Exhibit 10.5
CONVERTED ORGANICS INC. EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") dated March 2, 2006 and
effective as of the Effective Date (as hereinafter defined), is made and entered
into by and between CONVERTED ORGANICS INC., a Delaware corporation (the
"Company"), and XXXXXX X. XXXXXX, (the "Executive").
WITNESSETH
WHEREAS, the Company is engaged in the business of converting waste into
high value products; and
WHEREAS, the Executive has certain knowledge and expertise relating to the
operation of businesses, in general, as well as the business of the Company; and
WHEREAS, the Company desires to employ the Executive to perform certain
services for and on behalf of the Company as hereafter set forth; and
WHEREAS, the Executive desires to accept such employment upon the terms and
conditions set forth in this Agreement.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements set forth herein, plus other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. Capitalized terms used in this Agreement shall have the
meanings set forth below unless otherwise required by the content of this
Agreement:
"Agreement" shall have the meaning set forth in the introductory paragraph
of this agreement.
"Cause" shall mean (a) Executive's conviction of, or plea of guilty or nolo
contendere to, a felony involving the business of the Company, (b) Executive's
commission of a deliberately dishonest and fraudulent act which results in an
adverse effect on the business of the Company, (c) Executive's willful, repeated
or habitual neglect or refusal to perform Executive's duties or obligations
under this Agreement, or (d) Executive's material breach of this Agreement which
breach is not cured within a reasonable period of time following written notice
by the Company.
"Change of Control" shall mean:
(i) The acquisition by any Person or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the
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"Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of (A) 20%
of the total shares or more than 35% of the outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock")
provided, however, that, for purposes of this Section, the following
acquisitions shall not constitute a Change of Control: (1) any
acquisition directly from the Company, (2) any acquisition by the
Company, or (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
Affiliates, or
(ii) Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the Effective Date 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 shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Consummation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following
such Business Combination, (A) all or substantially all of the
individuals and entities that were the beneficial owners of the
outstanding shares of the Company common stock prior to such Business
Combination beneficially own, directly or indirectly, more than 51% of
the then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including,
without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership immediately
prior to such Business Combination of the outstanding shares of the
Company common stock, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan
(or related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly,
25% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination or
the combined voting power of the then-outstanding voting securities of
such corporation, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the
members of the
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board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
"Confidential Information" means information that is not generally known
and that is proprietary to the Company or that the Company is obligated to treat
as proprietary. This information includes, without limitation: (i) trade secret
information about the Company and its products and services; (ii) confidential
information concerning the business, including customer lists and suppliers of
the Company (as conducted at any time during the Employment Period); and (iii)
confidential information concerning any of the past, current, or possible future
locations, products and services of the Company, including (without limitation)
information about research, development, engineering, purchasing, manufacturing,
accounting, marketing, selling or leasing. Any information that is known to the
public or that becomes known to the public other than through a breach of this
Agreement by Executive or that which is received from a third party without
breach of any obligation to the Company, is not Confidential Information.
"Disability" shall mean any physical or mental impairment which causes the
Executive to be unable to perform the essential functions of Executive's duties
under this Agreement with reasonable accommodation for a period of one hundred
twenty (120) consecutive days, or one hundred eighty (180) days during any
twelve (12) month period or at such time as Executive is judged permanently
disabled by medical experts.
"Effective Date" shall mean the date on which the Company successfully
completes the consummation of a transaction approved by its board of directors
through which the Company secures initial minimum capital in an amount equal to
or greater than $5,000,000 (five million dollars).
"Employment Period" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Fiscal Year" shall mean the Company's fiscal year, as it exists on the
Effective Date or as changed from time to time.
"Good Reason" shall mean any termination of employment by Executive as a
result of: (i) the Company's material breach of this Agreement which breach is
not cured within 30 (thirty) days following written notice by Executive; (ii)
any material change in the duties and responsibilities assigned to Executive
under this Agreement; and (iii) a requirement by the Company that Executive be
based in an office that is more than 100 miles from Executive's principal place
of employment as of the Effective Date.
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"Inventions" shall mean any ideas, discoveries, modifications,
improvements, designs, logos (whether or not they are in writing or reduced to
practice) or works of authorship (whether or not they can be patented,
copyrighted or registered as a trademark or service xxxx) that the Executive
makes, authors, or conceives (either alone or with others) during the Employment
Period and which (i) concern directly the business of the Company; (ii) result
directly from any work the Executive performs for the Company; or (iii) makes
use of the equipment, supplies, facilities, or trade secret information, of the
Company.
