EXHIBIT 10.20
EMPLOYMENT AGREEMENT
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This EMPLOYMENT AGREEMENT (the "Agreement") dated as of September 25, 2002
(the "Date of this Agreement"), is made by and between HiEnergy Technologies,
Inc., a Washington corporation (the "Company"), and Tom Pascoe (the
"Executive").
WHEREAS, the Company wishes to employ Executive on the terms set forth
below.
WHEREAS, Executive wishes to accept such employment.
Accordingly, the parties hereto agree as follows:
1. Term. The Company hereby employs Executive, and Executive hereby
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accepts such employment, for an initial term commencing as of the Date of this
Agreement and ending on the third anniversary of such date, unless sooner
terminated in accordance with the provisions of Section 4 or Section 5; with
such employment to continue thereafter for successive one-year periods in
accordance with the terms of this Agreement on each anniversary of the Date of
this Agreement (subject to termination as aforesaid) unless either party
notifies the other party in writing not less than ninety (90) days before
expiration of the initial term and each annual renewal thereof (the period
during which Executive is employed hereunder being hereinafter referred to as
the "Term") of an intent not to renew this Agreement.
2. Duties. During the Term, Executive shall be employed by the Company
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as its President & Chief Executive Officer and have the powers set forth in the
Company's bylaws (as currently in force and as proposed in an appendix to the
Company's definitive proxy statement for its 2002 annual meeting). The
Executive shall devote substantially all of his or her business time and effort
to the performance of Executive's duties hereunder, and shall work primarily at
the Company's main business offices.
3. Compensation.
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3.1 Salary. The Company shall pay Executive during the Term a salary
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at the rate of $250,000 per annum (the "Annual Salary"), in accordance with the
customary payroll practices of the Company applicable to senior executives,
provided the payments are no less frequent than monthly (or, if there is no such
policy, payments shall be semi-monthly). Notwithstanding the foregoing, in
light of the Company's early-stage situation and need to preserve cash,
Executive has agreed to receive a reduced portion of the Annual Salary on the
following schedule: $135,000 annually until the first $2 million of New Revenue
and/or New Financing (in any combination) is received by the Company. "New
Revenue" shall mean any revenue actually received by the Company, as well as any
revenue which is to be received by the Company in the future pursuant to a
written contract or agreement with the US government, which shall be included in
New Revenue at the time such contract or agreement is entered into, excluding
any revenue actually received prior to the date hereof or received or to be
received pursuant to a contract or agreement with the US government entered into
prior to the date hereof (the SBIR I and II contracts for an aggregate of
$775,000 are expressly excluded from New Revenue). "New Financing" shall mean
any gross proceeds received by the Company from the issuance of Company
securities excluding any financing received prior to the date of this Agreement
and excluding the closing of the Company's offering of its Series A Convertible
Preferred Stock, provided it closes by September 30, 2002. At that time, the
portion of the Executive's Annual Salary will be increased to $175,000 annually.
When cumulative New Revenue and/or New Financing exceeds $4 million (in any
combination) Executive will receive the full Annual Salary of $250,000.
Executive shall not retroactively receive any portion of the Annual Salary upon
attainment of the $2 million and $4 million milestones, his salary for the
periods prior to attaining the milestones being strictly limited to the stated
reduced portions. The Executive's salary will also be annually reviewed by the
Company for possible increases. The Annual Salary shall be subject to possible
further increase from time to time in the sole discretion of the Board of
Directors of the Company (the "Board") or such committee of the Board as they
shall designate for such purpose from time to time. Any increased Annual Salary
shall thereupon be the "Annual Salary" for the purposes hereof. The Executive's
Annual Salary shall not be decreased without his prior written consent at any
time during the Term.
