Exhibit
10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “
Agreement ”) is made, entered into and effective as of
October 9, 2006 (the “ Effective Date ”),
between Ethanex Energy, Inc. (the “ Company ”),
and David J. McKittrick, an individual (the “
Executive ”).
WHEREAS, the Company and the Executive wish to
memorialize the terms and conditions of the Executive’s
employment by the Company in the positions of Executive Vice
President and Chief Financial Officer;
NOW, THEREFORE, in consideration of the
covenants and promises contained herein, the Company and the
Executive agree as follows:
1. Employment Period . The Company offers to employ the Executive,
and the Executive agrees to be employed by Company, in accordance
with the terms and subject to the conditions of this Agreement. The
Company and Executive agree that Executive is employed “at
will” which means that the employment relationship may be
terminated by either party at any time, for any reason or no
reason, subject to the provisions of Section 11 below. The
Executive affirms that no obligation exists between the Executive
and any other entity which would prevent or impede the
Executive’s immediate and full performance of every
obligation of this Agreement.
2. Position and Duties . During the term of the Executive’s
employment hereunder, the Executive shall continue to serve in, and
assume duties and responsibilities consistent with, the positions
of Executive Vice President and Chief Financial Officer of a public
company, which may include, but are not limited to, management of
the Company’s financial affairs, information technology
functions and legal functions, unless and until otherwise
instructed by the Company. The Executive agrees to devote to the
Company substantially all of his working time, skill, energy and
best business efforts during the term of his employment with the
Company, and the Executive shall not engage in business activities
outside the scope of his employment with the Company if such
activities would detract from or interfere with his ability to
fulfill his responsibilities and duties under this Agreement or
require substantial amounts of his time or of his services. The
Company consents to Executive’s continued membership on the
Boards of Directors of Wellman, Inc. and Hamilton Beach/Proctor
Silex and the Board of Trustees of Hampden-Sydney College. While
you will not be a formal member of the Board of Directors it is the
Company’s expectation that you will be an active participant
in all Board meetings and other Board affairs.
3. No Conflicts . The Executive covenants and agrees that for so
long as he is employed by the Company, he shall inform the Company
of each and every future business opportunity presented to the
Executive that arises within the scope of the Business of the
Company (as defined below) and would be feasible for the Company,
and that he will not, directly or indirectly, exploit any such
opportunity for his own account.
4. Hours of Work . The Executive’s normal days and hours of
work shall coincide with the Company’s regular business
hours. The nature of the Executive’s employment with the
Company requires flexibility in the days and hours that the
Executive must work, and may necessitate that the Executive work on
other or additional days and hours.
5. Location . The locus of the Executive’s employment
with the Company shall be Richmond, Virginia and any other locus
where the Company now or hereafter has a business facility. The
Executive will travel to the Company’s office in Basehor,
Kansas and elsewhere from time to time as necessary to fulfill his
duties.
6. Compensation .
(a) Base Salary . During the term of this Agreement, the Company
shall pay, and the Executive agrees to accept, in consideration for
the Executive’s services hereunder, pro rata
bi-weekly payments of the annual salary of $190,000, less all
applicable taxes and other appropriate deductions.
(i) Upon successful completion of financing in such
amount as is sufficient, in the opinion of the Company’s
Board of Directors (the “ Board ”), to enable
the Company to finance the acquisition or construction of the
Company’s initial operating ethanol producing facility (the
“ Initial Ethanol Facility ”), the
Executive’s annual base salary shall be increased to
$210,000.
(ii) The Executive’s base salary shall be
increased to $250,000 at such time as the Initial Ethanol Facility
becomes operational, either through the start of revenue producing
activities of a newly constructed plant or through the acquisition
of an existing operational plant.
The Compensation Committee (the “
Compensation Committee ”) of the Board shall also
review the Executive’s base salary annually and shall make a
recommendation to the Board as to whether such base salary should
be increased but not decreased, which decision shall be within the
Board’s sole discretion.
