Exhibit 10.5
SEVERANCE AGREEMENT AND MUTUAL GENERAL RELEASE
This SEVERANCE AGREEMENT AND MUTUAL GENERAL RELEASE ("AGREEMENT") is
made as of November 30, 2005 by and between American Mold Guard, Inc., a
California corporation ("EMPLOYER") and Xxxxxxx Xxxxxx ("Executive"). Employer
and Executive are referred to herein individually as a "PARTY" and collectively
as the "PARTIES."
RECITALS
A. Executive has been employed by Employer in the position of
President, and has served as a member of Employer's Board of Directors.
Executive has resigned as President effective as of November 30, 2005, but shall
continue to serve Employer as a member of Employer's Board of Directors.
B. Executive and Employer are parties to that certain Employment
Agreement dated January 1, 2004, (the "EMPLOYMENT AGREEMENT"), which is
scheduled to expire on December 31, 2009. The Parties desire that
notwithstanding said scheduled expiration, the Employment Agreement shall be
superseded and effectively terminated by this Agreement except as set forth in
Section 6.5 below.
C. Executive and Employer have voluntarily entered into this
Agreement in view of its mutual benefits, the payment of valuable consideration
by Employer and the mutual release of any claims related to Executive's
employment with Employer.
D. In entering into this Agreement, the Parties contemplate that
Employer will presently commence and successfully complete an initial public
offering of 925,000 Units, each Unit consisting of two shares of Employer common
stock, two Class A Warrants and one Class B Warrant, or on such other terms as
Employer elects (such initial public offering is hereinafter referred to as the
"IPO").
AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT TERMS AND DUTIES.
1.1 RESIGNATION. Effective November 30, 2005
("RESIGNATION DATE"), Executive voluntarily resigns as President of Employer.
Effective on the Resignation Date, Executive is relieved of all of his duties as
President of Employer.
1.2 CONTINUED MEMBERSHIP ON EMPLOYER'S BOARD OF
DIRECTORS; STOCKHOLDER RIGHTS. Executive will remain a member of Employer's
Board of Directors (the "BOARD") after the Resignation Date and will have rights
as a stockholder of Employer, each in accordance with, and subject to,
applicable provisions of law, and Employer's articles of incorporation and
bylaws, as in effect from time to time. For greater certainty, Employer shall
not withhold from Executive in his capacity as a director or stockholder of
Employer any information or access to personnel made available or given to any
other non-employee director or stockholder of Employer in their capacities as
such. Executive shall serve on the Board without remuneration until such time as
compensation becomes available to other directors.
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2. ACCRUED SALARY AND SEVERANCE PAYMENTS.
2.1 ACCRUED SALARY.
2.1.1 AMOUNT AND PAYMENT OF ACCRUED SALARY.
Employer shall pay Executive the sum of $244,481 as accrued but unpaid salary
earned by Executive during the term of his employment with Employer (such
$244,481 is hereinafter referred to as the "ACCRUED SALARY"). Commencing in
December, 2005, Employer shall pay Executive his Accrued Salary at the rate of
Fifteen Thousand Dollars ($15,000) per month, payable in equal semi-monthly
payments of Seven Thousand Five Hundred Dollars ($7,500).
2.1.2 PAYMENT OF ACCRUED SALARY UPON COMPLETION OF
IPO. Notwithstanding the provisions of subsection 2.1.1 hereinabove, and subject
to the provisions of Section 2.3 of this Agreement, Employer shall, on the date
that the IPO is deemed completed (hereinafter referred to as the "IPO DATE"),
pay to Executive the Accrued Salary amount of $119,078, which amount is intended
by the Parties to reduce Executive's outstanding Accrued Salary to an amount
equal to Employer's accrued but unpaid salary obligation to Xxx Xxxxxxxx
(Employer's Chairman of the Board and CEO) on the IPO Date.
2.1.3 PAYMENT OF ACCRUED SALARY AFTER IPO DATE.
Notwithstanding the provisions of subsections 2.1.1 and 2.1.2 hereinabove, and
subject to the provisions of Section 2.3 of this Agreement, and after giving
effect to any payments made by Employer to Executive pursuant to the provisions
of subsections 2.1.1 and 2.1.2 hereof, Employer shall, commencing thirty (30)
days after the IPO Date, pay to Executive any remaining Accrued Salary amount in
twelve (12) consecutive equal monthly payments; PROVIDED, HOWEVER, that if
Employer pays any of Xxx Xxxxxxxx'x accrued but unpaid salary at a rate greater
than the equal monthly amounts paid to Executive pursuant to this subsection
2.1.3, then Executive's remaining Accrued Salary shall be paid at the same rate
that Xxx Xxxxxxxx is paid his accrued but unpaid salary by Employer.