3.2 Incentive Compensation. During the Term, Executive shall, in
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addition to his Annual Salary, be entitled to a bonus (the "PCF Bonus") equal to
$250,000 once the Company achieves two consecutive quarters of positive cash
flow from operations. The bonus shall be payable from time to time, but not in
a cumulative amount in excess of Cumulative PCF (as defined below), out of
Excess Cash (as defined below), within five business days after the Company
files its financial statements with the SEC and in no event no later than 90
days after the close of the quarter, until such time as the full $250,000 bonus
is paid. "Cumulative PCF" means, at the end of any given quarter, the cumulative
amount of "Net cash provided by (used in) operating activities" as shown in the
Company's financial statements from the beginning of the first of the two
consecutive quarters in which the Company achieved positive cash flow from
operations. "Excess Cash" means the difference of (a) that portion of "Cash and
cash equivalents" as shown in the Company's financial statements equal to the
difference of "Total current assets" minus "Total current liabilities"
(excluding indebtedness to related parties) each as shown in the Company's
financial statements, minus (b) $250,000. Executive and the Company shall
negotiate in good faith to develop a more definitive bonus program, which shall
be submitted to the Board within 90 days from the Date of this Agreement. The
Board shall have the right to award additional bonus amounts and the amount of
such additional bonus and any performance standards or goals required to be
attained in order to receive such bonus shall be set by the Board or such
committee of the Board as they shall designate for such purpose from time to
time.
3.3 Stock Options. Upon execution of this Agreement, Executive shall be
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granted incentive stock options (the "Options") to purchase shares of the
Company's Common Stock pursuant to the terms of a Stock Option Agreement
substantially in the form of Exhibit A to this Agreement. The Options shall
entitle Executive to purchase, in the aggregate, underlying shares of the
Company's common stock in an amount equal to ten percent (10%) of the Company's
outstanding common stock on a fully diluted basis, based on the Company's equity
structure on the earlier of (a) the final closing of its offering of its Series
A Convertible Preferred Stock, provided that such final closing has occurred by
September 30, 2002, or (b) September 30, 2002.
3.4 Benefits. Except as otherwise provided herein, Executive shall
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participate in any group life, medical or disability insurance plans, health
programs, retirement plans, fringe benefit programs and similar benefits that
may be available to other senior executives of the Company generally, on the
same terms as such other executives, to the extent that Executive is eligible
under the terms of such plans or programs as they may be in effect from time to
time. The Company will provide coverage for Executive under the Company's
health benefits plan and will pay 100% of the cost of spouse or dependent
coverage. Coverage under the health benefits plan will be in effect commencing
with the first month following thirty (30) days of employment. In addition, the
Company will provide a monthly auto allowance in the amount of $900, paid
concurrent with the first salary paycheck of each month.
3.5 Expenses. The Company shall pay or reimburse Executive for all
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ordinary and reasonable out-of-pocket expenses actually incurred (and, in the
case of reimbursement, paid) by Executive during the Term in the performance of
Executive's services under this Agreement, provided that Executive submits proof
of such expenses, with the properly completed forms as prescribed from time to
time by the Company, no later than thirty (30) days after the end of the monthly
period in which such expenses have been so incurred.
4. Termination upon Death or Disability. If Executive dies during the
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Term, the Term shall terminate as of the date of death, and the obligations of
the Company to or with respect to Executive shall terminate in their entirety
upon such date except as otherwise provided under this Section 4. If Executive
becomes disabled for purposes of the long-term disability plan of the Company
for which Executive is eligible, or, in the event that there is no such plan, if
Executive by virtue of ill health or other disability is unable to perform
substantially and continuously the duties assigned to him for more than 180
consecutive or non-consecutive days out of any consecutive 12-month period, then
the Company shall have the right, to the extent permitted by law, to terminate
the employment of Executive upon notice in writing to Executive. Upon
termination of employment due to death or disability, (i) Executive (or
Executive's estate or beneficiaries in the case of the death of Executive) shall
be entitled to receive any Annual Salary, PCF Bonus and other benefits earned
and accrued under this Agreement prior to the date of termination (and
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reimbursement under this Agreement for expenses incurred prior to the date of
termination, (ii) in the case of termination due to disability, Executive shall
be entitled to receive 60% of his Annual Salary (provided that Executive shall
be entitled to any more favorable percentage accorded any other executive
officer of the Company) for the lesser of twelve (12) months following such
termination, or the period until long term disability insurance benefits
commence under disability coverage furnished by the Company to Executive; and
(iii) Executive (or, in the case of Executive's death, Executive's estate and
beneficiaries) shall have no further rights to any other compensation or
benefits hereunder on or after the termination of employment, or any other
rights hereunder, except as otherwise provided in the plans and policies of the
Company.
