EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”) is made and entered into by and among Xxx
X. Xxxxxxx, Xx. (the “Employee”) and Acorn Energy, Inc. (“Acorn”) and CoaLogix
Inc. (“CoaLogix”), a subsidiary of Acorn, as of September 15, 2008. Acorn and
CoaLogix are sometimes hereinafter collectively referred to as the “Companies”.
1. Duties
and Scope of Employment.
(a) Positions
and Duties.
Employee’s employment with the Companies will commence January 5, 2009 (the
“Effective Date”). As of the Effective Date, Employee will serve as Vice
President, General Counsel and Secretary for each of the Companies. Employee
will render such other business and professional services in the performance
of
his duties, consistent with Employee’s position within the Companies as shall be
assigned to him, by the CEO of Acorn and the CEO of CoaLogix (collectively,
the
“CEOs”) or the boards of directors of Acorn and CoaLogix (collectively, the
“Boards”) or their designee. The period of Employee’s employment under this
Agreement is referred to herein as the “Employment Term.” Employee will office
and be located in the headquarters of CoaLogix in Charlotte, North Carolina.
Employee will report to the CEOs who, together with Employee, will set
Employee’s goals and objectives for each of Acorn and CoaLogix.
(b) Obligations.
During
the Employment Term, Employee will perform his duties faithfully and to the
best
of his ability and will devote his full business efforts and time to the
Companies. For the duration of the Employment Term, Employee agrees not to
actively engage in any other employment, occupation or consulting activity
for
any direct or indirect remuneration without the prior approval of the CEOs
or
the Boards.
2. At-Will
Employment.
The
Companies and the Employee acknowledge and agree that the Employee’s employment
is and shall continue to be at-will, as defined under applicable law. If the
Employee’s employment terminates for any reason, including (without limitation)
any termination after an announcement of Change of Control and prior to
twenty-four months following a Change of Control or the announcement of a Change
of Control, whichever comes later, the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation other than as provided
by
this Agreement.
3. Compensation.
(a) Base
Salary.
During
the Employment Term, CoaLogix will pay Employee as compensation for his services
an aggregate base salary at the annualized rate of $300,000 (the “Base Salary”)
subject to adjustment based upon the mutual written agreement of the parties.
The Base Salary will be paid periodically ($12,500 twice monthly) in accordance
with CoaLogix’s normal payroll practices and be subject to the usual, required
withholding. Employee’s compensation and benefits will be administered by
CoaLogix. CoaLogix will be reimbursed for the portion of Employee’s compensation
and benefits that is allocated to Acorn in accordance with terms of the Services
Agreement entered into between Acorn and CoaLogix.
(b) Annual
Bonus.
During
the Employment Term, Employee shall be eligible to receive an annual bonus
equal
to 30% of Employee’s Base Salary based upon criteria including personal,
corporate and subjective goals in the approximate percentages of 50%, 30% and
20%, respectively (the “Target Bonus”). Such criteria shall be determined by the
CEO and Board of Acorn with respect to Employee’s services rendered to Acorn for
which CoaLogix is entitled to reimbursement and by the CEO and Board of CoaLogix
with respect to Employee’s services rendered to CoaLogix.
(c) Stock
Options and CARs.
Employee will be awarded Acorn and CoaLogix stock options as follows: (i) award
as of July 30, 2008 of non-qualified executive management stock options for
18,400 shares of capital stock of CoaLogix with an exercise price of fair market
value (The fair market value is $5.05 as of date of grant, July 30, 2008, and
as
of the date of the Agreement herein), vesting over the initial four year period
after the Effective Date and conditioned upon Employee’s employment with
CoaLogix on the Effective Date per the terms of the CoaLogix 2008 Stock Option
Plan and Employee’s stock option agreement with CoaLogix and (ii) award as of
the Effective Date of stock options to purchase 120,000 shares of the common
stock of Acorn which will be awarded and priced at the closing trading value
at
the end of the trading session on the Effective Date, which with respect to
the
Acorn stock options will be incentive stock options to the maximum extent
possible, with vesting over the initial four year period after the Effective
Date per the terms of the Acorn 2006 Stock Incentive Plan. In addition, Employee
will be eligible to participate in the CoaLogix and Subsidiaries Capital
Appreciation Rights Plan (the “CARs Plan”) to receive a CARs Award of 2.5% of
the Aggregate Award Pool per the terms of the CARs Plan. Employee will have
the
right to participate in any future financing of CoaLogix at the same level
and
priority as Acorn.
4. Employee
Benefits.
