This employment
agreement (“Agreement”) is effective as of
March 19, 2007 (“Effective Date”), by and between
Kreido Biofuels, Inc., a Nevada corporation located at 1140 Avenida
Acaso, Camarillo, California 93012 and Kreido’s wholly-owned
subsidiary, Kreido Laboratories, Inc. (collectively
“Kreido” or the “Company”) and John M.
Philpott, C.P.A., an individual
(“Executive”).
Whereas Kreido
wishes to employee Executive as its Vice President and Chief
Accounting Officer and Executive wishes to be so
employed;
Now, therefore, in
consideration of the foregoing and good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, the
parties agree as follows:
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Executive’s
Duties;Title; Location. As of the Effective Date, Executive
is employed as Kreido’s Vice President and Chief Accounting
Officer under the terms and conditions below. Executive will report
to the Company’s CEO. Executive’s duties include,
without limitation, managing the Company’s budgeting,
financial reporting, SEC filings, internal financial controls,
Sarbanes Oxley compliance, developing all related systems and
infrastructure to support the accounting function within the
Company, and such other matters that are reasonable within the
scope of Executive’s expertise. Executive shall dedicate his
full-time efforts to Kreido’s business and shall work at
Kreido’s Camarillo, California, office or such other location
as Kreido deems appropriate; provided, however, that Executive
shall not be required routinely to provide services outside of a
reasonable commuting distance from the current Camarillo office
except when traveling on Kreido business.
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Term and
Termination . The Term of this Agreement shall
commence on March 19, 2007. The Term shall continue for one
(1) year unless it is terminated earlier as provided below in
Sections 6, 7 and 8.
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Hours.
The Executive’s
normal days and hours of work shall coincide with the
Company’s regular business hours. The nature of the
Executive’s duties requires flexibility in the days and hours
that the Executive must work, and is likely to require the
Executive to work on other and additional days and
hours.
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4
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Compensation.
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Cash Compensation.
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4.1.1 Base
Salary . Executive shall receive a base salary of $185,000 in
accordance with Kreido’s regular payroll
practices.
4.1.2
Bonus. So long as Executive is employed hereunder, Executive
shall be entitled to participate in a performance-based executive
bonus plan (“Bonus Plan”) that shall be promulgated by
the Compensation Committee of the Company’s board of
directors each fiscal year. The Bonus Plan will set forth three
levels of target performance goals “TPGs” which, if
achieved, will entitled the Executive to a bonus of either 20%, 35%
or 50% of the Executive’s Base Salary. The TPGs will consist
of a combination of goals for the Executive’s individual
performance and the Company’s overall performance in a ratio
of 75% Company performance and 25% individual Executive
performance. Bonuses paid under the Bonus Plan, if any, will be
paid annually within 60 days after the end of the fiscal
year.
4.1.3. Stock
Options. Upon the execution of this Agreement, Executive shall
be entitled to participate in the Kreido Biofuels 2006 Equity
Incentive Plan (“Plan”). Executive’s
participation in the Plan shall be governed by the terms and
conditions set forth in the applicable Plan documents. Capitalized
words not defined in this Agreement but used in this Section shall
have the meanings ascribed to them in the Plan.
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4.1.3
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(a)
Grant of Options. On the Effective Date, the Company will
grant Executive an option to purchase 150,000 shares of the
Company’s common voting stock under the Plan (the
“Options”). Subsequently, the Executive shall be
eligible for such additional grants of options and other
permissible grants (collectively “Awards”) under the
Plan as the Compensation Committee of the board of directors of the
Company shall determine in its absolute discretion.
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4.1.3
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(b)
Option Exercise Price; Term . The per share exercise
price of the Option shall be the closing bid price per share of
Company common stock on the date of grant. The Term of the Option
shall be ten years from the date of grant.
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4.1.3
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(c)
Vesting and Exercise . The Options shall vest and be
exercisable as follows: 150,000 options shall vest in eight equal
installments of 18,750 options per calendar quarter beginning with
the quarter that ends on June 30, 2007 (“Quarterly
Grant(s)”). Each such Quarterly Grant shall remain
exercisable for a period of ten years from the date of grant,
subject to vesting and Section 4.1.3(e).