5. Certain Terminations of Employment.
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5.1 Termination for Cause; Termination of Employment by Executive
without Good Reason.
(a) For purposes of this Agreement, "Cause" shall mean Executive's:
(i) conviction of (or pleading nolo contendere to) a felony
involving physical violence or moral turpitude, or any crime involving
the Company that results in material economic harm to the Company;
(ii) engagement in the performance of his or her duties hereunder
or otherwise to the material and demonstrable detriment of the
Company, in willful misconduct, willful or gross neglect, fraud,
misappropriation or embezzlement;
(iii) after notice from the Board, and, if requested by
Executive, the opportunity to be heard by the Board, the failure to
adhere to the lawful and reasonable directions of the Board that are
consistent with the terms of this Agreement, or the failure to devote
substantially all of the business time and effort to the Company
(except for any activities expressly authorized by the Company);
(iv) material breach of any of the provisions of Section 6, other
than inadvertent breaches; or
(v) breach in any material respect of the terms and provisions of
this Agreement and failure to cure such breach within thirty (30) days
following written notice from the Company specifying such breach;
provided however, if Executive delivers written notice to Company
during the thirty (30) day cure period requesting to be heard at a
meeting of the Board, his or her termination under this Section
5.1(a)(v) shall not be effective until such Board meeting at which
Executive has had an opportunity to be heard.
provided that Cause shall not exist except on written notice given to Executive
at any time not more than sixty (60) days following the occurrence of any of the
events described above (or, if later, the Board's knowledge (excluding
Executive's knowledge) thereof).
(b) The Company may terminate Executive's employment hereunder for
Cause, and Executive may terminate his employment for any or no reason on at
least 30 days' and not more than 60 days' written notice given to the Company.
If the Company terminates Executive for Cause, or Executive terminates his
employment and the termination by Executive is not covered by Section 4 or 5.2,
(i) Executive shall receive Annual Salary, PCF Bonus, and other benefits earned
and accrued under this Agreement prior to the termination of employment (and
reimbursement under this Agreement for expenses incurred prior to the
termination of employment); and (ii) Executive shall have no further rights to
any other compensation or benefits hereunder on or after the termination of
employment, or any other rights hereunder, except as otherwise provided in the
plans and policies of the Company.
5.2 Termination by the Company without Cause; or by Executive for Good
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Reason.
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(a) For purposes of this Agreement, "Good Reason" shall mean, unless
otherwise consented to in writing by Executive;
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(i) a reduction in Annual Salary or in benefits of Executive, or
the failure of the Company timely to make any payment due to
Executive;
(ii) any action by the Company that results in a material
diminution in Executive's position, authority, duties or
responsibilities;
(iii) a material breach of any provision of this Agreement by the
Company;
(iv) relocation of Executive outside of the Orange County,
California area without Executive's written consent; or
(v) a failure of the Company to have a successor entity
specifically assume this Agreement.
Notwithstanding the foregoing, (i) Good Reason shall not be deemed to exist
unless notice of termination on account thereof (specifying a termination date
no later than thirty (30) days from the date of such notice) is given no later
than sixty (60) days after the time at which the event or condition purportedly
giving rise to Good Reason first occurs or arises (or when Executive first
becomes aware of such circumstances); and (ii) if there exists (without regard
to this clause (ii)) an event or condition that constitutes Good Reason, the
Company shall have thirty (30) days from the date notice of such a termination
is given to cure such event or condition and, if the Company does so fully cure
such event or condition, or, if it commences a cure within such 30-day period
that would reasonably take longer than 30 days to complete, so long as the
Company diligently prosecutes such cure to completion, such event or condition
shall not constitute Good Reason hereunder.
