EXHIBIT 10.15
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on this
23rd day of February, 1995, by and between NORTH AMERICAN TECHNOLOGIES GROUP,
INC., a Delaware corporation (the "Company"), and XXXXXXX XXXX, an individual
("Executive").
WHEREAS, the Company desires to employ Executive to serve as an executive
officer of the Company, and Executive desires to accept such employment, upon
the terms and conditions of this Agreement; and
NOW, THEREFORE, in consideration of the provisions hereinafter described,
Company and Executive agree as follows:
1. DUTIES OF EXECUTIVE. During the Term (as defined below) of this
Agreement, Executive shall be employed by the Company as its Sr. Vice President
- Operations. In such capacity, Executive shall perform all functions and
duties consistent with such position, in an efficient, trustworthy and
professional manner, as reasonably required by the Board of Directors of the
Company. Executive's primary functions and duties shall include all those
duties customarily undertaken by a senior vice president - operations of a
company similar to the Company. Executive agrees to devote substantially all of
his working time and energy to the performance of his duties hereunder during
the Term of this Agreement so long as his employment under this Agreement is
continued by the Company.
2. TERM OF AGREEMENT; TERMINATION.
a. Term of Agreement. Unless terminated sooner or extended in accordance
with provisions of this Agreement, the Company shall employ Executive, and
Executive accepts such employment, as set forth herein for a term (the "Term"):
(i) beginning on the first Monday following the consummation of the acquisition
(the "Acquisition"), if any, of EET, Inc. ("EET") by the Company pursuant to
that certain Agreement and Plan of Merger, dated as of February 7, 1995, by and
among NATK, EET and NATK SUB, INC., a Texas corporation and wholly-owned
subsidiary of NATK, and (ii) ending upon the close of business on December 31,
1999. Notwithstanding the foregoing, if this Agreement is not terminated in
accordance with the provisions herein on or before the expiration of its Term,
the Term of this Agreement shall be extended for an additional twelve (12)
months unless, at least ninety (90) days prior to the expiration of the initial
Term of the Agreement, or ninety (90) days prior to the expiration of a
subsequent twelve (12) month extended Term, either Executive or the Company
gives the other party written notice of its intent to terminate the Agreement at
the end of such Term.
b. Termination. In the event the Acquisition is not consummated on or
before March 31, 1995, this Agreement and all rights and obligations of the
parties
under this Agreement shall immediately terminate on March 31, 1995, unless
extended in a writing signed by both of the parties hereto. In addition, subject
to the Company's performance of its obligations under this Agreement to be
performed upon Termination of Executive's Service (as defined below), the
Company shall have the right to terminate this Agreement for Cause, and this
Agreement shall automatically terminate upon Executive's death or Disability.
Except as expressly provided in Paragraph 2.a. and this Paragraph 2.b., the
Company shall have no right to terminate this Agreement. Executive shall have
the right to voluntarily terminate his Service under this Agreement at any time
upon not less than thirty (30) days' prior written notice.
3. DEFINITIONS. For purposes of this Agreement, the following terms as
used herein shall have the meanings set forth in this Paragraph 3:
a. "Annual Base Salary" or "Base Salary" shall mean the annual base salary
rate in effect for Executive from time to time during the Term of this Agreement
in accordance with the provisions of Paragraph 4.a. of this Agreement.
b. "Annual Bonus" or "Bonus" shall mean a cash payment available annually
to Executive in addition to Base Salary of which payment is contingent upon the
performance of the Company and Executive during the fiscal year as determined in
accordance with Paragraph 4.b. of this Agreement.
c. "Cause" shall mean:
(i) Willful refusal by Executive to follow a written order of Executive's
immediate supervisor at the Company, unless (x) Executive's refusal is based on
his good faith belief that to follow such written order would constitute a
violation of his fiduciary duties to the Company or a violation of any
applicable law, rule or regulation or (y) such order is outside the scope of the
obligations or duties of the Executive as set forth in Paragraph 1 of this
Agreement;
(ii) Executive's willful engagement in conduct materially injurious to the
Company; or
(iii) Executive's willful continued failure to perform his duties under
this Agreement (except due to Executive's incapacity as a result of physical or
mental illness) for a period of at least ninety (90) consecutive days after
written notice is delivered to Executive from the Board of Directors of the
Company specifically identifying the manner in which Executive has failed to
perform his duties.
For purposes of clauses (i), (ii) and (iii) of this definition, no act, or
failure to act, on Executive's part shall be deemed "willful" unless done, or
omitted to be done, by Executive in bad faith.
2
d. "Constructive Termination" shall mean Executive's voluntary Termination
of Service within one hundred twenty (120) days following the occurrence of one
or more of the following events, except if such event is approved in writing by
Executive prior to its occurrence:
(i) A failure by the Company to abide by any part of this Agreement that
is not remedied within thirty (30) days after receiving written notification by
Executive of such failure, including without limitation any violation of
Executive's rights as described in Paragraph 4 of this Agreement, unless such
rights are replaced by rights of essentially equal value;
(ii) A material reduction in Executive's title or responsibilities; or
(iii) Relocation of Executive's primary place of work to an area other
than Houston, Texas.
e. "Disability" shall be deemed to have occurred if Executive makes
application for or is otherwise eligible for disability benefits under any
Company-sponsored long-term disability program covering Executive, and Executive
qualifies for such benefits. In the absence of a Company-sponsored long-term
disability program covering Executive, "Disability" shall mean Executive's total
and permanent disability as determined by the Company's Board of Directors based
on the Board's review of a medical opinion satisfactory to the Board certifying
that Executive is permanently unable to perform his normal duties under this
Agreement as a result of a physical or mental condition.
