EMPLOYMENT AGREEMENT
Exhibit 10.3
This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the 1st day of August 2006, by and
between Cereplast, Inc., a Nevada corporation (the “Company”), and Xxxxxxxx Xxxxxx, an individual
(“Employee”), and is made with respect to the following facts:
R E C I T A L S
A. The Company and the Employee wish to ensure that the Company will receive the benefit of
Employee’s loyalty and service.
B. In order to help ensure that the Company receives the benefit of Employee’s loyalty and
service, the parties desire to enter into this formal Employment Agreement to provide Employee with
appropriate compensation arrangements and to assure Employee of employment stability.
C. The parties have entered into this Agreement for the purpose of setting forth the terms of
employment of the Employee by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, THE
PARTIES HERETO AGREE AS FOLLOWS:
1. Employment of Employee and Duties. The Company hereby hires Employee and Employee
hereby accepts employment upon the terms and conditions described in this Agreement. The Employee
shall continue to be the Chief Executive Officer and President of the Company with all of the
duties, privileges and authorities usually attendant upon such office, including but not limited to
overall supervision of the management of the Company’s operations. Subject to (a) the general
supervision of the Board of Directors of the Company, and (b) the Employee’s duty to report to the
Board of Directors periodically, as specified by it from time-to-time, Employee shall have all of
the authority to perform his employment duties for the Company.
2. Time and Effort. Employee agrees to devote his full working time and attention to
the management of the Company’s business affairs, the implementation of its strategic plan, as
determined by the Board of Directors, and the fulfillment of his duties and responsibilities as the
Company’s Chief Executive Officer and President. Expenditure of a reasonable amount of time for
personal matters and business and charitable activities shall not be deemed to be a breach of this
Agreement, provided that those activities do not materially interfere with the services required to
be rendered to the Company under this Agreement.
3. The Company’s Authority. Employee agrees to comply with the Company’s rules and
regulations as adopted by the Company’s Board of Directors regarding performance of his duties, and
to carry out and perform those orders, directions and policies established by the Company with
respect to his engagement. Employee shall promptly notify the Company’s Board of Directors of any
objection he has to the Board’s directives and the reasons for such objection.
4. Noncompetition by Employee. During the term of this Agreement, the Employee shall
not, directly or indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder (in a private company), corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business that is in direct
competition with the business of the Company or its affiliates.
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5. Term of Agreement. This Agreement shall commence to be effective on August 1, 2006
(the “Commencement Date”), and shall continue until July 31, 2011, unless terminated as provided in
Section 14 hereof.
6. Compensation. During the term of this Agreement, the Company shall pay the
following compensation to Employee:
6.1 Annual Compensation. Employee shall be paid a fixed salary of $400,000 per year,
payable in two installments per month of $16,700 each on the 1st and 16th day of each month,
corresponding to the second half of the previous month and the first 15 days of the current month,
respectively, commencing on August 16, 2006 for the period from August 1, 2006 until August 15,
2006. Employee shall receive an annual 7% increase in said fixed salary effective each January
1st during the term of this Agreement. Employee has the right is his sole discretion to
defer any portion of his salary in excess of $13,000 per month and have it paid at a later date by
notifying the Company on or before the scheduled date for a salary payment.
6.2 Additional Compensation. In addition to the compensation set forth in Section 6.1
of this Agreement, Employee may be paid a bonus or bonuses during each year, as determined at the
sole discretion of the Company’s Board of Directors based on the Board’s evaluation of the
Employee’s definable efforts, accomplishments and similar contributions.
7. Fringe Benefits. Employee shall be entitled to all fringe benefits which the
Company or its subsidiaries may make available from time-to-time for persons with comparable
positions and responsibilities. Without limitation, such benefits shall include participation in
any life and disability insurance programs, profit incentive plans, pension or retirement plans,
and bonus plans as are maintained or adopted from time-to-time by the Company. The Company shall
also provide Employee with medical and dental group insurance coverage or equivalent coverage for
Employee and his dependents. The medical and dental insurance coverage shall begin on the
Commencement Date and shall continue throughout the term of this Agreement. The Company will also
provide and pay for a health club membership for Employee, reasonably selected by the Employee.