During
the Employment Term, Employee will be entitled to participate in the employee
benefit plans currently and hereafter maintained by CoaLogix of general
applicability to other senior executives including, but not limited to, medical
and dental insurance, short and long-term disability insurance and group life
insurance and 401(k) retirement plan (which currently provides a 60% company
match on the first 6% of Employee’s eligible compensation contributed to the
plan with immediate vesting of company contributions). CoaLogix reserves the
right to cancel or change the benefit plans and programs it offers to its
employees at any time.
Employee
will have paid holidays and four weeks paid vacation annually (20 business
days)
with vacation days earned on an accrual basis from the Effective Date in
accordance with CoaLogix’s policy applicable to senior officers.
The
Companies will provide Employee with the following additional benefits at
Companies’ expense: officer’s liability insurance with coverage equal to that
provided to other senior officers of the Companies, legal malpractice insurance
with a coverage amount not less than $2,000,000 per occurrence, bar and legal
association dues and continuing legal education programs (including program
cost
and reasonable travel expenses) sufficient for Employee to satisfy bar required
continuing legal education requirements and provide Employee with education
regarding legal developments affecting the Companies, subject to the CoaLogix
CEO’s determination of the reasonableness of the expenses. Time spent by
Employee at continuing legal education programs will be considered work related
and not vacation so long as the amount of time is reasonable and does not unduly
interfere with Employee’s performance of his obligations under this
Agreement.
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5. Severance
Benefits.
(a) Termination
Not in Connection with a Change of Control.
If
the
Employee’s employment with either Acorn or CoaLogix terminates as a result of
Involuntary Termination (as defined below) other than for Cause at any time
prior to an announcement of a Change of Control or on or after the date that
is
twenty-four months following a Change of Control or the announcement of a Change
of Control, whichever comes later (a “Non-Change of Control Severance
Termination”), then, subject to Employee (i) executing and not revoking a
standard release of claims in favor of the Companies within twenty-eight (28)
days of the Termination Date, provided that such release shall preserve all
indemnification rights of Employee (a “Release”), and (ii) not breaching the
provisions of Section 6 hereof and the Confidential Information and Invention
Assignment Agreement, then Employee shall be entitled to receive the following
severance and non-competition benefits:
(i) Severance
Payments.
Thirty
(30) days following the employment Termination Date, CoaLogix shall pay Employee
an aggregate amount equal to 200% of the Employee’s then current Annual
Compensation (i.e., a total of two year’s Annual Compensation) less applicable
taxes with such amount to be paid over the next twenty-four months in accordance
with CoaLogix’s normal payroll practices.
(ii) COBRA.
Subject
to Employee timely electing continuation coverage under Title X of the
Consolidated Budget Reconciliation Act of 1985 (“COBRA”), CoaLogix shall
subsidize Employee and his eligible dependent’s COBRA premiums so that Employee
pays the same premium as an active employee of the Companies for a period equal
to the lesser of (A) eighteen months following the Employee’s Termination Date
or (B) the period of time immediately preceding the date upon which
Employee becomes covered under the group health plans of another employer with
comparable group health benefits and levels of coverage, provided that if
Employee has not become covered under the group health plans of another employer
with comparable group health benefits and levels of coverage at the end of
such
eighteen month period, CoaLogix shall continue to pay the employer premium
portion of CoaLogix’s group health plan, if permissible, and, if not
permissible, shall pay such amount directly to Employee for the lesser of (A)
six months following the Employee’s Termination Date or (B) the period of
time immediately preceding the date upon which Employee becomes covered under
the group health plans of another employer with comparable group health benefits
and levels of coverage.
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Provided,
however, for purposes of this Section 5(a) only and notwithstanding the above
provisions of Section 5(a) to the contrary, in the event any action, event
or
occurrence described in Section 9(f) (the definition of “Involuntary
Termination”) is caused by either Acorn or CoaLogix, but not both, and the other
one of Acorn or CoaLogix which did not cause such action, event or occurrence
offers in writing to Employee within three days of the date of such action,
event or occurrence to (i) employ Employee on a full-time basis and assume
full
responsibility for (and to pay and provide to Employee) 100% of all of
Employee’s aggregate compensation (including Base Salary and Target Bonus) and
benefits described in this Agreement and (ii) assume all of the obligations
of
both Acorn and CoaLogix to Employee set forth in this Agreement, then such
action, event or occurrence shall not be an Involuntary Termination for purposes
of only that particular such action, event or occurrence, and in such instance
(and in such instance only) Employee shall not be entitled to severance benefits
described above in this Section 5(a).
(b) Termination
in Connection with a Change of Control.