f. "Long-Term Incentive Plan" shall mean any stock option plan or any
other form of equity (real or phantom) or other long-term incentive plan
introduced by the Company.
g. "Management Bonus Plan" shall mean the annual cash bonus plan approved
by the Board of Directors and amended from time to time. Participants in the
Management Bonus Plan shall be eligible to receive annual cash payments based on
Board assessment of performance which may be totally discretionary or based
partially or totally on specific objectives established by the Board for the
Company and Executive for the fiscal year.
h. "Service" shall mean Executive's full-time or substantially full-time
employment with the Company, or any affiliated organization, including any leave
of absence approved by the Company's Board of Directors.
i. "Termination of Service" or "Termination of Executive's Service" shall
mean the termination of Executive's Service under this Agreement for any reason
whatsoever, including without limitation: (a) death, (b) Disability, (c) Cause,
(d) the expiration of the Term of this Agreement (i.e., as a result of either
Executive or the Company giving notice of termination under Paragraph 2.a. of
this Agreement), and (e) Constructive Termination. Such termination shall not
include a termination of this Agreement as a result of the
3
Acquisition not being consummated as provided in the first sentence of Paragraph
2.b. of this Agreement.
4. EXECUTIVE'S RIGHTS WHILE EMPLOYED BY THE COMPANY. During the Term of
this Agreement, the Company shall provide to Executive the following rights and
benefits:
a. Base Salary. During the Term of this Agreement, the Company shall pay
to Executive the Base Salary set forth in this Paragraph 4.a. The minimum
Annual Base Salary payable to Executive by the Company shall be One Hundred
Thirty-Five Thousand Dollars ($135,000.00). Such Base Salary shall be paid in
equal semi-monthly installments on the Company's normal payroll dates.
Beginning March 1, 1996, and on each January 1 thereafter during the Term of
this Agreement (each such date being termed the "Anniversary Date"), Executive's
Base Salary shall be adjusted to reflect the increase, if any (but not any
decrease, if any) during the prior year in the Consumer Price Index for Houston,
Texas published by the United States Department of Labor, Bureau of Labor
Statistics (the "Index").
If the Index published for any Anniversary Date (the "Comparison Index")
has increased over the index published for December 31, 1994 (the "Base Index"),
then Executive's Base Salary for the following year shall be established by
multiplying One Hundred Thirty-Five Thousand Dollars ($135,000.00) by a
fraction, the numerator of which shall be the Comparison Index and the
denominator of which shall be the Base Index. Any such adjustments to
Executive's Base Salary shall be retroactive to the Anniversary Date to account
for delays in reporting the Index. If the Index ceases to be published, or if
material changes are made to the process by which the Index is computed,
Executive's increase in Base Salary, if any, shall be computed on the basis of
any change in the most nearly comparable index then being computed and published
by the United States government or an agency of the United States government.
Notwithstanding the foregoing, Executive's Base Salary shall be reviewed by
the Board of Directors of the Company on an annual basis during the Term of this
Agreement and may be increased (but not decreased) based on an assessment of
Executive's performance and external market factors. Executive's Base Salary as
determined above shall constitute Executive's minimum Base Salary during the
Term of this Agreement.
b. Annual Bonus. Executive shall also be eligible to receive an Annual
Bonus pursuant to any Management Bonus Plan adopted by the Company, subject to
the terms and provisions of this Paragraph b. The amount of Annual Bonus earned
by Executive for each fiscal year shall be determined by Executive's immediate
supervisor at the Company based upon, among other factors, the performance of
the Company during such fiscal year. Any Annual Bonus earned by Executive shall
be paid in cash within one hundred twenty (120) days following the completion of
the Company's fiscal year then ending.
4
c. Long-Term Incentives. Executive shall be entitled to participate in
any Long-Term Incentive Plan that may be provided to other senior executives of
the Company during the Term of this Agreement. Grants to Executive under such
Long-Term Incentive Plan shall be no less favorable in amount and other key
design features, including vesting restrictions, than grants provided to other
senior executives of the Company with comparable levels of responsibility to
Executive.
d. Fringe Benefits. The Company shall provide Executive with the
following:
(i) Such benefits and perquisites, including but not limited to disability
income, life and health insurance, deferred compensation and any form of savings
or retirement plan, as may from time to time be provided to other executives of
the Company with a similar level of Base Salary and responsibilities. Such
benefits and perquisites shall be provided at the same proportional cost to
Executive as that paid by other comparable executives in the Company who
participate in such programs;
(ii) Reasonable vacation each year during the Term of this Agreement, but
not less than four (4) weeks. Said vacation shall not reduce Executive's
compensation under this Agreement;
(iii) A health and dental insurance policy or policies (and the Company
shall pay all premiums associated therewith) reasonably selected by the Company
for Executive and other executive officers of the Company with a similar level
of Base Salary and responsibilities;
(iv) Directors and officers liability insurance for Executive (to the
extent that such insurance can be obtained at commercially reasonable rates),
the premiums and other amounts due with respect to which shall be paid by the
Company;
(v) Payment of dues for such clubs, societies and professional
associations of which Executive is a member that benefit the Company; and
(vi) A term life insurance policy (and the Company shall pay all premiums
associated therewith) that pays not less than $500,000 to Executive's designee,
on the death of Executive, with rights in favor of Executive to purchase such
policy on termination of this Agreement, so long as the annual premiums therefor
do not exceed $5,000.
e. Stock Options. The Company shall grant to Executive the right to
exercise the options to acquire shares of common stock, par value $0.001 per
share, of the Company as set forth in that certain Stock Option Agreement, a
copy of which is attached hereto as Annex 1 and made a part hereof, which Stock
Option Agreement shall be executed and delivered by the Company and Executive
simultaneously with the execution of this Agreement.