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4.1.3
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(d)
Lock-Up Agreement . The Executive shall enter into a
Lock-Up Agreement with the Company in the form attached hereto as
Exhibit B . During any period that Executive is
precluded by the Lock-Up Agreement from exercising the Option
granted to Executive in Section 4.1.3(a), then the exercise period
in Section 4.1.3(b) will be extended by the amount of time
during which Executive could not exercise the Option, but in no
event beyond ten years from the date of grant.
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4.1.3
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(e)
Termination of Service; Accelerated Vesting
.
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(i)
If the Executive’s employment is terminated by the Company
for Cause as such term is defined below in Sections 7.1.1 (A),
(B) or (C), (1) all unvested Quarterly Grants shall
expire immediately effective the date of termination, and
(2) all vested Quarterly Grants shall expire thirty days
following the date of such termination unless and to the extent
that within said 30-day period Executive shall exercise any or all
such vested Quarterly Grants and pay the full exercise price of
such shares as provided for in 4.1.3(f).
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(ii) If the Executive’s
employment is terminated voluntarily by the Executive without Good
Reason as such term is defined below, all unvested Quarterly Grants
shall immediately expire effective the date of termination of
employment. Vested Quarterly Grants, to the extent unexercised,
shall expire on the later of five years after the date of grant or
the expiration of the contractual Lock-Up Agreement.
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(iii) If the Executive’s
employment terminates on account of death or Disability, as defined
below, all unvested Quarterly Grants shall immediately expire
effective the date of death or termination of employment and all
vested Quarterly Grants to the extent unexercised, shall expire one
year after the date of death or Disability.
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(iv) 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) by the Executive for Good Reason, one-half of all unvested
Quarterly Grants shall immediately vest and become exercisable
effective the date of termination of employment, and, to the extent
unexercised, shall expire five years from the date of termination
of employment, but in no event beyond ten years from the date of
grant.
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4.1.3(f) Payment . The
full consideration for shares purchased by the Executive upon
exercise of the Option shall be paid: (a) by delivery of a
certified check payable to the order of the Company; (b) by
delivery and attestation of Mature Shares (valued at their Fair
Market Value on the date of delivery) or (c) by delivery of a
properly executed exercise notice with irrevocable instructions to
a broker to deliver to the Company the amount necessary to pay the
exercise price from the sale of proceeds of a loan from the broker
with respect to the sale of such award or a broker loan secured by
Mature Shares.
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4.2
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Additional Benefits
.
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4.2.1
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Welfare Benefit Plans
. Executive shall at all
times be entitled to participate in all benefit, 401(k) and other
ERISA-qualified plans made available to senior management
executives of Kreido under the same terms offered to other senior
management executives, including without limitation, health benefit
coverage for Executive’s spouse and dependant children, if
any.
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4.2.2
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Expense Reimbursement
. Kreido shall reimburse
Executive for all ordinary and necessary expenses reasonably
incurred by Executive on Kreido’s behalf (“Business
Expenses”). Business Expenses (including travel costs) in
excess of $500.00 individually or $2,500.00 in the aggregate shall
be approved in advance except in case of emergency. Executive shall
provide Kreido with documentation for all Business Expenses at the
time reimbursement is requested. In the event it is necessary for
Executive to travel on Kreido’s behalf, Executive shall be
entitled to fly and have travel accommodations on the same level as
Kreido’s other most senior management Executives.
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4.2.3
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Discretionary Time Off
. During his employment
hereunder, Executive shall be entitled to accrue Paid Time Off
(“PTO”) in accordance with Kreido’s regular PTO
policy for all employees, but in any case not less than
10 days per calendar year. Executive shall be entitled to
additional PTO of no more than two days per month to attend classes
and study in the Executive MBA Program at the Graduate School of
Management at UCLA. Executive shall provide the Company with a
report each month of those days on which he was absent from work to
attend and/or prepare for class.