If the
Employee’s employment terminates with either Acorn or CoaLogix as a result of
Involuntary Termination (as defined below) other than for Cause at any time
after an announcement of a Change of Control and prior to twenty-four months
following a Change of Control or the announcement of a Change of Control,
whichever comes later (the “Change of Control Period”) (a “Change of Control
Severance Termination”), then, subject to Employee (i) executing and not
revoking a Release within twenty-eight (28) days of the Termination Date, (ii)
not breaching the provisions of Section 6 hereof and the Confidential
Information and Invention Assignment Agreement and (iii) the provisions of
Section 8 hereof, the Employee shall be entitled to receive the following
severance benefits:
(i) Severance
and Non-Competition Payment.
A cash
payment in an amount equal to 200% of Employee’s Annual Compensation (i.e., a
total of two years’ Annual Compensation) payable thirty (30) days after the
Termination Date.
(ii) Continued
Employee Benefits.
One
hundred percent (100%) CoaLogix-paid health, dental and life insurance coverage
at the same level of coverage as was provided to such employee immediately
prior
to the Change of Control Severance Termination (the “CoaLogix-Paid Coverage”) as
provided herein. If such coverage included the Employee’s dependents immediately
prior to the Change of Control Severance Termination, such dependents shall
also
be covered at CoaLogix expense. CoaLogix-Paid Coverage shall continue until
the
earlier of (A) eighteen months following the date of the Involuntary Termination
or (B) the date that the Employee and his dependents become covered under
another employer’s group health, dental or life insurance plans that provide
Employee and his dependents with comparable benefits and levels of coverage
provided that if Employee has not become covered under the group health plans
of
another employer with comparable group health benefits and levels of coverage
at
the end of such eighteen month period, CoaLogix shall continue to pay the
employer premium portion of CoaLogix’s group health plan, if permissible, and,
if not permissible, shall pay such amount directly to Employee for the lesser
of
(A) six months following the Employee’s Termination Date or (B) the period
of time immediately preceding the date upon which Employee becomes covered
under
the group health plans of another employer with comparable group health benefits
and levels of coverage. For purposes of COBRA, the date of the “qualifying
event” for Employee and his dependents shall be the date upon which the
CoaLogix-Paid Coverage terminates.
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(iii) Timing
of Severance & Non-Competition Payments.
Any
Change of Control severance and non-competition payments to which Employee
is
entitled under Section 5(b)(i) shall be paid by CoaLogix to the Employee
(or to the Employee’s successor in interest, pursuant to Section 10(b)) in
cash and in full, thirty (30) calendar days following the Termination Date,
subject to Sections 9(g) and 12(f).
(c) Voluntary
Resignation; Termination For Cause.
If the
Employee’s employment with Acorn or CoaLogix terminates by reason of the
Employee’s voluntary resignation (and is not an Involuntary Termination), or if
the Employee’s employment with Acorn or CoaLogix is terminated for Cause, then
the Employee shall not be entitled to receive severance or other benefits except
for those (if any) as may then be established under the Companies’ then existing
option, severance and benefits plans and practices and Employee’s employment
with the other one of Acorn or CoaLogix shall also terminate at the same time
unless the other company offers in writing to Employee to (i) employ Employee
on
a full-time basis and assume full responsibility for (and to pay and provide
to
Employee) 100% of all of Employee’s aggregate compensation (including Base
Salary and Target Bonus) and benefits described in this Agreement and (ii)
assume all of the obligations of both Acorn and CoaLogix to Employee set forth
in this Agreement.
(d) Disability;
Death.
If
Acorn or CoaLogix terminates the Employee’s employment as a result of the
Employee’s Disability, or such Employee’s employment with Acorn or CoaLogix is
terminated due to the death of the Employee, then the Employee shall not be
entitled to receive severance or other benefits except for those (if any) as
may
then be established under the Companies’ then existing severance and benefits
plans and practices or pursuant to other agreements with the
Companies.
6. Non-Competition
and Non-Solicitation.
(a) Employee’s
Covenants.
In
consideration of the Companies hiring Employee on the terms described above,
Employee hereby agrees that during the Non-Competition Period (as defined
below), the Employee shall not in the Non-Competition Territory (as defined
below), through an entity of which he is a partner, shareholder, officer,
director, employee, manager, associate, agent, consultant, or owner,
(i) solicit Business (as defined below) from any Customer (as defined
below) of the Companies or any Customer with which he has had material contact
during the term of his employment, (ii) employ or recruit for employment,
or cause the inducement of same, on his own behalf or for any company engaged
in
the Business, any person employed by the Companies as of the date of the
termination of the Employee’s employment, (iii) serve in the Business in a
capacity identical to or similar to that capacity in which the Employee worked
at the Companies or (iv) serve in the Business in a management level
position with any company which is a competitor of the Companies.
