Exhibit 10.5
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement (the "Agreement") is made and entered
into on August 29, 2005 (the "Execution Date") to be effective on the seventh
day following the Execution Date (the "Effective Date") by and between ▇▇▇▇▇▇
▇▇▇▇ ("▇▇▇▇"), ▇▇▇▇ HOLDINGS, INC., a Texas corporation ("▇▇▇▇ Holdings"), ▇▇▇▇
PARTNERS, LTD, a Texas limited partnership ("▇▇▇▇ Partners"), ADVANCED MATERIALS
GROUP, INC. (the "Company"), and for the limited purposes set forth in Section 7
and 9 of this Agreement, those officers, directors and stockholders of the
Company who have executed this Agreement (the "Company Affiliated Signatories").
▇. ▇▇▇▇ has been employed by the Company in the position of President and
Chief Executive Officer (the "▇▇▇▇ Employment"), pursuant to an
Employment Agreement as of August 1, 2003 (the "Employment
Agreement"), a copy of which is attached hereto as Exhibit A,
B. The Company owes ▇▇▇▇ $47,269.86 in unpaid compensation due and owing
through July 31, 2005 (the "▇▇▇▇ Unpaid Wages").
▇. ▇▇▇▇ has been serving as a Director of the Company since January 2003.
▇. ▇▇▇▇ Partners holds a significant amount of the Company's common
stock.
▇. ▇▇▇▇ loaned the Company $150,000 pursuant to a promissory note dated
April 22, 2004 (the "▇▇▇▇ Note"), a copy of which is attached hereto
as Exhibit B and incorporated herein by reference.
F. The amount of principal and accrued but unpaid interest on the ▇▇▇▇
Note as of the Execution Date is $112,000 (the "▇▇▇▇ Unpaid Principal
and Interest"); and
▇. ▇▇▇▇ Holdings has executed an Assignment and Assumption of
Intellectual Property as of the date hereof to be effective on the
Effective Date in favor of the Company, a copy of which is attached
hereto as Exhibit C (the "IP Assignment Agreement") whereby certain
intellectual property assets (the "(IP Assets") are being conveyed to
the Company.
H. The Company owes ▇▇▇▇ $84,114 which represents legal fees, third party
royalties and other expenses for patent prosecution and related
matters which ▇▇▇▇ incurred in respect of the IP Assets which are
being assigned to the Company by ▇▇▇▇ Holdings pursuant to the IP
Assignment Agreement (the "▇▇▇▇ IP Advances");
▇. ▇▇▇▇ tendered, and the Company has accepted, his resignation as a
Director effective June 24, 2005, and the Company has agreed to accept
his resignation as President and Chief Executive Officer effective as
of the Effective Date.
▇. ▇▇▇▇, ▇▇▇▇ Holdings and ▇▇▇▇ Partners, on one hand, and the Company
and the Company Affiliated Signatories, on the other hand, desire to
settle fully, finally and amicably all issues between them, pursuant
to the terms and conditions set forth below.
NOW THEREFORE, in exchange for the terms, promises and obligations of the
parties hereto made in this Agreement:
1. EFFECTIVE DATE. This Agreement shall become effective as of the
Effective Date.
2. TERMINATION OF EMPLOYMENT AGREEMENT. ▇▇▇▇ and the Company agree to
terminate and cancel the Employment Agreement in its entirety, such Employment
Agreement to be null and void and of no future force and effect, with no
provision therein to survive this termination and cancellation regardless of any
provision in the Employment Agreement to the contrary, and to the extent an
amendment of the Employment Agreement is required in order to give effect to
this Section 2, then the parties hereby agree that the Employment Agreement is
so amended.
3. COMPANY PAYMENTS DUE ▇▇▇▇. The Company remits the amount of $248,383.86
to ▇▇▇▇ contemporaneously with the execution of this Agreement (the "▇▇▇▇
Payment"), which represents the following aggregated amounts:
(a) The ▇▇▇▇ Unpaid Wages;
(b) The ▇▇▇▇ IP Advances;
(c) The ▇▇▇▇ Unpaid Principal and Interest; and
(d) $5,000 in legal fees incurred by ▇▇▇▇ and ▇▇▇▇ Holdings in
furtherance of negotiating and consummating this Agreement and the IP
Assignment Agreement.