8. Office and Staff. In order to enable Employee to discharge his obligations and
duties pursuant to this Agreement, the Company agrees that it shall provide suitable office space
for Employee in El Segundo, California, together with all necessary and appropriate supporting
staff and secretarial assistance, equipment, stationery, books and supplies. Employee agrees that
the office space and supporting staff presently in place is suitable for the purposes of this
Agreement. The Company agrees to provide at its expense parking for one vehicle by the Employee at
the Company’s executive offices.
9. Reimbursement of Expenses. The Company shall reimburse Employee for all reasonable
travel, mobile telephone, promotional and entertainment expenses incurred in connection with the
performance of Employee’s duties hereunder, subject to Section 10 of this Agreement with respect to
automobile expenses. Employee’s reimbursable expenses shall be paid promptly by the Company upon
presentment by Employee of an itemized list of invoices
describing such expenses. All compensation provided in Sections 6, 7, and 9 of this Agreement
shall be subject to customary withholding tax and other employment taxes, to the extent required by
law.
10. Automobile. Notwithstanding anything else herein to the contrary, the Company
shall pay to the Employee a fixed amount equal to $500 per month on the last day of each month
during the term of this Agreement as reimbursement to the Employee on a non-accountable basis of
all expenses incurred by the Employee for the use of his automobile for Company business purposes,
including but not limited to depreciation, repairs, maintenance, gasoline and insurance. After the
expiration of the first year of the term of this Agreement, the Company’s Board of Directors will
review and may in its discretion determine to increase the Employee’s automobile allowance, or
authorize the Company to lease an automobile for the Employee. Employee shall not be entitled to
any other reimbursement for the use of his automobile for business purposes.
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11. Vacation. Employee shall be entitled to three weeks of paid vacation per year or
pro rata portion of each year of service by Employee under this Agreement. The Employee shall be
entitled to the holidays provided in the Company’s established corporate policy for employees with
comparable duties and responsibilities.
12. Rights In And To Inventions And Patents.
12.1 Description of Parties’ Rights. The Employee agrees that with respect to any
inventions made by him or the Company during the term of this Agreement, solely or jointly with
others, (i) which are made with the Company’s equipment, supplies, facilities, trade secrets or
time, or (ii) which relate to the business of the Company or the Company’s actual or demonstrably
anticipated research or development, or (iii) which result from any work performed by the Employee
for the Company, such inventions shall belong to the Company. The Employee also agrees that the
Company shall have the right to keep such inventions as trade secrets, if the Company chooses.
12.2 Disclosure Requirements. For purposes of this Agreement, an invention is deemed
to have been made during the term of this Agreement if, during such period, the invention was
conceived or first actually reduced to practice. In order to permit the Company to claim rights to
which it may be entitled, the Employee agrees to disclose to the Company in confidence the nature
of all patent applications filed by the Employee during the term of this Agreement.
13. Termination. This Agreement may be terminated in the following manner and not
otherwise:
13.1 Mutual Agreement. This Agreement may be terminated by the mutual written
agreement of the Company and Employee to terminate.
13.2 Termination by Employee for Breach. Employee may at his option and in his sole
discretion terminate this Agreement for the material breach by the Company of the terms of this
Agreement. In the event of such termination, Employee shall give the Company 30 days prior written
notice.
13.3 Termination by the Company for Breach. The Company may at its option terminate
this Agreement in the event that the Employee intentionally performs his duties in bad faith under
this Agreement, or breaches his fiduciary duty to the Company, to the Board of
Directors or to the Company’s shareholders; provided, however, that the Company shall give the
Employee written notice of specific instances for the basis of any termination of this Agreement by
the Company pursuant to Section 13.3 of this Agreement. Employee shall have a period of 30 days
after said notice in which to cease the alleged violations before the Company may terminate this
Agreement. If Employee ceases to commit the alleged violations within said 30 day period, the
Company may not terminate this Agreement pursuant to this Section. If Employee continues to commit
the alleged violations after said 30 day period, the Company may terminate this Agreement
immediately upon written notification to Employee. Notwithstanding anything else herein to the
contrary, if the Employee is removed pursuant to Section 13.3 of this Agreement, the Employee shall
receive all of the benefits provided in Section 14(iii) of this Agreement, regardless of the terms
and conditions of the Company’s Stock Option Plan or any existing stock option agreements or any
amendments thereto governing the options described in Section 14(iii) of this Agreement.
