EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective this 5th
day of March, 1998 (the "Effective Date"),is entered into by and between ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ("Executive") and Aura Systems, Inc., a Delaware corporation (the
"Company").
WHEREAS, Executive is a founder of the Company and has been
employed by the Company for several years in the capacity of Chief Executive
Officer; and
WHEREAS, the Company desires to establish its right to the
continued services of Executive, in the capacity described below, on the terms
and conditions hereinafter set forth, and Executive is willing to continue such
employment on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, Executive and the Company have agreed and do hereby agree
as follows:
1. EMPLOYMENT. The Company does hereby employ Executive and Executive does
hereby accept employment as Chief Executive Officer of the Company. Executive
shall do and perform all services and acts necessary or advisable to fulfill the
duties and responsibilities of his position and shall render such services on
the terms set forth herein and shall report to the Company's Board of Directors.
In addition, Executive shall have such other executive and managerial powers and
duties with respect to the Company and its subsidiaries as may reasonably be
assigned to him by the Company's Board of Directors, to the extent consistent
with his positions and status as set forth above. Executive agrees to devote to
the Company and its subsidiaries such time as shall be necessary for the
effective conduct of his duties hereunder.
2. TERM OF AGREEMENT. The term ("Term") of this Agreement shall commence on
the Effective Date and shall continue for a period of three (3) years; provided,
however, that on the first anniversary of the Effective Date (and on each
succeeding anniversary of the Effective Date during the Term), the Term shall
automatically be extended by an additional year (unless Executive or the Company
shall give the other at least ninety (90) days' prior written notice to the
contrary).
3. LOCATION. In connection with Executive's employment by the Company,
Executive shall be based at the headquarters of the Company in El Segundo,
California, except for required travel on the. Company's. business to an extent
substantially consistent with present business travel obligations.
4. COMPENSATION.
(a) BASE SALARY. The Company shall pay Executive an initial annual base
salary at the rate of $385,000 per year (the "Base Salary"), payable in equal
biweekly installments or at such other time or times as Executive and the
Company shall agree. The Base Salary shall be effective December 19, 1997, and
is subject to increase as recommended by the Compensation Committee and approved
by a majority of the disinterested directors of the Board of Directors. The Base
Salary shall be adjusted on or prior to each anniversary of the Effective Date
pursuant to the normal historical business practices of the Company; provided,
however, that the Base Salary shall be no less than the average salary paid to
chief executive officers in comparable companies in the Los Angeles metropolitan
area as determined by the Company's compensation consultants.
(b) DISCRETIONARY BONUS. As recommended by the Compensation Committee and
approved by a majority of the disinterested directors of the Board of Directors,
Executive shall be entitled to receive an annual performance bonus (the
"Discretionary Bonus") from the Company based on such factors as the
Compensation Committee may recommend to the disinterested directors of the Board
of Directors.
(c) TARGET BONUS. Executive shall have the opportunity to earn a target
bonus (the "Target Bonus") up to 50% of Executive's Base Salary based on the
attainment of certain criteria recommended by the Compensation Committee and
approved by a majority of disinterested directors of the Board of directors.
Such criteria may include sales of the Company, earnings per share, stock price,
return on equity, net earnings growth, net earnings, related return ratios, cash
flow, earnings before interest, taxes, depreciation and amortization (EBITDA),
return on assets or total stockholder return, reductions in the company's
overhead ratio, and expense to sales ratios. (d) LIFE INSURANCE. The Company
shall maintain a life insurance policy with a face value equal to two times the
Executive's Base Salary on Executive's life (the "Life Insurance Policy"),
provided that the annual premiums for such policy shall not exceed $10,000. The
beneficiary of such policy shall be designated by Executive.
(e) STOCK OPTIONS. Subject to the recommendation of the Compensation
Committee and approval by a majority of the disinterested members of the Board
of Directors, effective as of the date of this Agreement, the Company shall make
a one-time grant (the "Initial Grant") of stock options (the "Options") to
Executive to purchase up to 1,000,000 shares of Common Stock, and commencing on
the anniversary date of this Agreement and continuing for each year thereafter
during the Term, Executive shall be eligible to receive a grant of Options (the
"Subsequent Grant") to purchase up to 500,000 shares of Common Stock. Such
Subsequent Grants shall be made subject to the recommendation of the
Compensation Committee and approval by a majority of the disinterested directors
of the Board of Directors.
The per share exercise price of the Initial Grant Options
shall be equal to $3.31, which amount is equal to 5 % over the fair market value
of the Initial Grant Options on the date such Initial Grant Options were
granted. The per share exercise price of the Subsequent Grant Options shall
equal the fair market value of the Subsequent Grant Options on the date such
Subsequent Grant Options are granted. The Options shall vest and become
exercisable at the rate of 20% per year on each of the first five anniversaries
of the date of grant and the Options shall have a term of ten (10) years from
the date of grant.
