EMPLOYMENT AGREEMENT AGREEMENT dated as of Jan. 14, 1992, between CNS Compressor Corporation, a Minnesota corporation (the "Company"), Suite 255, Southgate Office Plaza, 5001 West 80th Street, Minneapolis, MN 55437, and Thomas C. Edwards, 1426 Gleneagles Way, Rockledge, FL 32955 (the "Executive"). WITNESSETH: The parties hereto agree as follows: 1. EMPLOYMENT. The Company hereby employs the Executive and the Executive hereby accepts employment upon the terms and conditions hereinafter set forth. 2. TERM. This Agreement shall commence on the date hereof and shall terminate as of the earlier of: (a) Five (5) years from the date hereof (the "Initial Term") unless the Company notifies the Executive that it elects to extend the term hereof for an additional One (1) year (the "Renewal Period"), such notice to be given within sixty (60) days before the end of the Initial Term hereof or within sixty (60) days before the end of each successive Renewal Period; (b) the death of the Executive; (c) thirty (30) days after notice is given by the Company to the Executive after a material breach hereof; or (d) thirty (30) days after notice is given by the Executive to the Company after a material breach hereof by the Company. (e) in the event that all of the patents which relate to, and are used by the Company in the manufacture, use, lease or sale of, the Licensed Products included in Patent Rights and Foreign Patent Rights under that certain Patent And Know-How License Agreement between the Company and the Executive have become unenforceable due to a final adverse judgment by a court of competent jurisdiction which cannot or has not been appealed, the Company at its sole option may terminate this Agreement thirty (30) days after notice is given by the Company to the Executive of its intention to do so. (f) in the event the Executive shall for any reason whatever terminate that certain Patent And Know-How License Agreement between the Company and the Executive, the Company at its sole option may terminate this Agreement thirty (30) days after notice is given by the Company to the Executive of its intention to do so. The exercise of the Company's or the Executive's right to 1 terminate this Agreement pursuant to clause (c), (d), (e) or (f) hereof, as the case may be, shall not abrogate the rights and remedies of the terminating party in respect of the breach giving rise to such termination. The Company shall only be deemed to have materially breached this Agreement and the terms of the Executive's employment if it fails to comply with Section 3 hereof. 3. COMPENSATION. For all services rendered under this Agreement: (a) (i) The Company shall pay the Executive a base salary of Seventy Two Thousand ($72,000.00) Dollars per annum in equal bimonthly installments. Such salary shall be annually adjusted at each anniversary date of this Agreement for (1) any change from the preceding year in the cost-of-living index for the appropriate State of Florida region compiled by the United States Department of Labor and/or (2) any increase in the rate of base salary solely approved by the Company board of directors by its decision. (ii) In the event the Company elects to extend the Initial Term of this Agreement, such salary for any Renewal Period shall be adjusted at the anniversary date of this Agreement as provided above. (iii) If the Executive has been disabled for a period of at least ninety (90) consecutive days, the Company may elect, upon notice to the Executive, to pay the Executive fifty (50%) percent of the compensation the Executive would otherwise be entitled to pursuant to clause (i) or (ii) above and shall thereupon have no further obligation under Section 3 hereof. Disability shall mean the Executive's inability, due to sickness or injury, to perform effectively his duties hereunder. (b) During the term of his employment, the Executive shall be entitled to participate in employee benefit plans or programs of the Company, if any, to the extent that his position, tenure, salary, age, health and other qualifications make him eligible to participate, subject to the rules and regulations applicable thereto. Such benefits shall include, and subject to the approval of the Board of Directors, twenty-one (21) days paid vacation and qualified pension and profit sharing plans. (c) The Executive shall be entitled to reimbursement of all direct expenses incurred by him in the performance of his duties, subject to the presenting of appropriate vouchers in accordance with the Company's policy. 4. DUTIES. So long as the Company has not notified the Executive of his disability pursuant to Section 3(a)(iii), the Executive is engaged with the title and functions of Chief 2 Executive Officer and President of the Company and, subject to the direction of Company Board of Directors, shall perform and discharge well and faithfully the duties which may be assigned to him from time to time by the Company in connection with the conduct of its business. Nothing herein shall preclude the Board of Directors of the Company from changing the Executive's title and duties if such Board of Directors has concluded in its reasonable judgment that such change is in the Company's best interests; provided, however, that at all times during the term of this Agreement, the Executive shall be employed as a senior executive of the Company. If the Executive is elected or appointed a director of the Company or an officer or director of any subsidiary thereof during the term of this Agreement, the Executive will serve in such capacity without further compensation. 