13.4 Termination Upon Death. This Agreement shall terminate upon the death of the
Employee.
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13.5 Termination Upon the Disability of the Employee. This Agreement shall terminate
upon the disability of the Employee. As used in the previous sentence, the term “disability” shall
mean the complete disability to discharge Employee’s duties and responsibilities for a continuous
period of not less than six months during any calendar year. Any physical or mental disability
which does not prevent Employee from discharging his duties and responsibilities in accordance with
usual standards of conduct as determined by the Company in its reasonable opinion shall not
constitute a disability under this Agreement.
13.6 Termination from or Changes in Position. Removal of the Employee from his
position as the Chief Executive Officer or President of the Company shall be deemed to be a
termination subject to the severance payment positions set forth in Section 14 of this Agreement.
The Company shall not be entitled to place the Employee in any other employment position without
the Employee’s consent. The Employee’s failure to consent shall not be a breach of any provision
of this Agreement.
13.7 Termination As A Result of A Change in Control of the Company. “Change of
Control” is defined as a sale of all or substantially all of the Company’s assets or more than
fifty percent (50%) of the Company’s outstanding stock, to a purchaser which is unaffiliated with
the Company, in a single transaction or a series of related transactions, or a merger pursuant to
which the Company is not the surviving corporation, with any entity which is unaffiliated with the
Company. In the event of a Change in Control of the Company, if the Employee, negotiating in good
faith, is unable to come to an agreement with the surviving company regarding an employment
agreement, then the Employee may terminate this Agreement pursuant to Section 13.2 of this
Agreement.
13.8 Other Termination by Employee. If this Agreement is terminated by Employee in
writing for a reason other than the Company’s breach of this Agreement (i.e. voluntary resignation)
then (a) Employer shall not be entitled to assert any claim against the Employee for consequential
or indirect damages or for lost profits as a result of the termination; and (b) Employee shall not
be entitled to any rights set forth in Section 14 of this Agreement except that Employee shall be
entitled to the right to exercise vested options, if any, for a period of 90 days after the date of
the written notification of termination by the Employee.
14. Improper Termination. If this Agreement is terminated by Employee for any reason
pursuant to Section 13.2, 13.6 or 13.7 of this Agreement or by the Company in any manner except
specifically in accordance with Section 13.1 or 13.3, 13.4 or 13.5 of this Agreement, then (i) the
Company shall immediately pay to the Employee a lump sum payment equal to the sum of the Employee’s
entire annual compensation and accrued but unpaid bonus (if any, with respect to bonus) payable
through the end of the term of this Agreement pursuant to Sections 6.1 and 6.2 herein,
respectively, plus an additional lump sum equal to 36 months of his last monthly payment on record
(ii) Employee shall be entitled to all of the benefits under Section 7 of this Agreement, as
amended, through the end of the term of this Agreement, and (iii) if applicable, all unvested stock
options owned by Employee will immediately vest, Employee shall be entitled to exercise all vested
stock options which he owns for the entire remaining exercise period of the stock options, no such
stock options shall terminate prior to said expiration dates, and no “severance” shall be deemed to
have occurred under the Company’s Stock Option Plan or under existing Stock Option Agreements
covering said stock options. It is specifically agreed that in such event Employee shall have no
duty to mitigate his damages by seeking comparable, inferior or different employment.
