AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EXHIBIT
10.17
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
XXXXXXX
XXXXXX,
an
individual having an address at 0000 Xxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx
00000 (“Executive”)
WHEREAS,
the
Company and the Executive 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,
Executive 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 Employer
hereby hires the Executive as a President Technology Division of the Company
and
Executive hereby affirms and accepts such position and employment by Employer
for the Term (as defined in Article 3 below), 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 Executive as a member of the Employer’s Board of Directors
throughout the Term.
ARTICLE
2
DUTIES
During
the Term, Executive 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
the Company’s Chief Executive Officer 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.
Executive 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. Executive
shall have those duties and powers as generally pertain to each of the offices
of which he holds, as the case may be, subject to the control of the Board
of
Directors. Employer and Executive also agree that Executive shall serve as
a
member of the Employer’s Board of Directors during the Term.
ARTICLE
3
TERM
3.1 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, Executive 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 Salary
and Equity Compensation
(a) In
consideration of Executive’s services to Employer, Employer shall pay to
Executive an annual salary (the “Salary”)
of Two
Hundred Fifty Thousand Dollars ($250,000.00), 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 Seventy Nine Thousand Eight Hundred Ninety Eight Dollars
($79,898), 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.
(b) In
addition to the Salary, Employer shall issue to Executive a Stock Option to
purchase 500,000 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.
Executive 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 Executive 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 Executive 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
Executive 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.
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(c) Executive
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 Executive 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 therefrom, and; the Executive further acknowledges
that he may be required to hold such securities for an indeterminable amount
of
time.
(d)
Executive
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, Executive 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 the 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, but only to the extent
that
the cost thereof is determined to be reasonable by the independent directors
of
the Board. The beneficiary of the life insurance policy shall be Executive’s
spouse, and if he has no spouse as directed by Executive. Executive also agrees
to cooperate with the Company in obtaining for the benefit of the Company “key
man” life insurance on Executive’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 Executive 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.
4.5 Performance
Bonus
In
addition to the compensation payable under Section 4.1, Executive shall be
eligible to receive during the Term an annual discretionary performance bonus,
the amount of which shall be determined by the Board of Directors based on
the
performance of the Executive during the period intended to be covered by such
bonus (the “Performance Bonus”). Employer shall make a determination as to the
sufficiency of its cash flow and profits for purposes of awarding a Performance
Bonus, to Executive in connection with each performance period. Each year’s
Performance Bonus shall be paid to the Executive within 110 days of the
Employer’s fiscal year end.
4.6 Other
Compensation
Commencing
upon the Full Payment Date, Employer
shall provide Executive with an automobile for his exclusive use throughout
the
Term, including costs for gasoline, maintenance and comprehensive insurance
including an “umbrella” policy.
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ARTICLE
5
OTHER
EMPLOYMENT
During
the Term, Executive 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 Executive’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 Executive. Nothing
in this Agreement shall preclude Executive from:
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(a)
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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 Executive must obtain the prior written approval of the independent
members of the Board;
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(b)
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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 Executive must obtain the prior written approval of the
independent members of the Board of Employer and where it does not
conflict with the interests of Employer;
and
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(c)
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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.
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ARTICLE
6
CONFIDENTIAL
INFORMATION/INVENTIONS
Confidential
Information
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6.1
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Executive
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.
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Documents
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6.2
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Executive
further agrees that all documents and materials furnished to Executive
by
Employer and relating to Employer’s business or prospective business are
and shall remain the exclusive property of Employer. Executive shall
deliver all such documents and materials, and all copies thereof
and
extracts therefrom, to Employer upon demand therefor and in any event
upon
expiration or earlier termination of this Agreement.
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Inventions
and Intellectual Property
6.3 Inventions
and Intellectual Property. The Company’s rights in patents, ideas, inventions,
and other intellectual property rights, including 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 Executive that (i) do not relate to the CRSV System
technology.