"Person" shall mean any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or any other business entity
or governmental body.
"Severance" following or in connection with a Change in Control, shall mean
the payment of 36 months of base salary and benefits; plus any bonus which would
have been payable in the year the Executive's employment is terminated; and full
acceleration of vesting of shares of common stock held by Executive and all
Options granted by the company to Executive. In the absence of a Change in
Control, "Severance" shall mean the payment of 12 months of base salary and
benefits; plus full acceleration of vesting of shares of common stock held by
Executive and all Options granted by the Company to Executive.
"Without Good Reason" shall mean any termination of employment by Executive
for any reason other than for Good Reason, including, without limitation,
voluntary resignation by Executive.
"Without Cause" shall mean termination by the Company for the sole
convenience of the Company, exclusive of termination by reason of death,
Disability of Executive, termination for Cause, or termination by Executive
either for Good Reason or Without Good Reason.
2. Employment Terms and Duties.
2.1 Employment. The Company hereby employs the Executive, and the
Executive hereby accepts such employment on the terms and conditions set forth
in this Agreement.
2.2 Term. Unless earlier terminated as provided in this Agreement, the
term of employment under this Agreement (the "Employment Period") shall be for a
period beginning on the Effective Date and ending on December 31, of the year
that is at least three (3) years subsequent to the Effective Date.
2.3 Title. The Executive shall have the title, President and Chief
Executive Officer ("President and CEO").
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2.4 Duties. The Executive shall have such duties and responsibilities
as may be assigned to Executive from time to time by the Chief Executive Officer
of the Company. Following the Effective Date, Executive shall devote Executive's
full time and attention to the business and affairs of the Company throughout
the remainder of the Employment Period. Executive shall (i) perform the duties
and responsibilities assigned to Executive to the best of Executive's ability,
and (ii) promote the best interests of the Company in carrying out the duties
and responsibilities assigned to Executive. In performance of Executive's duties
under this Agreement, Executive shall report directly to the Chief Executive
Officer of the Company and shall be subject to the direction and control
thereof.
2.5 Outside Board of Directors. Executive will be permitted to serve
on the board of directors of up to two commercial or charitable organizations,
for which Executive may receive compensation, provided that such activity does
not conflict with Executive's obligations to the Company, nor substantially
diminish the amount of time Executive spends in the performance of his duties
and responsibilities with the Company.
3. Compensation and Benefits.
3.1 Salary. In consideration for the performance of Executive's duties
under this Agreement, the Company shall, commencing on the Effective Date and
continuing through the end of the Employment Period, pay Executive an annual
salary ("Salary") during each year of the Employment Period of $220,000.00.
Annual salary adjustments may be made at the discretion of the Chief Executive
Officer and the compensation committee of the Board of Directors.
The Salary payable to Executive under this Agreement shall be paid in such
periodic installments as may be provided under the Company's customary payroll
policy. The Salary shall be subject to annual review by the Board of Directors.
3.2 Bonus. Executive will be eligible to receive a bonus under any
company bonus plan approved by the Board of Directors.
3.3 2006 Stock Options. Executive will receive an option to purchase
100,000 shares of the Company's common stock pursuant to the terms of the 2006
Stock Option Plan adopted by the Board of Directors. Executive shall be eligible
for participation in all future equity based compensation programs that may be
established by the Company which apply generally to Executive of the Company.
3.4 Benefits. During the Employment Period, Executive shall be
entitled to participate in any employee benefit plans, including, without
limitation, any life, disability, medical and/or dental plans, pension plans,
401(k) and any other customary plans adopted by the Company, to the extent that
Executive is eligible to participate in such plans under the terms of such
plans.
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3.5 Expenses. The Company will pay on behalf of the Executive (or
reimburse the Executive for) all reasonable and customary expenses incurred by
Executive in the performance of Executive's duties under this Agreement, as well
as all reasonable expenses incurred by Executive in the completion of this
Agreement and subsequent agreements between Executive and Company. Reasonable
and necessary relocation and moving expenses will be paid by the Company should
the Executive be required to relocate.