15. Indemnification of Employee. Pursuant to the provisions and subject to the
limitations of the California Corporations Code, and in particular Sections 204 and 317 therein,
the Company shall indemnify and hold Employee harmless as provided in Sections 15.1, 15.2 and 15.3
of this Agreement. The Company shall, upon the request of Employee, assume the defense and
directly bear all of the expense of any action or proceedings which may arise for which Employee is
entitled to indemnification pursuant to this Section.
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15.1 Indemnification of Employee for Actions by Third Parties. The Company hereby
agrees to indemnify and hold Employee harmless from any liability, claims, fines, damages, losses,
expenses, judgments or settlements actually incurred by him, including but not limited to
reasonable attorneys’ fees and costs actually incurred by him as they are incurred, as a result of
Employee being made at any time a party to, or being threatened to be made a party to, any
proceeding (other than an action by or in the right of the Company, which is addressed in Section
15.2 of this Agreement), relating to actions Employee takes within the scope of his employment as
the Chief Executive Officer of the Company or in any other employment capacity, or in his role as a
director of the Company, provided that Employee acted in good faith and in a manner he reasonably
believed to be in the best interest of the Company and, in the case of a criminal proceeding, had
no reasonable cause to believe his conduct was unlawful.
15.2 Indemnification of Employee for Actions in the Right of the Company. The Company
hereby agrees to indemnify and hold Employee harmless from any liability, claims, damages, losses,
expenses, judgments or settlements actually incurred by him, including but not limited to
reasonable attorneys’ fees and costs actually incurred by him as they are incurred, as a result of
Employee being made a party to, or being threatened to be made a party to, any proceeding by or in
the right of the Company to procure a judgment in its favor by reason of any action taken by
Employee as an officer, director or agent of the Company, provided that Employee acted in good
faith in a manner he reasonably believed to be in the best interests of the Company and its
shareholders, and provided further, that no indemnification by the Company shall be required
pursuant to this Section 15.2 (i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law, (ii) for acts or omissions that Employee believed to be
contrary to the best interests of the Company or its shareholders or that involve the absence of
good faith on the part of Employee, (iii) for any transaction from which Employee derived an
improper personal benefit, (iv) for acts or omissions that show a reckless disregard by Employee of
his duties to the Company or its shareholders in circumstances in which Employee
was aware, or should have been aware, in the ordinary course of performing his duties, of a
risk of serious injury to the Company or its shareholders, (v) for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of Employee’s duties
to the Company or its shareholders, or (vi) for any other act by Employee for which Employee is not
permitted to be indemnified under the California Corporations Code. Furthermore, the Company has
no obligation to indemnify Employee pursuant to this Section 15.2 in any of the following
circumstances:
A. In respect of any claim, issue, or matter as to which Employee is adjudged to be liable to
the Company in the performance of his duties to the Company and its shareholders, unless and only
to the extent that the court in which such action was brought determines upon application that, in
view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for
the expenses and then only in the amount that the court shall determine.
B. In the event of the application of Section 15.2(A), then for amounts paid in settling or
otherwise disposing of a threatened or pending action without court approval.
C. In the event of the application of Section 15.2(A), then for expenses incurred in defending
a threatened or pending action which is settled or otherwise disposed of without court approval.
15.3 Reimbursement. In the event that it is determined by a trier of fact that
Employee is not entitled to indemnification by the Company pursuant to Sections 15.1 or 15.2 of
this Agreement, then Employee is obligated to reimburse the Company for all amounts paid by the
Company on behalf of Employee pursuant to the indemnification provisions of this Agreement. In the
event that Employee is successful on the merits in the defense of any proceeding referred to in
Sections 15.1 or 15.2 of this Agreement, or any related claim, issue or matter, then the Company
will indemnify and hold Employee harmless from all fees, costs and expenses actually incurred by
him in connection with the defense of any such proceeding, claim, issue or matter.
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16. Assignability of Benefits. Except to the extent that this provision may be
contrary to law, no assignment, pledge, collateralization or attachment of any of the benefits
under this Agreement shall be valid or recognized by the Company. Except as provided by law,
payment provided for by this Agreement shall not be subject to seizure for payment of any debts or
judgments against the Employee, nor shall the Employee have any right to transfer, modify,
anticipate or encumber any rights or benefits hereunder; provided that any stock issued by the
Company to the Employee pursuant to this Agreement shall not be subject to Section 16 of this
Agreement.