5
f. Expense Reimbursement. The Company shall promptly reimburse Executive
for all out-of-pocket fees and expenses (including without limitation travel
expenses) incurred by him in connection with the performance of his obligations
under this Agreement so long as Executive provides reasonable documentation
evidencing such fees and expenses.
g. Reimbursement and Loan Provisions Relating to Executive's Relocation to
Houston, Texas.
(i) Subject to the terms and provisions of this Section 4.g., the Company
agrees to reimburse Executive for the Relocation Costs (as defined below) in
connection with Executive's relocation from Indiana to the Houston, Texas area.
(ii) "Relocation Costs" shall mean and include: (A) real estate broker
fees and other closing costs relating to the sale of Executive's principal
residence in Indiana; (B) closing costs (not including any down payment or
insurance costs), and costs incurred in connection with up to two loan
applications, relating to a purchase of a home in the Houston, Texas area to be
used by Executive as his principal residence, so long as such costs are incurred
within the first twelve (12) months of the Term of Employment; (C) costs of
moving Executive's personal effects from Indiana to Houston, Texas; and (D) an
amount necessary to cover the federal income tax consequences, if any, of
Executive's receipt of amounts from the Company representing such Relocation
Expenses.
(iii) Notwithstanding the foregoing, in the event of Termination of
Executive's Service, at any time during the first twelve (12) months of the Term
of Employment, as a result of Executive's voluntary termination of this
Agreement not constituting Constructive Termination, Employee shall be obligated
to repay, and shall repay, to the Company, on or before the 90th day following
such Termination of Executive's Service all amounts received by him from the
Company representing Relocation Costs.
(iv) The Company agrees to loan to Executive up to $70,000, upon
Executive's written request, at any time during the first six (6) months of the
Term of Employment, the proceeds of which loan shall be used by Executive to
satisfy certain obligations of Executive in connection with a residential lot in
Indiana on which Executive intended to build his principal residence. Such loan
shall bear interest at six percent (6%) per annum, and shall be repaid, together
with all accrued interest thereon, on the earlier to occur of (A) the day that
is one year from the first day of the Term of Employment or (B) the sale of such
residential lot. In the event such loan is repaid as a result of the provisions
of clause (B) of the preceding sentence, and such residential lot is sold to an
unrelated party for an amount less than the sum of the then-outstanding
principal and accrued and unpaid interest on such loan, then Executive shall be
required only to repay such amount as is equal to the proceeds of such sale, and
the remainder, if any, of the amount due with respect to the loan shall be
forgiven by the Company. Executive agrees to use reasonable efforts to cause
such residential lot to be resold at the highest price available.
6
5. EXECUTIVE'S RIGHTS UPON TERMINATION OF SERVICE.
a. Upon Termination Of Service For Reason Other Than Death, Disability,
Cause Or Voluntary Termination by Executive Not Constituting Constructive
Termination. In the event of Termination of Executive's Service for any reason
other than (a) death, (b) Disability, (c) Cause, or (d) voluntary termination of
this Agreement by Executive not constituting Constructive Termination, Executive
(or if Executive dies while benefits remain due under this Agreement,
Executive's beneficiaries as designated in accordance with the provisions of
Paragraph 9 herein) shall be entitled to receive for a period of thirty-six (36)
months following such Termination of Service:
(i) Executive's Base Salary in effect as of the date of Termination of
Executive's Service;
(ii) A bonus payable annually in cash equal to the average dollar bonus
earned by Executive during the Company's two fiscal years immediately prior to
Termination of Executive's Service (or if Executive has been employed for less
than such two fiscal year period, the dollar bonus earned by Executive for the
prior fiscal year, if any);
(iii) Continued participation in all fringe benefits as described in
paragraph 4.d.(i) herein, available to Executive immediately prior to
Termination of Executive's Service. If continued participation in one or more
of these fringe benefits is not possible due to legal or other constraints, the
Company shall provide Executive with sufficient funds on a monthly basis to
enable Executive to secure fringe benefits, on an after-tax basis, substantially
similar to those which Executive was entitled to immediately prior to
Termination of Executive's Service; and
b. Upon Termination Of Service For Reason Of Death, Disability, Cause Or
Voluntary Termination Not Constituting Constructive Termination. In the event
of Termination of Executive's Service for reason of (a) death, (b) Disability,
(c) Cause, or (d) voluntary termination of this Agreement by Executive not
constituting Constructive Termination, Executive shall be entitled to receive
following such Termination of Service:
(i) For a period of 90 days following such Termination the then-applicable
Base Salary and other benefits that Executive would have been entitled to
receive under this Agreement but for such Termination;
(ii) Payment of any death, Disability or other benefits provided to
Executive by the Company in accordance with the terms and conditions of such
benefits (but only in the event such Termination of Executive's Service was for
reason of death or Disability); and
(iii) Executive shall have the right to exercise (in accordance with the
terms thereof) any stock options, if any, previously granted to Executive under
any Long-Term Incentive Plan of the Company, provided such options have vested
in accordance with the
7
provisions of the Plan or in accordance with any agreement between the Company
and Executive covering such options.
