EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement "), dated as of May 10,
2000, between US ENERGY SYSTEMS, INC., a Delaware corporation (the "Company"),
and Goran Mornhed (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company's business consists of (a) acquiring and
operating existing independent power plants ("IPPs") and cogeneration facilities
throughout the world, (b) developing, building and operating new IPPs and
cogeneration facilities throughout the world, and (c) developing, building and
selling special energy efficient products using cogeneration technology
throughout the world and (d) developing, building, acquiring and/or operating
"inside the fence" energy facilities and operations for commercial and
industrial users throughout the world, and (e) developing, building, acquiring
and/or operating district heating and cooling systems throughout the world.
WHEREAS, the Company and the Executive now desire to enter
into this Agreement in its entirety.
NOW, THEREFORE, in consideration of the mutual promises,
representations and warranties set forth herein. and for other good and valuable
consideration, it is hereby agreed as follows:
1. Position and Duties.
a) Employment and Position -The Company hereby
agrees to employ the Executive as set forth in the next succeeding sentence,
and the Executive hereby accepts such employment, upon the terms and conditions
set forth herein. The Executive shall serve as President and Chief Operating
Officer of the Company and shall have such other duties consistent with such
office, as from time to time may be prescribed by the Board of Directors of
the Company (the "Board ").
(b) Duties - During the Term (as defined in
Section 5(f) below), the Executive shall perform and discharge the duties that
may be assigned to him by the Board from time to time as provided in this
Agreement, and the Executive shall devote his reasonable best talents, efforts
and abilities to the performance of his duties hereunder. During the Term, the
Executive shall perform such duties on a substantially full-time basis, and the
Executive shall have no other employment whatsoever.
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2. Compensation.. Notwithstanding anything to the contrary in
this Agreement, during the term of this Agreement, each part of the total
compensation paid to the Executive by the Company as well as Executive's total
compensation shall be no less than such part of the compensation and such total
compensation paid by the Company to Larry Schneider in his capacity as an
employee of the Company or any successor CEO with respect to the corresponding
time period.
(a) Base Salary - The Company shall pay the
Executive for his services hereunder a salary (as the same may be increased from
time to time, the "Base Salary") at the annual rate of $180,000.00 which shall
be payable in accordance with the customary payroll practices of the Company but
not less frequently than on a monthly basis. The Base Salary shall be reviewed
periodically by the Board and shall be subject to such increases as the Board,
(b) Incentive Bonus - In addition to the Base
Salary, the Executive shall at the end of each fiscal year for the Company
be awarded a bonus determined in accordance with the 2000 Executive Bonus Plan
(the "Bonus Plan") annexed hereto as Exhibit A and incorporated herein as if
fully set forth. In addition, the Executive is eligible for such other bonuses
which may be awarded by the Board in its sole discretion under such other plans
that the Board may establish in its sole discretion from time to time.
(c) Simultaneous herewith, the Company and the
Executive are executing (i) a Stock Option Agreement respecting 187,500 shares
(the "187,500 Share Agreement"), (ii) a Stock Option Agreement respecting
562,500 shares (the "562,500 Share Agreement") and (iii) a Stock Option
Agreement respecting 1,000,000 shares (the "1,000,000 Share Agreement") dated
as of the date hereof providing collectively for up to 1,750,000 stock options
(collectively the "Stock Options") annexed hereto as Exhibit B and incorporated
herein as if fully set forth.
(d) Shareholder Consent - Executive acknowledges
that, except for the issuance of the Options under the 187,500 Share Agreement
which are vesting immediately upon the execution of this Agreement (the
"Immediate Vesting Options") the Board may determine that it is required or
advisable for the Board to present the Stock Options, the 2000 Executive
Incentive Plan (the "Incentive Plan") and/or the Bonus Plan to the Company's
shareholders for a vote (individually each of the matters described above
submitted to the Shareholders for a vote shall be referred to as a "Voted
Matter"). In the event the Board presents any of the foregoing matters to the
Company's shareholders for a vote, in order for such Voted Matter to become
effective, the affirmative vote of a majority of the Company's shares,
present in person or represented by proxy, at a meeting of shareholders at which
a quorum is present and in
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fact voting (a "Majority of the Shareholders") must approve the material terms
of the Voted Matter, it being further understood that if the Majority of the
Shareholders do not approve the Incentive Plan none of the Stock Options except
for the Immediate Vesting Options shall be effective. The Board shall present
any Voted Matter (or the material terms thereof) to the Company's shareholders
for a vote as soon as reasonably possible after the execution of this Agreement.