Agreements evidencing such options shall provide that the
Options may be exercised by giving written notice of exercise to the Company
specifying the number of shares to be purchased, accompanied by payment in full
of the aggregate option price by delivery of (i) cash or cash equivalents, (ii)
an executed irrevocable exercise notice to the Company to withhold from the
number of shares to be purchased as set forth in the notice of exercise that
number of shares of Common Stock having a fair market value equal to the
aggregate option price of the number of shares to be purchased. The agreements
shall also provide that, subject to the unanimous approval by the disinterested
directors of the Board of Directors, the Company may make loans available to
Executive in connection with the exercise of outstanding Options. The principal
amount of the loan will be due and payable (i) in a lump sum at the end of the
2-year period following the exercise date or (ii) upon the earlier sale of the
Option stock on a pro-rata basis, and will be with recourse against Executive
with respect to principal and interest. The loan will bear interest at the
applicable federal rate.
(f) FRINGE BENEFITS. Executive shall be entitled to participate in any
fringe, welfare and pension benefit and incentive programs adopted from time to
time by the Company for the benefit of its executive employees, and Executive
shall continue to be entitled to such other fringe and other benefits provided
by the Company to Executive as of the Effective Date. Without limiting the
generality of the foregoing, Executive shall be entitled to the following
benefits: (1) Participation in Retirement/Welfare Plans. Executive shall be
eligible to participate in all savings, retirement, and welfare plans,
practices, policies and programs applicable generally to senior executive
officers of the Company and its subsidiaries.
(2) Reimbursement for Business Expenses. The Company shall reimburse
Executive for all reasonable and necessary expenses incurred by Executive in
performing his duties for the Company and its subsidiaries.
(3) Vacation. Executive shall be entitled to the number of paid vacation
days in accordance with the Company's policy applicable to executive officers
generally. The timing of paid vacations shall be scheduled in a reasonable
manner by Executive.
(4) Automobile. The Company shall provide Executive during the Term with
the use of an automobile in accordance with the Company's practice as of the
Effective Date of this Agreement.
5. TERMINATION OF EXECUTIVE'S EMPLOYMENT.
(a) DEATH. In the event Executive's employment hereunder is terminated by
reason of Executive's death, (i) if Executive is survived by his then spouse,
the Company shall within ten (10) days thereof pay to Executive's estate a lump
sum in an amount equal to Executive's then Base Salary, (ii) the Company shall
pay all benefits payable to Executive under the terms of the Company's
compensation and benefit plans, programs or arrangements, and (iii) all
outstanding equity incentive awards (including without limitation stock options
granted under the Stock Plan) shall immediately vest and any then outstanding
stock options or similar awards held by Executive to the extent exercisable
shall remain exercisable through the end of the stated term thereof.
(b) DISABILITY. If, as a result of Executive's incapacity due to physical
or mental illness ("Disability"), Executive shall have been absent from the full
time performance of his duties with the Company for a period of six (6)
consecutive months and, within thirty (30) days after written notice is provided
to him by the Company, he shall not have returned to the full-time performance
of his duties, Executive's employment under this Agreement may be terminated by
the Company or Executive for Disability. During any period prior to such
termination during which Executive is absent from the full-time performance of
his duties with the Company due to Disability, the Company shall continue to pay
Executive his Base Salary at the rate in effect at the commencement of such
period of Disability. Upon termination of Executive's employment for Disability,
(i) the Company shall within ten (10) days thereof pay Executive a lump sum
equal to his then Base Salary, the Company shall pay all benefits payable to
Executive under the terms of the Company's compensation and benefit plans,
programs or arrangements, and (iii) all outstanding equity incentive awards
(including without limitation stock options granted under the Stock Plan) shall
immediately vest and any then outstanding stock options or similar awards held
by Executive to the extent exercisable shall remain exercisable through the end
of the stated term thereof.
(c) TERMINATION FOR CAUSE. The Company may terminate Executive's employment
under this Agreement for Cause at any time prior to expiration of the Term. As
used herein, termination for "Cause" shall mean termination upon (1) the willful
failure by Executive to materially perform his duties with the Company or to
follow the instructions of the Board (other than any such failure resulting from
his incapacity due to physical or mental illness), (2) the willful engaging by
Executive in conduct that is materially injurious to the Company, monetarily or
otherwise, (3) the conviction of Executive of (or the pleading by Executive of
nolo contendre to) any felony, fraud or embezzlement or (4) any willful material
breach by Executive of the terms of this Agreement, unless any such breach of
this Agreement by Executive that is capable of being corrected is corrected in
all material respects within thirty (30) days following written notification by
the Company to Executive that the Company intends to terminate the employment of
Executive hereunder by reason of a willful material breach of this Agreement for
Cause as specified in such written notice to Executive.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the entire membership of the Board of Directors of the Company
(the "Board") at a meeting of the Board (after reasonable notice to Executive
and opportunity for Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, Executive was
guilty of the conduct described herein, and specifying the particulars thereof
in full detail. In the event of termination for Cause, this Agreement shall
terminate without further obligation by the Company, except for (i) payment of
amounts of Base Salary and any fringe benefits accrued through the date of such
termination, and (ii) as otherwise may be provided under the terms of any
outstanding equity incentive award.
(d) TERMINATION BY THE COMPANY OTHER THAN FOR DEATH. DISABILITY OR CAUSE.
