenses that he may incur in
cooperating with the Company, its affiliates, and/or their Attorneys
pursuant to this Section 8.
9. INDEMNIFICATION.
The Company shall continue to indemnify Executive for all actions
and inactions related to his service as an officer or director of the
Company to the extent such actions and inactions are covered by the
Company's Directors and Officers insurance policy as then in effect
("Indemnified Actions") through the expiration of the applicable
statute of limitations. Notwithstanding the foregoing, in the event
such Indemnified Actions result from Executive's gross negligence or
willful misconduct, the indemnification hereunder shall not apply.
10. BINDING EFFECT.
This Agreement shall be binding upon the Parties and their
respective heirs, administrators, representatives, executors,
successors and assigns, and shall inure to the benefit of the Parties
and their respective heirs, administrators, representatives,
executors, successors and assigns.
11. SEVERABILITY.
While the provisions contained in this Agreement are considered
by the Parties to be reasonable in all circumstances, it is recognized
that some provisions may fail for technical reasons. Accordingly, it
is hereby agreed and declared that if any one or more of such
provisions shall, either by itself or themselves or taken with others,
be adjudged to be invalid as exceeding what is reasonable in all
circumstances for the protection of the interests of the Company, but
would be valid if any particular restrictions or provisions were
deleted or restricted or limited in a particular manner, then the said
provisions shall apply with any such deletions, restrictions,
limitations, reductions, curtailments, or modifications as may be
necessary to make them valid and effective and the remaining
provisions shall be unaffected thereby.
12. ENTIRE AGREEMENT; MODIFICATION.
This Agreement constitutes the entire understanding among the
Parties and may not be modified without the express written consent of
the Parties. This Agreement supersedes all prior written and/or oral
and all contemporaneous oral agreements, understandings and
negotiations regarding the subject matter hereof.
13. GOVERNING LAW.
This Agreement shall be governed by and construed and enforced
pursuant to the laws of the State of California applicable to
contracts made and entirely to be performed therein.
14. VOLUNTARY AGREEMENT; NO INDUCEMENTS.
Each Party to this Agreement acknowledges and represents that he
or it (a) has fully and carefully read this Agreement prior to signing
it, (b) has been, or has had the opportunity to be, advised by
independent legal counsel of his or its own choice as to the legal
effect and meaning of each of the terms and conditions of this
Agreement, and (c) is signing and entering into this Agreement as a
free and voluntary act without duress or undue pressure or influence
of any kind or nature whatsoever and has not relied on any promises,
representations or warranties regarding the subject matter hereof
other than as set forth in this Agreement first written above.
IN WITNESS WHEREOF, the Parties have set their hand as of the date
EXECUTIVE:
[signature]
AURA SYSTEMS, INC.
Xxxxxxx X. Froch
Sr. Vice President, General Counsel and Secretary
Approved
[signature]
Title: Vice Chairman
