EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “ Agreement ”) is made as of July 23, 2009 (the “ Effective Date ”), by and among New Generation Biofuels Holdings, Inc., a Florida corporation (the “ Company ”), and Lee S. Rosen, an individual (“ Executive ”), with respect to the following facts and circumstances:

RECITALS

WHEREAS, the Company’s subsidiary, New Generation Biofuels, Inc. (formerly H2Diesel, Inc.) and Executive entered into an Employment Agreement dated May 5, 2006 and effective October 20, 2006, (the “ Existing Agreement ”) pursuant to which Executive is serving as Chairman of the Board of the Company;

WHEREAS, the Company and Executive wish to enter into the Agreement, on the terms and conditions as set forth herein, effective July 23, 2009, which will supersede the Existing Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements set forth herein, the parties hereto agree as follows:

ARTICLE 1

 

EMPLOYMENT, TERM AND DUTIES

 

1.1            Employment .  The Company shall hereby employ Executive as Chairman of the Board, upon the terms and conditions set forth in this Agreement.

1.3            Duties .  Executive shall report to the Company’s board of directors (the “ Board ”) and shall perform all the customary duties and obligations reasonably associated with the position of non-executive Chairman, including leading board meetings and providing general strategic advice to the Board and management team (“ Customary Duties ”).  Executive also shall perform such extraordinary executive duties consistent with the foregoing as are mutually agreed upon by the Executive and the Board.  Such extraordinary duties may include serving in a leadership role in capital raising and strategic transactions, interfacing with major Company shareholders, assisting with sales and marketing and providing executive-level guidance to the Board and other executives including the Chief Executive Officer (“ Extraordinary Duties ”).  Executive shall perform the services contemplated herein faithfully and diligently.  While performing both Customary Duties and Extraordinary Duties as one of the principal executives of the Company, Executive shall devote substantially all of his business time and efforts to rendering such services; provided , that Executive may participate in social, civic, charitable, religious, business, educational or professional associations, so long as such participation does not materially interfere with the duties and obligations of Executive hereunder.

 

ARTICLE 2

 

COMPENSATION

 

2.1            Salary .  In consideration for Executive’s full-time services hereunder as a Company executive performing both Customary Duties and Extraordinary Duties, the Company shall pay Executive an annual salary at the rate of $198,000 per year, payable in accordance with the Company’s regular payroll schedule from time to time (less any deductions required for Social Security, state, federal and local withholding taxes, and any other authorized or mandated similar withholdings).  The annual salary shall be reviewed by the Compensation Committee of the Board (the “ Compensation Committee ”) no less frequently than annually and may be increased at the discretion of the Compensation Committee to reflect additional Extraordinary Duties or decreased at the discretion of the Compensation Committee to reflect reductions in the Executive’s Extraordinary Duties; provided that such salary shall not be decreased as long as the Executive remains employed full-time to perform both the Customary and Extraordinary Duties set forth in section 1.3.

2.2            Annual Cash Bonus .  Executive shall be entitled to earn bonuses during the Term (the “ Annual Cash Bonus ”), based upon Executive’s achievement of performance objectives set by the Compensation Committee, with a targeted bonus of fifty percent (50%) of Executive’s annual salary for such fiscal year (or partial fiscal year).

2.3            Special Cash Bonus .  Executive shall be entitled to receive a one-time special cash bonus of up to $160,000 based upon Executive’s assistance and support in raising equity capital for the Company, at an exact amount to be determined by the Compensation Committee.  Such amount shall be excluded from any performance-based compensation payable to the Executive based on achievement of the Company’s 2009 Performance Goals.

2.4            Stock Options .  In consideration of the services to be rendered under this Agreement:

 (a) Subject to the approval requirements set forth in Section 2.4(c) below, the Company shall grant to Executive options to purchase 463,060 shares of the Company’s common stock at a price of $1.05 per share, of which 150,000 shares shall vest on the date hereof and the remainder shall vest in annual tranches as follows (collectively, the “ Time-Based Options ”):

104,353 shares shall vest on the first anniversary of the Effective Date;

104,354 shares shall vest on the third anniversary of the Effective Date.

(b) Subject to the approval requirements specified in Section 2.4(c) below, the Company shall grant to the Executive options to purchase 469,440 shares of the Company’s common stock at a price of $1.05 per share which shall vest in annual tranches if certain annual performance targets (the “ Performance Targets ”) to be established in good faith by the Compensation Committee are met, as more fully set forth below  (collectively, the “ Performance Options ” and together with the Time-Based Options the “ Options ”):

The Performance Targets for each fiscal year shall be established by the Compensation Committee.  The Compensation Committee shall determine whether the Performance Targets for the preceding fiscal year have been met after the date that the Company’s audited financial statements in respect of such fiscal year become available, and if such Performance Targets are determined to have been met, the Performance Options in respect of such fiscal year shall be deemed to be vested as of such date of determination.  The Time Based Options and the Performance Options shall be more fully documented in one or more Stock Option Agreement(s) containing customary terms and conditions and shall expire on the tenth (10 ^th ) anniversary of the Effective Date.