▇▇▇▇ and ▇▇▇▇ Holdings acknowledge and agree that, with the Company's
remittance of the ▇▇▇▇ Payment, the Company has paid ▇▇▇▇ and ▇▇▇▇ Holdings
all wages due and owing to either ▇▇▇▇ or ▇▇▇▇ Holdings as of the Effective
Date, and that neither ▇▇▇▇ nor ▇▇▇▇ Holdings shall have any entitlement or
claim to any further compensation or benefits from the Company, including,
without limitation, salary, bonuses, incentive compensation, stock, stock
options, accrued vacation payments, severance, unvested pension benefits,
employer-paid health benefits, fringe benefits, expense reimbursements, or
any other employment benefits.
4. RESTRICTED ACTIVITIES.
(a) None of ▇▇▇▇, ▇▇▇▇ Holdings, nor ▇▇▇▇ Partners shall, for a period
of one (1) year from the Effective Date (the "Restricted Period"), directly
or indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, board member, director,
or in any other individual or representative capacity, engage or attempt to
engage in any activity which is competitive with either (i) the specific
products sold by the Company to its customers as of the Effective Date and
set forth in Exhibit D (a "Company Product") or (ii) the IP Assets conveyed
to the Company in the IP Assignment Agreement. The foregoing restrictions
shall not prevent any of ▇▇▇▇, ▇▇▇▇ Holdings, or ▇▇▇▇ Partners from owning
stock in the Company or from owing five percent (5%) or less of the equity
securities of any public company other than the Company.
(b) During the Restricted Period, none of ▇▇▇▇, ▇▇▇▇ Holdings, nor
▇▇▇▇ Partners shall directly or indirectly through another person or entity
(i) assist, induce or attempt to induce any employee of the Company to
leave the employ of the Company, or in any way interfere with the
relationship between the Company and any employee thereof, (ii) hire
directly or through another person, any person who was an employee of the
Company as of the Effective Date, or (iii) assist, induce or attempt to
induce any independent contractor, vendor or supplier of the Company to
discontinue its relationship or violate any agreement with the Company.
(c) During the Restricted Period, none of ▇▇▇▇, ▇▇▇▇ Holdings, nor
▇▇▇▇ Partners shall disclose or use any Company Confidential Information
that they became aware of during the term and within the scope of the ▇▇▇▇
Employment except to the extent such Company Confidential Information was
known to ▇▇▇▇, ▇▇▇▇ Holdings, or ▇▇▇▇ Partners prior to the beginning of
the ▇▇▇▇ Employment or becomes generally known to and available for use by
the public other than as a result of the acts or omissions of ▇▇▇▇, ▇▇▇▇
Holdings, or ▇▇▇▇ Partners in violation of this Agreement. Each of ▇▇▇▇,
▇▇▇▇ Holdings, and ▇▇▇▇ Partners shall take all reasonable steps to
safeguard Company Confidential Information in their possession and to
protect it against disclosure, misuse, espionage, loss and theft during the
Restricted Period. As used in this Agreement, the term "Company
Confidential Information" means trade secrets and other similar proprietary
information designated and safeguarded as confidential by the Company and
which is not generally known to the public and which is directly related to
either (i) a Company Product or (ii) the IP Assets conveyed to the Company
in the IP Assignment Agreement; provided, however, that "Company
Confidential Information" shall expressly not include any information that
is required by law or court order to be disclosed.
-2-
5. RETENTION OF WARRANT. As partial consideration for the ▇▇▇▇ Note, ▇▇▇▇
received a Warrant to purchase up to 100,000 shares of the Company's Common
Stock for $0.363 per share (the "Warrant"), a copy of which is attached hereto
as Exhibit E and incorporated herein by reference. The Company acknowledges that
▇▇▇▇ shall be entitled to keep the Warrant, and may exercise it in accordance
with its terms.
6. STOCK OPTIONS. Pursuant to the Company's 2003 Stock Plan (the "Plan"),
▇▇▇▇ received options to purchase up to 1,770,000 shares of the Company's Common
Stock at varying exercise prices (the "Options"). The Company acknowledges that
▇▇▇▇ shall be entitled to keep the Options, and may exercise them in accordance
with the terms of the grant certificates related thereto and the terms of the
Plan. ▇▇▇▇ acknowledges that, pursuant to the terms of the grant certificates
and the Plan, the Options expire, if not exercised, 90 days after the date of
his resignation as a Service Provider (as that term in defined in the Plan) to
the Company.