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4.2.4
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Reimbursement of Tuition
. Company shall
reimburse Executive 25% of the cost of his tuition at the Executive
MBA Program at the Graduate School of Management at UCLA in which
he is currently enrolled so long as he is employed hereunder
provided that he passes the coursework (“Tuition
Reimbursements”). The foregoing notwithstanding, in the event
that prior to March 20, 2008, Executive voluntarily terminates
his employment without Good Reason as defined in Section 8.1
of this Agreement, or the Company terminates Executive’s
employment before that date with Cause as defined in
Section 7.1, then all Tuition Reimbursements shall be deemed
to have been payroll advances to Executive (“Payroll
Advances”). All such payroll advances shall be recoupable
against any accrued payroll and/or accrued but unused Paid Time Off
due to Executive at the time of the termination of his employment.
If any balance remains thereafter on such Payroll Advances,
Executive agrees to remit the balance to the Company within
10 days after the termination of his employment.
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5
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Proprietary Covenants of
Executive .
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5.1
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No Conflicts Of Interest.
Executive acknowledges
that she/he is bound to use good judgment, to adhere to the highest
ethical standards, and to avoid situations that create an actual,
potential, or apparent conflict of interest. Executive warrants and
represents to Kreido that she/he is currently unaware of any
actual, potential, or apparent conflicts of interest. She/he also
agrees to immediately disclose to the CEO or Chairperson of Kreido
any and all actual, potential, or apparent conflicts of interest,
should they later arise. In addition, Executive further represents
and warrants to Kreido that for so long as he is employed by the
Company, he shall inform the Company of each and every business
opportunity presented to the Executive that arises that could be
feasible for the Company to undertake, and that he will not,
directly or indirectly, exploit any such opportunity for his own
account or the account of any third party.
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5.2
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Covenant Not to Use or Disclose
Confidential Information.
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5.2.1
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Definition of Confidential
Information. For purposes of this Agreement, the
term Confidential Information means all and any confidential
information and/or trade secrets of Kreido, including without
limitation, scientific discoveries, recipes, formulations,
information encompassed in all advertising and marketing plans,
customer lists, costs, pricing information, information concerning
software and all concepts or ideas, in or reasonably related to the
business of Kreido. Confidential Information shall not include any
Kreido information that has been voluntarily disclosed to the
public by Kreido, independently developed and disclosed by others,
or otherwise enters the public domain through lawful
means.
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5.2.2
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Non-disclosure of Confidential
Information. Executive expressly acknowledges
that in the performance of his duties and responsibilities with the
Company prior to the execution of this Agreement, he has been
exposed to the trade secrets, recipes, formulations, business
and/or financial secrets and confidential and proprietary
information of the Company, its affiliates and/or its clients,
business partners or customers (“ Confidential
Information ”) and that he will continue to be exposed to
the Confidential Information after the execution of this Agreement.
During his employment and after the termination of his employment,
Executive shall regard and preserve as confidential all
Confidential Information pertaining to Kreido and its affiliates
that have been or may be obtained by Executive in any way by reason
of Executive’s employment by Kreido. Executive shall not,
without the prior and specific written consent of Kreido, or unless
ordered to do so by court order or subpoena (i) use,
publicize, release or disclose to others, either during or after
the period of employment, Confidential Information or
(ii) take, retain or copy any Kreido executive compensation
plans, Executive benefit plans, business plans, customer lists,
costs, pricing information, documents, reports, information
encompassed in advertising and marketing plans, or other concepts
or ideas, in or reasonably related to the business of Kreido.
Executive agrees to notify Kreido’s CEO within two (2)
business days of receipt of any court order or subpoena to his or
any individual which calls for information deemed Confidential
under this Agreement and to give Kreido reasonable opportunity to
contest the subpoena.
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5.3
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Covenant Not to Interfere With
Kreido’s Business Relationships. During his employment and for a
period of three (3) years after the termination of his
employment, executive shall not, whether for Executive’s own
account or for the account of a third-party, solicit or endeavor to
entice any Executive, client, customer or vendor of Kreido to end
any business and/or contractual relationship with
Kreido.
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5.4
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Ownership and Use of
Materials.
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5.4.1
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Kreido Materials.
Executive agrees that
all information encompassed in all executive compensation plans,
Executive benefit plans, business plans, advertising plans and
marketing materials and other Confidential Information concerning
Kreido, its Executives and shareholders, customer lists, costs,
pricing information, documents, reports, plans, proposals or other
items made or cr
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