(b) The Company may terminate Executive's employment at any time for
any reason or no reason and Executive may terminate Executive's employment with
the Company for Good Reason. A notice of non-renewal by the Company shall
constitute a termination of employment by the Company without Cause.
(c) If the Company terminates Executive's employment and the
termination is not covered by Section 4 or 5.1, or Executive terminates his
employment for Good Reason, Executive shall receive:
(i) Annual Salary, PCF Bonus, and other benefits earned and accrued
under this Agreement prior to the termination of employment (and
reimbursement under this Agreement for expenses incurred prior
to the termination of employment);
(ii) an amount equal to Executive's Annual Salary, payable in twelve
(12) monthly installments over the twelve (12) month period
following the termination date; and
(iii) reimbursement for COBRA payments equal to Executive's regular
monthly contributions toward Executive's health insurance
benefits for the twelve (12) month period following the
termination date if Executive elects COBRA benefits.
6. Invention, Non-Disclosure and Non-Solicitation.
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6.1 Inventions and Patents.
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(a) The Executive will promptly and fully disclose to the Company any
and all inventions, discoveries, improvements, ideas, developments, designs,
products, formulas, software programs, processes, techniques, technology,
know-how, negative know-how, data, research, technical data and original works
of authorship (whether or not patentable or registrable under patent, copyright
or similar statutes and including all rights to obtain, register, perfect and
enforce those proprietary interests) that are related to or useful in the
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Company's present or future business or result from use of property owned,
leased, or contracted for by the Company and which Executive develops, makes,
conceives or reduces to practice during Executive's employment by the Company,
either solely or jointly with others (collectively, the "Developments"). All
such Developments shall be the sole property of the Company, and Executive
hereby assigns to the Company, without further compensation, all of Executive's
right, title and interest in and to such Developments and any and all related
patents, patent applications, copyrights, copyright applications, trademarks,
service marks and trade names in the United States and elsewhere.
(b) The Executive shall disclose promptly to an officer or to attorneys
of the Company in writing any inventions, discoveries, improvements, ideas,
developments, designs, products, formulas, software programs, processes,
techniques, technology, know-how, negative know-how, data, research, technical
data and original works of authorship, whether or not patentable or registrable
under patent, copyright or similar statutes, Executive may conceive, make,
develop or work on, in whole or in part, solely or jointly with others during
Executive's employment, for the purpose of permitting the Company to determine
whether they constitute Developments. The Company shall receive such
disclosures in confidence.
(c) The Executive will keep and maintain adequate and current written
records of all Developments (in the form of notes, sketches, drawings and as may
be specified by the Company), which records shall be available to and remain the
sole property of the Company at all times.
(d) The Executive will assist the Company in obtaining and enforcing
patent, copyright, trademark, service marks and other forms of legal protection
for the Developments in any country. Upon request, Executive will sign all
applications, assignments, instruments and papers and perform all acts necessary
or desired by the Company to assign all such Developments fully and completely
to the Company and to enable the Company, its successors, assigns and nominees,
to secure and enjoy the full and exclusive benefits and advantages thereof.
(e) The Executive understands that Executive's obligations under this
section will continue after the termination of Executive's employment with the
Company and that during Executive's employment Executive will perform such
obligations without further compensation, except for reimbursement of expenses
incurred at the request of the Company. The Executive further understands that
if Executive is not employed by the Company as an employee at the time Executive
is requested to perform any obligations under this section, Executive shall
receive for such performance a reasonable per diem fee, as well as reimbursement
of any reasonable expenses incurred at the request of the Company.
