EMPLOYMENT AGREEMENT
Exhibit 4.16
This Employment Agreement is made as of the 14th day of December, 2005 between CHI Systems, Inc.
(the “Company”) and Xxxxx Xxxxxxx (the “Executive”).
WHEREAS the Executive has been serving as a senior executive of the Company and;
WHEREAS the Company desires to continue to retain the services of the Executive and the
Executive desires to continue to perform services for the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and the Executive agree as follows:
1. Term of Employment. The term of the Executive’s employment hereunder
shall begin on the date on which the purchase of all of the issued and outstanding shares of the
Company (the “Purchase”) by Offshore Systems International Ltd. (“OSIL”) (the “Effective Date”) is
closed, and shall end on the 3rd anniversary of the Effective Date, subject to earlier termination
pursuant to Section 5 of this Agreement. In the event that the Purchase does not close, this
Agreement shall be null and void ab initio and of no further force and effect. Following
this initial term, and subject to Section 5 hereof, this Agreement shall be deemed to be
automatically extended for successive one (1) year periods, unless either party gives the other
written notice of its intention not to renew this Agreement at least ninety (90) days prior to the
end of the initial or any extended term (the initial term and any extensions thereof referred to
herein as the “Term”).
2. Position and Duties. During the Term, the Executive shall be employed in the
position of Chief Executive Officer and in such position shall report to the Board of Directors
of the Company (the “Board”), subject to adherence to the requirements of the Special Security
Agreement governing the operations of the Company. The Executive shall faithfully and diligently
perform such duties and exercise such powers as are consistent with his position, perform such
other related duties and responsibilities and serve in such other positions as may be assigned to
him from time to time by the Board. In addition, the Executive shall serve as an Officer /
Director within the meaning of and pursuant to ther terms of any Special Security Agreement
governing the operations of the Company. The Executive shall devote substantially all of his
business time, attention and skill to his duties to the Company and shall not engage in,
participate in, render any service to, or undertake any employment, either directly or indirectly,
with respect to any other business or for any other entity, without the prior written consent of
the Company.
3. Place of Employment. The Executive’s principal office and place of
employment shall be at 0000 Xxxxxxxx Xxxxx, Xxxx Xxxxxxxxxx, XX, or within a twenty (20)
mile radius of this location. The Executive acknowledges that he may be required to travel
from time to time at the request of the Company to discharge his duties to the Company, and
agrees to such travel obligations.
4. Compensation and Benefits.
(a) Base Salary and Bonus. During the Term, the Executive’s annual base salary (“Base
Salary”) shall be U.S. $200,000, payable in accordance with the Company’s
payroll practices as in effect from time to time. The Executive’s Base Salary shall be
subject to review and possible adjustment in accordance with the Company’s normal practices and
the terms of any Special Security Agreement governing the operations of the Company, but in no
event shall Executive’s Base Salary be less than the amount specified in the first sentence of
this Section 4(a). In addition, during each year of the Term, the Executive may be eligible to
receive an annual cash bonus of up to 40% of the Executive’s Base Salary, subject to meeting
reasonable objectives mutually established by OSIL’s COO and by the Executive.
(b) Stock Options. The Executive shall be eligible for participation in OSIL’s stock
option plans or share incentive plans which are now in place or may hereafter be established by
OSIL. The Executive acknowledges that any grant of options or other share incentives to the
Executive are in the discretion of the board of directors of OSIL, subject to the terms of any
Special Security Agreement governing the operations of the Company. Any stock options or other
share incentives so granted shall be subject to the terms and conditions of, and shall be
administered in accordance with, the formal plan under which they were granted.
(c) Benefits. During the Term, the Executive (and, to the extent eligible, his
dependents) shall be entitled, and hereby agrees, to continue to participate in the Company’s
executive employee benefit plans in which he participated immediately prior to the Effective Date
(including but not limited to health insurance and short and long-term disability insurance, with
substantially the same levels of benefits and with substantially the same terms and conditions as
were in effect immediately prior to the Effective Date of this Agreement), and in any other such
plans that are generally made available to senior executives of the Company. All such benefits
plans in place as of the date of execution of this Agreement are listed in Appendix A to this
Agreement. The Executive shall also be subject to the same leave time policies as set forth in the
Company’s Employee Handbook (revised June 2004). The Company shall have the right to amend or
replace any such plans and policies, provided that such amended policies or new policies do not
provide materially lesser value or benefits than were provided under the policies in effect
immediately prior to the Effective Date of this Agreement. The Company shall not be obligated to
continue to maintain the existing key-man life insurance policy on the Executive under which the
Company is named as the beneficiary or any life insurance policies which may be currently in place
to fund a purchase of the shares on the death of the Executive pursuant to the existing
shareholders’ agreement among the Executive and of the Company’s shareholders.