6. MITIGATION AND OFFSET REQUIREMENTS. Executive shall not be required to
mitigate the amount of any benefit provided for in this Agreement by actively
seeking alternative employment during the period in which such benefits are
paid. In addition, Executive shall not be required to offset any such benefits
provided for in this Agreement by amounts earned as a result of Executive's
employment or self-employment during the period in which Executive is entitled
to receive such benefits.
Notwithstanding the above, the Company's obligation to continue to provide
Executive with fringe benefits, as described in Paragraph 4.d.(i) of this
Agreement, shall cease if Executive becomes eligible to participate in fringe
benefits substantially similar to those provided for in this Agreement as a
result of Executive's employment during the period that Executive is entitled to
such fringe benefits.
7. BREACH OF CONFIDENTIALITY OR ENTERING INTO DIRECT COMPETITION.
Beginning on the first day of the Term of this Agreement and continuing during
the period in which this Agreement remains in force and only so long as
Executive is entitled to receive any compensation and/or benefits pursuant to
the provisions of Paragraph 4 or 5 hereof, and is receiving all such
compensation and/or benefits, Executive shall not, without prior written consent
of the Board of Directors except pursuant to and consistent with the order of
any court, legislative body or regulatory agency, (a) engage directly or
indirectly (including, by way of example only, as a principal, partner,
venturer, employee or agent), nor have any direct or indirect interest, in any
business which competes with the Company in any material way, or (b) disclose to
any third party, either directly or indirectly, any non-public information
regarding the Company's business, customers, financial condition, strategies or
operations the disclosure of which xxxxx the Company in any material way.
Clause (a) above shall not apply to (1) any investment by Executive in the stock
of a publicly-traded corporation, provided such investment constitutes less than
one percent (1%) of the corporation's cumulative voting shares.
8. LIMITATION OF BENEFITS UNDER THIS AGREEMENT. In the event that the
payment of any benefit due to Executive under this Agreement (including any
early vesting of stock options) shall result in the Company's inability to
deduct such payment for Federal Income Tax purposes as a result of exceeding
limitations under Section 4999 of the Internal Revenue Code, as amended, the
cumulative payments due under this Agreement shall be reduced by the minimum
amount necessary to avoid exceeding such limitations. In such an event,
Executive may elect which benefit(s) to reduce and in which proportions in order
to conform with the provisions of this Paragraph.
9. DESIGNATION OF BENEFICIARIES. Executive shall have the right at any
time to designate any person(s) or trust(s) as beneficiaries to whom any
benefits
8
payable under this Agreement shall be made in the event of Executive's death
prior to the distribution of all benefits due Executive under this Agreement.
Each beneficiary designation shall be effective only when filed in writing with
the Company during Executive's lifetime. If Executive designates more than one
beneficiary, distributions of cash payments shall be made in equal proportions
to each beneficiary unless otherwise provided for in Executive's beneficiary
designation. The filing of a new beneficiary designation shall cancel all
designations previously filed.
Any finalized marriage or divorce (other than a common law marriage) of
Executive subsequent to the date of filing a beneficiary designation shall
revoke such designation unless (a) in the case of divorce, the previous spouse
was not designated as beneficiary, and (b) in the case of marriage, Executive's
new spouse had previously been designated as beneficiary. Executive's spouse
shall join in any designation of a beneficiary other than Executive's spouse.
If Executive fails to designate a beneficiary as provided for above, or if the
beneficiary designation is revoked by marriage, divorce or otherwise without
execution of a new designation, or if the beneficiary designated by Executive
dies prior to distribution of the benefits due Executive under this Agreement,
the Board of Directors of the Company shall direct the distribution of any
benefits due under this Agreement to Executive's estate.
10. ADDITIONAL INDEMNIFICATION RIGHTS.
a. During the Term of this Agreement and for a period of three (3) years
thereafter, the Company shall use all reasonable efforts to cause to be
maintained in effect a policy of directors' and officers' insurance and
indemnification policy relating to actions, alleged actions, omissions and
alleged omissions of Executive occurring during the Term of this Agreement.
b. (1) If during the Term of this Agreement or for a three (3) year
period thereafter, Executive is made a party or is threatened to be made a party
to or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company, or is or
was serving at the request of the Company as a director, officer or employee of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action or inaction in an official
capacity as a director, officer or employee or in any other capacity while
service as a director, officer or employee, then Executive shall be indemnified
and held harmless by the Company to the fullest extent authorized by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
such law permitted the Company to provide prior to such amendment) (the "GCL"),
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by Executive in connection
therewith, whether occurring before,
9
during or after the Term of this Agreement, and such indemnification shall
continue as to Executive even if he shall have ceased to be a director, officer
or employee and shall inure to the benefit of his heirs, executors and
administrators; provided, however, that except as provided in this Paragraph b.,
the Company shall indemnify Executive in connection with a proceeding (or part
thereof) initiated by Executive only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Company. The right to
indemnification conferred in this Paragraph b., shall be a contract right and
shall include the right to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the GCL requires, the payment of such expenses incurred by
Executive in his capacity as a director, officer or employee (and not in any
capacity in which service was or is rendered by Executive while a director or
officer or employee, including without limitation, service to any employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Company of an undertaking, by or on behalf of
Executive, to repay all amounts so advanced if it shall ultimately be determined
that Executive is not entitled to be indemnified under this Paragraph b. or
otherwise.