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“Customer”
shall mean any person or entity that purchased any goods or services from the
Companies during the twelve months immediately preceding the date of termination
of the Employee’s employment. The “Non-Competition Period” shall mean a period
of eighteen months following the termination, for any reason, of Employee’s
employment. “Non-Competition Territory” means:
(i) The
countries of the United States, Canada and Mexico and any additional country
in
the world in which the Companies conducts Business after the Effective Date;
or
(ii) If
the
preceding subdivision is determined by a court of competent jurisdiction to
be
too broad, the territory shall be the United States, Canada and Mexico;
or
(iii) If
the
preceding subdivision is determined by a court of competent jurisdiction to
be
too broad, the territory shall be the United States; or
(iv) If
the
preceding subdivision is determined by a court of competent jurisdiction to
be
too broad, the territory shall be the states of the United States located east
of the Mississippi River.
Notwithstanding
the foregoing, Employee may, without violating this Section 6, own, as a passive
investment, shares of capital stock of a publicly-held corporation that engages
in the Business where the number of shares of such corporation’s capital stock
that are owned by Employee represent less than five percent of the total number
of shares of such corporation’s capital stock outstanding. Further, if the
Employee notifies the CEOs or the Boards in writing about potential employment
that may be construed as in the Business, the CEOs or Boards shall consider
in
good faith whether such potential employment may be construed as in the Business
and to notify Employee of its determination in writing or by e-mail within
a
reasonable period of time.
(b) Conditional
Payments.
The
severance payments set forth in Section 5 (to the extent Employee is
otherwise entitled to such payments) shall be conditioned upon Employee
complying with all covenants set forth in this Section 6, the Agreement and
the
Confidential Information and Invention Assignment Agreement.
(c) Understanding
of Covenants.
Employee represents and agrees that he (i) is familiar with the foregoing
covenants not to compete and not to solicit and (ii) is fully aware of his
obligations hereunder, including, without limitation, the reasonableness of
the
length of time, scope and geographic coverage of these covenants. The Employee
acknowledges and agrees that the provisions of this Section are reasonable
and
an integral part of his employment relationship with the Companies and that
the
restrictions contained within this Section are part of the consideration
received by the Companies in connection with the entering into the
employer-employee relationship with the Employee, and that the restrictions
are
necessary to protect the Companies’ legitimate business interests and to prevent
the Employee from unfairly taking advantage of those contacts established or
strengthened and the knowledge gained while with the Companies.
(d) Cessation
of Payments and Benefits Upon Breach.
Upon
any breach of this Agreement or the Confidential Information and Invention
Assignment Agreement by Employee, all severance payments pursuant to Section
5
shall immediately cease and terminate, and Employee shall be obligated to
immediately return to the Companies the full amount of any severance payments
previously paid to Employee.
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(e) Survival
of Restrictions.
In the
event that any provision of this Section 6 relating to the time period of
the restrictions, the definitions of Customer or Business, the breadth of
restricted activities or geographic area, or related matters, is declared by
a
court of competent jurisdiction to exceed the maximum restrictiveness such
court
deems reasonable and enforceable, then such aspects of this Section 6 as
would be deemed reasonable and enforceable by the court will become and
thereafter be the maximum restriction in such regard, and such restriction
will
remain enforceable to the fullest extent deemed reasonable by such court. The
restrictions set forth in this Section 6 shall survive the termination of
this Agreement or Employee’s termination of employment.
(f) Inadequacy
of Monetary Damages.
The
Employee acknowledges and agrees that monetary damages alone would not
adequately compensate the Companies in the event of a breach by the Employee
of
any of the provisions of this Section 6 or the Confidential Information and
Invention Assignment Agreement. In the event of a breach or threatened breach
by
the Employee of any of the provisions of this Section 6 or the Confidential
Information and Invention Assignment Agreement, the Companies will have the
right to seek both monetary damages for any past breach and equitable relief,
including specific performance by means of an injunction or other action against
the Employee or against the Employee’s partners, agents, representatives,
servants, employers, employees, associates or any and all other persons acting
directly or indirectly by or with him, to prevent or restrain any
breach.
(g) Companies.
For
purposes of this Section 6 “Companies” shall be deemed to mean CoaLogix, Inc.
and Acorn Energy, Inc.
7. Attorney
Fees, Costs and Expenses.
With
respect to any Change of Control Severance Termination only, the Companies
will
reimburse Employee for the reasonable attorney fees, costs and expenses incurred
by the Employee in connection with any action brought by Employee to enforce
his
rights hereunder, provided such action is not decided in favor of the
Companies.
8. Limitation
on Payments.
(a) In
the
event that the severance and other benefits provided for in this Agreement
or
otherwise payable to the Employee (i) constitute "parachute payments"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and (ii) but for this Section 8, would be subject
to the excise tax imposed by Section 4999 of the Code, then the Employee’s
severance benefits under this Agreement shall be either
(A) delivered
in full, or
| (B) |
delivered
as to such lesser extent which would result in no portion of such
severance benefits being subject to excise tax under Section 4999 of
the Code,
|
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whichever
of the foregoing amounts, taking into account the applicable federal, state
and
local income taxes and the excise tax imposed by Section 4999, results in
the receipt by the Employee on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Any taxes due under
Section 4999 shall be the responsibility of the employee.