(f) Any provision in this Agreement requiring Executive to assign
Executive's rights in all Developments shall not apply to an invention that
qualifies fully under the provisions of California Labor Code section 2870, the
terms of which are set forth below:
(i) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information
except for those inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual
or demonstrably anticipated research or development of the
employer; or
(2) Result from any work performed by the employee for the
employer.
(ii) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (i), the provision is against the
public policy of this state and is unenforceable.
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6.2 Proprietary Information.
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(a) The Executive recognizes that Executive's relationship with the
Company is one of high trust and confidence by reason of Executive's access to
and contact with the trade secrets and confidential and proprietary information
of the Company including, without limitation, information not previously
disclosed to the public regarding current and projected revenues, expenses,
costs, profit margins and any other financial and budgeting information;
marketing and distribution plans and practices; business plans, opportunities,
projects and any other business and corporate strategies; product information;
names, addresses, terms of contracts and other arrangements with customers,
suppliers, agents and employees of the Company; confidential and sensitive
information regarding other employees, including information with respect to
their job descriptions, performance strengths and weaknesses, and compensation;
and other information not generally known regarding the business, affairs and
plans of the Company (collectively, the "Proprietary Information"). The
Executive acknowledges and agrees that Proprietary Information is the exclusive
property of the Company and that Executive shall not at any time, either during
Executive's employment with the Company or thereafter disclose to others, or
directly or indirectly use for Executive's own benefit or the benefit of others,
any of the Proprietary Information.
(b) The Executive acknowledges that the unauthorized use or disclosure
of Proprietary Information would be detrimental to the Company and would
reasonably be anticipated to materially impair the Company's value.
(c) The Executive's undertakings and obligations under this Section 6.2
will not apply, however, to any Proprietary Information which: (a) is or becomes
generally known to the public through no action on Executive's part, (b) is
generally disclosed to third parties by the Company without restriction on such
third parties, (c) is approved for release by written authorization of the
Board, (d) is known to Executive other than as a result of work performed for
the Company, or (e) is required to be disclosed by law or governmental or court
process or order.
(d) Upon termination of Executive's employment with the Company or at any
other time upon request, Executive will promptly deliver to the Company all
notes, memoranda, notebooks, drawings, records, reports, written computer code,
files and other documents (and all copies or reproductions of such materials in
whatever media) in Executive's possession or under Executive's control, whether
prepared by Executive or others, which contain Proprietary Information. The
Executive acknowledges that this material is the sole property of the Company.
6.3 Absence of Restrictions Upon Disclosure and Competition.
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(a) The Executive hereby represents that, except as Executive has
disclosed in writing to the Company on Exhibit A attached hereto, Executive is
not bound by the terms of any agreement with any previous employer or other
party to refrain from using or disclosing any trade secret or confidential or
proprietary information in the course of Executive's employment with the Company
or to refrain from competing, directly or indirectly, with the business of such
previous employer or any other party.
(b) The Executive further represents that Executive's performance of
all the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by Executive in confidence or in trust prior to his
employment with the Company, and Executive will not disclose to the Company or
induce the Company to use any confidential or proprietary information or
material belonging to any previous employer or others.
6.4 Prohibition on Solicitation of Customers. During the Term and for
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a period of one (1) year thereafter, Executive agrees not to, directly or
indirectly, either for Executive or for any other person or entity, solicit any
person or entity to terminate such person's or entity's contractual and/or
business relationship with the Company, nor will Executive interfere with or
disrupt or attempt to interfere with or disrupt any such relationship. None of
the foregoing shall be deemed a waiver of any and all rights and remedies the
Company may have under applicable law.
6.5 Prohibition on Solicitation of Employees, Agents or Independent
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Contractors. During the Term and for a period of one (1) year thereafter,
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Executive agrees not to solicit any of the employees, agents or independent
contractors of the Company to leave the employ of the Company for a competitive
company or business. However, Executive may solicit any employee, agent or
independent contractor who voluntarily terminates his or her employment with the
Company after a period of ninety (90) days have elapsed since the termination
date of such employee, agent or independent contractor. None of the foregoing
shall be deemed a waiver of any and all rights and remedies the Company may have
under applicable law.