(2) If a claim under Paragraph b.(1) above is not paid in full by the
Company within 30 days after a written claim has been received by the Company,
Executive may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim, and, if successful in whole or in part,
Executive shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in defending any proceeding in advance
of its final disposition where the required undertaking, if any is required, has
been tendered to the Company) that Executive has not met the standards of
conduct which made it permissible under the GCL for the Company to indemnify
Executive for the amount claimed, but the burden of proving such defense shall
be on the Company. Neither the failure of the Company (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
Executive is proper in the circumstances because he has met the applicable
standard of conduct set forth in the GCL, nor an actual determination by the
Company (including its Board of Directors, independent legal counsel or its
stockholders) that Executive has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that Executive has not
met the applicable standard of conduct.
11. SUCCESSORS. Except as provided for in Paragraph 9 above, the rights
and duties of a party hereunder shall not be assignable by that party; provided,
however, that this Agreement shall be binding upon and shall inure to the
benefit of and binding upon any successor of the Company, and any such successor
shall be deemed substituted for the Company under the terms of this Agreement.
The term "successor" as used herein shall include, without limitation, any
person, firm, corporation or other business entity which at any time, by merger,
purchase or otherwise, acquires all or a substantial portion of the assets or
business of the Company.
10
12. ATTORNEYS' FEES UPON A DISPUTE. In any action at law or in equity to
enforce any of the provisions or rights under this Agreement, the unsuccessful
party to such litigation, as determined by the Court in a final judgment or
decree, shall pay the successful party all costs, expenses and reasonable
attorneys' fees incurred therein by such party (including without limitation
such costs, expenses and fees on any appeals), and if such successful party
shall recover judgment in any such action or proceeding, such costs, expenses
and attorneys' fees shall be included as part of such judgment.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Company and Executive as to the terms of Executive's employment by
the Company and supersedes all prior written agreements, understandings and
commitments between the Company and Executive as to the terms of Executive's
employment by the Company. No amendments to this Agreement may be made except
by a written document signed by the Executive and approved in writing by the
Company's Board of Directors.
14. VALIDITY. In the event that any provision of this Agreement is held
to be invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Agreement.
15. PARAGRAPHS AND OTHER HEADINGS. Paragraphs and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretations of this Agreement.
16. NOTICE. Any notice or demand required or permitted to be given under
this Agreement shall be made in writing and shall be deemed effective upon the
personal delivery thereof if delivered or, if mailed, forty-eight (48) hours
after having been deposited in the United States mail, postage prepaid, and
addressed in the case of the Company to the attention of the Board of Directors
at the Company's then principal place of business in Houston, Texas, and in the
case of Executive to his attention at X.X. Xxx 0000, Xxxxxxxxxx, Xxxxxxx 00000.
Either party may change the address to which such notices are to be addressed by
giving the other party notice in the manner herein set forth.
17. WITHHOLDING TAXES AND OTHER DEDUCTIONS. To the extent required by
law, the Company shall withhold from any payments due Executive under this
Agreement any applicable federal, state or local taxes, and such other
deductions as are prescribed by law.
18. SURVIVAL OF CERTAIN PROVISIONS. The provisions of Paragraphs 5, 6, 7,
8, 9, and 10 through 19 of this Agreement shall survive termination of this
Agreement; provided, however, that the provisions of: (a) Paragraphs 5 and 8
hereof shall continue so long as any compensation is to be paid to Executive
under this Agreement as set forth in Paragraph 5 and (b) the provisions of
Paragraphs 7 and 10 shall survive such termination for the respective periods
provided therein. Notwithstanding the foregoing provisions, none of the
provisions of this Agreement shall survive the termination of this
11
Agreement if this Agreement is terminated as provided in the first sentence of
Paragraph 2.b. of this Agreement.
19. APPLICABLE LAW. To the full extent controllable by stipulation of the
Company and Executive, this Agreement shall be interpreted and enforced under
Texas law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized representative and Executive has affixed his signature as of
the date first written above.
COMPANY:
NORTH AMERICAN TECHNOLOGIES
GROUP, INC., a Delaware corporation
By /s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx
Title: Chairman
EXECUTIVE:
/s/ Xxxxxxx Xxxx
-------------------------------------
XXXXXXX XXXX
12
ANNEX 1 TO EMPLOYMENT AGREEMENT
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement"), dated as of February 23, 1995,
is by and between NORTH AMERICAN TECHNOLOGIES GROUP, INC., a Delaware
corporation (the "Company"), and XXXXXXX XXXX ("Employee").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Employee hereby agree as follows:
1. Grant of Option; Vesting Schedule.
(a) Grant of Option. The Company hereby grants to Employee an option the
("Option") to purchase, subject to the terms and conditions hereof, from the
Company two hundred thousand (200,000) shares (the "Option Shares") of Common
Stock, par value $0.001 per share, of the Company (the "Common Stock") beginning
on the Commencement Date (as defined below) and ending at 5:00 p.m. Eastern
Standard Time, on March 31, 2004 (the "Termination Date"), at an exercise price
equal to $2.50 per share of Common Stock. As used herein, the term
"Commencement Date" shall mean the date of the beginning of the "Term" of that
certain Employment Agreement ("Employment Agreement") by and between the Company
and Employee, dated as of the date of this Agreement, as the word "Term" is
defined in Paragraph 2.a. of such Employment Agreement. The number of Option
Shares and the exercise price per share shall be subject to adjustment from time
to time upon the occurrence of certain events as set forth below. The shares of
Common Stock or any other shares or other units of stock or other securities or
property, or any combination thereof then receivable upon exercise of the
Option, as adjusted from time to time, are sometimes referred to hereinafter as
"Exercise Shares." The exercise price per share as from time to time in effect
is referred to hereinafter as the "Exercise Price." The Option is not an
"incentive stock option" as described in Section 422A of the Internal Revenue
Code of 1986, as amended.