2.2 SEVERANCE PAYMENTS. Subject to Section 2.3 below, and
in addition to the payments made by Employer pursuant to Section 2.1 of this
Agreement, commencing thirty (30) days after the IPO Date, Employer shall pay to
Executive the sum of Four Hundred Forty Thousand Dollars ($440,000.00) in twelve
(12) consecutive equal monthly installments of Thirty-Six Thousand Six Hundred
Sixty-Six and 66/100 Dollars ($36,666.66) each (the "SEVERANCE PAYMENTS").
2.3 IPO CONTINGENCY. Notwithstanding the provisions of
Sections 2.1 and 2.2 of this Agreement, if the IPO Date has not occurred prior
to April 1, 2006, then Employer shall on April 1, 2006 commence paying
Executive's outstanding Accrued Salary and Severance Payments at the rate of
Twenty-Five Thousand Dollars ($25,000.00) per month until any and all
outstanding Accrued Salary and Severance Payments have been paid in full;
PROVIDED, HOWEVER, that if the IPO Date occurs at any time after April 1, 2006
but prior to the payment in full of all outstanding Accrued Salary and Severance
Payments, Employer shall increase its payments to Executive hereunder so that
all outstanding Accrued Salary and Severance Payments will be fully paid by no
later than the earlier of (i) twelve (12) months after the IPO Date or (ii) the
date all outstanding Accrued Salary and Severance Payments would have been fully
paid at the rate of $25,000.00 per month, commencing on April 1, 2006.
2.4 ZERO PLUS TRANSACTION. The Parties understand and
acknowledge that Employer owns fifty percent (50%) of the outstanding equity of
Zero Plus, LLC, a Nevada limited liability company ("ZERO Plus"). The owner of
the remaining fifty percent (50%) of the outstanding equity of Zero Plus is
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Electric Aquagenics Unlimited, Inc., a Delaware corporation ("EAU"). Employer
currently intends to sell its interest in Zero Plus to EAU. In this regard, the
Parties hereby agree that should Employer sell its interests in Zero Plus to
EAU, whether by stock purchase, asset purchase, merger, reverse merger or
otherwise (a "ZERO PLUS TRANSACTION"), Executive shall be entitled to a
commission in the amount of twenty percent (20%) of the compensation paid or
payable by EAU as a compensation for Executive's work on the Zero Plus
Transaction. Such compensation is to be paid in cash immediately upon the
receipt of any cash or other consideration by Employer as a result of the Zero
Plus Transaction.
2.5 PAYMENT OF ACCRUED SALARY AND SEVERANCE PAYMENTS. All
amounts to be paid by Employer to Executive on a monthly basis pursuant to this
Agreement shall be paid on the same dates as regular payroll for executives of
Employer is paid.
2.6 ACCRUED BUSINESS EXPENSES. On the earlier of the IPO
Date or April 1, 2006, Employer shall reimburse Executive for all accrued and
unreimbursed business expenses incurred by Executive prior to such date.
2.7 BENEFITS. Executive's participation in the life,
accident and health insurance, employee welfare benefit plans (as defined in the
Employee Retirement Income Security Act of 1974) and supplemental early
retirement plan, split dollar insurance program, personal health services
allowance health or social club benefits, and any other benefits ("BENEFITS")
provided to Executive prior to his resignation shall be continued or equivalent
benefits provided by Employer at no cost to Executive for a period of two (2)
years from Executive's resignation. If for any reason Employer is unable to
continue the Benefits, as required by the preceding sentence, Employer shall
reimburse Executive for the cost of COBRA for medical, dental and vision for a
period of twenty-four (24) months following Executive's last day of employment.
2.8 STOCK OPTIONS. Effective upon the Resignation Date,
one hundred percent (100%) of all unvested stock options, stock appreciation
rights, stock purchase rights, restricted stock rights and any similar rights
which Executive holds shall become fully vested and be exercisable.
Additionally, the AMG Board of Directors has extended the period required by you
to fully exercise your stock options to 12 months from the date of your
resignation.
2.9 FEES AND EXPENSES. Employer shall reimburse Executive
for, or pay directly on his behalf, the reasonable legal fees and expenses
incurred by Executive in connection with the negotiation, preparation and review
of this Agreement up to a maximum of $5,000.