7. RELEASE BY ▇▇▇▇, ▇▇▇▇ HOLDINGS AND ▇▇▇▇ PARTNERS. Each of ▇▇▇▇, ▇▇▇▇
Holdings, and ▇▇▇▇ Partners (collectively, the "▇▇▇▇ Releasing Parties"),
individually and collectively, and whether in the capacity of director,
stockholder, partner, trustee, employee, agent or affiliate, hereby fully and
without limitation release, covenant not to ▇▇▇, and forever discharge the
Company and the Company Affiliated Signatories (the "Company Releasees"), from
any and all rights, claims, cross-claims, counter-claims, demands, liabilities,
actions and causes of action whether in law or in equity, suits, damages,
losses, workers' compensation claims, attorneys' fees, costs, and expenses, of
whatever nature whatsoever, known or unknown, fixed or contingent, suspected or
unsuspected (collectively, the "▇▇▇▇ Claims"), that the ▇▇▇▇ Releasing Parties
now have, or may ever have, against any of the Company Releasees for any acts or
omissions by the Company Releasees occurring on or prior to the Effective Date
of this Agreement; provided, however, that nothing herein shall release any
Company Releasee from any obligation which it may have under this Agreement or
from any rights expressly retained pursuant to this Agreement and/or the IP
Assignment Agreement, and provided further than nothing herein shall prevent the
▇▇▇▇ Releasing Parties from asserting any claim or demand in connection with the
Company's directors and officers insurance policies or otherwise being entitled
to the full benefits of any such policies to the same extent as if this
Agreement had not been entered into.
8. OLDER WORKER'S BENEFIT PROTECTION ACT. This Agreement is subject to the
terms of the Older Workers Benefit Protection Act of 1990 (the "OWBPA"). The
OWBPA provides that an individual cannot waive a right or claim under the Age
Discrimination in Employment Act ("ADEA") unless the waiver is knowing and
voluntary. Pursuant to the terms of the OWBPA, ▇▇▇▇ acknowledges and agrees that
he has executed this Agreement voluntarily, and with full knowledge of its
consequences. In addition, ▇▇▇▇ hereby acknowledges and agrees that: (a) this
Agreement has been written in a manner that is calculated to be understood, and
is understood, by ▇▇▇▇; (b) the release provisions of this Agreement apply to
rights and claims that ▇▇▇▇ may have under the ADEA, including the right to file
a lawsuit against the Company for age discrimination; (c) the release provisions
of this Agreement do not apply to any rights or claims that ▇▇▇▇ may have under
the ADEA that arise after the date ▇▇▇▇ executes this Agreement; (d) ▇▇▇▇ has
been advised in writing to consult with an attorney prior to executing this
Agreement; (e) ▇▇▇▇ shall have a period of 21 days in which to consider the
terms of this Agreement prior to its execution; and (g) ▇▇▇▇ shall have a period
of seven days after execution of this Agreement in which to revoke this
Agreement. ▇▇▇▇ further understands that this Agreement shall not become
effective until expiration of this seven-day period.
9. RELEASE BY THE COMPANY AND THE COMPANY AFFILIATED SIGNATORIES. The
Company and the Company Affiliated Signatories (collectively, the "Company
Releasing Parties"), each individually and collectively, and whether in the
capacity of director, stockholder, partner, trustee, employee, agent or
affiliate, hereby fully and without limitation release, covenant not to ▇▇▇, and
forever discharge each of ▇▇▇▇, ▇▇▇▇ Holdings, and ▇▇▇▇ Partners (the "▇▇▇▇
Releasees"), from any and all rights, claims, cross-claims, counter-claims,
demands, liabilities, actions and causes of action whether in law or in equity,
suits, damages, losses, workers' compensation claims, attorneys' fees, costs,
and expenses, of whatever nature whatsoever, known or unknown, fixed or
contingent, suspected or unsuspected (collectively, the "Company Claims"), that
the Company Releasing Parties now have, or may ever have, against any of the
▇▇▇▇ Releasees for any acts or omissions by the ▇▇▇▇ Releasees occurring on or
prior to the Effective Date of this Agreement; provided, however, that nothing
herein shall release any ▇▇▇▇ Releasee from any obligation which it may have
under this Agreement and/or the IP Assignment Agreement.