6.6 Other Obligations. The Executive acknowledges that the Company from
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time to time may have agreements with other persons or with the U.S. Government
or agencies thereof, which impose obligations or restrictions on the Company
regarding inventions made during the course of work under such agreements or
regarding the confidential nature of such work. The Executive agrees to be
bound by all such obligations and restrictions which are made known to Executive
and to take all action necessary to discharge the obligations of the Company
under such agreements.
6.7 Rights and Remedies upon Breach. The Executive acknowledges and
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agrees that any breach by him of any of the provisions of Section 6 (the
"Restrictive Covenants") would result in irreparable injury and damage for which
money damages may not provide an adequate remedy. Therefore, if Executive
breaches any of the provisions of Section 6, the Company shall have the
following rights and remedies, each of which rights and remedies shall be
independent of the other and severally enforceable, and all of which rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity (including, without
limitation, the recovery of damages): the right and remedy to have the
Restrictive Covenants specifically enforced (without posting bond and without
the need to prove damages) by any court having equity jurisdiction, including,
without limitation, the right to an entry against Executive of restraining
orders and injunctions (preliminary, mandatory, temporary and permanent) against
violations, threatened or actual, and whether or not then continuing, of such
covenants.
7. Other Provisions.
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7.1 Severability. The Executive acknowledges and agrees that (i) he
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has had an opportunity to seek advice of counsel in connection with this
Agreement and (ii) the Restrictive Covenants are reasonable in geographical and
temporal scope and in all other respects. If it is determined that any of the
provisions of this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the provisions of this Agreement shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
7.2 Duration and Scope of Covenants. If any court or other
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decision-maker of competent jurisdiction determines that any of Executive's
covenants contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or scope of such provision, as
the case may be, shall be reduced so that such provision becomes enforceable
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.
7.3 Arbitration.
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(a) Any controversy, dispute, or claim between the parties to this
Agreement, including any claim arising out of, in connection with, or in
relation to the formation, interpretation, performance or breach of this
Agreement shall be settled exclusively by arbitration, before a single
arbitrator, in accordance with this section and the then most applicable rules
of the American Arbitration Association. Judgment upon any award rendered by
the arbitrator may be entered by any state or federal court having jurisdiction
thereof. Such arbitration shall be administered by the American Arbitration
Association. Arbitration shall be the exclusive remedy for determining any such
dispute, regardless of its nature. Notwithstanding the foregoing, either party
may in an appropriate matter apply to a court pursuant to California Code of
Civil Procedure Section 1281.8, or any comparable provision, for provisional
relief, including a temporary restraining order or a preliminary injunction, on
the ground that the award to which the applicant may be entitled in arbitration
may be rendered ineffectual without provisional relief.
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(b) In the event the parties are unable to agree upon an arbitrator,
the parties shall select a single arbitrator from a list of nine arbitrators
drawn by the parties at random from the "Independent" (or "Gold Card") list of
retired judges or, at Executive's option, from a list of nine persons from the
Employment Panel and provided by the American Arbitration Association. If the
parties are unable to agree upon an arbitrator from the list so drawn, then the
parties shall each strike names alternately from the list, with the first to
strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to
serve for any reason, the parties shall repeat this process until an arbitrator
is selected.
(c) This agreement to resolve any disputes by binding arbitration shall
extend to claims against any parent, subsidiary or affiliate of each party, and,
when acting within such capacity, any officer, director, shareholder, employee
or agent of each party, or of any of the above, and shall apply as well to
claims arising out of state and federal statutes and local ordinances as well as
to claims arising under the common law. In the event of a dispute subject to
this paragraph the parties shall be entitled to reasonable discovery subject to
the discretion of the arbitrator. The remedial authority of the arbitrator shall
be the same as, but no greater than, would be the remedial power of a court
having jurisdiction over the parties and their dispute. The arbitrator shall,
upon an appropriate motion, dismiss any claim without an evidentiary hearing if
the party bringing the motion establishes that he, she or it would be entitled
to summary judgment if the matter had been pursued in court litigation. In the
event of a conflict between the applicable rules of the American Arbitration
Association and these procedures, the provisions of these procedures shall
govern.