In the event any Voted Matter (or the material terms thereof) is not approved by
a Majority of the Shareholders by November 15, 2000, the Executive shall have
the rights set forth in Section 5(g) hereof.
(e) Withholding. All payments required to be
made by the Company to the Executive under this Agreement (whether under this
Section 2 or otherwise) shall be subject to withholding of employment and income
taxes and other payroll deductions in accordance with applicable tax
requirements, the Company's policies applicable to employees of the Company at
the Executive's level and the provisions of the Benefit Plans (as defined in
Section 3 below).
3. Benefits. (a) Benefit Plans - During the Term, the Company
shall provide to the Executive all fringe benefits currently provided, as well
as those which the Company may generally make available to its senior
executives, including, without limitation, benefits provided under the Company's
pension and profit-sharing plans (if any), health benefit plans (such as medical
and hospitalization coverage), and insurance plans (such as life, supplemental
life, disability, business travel, accident and accidental death and
dismemberment) (collectively, the "Benefit Plans"). Such plans shall during the
term provide for at least the same level of benefits as the Benefit Plans
provide at the date of this Agreement and at least as provided for below. Such
Benefit Plans shall generally provide the following benefits:
o Medical and Dental Insurance
o 401K plan with Company, matching or equal, to be structured for
Company management
o $1 million Life Insurance (the employee's estate shall be the
beneficiary)
o Disability Insurance: 60% of base compensation for life
(b) Automobiles - During the Term, the Company
shall provide the Executive with a Company-owned or leased automobile of a type
to be agreed upon by the Executive and the Company, or at the Executive's option
a car allowance of $600 per month in lieu thereof. The Company will bear all
insurance, gasoline, registration, maintenance and repair costs incident to the
Executive's use of such Company-owned or leased or Executive-owned or leased
automobile in the performance of his duties hereunder.
(c) Vacations, sick leave and holidays. The
Executive shall be entitled to no less than four (4) weeks of paid vacation
during each year of the Term (and a pro rata
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portion thereof for any portion of the Term that is less than a fiscal year). In
addition, the Executive shall be entitled to paid sick leave and holidays in
accordance with the Company's usual policies for its senior executives.
(d) Company Life Insurance. In addition to the
life insurance policy described above, the Company intends to obtain a $5
million policy on Executive's life for which the Company shall be the
beneficiary. Executive shall cooperate with the Company in obtaining such
insurance.
4. Reimbursement of Expenses. During the Term, the Company
shall pay or reimburse the Executive for all reasonable travel, entertainment
and other business expenses actually incurred or paid by the Executive in the
performance of his duties hereunder upon presentation of expense statements or
vouchers or such other supporting information as the Company may reasonably
require of the Executive.
5. Term: Termination. Subject to the provisions of this
Section 5, the term of the Executive's employment under this Agreement shall
commence on the date hereof and shall end on the fifth anniversary hereof,
provided that the term of this Agreement shall automatically be renewed for
successive additional one-year periods at the end of such five-year period and
of each such one-year renewal period, unless either party elects not to renew by
giving written notice to the other at least 90 days before an annual renewal
date. The initial five-year term referred to herein, together with any renewal
thereof, is referred to in this Agreement as the "Term". The employment of the
Executive may be terminated prior to the expiration of the Term in the manner
described in this Section 5 solely on the following grounds.
(a) Termination by the Company for Cause - The
Company shall have the right to terminate the employment of the Executive prior
to expiration of the Term for Cause (as defined in Section 5(i)(iii) below) by
written notice to the Executive specifying the particulars of the conduct of
the Executive forming the basis for such termination, as provided in this
Agreement.
(b) Termination by the Executive for Good Reason
- The Executive shall have the right to terminate his employment hereunder
prior to expiration of the Term for Good Reason (as such term is defined in
Section 5(i)(iv) below) by written notice to the Company specifying the
grounds constituting such Good Reason, provided such written notice is given
within six months of the date the Executive reasonably became aware of such
an event constituting such Good Reason.
(c) Termination upon Death - The employment of
the Executive hereunder shall terminate immediately upon his death.
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(d) The Company's Option upon Disability. If the
Executive becomes physically or mentally disabled during the Term so that he is
unable to perform the services required of him pursuant to this Agreement for
a period of six successive months, or an aggregate of six months in any
consecutive twelve-month period (the "Disability Period"), the Company shall
have the option, in its discretion, by giving written notice thereof, to
terminate the Executive's employment hereunder prior to expiration of the Term.
