This employment agreement
(“Agreement”) is effective as of April 10, 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 Alan
McGrevy, an individual (“Executive”).
Whereas employee is currently employed as
Company’s Vice President of Engineering and Company and
Executive now wish to memorialize the terms and conditions of
Executive’s employment;
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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1
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Executive’s
Duties; Title; Location . As of the Effective Date,
Executive is employed as Kreido’s Vice President of
Engineering under the terms and conditions below. Executive will
report to the Company’s CEO. Executive’s duties
include, without limitation, oversight of the Company’s
engineering activities and machine shop activities and managing
such other matters that are reasonably within the scope of
Executive’s expertise. In addition, Executive shall
participate in the management of Kreido as part of Kreido’s
senior executive team. 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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2
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Term,
Termination and Renewal .
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2.1 Term and Termination . The Term of
this Agreement shall commence on April 10, 2007. The Term
shall continue for two (2) years (“Initial Term”)
unless it is terminated earlier as provided herein below or renewed
by the mutual agreement of the parties pursuant to this
Section 2.
2.2 Renewal . Provided that by ninety
(90) days before the end of the Initial Term the Agreement has
not been terminated as provided herein below, the parties shall
inform each other of their interest or lack of interest in renewing
the Agreement. In the event that both parties wish to renew the
Agreement, they will enter into good faith negotiations to achieve
that result prior to the end of the Initial Term. If the Agreement
is renewed for one or more additional terms (each such additional
term a “Renewal Term”), then ninety (90) days
prior to the end of each such Renewal Term, the parties will enter
into good faith negotiations over whether to further renew the
Agreement.
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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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4.1.1 Base
Salary . Executive shall receive a base salary of $190,000 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 2006
Bonus . Upon the execution of this Agreement by both parties,
Executive shall receive a 2006 Bonus payment of $50,000 less all
applicable payroll taxes (“2006 Bonus”).
4.1.4 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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4.1.4
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(a)
Grant of Options. On April 9, 2007, the Company granted
Executive an option to purchase 580,000 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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4.1.4
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(b)
Option Exercise Price; Term . The per share exercise
price of the Option is $1.20, the closing bid price per share of
Company common stock on April 9, 2007. The Term of the Option
shall be ten years from the date of grant.
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4.1.4
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(c)
Vesting and Exercise . The Options shall vest and be
exercisable as follows: (A) 145,000 options shall vest upon
signing of this Employment Agreement (“Signing Grant”)
and remain exercisable for a period of ten years from the date of
grant; and (B) 435,000 options shall vest in eight equal
installments of 54,375 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 4.1.4(e).
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4.1.4
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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 4.1.4(a), then the exercise
period in Section 4.1.4(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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4.1.4
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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 4.1.4(f).
(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.
(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.
(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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4.1.4
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(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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4.1.5
Retention Bonus . If Executive successfully completes the
three requirements set forth in this Section 4.1.5, then at
the end of the Term Executive will receive either $150,000.00 in
cash (less all routine payroll taxes) or Kreido securities with a
fair market value of $150,000.00 on the date the securities are
issued (“Retention Bonus”). The decision whether the
Retention Bonus will be paid in cash or in Kreido securities will
be made solely in Kreido’s discretion. The three requirements
are: (1) Executive must successfully complete two full years
of employment at Kreido following the execution of this Agreement;
(2) Executive must participate meaningfully and cooperate
materially in training his successor to head Kreido’s
Engineering department and lead Kreido’s future engineering
and research efforts; and (3) Executive must oversee the
successful achievement of certain commercially reasonable
performance specifications for the 10G SST System as commercially
deployed during its first year of service, which specifications
will be set forth by the Company, (collectively “Retention
Bonus Requirements”). Unless all three Retention Bonus
Requirements are completed to the reasonable satisfaction of the
Company, no portion of the Retention Bonus shall be owed to
Executive.
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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 $1,000.00 individually or $3,500.00 in the aggregate
shall be approved in advanced 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
20 days per calendar year.
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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 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 he is currently unaware of any actual,
potential, or apparent conflicts of interest. 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
reasonably 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 created by Executive or that come into
Executive’s possession during the Term are the property of
Kreido and shall not be used by Executive in any way after the
Term. Executive shall not deliver, reproduce or in any way allow
such documents, or things to be delivered to be used by any third
party without specific written direction or consent of a duly
authorized representative of Kreido.
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5.4.2
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Delivery of Materials
. Upon termination of
this Agreement, Executive shall promptly deliver to Kreido all of
its 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 created
by Executive during the period of employment.
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6.
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Termination Due to Death or
Disability .
If Executive dies during the employment, Executive’s
employment shall automatically cease and terminate as of the date
of Executive’s death. In the event of Executive’s
disability for a period of 120 consecutive days during any 365-day
period, Company shall thereafter have the right, upon written
notice to Executive, to terminate this Agreement, in which case the
date of termination shall be the date of such written notice to
Executive. As used herein, “disability” means a
physical and/or mental disability of Executive that prevents
Executive from substantially performing the essential functions of
his position even with reasonable accommodation
(“Disability”). Company does not currently offer
disability insurance to its employees. In the event Company, in its
sole discretion, elects to offer such insurance coverage
(“Disability Policy”) to its employees at any time in
the future, the definition of Disability as used herein
automatically shall be modified by the adoption of the definition
of disability as used in the Disability Policy. In the event of the
termination of Executive’s employment due to his death or
Disability, Executive’s estate and/or Executive shall be
entitled to receive: (i) a lump sum cash payment, payable
within ten (10) business days after the date of death equal to
the sum of any accrued but unpaid salary and bonus as of the date
of death; and (ii) earned Executive benefits, perquisites and
reimbursements described in Section 4 inclusive, if any, as to
which Executive may be entitled hereunder or under Executive
benefit plans, programs and arrangements of Kreido through the date
of death. In the event of the termination of Executive’s
employment due to Disability, Executive shall not be entitled to
any severance pay.
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7.
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Termination by
Kreido.
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7.1
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Termination for
Cause.
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7.1.1
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Definition of Cause.
The term
“Cause” for purposes of this Agreement means all of the
following, any one of which will constitute a material breach of
this Agreement unless cured pursuant to Section 7.1.2
(“Material Breach”): (A) Any willful act by
Executive that causes the Company materially to violate any
applicable law; (B) Executive’s commission of any
material act of dishonesty in connection with his employment;
(C) Executive’s conviction of or plea of nolo contendere
to any felony or
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