(d) Any filing or administrative fees shall be borne initially by the party
requesting arbitration. The Company shall initially be responsible for the costs
and fees of the arbitrator, unless Executive wishes to contribute up to 50% of
the costs and fees of the arbitrator. The prevailing party in such arbitration,
as determined by the arbitrator, and in any enforcement or other court
proceedings, shall be entitled, to the extent permitted by law, to reimbursement
from the other party for all of the prevailing party's costs (including but not
limited to the arbitrator's costs and fees), expenses, and attorneys' fees.
(e) The arbitrator shall render an award and written opinion, and the award
shall be final and binding upon the parties. If any of the provisions of this
Section 7.3, or of this Agreement, are determined to be unlawful or otherwise
unenforceable, in whole or in part, such determination shall not affect the
validity of the remainder of this Agreement, and this Agreement shall be
reformed to the extent necessary to carry out its provisions to the greatest
extent possible and to insure that the resolution of all conflicts between the
parties, including those arising out of statutory claims, shall be resolved by
neutral, binding arbitration. If a court should find that this Section's
arbitration provisions are not absolutely binding, then the parties intend any
arbitration decision and award to be fully admissible in evidence in any
subsequent action, given great weight by any finder of fact, and treated as
determinative to the maximum extent permitted by law.
(f) Unless mutually agreed by the parties otherwise, any arbitration shall
take place in Orange County, California.
7.4 Covenant to Notify Management. Executive agrees to abide by the
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ethics policies of the Company as well as the Company's other rules,
regulations, policies and procedures. Executive agrees to comply in full with
all governmental laws and regulations as well as ethics codes applicable to the
profession. In the event that Executive is aware or suspects the Company, or
any of its officers or agents, of violating any such laws, ethics codes, rules,
regulations, policies or procedures, Executive agrees to bring all such actual
and suspected violations to the attention of the Company immediately so that the
matter may be properly investigated and appropriate action taken. Executive
understands that he is precluded from filing a complaint with any governmental
agency or court having jurisdiction over wrongful conduct unless Executive has
first notified the Company of the facts and permits it to investigate and
correct the concerns.
7.5 Statute of Limitations. Executive and the Company hereby agree
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that there shall be a one year statute of limitations for the filing of any
requests for arbitration or any lawsuit relating to this Agreement or the terms
or conditions of Executive's employment by the Company. If such a claim is
filed more than one year subsequent to Executive's last day of employment it
shall be precluded by this provision, regardless of whether or not the claim has
accrued at that time.
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7.6 Company Information. The Company has timely filed all request
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forms, reports, statements and documents with the Securities and Exchange
Commission (the "Commission"), all of which have complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended. The Executive
represents that he has reviewed the following filings with the Commission: (i)
the Company's Annual Report on Form 10-KSB for the fiscal year ended April 30,
2002, (ii) the definitive proxy statement relating to the Company's annual
shareholders meeting to be held October 10, 2002, and (iii) all other forms,
reports, statements and documents filed by the Company since April 30, 2002
(collectively, the "Company Reports"). As of their respective dates, the
Company Reports did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
7.7 Notices. All notices or deliveries authorized or required pursuant
-------
to this Agreement shall be deemed to have been given when in writing and when
(i) deposited in the U.S. mail, certified, return receipt requested, postage
prepaid, or (ii) otherwise delivered by hand or by overnight delivery, against
written receipt, by a common carrier or commercial courier or delivery service
addressed to the parties at the following addresses or to such other addresses
as either may designate in writing to the other party:
to the Company: HiEnergy Technologies, Inc.