(d) Expenses. The Company shall pay or reimburse the Executive for all reasonable business
expenses incurred by him in the performance of his duties under this Agreement in accordance with
the Company’s policies and practices in effect from time to time following receipt from the
Executive of written substantiation of such charges which is acceptable to the Company. The Company
shall continue to provide the Executive with one or more corporate credit cards to be used by the
Executive solely for Company business, subject to the Company’s policies governing such use.
Page 2
(e) Vacation. The Executive shall be entitled to 4 weeks vacation per year, in
accordance with the policies regarding vacation as set forth in the Company’s Employee Handbook
(revised June 2004).
(f) Auto Allowance: The Executive shall be entitled to a company leased or owned
automobile with an MSRP not to exceed $30,000 during 2006, which amount shall be adjusted at the
time that a new automobile lease is entered into by a percentage equal to the percentage increase
in the U.S. consumer price index between January 1, 2006 and the date of the new lease. The
Company will cover the lease payments and cost of automobile insurance premiums, maintenance and
service respecting such vehicle. The Company shall have discretion in determining the duration of
any such lease in accordance with reasonable commercial practices.
5. Termination of Employment. The Executive’s employment may be
terminated in accordance with the following:
(a) Death. The Executive’s employment shall terminate upon his death.
(b) Disability. The Company may terminate the Executive’s employment if, in the good
faith judgment of the Board, the Executive becomes physically or mentally unable to substantially
and completely perform his duties hereunder for a period of 90 days during any six-month period or
for any 90 consecutive days. To assist the Boardin making this determination, the Executive agrees
to submit, at the request of the Board, to a physical and/or mental examination by a physician
mutually selected by the Board and by the Executive’s personal physician, and to grant to the
Board, and any physician it designates, access to all relevant medical information concerning him
and to cause his own physicians to be available to discuss his health with the Board.
(c) Without Cause. The Company may terminate the Executive’s employment at any time
upon providing thirty (30) days written notice to the Executive.
(d) Voluntary Termination. The Executive may terminate his employment for any reason
or no reason upon providing the Company thirty (30) days written notice of termination.
(e) Cause. The Company may terminate the Executive’s employment at any time,
effective immediately, for Cause. “Cause” shall mean any of the following: (i) actions by the
Executive which materially damage the Company’s or an affiliate’s business or reputation; (ii) the
Executive’s violation of any material policy, standard, rule, or practice of the Company, if such
violation in fact causes material damage to the Company’s or an affiliate’s business or
reputation; (iii) the Executive’s breach of his fiduciary duties to the Company or its affiliates,
if such breach in fact causes material damage to the Company’s or an affiliate’s business or
reputation; (iv) the Executive’s continued failure or neglect to substantially perform his duties
hereunder; (v) a breach of any material provision of this Agreement; (vi) the Executive’s
conviction of, or plea of nolo contendere to, a felony, or (vii) the revocation of the Executive’s
current level of security clearance from the U.S. government; provided, however, that the Company
may terminate Executive’s employment for Cause under subsections (i) through (v)
Page 3
hereof only if it provides written notice to the Executive of an intent to terminate for Cause,
which notice specifies the grounds allegedly constituting Cause, and the Executive fails to
reasonably cure or eliminate such grounds within thirty (30) days of his receipt of such notice;
and provided further, that as used in this Agreement (including in section 8), the term
“affiliate” means a company in which Offshore Systems International LTD (“Offshore”) or a
subsidiary thereof has a majority ownership interest, and does not include joint ventures with the
Company or with Offshore or any of its subsidiaries, or any other entities with which Offshore may
have a business relationship but not a majority ownership interest..
(f) Termination by Executive for Good Reason. The Executive may terminate his
employment at any time for Good Reason. As defined herein, the term “Good Reason” shall mean any
of the following: (a) a material breach by the Company of any of its obligations hereunder; (b) a
material diminution in the Executive’s duties or level of responsibility; (c) a reduction in
Executive’s Base Salary below the level specified in paragraph 4(a) or a material diminution in
the level or benefits provided to the Executive; (d) the relocation of the Executive’s place of
employment, without Executive’s consent, to a location which is not within a radius of twenty (20)
miles from the address specified in Section 3 above; and (e) any other actions or failures to act
by the Company that would constitute a “constructive discharge” under applicable legal principles;
provided, however, that the Executive may resign for Good Reason only if he provides written
notice to the Company of an intent to resign for Good Reason, which notice specifies the grounds
allegedly constituting Good Reason, and the Company fails to reasonably cure or eliminate such
grounds within thirty (30) days of its receipt of such notice.
