Exhibit 10.38
KEY EXECUTIVE EMPLOYMENT AGREEMENT
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THIS KEY EXECUTIVE EMPLOYMENT AGREEMENT
(the "Agreement"), effective
October 2, 2008, is between ENGlobal Corporation, a Nevada
corporation (the
"Company"), and Michael M. Patton, a resident of Spring, Texas
(the
"Executive"). The Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1
Employment by the Company. The Company agrees to employ the
Executive as Senior Vice President of Business Development for the
duration of
the Employment Term (as defined in Section 2), to render such
services and to
perform such duties as are normally associated with and inherent in
the
executive capacity in which the Executive will be serving, as well
as such other
duties, which are not inconsistent with the Executive's position
with the
Company, as shall from time to time reasonably be assigned to him
by the Board
of Directors of the Company (the "Board of Directors").
1.2 Extent
of Service. The Executive agrees to render the services
required of him under Section 1.1. During the Employment Term, the
Executive
shall devote his full business time, attention and energy to the
business of the
Company and the performance of his duties under this Agreement. The
foregoing
shall not, however, prohibit the Executive from making and managing
personal
investments, or from engaging in civic or charitable activities,
that do not
materially impair the performance of his duties under this
Agreement. If
appointed or elected, as applicable, the Executive also shall serve
during all
or any part of the Employment Term as any other officer and/or as a
director of
the Company or any of its subsidiaries or affiliates, without any
additional
compensation other than that specified in this Agreement.
1.3 Place of
Performance. The Executive shall be based in the Houston
Metropolitan Area, and nothing in this Agreement shall require the
Executive to
relocate his base of employment or principal place of residence
from the Houston
Metropolitan Area.
2. Employment Term. The term of the
Executive's employment under this
Agreement (the "Employment Term") shall commence on October 4, 2008
(the
"Commencement Date"), and shall expire on December 31, 2010, (the
"Expiration
Date"), unless extended by the Company or earlier terminated as
herein provided.
At the end of the Employment Term, this Agreement shall be
automatically renewed
from year to year thereafter, unless (a) Employee's employment has
been
terminated prior to such day, or (b) not later than 60 days prior
to such day,
either party to this Agreement shall have given written notice to
the other
party that he or it does not wish to extend further the Expiration
Date (and the
Employment Term).
3. Compensation and Other Benefits.
3.1 Annual
Salary. As compensation for services to be rendered under
this Agreement, the Company shall pay the Executive a salary (the
"Annual
Salary"), subject to such increases as the Board of Directors may,
in its
discretion, approve, at a rate of $230,000 per annum. The Executive
shall also
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be eligible, during the Employment Term, to receive such other
compensation,
whether in the form of cash bonuses, incentive compensation, stock
options,
stock appreciation rights, restricted stock awards or otherwise
(collectively,
the "Additional Compensation"), as the Board of Directors (or any
committee of
the Board) may, in its discretion, approve. The Annual Salary and
the Additional
Compensation shall be payable in accordance with the applicable
payroll and/or
other compensation policies and plans of the Company as in effect
from time to
time during the Employment Term, less such deductions as shall be
required to be
withheld by applicable law and regulations.
3.2
Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent he is
and continues
to meet all applicable eligibility requirements, to participate in
any group
life, hospitalization or disability insurance plan, health program,
pension
plan, similar benefit plan or other "fringe benefits" of the
Company, which may
be available to all other similarly situated members of the
Company's executive
management on generally the same terms.
3.3
Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course
of his
performance of his duties under this Agreement, including expenses
for travel,
food and entertainment. The Company shall reimburse the Executive
for all such
business expenses if (i) the expenses are incurred by the Executive
in
accordance with the Company's business expense reimbursement
policy, if any, as
may be established and modified by the Company from time to time,
and (ii) the
Executive provides to the Company a record of and appropriate
receipts for (A)
the amount of the expense, (B) the date, place and nature of the
expense, (C)
the business reason for the expense and (D) the names, occupations
and other
data concerning individuals entertained sufficient to establish
their business
relationship to the Company. The Company shall have no obligation
to reimburse
the Executive for expenses that are not incurred and substantiated
as required
by this Section 3.3.