(b) If
a
reduction in the payments and benefits that would otherwise be paid or provided
to the Employee under the terms of this Agreement is necessary to comply with
the provisions of Section 8(a), the Employee shall be entitled to select
which payments or benefits will be reduced and the manner and method of any
such
reduction of such payments or benefits subject to reasonable limitations
(including, for example, express provisions under the Companies’ benefit plans)
(so long as the requirements of Section 8(a) are met). Within thirty (30)
days after the amount of any required reduction in payments and benefits is
finally determined in accordance with the provisions of Section 8(c), the
Employee shall notify the Companies in writing regarding which payments or
benefits are to be reduced. If no notification is given by the Employee, the
Companies will determine which amounts to reduce. If, as a result of any
reduction required by Section 8(a), amounts previously paid to the Employee
exceed the amount to which the Employee is entitled, the Employee will promptly
return the excess amount to the Companies.
(c) Unless
the Companies and the Employee otherwise agree in writing, any determination
required under this Section 8 shall be made in writing by the Companies’
primary outside tax advisors immediately prior to the Change of Control (the
“Accountants”), whose determination shall be conclusive and binding upon the
Employee and the Companies for all purposes. For purposes of making the
calculations required by this Section 8, the Accountants may, after taking
into account the information provided by the Employee, make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Companies and the Employee shall
furnish to the Accountants such information and documents as the Accountants
may
reasonably request in order to make a determination under this Section. The
Companies shall bear all costs the Accountants may reasonably incur in
connection with any calculations contemplated by this
Section 8.
9. Definition
of Terms.
The
following terms referred to in this Agreement shall have the following
meanings:
(a) Annual
Compensation.
“Annual
Compensation” means an amount equal to the greater of (i) Employee’s Base
Salary for the twelve (12) months preceding the Change of Control or the
Termination Date, whichever is applicable, plus the Employee’s Target Bonus for
the same period, or (ii) Employee’s Base Salary on an annualized basis and
the Employee’s Target Bonus as of the Termination Date.
(b) Business.
“Business” shall mean (i) selective catalytic reduction (“SCR”) catalyst and
management services including, but not limited to the cleaning, rejuvenation
and
regeneration of SCR catalysts and managing SCR catalysts for utilities and
independent power producers and (ii) any other businesses engaged in by CoaLogix
and Acorn or any of their affiliates including, but not limited to, activities,
products, services or lines of business acquired or developed by CoaLogix or,
Acorn or any of their affiliates after the Effective Date.
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(c) Cause.
“Cause”
shall mean (i) any act of personal dishonesty taken by the Employee in
connection with his responsibilities as an employee and intended to result
in
substantial personal enrichment of the Employee, (ii) the conviction of or
plea of nolo contendere
or guilty to a felony, (iii) a willful act by the Employee that constitutes
gross misconduct and that is injurious to the Companies, (iv) for a period
of not less than thirty (30) days following delivery to the Employee of a
written demand for performance from the Companies that describes the basis
for
the Companies’ belief that the Employee has not substantially performed his
duties, a continued violation by the Employee of the Employee’s obligations to
the Companies that are demonstrably willful and deliberate on the Employee’s
part or (v) Employee’s breach of this Agreement or any covenant contained in
this Agreement or the Confidential Information and Invention Assignment
Agreement or any covenant contained therein. Any dismissal for cause must be
approved by the CEO or the Board prior to the dismissal date.
(d) Change
of Control.