6. Obligations of the Company Upon Termination.
(a) Upon termination of employment by either the Executive or the Company for any reason, the
Executive shall be entitled to be paid (i) any earned but unpaid Base Salary, (ii) any Bonus
earned but unpaid from the prior fiscal year, (iii) reimbursement for any expenses incurred by him
but unpaid as of the date of termination, and (iv) any earned but unused vacation due under the
Company’s Employee Handbook (revised June 2004), subject to the provisions of that Handbook. These
amounts shall be payable in cash within 30 days of such termination date.
(b) Upon the Company’s termination of the Executive’s employment for any reason other than for
Cause in accordance with section 5(e), or upon the Executive’s termination of his employment for
Good Reason, and in consideration for the Confidentiality and Non-Disclosure, Non-Competition and
Non-Solicitation provisions hereof, the Executive will be entitled to the payment set forth in
paragraph 6(a) above and, in addition, to the continuation of his Base Salary for a period of
twelve (12) months following such termination, payable as and when his Base Salary otherwise would
have been payable. The Company shall also pay for the cost of the Executive’s COBRA premiums for a
period of twelve (12) months from the date of termination or until the Executive is fully covered
under another employer’s group health plan, whichever date occurs first, and if Executive does
become fully covered within that twelve month period, he shall promptly notify the Company of that
fact. In the event payments are payable to Executive pursuant to this Section 6(b), no severance
benefits shall be payable to the Executive under any severance plan maintained by the Company.
Page 4
(c) Executive’s entitlement to any compensation under this Section also is subject to the
Executive’s execution of a release of all claims against the Company; provided, however, that (i)
such release does not impose any new obligations or restrictions on the Executive not encompassed
within this Agreement and (ii) such release is reciprocal, containing
a release of all claims that the Company may have against the Executive.
7. Confidentiality and Non-Disclosure.
(a) The Executive shall not, either during or after the Term, divulge or communicate to any
person (except in performing his duties under this Agreement) or use for his own purposes or for
the benefit, purposes or account of the Executive or any other person, trade secrets, confidential
commercial information, or any other information, knowledge, or data of the Company or of any of
its affiliates which is not generally known to the public, and shall use his best efforts to
prevent the publication or disclosure by any other person of any such secrets, information,
knowledge, or data. Confidential information includes, without limitation, information relating to
the Company’s business plans, financial matters, customers, employees, contracts, and all other
secrets and information of a confidential or proprietary nature. The confidentiality and
non-disclosure obligations imposed by this Section 7 will cease if such confidential or
proprietary information becomes, through no fault of the Executive, generally known to the public
or the Executive is required by law to make disclosure (after giving the Company notice and an
opportunity to contest such requirement). The terms of this Section 7 shall be in addition to the
terms of any confidentiality agreement that may previously or contemporaneously herewith have been
executed by the Executive, which will continue in effect and be made a part of this Agreement, and
shall not be read or interpreted to limit, diminish, circumscribe or conflict with the terms or
requirements of any such confidentiality agreement.
8. Non-Competition. The Executive agrees that during the Term, and for a
period of one (1) year following the termination of this Agreement for any reason, he shall
not
directly or indirectly, with or without compensation, be engaged in any work or activity for
or
with, or have any financial interest in, any business materially in competition with, or which
may
materially compete with the Business of the Company (or with the Business of any affiliate for
which the Executive performed substantial services hereunder) within any country, state,
region,
or locality in which the Company or such affiliate is then doing business or marketing its
products, as the business of the Company or such affiliate may then be constituted. For
purposes
of this Agreement, the Business of the Company and of any affiliate means (i) the provision of
research and development services and tools to Federal Government agencies responsible for
national defense, homeland defense, and healthcare clinical information management —
specifically, in areas relating to training systems, cognitive engineering, decision support
systems, and command, control, communications, computing, intelligence, surveillance, and
reconnaissance (C4ISR) systems and (ii) any other business in which the Company is engaged as
of the date of termination of this Agreement. Also, for purposes of this Agreement, the
Executive shall be deemed to be engaged in such a Business if he is a principal, agent,
consultant, employee, officer, director, or partner, of any person, partnership, corporation,
trust
or other entity which is engaged in such a Business, and he shall be deemed to have a
financial
interest in such an entity if he has an equity interest, or interest convertible into equity,
in any
entity engaging in the Business; provided, however, that the foregoing shall not prohibit the
Executive from owning, for the purpose of passive investment, less than two percent (2%) of
any
Page 5
class of securities of a publicly held corporation. The terms of the Section 8 shall be in
addition to the terms of any agreement previously entered into by the Executive, expressly
including that certain Share Purchase Agreement dated for reference November 2, 2005 among OSIL,
the Company, the Executive and the other shareholders of the Company respecting the Purchase.
