Exhibit 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated October 23,
2006
by and between:
COATES
INTERNATIONAL, LTD.., a Delaware corporation (the "Company" or
the
"Employer"),
AND
GEORGE J.
COATES, an individual having an address at
1811
Murray Drive
Wall
Township, New Jersey
07719
"Employee")
WHEREAS, Employee served as the Company's President, CEO, Treasurer
and
Principal Financial Officer for more than eighteen (18) years;
and
WHEREAS, Employee has terminated from all the positions he held
with the Company
as a director and an officer, and the Company desires to continue
to employ
Employee; and
WHEREAS, Employee has agreed to continue to be employed by the
Company pursuant
to the terms and conditions set forth herein.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of
the premises
and the mutual covenants, agreements, representations and
warranties contained
herein, and other good and valuable consideration, the receipt and
sufficiency
of which are hereby acknowledged, Employee and the Company hereby
agree as
follows:
ARTICLE 1
EMPLOYMENT
Employee shall continue to be employed with the Company and
Employee hereby
affirms and accepts such employment by Employer for the Term (as
defined in
Article 3 below), upon the terms and conditions set forth
herein.
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ARTICLE 2
DUTIES
During the Term, Employee shall serve Employer faithfully,
diligently and to the
best of his ability, under the direction and supervision of the
Board of
Directors of Employer ("Board of Directors") and shall use his best
efforts to
promote the interests and goodwill of Employer and any affiliates,
successors,
assigns, parent corporations, subsidiaries, and/or future
purchasers of
Employer. Employee shall render such services during the Term at
Employer's
principal place of business or at such other place of business as
may be
determined by the Board of Directors, as Employer may from time to
time
reasonably require of him, and shall devote all of his business
time to the
performance thereof. Employee shall have those duties and powers as
are assigned
to him from time to time by the Board of Directors.
ARTICLE 3
TERM
The term of this Agreement (the "Term") shall commence on the date
hereof (the
"Effective Date"), and continue thereafter for a term of five (5)
years, as may
be extended or earlier terminated pursuant to the terms and
conditions of this
Agreement. The Term is renewable upon the agreement of the parties
hereto.
ARTICLE 4
GOVERNANCE AND COMPENSATION
4.1 Governance. During the term of this Agreement, Employee agrees
to vote all
shares of the Company's Common Stock owned by him or as to which he
had voting
power to elect to the Company's Board of Directors at least two
directors who
qualify as "independent directors" under the rules of the
Securities Exchange
Commission and Nasdaq.
4.2 Compensation.
(a) In
consideration of Employee's services to Employer, Employer
shall
pay to Employee an annual salary (the "Salary") of Three Hundred
Thousand
Dollars ($300,000.00), payable in equal installments at the end of
each regular
payroll accounting period as established by Employer, or in such
other
installments upon which the parties hereto shall mutually agree,
and in
accordance with Employer's usual payroll procedures, but no less
frequently than
monthly. Notwithstanding the above, payment of the Salary will be
deferred until
the earlier to occur of: (I) the closing by the Company of an
equity investment
of at least $10,000,000; or (II) December 31, 2006.
(b) In
addition to the Salary, Employer shall issue to Employee a
Stock
Option to purchase 3,000,000 shares of the Employer's common stock,
at an
exercise price equal to Employer's common stock fair market value
as of the date
of issuance, as determined by the independent members of the Board
(the "Stock
Option"). The Stock Option shall vest (i.e., become exercisable) in
three equal
installments, as follows: One third of the Stock Options shall vest
on the
Effective Date; an additional third of the Stock Option shall vest
on each of
the first and second anniversaries of the Effective Date. Employee
must be
continuously a full-time employee of the Company through the time
he exercises
part or all of the Stock Option, except, however, in the event this
Agreement is
terminated by the Employee for a Good Reason, as defined in Article
10.1 and
10.2 below, or by the Employer without Cause, as defined in Article
10.3 below,
in which cases the Stock Option shall immediately and fully vest
upon such
termination provided further that the events surrounding any such
termination
have not been the subject of any claim, proceeding or lawsuit by
either the
Employee or the Company in which further case the Stock Option
shall only vest
upon final adjudication, determining that such termination was a
valid
termination by the Employee for Good Reason or by the Employer
without Cause
pursuant to the applicable above referenced articles of this
Agreement. The
Stock Option shall be deemed a non-qualified stock option (i.e.,
not an ISO).