Regardless of whether the Company exercises such option, during a period of 18
month's from the date of the commencement of the Disability Period, the
Executive shall continue to receive his full compensation and other benefits
provided herein net of any payments received under any disability policy or
program provided by the Company of which the Executive is a beneficiary or
recipient.
(e) Termination by the Company for other reason
than under 5(a), 5(c), 5(d) - The Company shall have the right to terminate the
employment of the Executive prior to expiration of the Term for other reasons
than defined in 5(a), 5(c) and 5(d) above ("Without Cause") by written notice to
the Executive as provided in this Agreement. Such notice shall state for
informational reasons only, the reason for such Termination.
(f) Termination by the Executive for other
reason than under 5(b) The Executive shall have the right to terminate his
employment hereunder prior to expiration of the Term for other reason than
under 5(b) by written notice given at least 90 days prior to the "Termination
Date" as defined in section 5(h) below..
(g) Termination By Executive if A Voted Matter
is Not Approved -- The Executive shall have the right to terminate his
employment if Company's shareholders do not approve any Voted Matter (or
material terms thereof) on or before November 15, 2000 provided that such
notice is given within 30 days of the earlier of November 15, 2000 or the date
the shareholders reject the Voted Matter.
(h) Termination Date - Any notice of termination
given by the Company or the Executive pursuant to the provisions of this
Agreement shall specify therein the effective date of such termination (the
"Termination Date").
(i) Certain Definitions - For purposes of this
Agreement, the following terms shall have the following meanings:
(i) The "Affiliate" of any Person means
any other Person directly or indirectly through one or more intermediary
Persons, controlling, controlled by or under common control with such Person.
For purposes of this definition, "control" shall mean the power to direct the
management and policies of such Person, directly or indirectly, by or through
equity ownership, agency or otherwise, or pursuant to or in connection with an
agreement,
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arrangement or understanding (written or oral) with one or more other Persons by
or through equity ownership, agency or otherwise; and the terms "controlling"
and "controlled" shall have meanings correlative to the foregoing.
(ii) "Change of Control" with respect to the
Company, means the occurrence of any of the following:
(A) the acquisition, with or without
the approval of the Board, directly or indirectly (in one
or more related transactions), by any Person (other than (i)
the Executive or an Affiliate of the Executive (ii)
Sparkenergy or any of their Affiliates (iii) Lawrence
Schneider or any of his Affiliates (iv) Ormat or any of its
Affiliates or (v) the Marmon Group or any of its Affiliates or
(collectively the "Excluded Group")) or two or more Persons
acting as a group, of beneficial ownership (as that term
is defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of more than 30% of the outstanding voting stock
of the Company (Voting Stock");
(B) the merger or consolidation of
the Company with one or more other Persons (other than any one
or more of the Excluded Group) as a result of which the
holders of the outstanding Voting Stock of the Company
immediately before the merger hold less than 30% of the Voting
Stock (or equivalent thereof) of the surviving or resulting
Person;
(C) the sale to any Person (other
than any one or more of the Excluded Group) of all or
substantially all of the assets of the Company or its
subsidiaries taken as a whole, and this Agreement is not
assumed by the acquiring Person in connection therewith; or
(D) the Company or any of its
members enters into any agreement providing for any of the
foregoing and the transaction contemplated thereby is
ultimately consummated.
provided, however, that for purposes of this Agreement, the sale of any Voting
Stock (or equivalent thereof) of the Company (or any successor Person thereto)
pursuant to a public offering shall not constitute a Change of Control.
(iii) "Cause" shall mean (A) the continued
failure of the Executive to perform substantially his duties with the Company
('Non-Performance') other than
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any such failure resulting from (1) the Executive's incapacity due to physical
or mental illness or (2) the Executive's delivery to the Company of a notice of
termination for Good Reason or other reason), which failure continues for a
period of more than 7 business days after a written demand for substantial
performance is given to the Executive by the Board which specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed his duties, (B) the Executive having been convicted of a crime which
constitutes a felony under applicable law or having entered a plea of guilty or
nolo contendere with respect thereto, or (C) the engaging by the Executive in
illegal or fraudulent conduct with respect to the Company.