2.10 EMPLOYER EQUIPMENT. Upon execution of this Agreement,
Executive will, return all physical property of any kind of Employer's in
Executive's possession, including, without limitation, directories, documents,
lists of any kind, including lists of prices, personnel, addresses, vendors,
suppliers or existing or potential customers, rolodexes, plans, files, software,
programs, tapes, materials, manuals, keys, access cards credit cards and
equipment. Executive shall not be required to turn over his computer, which
Employer acknowledges is owned by Executive.
3. LATE PAYMENTS.
3.1 INTEREST AND SERVICE CHARGE. Any amount due from
Employer to Executive hereunder which is not paid when due shall bear interest
at the lower of (i) the per annum interest rate announced by and quoted in the
Wall Street Journal from time-to-time as the prime or base rate plus six percent
(6%) or (ii) the highest rate of interest from time-to-time permitted under
applicable law.
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3.2 ACCELERATION. If interest is payable hereunder,
whether or not collected, for any two (2) consecutive installments of Accrued
Salary or Severance Payments, then all unpaid Accrued Salary and Severance
Payments shall automatically become immediately due and payable, notwithstanding
any provision of this Agreement to the contrary.
4. MUTUAL RELEASE OF CLAIMS.
4.1 EXECUTIVE'S RELEASE OF CLAIMS. Except as set forth in
Section 4.5 below, Executive on his own behalf, and on behalf of his successors
and assigns, releases Employer and its officers, directors, employees, agents
and representatives, and their respective successors and assigns from all causes
of action, judgments, liens, indebtedness, damages, losses, claims, liabilities,
and demands of every kind and character in any manner attributable to
Executive's employment by Employer which Executive may have based on, or
pertaining to Executive's employment with Employer occurring prior to the date
of this Agreement, including attorneys' fees and costs, whether or not
previously brought before any state or federal court or any other state or
federal governmental agency. This release includes but is not limited to any
claims Executive may have for wages, bonuses, or other compensation due, claims
under the Age Discrimination in Employment Act arising on or before the date
Executive signs this Agreement, Title VII of the Civil Rights Act, as amended,
which prohibits discrimination in employment based on race, color, sex, religion
or national origin, the Americans with Disabilities Act, the Family and Medical
Leave Act, or any other federal, state or local law or regulation affecting
employment rights or prohibiting employment discrimination. This release also
includes any claim for intentional or negligent infliction of emotional
distress, wrongful discharge, violation of any public policy or statute, breach
of the covenant of good faith and fair dealing, defamation, and breach of any
implied or express contract between Employer and Executive, including without
limitation the Employment Agreement and any policy of Employer occurring prior
to the date of this Agreement or any other matter or event occurring prior to
the date of this Agreement.
4.2 EMPLOYER'S RELEASE OF CLAIMS. Except as set forth in
Section 4.5 below, Employer hereby forever releases and discharges Executive
from any and all causes of action, judgments, liens, indebtedness, damages,
losses, claims, liabilities, and demands of every kind and character in any
manner attributable to Executive's employment by Employer, including, without
limitation, breach of the covenant of good faith and fair dealing, defamation,
and breach of any implied or express contract between Employer and Executive,
including without limitation the Employment Agreement and any policy of Employer
occurring prior to the date of this Agreement or any other matter or event
occurring prior to the date of this Agreement, including attorneys' fees and
costs, whether or not previously brought before any state or federal court or
any other state or federal governmental agency.
4.3 UNKNOWN CLAIMS. Executive and Employer each
understand that the claims set forth in Sections 4.1 and 4.2 above cover claims
which Executive and Employer know about and those Executive and Employer may not
know about. Executive and Employer each expressly waives all rights under
Section 1542 of the California Civil Code, which Section Executive and Employer
have read and understand, and which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
4.4 AGREEMENT NOT TO XXX; WARRANTY OF NON-ASSIGNMENT.
Executive and Employer each promises never to file a lawsuit asserting any
claims that are released in Sections 4.1 and 4.2 above.
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Executive and Employer each represents and warrants to the other Party that he
or it has not assigned, and will not assign, to any other person or entity the
claims which are the subject of Sections 4.1 and 4.2.
4.5 NO RELEASE OF CLAIMS UNDER THIS AGREEMENT. Nothing in
the releases set forth in Sections 4.1 and 4.2 shall constitute a release of any
claims by either Party for breach of this Agreement by the other Party or
failure by either Party to perform its obligations under this Agreement.
4.6 EXECUTIVE'S RIGHT TO REVIEW AND REVOKE AGREEMENT.
Executive has been given a period of twenty-one (21) days within which to
consider whether to sign this Agreement and has freely elected to sign this
Agreement on the date set forth below. Executive has been encouraged to consult
with an attorney before signing this Agreement, and has done so to the extent he
so desires.