(b) Vesting Schedule. Following the Commencement Date, the Option shall
vest and be exerciseable (unless earlier terminated as provided herein) on March
31 in the years set forth below and in the amounts set forth below:
Number of
March 31 Shares
1996 50,000
1997 50,000
1998 50,000
1999 50,000
Total 200,000
1
; provided, however, that (i) the Option to acquire such shares shall vest on
the date set forth above only in the event that Employee is in the employ of the
Company or any of its subsidiaries in any capacity on such date and (ii) the
Option to acquire any Exchange Shares, if not earlier terminated by the terms of
this Agreement, shall terminate on the 5th annual anniversary date of the date
on which the Option to acquire such Exchange Shares vested as provided in this
clause (b). The period beginning on the Commencement Date and ending on the
Termination Date is sometimes referred to herein as the Option Period. If
Employee is not in the employ of the Company or any of its subsidiaries in any
capacity on any of the various vesting dates set forth above, regardless of the
reason therefore, then the Option with respect to such year shall not vest.
2. Exercise of Option. The Option may be exercised, so long as it is then
valid and outstanding, from time to time in whole (as to Option Shares then
exercisable) or in part, and if in part, on as many occasions during the Option
Period as Employee shall desire, subject to the terms and provisions of this
Agreement. The Option may be exercised upon delivery on any business day to the
Company at its address set forth below (or such other office of the Company, if
any, as shall theretofore have been designated by the Company by written notice
to the Employee) of the following:
(a) a completed and executed Notice of Option Exercise in the form set
forth in Appendix A hereto and made a part hereof; and
(b) payment of the full Exercise Price for the number of Exercise Shares
set forth in the Notice of Option Exercise, in lawful money of the United States
of America, by certified check or cashier's check made payable to the order of
the Company (or with the consent of the Company, the purchase price therefor may
be paid in whole or in part by the delivery to the Company of certificates
representing shares of Common Stock held by Employee, duly endorsed for transfer
or accompanied by blank stock, each of which shares shall be valued at a price
equal to its then Current Market Value, as defined below).
In the event that Employee is no longer in the employ of the Company or any of
its subsidiaries in any capacity, Employee shall be entitled to exercise this
Option, according to the terms and conditions set forth herein, to purchase only
that number of Option Shares in which Employee has become vested prior to the
termination of such employment.
3. Issuance of Exercise Shares; Delivery of Stock Certificate. The Company
shall, within ten (10) business days (or as soon thereafter as is practicable)
of the exercise of this Option, issue in the name of and cause to be delivered
to the Employee (or such other person or persons, if any, as the Employee shall
have designated in the Notice of Option Exercise) one or more certificates
representing the Exercise Shares to which the Employee (or such other person or
persons) shall be entitled upon such exercise under the terms hereof. Such
certificate or certificates shall be deemed to have been issued and the Employee
(or such other person or persons so designated) shall be deemed to have
2
become the record holder of the Exercise Shares as of the date of the due
exercise of this Option.
4. Exercise Shares Fully Paid and Non-assessable. The Company agrees and
covenants that all Exercise Shares issuable upon the due exercise of the Option
will, upon issuance of a certificate therefor in accordance with the terms
hereof, be duly authorized, validly issued, fully paid and non-assessable and
free and clear of all taxes (other than taxes which, pursuant to this Agreement,
the Company shall not be obligated to pay) or liens, charges, and security
interests created by the Company with respect to the issuance thereof.
5. Reservation of Exercise Shares. At the time of or before taking any
action which would cause an adjustment pursuant to this Agreement increasing the
number of shares of capital stock constituting the Exercise Shares, the Company
will take any corporate action which may be necessary in order that the Company
have remaining, after such adjustment, a number of shares of such capital stock
unissued and unreserved for other purposes sufficient to permit the exercise of
all the then vested Options under this Agreement of like tenor immediately after
such adjustment. The Company will also from time to time take action to
increase the authorized amount of its capital stock constituting the Exercise
Shares if at any time the number of shares of capital stock authorized but
remaining unissued and unreserved for other purposes shall be insufficient to
permit the exercise of the Options under this Agreement then vested. The
Company may but shall not be limited to reserve and keep available, out of the
aggregate of its authorized but unissued shares of capital stock, for the
purpose of enabling it to satisfy any obligation to issue Exercise Shares upon
exercise of Options, through the Termination Date, the number of Exercise Shares
deliverable upon the full exercise of this Option. At the time of or before
taking any action which would cause (pursuant to the provisions of this Section
5) an adjustment resulting in a reduction of the Exercise Price below the then
par value (if any) of the Exercise Shares issuable upon exercise of the Options,
the Company will take any corporate action which may be necessary in order to
assure that the par value per share of the Exercise Shares is at all times equal
to or less than the Exercise Price per share and so that the Company may validly
and legally issue fully paid and non-assessable Exercise Shares at the Exercise
Price, as so adjusted. The Company will also from time to time take similar
action if at any time the Exercise Price is below the then par value of the
Exercise Shares.
6. Fractional Shares. The Company shall not be required to issue
fractional shares of capital stock upon the exercise of this Option or to
deliver stock certificates which evidence fractional shares of capital stock.