(b) Annual Bonus . During the term of this Agreement, the
Executive shall be entitled to an annual bonus of up to 50% of his
base salary (considered at the end of the period for which the
bonus is being calculated) the actual amount of which bonus shall
be determined according to achievement of performance-related
financial and operating targets established annually for the
Company and the Executive by the Compensation Committee (or by the
independent members of the Board if there exists no Compensation
Committee). Such performance targets for each fiscal year shall be
adopted by the Compensation Committee promptly after the end of the
prior fiscal year, but in no event later than March 31
st of the current fiscal year (except for fiscal year
2006, the performance targets for which shall be adopted within 45
days after the Effective Date). Each annual bonus shall be paid by
the Company to the Executive promptly after the first meeting of
the Board following the completion of the annual audit, which
meeting shall occur on or about April 15th of each year.
(c) The Executive’s salary and bonus for 2006
shall be paid pro rata for the portion of the year he is an
employee.
7. Expenses . During the term of this Agreement, the
Executive shall be entitled to payment or reimbursement of any
reasonable expenses paid or incurred by him in connection with and
related to the performance of his duties and responsibilities
hereunder for the Company. All requests by the Executive for
payment of reimbursement of such expenses shall be supported by
appropriate invoices, vouchers, receipts or such other supporting
documentation in such form and containing such information as the
Company may from time to time require, evidencing that the
Executive, in fact, incurred or paid said expenses. Without
limiting the foregoing, the Company shall, upon the
Executive’s written request, provide the Executive with
reasonable temporary office facilities in Richmond, Virginia, which
may include, but is not limited to, computers, telephones, and
administrative assistance as may be necessary for the effective
performance of the Executive’s duties and
responsibilities.
8. Vacation . During the term of this Agreement, the
Executive shall be entitled to accrue, on a pro rata
basis, 20 vacation days, per year. The Executive shall be entitled
to carry over any accrued, unused vacation days from year to year
without limitation.
9. Stock Options and Restricted Shares
. The Company hereby agrees that the
Executive shall be granted a non-qualified stock option and
restricted shares on the terms and conditions hereinafter
stated:
(a) Grant of Options . On the Effective Date, the Company will grant
the Executive an option to purchase an aggregate of 1,500,000
shares of the Company’s common voting stock (the “
Option ”) under the Company’s 2006 Stock Option
Plan (the “ Stock Option Plan ”). Such grant
shall be evidenced by an Option Agreement as contemplated by the
Stock Option Plan. In subsequent years the Executive shall be
eligible for such grants of Options and other permissible awards
(collectively with Options and Restricted Shares,
“Awards”) under the Stock Option Plan as the
Compensation Committee or the Board shall determine.
(b) Option Price; Term . The per share exercise price of the Option
shall be the fair market value per share of Company common voting
stock on the Effective Date as determined by the closing sale price
of Company common stock on the OTC Bulletin Board on the date
immediately preceding the Effective Date. The term of the Option
shall be ten years from the date of grant.
(c) Option Vesting and Exercise
. Twenty-five percent (25%) of the
Option shall be vested and exercisable on the first anniversary of
the grant of the Option. Thereafter, the balance of the Options
shall be vested and become exercisable in monthly installments over
the next 24 months that the Executive is employed with the
Company.
(d) Grant of Restricted Shares
. On the Effective Date, the Company
will grant the Executive a restricted stock award of 1,000,000
shares of the Company’s common voting stock (the “
Restricted Shares ”) under the Stock Option Plan. Such
grant shall be evidenced by a Restricted Stock Agreement as
contemplated by the Stock Option Plan.
(e) Restricted Share Vesting and
Disposition . Twenty-five
percent (25%) of the Restricted Shares shall be vested six months
after the Effective Date. Thereafter, the balance shall be vested
in monthly installments over the next 30 months that the Executive
is employed with the Company. During the Executive’s
employment with the Company, all Restricted Shares, whether vested
or not, shall only be sold or otherwise disposed of with the
consent of the Company’s Board of Directors or if the dollar
value of the shares of common stock beneficially owned by the
Executive following such sale or disposition is equal to or exceeds
four times the Executive’s base salary.
(f) Termination of Service; Accelerated
Vesting .
(i) If the Executive’s employment is
terminated for Cause, as such term is defined below, all Awards,
whether or not vested, shall immediately expire effective the date
of termination of employment.
(ii) If the Executive’s employment is
terminated voluntarily by the Executive without Good Reason, as
such term is defined below, all unvested Awards shall immediately
expire effective the date of termination of employment. Vested
Awards, to the extent unexercised, shall expire one month after the
termination of employment.