The Stock Option will be issued out of the Employer's stock
incentive plan, and
subject to such incentive plan.
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(c)
Employee hereby acknowledges that the Stock Option and the
shares
issuable upon the exercise thereof shall be "restricted securities"
as such term
is defined under Rule 144, unless and until an effective
registration covering
these shares takes place, promulgated under the Securities Act of
1933, as
amended (the "1933 Act"); that the Employee hereby represents that
he shall
accept such compensation and has no present intent to distribute or
transfer
such securities; that such securities shall bear the appropriate
restrictive
legend providing that they may not be transferred except pursuant
to the
registration requirements of the 1933 Act or pursuant to exemptions
there from,
and; the Employee further acknowledges that he may be required to
hold such
securities for an indeterminable amount of time.
(d) The
Company undertakes, that it shall file a Form S-8, that will
cover
the shares issuable upon exercise of the Stock Option, within a
reasonable time
after a registration statement covering the securities issued in
connection with
the Investment becomes effective.
(e)
Employee shall not be entitled to any other compensation from
the
Company unless they have been unanimously approved by the
independent directors
of the Board.
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4.3 Benefits
Upon the earlier to occur of: (I) the closing by the Company of an
equity
investment of at least $10,000,000; or (II) December 31, 2006, and
thereafter
during the Term, Employee shall be entitled to participate in all
medical and
other executive benefit plans, including vacation, sick leave,
retirement
accounts and other executive benefits provided by Employer to any
of the other
senior officers of Employer on terms and conditions no less
favorable than those
offered to such senior officers. Such participation shall be
subject to the
terms of the applicable plan documents and Employer's generally
applicable
policies. In addition, upon the earlier to occur of: (I) the
closing by the
Company of an equity investment of at least $10,000,000; or (II)
December 31,
2006, Employer shall pay the premiums for : (A) Executive's
disability
insurance; and (B) life insurance in the amount of $2,000,000, but
only to the
extent that the cost thereof is determined to be reasonable by the
independent
directors of the Board. The beneficiary of the life insurance
policy shall be
Bernadette Coates, Employee's spouse. Employee also agrees to
cooperate with the
Company in obtaining for the benefit of the Company "key man" life
insurance on
Employee's life in the amount of at least $2,000,000. The amount of
such
insurance shall be approved by the independent directors of the
Board.
4.4 Expense Reimbursement
Employer shall reimburse Employee for reasonable and necessary
expenses incurred
by him on behalf of Employer in the performance of his duties
hereunder during
the Term, including any and all travel and entertainment expenses
related to the
Employer's business in accordance with Employer's then customary
policies,
provided that such expenses are adequately documented.
4.5 Bonus
In addition to the compensation payable under Section 4.1, Employee
shall be
entitled to receive during the Term an annual bonus, the amount of
which shall
be determined by the unanimous vote of the independent members of
the Board of
Directors ("Bonus"). Each year's Bonus shall be paid to the
Employee within 110
days of the Employer's calendar year end.
4.6 Other Compensation
Employer shall provide Employee with a leased automobile for his
exclusive use
throughout the Term, including costs for gasoline, maintenance and
comprehensive
insurance including an "umbrella" policy.
ARTICLE 5
OTHER EMPLOYMENT
During the Term, Employee shall devote all of his business and
professional time
and effort attention, knowledge, and skill to the management,
supervision and
direction of Employer's business and affairs as Employee's highest
professional
priority. Employer shall be entitled to all benefits, profits or
other
remuneration arising from or incidental to all work, services and
advice
performed or provided by Employee. Nothing in this Agreement shall
preclude
Employee from:
(a)
serving as a
director or member of a committee of any organization
or corporation involving no conflict of interest with the
interests
of Employer, provided that Employee must obtain the prior
written
approval of the independent members of the Board;;
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(b)
serving as a
consultant in his area of expertise (in areas other
than in connection with the business of Employer), to
government,
industrial, and academic panels provided that only de minimis
time
shall be devoted thereto and Employee must obtain the prior
written
approval of the independent members of the Board consent of
Employer
and where it does not conflict with the interests of Employer,
provided that such written consent shall not be unreasonably
withheld, delayed or conditioned; and
(c)
managing his
personal investments or engaging in any other
non-competing business;
provided that such activities do not materially interfere with
the
regular performance of his duties and responsibi