(iv) "Good Reason" means the occurrence
of any one of the following events:
(A) a Change of Control of the
Company;
(B) the assignment to the Executive
of any duties inconsistent in any material respect with the Executive's then
position (including status, offices, titles and reporting relationships),
authority, duties or responsibilities, or any other action by the Company which
when taken as a whole results in a significant diminution in the Executive's
position, authority, duties or responsibilities, excluding for this purpose any
isolated, immaterial and inadvertent action not taken in bad faith and which is
remedied by the Company within 7 business days after receipt of notice thereof
given by the Executive;
(C) a reduction by the Company in
the Executive's Base Salary without the consent of such Executive or the
failure by the Company to continue in effect any material benefit or
compensation plan, life insurance plan, health and accident plan or
disability plan in existence as of the date of this Agreement (or a replacement
or substitute plan providing the Executive with substantially similar benefits)
in which the Executive is participating or the material reduction of the
Executive's benefits under any of such plans (or replacement or substitute
plans); or
(D) the Company requiring the
Executive to be based at any location other than New York City or any county in
New York, New Jersey or Connecticut that abuts New York City, Westchester, NY
and north of the southern boundary of New York City except for requirements of
travel on the Company's business which travel may be on a regular and extensive
basis given the geographic scope of the Company's franchise territories.
(v) "Person" means any individual,
corporation, partnership, limited liability company, association, joint-stock
company, trust, unincorporated organization,
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joint venture, court or government (or political subdivision or agency thereof).
6. Obligations on Termination.
(a) Payment Obligations of the Company in Case
of Termination for Good Reason Under Section 5(b) and the Company's Termination
Without Cause under Section 5(e).
(i) Upon termination of the Executive's
employment pursuant to Section 5(b) and Section 5(e), then, in lieu of any
further payment under 2(a), the Company shall pay the Executive a lump sum cash
payment equal to 2.9 times the Base Salary then in effect, plus any unreimbursed
expenses and unpaid accrued benefits (collectively, the "Severance Payment).
The Severance Payment shall be payable within 60 days after the Termination
Date. Executive's rights to payments under the Bonus Plan shall not be
affected by termination under Sections 5(b) and 5(e) except as provided in
such Bonus Plan.
(ii) Notwithstanding anything to the
contrary contained herein or in any other agreement between the Company and the
Executive, in the event that the Executive's employment is terminated pursuant
to Section 5(b) and 5(e), then (I) (A) any Stock Options which vest solely based
on the Executive's employment by the Company for specified periods of time
(including the options covered by the 187,500 Share Agreement and the
562,500 Share Agreement) heretofore or hereafter granted to the Executive vested
and unvested, will be automatically vested and may be exercised in full (to the
extent not previously exercised and provided that the term of the applicable
option has not otherwise expired) at any time within six months after such
cessation of employment after which time such options shall expire; and (B) any
Stock Options described in the 1,000,000 Share Agreement shall be unaffected by
any termination of employment under Sections 5(b) and 5(e) hereof and shall
continue to be in full force and effect as if the Executive had continued to be
an employee of the Company. Any and all reasonable costs and expenses,
including but not limited to, reasonable legal fees incurred by the Executive in
good faith in enforcing or establishing any of his rights hereunder shall be
immediately paid to the Executive upon presentation of appropriate
documentation to the Company.
(b) Payment Obligations of the Company in case
of Termination for Non-Performance as defined in Section 5(i)(iii)(A) Under
Section 5(a).
(i) Upon termination of the Executive's
employment for Non-Performance, then, in lieu of any further payment under 2(a)
the Company shall pay the Executive a lump sum cash payment equal to 1 times
the Base Salary then in effect, plus any unreimbursed
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expenses and unpaid accrued benefits (collectively, the "Severance Payment). The
Severance Payment shall be payable within 60 days after the Termination Date.
Executive's rights under the Bonus Plan shall not be affected by termination
under Section 5(a) except as provided in such Bonus Plan.
(ii) Notwithstanding anything to the
contrary contained herein or in any other agreement between the Company and the
Executive, in the event that the Executive's employment is terminated pursuant
to Section 5(a) for Non-Performance,
(A) then any stock options (or
equivalent thereof) heretofore or hereafter granted to the Executive, which
have vested, may be exercised in full (to the extent not previously exercised
and provided that the term of the applicable option has not otherwise expired)
at any time within six months after such cessation of employment after which
time such options shall expire; and
(B) any and all reasonable costs and
expenses, including but not limited to, reasonable legal fees incurred by the
Executive in good faith in enforcing or establishing any of his rights hereunder
shall be immediately paid to the Executive upon presentation of appropriate
documentation to the Company.
(c) Payment Obligations of the Company in case
of Termination for Death.