9. Non-Solicitation. The Executive agrees that for a period of two (2) year after the
termination of his employment for any reason, he will not, on behalf of himself or any person,
firm, partnership, joint venture, corporation or other business organization directly or indirectly
induce, solicit, or participate in the inducement or solicitation, either directly or through a
third party, of any person who is an officer, director, employee, principal or agent of the Company
or any affiliate to leave his or her employment, agency, directorship or office with the Company or
any affiliate, or to induce or solicit any person to not commence an employment or business
relationship with the Company or any affiliate.
10. Company Ownership. Except to the extent required by any applicable
governmental contract, statute, regulation or rule, the Executive hereby agrees that any and all
improvements, inventions, patents, patent applications, software, research, data reports,
copyrightable works of authorship, concepts, discoveries, formulae, processes, methods, know-how,
confidential data, trade secrets and other proprietary information (collectively, “Work Product”)
within the scope of any business of the Company or any affiliate which the Executive may conceive
or make, or have conceived or made, during his employment with the Company shall be and are the
sole and exclusive property of the Company or any such affiliate. The Executive shall, whenever
requested to do so by the Company or any affiliate, and without any obligation on the part of the
Company or such affiliate to pay any royalty or other compensation to the Executive, at the
Company’s or affiliate’s expense, execute and sign any and all applications, assignments or other
instruments and do all other things which the Company or its affiliate may deem necessary or
appropriate (i) in order to apply for, obtain, maintain, enforce or defend letters patent in the
United States or in any foreign country for any Work Product, and/or (ii) in order to assign,
transfer, convey or otherwise make available to the Company or such affiliate the sole and
exclusive right, title, and interest in and to any Work Product.
11. Injunctive Relief. The Executive acknowledges and agrees that the remedy at law
available to the Company for breach of any of his obligations under Sections 7 through 10 would be
inadequate and that damages flowing from such breach may not readily be susceptible to being
measured in monetary terms. Accordingly, the Executive acknowledges and agrees that, in addition
to any other rights or remedies which the Company may have at law, in equity or under this
Agreement, upon adequate proof of his violation of any such provision of this Agreement, the
Company will be entitled to immediate injunctive relief, and may obtain a temporary order
restraining any threatened or further breach, without the necessity of proof of actual damage. Any
such action may only be filed in a court of competent jurisdiction in the State of Delaware, and
the Executive consents to the personal jurisdiction and venue of such courts.
12. Security Clearances. The Executive acknowledges and agrees that maintaining his
existing personnel security clearances with various agencies and departments of the Government of
the United States of America will be a continuing condition of his employment with the Company.
The Executive agrees to co-operate with the Company and such agencies and
Page 6
authorities and to provide such information as they may reasonably require to maintain such
personnel security clearances and to seek to obtain any increased level of security clearance that
may be appropriate. The Executive hereby consents to the disclosure by the Company to such
authorities of such personal information as has been provided by the Executive to the Company in
connection with his or her employment with the Company.
13. Confidential Disclosure and Xxxxxxx Xxxxxxx. The Executive acknowledges
that:
(a) OSIL’s common shares are publicly traded;
(b) he will become privy from time to time to material information about OSIL or material
changes in affairs of OSIL which have not been generally disclosed to the public; and
(c) that he is a “person in a special relationship” with OSIL and an “insider” of OSIL, as
those terms are defined under applicable Canadian securities regulations and may be an “insider”
of OSIL under applicable U.S. securities regulations. The Executive further acknowledges that he
or she has been provided with a copy of OSIL’s Corporate Governance Policy and Code of Business
Ethics which sets out OSIL’s polices concerning, among other things, the maintenance of
confidentiality with respect to OSIL information and restrictions and prohibitions on trading in
OSIL’s securities. The Executive agrees to comply with such policies, and acknowledges that a
material breach of such policies will constitute a material breach of this Agreement. The
Executive further acknowledges that it is his obligation to comply with all applicable laws and
regulations respecting trading in securities of OSIL.