“Change
of Control” means the occurrence of any of the following events:
(i) Any
“person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as
defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of Acorn representing fifty percent (50%) or more of the total voting
power represented by Acorn’s then outstanding voting securities;
(ii) Any
“person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than Acorn, or an affiliated
entity, becomes the “beneficial owner” (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of CoaLogix representing fifty
percent (50%) or more of the total voting power represented by CoaLogix’s then
outstanding voting securities;
(iii) Any
“person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than Acorn, CoaLogix or
an
affiliated entity, becomes the “beneficial owner” (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of SCR-Tech LLC
(“SCR-Tech”) or CoaLogix Solutions Inc. (“CoaLogix Solutions”) representing
fifty percent (50%) or more of the total voting power represented by SCR-Tech’s
or CoaLoagix Solutions’, as the case may be, then outstanding voting
securities;
(iv) A
change
in the composition of Acorn’s Board of Directors occurring within a twelve-month
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. “Incumbent Directors” shall mean directors who either
(A) are directors of Acorn as of the date hereof, or (B) are elected,
or nominated for election, to Acorn’s Board of Directors with the affirmative
votes of at least a majority of the Incumbent Directors at the time of such
election or nomination (but shall not include an individual whose election
or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to Acorn’s Board of Directors);
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(v) The
consummation of a merger or consolidation of CoaLogix with any other
corporation, other than a merger or consolidation that would result in the
voting securities of CoaLogix outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity or such surviving entity’s parent) at least
fifty percent (50%) of the total voting power represented by the voting
securities of CoaLogix or such surviving entity or such surviving entity’s
parent outstanding immediately after such merger or consolidation;
(vi) The
consummation of a merger or consolidation of SCR-Tech or CoaLogix Solutions
with
any other corporation (other than a merger or consolidation with Acorn, CoaLogix
or an affiliated entity), other than a merger or consolidation that would result
in the voting securities of SCR-Tech or CoaLogix Solutions outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or such surviving entity’s parent) more than fifty percent (50%) of the total
voting power represented by the voting securities of SCR-Tech or CoaLogix
Solutions, as the case may be, or such surviving entity or such surviving
entity’s parent outstanding immediately after such merger or
consolidation;
(vii) The
consummation of a merger or consolidation of Acorn with any other corporation
(other than a merger or consolidation with SCR-Tech, CoaLogix, CoaLogix
Solutions or an affiliated entity), other than a merger or consolidation that
would result in the voting securities of Acorn outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or such surviving
entities’ parent) more than fifty percent (50%) of the total voting power
represented by the voting securities of Acorn or such surviving entity or such
surviving entities’ parent outstanding immediately after such merger or
consolidation;
(viii) The
consummation of the sale or disposition by Acorn of all or seventy-five percent
(75%) or more of Acorn’s assets;
(ix) The
consummation of the sale or disposition by SCR-Tech or CoaLogix Solutions of
all
or seventy-five percent (75%) or more of SCR-Tech’s or CoaLogix Solutions’
assets; or
(x) The
consummation of the sale or disposition by CoaLogix of all or seventy-five
percent (75%) or more of CoaLogix’s assets.
(e) Disability.
“Disability” shall mean that the Employee has been unable to perform his
Companies duties as the result of his incapacity due to physical or mental
illness, and such inability, at least twenty-six (26) weeks after its
commencement, is determined to be total and permanent by a physician selected
by
the Companies or its insurers and acceptable to the Employee or the Employee’s
legal representative (such agreement as to acceptability not to be unreasonably
withheld). Termination resulting from Disability may only be effected after
at
least thirty (30) days' written notice by the Companies of their intention
to
terminate the Employee’s employment. In the event that the Employee resumes the
performance of substantially all of his duties hereunder before the termination
of his employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
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(f) Involuntary
Termination.
“Involuntary Termination” shall mean (i) without the Employee’s express
written consent, the significant reduction of the Employee’s duties, authority
or responsibilities, relative to the Employee’s duties, authority or
responsibilities as in effect immediately prior to such reduction, or the
assignment to Employee of such reduced duties, authority or responsibilities,
except to the extent provided in the last paragraph of Section 5(a); provided,
however, that so long as Employee remains the Vice President, General Counsel
and Secretary of the Companies (or, to the extent provided in the last paragraph
of Section 5(a), either Company), or, following a Change of Control of either
or
both of the Companies, whatever entity or entities substantially contains the
Companies’ business, in either case with the duties, authority and
responsibilities that are commensurate with such position, then Employee shall
have no grounds for an Involuntary Termination pursuant to this Section 9(f)(i)
or 9(f)(viii); provided, further, that if Employee reports to someone other
than
the CEOs of the Companies, that shall not in and of itself constitute grounds
for an Involuntary Termination pursuant to this Section 9(f)(i) or 9(f)(viii);
(ii) without the Employee’s express written consent, a substantial
reduction, without good business reasons, of the facilities and perquisites
(including office space and location) available to the Employee immediately
prior to such reduction; (iii) a reduction in the base salary or Target
Bonus of the Employee as in effect immediately prior to such reduction;
(iv) a material reduction in the kind or level of employee benefits to
which the Employee was entitled immediately prior to such reduction with the
result that the Employee’s overall benefits package is significantly reduced;
(v) the relocation of the Employee to a facility or a location more than
fifty miles from the Employee’s then present location, without the Employee’s
express written consent; (vi) any purported termination of the Employee by
either of the Companies that is not effected for Disability or for Cause, or,
during the Change of Control Period only, any purported termination for which
the grounds relied upon are not valid; (vii) the failure of either of the
Companies to obtain the assumption of this Agreement by any successors
contemplated in Section 10(a) below; or (viii) during the Change of
Control Period only, any act or set of facts or circumstances that would, under
North Carolina case law or statute constitute a constructive termination of
the
Employee. However, with respect to any non-Change of Control Severance
Termination, an Involuntary Termination shall not be deemed to have occurred
unless Employee provides written notice to the Companies describing the nature
of the event that he believes forms the basis for Involuntary Termination and
the Companies do not cure such event within ten (10) days following receipt
of
such notice.