5. NONDISPARAGEMENT; REFERENCES.
5.1 NONDISPARAGEMENT BY EXECUTIVE. Executive agrees that
he will not disparage or make negative statements (or induce or encourage others
to disparage or make negative statements) about Employer or any of its past or
present officers, directors, agents, employees, attorneys, successors and
assigns, including, without limitation, disparaging any of such parties in
connection with disclosing the facts or circumstances surrounding his separation
from employment with Employer or criticizing Employer's business strategy. For
the purposes of this subparagraph, the term "disparage" means any comments or
statements which would adversely affect in any manner: (i) the conduct of
Employer's business; or (ii) the business reputation or relationships of
Employer and/or any of its past or present officers, directors, agents,
employees, attorneys, successors and assigns.
5.2 NONDISPARAGEMENT BY EMPLOYER. Employer agrees that it
will not to disparage or make negative statements (or induce or encourage others
to disparage or make negative statements) about Executive, including, without
limitation, disparaging Executive in connection with disclosing the facts or
circumstances surrounding his separation from employment with Employer or
criticizing his performance as an employee or executive officer of Employer. For
purposes of this subparagraph, the term "disparage" means any statements made by
Employer's executive officers or members of its Board, or any statements made
officially by Employer, as applicable, that adversely affect in any manner
Executive's personal or professional reputation.
5.3 REFERENCES. Employer shall give favorable references
regarding Executive to any person, company, entity or prospective future
employer of Executive.
6. GENERAL PROVISIONS.
6.1 OBLIGATIONS CONTINGENT ON PERFORMANCE. The
obligations of Executive hereunder are contingent upon the performance by
Employer of its obligations hereunder, including its obligations to pay the
compensation provided for herein.
6.2 WAIVER. The rights and remedies of the Parties to
this Agreement are cumulative and not alternative. Neither the failure nor any
delay by either Party in exercising any right, power, or privilege under this
Agreement will operate as a waiver of such right, power or privilege, and no
single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law (a) no claim or right arising out of this Agreement can be
discharged by one Party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other Party; (b) no waiver that
may be given by a Party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any
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obligation of such Party or of the right of the Party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.
6.3 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED. This
Agreement shall inure to the benefit of, and shall be binding upon, the Parties
hereto and their respective affiliates, successors, assigns, heirs and legal
representatives, including any entity with which Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. References herein to Employer, Zero Plus and EAU include their
respective affiliates, successors, assigns and legal representatives. The duties
and covenants of Executive and Employer under this Agreement, being personal,
may not be delegated.
6.4 NOTICES. All notices, consents, waivers and other
communications under this Agreement will be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally or regionally recognized overnight delivery
service (receipt requested), in each case to the appropriate address and
facsimile number set forth below (or to such other address and facsimile number
as a Party may designate by notice to the other Party pursuant to the terms of
this Section 6.4.
If to Executive: Xxxxxxx Xxxxxx, 000 Xxxxxxx Xxx, Xxxxxx
Xxxxx, Xxxxxxxxxx 00000
If to Employer: American Mold Guard, Inc., 00000 Xxxxxx Xxxxx
Xxxx, Xxxxx X, Xxx Xxxx Xxxxxxxxxx, Xxxxxxxxxx 00000, Attention: Chief Executive
Officer, Facsimile No.: (000) 000-0000, or at such other address or addresses as
may have been furnished in writing by Employer to Executive.
6.5 PRIOR AGREEMENTS. Nothing in this Agreement shall be
deemed to relieve Executive or Employer of any of their respective obligations
set forth in Sections 8, 9, 10 and 11 of the Employment Agreement. The Parties
acknowledge and agree that Sections 8, 9, 10 and 11 of the Employment Agreement
survive the termination of the Employment Agreement and shall continue to be
operative throughout the Consulting Period.
6.6 ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains
the entire Agreement between the Parties with respect to the subject matter
hereof. Except as specifically provided in Section 6.5, this Agreement
supersedes all prior agreements and understandings, oral or written, between the
Parties hereto with respect to the subject matter hereof, including without
limitation, the Employment Agreement. This Agreement may not be amended orally,
but only by an agreement in writing signed by the Parties.