5. EXTENT OF SERVICES. (a) So long as the Company has not notified the Executive of his disability pursuant to Section 3(a)(iii) hereof, the Executive shall devote his entire time, attention and energies to the business of the Company and shall not during the term of this Agreement be engaged (whether or not during normal business hours) in any other business or professional activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage, unless the Board of Directors of the Company approves of such activities prior to the Executive's engaging in them; but this shall not be construed as preventing the Executive from (1) investing his personal assets in businesses which do not compete with the Company in such form or manner as will not require any services on the part of the Executive in the operation or the affairs of the companies in which such investments are made and in which his participation is solely that of an investor, (2) purchasing securities in any corporation whose securities are regularly traded provided that such purchase shall not result in his collectively owning beneficially at any time one (1%) percent or more of the equity securities of any corporation engaged in a business competitive to that of the Company, and (3) participating in conferences, preparing or publishing papers or books or teaching, so long as the Chief Executive Officer of the Company approves of such activities prior to the Executive's engaging in them. (b) Prior to commencing any activity described in subparagraph 3(a) above, the Executive shall inform the Board of Directors of the Company in writing of such activity. 6. DISCLOSURE OF INFORMATION. (a) The Executive represents and warrants to the Company that Exhibit A hereto sets forth (i) all rights, in respect of the Executive's engaging in any business activity (whether or not for profit), of former employers, clients, principals, partners or others with whom or for whom the Executive has performed services since January 1, 1986, and (ii) all of the 3 business activities (whether or not for profit) of the Executive applicable to periods after the time such services were performed. (b) The Executive recognizes and acknowledges that the Company's or subsidiary trade secrets and proprietary information and processes, as they may exist from time to time, are valuable, special unique assets of the Company's business, access to and knowledge of which are essential to the performance of the Executive's duties hereunder. The Executive will not, during or after the term of his employment with the Company, in whole or in part, disclose such secrets, information or processes to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, nor shall the Executive make use of any such property for his own purposes or the benefit of any person, firm, corporation, association or other entity (except the Company) under any circumstances during the term of his employment, provided that after the term of his employment these restrictions shall not apply to such secrets, information and processes which are then in the public domain (provided that the Executive was not responsible, directly or indirectly, for such secrets, information or processes entering the public domain without the Company's consent). The Executive agrees to hold as the Company's property, all memoranda, books, papers, letters, formulas and other data, and all copies thereof and therefrom, in any way relating to the Company's business and affairs, whether made by him or otherwise coming into his possession, and on termination of his employment, or on demand of the Company, at any time, to deliver the same to the Company. In addition to this Agreement, the Executive agrees to execute and deliver to the Company a CNS Compressor Corporation Employee Confidential Information and Inventions Agreement which agreement is incorporated herein by reference. 7. The Executive hereby sells, transfers and assigns to the Company or to any person, or entity designated by the Company, all of the entire right, title and interest of the Executive in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material, made or conceived by the Executive, solely or jointly, or in whole or in part, during or before the terms hereof (but after December 11, 1991) which (i) related to methods, apparatus, designs, products, processes or devices sold, leased, used or under construction or development by the Company or any subsidiary or (ii) otherwise relate or pertain to the business, functions or operations of the Company or any subsidiary. The Executive shall communicate promptly and disclose to the Company, in such form as the Company requests, all information, details and data pertaining to the aforementioned inventions, ideas, disclosures and improvements; and, whether during the term hereof or thereafter, the Executive shall execute and deliver to the Company such formal transfers and assignments and such other papers and documents as may be required 4 of the Executive to permit the Company or any person or entity designated by the Company to file and prosecute the patent application and, as to copyrightable material, to obtain copyright thereon. Any invention by the Executive within three (3) years following the termination of this Agreement shall be deemed to fall within the provisions of this paragraph unless proved by the Executive to have been first conceived and made following such termination. 8. COVENANT NOT TO COMPETE. (a) During the term hereof and, unless this Agreement is terminated pursuant to Section 2(d) hereof, for a period of two (2) years thereafter, the Executive shall not compete, directly or indirectly, with the Company or any subsidiary, interfere with, disrupt or attempt to disrupt the relationship, contractual or otherwise, between the Company and any customer, client, supplier, consultant or employee of the Company, including, without limitation, employing or being an investor (representing more than a one (1%) percent equity interest) in, or an officer, director or consultant to, any person or entity which employs any former key or technical employee whose employment with the Company was terminated after the date which is one (1) year prior to the date of termination of the Executive's employment therewith. An activity competitive with an activity engaged in by the Company shall mean performing services (whether as an employee, officer, consultant, director, partner or sole proprietor) for any person or entity engaged in the business then engaged in by the Company, which services involve (i) developing joint selling alliances, and (ii) developing and implementing market plans involving lead generation, responses to proposals, closing strategies, pricing strategies, and promotions. (b) It is the desire and intent of the parties that the provisions of this Section 8 shall be enforced to the fullest extent permissible under the laws and public policies applied in any jurisdiction in which enforcement is sought. Accordingly, if any particular portion of this Section 8 shall be adjudicated to be invalid or unenforceable, this Section 8 shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of this Section in the particular jurisdiction in which such adjudication is made. (c) Nothing in this Section 8 shall reduce or abrogate the Executive's obligations during the term of this Agreement under Sections 4 and 5 hereof. 