EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this
“Agreement”) is entered into as of December 19, 2007 by
and between Richard Papalian (the “Executive”) and
Sionix Corporation, a Nevada corporation (the
“Corporation”). The foregoing parties are sometimes
referred to hereinafter individually as a “Party” or
collectively as the “Parties.”
WHEREAS ,
the Corporation believes that the Executive’s service,
experience, contacts and knowledge are valuable to the Corporation
in connection with its business; and
WHEREAS ,
the Corporation desires to employ the Executive, and the Executive
desires to be employed by the Corporation, as the Chief Executive
Officer of the Corporation.
NOW, THEREFORE ,
in consideration of the mutual covenants and agreements hereinafter
set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Parties do hereby covenant and agree as follows:
1.
Employment .
The Corporation hereby agrees to employ the Executive and the
Executive hereby accepts such employment upon the terms and subject
to the conditions hereinafter set forth. The Executive agrees to
devote at least two (2) business days per week to the performance
of his duties and responsibilities hereunder. The Executive shall
not be prohibited from engaging in any other business or endeavor
so long as such other business or endeavor is not competitive with
the Corporation’s actual or prospective business and, subject
to the foregoing, nothing herein shall prohibit Executive from
engaging in any other business or activity, including, without
limitation, as an officer, director, manager, member, partner or
stockholder of any other entities.
2.
Term of Employment .
Subject to Section 7, the term of the Executive’s employment
pursuant to this Agreement shall commence on and as of the date
hereof (the “Effective Date”), and shall terminate on
December 19, 2008 (the “Initial Term”). This Agreement
shall automatically renew for an additional one (1) year period
(the “Successive Term”), unless either Party shall
notify the other in writing of its intent not to renew at least
sixty (60) days prior to the expiration of the Initial Term.
In
this Agreement the word “Term” shall refer to the
Initial Term and the Successive Term, if any.
3.
Authority; Extent of Service .
During the Term, the Executive shall serve as Chief Executive
Officer of the Corporation. The Executive shall report directly to
the board of directors of the Corporation (the
“Board”), and shall have powers and duties consistent
with the position of Chief Executive Officer, including, but not
limited to: (a) hiring personnel, subject to Board approval (except
with respect to hiring administrative support staff, which shall
not require Board approval); (b) terminating personnel, upon Board
approval; (c) establishing and executing a strategic plan for the
Corporation, which plan shall be approved by the Board; (d)
overseeing of all of the Corporation’s day-to-day operations;
(e) recommending to the Board auditing, financial and legal
advisors for engagement by the Corporation; (f) negotiating and
managing strategic transactions for the Corporation, including,
without limitation, corporate financing, sale and acquisition
transactions; and (g) such other duties as are reasonably and
lawfully delegated to him from time to time by the
Board.
4.
Appointment to Board .
On the Effective Date, the Board shall appoint the Executive to
serve as a member of the Board. Thereafter, the Executive shall be
a director of the Corporation and shall hold such office so long as
Employee continues to serve as the Chief Executive Officer of the
Corporation.
5.
Location .
During the Term, the Executive may perform his duties from his home
office or at the Corporation's offices in Irvine, California, at
the discretion of the Executive.
6.
Remuneration; Benefits .
In consideration of the services to be rendered hereunder, the
Executive shall be entitled to the following
remuneration:
(a)
Equity Compensation .
Upon the Effective Date, the Executive shall be granted a
non-qualified stock option (the “Option”) to purchase
up to an aggregate of 5% of the Corporation’s outstanding
common stock, par value $0.001 per share (the “Common
Stock”), on a fully diluted basis calculated as of the
Effective Date (the “Option Shares”), and exercisable
for a period of 5 years at an exercise price of $0.25 per share
(the “Exercise Price”), which Option Shares shall be
subject to vesting and certain adjustments as provided in the
Notice of Grant of Stock Option substantially in the form attached
hereto as
Exhibit A (the
“Grant Notice”) and the form of Option Agreement
attached thereto as Exhibit A (the “Option Agreement”).
The Corporation agrees to register the Option Shares with the
Securities and Exchange Commission on Form S-8 within 30 days of
the Effective Date. In addition, in the event the
Corporation’s Market Capitalization (as defined in the Grant
Notice) is $175 million or more for 15 consecutive trading days, no
later than the first year anniversary of the expiration of the
Term, then the Corporation will issue to the Executive upon the
conclusion of such 15 trading day period a five-year option to
purchase an additional 1.5% of the Corporation’s outstanding
Common Stock on a fully diluted basis calculated as of the date of
this Agreement, at an exercise price equal to the closing price on
the 15
th day
of such 15 trading day period.