4. Restrictive Covenants
4.1
Covenants Against Competition. On the Commencement Date and
during
the Employment Term, the Company will provide confidential
information to the
Executive. The Executive acknowledges that his employer is (i) is
engaged in the
business of engineering, detailed design, equipment procurement and
project
management for energy related facilities (the "Business"); (ii) the
Executive is
one of a limited number of persons who has performed a significant
role in
developing the Business; (iii) the Business is conducted throughout
the United
States and internationally; (iv) the Company will give him
possession of, and
access to, trade secrets of, and confidential, proprietary
information
concerning the Business; (v) the agreements and covenants contained
in this
Section 4 (collectively, the "Restrictive Covenants") are essential
to protect
the Business and the goodwill of the Company; and (vi) the
Restrictive Covenants
will not impair his ability to engage in a wide array of other
professional
activities. Accordingly, the Executive agrees as follows:
4.1.1 Competitive Activities. During the Restricted Period, the
Executive shall not (A) engage, anywhere within the Territory (as
hereinafter
defined), as an officer, director or in any other managerial
capacity or as an
owner, co-owner or other investor or creditor in or of, whether as
an employee,
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independent contractor, consultant or advisor, in any business that
is directly
competitive with the Business within the territory surrounding each
office or
facility (each a "Facility") at which the Executive was employed by
the Company
within the one-year period immediately preceding the date of the
Executive's
termination of employment (for purposes of this Section 4.1, the
territory
surrounding a Facility shall be: (1) the city, town or village in
which the
Facility is located, (2) the county or parish in which the Facility
is located,
(3) the counties or parishes contiguous to the county or parish in
which the
Facility is located and (4) the area located within 100 miles of
the Facility,
all of such locations being herein collectively called the
"Territory"), or (B)
call on any person or entity that at the time is, or at any time
within one-year
prior to the date of termination of the Executive's employment was,
a customer
of this Business of the Company for the purpose of soliciting or
selling any
product or service which is then sold or offered within the
Territory by this
Business of the Company if the Executive has knowledge of that
customer
relationship; provided, however, that nothing in this Section 4.1.1
shall
prohibit the Executive from owning, directly or indirectly, solely
as an
investment, securities of any entity traded on any national
securities exchange
or over-the-counter market if the Executive is not a controlling
person of, or a
member of a group which controls, such entity and does not,
directly or
indirectly, own one percent or more of any class of securities of
such entity.
As used in this Section 4, the term "Restricted Period" means the
period
beginning on the Commencement Date and ending on the expiration of
the Total
Severance Benefit Period (as defined in Section 5.5).
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and thereafter, the Executive shall keep
secret and retain
in strict confidence, and shall not use for the benefit of himself
or others,
all confidential matters of the Company, including, without
limitation,
"know-how," trade secrets, customer lists, details of client or
consultant
contracts, pricing policies, bidding practices and procedures,
operational
methods, marketing plans or strategies, project development
techniques or plans,
business acquisition plans, new personnel acquisition plans,
methods of
production, manufacture and installation, technical processes,
designs and
design projects, inventions and research projects of the Company
learned by the
Executive heretofore or during the Restricted Period. THE
OBLIGATION TO KEEP THE
COMPANY'S INFORMATION CONFIDENTIAL SHALL CONTINUE IN FULL FORCE AND
EFFECT AFTER
THE EMPLOYMENT TERM.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof,
including such
items stored in computer memories, on microfiche or by any other
means), made or
compiled by or on behalf of the Executive, or made available to the
Executive
relating to the Company, other than purely personal matters, are
and shall be
the Company's property and shall be destroyed or delivered to the
Company
promptly upon the termination of the Executive's employment
(whether such
termination is for Cause, as hereinafter defined, or otherwise) or
at any other
time on request of the Company. Upon termination of the Executive's
employment,
the Company may also request that Executive deliver to the Company
a written
certification of the Executive's compliance with its obligations
under this
Section 4.1.3.
4.1.4 Employees of the Company. During the Employment Term and
the Restricted Period, the Executive shall not, directly or
indirectly, recruit
or solicit any employee of the Company away from the Company or
encourage any
such employee to terminate his employment with the Company.
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4.1.5 Consultants of the Company. During the Employment Term
and
the Restricted Period, the Executive shall not, directly or
indirectly, recruit
or solicit any consultant then under contract with the Company or
encourage such
consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Employment Term and
the
Restricted Period, the Executive shall not call on any Acquisition
Candidate (as
defined below in this Section 4.1.6), with the knowledge of such
Acquisition
Candidate's status as such, for the purpose of acquiring, or
arranging the
acquisition of, that Acquisition Candidate by any person or entity
other than
the Company. "Acquisition Candidate" means any person or entity
engaged in