(i) Upon termination of the Executive's
employment upon death, the Company shall have no payment obligations to the
Executive hereunder, except for the payment of any proceeds received by the
Company from the $1,000,000 Life Insurance policy described in Section 3(a)
hereof, any accrued and unpaid compensation (including unpaid accrued benefits),
and reimbursement of any unreimbursed expenses. Executive's rights under the
Bonus Plan shall not be affected by termination under Section 5(c) except as
provided in such Bonus Plan.
(ii) Notwithstanding anything to the
contrary contained herein or in any other agreement between the Company and the
Executive, in the event that the Executive's employment is terminated pursuant
to Section 5(c),
(A) then any stock options (or
equivalent thereof) heretofore or hereafter granted to the Executive, which
have vested, may be exercised in full (to the extent not previously exercised
and provided that the term of the applicable option has not otherwise expired)
by the Executive's estate at any time within six months after such termination;
and
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(B) any and all reasonable costs and
expenses, including but not limited to, reasonable legal fees incurred by the
Executive's estate in good faith in enforcing or establishing any of his rights
hereunder shall be immediately paid to the Executive's estate upon presentation
of appropriate documentation to the Company.
(d) Payment Obligations of the Company in case
of Termination for Disability.
(i) Upon termination of the Executive's
employment upon disability, the Executive shall receive the compensation
provided for in Section 5(d) hereof plus any unreimbursed expenses and unpaid
accrued benefits. Upon termination under Section 5(d), Executive shall have
the same rights under the Bonus Plan as if his employment continued for
eighteen months after the commencement of the Disability Period.
(ii) Notwithstanding anything to the
contrary contained herein or in any other agreement between the Company and the
Executive, in the event that the Executive's employment is terminated pursuant
to Section 5(d),
(A) then any stock options (or
equivalent thereof) heretofore or hereafter granted to the Executive, which
have vested or which vest in accordance with the terms of the Stock Option
Agreement within the 18 month period after commencement of the Disability
Period, will vest as if the Executive's employment did not terminate and
may be exercised in full (to the extent not previously exercised and provided
that the term of the applicable option has not otherwise expired) at any time
within such eighteen month period after which time such options shall expire;
and
(B) any and all reasonable costs and
expenses, including but not limited to, reasonable legal fees incurred by the
Executive in good faith in enforcing or establishing any of his rights hereunder
shall be immediately paid to the Executive upon presentation of appropriate
documentation to the Company.
(e) Payment Obligations of the Company in case
of Termination for Voluntary Resignation or Cause as defined in Section 5(i)
(iii)(B) and (C).
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(i) Upon termination of the Executive's
employment as a result of the voluntary resignation of the Executive
under Section 5(f) or termination of the Executive by the Company for Cause
(except Non-Performance) as defined in Section 5 (i)(iii)(B) and (C) under
Section 5 (a), the Company shall have no payment obligations to the Executive
hereunder, except for the payment of any accrued and unpaid compensation
(including unpaid accrued
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benefits), and reimbursement of any unreimbursed expenses. Executive's rights
under the Bonus Plan shall not be affected by such termination except as
provided in such Bonus Plan.
(ii) Notwithstanding anything to the
contrary contained herein or in any other agreement between the Company
and the Executive, in the event the Executive terminates his employment by
voluntary resignation pursuant to Section 5(f) or the Executive's employment is
terminated pursuant to Section 5(a) for Cause (except Non-Performance),
(A) then any stock options (or
equivalent thereof) heretofore or hereafter granted to the Executive, which
have vested, may be exercised in full (to the extent not previously exercised
and provided that the term of the applicable option has not otherwise expired)
at any time within six months after such cessation of employment after
which time such options shall expire; and
(B) any and all reasonable costs and
expenses, including, but not limited to, reasonable legal fees incurred by the
Executive in good faith in enforcing or establishing any of his rights hereunder
shall immediately be paid to the Executive upon presentation of appropriate
ocumentation to the company.
(f) Continued Medical Dental Coverage. Upon the
termination of the Executive's employment with the Company for whatever reason,
to the extent permitted by applicable law, the Company shall continue to provide
the Executive (at the Company's cost or, in the case of a termination pursuant
to Sections 5(a) for other than Non-Performance and Section 5(f), at the
Executive's cost) with medical, dental and hospitalization insurance coverage
for the longest of-(i) the 18-month period from the Termination Date; (ii) the
period prescribed by applicable law; and (iii) the period set forth in the
applicable Benefit Plans.
(g) Company Obligations Upon Termination If a
Voted Matter is Not Approved.