3.6 Personal Leave Days (Vacations, Holidays and Sick Days). The
Executive shall be entitled to thirty (30) days of paid leave to be used for
vacation and sick days in addition to Company paid holidays. Vacation may be
taken at such time as Executive chooses, provided such vacation taken does not
unreasonably interfere with the duties and responsibilities of Executive.
Personal Leave days during any calendar year that are not used by the Executive
during such calendar year may not be "carried over" for use by Executive in any
subsequent calendar year.
4. Termination.
4.1 Events of Termination. Executive's employment shall terminate upon
the earliest to occur of any of the following events (hereinafter referred to as
a "Termination Event"):
(a) death of the Executive;
(b) notice given by either party of termination as a result of the
Disability of Executive;
(c) notice given by the Company of termination of Executive (whether
such termination is for Cause or Without Cause);
(d) notice given by Executive of termination (whether such
termination is for Good Reason or Without Good Reason).
4.2 Effect of Termination. Upon the occurrence of a Termination Event
the party's sole rights and remedies shall be as set forth in this Agreement.
Notwithstanding a Termination Event, all provisions of this Agreement which by
their terms survive, including the covenants set forth in paragraphs 5, 6 and 7
of this Agreement, shall survive in accordance with such terms.
4.3 Termination Pay. Effective upon a Termination Event, the Company
shall, in lieu of all other amounts and in settlement and complete release of
all claims Executive may have against the Company, pay the Executive (or, in the
event of Executive's death, the Executive's estate) only such amounts as are
provided for in this paragraph.
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(a) Termination Pay Upon Death or Disability. If Executive's
employment is terminated because of the Executive's death, the
Executive's estate will be entitled to receive an amount equal to
Severance.
(b) Termination Pay Upon Termination for Cause. If Executive's
employment is terminated by the Company for Cause, the Executive
will be entitled to receive Executive's Salary, Bonus, and
Option(s) held by Executive through the date such termination is
effective.
(c) Termination Pay Upon Termination Without Cause. If Executive's
employment is terminated by the Company Without Cause, the
Executive will be entitled to receive Severance.
(d) Termination Pay Upon Termination for Good Reason. If the
Executive terminates Executive's employment for Good Reason, the
Executive will be entitled to receive Severance.
(e) Termination Pay Upon Termination Without Good Reason. Upon any
termination by Executive Without Good Reason, the Executive will
be entitled to receive only Executive's Salary, Bonus, and
Option(s) held by Executive through the date such termination is
effective.
(g) Benefits Upon Termination. The Executive's accrual of, or
participation in, any employee benefit plans will continue in
accordance with the provisions of such plans. The Executive will
receive any payment or other compensation for any vacation unused
on the date of termination of Executive's employment within 30
(thirty) days of the termination date.
Any Salary or additional compensation payable to Executive pursuant to
this paragraph shall be paid in a single, lump sum payment on the date of
termination.
5. Non Disclosure and Non Interference. Executive agrees (i) not to use any
Confidential Information for any purpose other than the business of the Company,
and (ii) not to disclose any part of the Confidential Information to any Person
who is not authorized by the Company to receive such Confidential Information
and who is required to maintain the confidentiality of such information.
Executive agrees that, upon termination of the Employment Period, Executive
shall promptly deliver to the Company (or leave in the possession of the
Company) all documents, records and any other items that disclose, describe or
embody Confidential Information, and any other property of the Company (whether
or not containing Confidential Information) which is within the Executive's
possession, custody or control. In the event Executive is required to disclose
any Confidential Information by reason of law or by order of any court or
tribunal of competent jurisdiction, Executive shall immediately give notice of
such requirement or order to the Company and shall use Executive's reasonable
best efforts to provide the Company with an adequate opportunity to seek
appropriate relief to protect the confidentiality of the
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Confidential Information. Executive further agrees not to (i) solicit, employ,
or otherwise engage as an employee, independent contractor, or otherwise, any
person who is an employee of the Company at any time, or in any manner induce or
attempt to induce any employee of the Company to terminate his or her employment
with the Company; or (ii) disparage the Company or its customers or suppliers,
or any of their officers, directors, shareholders, employees, or agents.