6.7 HEADINGS; CONSTRUCTION. The headings in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "section" or "sections" refer to the
corresponding section or sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
6.8 SEVERABILITY. If any provision of this Agreement is
held invalid or unenforceable by any court of competent jurisdiction or
Arbitrator, then to the extent that the rights or obligations of the parties
under this Agreement will not be materially and adversely affected thereby, the
other provisions of this Agreement will remain in full force and effect. Any
provision of this Agreement held invalid and
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unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
6.9 GOVERNING LAW; JURISDICTION AND VENUE. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California.
6.10 ATTORNEY'S FEES. If any legal action is necessary to
enforce the terms and conditions of this Agreement, the prevailing party shall
be entitled to recover all costs of suit and reasonable attorneys' fees as
determined by the court or arbitrator.
6.11 COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
7. ARBITRATION OF DISPUTES.
7.1 EXCLUSIVE REMEDY. Except as set forth in Section 7.3,
arbitration shall be the sole and exclusive remedy for any dispute, claim, or
controversy of any kind or nature (a "CLAIM") arising out of, related to, or
connected with the Executive's employment relationship with the Employer, or the
termination of the Executive's employment relationship with the Employer,
including any Claim against any parent, subsidiary or affiliated entity of the
Employer, or any director, officer, general or limited partner, employee or
agent of the Employer or of any such parent, subsidiary or affiliated entity.
7.2 CLAIMS SUBJECT TO ARBITRATION. This agreement to
arbitrate specifically includes (without limitation) any Claim for breach of
this Agreement; any Claim under or relating to any federal, state or local law
or regulation prohibiting discrimination, harassment or retaliation based on
race, color, religion, national origin, sex, age, disability or any other
condition or characteristic protected by law; demotion, discipline, termination
or other adverse action in violation of any contact, law or public policy;
entitlement to wages or other economic compensation; and any Claim for personal,
emotional, physical, economic or other injury.
7.3 CLAIMS NOT SUBJECT TO ARBITRATION. This Section 7
does not preclude either party from making an application to a court of
competent jurisdiction for: (a) provisional remedies (e.g., a temporary
restraining order or preliminary injunction) pursuant to California Code of
Civil Procedure section 1281.8; or (b) a temporary restraining order or an
injunction under California Code of Civil Procedure section 527.8. This Section
7 also does not apply to any claims by Executive: (i) for workers' compensation
benefits; (ii) for unemployment insurance benefits; (iii) under a benefit plan
where the plan specifies a separate arbitration procedure; (iv) filed with an
administrative agency which is not legally subject to arbitration under this
Agreement; or (v) which are otherwise expressly prohibited by law from being
subject to arbitration under this Agreement.
7.4 PROCEDURE. The arbitration proceedings shall be
conducted in Orange County, California. Any Claim submitted to arbitration shall
be decided by a single, neutral arbitrator (the "Arbitrator"). The parties to
the arbitration shall mutually select the Arbitrator not later than 45 days
after service of the demand for arbitration. If the parties for any reason do
not mutually select the arbitrator within the 45 day period, then any party may
apply to any court of competent jurisdiction to appoint a retired judge as the
Arbitrator. The parties agree that the arbitration shall be conducted in
accordance with California Code of Civil Procedure sections 1280 et seq., except
as modified by this Agreement. The Arbitrator shall apply the substantive
federal, state or local law and statute of limitations governing any Claim
submitted to arbitration. In ruling on any such Claim submitted to arbitration,
the Arbitrator shall have the authority to award only such remedies or forms of
relief as are provided for
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under the substantive law governing such Claim. The Arbitrator shall issue a
written decision revealing the essential findings and conclusions on which the
decision is based. Judgment on the Arbitrator's decision may be entered in any
court of competent jurisdiction.
7.5 COSTS. Employer shall be responsible for paying the
fees and costs incurred in the arbitration (e.g., filing fees, transcript costs
and Arbitrator's fees). The parties shall be responsible for their own
attorneys' fees and costs, except that the Arbitrator shall have the authority
to award attorneys' fees and costs to the prevailing party in accordance with
the applicable law governing the dispute.
7.6 INTERPRETATION OF ARBITRABILITY. The Arbitrator, and
not any federal or state court, shall have the exclusive authority to resolve
any issue relating to the interpretation, formation or enforceability of this
Agreement, or any issue relating to whether a Claim is subject to arbitration
under this Agreement, except that any party may be bring an action in any court
of competent jurisdiction to compel arbitration in accordance with the terms of
this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, Employer and Executive have executed and delivered
this Agreement as of the date first above written.
EXECUTIVE:
/s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx
EMPLOYER:
AMERICAN MOLD GUARD, INC.,
a California corporation
By: /s/ Xxxx X. Xxxxxxx
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Print Name: Xxxx X. Xxxxxxx
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Title: Chief Financial Officer
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By:
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Print Name:
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Title:
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