(i) If the Executive terminates this
Agreement pursuant to Section 5(g) because any Voted Matter (or the material
terms thereof) is not approved by a Majority of the Shareholders then in lieu
of any further payments under 2(a) the Company shall pay the Executive $500,000
plus any unreimbursed expenses (collectively the "Severance Payment"). 50% of
such Severance Payment shall be made within 60 days of the Termination Date and
the remaining 50% shall be made within 420 days of the Termination Date.
(ii) In the event that the Executive's
employment is terminated pursuant to Section 5(g) then
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(A) any stock options heretofore or
hereafter granted to the Executive pursuant to authorized stock option plans
which have vested may be exercised in full (to the extent not previously
exercised and provided that the term of the applicable option has not otherwise
expired) at any time within six months after such cessation of employment after
which time such options shall expire and
(B) any and all reasonable costs and
expenses, including but not limited to reasonable legal fees incurred by the
Executive in good faith in enforcing or establishing any of his rights hereunder
shall be immediately paid to the Executive upon presentation of appropriate
documentation to the Company.
(h) Obligations of Company Under Bonus Plan.
Notwithstanding anything to the contrary subject to Executive's full compliance
under Section 7 after the Term, and 8 hereof, the Company's obligation to the
Executive under the Bonus Plan shall not be affected by the termination or
renewal of the Executive's employment except as provided in such Bonus Plan. In
the event the Executive commits a breach of Section 7 after the Term or Section
8 of this Agreement and fails to cure such breach within seven days after
receiving written notice describing such breach (provided the Company sends such
notice to Executive within 14 days of obtaining actual knowledge of the material
facts relating to such breach), the Company shall have the right to terminate
this Agreement under paragraph 5(a) (if Executive's employment has not already
been terminated or expired at such time) and effective upon the date of such
Termination (if Executive's employment has not already been terminated or
expired at such time) or the lapse of such cure period (if Executive's
employment has already been terminated or expired at such time), the Company
shall be relieved of its obligation to make any further payments under the Bonus
Plan. In the event the Executive and the Company dispute whether Executive has
committed an uncured breach of Sections 7 or 8 hereof, the Parties' rights and
obligations under the Bonus Plan shall remain in effect except that the Company
shall make any payments due under the Bonus Plan into an interest-bearing escrow
held by an outside escrow agent designated jointly by the parties until the
earlier of the passage of 180 days from the date of the lapse of the cure period
described above (in which case the Escrow shall be released to the Executive)
or;
(i) an arbitration panel described in
Section 12 of this Agreement and, finds that
(A) the Executive breached Sections
7 or 8, in which case, the escrow shall be released to the Company and the
Company shall have no further obligations to Executive under the Bonus Plan, or
(B) that the Executive did not
breach Sections 7 or 8, in which case the escrow shall be released to the
Executive and the Company shall thereafter make payments to the Executive under
the Bonus Plan in accordance with its terms, or
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(ii) the Company and the Executive deliver a
joint written instruction to such escrow holder respecting the disposition of
the funds.
At the request of the escrow holder, the parties shall execute an escrow
agreement containing normal terms and conditions consistent with this paragraph.
The parties agree to proceed expeditiously under any arbitration in which the
Executive's rights under the Bonus Plan is at issue so that the arbitration is
adjudicated within the 180 day period described above.
(i) Liability of the Company for Compensation
in the Event of Termination - Provided the Company fully complies with this
Section 6, then the Company shall have no further liability to the Executive
under Section 2 above in the event of termination as provided for herein.
7. Trade Secrets; Confidentiality. The Executive recognizes
and acknowledges that, in connection with his employment with the Company, he
has had and will continue to have access to valuable trade secrets and
confidential information of the Company and its Affiliates including, but not
limited to, customer lists, business methods and processes, marketing,
promotional, pricing, financial information, technical information and data
relating to clients, employees and consultants (collectively, "Confidential
Information") and that such Confidential Information is being made available to
the Executive only in connection with the furtherance of his employment with the
Company. The Executive agrees that during the Term and for a period of 2 years
thereafter, the Executive shall not disclose any Confidential Information to any
Person, except that disclosure of Confidential Information will be permitted:
(a) to the Company and its respective Affiliates and advisors; (b) if such
Confidential Information has previously become available to the public through
no fault of the Executive; (c) if required by law or any court or governmental
agency or body, provided that in any such case covered by this clause (c) the
Executive shall provide the Company, in advance of any such disclosure, with
prompt notice of such requirement(s) and shall cooperate fully with the Company
to the extent it may seek to limit such disclosure; (d) if necessary to
establish or assert the rights of the Executive hereunder; or (e) if expressly
consented to by the Company.