6. Inventions. Executive agrees that all Inventions made by the Executive
during the Employment Period will be the Company's sole and exclusive property
and shall for all purposes be deemed "works for hire". Executive will, with
respect to any Invention: (i) keep current, accurate, and complete records,
which will belong to the Company and be kept and stored on the Company's
premises; (ii) promptly and fully disclose the existence and describe the nature
of any Invention to the Company; (iii) assign (and the Executive does hereby
assign) to the Company all of Executive's rights to any Invention, any
applications Executive makes for patents or copyrights in any country, and any
patents or copyrights granted to Executive in any country; and (iv) acknowledge
and deliver promptly to the Company any written instruments, and perform any
other acts necessary in the Company's opinion to preserve property rights in any
Invention against forfeiture, abandonment or loss and to obtain and maintain
letters, patents and/or copyrights on any Invention and to vest the entire right
and title to any Invention in the Company. Inventions include but are not
limited to improvements to the Company's products, process and technology.
7. Non-Competition. Executive agrees that, during the Employment Period and
for a period of one (1) year thereafter, Executive shall not, directly or
indirectly, (i) own, manage, operate, lend Executive's name or credit to, or be
connected with, either as an owner, director, employee, agent, independent
contractor, partner, sole proprietor, lender or otherwise, any business which
competes with the Company in connection with the commercial conversion of waste
into high value products that is substantially similar to that developed by the
Company or any product developed or marketed by the Company at any time during
the Employment Period, or (ii) induce any employee of the Company to terminate
such employee's employment with the Company or hire any employee of the Company
to work with Executive or any company or business affiliated with Executive.
Notwithstanding the limitations on the ownership of competing
businesses set forth above, Executive may hold, purchase, or acquire up to (but
not more than) one percent 1% of any class of equity securities of any competing
business if such securities are listed on any national or regional securities
exchange or have been registered under Section 12(g) of the Securities Act of
1934.
If any part of the foregoing covenant not to compete is held to be
unreasonable, arbitrary, or against public policy, such covenant shall be
considered to be divisible with respect to scope, time, and geographic area, and
such lesser scope, time, or geographic area, or all of them, as may be necessary
to be determined to be reasonable, not arbitrary and not against public policy,
will be effective, binding, and enforceable against the parties hereto.
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8. Miscellaneous.
8.1 Entire Agreement. This Agreement constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties, whether oral or written,
with respect to the subject matter hereof.
8.2 Amendments, Modification and Waiver. No amendment, modification,
or waiver of any provision of this Agreement shall be effective unless it is in
writing and signed by the party against whom enforcement of such modification,
amendment or waiver is sought. This Agreement will be expressly made a part of
any agreement entered into by the Company to sell equity in the Company.
8.3 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their respective personal representatives,
heirs, successors, and permitted assigns.
8.4 Assignment. No party to this Agreement may assign its rights or
delegate its obligations under this Agreement to any other Person or other
entity without the express prior written consent of the other party to this
Agreement.
8.5 Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity of enforceability of any other
provision hereof and if any particular provision is determined to be invalid or
unenforceable, the remainder of this Agreement shall be interpreted and
construed as if such provision were omitted.
8.6 Notices. All notices, requests, consents, demands, and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to be duly given and received on the date of
delivery if delivered personally (or sent by fax), or on the second day after
deposit in the United States mail if mailed by prepaid first class registered or
certified mail, and properly addressed as follows:
If to the Company: Converted Organics Inc
0X Xxxxxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
If to Executive: Xxxxxx X. Xxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Any party may change its address for purposes of this paragraph by giving
the other party written notice of the new address in the manner set forth above.
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8.7 Headings. Descriptive headings used in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provision of this Agreement.
8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Massachusetts, without regard to any
otherwise applicable principles of conflicts of laws.
8.9 Counterparts and Facsimile. For the convenience of the parties
hereto, this Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. This Agreement may be executed by
facsimile signature, and each signature printed by a facsimile machine, when
attached to this Agreement, shall be deemed an original counterpart.
8.10 Further Assurances. Each party shall perform such further acts
and execute and deliver such further documents as may be reasonably necessary to
carry into or give effect to the intention of the parties hereto and to carry
out and accomplish the purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date above first written above.
EXECUTIVE: COMPANY:
Xxxxxx X. Xxxxxx Converted Organics Inc.
Print Name
/s/ Xxxxxx X. Xxxxxx /s/ Xxxx X. Xxxxxxx
------------------------------------- ----------------------------------------
Signature By
President & CEO V.P. Development/Operations
Title Its
6-16-06 6/16/06
Date Date
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