(c)  521,667 of the Options (the “ Conditional Options ”), consisting of the Time-Based Options vesting on the second and third anniversary of the Effective Date and the Performance Options vesting in respect of fiscal years ending December 31, 2010 and 2011, shall be subject to the following conditions: (i) shareholder approval of additional shares available under the Company’s Omnibus Incentive Plan, or (ii) Compensation Committee approval to grant Options from existing shares available under the Company’s Omnibus Incentive Plan.  If such shareholder approval or Compensation Committee approval is not obtained, Executive shall not be granted such Conditional Options.

2.5            Stock Grant . (a) Subject to the approval requirements set forth in Section 2.5(b) below,  the Company shall grant to Executive 782,500 shares of the Company’s common stock which shall vest in annual tranches, as follows (collectively, the “ Stock Grant ”):

260,833 shares vest on the first anniversary of the Effective Date;

260,833 shares vest on the second anniversary of the Effective Date; and

260,834 shares vest on the third anniversary of the Effective Date.

The Stock Grant shall be more fully documented in one or more Stock Agreement(s) containing customary terms and conditions.

(b) 521,667 shares of such Stock Grant (the “ Conditional Stock Grant ”), consisting of the shares vesting on the second and third anniversary of the Effective Date, shall be subject to the following conditions: (i) shareholder approval of additional shares available under the Company’s Omnibus Incentive Plan or (ii) Compensation Committee approval of the remaining Stock Grant from existing shares available under the Company’s Omnibus Incentive Plan.  If such shareholder approval or Compensation Committee approval is not obtained, Executive shall not receive the Conditional Stock Grant.

2.6            Awards Subject to Omnibus Incentive Plan .  All equity awards contemplated by this Agreement shall be subject to any caps, limitations, restrictions or other terms and conditions under the Company’s Omnibus Incentive Plan (or other such plan as may be adopted to supersede the Omnibus Incentive Plan), and the rules and regulations of the Securities and Exchange Commission and the Nasdaq Capital Market (or such other exchange on which the Company’s securities may be listed and traded.)

2.7            Other Performance-Based Cash or Equity Compensation Awards .  The Executive shall be eligible to participate in the Company’s existing Management Equity Compensation Plan and in any other performance-based cash or equity compensation plans that include the other Company executives.  The amount of any cash or equity awards to the Executive and terms and conditions thereof shall be determined by the Compensation Committee, or such other committee of the Board appointed pursuant to the plan, or by the Board. 

ARTICLE 3

EXECUTIVE BENEFITS

 

3.1            Vacation .  Executive shall be entitled to vacation each calendar year in accordance with the general policies of the Company applicable generally to other senior executives of the Company.  Unused vacation shall carry over in accordance with the general policies of the Company.

3.2            Executive Benefits .  Executive shall receive all group insurance and pension plan benefits and any other benefits on the same basis as are available to other senior executives of the Company under the Company personnel policies in effect from time to time.  Executive shall receive all other such fringe benefits as the Company may offer to other senior executives of the Company generally under the Company personnel policies in effect from time to time, such as life, health and disability insurance coverage and paid sick leave.

3.3            Reimbursement for Expenses .  Executive shall be reimbursed by the Company for all documented reasonable expenses incurred by Executive in the performance of his duties or otherwise in furtherance of the business of the Company in accordance with the policies of the Company in effect from time to time.  Any reimbursement under this Section 3.3 that is taxable to Executive shall be made   by December 31 of the calendar year following the calendar year in which Executive incurred the expense.

ARTICLE 4

 

INDEMNIFICATION

 

4.1            Indemnification .  Except as otherwise provided by applicable law, while the Executive is employed by the Company and thereafter while potential liability exists (but in no event less than three (3) years after termination), in the event Executive is made a party to any threatened, pending, or contemplated action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by the Company against Executive), by reason of the fact that Executive is or was performing services under this Agreement, then the Company shall indemnify Executive to the fullest extent permitted by applicable law against all expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement, as actually and reasonably incurred by Executive in connection therewith. In the event that both Executive and the Company are made a party to the same third party action, complaint, suit, or proceeding, the Company will engage competent legal representation, and Executive will use the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from representing Executive, then the Company may engage separate counsel on Executive’s behalf, and subject to the provisions of this Section 4, the Company will pay all attorneys’ fees of such separate counsel.

ARTICLE 5

 

TERMINATION

 

5.1            Grounds for Termination .

5.1.1                       Death or Disability .  Executive’s employment shall terminate immediately in the event of Executive’s death or Disability.  “ Disability ” means Executive is unable   to engage in any substantial gainful business activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or that has rendered Executive unable effectively to carry out his duties and obligations under this Agreement or unable to participate effectively and actively in the management of the Company for a period of ninety (90) consecutive days or for shorter periods aggregating to one hundred twenty (120) days (whether or not consecutive) during any consecutive twelve (12) months of the Term.