(b)
Annual Salary .
The Executive shall not be entitled to receive an annual salary
during the Initial Term.
(c)
Benefits .
The Executive shall not be entitled to receive any paid vacation or
other benefits during the Initial Term, including, without
limitation, medical, pension, dental, life insurance, disability
income, retirement or other employment benefits as may be in effect
from time to time for other executive officers of the Corporation
generally.
(d)
Expenses .
The Corporation shall reimburse the Executive for all reasonable
business expenses incurred during Executive’s employment
hereunder (the “Expenses”), with any individual
Expenses in excess of two thousand five hundred dollars ($2,500) or
aggregate Expenses in excess of five thousand dollars ($5,000) in
any 30-day period commencing as of the Effective Date to be
submitted to the Board for pre-approval by the Board.
(e)
Directors’ and Officers’ Liability Insurance
.
The Corporation shall maintain directors’ and officers’
liability insurance in an amount of not less than $5,000,000
million in coverage and with a carrier as determined in the
Board’s discretion and consented to by the
Executive.
(f)
Additional Remuneration .
During the Successive Term, if any, the Executive shall be entitled
to only such remuneration and benefits as may be negotiated and
mutually agreed upon in writing by the Parties. The parties agree
that prior to the end of the Initial Term they shall use good faith
efforts to negotiate renumeration for the Successive Term; provided
that nothing herein shall require either party to renew the term of
this Agreement for the Successive Term.
7.
Termination and Termination Benefits .
Notwithstanding the provisions of Section 2, the Executive’s
employment under this Agreement shall terminate under the following
circumstances:
(a)
Termination for Cause .
Subject to Section 7(d), the Corporation may terminate Executive's
employment under this Agreement for Cause at any time prior to
expiration of the Term. As used herein, "Cause" shall mean
only:
(i)
if
Executive is convicted of (or pleads nolo contendere to) any
felony;
(ii)
acts
of fraud, misappropriation or embezzlement committed by
Executive at the expense of the Corporation;
(iii)
a
determination by the Corporation that Executive has engaged in
willful misconduct, gross negligence or gross or habitual
neglect in the performance of his duties under this Agreement;
or
(iv)
a
material breach by the Executive of any of the covenants,
terms or provisions of this Agreement that remains uncured for
a period of 30 days after written notice by the Corporation to
the Executive.
Executive
shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to him a copy of a
resolution duly adopted by the affirmative vote of a majority
of the Board (not counting Executive) at a meeting of the
Board (after reasonable notice to Executive and opportunity
for Executive, together with his counsel, to be heard before
the Board and to cure such conduct within thirty (30) days
thereof to the extent curable), finding that in the good faith
opinion of the Board, Executive engaged in the conduct
described herein, and specifying the particulars
thereof.
(b)
Termination for Good Reason .
Subject to Section 7(d), the Executive’s employment under
this Agreement may be terminated by the Executive for Good Reason
by written notice to the Board. The occurrence of one or more of
the following events shall constitute “Good
Reason”:
(i)
the
Corporation’s material breach of any of the provisions
of this Agreement, which breach is not cured by the
Corporation within fifteen (15) days following written notice
thereof from Executive; provided, that the Corporation can
only cure such breach on two (2) occasions;
(ii)
any
adverse alteration in Executive's titles, positions, status,
duties or authority with the Corporation;
(iii)
the
Executive's ceasing to be a member of the Board for any reason
other than Executive's death, Disability, termination for
Cause hereunder, resignation or refusal to stand for
re-election to the Board;
(iv)
any
reduction in Executive's compensation;
(v)
any
relocation of the Corporation's principal executive offices
outside of the Orange County or Los Angeles metropolitan
areas;
(vi)
the
Board requests the Executive to engage in any unlawful
activity; or
(vii)
a
Change in Control shall occur.
A
"Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs
shall have been satisfied:
(i)
any
"person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Corporation or any Affiliate thereof, is
or becomes after the Effective Date the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation (not including
in the securities beneficially owned by such person any
securities acquired directly from the Corporation
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