(g) Termination
Date.
“Termination Date” shall mean (i) if this Agreement is terminated by either
of the Companies for Disability, thirty (30) days after notice of termination
is
given to the Employee (provided that the Employee shall not have returned to
the
performance of the Employee’s duties on a full-time basis during such thirty
(30)-day period), (ii) if the Employee’s employment is terminated by either
of the Companies for any other reason, the date on which a notice of termination
is given, provided that if within thirty (30) days after either of the Companies
gives the Employee notice of termination, the Employee notifies such company
that a dispute exists concerning the termination or the benefits due pursuant
to
this Agreement, then the Termination Date shall be the date on which such
dispute is finally determined, either by mutual written agreement of the
parties, or a by final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected), or (iii) if the Agreement is terminated by the Employee,
the date on which the Employee delivers the notice of termination to the
Companies.
-11-
10. Successors.
(a) Companies’
Successors.
Any
successor to either of the Companies (whether direct or indirect and whether
by
purchase, merger, consolidation, liquidation or otherwise) to all or
substantially all of such company’s business and/or assets shall assume the
obligations under this Agreement and agree expressly to perform the obligations
under this Agreement in the same manner and to the same extent as such company
would be required to perform such obligations in the absence of a succession.
For all purposes under this Agreement, the term “Companies” shall include any
successor to the Companies’ business and/or assets which executes and delivers
the assumption agreement described in this Section 10(a) or which becomes
bound by the terms of this Agreement by operation of law.
(b) Employee’s
Successors.
The
terms of this Agreement and all rights of the Employee hereunder shall inure
to
the benefit of, and be enforceable by, the Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
11. Notice.
(a) General.
Notices
and all other communications contemplated by this Agreement shall be in writing
and shall be deemed to have been duly given when personally delivered or when
mailed by U.S. registered or certified mail, return receipt requested and
postage prepaid. In the case of the Employee, mailed notices shall be addressed
to him at the home address which he most recently communicated to the Companies
in writing. In the case of the Companies, mailed notices shall be addressed
to
its corporate headquarters, and all notices shall be directed to the attention
of their respective CEOs, as follows:
CoaLogix,
Inc.
00000
Xx
Xxxxx Xx.
Xxxxxxxxx,
XX 00000
Attention:
CEO
0
X.
Xxxxxxxx Xxxx
X.
X. Xxx
0
Xxxxxxxxxx,
XX 00000
Attention:
CEO
-12-
(b) Notice
of Termination.
Any
termination by the Companies for Cause or by the Employee as a result of a
voluntary resignation or an Involuntary Termination shall be communicated by
a
notice of termination to the other party hereto given in accordance with
Section 11(a) of this Agreement. Such notice shall indicate the specific
termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than thirty (30) days after the giving of such
notice). The failure by the Employee to include in the notice any fact or
circumstance which contributes to a showing of Involuntary Termination shall
not
waive any right of the Employee hereunder or preclude the Employee from
asserting such fact or circumstance in enforcing his rights
hereunder.
12. Miscellaneous
Provisions.
(a) No
Duty to Mitigate.
The
Employee shall not be required to mitigate the amount of any severance payment
contemplated by this Agreement, nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source, provided Employee
is in compliance with all obligations that the Employee owes under this
Agreement.
(b) Waiver.
No
provision of this Agreement shall be modified, waived or discharged unless
the
modification, waiver or discharge is agreed to in writing and signed by the
Employee and by an authorized officer of the Companies (other than the
Employee). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.
(c) Whole
Agreement.
This
Agreement together with the Confidential Information and Invention Assignment
Agreement represent the entire understanding of the parties hereto with respect
to the subject matter hereof and supersede in their entirety all prior
arrangements and understandings regarding same, including any offer letter,
promotion letter, employment agreement, oral representation or promise or other
agreement regarding Employee’s employment terms with the Companies. Other than
this Agreement and the Confidential Information and Invention Assignment
Agreement, no agreements, representations or understandings (whether oral or
written and whether express or implied) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect
to
the subject matter hereof.
(d) Choice
of Law.
The
validity, interpretation, construction and performance of this Agreement shall
be construed and enforced in accordance with, and the rights of the parties
shall be governed by, the laws of the State of North Carolina without regard
to
principles of conflicts of laws.
(e) Severability.