In the event that any fraction of an Exercise Share would, except for the
provisions of this Section 6, be issuable upon the exercise of this Option, the
Company shall pay to the Employee an amount in cash equal to such fraction
multiplied by the Current Market Value (as defined herein) of the Exercise
Share. For purposes of this subparagraph, the "Current Market Value" shall
mean, and be determined, as follows:
3
(a) if the type of securities representing the Exercise Shares are traded
in the over-the-counter market and not on any national securities exchange and
not in the NASDAQ Reporting System, the average of the mean between the last bid
and asked prices per share, as reported by the National Quotation Bureau, Inc.,
or another generally accepted reporting service, for the last business day prior
to the date on which this Option is exercised, or if not so reported, the
average of the closing bid and asked prices for an Exercise Share as furnished
to the Company by any member of the National Association of Securities Dealers,
Inc., selected by the Company for that purpose;
(b) if the type of securities representing the Exercise Shares are listed
or traded on a national securities exchange or in the NASDAQ National Market
System, the closing price on the principal national securities exchange on which
they are so listed or traded or in the NASDAQ National Market System, as the
case may be, on the last business day prior to the date of the exercise of this
Option. The closing price referred to in this clause (b) shall be the last
reported sales price or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices, in either case, on the
national securities exchange on which the Exercise Shares are then listed or in
the NASDAQ Reporting System; or
(c) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
7. Payment of Taxes. The Company will pay all documentary stamp taxes, if
any, attributable to the issuance of Exercise Shares upon the exercise of this
Option; provided, however, that the Company shall not be required to pay any tax
or taxes which may be payable in respect of any transfer involved in the issue
of any certificates representing the Exercise Shares in a name other than that
of the Employee, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
8. Rights of Employee. The Employee shall not, by virtue of anything
contained in this Agreement or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including without
limitation, the right to receive dividends or to vote or to consent or to
receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter, with respect to
any Exercise Shares prior to the acquisition of such Exercise Shares on the
exercise of this Option as provided in this Agreement .
9. Adjustment of Exercise Shares and Exercise Price. The Exercise Price
and the number and kind of Exercise Shares purchasable upon the exercise of this
Option shall be subject to adjustment from time to time upon the happening of
certain events as provided in this Section 9. The Exercise Price in effect at
any time and the number and
4
kind of securities purchasable upon exercise of this Option also shall be
subject to adjustment as hereinafter provided.
(a) In the case the Company shall (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its outstanding Common Stock into a greater number of
shares or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, classification, combination or reclassification shall be
proportionally adjusted so that the Employee, upon any exercise of this Option
immediately thereafter shall be entitled to receive the aggregate number and
kind of shares which, if this Option had been exercised by such Employee
immediately prior to such date, he would have owned upon such exercise and been
entitled to receive upon such dividend, subdivision, classification, combination
or reclassification. For example, if the Company declares a 2 for 1 stock
dividend or stock split and the Exercise Price immediately prior to such event
was $5.00 per share, the adjusted Exercise Price immediately after such event
would be $2.50 per share. Such adjustment shall be made successively whenever
any event listed above shall occur.
(b) In case the Company shall hereafter issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price (or
having a conversion price per share) less than the current market price of the
Common Stock (as defined in the subsection (d) below) on the record date
mentioned below, the Exercise Price shall be adjusted so that the same shall
equal the price determined by multiplying the Exercise Price in effect
immediately prior to the date of such issuance by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock outstanding on
the record date mentioned below and the number of additional shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so offered (or the aggregate conversion price of the convertible
securities so offered) would purchase at such current market price per share of
the Common Stock, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding on such record date and the number of
additional shares of Common Stock offered for subscription or purchase (or into
which the convertible securities so offered are convertible). Such adjustment
shall be made successively whenever such rights or warrants are issued and shall
become effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made upon the basis of delivery of only the number of shares of Common
Stock (or securities convertible into Common Stock) actually delivered.
(c) Whenever the Exercise Price payable upon exercise of this Option is
adjusted pursuant to the provisions of (a) or (b) above, the number of Exercise
Shares purchasable
5
upon exercise of this Option shall simultaneously be adjusted by multiplying the
number of Exercise Shares initially issuable upon exercise of this Option by the
Exercise Price in effect on the date hereof and dividing the product so obtained
by the Exercise Price, as adjusted.
(d) For the purpose of any computation under the subsection above, the
current market price per share of Common Stock at any date shall be deemed to be
the average of the daily closing prices for 30 consecutive business days before
such date. The closing price for each day shall be the last sale price (regular
way) or, in case no such reported sale takes place on such day, the average of
the last reported bid and lowest reported asked prices as reported by NASDAQ, or
other similar organization if NASDAQ is no longer reporting such information, or
if not so available, the fair market price as determined by the Board of
Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one cent ($0.01) in
such price; provided, however, that any adjustments which by reason of the
provisions of this sentence are not required to be made shall be carried forward
and taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this Section 9 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be. Anything
in this section to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the Exercise Price, in
addition to those required by this Section 9 as it, in its sole discretion,
shall determine to be advisable in order that any dividend or distribution in
shares of Common Stock, subdivision, classification, reclassification or
combination of Common Stock, issuance of warrants or options or other rights to
acquire Common Stock or distribution of evidences of indebtedness or other
assets (excluding cash dividends) referred to hereinabove in this Section 9
hereafter made by the Company to the holders of its Common Stock shall not
result in any tax to the holders of its Common Stock or securities convertible
into Common Stock.
(f) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of Shares issuable upon exercise of this Option to be mailed
to the Employee, at the address set forth in this Agreement for notice, and
shall cause a certified copy thereof to be mailed to its transfer agent, if any.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 9, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(g) In the event that at any time, as a result of an adjustment made
pursuant to this Section 9, the Employee thereafter shall become entitled to
receive any Exercise Shares of the Company other than Common Stock, thereafter
the number of such other shares so receivable upon exercise of this Option shall
be subject to adjustment from time to time in
6
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in this Section 9.