10 Mauchly Drive
Irvine, CA 92618
Attn: Secretary
To Executive: Tom Pascoe
________________
________________
7.8 Entire Agreement. This Agreement contains the entire agreement
-----------------
between the parties with respect to the subject matter hereof and thereof and
supersedes all prior agreements, written or oral, with respect thereto.
7.9 Waivers and Amendments. This Agreement may be amended, superseded,
----------------------
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any such right, power or privilege nor
any single or partial exercise of any such right, power or privilege, preclude
any other or further exercise thereof or the exercise of any other such right,
power or privilege.
7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
7.11 Assignment. This Agreement, and Executive's rights and obligations
----------
hereunder, may not be assigned by Executive; any purported assignment by
Executive in violation hereof shall be null and void. In the event of any sale,
transfer or other disposition of all or substantially all of the Company's
assets or business, whether by merger, consolidation or otherwise, the Company
may assign this Agreement and its rights hereunder; provided that such
assignment shall not limit the Company's liability under this Agreement to
Executive.
7.12 Withholding. The Company shall be entitled to withhold from any
-----------
payments or deemed payments any amount of tax withholding required by law.
7.13 Binding Effect. This Agreement shall be binding upon and inure to
---------------
the benefit of the parties and their respective successors, permitted
assigns, heirs, executors and legal representatives.
7.14 Counterparts. This Agreement may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall
be an original but all such counterparts together shall constitute one and
the same
9
instrument. Each counterpart may consist of two copies hereof each signed by
one of the parties hereto.
7.15 Survival. Anything contained in this Agreement to the contrary
--------
notwithstanding, the provisions of Sections 6, 7.3, 7.5, 7.11 and 7.16, and the
other provisions of this Section 7 (to the extent necessary to effectuate the
survival of Sections 6, 7.3, 7.5, 7.11 and 7.16), shall survive termination of
this Agreement and any termination of Executive's employment hereunder.
7.16 Headings. The headings in this Agreement are for reference only
--------
and shall not affect the interpretation of this Agreement.
7.17 Indemnification; Directors and Officers Insurance. To the fullest
-------------------------------------------------
extent permitted by law, the Company shall indemnify, defend and hold harmless
Executive from and against all actual or threatened actions, suits or
proceedings, whether civil or criminal, administrative or investigative,
together with all attorneys' fees and costs, fines, judgments or settlements
imposed upon or incurred by Executive in connection therewith, that arise from
Executive's employment by, or serving as an officer of, the Company, so long as
Executive acted or refrained from acting legally and in good faith or reasonably
believed that his actions or refraining from acting were legal and performed or
omitted in good faith. Company currently has directors and officers liability
insurance and will use reasonable efforts to maintain such insurance coverage
during the term of this Agreement.
IN WITNESS WHEREOF, the parties hereto have signed their names as of the
day and year first above written.
EMPLOYER
Hi Energy Technologies, Inc., a
Washington corporation
By: /s/ B.C. Maglich
---------------------
Name: Dr. Bogdan C. Maglich
Its: Chairman
By: /s/ Barry Alter
--------------------
Name: Barry Alter
Its: Director
EXECUTIVE
/s/ Tom Pascoe
------------------
Tom Pascoe
10
INVENTION, NON-DISCLOSURE AND NON-COMPETITION AGREEMENT
-------------------------------------------------------
Exhibit A
---------
Please list terms of any agreements with any previous employer or other
party which restrains you from using or disclosing any trade secret or
confidential or proprietary information in the course of your employment with
___________________ or restrains you from competing directly or indirectly with
the business of such previous employer or any other party.
Date Signed by
Executive:
9-23-02 /s/ Tom Poscoe
_____________________________________ _____________________________________
Signature of Executive
TOM POSCOE
_____________________________________
Printed Name of Executive
Reviewed and accepted by
B.C. Maglich
_________________________
9/24/02
On_______________________
/s/ B.C. Maglich
By:______________________