The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not affect the validity or enforceability of any other provision hereof,
which shall remain in full force and effect.
(f) Withholding.
All
payments made pursuant to this Agreement will be subject to withholding of
applicable income and employment taxes.
-13-
(g) Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together will constitute one and the same
instrument.
(h) No
Conflicting Obligations.
The
Employee acknowledges that performance of employment-related duties for the
Companies will not cause any breach or violation of any other employment,
non-competition, or similar agreement to which the Employee may be bound.
Furthermore, the Employee agrees that he will not use or otherwise disclose
to
the Companies any trade secrets or confidential information of another person
or
entity (including any former employer) if and to the extent that such would
be a
breach or violation of any duty owed to that person or entity.
(i) Assignment
and Succession.
This
Agreement is personal to the Employee, and the Employee may not assign or
delegate any of his rights or obligations hereunder. The obligations of Employee
under this Agreement shall continue after the termination of Employee’s
employment and shall be binding on Employee’s heirs, executors, legal
representatives and assigns. Such obligations shall inure to the benefit of
any
successors or assigns of Companies. Employee specifically acknowledges that
in
the event of a sale of all or substantially all of the assets of Companies,
or
any other event or transaction resulting in a change of ownership or control
of
Companies’ business, the rights and obligations of the parties hereunder shall
inure to the benefit of any transferee, purchaser, or future owner of Companies’
business. This Agreement may be assigned only by Employer.
(j) Binding
Effect.
This
Agreement shall be binding upon the parties hereto and it shall inure to the
benefit of the Companies’ successors.
(k) Waiver
of Provisions.
The
terms, covenants, representations, warranties, and conditions of this Agreement
may be waived only by a written instrument executed by the party waiving
compliance. The failure of any party at any time or times to require performance
of any provision of this Agreement shall in no manner affect the right at a
later date to enforce the same or to enforce any future compliance with or
performance of any of the provisions hereof. No waiver by any party of any
condition or the breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
(l)
Section
409A.
(i) With
respect to payments under this Agreement, for purposes of Section 409A of the
Internal Revenue Code of 1986, as amended (“Section 409A”), each severance
payment and COBRA continuation reimbursement payment will be considered one
of a
series of separate payments.
-14-
(ii) The
Employee will be deemed to have Date of Termination for purposes of determining
the timing of any payments that are classified as deferred compensation only
upon a “separation from service” within the meaning of Section 409A.
(iii) Any
amount that the Employee is entitled to be reimbursed under this Agreement
will
be reimbursed to the Employee as promptly as practical and in any event not
later than sixty days after Employee has submitted to CoaLogix or Acorn, as
the
case may be, the appropriate reimbursement request and substantiation for the
amount to be reimbursed, and the amount of the expenses eligible for
reimbursement during any calendar year will not affect the amount of expenses
eligible for reimbursement in any other calendar year.
(iv) If
on the
due date for any payment pursuant to Section 5, all revocation periods with
respect to the Release have not yet expired, such payment will not be made
until
such revocation period has expired and if such revocation period has not expired
by the end of the calendar year in which the payment would have otherwise been
made, the payment shall be forfeited.
(v) To
the
extent the Employee would be subject to the additional 20% tax imposed on
certain deferred compensation arrangements pursuant to Section 409A of the
Code as a result of any provision of this Agreement, such provision shall be
deemed amended to the minimum extent necessary to avoid application of such
tax
and the parties shall promptly execute any amendment reasonably necessary to
implement this Section 12(l)(v)). The Employee and the Companies agree to
cooperate to make such amendments to the terms of this Agreement as may be
necessary to avoid the imposition of penalties and additional taxes under
Section 409A of the Code to the extent possible; provided however, that the
Companies agrees that any such amendment shall provide the Employee with
economically equivalent payments and benefits, and the Employee agree that
any
such amendment will not materially increase the cost to, or liability of, the
Companies with respect to any payments.
IN
WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of
the Companies by their duly authorized officers, as of the day and year set
forth below.
|
COALOGIX
|
CoaLogix
INC.
|
|
|
By:
|
/s/
Xxxxxxx X. XxXxxxx
|
|
|
Xxxxxxx
X. XxXxxxx
|
||
|
Its:
CEO
|
||
|
|
Date:
September 15, 2008
|
|
-15-
|
ACORN
|
||
|
By:
|
/s/
Xxxx X. Xxxxx
|
|
|
Xxxx
X. Xxxxx
|
||
|
Its:
CEO
|
||
|
Date:
September 15, 2008
|
||
|
EMPLOYEE
|
/s/Xxx
X. Xxxxxxx, Xx.
|
|
|
Xxx
X. Xxxxxxx, Xx.
|
||
|
Date:
September 15, 2008
|
||
-16-