Disclosure
6.4 During
the Term, Executive will promptly disclose to the Board of Directors full
information concerning any interest, direct or indirect, of Executive (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 Executive 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, Executive 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 Executive is terminated for Cause, or if Executive
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 Executive,
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
Executive 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 Executive.
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ARTICLE
8
SURVIVAL
Except
as
otherwise provided, Executive 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
Executive
acknowledges and agrees that the covenants and obligations of Executive 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, Executive agrees that if Executive
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 Executive from committing any violation of the covenants
and obligations referred to in this Article 9. Executive 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
Termination
by Executive
10.1 Executive
shall be entitled to terminate this Agreement, for any, or no reason, upon
providing a 60 days’ written notice.
Executive
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.
Good
Reason
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10.2
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In
this Agreement, “Good Reason” means, without Executive’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 Executive gives notice
thereof:
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(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;
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(ii)
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any
material failure to timely grant, or timely honor, the Stock Option
set
forth in Article 4.2;
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(iii)
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failure
to pay or provide required
expenses;
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(iv)
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any
diminution in authority or responsibility to a non-executive
position;
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The
written notice given for Good Reason by Executive 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 Executive’s notice
and cure the breach or other event giving rise to the termination.
Termination
by Employer
10.3 Employer
may terminate its employment of Executive under this Agreement only with Cause
and only by written notice to Executive. 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
Executive to a felony, or any crime involving fraud, securities laws violations,
embezzlement or moral turpitude; (b) the refusal by Executive 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)
Executive’s willful or intentional misconduct in the performance of his duties
and obligations; or (d) conduct that is known or that should have been known
by
Executive to be detrimental to the best interests of the Company, as determined
by the independent members of the Board; (e) if Executive 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 Executive. The written notice given hereunder by Employer
to
Executive 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
Executive’s receipt of such notice, during which time Executive shall have the
right to respond to Employer’s notice and cure (if curable) the breach or other
event giving rise to the termination.
Severance
10.4 Upon
a
termination of this Agreement with Good Reason by Executive, Employer shall
pay
to Executive 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 Executive under
Section 4.2 of this Agreement for a period of two years .
Termination
Upon Death
10.5 If
Executive dies during the Term, this Agreement shall terminate, except that
Executive’s legal representatives shall be entitled to receive any earned but
unpaid compensation or expense reimbursement due hereunder through the date
of
death.
Termination
Upon Disability
10.6
If,
during the Term, Executive suffers and continues to suffer from a “Disability”
(as defined below), then Employer may terminate this Agreement by delivering
to
Executive 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, Executive 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.
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ARTICLE
11
PERSONNEL
POLICIES, CONDITIONS, AND BENEFITS
During
the Term, Executive 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 Executive
the
right to use any accrued and unused vacation of Executive, or (ii) pay Executive
for such vacation in a lump sum in accordance with its standard payroll
practices.
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 and the Chief Executive Officer 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
12
BENEFICIARIES
OF AGREEMENT
This
Agreement shall inure to the benefit of the parties hereto, their respective
heirs, successors and permitted assigns.
ARTICLE
13
GENERAL
PROVISIONS
No
Waiver
13.1 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.
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Modification
13.2 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.
Submission
to Jurisdiction; Consent to Service of Process.
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.
Entire
Agreement
13.4 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 Executive 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.
Severability
13.5
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.
Headings
13.6 The
headings contained herein are for the convenience of reference and are not
to be
used in interpreting this Agreement.
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Independent
Legal Advice
13.7 Employer
and Executive each acknowledge that he or it has obtained legal advice
concerning this Agreement.
No
Assignment
13.8
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
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| By: | /s/ Xxxxx X. Xxxx | /s/ Xxxxxxx Xxxxxx | ||
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Xxxxx
X. Xxxx
Chief
Financial Officer
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Xxxxxxx
Xxxxxx
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