10. Restrictions on Exercise and Transferability. This Option, and the
rights of Employee under this Agreement, shall be exerciseable only by the
Employee or, upon his death or disability, by his estate or any duly appointed
guardian, executor, administrator, trustee or other legal representative(s), and
shall not be transferred or assigned to any other party other than Employee's
estate upon his death.
11. Restrictive Legends. So long as an exemption therefrom is then
available, the Company shall not be required by the terms of this Agreement to
register, under the Securities Act of 1933, as amended (the "Act"), or under
applicable state securities laws (together with the Act, the "Securities Laws"),
any of the Exercise Shares issued or to be issued upon the exercise of the
Option. In addition, in the event that any such Exercise Shares are not so
registered, Employee consents to the placement on the certificate or
certificates representing such Exercise Shares a legend or legends to the effect
that, among other things, neither such certificate or certificates nor the
Exercise Shares evidenced thereby have been registered under any Securities Laws
and that no sale, transfer or other disposition thereof or any interest therein
may be made or shall be recognized unless in the satisfactory written opinion of
counsel for, or satisfactory to, the Company, such transaction would not violate
or required registration under such Securities Laws. The Company may also place
on such certificate or certificates any other legend it deems necessary or
desirable in order to conform to any of the Securities Laws.
12. Certain Registration Rights. If at any time prior to the Termination
Date the Company registers under the Act any shares of Common Stock to be issued
to an executive officer of the Company or any of its subsidiaries upon exercise
of an option (a "Management Option") to acquire such shares of Common Stock
granted in connection with such person's employment with the Company or any of
its subsidiaries as an executive officer, then the Company shall offer in
writing to Employee a corresponding right to receive shares of Common Stock that
are registered under the Act upon the exercise of any of Employee's then vested
and unexercised shares of Common Stock under this Agreement upon similar terms
and provisions as those offered to such other executive officer. In addition,
if at any time prior to the Termination Date the Company offers to register any
of such other executive officer's outstanding shares of Common Stock that were
issued to him upon exercise of a Management Option, then the Company shall offer
in writing to Employee at the same time a corresponding right to cause the
Company to register any of the Employee's then outstanding shares of Common
Stock that were issued to him upon exercise of the Option granted under this
Agreement. The rights granted in favor of Employee under this Section 12: (a)
shall be as equal in nature to the rights granted in favor of such other
executive officer as is reasonably practicable, (b) shall relate to a
proportionate number of Employee's shares of Common Stock as the Board of
Directors of the Company deems reasonable and (c) shall be subject to such other
reasonable terms and conditions as the Board of Directors of the Company may
then impose.
7
13. Notices. All notices or other communications under or relating to
this Agreement shall be in writing and shall be deemed to have been given if
delivered by hand or mailed by certified mail, postage prepaid, return receipt
request, addressed as follows:
If to the Company: North American Technologies Group, Inc.
0000 Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Corporate Secretary
If to the Employee: Xxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Either of the Company or the Employee may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section.
14. Amendments. This Agreement may be amended or supplement only by a
writing signed by both parties hereto.
15. Successors and Assigns. Subject to the provisions of Section 10
hereof, this Agreement shall inure to the benefit of and be binding on the
respective successors, assigns and legal representatives of the Employee and the
Company.
16. Severability. If for any reason any provision, paragraph or terms of
this Agreement is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and Sections of this Agreement shall be deemed to be severable.
17. Governing Law. To the full extent controllable by stipulation of the
Company and Employee, this Agreement shall be interpreted and enforced under
Texas law.
8
18. Headings. Headings used herein are included herein for convenience of
reference only and shall not affect the construction of this Agreement or
constitute a part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first set out above.
"Company" NORTH AMERICAN TECHNOLOGIES
GROUP, INC.
By:
------------------------------------
Xxxx X. Xxxxxxx
President
"Employee" XXXXXXX XXXX
----------------------------------------
9
APPENDIX A
NOTICE OF STOCK OPTION EXERCISE
Pursuant to that certain Stock Option Agreement, dated as of ____________,
1995, as amended to date (the "Agreement"), by and between North American
Technologies Group, Inc., a Delaware corporation (the "Company"), and the
undersigned, and subject to the vesting periods set forth therein, the
undersigned hereby irrevocably elects to exercise an option to acquire
________________ shares of _____________________________, at an exercise price
of $____ per share, or an aggregate purchase price of $__________. Enclosed
herewith is a certified check or cashier's check made payable to the order of
the Company in the amount of the aggregate purchase price set forth in the
preceding sentence [or, if, applicable: "; provided, however, that $________ of
such purchase price therefor is hereby paid by the delivery to the Company of
______ shares of Common Stock represented by certificate no(s) ___________, duly
endorsed for transfer or accompanied by a blank stock power, all in accordance
with the terms and provisions of the Agreement"]. Each capitalized terms used
herein, unless otherwise defined, has the meaning given such term in the
Agreement.
The undersigned hereby represents and agrees that the Exercise Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Exercise Shares have not been registered under the Securities Laws.
The undersigned requests that a certificate for the Exercise Shares be
issued in the name of: ______________________________________
______________________________________
______________________________________
[Please print name, address]
Address of Employee (if different from above):
_________________________________
_________________________________
_________________________________
Dated:___________________________
Name of Employee: ________________________________
Employee's Signature: _______________________________
10