8. Noncompetition and Nonsolicitation.
(a) The Executive hereby covenants and agrees
that during the Term and for the respective periods set forth below immediately
following the termination by the Company or the Executive, as applicable, of
his employment under the respective circumstances set forth below he shall not,
without the prior written consent of the Board, at any time, directly
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or indirectly, on his own behalf or on behalf of any Person:
(i) own, manage, operate, control, be
employed by, participate in, provide consulting services to, or be connected or
associated in any manner with the ownership, management, operation or control of
any business which is in competition with the Company (in the business in
which the Company is substantially engaged during the Term in the case of
acts committed during the Term or in the business in which the Company is
substantially engaged at the time of termination of Executive's Employment in
the case of acts committed after the Term) or any of its Affiliates in any state
of the United States or in any foreign country in which any of them are engaged
in business during the Term in the case of acts committed during the Term or
in any state of the United States or in any foreign country in which any of them
are engaged in business at the time of termination of Executive's employment in
the case of acts committed after the Term for as long as the Company continues
to conduct such business (the "Non-Compete"),
(ii) solicit or take any action to cause the
solicitation of, or recommend that, any supplier, client, customer, contractor,
vendor, agent or consultant of the Company or any of its Affiliates or other
Person having business relations with the Company, discontinue business or
cease such relationship, in whole or in part, with the Company or any of its
Affiliates (the "Customer Non-Solicit"),
(iii) employ any Person employed by the
Company or any of its Affiliates at the time of, or during the 12 months
preceding, such termination of the Executive's employment with the Company (the
"Non-Hire") or
(iv) solicit for employment (other than
through unaffiliated employment recruiting or placement firms or services who
are not specifically directed to solicit employees of the Company or provided
with the names of any such employees) any Person employed by the Company or
any of its Affiliates at the time of, or during the 12 months preceding such
termination of the Executive's employment with the Company, or otherwise
encourage or entice any such Person to leave such employment (the "Employee Non-
Solicit"), provided, however, that nothing in this Agreement shall preclude the
executive from owning less than five percent of any class of publicly traded
equity of any entity
14
<PAGE>
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
Customer Employee
Reason for Termination Non-Compete Non-Solicit Non-Hire Non-Solicit
Good Reason 1 1/2 years 1 1/2 years 1 1/2 years 1 1/2 years
For Cause other than 2 years 2 years 1 1/2 years 2 years
Non-Performance
For Non-Performance 1 years 1 years 1 years 1 years
Company Termination 0 years 1 1/2 years 1 1/2 years 1 1/2 years
for other than Cause and
Disability
Voluntary Resignation not for 2 years 2 years 2 years 2 years
Good Reason
Company Failure to Renew 0 years 2 years 1 year 2 years
Executive Failure to Renew 0 years 2 years 1 year 2 years
Disability 0 years 1 1/2 years 1 year 1 year
</TABLE>
(b) The Employee acknowledges and agrees that
(i) the restrictive covenants set forth
in this Section 8 (the "Restrictive Covenants") are reasonable and valid in
geographical and temporal scope and in all other respects, and
(ii) it is the intention of the parties
hereto that the Restrictive Covenants be enforceable to the fullest extent
permitted by applicable law. Therefore, if any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full force and effect, without regard to the invalid or unenforceable
parts. Specifically, if any court of competent jurisdiction should hold that
any portion of the Restrictive Covenants is overly broad as to one or more
states of the United States or one or more foreign jurisdictions, then that
state or states or foreign jurisdiction or jurisdictions shall be eliminated
from the territory to which the Restrictive Covenants apply and the
restrictions shall remain applicable in all other states of the
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<PAGE>
United States and foreign jurisdictions.
(c) If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable for any
reason, such court shall have the power to modify such Restrictive Covenant, or
any part thereof, and, in its modified form, such restrictive covenant shall
then be valid and enforceable.
9. Equitable Relief. In the event of a breach or threatened
breach by the Executive of any of the covenants contained in this Agreement, the
Company shall be entitled to a temporary restraining order, a preliminary
injunction and/or a permanent injunction restraining the Executive from
breaching or continuing to breach any of said covenants. Nothing herein
contained shall be construed as prohibiting the Company from pursuing any other
remedies that may be available to it under this Agreement for such breach or
threatened breach.