9. REMEDIES. If there is a breach or threatened breach of the provisions of Section 5, 6(b), 7 or 8 of this Agreement, the Company shall be entitled to an injunction restraining the Executive from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach. 5 10. INSURANCE. The Company may, at its election and for its benefit, insure the Executive against accidental loss or death and the Executive shall submit to such physical examination and supply such information as may be required in connection therewith. 11. ASSIGNMENT. This Agreement may not be assigned by any party hereto, provided that the Company may assign this Agreement: (a) to an affiliate so long as such affiliate assumes the Company's obligations hereunder provided that no such assignment shall discharge the Company of its obligations herein, or (b) in connection with a merger or consolidation involving the Company or a sale of substantially all its assets to the surviving corporation or purchaser as the case may be, so long as such assignee assumes the Company's obligations hereunder. 12. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and sent by registered mail to the Executive at his residence at 1426 Gleneagles Way, Rockledge, FL 32955, or to the Company at its address set forth above, Attention: Arnold J. Ryden, Board Chairman. In the event the Executive or Company change their respective addresses for the purpose of giving notice hereunder, they shall advise the other in writing. 13. WAIVER OF BREACH. A waiver by the Company or the Executive of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by the other party. 14. ENTIRE AGREEMENT. This instrument contains the entire agreement of the parties. It may be changed only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first hereinabove written. CNS COMPRESSOR CORPORATION By -------------------------------- A.J. Ryden Its Chairman By --------------------------------- Thomas C. Edwards 6 EXHIBIT A I represent that I have indicated on this Exhibit A (i) all rights, in respect of my engaging in any business activity (whether or not for profit), of former employers, clients, principals, partners or others with whom or for whom I have performed services since January 1, 1986, and (ii) all of the business activities (whether or not for profit) of mine applicable to periods after the time such services were performed. BRIEF DESCRIPTION OF ACTIVITIES - Corporate - March 1985 - 19 January 1991: Member, Board of Directors, the Rovac Corporation. March 1985 - 2 February 1990: Product Design Office Director, the Rovac Corp.; Engineering applications involving the use of the Rovac roller-constrained vane gas-handling machine. 3 February 1990 - Present: Chairman of the Board of Directors, INNOVATION Technologies, Inc. 3 February 1990 - Present: CEO of INNOVATION Technologies, Inc.; Inventing, patenting, designing, analyzing, building, and testing of advanced anti-friction compressor/expander devices; ITI originally conceived as a platform for technical consulting and business counseling. - Consulting - February - March 1990: Prime Mfg. Co., Inc., Milwaukee WS; Technical consulting regarding manufacturing design of Rovac roller-constrained refrigerant compressor for roof-top locomotive air conditioning systems. February - April 1990: Autocam Corp., Grand Rapids MI; Technical consulting regarding manufacturing design of Rovac roller-constrained refrigerant compressor for automotive air conditioners; bench test system design. April 1990: DGI, Inc., Farmingdale NY; Technical consulting regarding comparative energy performance of various air conditioning thermodynamic cycles; conceptual system design. BRIEF DESCRIPTION OF RIGHTS March 1985 - 2 February 1990/The Rovac Corp.: No blanket rights were issued to Rovac*; however, specific rights were to be granted regarding a Rankine power system patent in return for converting/issuing Rovac common stock to Edwards. Transaction never completed by Rovac. Rights of Edwards in respect to Rovac activities are presumed to be inconsequential because rights generated during Rovac activities are not required by INNOVATION Technologies, Inc./CNS Compressor Corporation. Rights to advanced CNS machine technology were generated after employment with Rovac was terminated. Contents of first current Edwards patent application generated more than a month after Rovac employment. February - March 1990/Prime Mfg. Co., Inc.: Engineering activity confined to the Rovac roller-constrained vane compressor; no rights were generated or solicited. February - April 1990/Autocam Corp.: Engineering activity confined to the Rovac roller-constrained vane compressor; no rights were generated or solicited. April 1990/DGI, Inc.: content of engineering consulting services confined to conventional analysis of well-known air conditioning thermodynamic cycles. No rights generated or solicited. - ------------------------- * On two occasions (1985 and 1988), formal employment contracts that would have involved issuing/transferring patent rights were submitted to Rovac's CEO. On both occasions, the Rovac CEO rejected negotiations for such rights. Dated Jan. 14, 1992. /s/ [ILLEGIBLE] --------------- ------------------------------ Executive PAGE -2-