(iii) If the Executive’s employment is
terminated (A) in connection with a Change of Control, as defined
below, (B) by the Company without Cause or (C) upon death or
Disability, as defined below, all unvested Awards shall immediately
vest and become exercisable effective the date of termination of
employment, and, to the extent unexercised, shall expire one year
after any such event.
(g) Payment . The full consideration for any shares
purchased by the Executive upon exercise of the Option shall be
paid in cash.
10. Other Benefits .
(a) During the term of this Agreement, the
Executive shall be eligible to participate in incentive, savings,
retirement (401(k)), and welfare benefit plans, including, without
limitation, health, medical, dental, vision, life (including
accidental death and dismemberment) and disability insurance plans
(collectively, “ Benefit Plans ”), in
substantially the same manner, including but not limited to
responsibility for the cost thereof, and at substantially the same
levels, as the Company makes such opportunities available to all of
the Company’s managerial or salaried executive
employees.
(b)
The Executive’s spouse and
dependent minor children will be covered under the Benefit Plans
providing health, medical, dental, and vision benefits, in
substantially the same manner, including but not limited to
responsibility for the cost thereof, and at substantially the same
levels, as the Company makes such opportunities available to the
spouses and dependent minor children to all of the Company’s
managerial or salaried executive employees.
(c)
The Company shall purchase and
maintain traditional directors and officers liability insurance
coverage in the amount of at least $5,000,000 covering the
Company’s officers and directors, including the Executive no
later than 30 days following the Effective Date, provided such
coverage is available on commercially reasonable terms.
(d)
Until such time as Executive
becomes covered by Company medical coverage, the Company shall
reimburse Executive for Executive’s medical coverage
currently in place.
11. Termination of Employment
.
(a) Death . In the event that during the term of this
Agreement the Executive dies, this Agreement and the
Executive’s employment with the Company shall automatically
terminate and the Company shall have no further obligations or
liability to the Executive or his heirs, administrators or
executors with respect to compensation and benefits accruing
thereafter, except for the obligation to pay the Executor’s
heirs, administrators or executors any earned but unpaid base
salary, unpaid pro rata annual bonus and unused vacation
days accrued through the date of death; provided , that
nothing contained in this paragraph shall be deemed to excuse any
breach by the Company of any provision of this Agreement. The
Company shall deduct, from all payments made hereunder, all
applicable taxes, including income tax, FICA and FUTA, and other
appropriate deductions.
(b) “ Disability .” In the event
that, during the term of this Agreement the Executive shall be
prevented from performing his duties and responsibilities hereunder
to the full extent required by the Company by reason of Disability
(as defined below) this Agreement and the Executive’s
employment with the Company shall automatically terminate and the
Company shall have no further obligations or liability to the
Executive or his heirs, administrators or executors with respect to
compensation and benefits accruing thereafter, except for the
obligation to pay the Executive or his heirs, administrators or
executors any earned but unpaid base salary, unpaid pro
rata annual bonus and unused vacation days accrued through the
Executive’s last date of Employment with the Company;
provided , that nothing contained in this paragraph shall
be deemed to excuse any breach by the Company of any provision of
this Agreement including any failure to maintain the long-term
disability insurance coverage required pursuant to Section
10(b)(iv). The Company shall deduct, from all payments made
hereunder, all applicable taxes, including income tax, FICA and
FUTA, and other appropriate deductions through the last date of the
Executive’s employment with the Company. For purposes of this
Agreement, “ Disability ” shall mean a physical
or mental disability that prevents the performance by the
Executive, with or without reasonable accommodation, of his duties
and responsibilities hereunder for a period of not less than an
aggregate of three months during any twelve consecutive
months.
(c) “ Cause. ”
(i) At any time during the term of this Agreement,
the Company may terminate this Agreement and the Executive’s
employment hereunder for “Cause.” For purposes of this
Agreement, “ Cause ” shall be defined as the
occurrence of: (A) gross neglect, malfeasance or gross
insubordination in performing the Executive’s duties under
this Agreement; (B) the Executive’s conviction for a felony,
excluding convictions associated with traffic violations; (C) an
egregious act of dishonesty (including without
limitation