10. Severability. Should any provision of this Agreement be
held, by a court of competent jurisdiction, to be invalid or unenforceable, such
invalidity or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each individual provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
11. Successors and Assigns.
(a) This Agreement and all rights under this
Agreement are personal to the Executive and shall not be assignable other than
by will or the laws of descent. All of the Executive's rights under the
Agreement shall inure to the benefit of his heirs, personal representatives,
designees or other legal representatives, as the case may be.
(b) This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns. Any Person
succeeding to the business of the Company by merger, purchase, consolidation
or otherwise shall assume by contract or operation of law the obligations of the
Company under this Agreement.
12. Governing Law: Jurisdiction. This Agreement shall be
construed in accordance with and governed by the laws of the State of New York.
The parties hereby agree to submit any and all disputes arising out of or in
connection with this Agreement to binding arbitration in accordance with the
rules of the American Arbitration Association. Such arbitration shall be held in
New York City. Each party shall select one arbitrator and the two such selected
arbitrators shall select a third arbitrator. Notwithstanding anything to the
contrary in this Section 12, such parties may seek in any court of competent
jurisdiction any injunctive relief pursuant to Section 9 of this Agreement.
Provided that Executive's position in such dispute has a good faith basis, any
and all reasonable out of pocket costs incurred by the Executive in connection
with any
16
<PAGE>
dispute arising out of this Agreement shall be immediately paid to the Executive
by the Company upon presentation of appropriate documentation, up to an
aggregate amount equal to $180,000.
13. Notices. All notices, requests and demands given to or
made upon the respective parties hereto shall be deemed to have been given when
received or refused if mailed by registered or certified mail, postage prepaid,
if delivered by hand, or if delivered by Federal Express or similar overnight
delivery service, addressed to the parties at their addresses set forth below or
to such other addresses furnished by notice given in accordance with this
Section 13:
(a) if to the Company, to
Company Headquarters
Attention CEO
(b) if to the Executive, to Goran Mornhed 94
Colabaugh Road Croton-on-Hudson, NY 10520
14. Complete Understanding. Together with the Stock Option
Agreement, Stock Option Plans and the Bonus Plan, this Agreement supersedes any
prior contracts, understandings, discussions and agreements relating to
employment between the Executive and the Company and constitutes the complete
understanding between the parties with respect to the subject matter hereof. No
statement, representation, warranty or covenant has been made by either party
with respect to the subject matter hereof except as expressly set forth herein
or therein.
15. Modification:.
(a) This Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by the Company and the Executive or in the case of a waiver, by
the party against whom the waiver is to be effective. Any such waiver shall be
effective only to the extent specifically set forth in such writing.
(b) No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.
16. Mutual Representations.
17
<PAGE>
(a) The Executive represents and warrants to the
Company that the execution and delivery of this Agreement and the fulfillment of
the terms hereof
(i) will not constitute a default under
or conflict with any agreement or other instrument to which he is a party or by
which he is bound, and
(ii) do not require the consent of any
Person. The Executive represents and warrants to the Company that Executive's
performance of his duties under this Agreement shall not require him to breach
the terms of Exhibit C hereto..
(b) The Company represents and warrants to the
Executive that this Agreement has been duly authorized, executed and delivered
by the Company and that except with respect to any Voted Matter, (other than the
Initially Vesting Options), the fulfillment of the terms hereof
(i) will not constitute a default under
or conflict with any agreement or other instrument to which it is a party or by
which it is bound and
(ii) do not require the consent of any
Person.
(c) Each party hereto warrants and represents to
the other that this Agreement constitutes the valid and binding obligation of
such party enforceable against such party in accordance with its terms.
(d) The parties agree to indemnify, defend and
hold the each other harmless for any claim, loss, damage, cost, expense
including without limitation, reasonable attorney fees arising out of or
relating to a breach of the foregoing representations in Section 16 (a), (b),
and (c). The Executive's obligation under this Section 16 shall be limited to
an aggregate amount of $180,000.
17. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of this Agreement.
18. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by the other party hereto.
19. Inconsistencies. In the event of any inconsistency between
this Agreement on the one hand and the Incentive Plan or the Bonus Plan on the
other hand, this Agreement shall govern.
18
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed in its corporate name by one of its officers duly authorized to
enter into and execute this Agreement, and the Executive has manually signed his
name hereto, all as of the day and year first above written.
US ENERGY SYSTEMS, INC.
By: /s/ Lawrence I. Schneider
------------------------
Lawrence I. Schneider,
Chief Executive Officer
/s/ Goran Mornhed
-------------------
Goran Mornhed