10. LEGAL FEES. If any legal action, arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, or default in connection with this Agreement, the successful or
prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs.
-3-
11. INTEGRATED AGREEMENT. This Agreement and the agreements incorporated
herein by reference constitute a single, integrated written contract expressing
the entire agreement of the parties. There is no other agreement, written or
oral, express or implied, between the parties with respect to the subject matter
hereof, except this Agreement. This Agreement may not be orally modified, and
may be modified only in a written instrument signed by the parties. The parties
acknowledge that no representations, statements or promises made by the other
party, or by their respective agents or attorneys, have been relied on in
entering into this Agreement. Each party understands that the facts with respect
to which this Agreement is entered into may be materially different from those
the parties now believe to be true. Each party accepts and assumes this risk and
agrees that this Agreement and the releases in it shall remain in full force and
effect, and legally binding, notwithstanding the discovery or existence of any
additional or different facts, or any claims with respect to those facts.
12. SEVERABILITY. The parties to this Agreement agree, covenant and
represent that each and every provision of this Agreement shall be deemed to be
contractual, and that they shall not be treated as mere recitals at any time or
for any purpose. Therefore, the parties further agree, covenant and represent
that each and every provision of this Agreement shall be considered severable.
If a court of competent jurisdiction finds any provision to be invalid or
unenforceable for any reason, that provision, or part thereof, shall remain in
force and effect to the extent allowed by law, and all of the remaining
provisions of this Agreement shall remain in full force and effect and
enforceable.
13. CAPTIONS. The captions and section numbers in this Agreement are
inserted for the reader's convenience, and in no way define, limit, construe, or
describe the scope or intent of the provisions of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in counterparts, and when
each party has signed and delivered at least one such counterpart, each
counterpart shall be deemed an original, and, when taken together with other
signed counterparts, shall constitute one agreement, which shall be binding upon
and effective as to all parties.
15. APPLICABLE LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Texas, without regard to the principles
of conflicts of laws.
▇▇▇▇ HAS READ THE FOREGOING AGREEMENT AND ACCEPTS AND AGREES TO THE
PROVISIONS IT CONTAINS. ▇▇▇▇ HEREBY EXECUTES THIS AGREEMENT, KNOWINGLY
AND VOLUNTARILY, AND WITH FULL UNDERSTANDING OF ITS CONSEQUENCES. ▇▇▇▇
FURTHER ACKNOWLEDGES AND UNDERSTANDS THAT HE HAS BEEN GIVEN 21 DAYS IN
WHICH TO CONSIDER THE TERMS OF THIS AGREEMENT, AND THAT HE HAS
VOLUNTARILY CHOSEN TO EXECUTE THIS AGREEMENT ON THE DATE INDICATED
BELOW.
[SIGNATURE PAGE FOLLOWS]
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
dates indicated below.
Dated: August 29, 2005 /s ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ HOLDINGS, INC.
Dated: August 29, 2005 By: /s ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇, President
▇▇▇▇ PARTNERS, Ltd.
Dated: August 29, 2005 By: /s ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇, a General Partner
Dated: August 29, 2005 ADVANCED MATERIALS GROUP, INC.
By: /s ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman of the Board
FOR THE LIMITED PURPOSE OF
SECTIONS 7 AND 9 ONLY: THE COMPANY AFFILIATED SIGNATORIES
--------------------------
Dated: August 29, 2005 /s ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Dated: August 29, 2005 /s ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
Dated: August 29, 2005 /s ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Dated: August 29, 2005 /s ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Dated: August 29, 2005 /s Price ▇▇▇▇▇▇▇▇
-------------------------------------------
Price ▇▇▇▇▇▇▇▇
-5-
EXHIBIT A
▇▇▇▇ EMPLOYMENT AGREEMENT
-------------------------
EXHIBIT B
▇▇▇▇ NOTE
---------
EXHIBIT C
IP ASSIGNMENT AGREEMENT
-----------------------
EXHIBIT D
COMPANY PRODUCTS
----------------
EXHIBIT E
▇▇▇▇ WARRANT
------------