14. Notice. All notices or other communications hereunder shall be in writing and
shall be deemed to have been duly given (a) when delivered personally, (b) upon confirmation
of
receipt when such notice or other communication is sent by facsimile, (c) one day after
delivery
to an overnight delivery courier or (d) three days after it has been sent by registered or
certified
mail, return receipt requested postage prepaid, addressed to the addresses set forth below, or
to
such other address as either party may have furnished to the other in writing in accordance
herewith.
herewith.
If to the Company:
Offshore Systems International LTD
000-000 Xxxx 0xx Xxxxxx
Xxxxx Xxxxxxxxx, XX Xxxxxx X0X0X0
000-000 Xxxx 0xx Xxxxxx
Xxxxx Xxxxxxxxx, XX Xxxxxx X0X0X0
Attention: Chief Operating Officer
with a copy to:
Xxxxx Xxxxxx LLP
800 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Xxxxx Xxxxxx LLP
800 - 000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Attention: Xxxxx Xxxxxxx
Page 7
If to the Executive:
Xxxxx Xxxxxxx CHI Systems, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
With a copy to:
Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx, Esquire
or to such other address as either party may designate by notice to the other, and
shall be deemed to have been given upon receipt.
15. Miscellaneous.
(a) Survival. The termination of the Executive’s employment will not impair the rights
or obligations of a party that accrue prior to such termination, except to the extent specifically
stated herein. In addition, the Executive’s covenants contained in Sections 7, 8, 9 and 10 and the
Company’s obligations under Section 6 will survive the termination of the Executive’s employment.
(b) Amendments and Waiver. Only an instrument in writing signed by the parties may
amend this Agreement, and any provision hereof may be waived only by an instrument in writing
signed by the party against whom enforcement of such waiver is sought. The failure of either party
at any time to require the performance by the other party of any provision hereof shall in no way
affect the full right to require such performance at any time thereafter, nor shall the waiver by
either party of a breach of a provision hereof be taken or held to be a waiver of any succeeding
breach of such provision or a waiver of the provision itself or a waiver of any other provision of
this Agreement.
(c) Withholding. Executive agrees that the Company may withhold from any and all
payments required to be made to Executive in accordance with this Agreement all federal, state,
local, and other taxes that the Company determines are required to be withheld in accordance with
applicable statutes and regulations in effect from time to time.
(d) Successors. This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and other legal
representatives. The Company shall require any successor to all or a portion of the business
and/or assets of the Company by purchase, merger, consolidation, acquisition of stock or otherwise
which is or becomes the employer of the Executive to assume and agree to perform this Agreement in
the same manner and to the same extent as the Company would be required to perform if no such
succession had taken place, and a failure of any such successor to the Company which is or becomes
the employer of the Executive to assume and agree to perform
Page 8
this Agreement shall be, for all purposes of this Agreement, a termination of this Agreement by the
Company and such successor.
(e) Assignment. This Agreement and all of Executive’s rights and duties shall not be
assignable or delegable by the Executive. The Company may assign this Agreement to a person or
entity which is an affiliate or a successor in interest to substantially all of the business
operations of the Company, provided that the Company complies with its obligations in the second
sentence of Section 15(d) above.
(f) Severability of Provisions. If any provision of this Agreement, or portion
thereof, is so broad in scope or duration so as to be unenforceable, such provision or portion
thereof shall be interpreted to be only so broad as is enforceable. If any one or more provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby and this Agreement shall be interpreted as if such invalid, illegal,
or unenforceable provision was not contained therein.
(g) Headings. The headings used in this Agreement are intended for convenience and
reference only and will not in any manner amplify, limit, modify or otherwise be used in the
construction or interpretation of any provision of this Agreement. All section references are to
sections of this Agreement, unless otherwise noted.
(h) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to conflict of laws provisions.
(i) Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the same instrument.
(j) Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the Executive’s employment by the Company, and supersedes, and is
in full substitution of, any and all oral or written prior understandings, representations, or
agreements with respect to the Executive’s employment unless otherwise indicated herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated below.
| Executive | CHI Systems Inc. | |||||||
| /s/ Xxxxx Xxxxxxx | /s/ Xxxxxxx Xxxxxxxxxxx | |||||||
| December 13, 2005 | December 13, 2005 | |||||||
Date
|
Date | |||||||
Page 9
By its signature below, Offshore Systems International Ltd., intending to be legally bound, hereby
guarantees the Company’s obligations hereunder:
| Offshore Systems International Ltd.: |
||||
| By: | /s/ Xxxxxxx Xxxxxxxxxxx | |||
| Name: | XXX XXXXXXXXXXX | |||
| Title: | CEO | |||
Page 10
