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Exhibit 10.5
SEPARATION AND RELEASE AGREEMENT
This Separation
and Release Agreement (the "Agreement") is made and entered
into on August 29, 2005 (the "Execution
Date") to be effective on the seventh
day following the Execution Date (the
"Effective Date") by and between ROBERT
DELK ("Delk"), DELK HOLDINGS, INC., a Texas
corporation ("Delk Holdings"), DELK
PARTNERS, LTD, a Texas limited partnership
("Delk Partners"), ADVANCED MATERIALS
GROUP, INC. (the "Company"), and for the
limited purposes set forth in Section 7
and 9 of this Agreement, those officers,
directors and stockholders of the
Company who have executed this Agreement
(the "Company Affiliated Signatories").
A. Delk has been employed by
the Company in the position of President and
Chief Executive Officer (the "Delk Employment"), pursuant to an
Employment Agreement as of August 1, 2003 (the "Employment
Agreement"), a copy of which is attached hereto as Exhibit A,
B. The Company owes Delk
$47,269.86 in unpaid compensation due and owing
through July 31, 2005 (the "Delk Unpaid Wages").
C. Delk has been serving as a
Director of the Company since January 2003.
D. Delk Partners holds a
significant amount of the Company's common
stock.
E. Delk loaned the Company
$150,000 pursuant to a promissory note dated
April 22, 2004 (the "Delk Note"), a copy of which is attached
hereto
as Exhibit B and incorporated herein by reference.
F. The amount of principal and
accrued but unpaid interest on the Delk
Note as of the Execution Date is $112,000 (the "Delk Unpaid
Principal
and Interest"); and
G. Delk Holdings has executed
an Assignment and Assumption of
Intellectual Property as of the date hereof to be effective on
the
Effective Date in favor of the Company, a copy of which is
attached
hereto as Exhibit C (the "IP Assignment Agreement") whereby
certain
intellectual property assets (the "(IP Assets") are being conveyed
to
the Company.
H. The Company owes Delk
$84,114 which represents legal fees, third party
royalties and other expenses for patent prosecution and related
matters which Delk incurred in respect of the IP Assets which
are
being assigned to the Company by Delk Holdings pursuant to the
IP
Assignment Agreement (the "Delk IP Advances");
I. Delk tendered, and the
Company has accepted, his resignation as a
Director effective June 24, 2005, and the Company has agreed to
accept
his resignation as President and Chief Executive Officer effective
as
of the Effective Date.
J. Delk, Delk Holdings and Delk
Partners, on one hand, and the Company
and the Company Affiliated Signatories, on the other hand, desire
to
settle fully, finally and amicably all issues between them,
pursuant
to the terms and conditions set forth below.
NOW THEREFORE,
in exchange for the terms, promises and obligations of the
parties hereto made in this Agreement:
1. EFFECTIVE
DATE. This Agreement shall become effective as of the
Effective Date.
2. TERMINATION
OF EMPLOYMENT AGREEMENT. Delk and the Company agree to
terminate and cancel the Employment
Agreement in its entirety, such Employment
Agreement to be null and void and of no
future force and effect, with no
provision therein to survive this
termination and cancellation regardless of any
provision in the Employment Agreement to
the contrary, and to the extent an
amendment of the Employment Agreement is
required in order to give effect to
this Section 2, then the parties hereby
agree that the Employment Agreement is
so amended.
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3. COMPANY
PAYMENTS DUE DELK. The Company remits the amount of $248,383.86
to Delk contemporaneously with the
execution of this Agreement (the "Delk
Payment"), which represents the following
aggregated amounts:
(a) The Delk Unpaid Wages;
(b) The Delk IP Advances;
(c) The Delk Unpaid Principal and Interest; and
(d) $5,000 in legal fees incurred by Delk and Delk Holdings in
furtherance of
negotiating and consummating this Agreement and the IP
Assignment
Agreement.
Delk and Delk
Holdings acknowledge and agree that, with the Company's
remittance of
the Delk Payment, the Company has paid Delk and Delk Holdings
all wages due
and owing to either Delk or Delk Holdings as of the Effective
Date, and that
neither Delk nor Delk Holdings shall have any entitlement or
claim to any
further compensation or benefits from the Company, including,
without
limitation, salary, bonuses, incentive compensation, stock,
stock
options, accrued
vacation payments, severance, unvested pension benefits,
employer-paid
health benefits, fringe benefits, expense reimbursements, or
any other
employment benefits.
4. RESTRICTED
ACTIVITIES.
(a) None of Delk, Delk Holdings, nor Delk Partners shall, for a
period
of one (1) year
from the Effective Date (the "Restricted Period"), directly
or indirectly,
either as an employee, employer, consultant, agent,
principal,
partner, stockholder, corporate officer, board member,
director,
or in any other
individual or representative capacity, engage or attempt to
engage in any
activity which is competitive with either (i) the specific
products sold by
the Company to its customers as of the Effective Date and
set forth in
Exhibit D (a "Company Product") or (ii) the IP Assets conveyed
to the Company
in the IP Assignment Agreement. The foregoing restrictions
shall not
prevent any of Delk, Delk Holdings, or Delk Partners from
owning
stock in the
Company or from owing five percent (5%) or less of the equity
securities of
any public company other than the Company.
(b) During the Restricted Period, none of Delk, Delk Holdings,
nor
Delk Partners
shall directly or indirectly through another person or entity
(i) assist,
induce or attempt to induce any employee of the Company to
leave the employ
of the Company, or in any way interfere with the
relationship
between the Company and any employee thereof, (ii) hire
directly or
through another person, any person who was an employee of the
Company as of
the Effective Date, or (iii) assist, induce or attempt to
induce any
independent contractor, vendor or supplier of the Company to
discontinue its
relationship or violate any agreement with the Company.
(c) During the Restricted Period, none of Delk, Delk Holdings,
nor
Delk Partners
shall disclose or use any Company Confidential Information
that they became
aware of during the term and within the scope of the Delk
Employment
except to the extent such Company Confidential Information was
known to Delk,
Delk Holdings, or Delk Partners prior to the beginning of
the Delk
Employment or becomes generally known to and available for use
by
the public other
than as a result of the acts or omissions of Delk, Delk
Holdings, or
Delk Partners in violation of this Agreement. Each of Delk,
Delk Holdings,
and Delk Partners shall take all reasonable steps to
safeguard
Company Confidential Information in their possession and to
protect it
against disclosure, misuse, espionage, loss and theft during
the
Restricted
Period. As used in this Agreement, the term "Company
Confidential
Information" means trade secrets and other sim