17. Directors’ and Officers’ Liability Insurance. The Company will utilize its best
efforts in good faith to purchase directors’ and officers’ liability insurance for the officers and
directors of the Company, which would include the same coverage for Employee. The Company
covenants to maintain in effect a directors’ and officers’ liability insurance policy on the same
terms and conditions as applicable to all other officers and directors of the Company.
18. Notice. All notices and other communications required or permitted hereunder
shall be in writing or in the form of a telex or telecopy (confirmed in writing) to be given only
during the recipient’s normal business hours unless arrangements have otherwise been made to
receive such notice by telex or telecopy outside of normal business hours, and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or telex
or telecopy (as provided above) addressed (a) if to the Employee, at the address for such
Employee set forth on the signature page hereto or at such other address as such Employee shall
have furnished to the Company in writing or (b) if to the Company, to its principal executive
offices and addressed to the attention of the Chairman of the Board, or at such other address as
the Company shall have furnished in writing to the Employee.
In case of the Company:
Cereplast, Inc.
0000 Xx Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
0000 Xx Xxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chairman of the Board of Directors
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
Facsimile Number: (000) 000-0000
In case of the Employee:
Xxxxxxxx Xxxxxx
The address listed below Xx. Xxxxxx’x
signature to this Agreement.
The address listed below Xx. Xxxxxx’x
signature to this Agreement.
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19. Attorneys’ Fees. In the event that any of the parties must resort to legal action
in order to enforce the provisions of this Agreement or to defend such suit, the prevailing party
shall be entitled to receive reimbursement from the nonprevailing party for all reasonable
attorneys’ fees and all other costs incurred in commencing or defending such suit.
20. Entire Agreement. This Agreement embodies the entire understanding among the
parties and merges all prior discussions or communications among them, and no party shall be bound
by any definitions, conditions, warranties, or representations other than as expressly stated in
this Agreement or as subsequently set forth in a writing signed by the duly authorized
representatives of all of the parties hereto.
21. No Oral Change; Amendment. This Agreement may only be changed or modified and any
provision hereof may only be waived by a writing signed by the party against whom enforcement of
any waiver, change or modification is sought. This Agreement may be amended only in writing by
mutual consent of the parties.
22. Severability. In the event that any provision of this Agreement shall be void or
unenforceable for any reason whatsoever, then such provision shall be stricken and of no force and
effect. The remaining provisions of this Agreement shall, however, continue in full force and
effect, and to the extent required, shall be modified to preserve their validity.
23. Applicable Law. This Agreement shall be construed as a whole and in accordance
with its fair meaning. This Agreement shall be interpreted in accordance with the laws of the
State of California, and venue for any action or proceedings brought with respect to this Agreement
shall be in the County of Los Angeles in the State of California.
24. Successors and Assigns. Each covenant and condition of this Agreement shall inure
to the benefit of and be binding upon the parties hereto, their respective heirs, personal
representatives, assigns and successors in interest. Without limiting the generality of the
foregoing sentence, this Agreement shall be binding upon any successor to the Company whether by
merger, reorganization or otherwise.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above
written.
COMPANY:
|
CEREPLAST, INC. a Nevada corporation |
|||
Attest:
|
/s/ Xxxxxxx Xxxxxx | |||
| Xxxxxxx Xxxxxx, Chief Executive Officer, President and Chairman of the Board of Directors | ||||
/s/ Xxxxx Xxxxxxxxx |
||||
Xxxxx Xxxxxxxxx, Director |
||||
EMPLOYEE: |
||||
| /s/ Xxxxxxxx Xxxxxx | ||||
| Xxxxxxxx Xxxxxx | ||||
| Street Address | ||||
| City, State and Zip Code | ||||
| Telephone Number: | ||||
| Facsimile Number: |
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