5.1.2                       Cause .  The Company shall have the right to terminate Executive’s employment by giving written notice of such termination to Executive upon the occurrence of any one or more of the following events (“ Cause ”):

5.1.3                       Good Reason .  Executive may terminate his employment under this Agreement by giving written notice to the Company upon the occurrence of any one or more of the following events within one year following a Change of Control (as defined in Section 5.1.4) (“ Good Reason ”):

5.1.4                       Change of Control .  For purposes of this Agreement, a “ Change of Control ” shall mean the occurrence of any of the following events:

Notwithstanding the terms of this Section 5.1.4, none of the foregoing events shall constitute a Change of Control if such event is not a “Change in Control Event” under Treasury Regulations Section 1.409A-3(i)(5) or successor guidance of the Internal Revenue Service.

For purposes of determining whether a Change of Control has occurred, a Person or Group shall not be deemed to be “unrelated” if: (a) such Person or Group directly or indirectly has Beneficial Ownership of more than 50% of the issued and outstanding voting power of the Company’s voting securities immediately before the transaction in question, (b) the Company has Beneficial Ownership of more than 50% of the voting power of the issued and outstanding voting securities of such Person or Group, or (c) more than 50% of the voting power of the issued and outstanding voting securities of such Person or Group are owned, directly or indirectly, by Beneficial Owners of more than 50% of the issued and outstanding voting power of the Company’s voting securities immediately before the transaction in question.

The terms “ Person ,” “ Group ,” “ Beneficial Owner ,” and “ Beneficial Ownership ” shall have the meanings used in the Securities Exchange Act of 1934, as amended.  Notwithstanding the foregoing, (a) Persons will not be considered to be acting as a “Group” solely because they purchase or own stock of the Company at the same time, or as a result of purchases in the same public offering, (b) Persons will be considered to be acting as a “Group” if they are owners of a corporation that enters into a merger, consolidation, reorganization, purchase or acquisition of stock, or similar business transaction, with the Company, and (c) if a Person, including an entity, owns stock both in the Company and in a corporation that enters into a merger, consolidation, reorganization, purchase or acquisition of stock, or similar transaction, with the Company, such Person shall be considered to be acting as a Group with other shareholders only with respect to the ownership in such corporation prior to the transaction.

5.1.5                       Opportunity to Cure .  Notwithstanding Sections 5.1.2 and 5.1.3, it shall be a condition precedent to a party’s right to terminate Executive’s employment for Cause or Good Reason, as applicable, that (a) such party shall have first given the other party written notice stating with reasonable specificity the breach on which such termination is premised within ninety (90) days after the party providing such notice becomes aware of such breach, and (b) if such breach is susceptible of cure or remedy, such breach has not been cured or remedied within forty-five (45) days after receipt of such notice.

5.1.6                       Any Other Reason .  Notwithstanding anything to the contrary herein, the Company shall have the right to terminate Executive’s employment under this Agreement at any time without Cause by giving written notice of such termination to Executive, and Executive shall have the right to terminate Executive’s employment under this Agreement at any time without Good Reason by giving written notice of such termination to the Company.

5.2            Termination Date .  Except as provided in Section 5.1.1 with respect to Executive’s death or Disability, and subject to Section 5.1.5, any termination under Section 5.1 shall be effective upon receipt of notice by Executive or the Company, as the case may be, of such termination or upon such other later date as may be provided herein or specified by the Company or Executive in the notice (the “ Termination Date ”).

5.3            Effect of Termination .

5.3.1                       Termination with Cause or Voluntary Resignation without Good Reason Prior to a Change of Control .  If the Company (a) terminates the Executive’s employment with Cause or (b) the Executive voluntarily resigns prior to a Change of Control without Good Reason, the Company shall pay all Accrued Obligations to Executive in a lump sum in cash within ten (10) days after the Termination Date.  “ Accrued Obligations ” means the sum of (a) Executive’s annual salary hereunder through the Termination Date to the extent not yet paid, (b) the amount of any Annual Cash Bonus and any other cash compensation earned by Executive as of the Termination Date to the extent but not yet paid, and (c) any vacation pay, expense reimbursements and other cash entitlements accrued by Executive as of the Termination Date to the extent but not yet paid; provided , however , vacation pay will not in any event be based on more than the maximum number of vacation days that Executive may be entitled to in a single year.

5.3.2                       Termination without Cause, Termination by Company through Notice of Non-Renewal of Term or Voluntary Resignation with Good Reason after a Change of Control .  If (a) the Company terminates the Executive’s employment without Cause, (b) the Company terminates the Executive’s employment by notice of non-renewal of the Term pursuant to section 1.2, or (c) the Executive voluntarily resigns with Good Reason after a Change of Control: