EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day
of January, 1997 between ENERGY RESEARCH CORPORATION, a New
York corporation ("Employer"), and DR. BERNARD S. BAKER, an
individual with a mailing address at P.O. Box 166,
Hawleyville, Connecticut, 06440 ("Employee").
W I T N E S E T H
WHEREAS, Employee is currently employed by Employer
as its President; and
WHEREAS, Employer and Employee desire to enter into
an agreement to provide for the continued employment of
Employee pursuant to the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the covenants,
conditions, undertakings and promises contained herein, the
sufficiency which is fully acknowledged, Employer and Employee
agrees follows:
ARTICLE 1
EMPLOYMENT AND DUTIES
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1.1. Employment; Duties
For the term of this Agreement, Employer hereby employs
Employee, at the discretion of the Board of Directors, as
President and CEO, and/or Chairman of the Board of Employer.
In such position, Employee shall perform such duties as are or
may be assigned to Employee by the Board of Directors from
time to time consistent with Employee's position as a senior
executive of Employer. Employee shall devote his full working
time, attention, energies, skills and best efforts exclusively
to the performance of his duties and to the research and
development efforts, business and affairs of Employer, except
as otherwise assigned by the Board of Directors. Employee
shall not during the term of this agreement engage in any
other business activity whether or not such activity is
pursued for gain, profit or other pecuniary advantage, except
that Employee, on his own time, may manage his own
investments, and those of his immediate family so long as such
activity does not, in the reasonable judgment of Employer's
Board of Directors, adversely affect the performance of his
duties hereunder.
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1.2. Board Membership
During the term of this Agreement, Employer will use
its best efforts to cause its Board of Directors to nominate
Employee for re-election as a management nominee of Employer's
Board of Directors.
1.3. Emoluments of Office
During the term of this Agreement, Employee shall be
provided the use of a secretary, a private office and the use
of other facilities sufficient to enable Employee to perform
the duties assigned to him pursuant to Section 1.1.
ARTICLE 2
2.1 Term
The term of Employee's employment by employer hereunder
shall commence on January 1, 1997 and, except as otherwise
provided in this Agreement with respect to earlier
termination, shall continue in effect through December 31,
1997.
ARTICLE 3
COMPENSATION
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3.1. Base Salary
For all service to be rendered by Employee under this
Agreement, including services as a officer, director and
member of any committee, and such other duties as the board of
Directors may assign to him in accordance with Section 1.1
hereof, Employer agrees to pay Employee a base salary of
$320,000 per annum for his full time employment under this
Agreement. The base salary shall be payable at such times as
is customary for employees for Employer and in accordance with
the normal payroll practices of Employer.
3.2. Incentive Compensation
A bonus of $75,000 will be paid to Employee for
services in the 1996 year. This bonus will be paid on the
quarterly schedule set forth in Paragraph 6 of the ERC
Incentive Compensation Plan, with the first payment to be made
on the last payday of January 1997.
3.3. Expenses
In addition to base salary, Employer shall reimburse
Employee for all reasonable and necessary business expenses
actually incurred by him in the performance of his duties,
including, without limitation, expenses for travel, meals,
entertainment and other
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miscellaneous business expenses. Employee shall submit to
employer written, itemized expense accounts and such
additional substantiation and justification as Employer may
reasonably request.
ARTICLE 4
EMPLOYER BENEFITS
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4.1. Vacation
Employee shall be entitled to receive six weeks of paid
vacation during 1997 (pro rated for any partial year), which
shall be taken at such time or times as will not unreasonably
hinder or interfere with Employer's business or operations.
Vacation time may be accrued from year to year in accordance
with Employer's general vacation policy.
4.2. Death Benefit and Life Insurance
A. Employee is entitled to participate in any
life insurance, accidental death and
dismemberment and travel accident plans
maintained by Employer for its employees, on
terms no less favorable than those extended to
any other senior executive of Employer.
B. Employer may, if it so chooses, apply for and
procure in its own name, and for its own
benefit, additional life insurance and
disability insurance on Employee, and Employee
shall have no right, title or interest
therein.
C. Employee agrees to submit to any reasonable
medical or other examination, and to execute
any application or other instrument reasonably
necessary to obtain any policy of insurance
under this Article.
D. Employer shall maintain a $2 million life
insurance policy for Employee, the proceeds of
which shall be used, based upon the pricing
formula set forth below, to buy back his stock
to that amount in the event of his death. The
proceeds will go to his wife or his estate in
the event that Employee's wife is not living.
Any amounts then remaining shall be retained
by Employer. The price paid is to be based on
the market price based, if the stock is traded
on an exchange or the Nasdaq National Market,
on the average of the closing price for the
common stock for the five day period preceding
the date on which the death occurred, and the
five day period following the date on which
the death occurred, or, if the stock is traded
over-the-counter (other than on the Nasdaq
national market), on the average closing high
bid prices for the above
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-described time periods. In the event a death
announcement results in a trading halt, the
calculation will be based on the average price
5 days prior to death and 5 days after trading
is resumed.
4.3. Liability Insurance
Employer will obtain and maintain at all times directors'
and officers' liability insurance for Employee, so long as
such insurance can be obtained on terms acceptable to
Employer's Board of Directors.
4.4. Indemnification
Employer agrees to defend and shall indemnify and hold
Employee harmless to the fullest extent permitted by law from
any and all liability, costs, and expenses which may be
assessed against Employee by reason of the performance of his
responsibilities and duties under the terms of this Agreement,
provided such liability does not result from willful
misconduct or gross negligence of Employee.
4.5. Retirement Plan
Employee is entitled to participate in any retirement
plan maintained by Employer for its employees (including,
without limitation, pension, annuity, profit-sharing and
deferred compensation plans).
4.6. Other Benefit Plans
Nothing herein is intended to reduce the benefits that
Employee would otherwise be entitled to receive under any
Employer plans (exclusive of the ERC Incentive Compensation
Plan) currently in existence. Without limiting the foregoing,
Employee is entitled to participate in and receive benefits
under any accident, disability, health and dental insurance,
profit sharing, bonus, stock option and stock purchase plan
maintained by Employer or its affiliates for its employees.
In connection therewith, Employer shall grant Employee options
to purchase 50,000 shares, effective as of the date of this
Agreement, with exercise prices as follows:
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Number of Shares Per Share Exercise Price
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16,667 The greater of $12.00 or the fair market
value as measured by the closing price of
the Common Stock as of December 31,
1996 (the "Fair Market Value")
16,667 The greater of $15.00 or the Fair Market
Value
16,66 The greater of $18.00 or the Fair Market
Value
The options shall have terms and conditions consistent
with Employer's standard form of option agreement, except that
the options shall become fully vested one year from the date
of grant provided that Employee continues to be employed by
Employer through such date, and that, as set forth in Section
422(d) of the Internal Revenue Code, to the extent that the
aggregate fair market value of stock (valued as of the date of
grant) with respect to which the options vest in any calendar
year exceeds $100,000, such options shall be treated as
options which are not incentive stock options.
ARTICLE 5
RESTRICTIONS
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5.1. Non-Competition
So long as Employee is employed under this Agreement, and
for one year thereafter, Employee will not directly or
indirectly, in any capacity, engage in or render services
(including, without limitation, research development,
marketing or sales) to, or have a financial interest in, any
person, firm, corporation or other entity engaged in any line
of business activity in competition with Employer.
A. For purposes of this section, an entity is "in
competition with Employer" if in such territory
it produces or distributes any product, or
performs any service, which is directly
competitive with the products of Employer, or
services performed by Employer, or any
subsidiary or Employer, as of the date
Employee's employment under this Agreement is
terminated.
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B. Nothing contained in this Section shall
preclude Employee from purchasing or owning an
equity interest not in excess of 2% in any
entity which is in competition with Employer
if the securities so purchased or owned are
listed on any national stock exchange or are
traded or quoted on the National Association
of Securities Dealers Quotation System.
5.2. Confidentiality
Except as may be required by law, Employee will not,
while employed under this Agreement and for a period of seven
years thereafter, use directly or indirectly, for his own
account or for the account of any person, firm, corporation or
other entity or disclose to any person, firm, corporation or
other entity, Employer's proprietary information disclosed or
entrusted to him or developed or generated by him in the
performance of his duties hereunder, including, but not
limited to, information relating to Employer's organizational
structure, operations, business plans, technical projects,
pricing data, production costs, research data or results,
inventions, trade secrets, customer lists or other work
product developed by or for Employer, whether on the premises
of Employer or elsewhere.
The provisions of this Section shall not apply to any
proprietary, confidential or secret information which is, at
the commencement of the term of this Agreement, or at some
later date, publicly known under circumstances involving no
breach of this Agreement or is lawfully and in good faith made
available to Employee without restrictions as to disclosure by
a third party.
Any idea, concept device, program, plan, data, invention,
discovery, improvement, writing design or business method
conceived or made by Employee, individually or jointly, during
any past or future period of employment with Employer or any
affiliate thereof relating to the business of Employer or such
affiliate, whether patentable or unpatentable, or registrable
or copyrighted material or trademarks, shall be promptly and
fully disclosed to Employer or such affiliate and, whether or
not so disclosed, shall be and become the absolute property of
Employer or such affiliate. In confirmation thereof, Employee
will, upon reasonable request, execute and deliver to Employer
assignments of any such idea, concept, device, program, plan,
data, invention, discovery, writing, improvement, design or
business method.
Employee will reasonably assist Employer in every way, at
Employer's sole expense, both during the course of and after
termination of his employment, in the procurement, maintenance
and enforcement, for employer's benefit, of patents on such
inventions or discoveries and registrations on such
copyrighted material, trademarks or business methods in any
and all countries.
So long as Employee is employed by Employer, Employee
shall maintain proper files and records relating to work
performed by him in accordance with past practices or
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as otherwise reasonably specified by Employer from time to
time. All such files and records are to be kept in Employer's
custody and subject to its control and to be the exclusive
property of Employer. Upon termination of Employee's
employment with Employer or any affiliate thereof, Employee
shall deliver to Employer all files and records of any nature
which are in Employee's possession or control and which relate
in any manner to his employment or to the activities of
Employer or any affiliate thereof.
5.3. Injunctive Relief
Employee acknowledges that the restrictions contained in
this Article are reasonable in view of the nature of the
business in which Employer is engaged and his knowledge of the
business.
Employer and Employee mutually agree that Employee's
obligations under this Article are of a special and unique
character which gives them a peculiar value, and Employer
cannot be reasonably or adequately be compensated in damages
in an action at law in the event Employee breaches such
obligations. Employee therefore expressly agrees that, in
addition to any other rights or remedies which Employer may
possess, Employer shall be entitled to injunctive and other
equitable relief to prevent a breach of this Article by
Employee, including a temporary restraining order or temporary
injunction from any court of competent jurisdiction
restraining any threatened or actual violation, and each party
hereby consents to the entry of such order and injunctive
relief and waives the making of a bond as a condition for
obtaining such relief. Such rights shall be cumulative and in
addition to any other legal or equitable rights and remedies
Employer may have.
5.4 Survival Enforceability
It is expressly agreed by the parties hereto that the
provisions of this Article shall survive the termination of
this Agreement.
If any one or more of the provisions contained in this
Article shall for any reason in any jurisdiction be held to be
excessively broad as to the time, duration, geographical
scope, activity or subject, it shall be construed with respect
to such jurisdiction, by limiting or reducing it, so as to be
enforceable to the extent compatible with the applicable law
of such jurisdiction as it shall then appear.
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ARTICLE 6
DEATH; DISABILITY
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6.1. Death
If Employee dies while employed under this Agreement,
this Agreement shall terminate immediately. Employer will pay
to Employee's estate his base salary under Section 3.1 through
the last day of the calendar month in which he dies, plus any
incentive compensation awarded to Employee under the ERC
Incentive Compensation Plan, but not yet paid, and such death
benefits as may be provided pursuant to Section 4.2.
6.2. Disability
If Employee fails to perform his duties under this
Agreement due to "Disability", as defined in Section 6.2 B(i)
or (ii), Employer may terminate this Agreement upon 30 days
written notice to him. In that event, Employer shall pay
Employee his base salary under Section 3.1 through the date of
termination. If Employee fails to perform his duties under
this Agreement due to "Disability," as defined in Section 6.2
B(iii), then Employer may immediately terminate this Agreement
upon the payment to Employee of his base salary for a period
of seven (7) months, less such payments previously made by
Employer to Employee on account of such Disability. In
addition, upon any termination based upon Disability, Employer
shall pay to Employee any incentive compensation awarded to
Employee under the ERC Incentive Compensation Plan but not yet
paid; provided, however, that to the extent Employee is
receiving disability benefits pursuant to Employer's
disability insurance policy, the amount of such benefits shall
be credited against Employee's base salary during the period
prior to the date of termination.
A. If Employer gives notice of termination
under this Section and, before the
termination date stated in the notice,
Employee's Disability ceases and he takes
up and resumes performance of his duties
under this Agreement, the notice of
termination shall be void and of no
effect, and this Agreement shall continue
in effect as though such notice had not
been given.
B. The term "Disability" shall mean the
inability of Employee to perform for
Employer the duties specified in Section
1.1 by reason of any medically
determinable physical or mental
impairment for (i) a period of six
consecutive months, (ii) for shorter
periods aggregating six months in any 12-month
period or (iii) if the Board of
Directors determines that it is probable
that the Disability will continue for a
length of time so as to constitute a
Disability under clauses (i) or (ii)
above. The determination of whether
Employee
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is Disabled shall be made by the Board of
Directors on the basis of written medical
evidence reasonably satisfactory to it.
ARTICLE 7
TERMINATION
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7.1 Termination by Employee
Employee may terminate this Agreement upon 30 days
written notice to Employer setting forth with specificity the
grounds for termination upon the occurrence of any of the
following: (i) the failure of Employer to observe or comply
with Article 1 of this Agreement, if such failure has not been
cured within 30 days after written notice thereof has been
given by Employee to Employer, (ii) the dissolution of
Employer, or (iii) any merger in which Employer is not the
surviving corporation and in which the stockholders of
Employer own less than 50% of the voting securities of the
merged entity upon the effectiveness of the merger, or any
consolidation, sale of substantially all of the assets of
Employer or change of control of Employer, provided Employee
has not approved the transaction by voting for it either as a
director or shareholder. For purposes of clause (iii) above,
a "change of control" shall be presumed to have occurred if
within any 12-month period a single person or entity, or
related group of persons or entities, acquires 50% or more of
the outstanding voting stock of Employer. In the event of a
termination under this Section, Employer shall pay Employee
(i) his base salary as then in effect under Section 3.1
through the date of termination, (ii) any incentive
compensation awarded to Employee under the ERC Incentive
Compensation Plan, but not yet paid, and (iii) a supplemental
payment equal to 12 weeks' base salary, and shall continue to
pay to Employee his base salary as then in effect under
Section 3.1 for a period of one year following the date of
termination. Following termination of this Agreement,
pursuant to this Section, Employee shall have no obligation to
mitigate his damages by finding alternative employment or
otherwise. In the event that Employee terminates this
Agreement for reasons other than as set forth above in this
Section 7.1 and which are not otherwise within Article 6,
Employer shall pay Employee his base salary under Section 3.1
through the date of termination, plus accrued vacation time,
plus any incentive compensation awarded to Employee under the
ERC Incentive Compensation Plan but not yet paid.
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7.2 Termination by Employer for Cause
Employer may terminate this Agreement for cause in the
manner set forth below. For purposes of this Section, "cause"
shall mean a material breach by Employee of the terms of this
Agreement with results that are materially and demonstrably
injurious to the business of Employer. The term "cause" as
used in the preceding sentence does not include Employee's
erroneous judgment or judgments of a technical, scientific,
financial, legal and/or environmental nature which were,
although erroneous, nevertheless reasonable at the time and
under the circumstances in which they were made. In the event
of termination under this Section, Employer shall pay to
Employee his base salary under Section 3.1 through the date of
termination stated in the notice plus any incentive
compensation awarded to Employee under the ERC Incentive
Compensation Plan but not yet paid, and Employee shall, if so
requested by the Board of Directors, perform his duties under
Article 1 through the date of termination stated in the
notice.
7.3. Termination by Employer for Cause-Procedure
Notwithstanding anything to the contrary set forth
herein, Employee shall not be deemed to be have been
terminated for cause without (A) delivery to Employee of
reasonable written notice setting forth with specificity the
reasons for Employer's intention to terminate for cause, (B)
an opportunity for Employee, together with his counsel, to be
heard before the Board of Directors and (C) delivery to
Employee of a notice of termination from the Board of
Directors stating that a majority of the members of the Board
have determined in good faith that Employee was guilty of
injurious conduct as set forth above and specifying the
particulars thereof in detail. If Employee disputes the
findings of the Board pursuant hereto, the parties shall, at
the election of Employee, refer such matter to arbitration.
7.4 Termination by Employer or Employee Without Cause
Either Employer or Employee may terminate this Agreement
without cause prior to the expiration of the term hereof upon
30 days written notice. Upon such termination, Employer shall
pay Employee his base salary under Section 3.1 through the
date of termination (provided, however, that Employee
continues to be available to perform the services required
under Section 1.1 through the date of termination), plus any
incentive compensation awarded to Employee under the ERC
Incentive Compensation Plan, but not yet paid, and any accrued
vacation. Nothing herein shall prohibit Employer from
relieving Employee of any or all of his duties hereunder
pending the expiration of the 30-day notice period.
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ARTICLE 8
ARBITRATION
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8.1 Arbitration
All controversies, claims, disputes and other matters
in question between the parties arising out of, or relating
to, this Agreement, or the breach thereof, shall be decided by
arbitration before one arbitrator to be held in New York, New
York, in accordance with the commercial rules of the American
Arbitration Association then in effect, and judgment upon the
award shall be binding upon the parties hereto and may be
entered in any court having jurisdiction thereof.
ARTICLE 9
MISCELLANEOUS
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9.1. Entire Agreement
This Agreement contains the entire understanding and
agreement between Employer and Employee and cannot be amended,
modified, or supplemented in any respect except by subsequent
written agreement entered into by both parties.
9.2. Successors of Employer
This Agreement shall inure to the benefit of and be
binding upon Employer, its successors and assigns, including,
without limitation, any person, firm, corporation or other
entity which may acquire all or substantially all of
Employer's assets and business, or with or into which Employer
may be consolidated or merged, and this provision shall apply
in the event of any subsequent merger, consolidation or
transfer. Employer agrees that it will not merge or
consolidate with any other entity or permit its business
activities to be taken over by any other entity unless and
until the succeeding or continuing entity shall expressly
assume the rights and obligations of Employer set forth in
this Agreement. In every respect, this Agreement shall inure
to the benefit of and be binding upon Employee, his heirs,
executors and personal representatives and, being personal in
nature, shall not be assignable by Employee.
9.3. Effect of Waiver
The waiver by either party of a breach of any
provision of this Agreement shall not operate as or be
construed as a waiver of any subsequent breach.
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9.4 Notices
Any notice, request, demand or other communication in
connection with this Agreement must be in writing and shall be
deemed to have been given and received three days after a
certified or registered letter containing such notice,
properly addressed, with postage prepaid, is deposited in the
United States mail; and, if given otherwise than by registered
or certified mail, it shall not be deemed to have been given
until actually delivered to and received by the party to whom
it is addressed.
A. Notice to Employer shall be given at its principal
mailing address, which at the time of execution of
this Agreement is 3 Great Pasture Road, Danbury,
Connecticut, 06813, Attention: Corporate
Secretary, or at such other address as it may
designate, with a copy to Mr. Richard M. H.
Thompson, 116 East 64th Street, New York, New York,
10021, and Mr. William Lawson, 312 West Main
Street, Owosso, Michigan, 48867.
B. Notice to Employee shall be given at his home
address, which at the time of execution of this
Agreement is the address set forth in the heading
of this Agreement, or at such other address as he
may designate.
9.5. Counterparts
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.6. Severability
If, in any jurisdiction, any provision of this Agreement
or its application to any party or circumstances is
restricted, prohibited or unenforceable, such provision shall,
as to such jurisdiction, be ineffective only to the extent of
such restriction, prohibition or unenforceability without
invalidating the remaining provisions hereof and without
affecting the validity or enforceability of such provision in
any other jurisdiction or its application to other parties or
circumstances.
9.7. Survival
Each of the terms and provision of this Agreement which
are expressly or impliedly so intended shall survive the
termination of this Agreement.
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9.8. Applicable Law
This Agreement shall be governed by and construed
according to the laws of the State of New York..
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first stated above.
ENERGY RESEARCH CORPORATION
By: /s/ Thomas Kempner
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Thomas Kempner, Chairman
/s/ Dr. Bernard S. Baker
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Dr. Bernard S. Baker
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