If Executive's employment is terminated by the Company for any reason other than
Executive's death or Disability or for Cause, (i) the Company shall pay
Executive as severance (x) his Base Salary at the rate then in effect through
the then remaining Term (or for a period of six months, if greater) (either such
period, the "Severance Period") as if Executive had remained employed under this
Agreement during the Severance Period, and (y) an annual Discretionary Bonus in
an amount equal to Executive's highest annual Discretionary Bonus in the three
(3) year period immediately preceding such termination (including annual
Discretionary Bonuses received by Executive prior to the Effective Date) payable
at the end of each remaining fiscal year ending during the Severance Period,
with a pro rata Discretionary Bonus payment at the end of the Term with respect
to the period, if any, between the end of the last fiscal year ending during the
Severance Period and the end of the Term, (ii) the Company shall continue to
make payments with respect to premiums on the Life Insurance Policy through the
end of the Severance Period, and (iii) all outstanding equity incentive awards
(including without limitation stock options granted under the Stock Plan) shall
immediately vest and any then outstanding stock options or similar awards held
by Executive to the extent exercisable shall remain exercisable through the end
of the stated term thereof.
(e) NO MITIGATION REQUIRED. Executive shall not be required in any way to
mitigate the amount of any payment or benefit provided for under this Section 5,
including, but not limited to, by seeking other employment, nor shall the amount
of any payment or benefit provided for under this Section 5 be reduced by any
compensation earned by Executive as the result of employment with or services
provided to another employer after the date of Executive's termination of
employment hereunder, or otherwise; provided, however, that in the event
Executive shall breach the provisions of Section 6 hereof, the Company shall
have the right, in addition to any other remedies it may have with respect to
such breach, to offset any amounts payable hereunder or otherwise owing to
Executive by the amount of any compensation earned by Executive as the result of
employment with or other services provided to another employer after the date of
Executive's termination of employment, or otherwise.
6. CONFIDENTIAL INFORMATION AND NON-COMPETITION.
(a) CONFIDENTIALITY. Executive acknowledges that in his employment
hereunder, and during prior periods of employment with the Company and its
subsidiaries, he has occupied and will continue to occupy a position of trust
and confidence. Executive shall not, except as may be required to perform his
duties hereunder or as required by applicable law, without limitation in time or
until such information shall have become public other than by Executive's
unauthorized disclosure, disclose to others or use, whether directly or
indirectly, any Confidential Information regarding the Company and its
subsidiaries. "Confidential Information" shall mean information about the
Company and its subsidiaries, and their respective clients and customers that is
not disclosed by the Company and its subsidiaries for financial reporting
purposes and that was learned by Executive in the course of his employment by
the Company and its subsidiaries, including (without limitation) any proprietary
knowledge, trade secrets, data, formulae, information and client and customer
lists and all papers, resumes, and records (including computer records) of the
documents containing such Confidential Information. Executive acknowledges that
such Confidential Information is specialized, unique in nature and of great
value to the Company and its subsidiaries, and that such information gives the
Company and its subsidiaries a competitive advantage. Executive agrees to
deliver or return to the Company, at the Company's request at any time or upon
termination or expiration of his employment or as soon thereafter as possible,
all documents, computer tapes and disks, records, lists, data, drawings, prints,
notes and written information (and all copies thereof) furnished by the Company
and its subsidiaries or prepared by Executive during the term of his employment
by the Company and its subsidiaries.
(b) NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the period in which
he is employed by the Company (and, in the event Executive's employment is
terminated by the Company for Cause, for a period of one (1) year beyond the
expiration of the Term), Executive shall not, directly or indirectly, influence
or attempt to influence customers or suppliers of the Company or any of its
subsidiaries or affiliates to divert their business to any business, individual,
partner, firm, corporation., or other entity that. is then a direct competitor
of the Company or its subsidiaries with respect to electromagnetic and
electro-optical technology (each such competitor a "Competitor of the Company").
(c) NON-SOLICITATION OF EMPLOYEES. Executive recognizes that he possesses
and will possess confidential information about other employees of the Company
and its subsidiaries relating to their education, experience, skills, abilities,
compensation and benefits, and interpersonal relationships with customers of the
Company and its subsidiaries. Executive recognizes that the information he
possesses and will possess about these other employees is not generally known,
is of substantial value to the Company and its subsidiaries in developing its
business and in securing and retaining customers, and has been and will be
acquired by him because of his business position with the Company and its
subsidiaries. Executive agrees that, during the period in which he is employed
by the Company (and, in the event Executive's employment is terminated by the
Company for Cause, for a period of one (1) year beyond the expiration of the
Term), he will not, directly or indirectly, solicit or recruit any employee of
the Company or its subsidiaries for the purpose of being employed by him or by
any Competitor of the Company on whose behalf he is acting as an agent,
representative or employee and that he will not convey any such confidential
information or trade secrets about other employees of the Company and its
subsidiaries to any other person.
(d) SURVIVAL OF PROVISIONS. The obligations contained in this Section 6
shall, to the extent provided in this Section 6, survive the termination or
expiration of Executive's employment with the Company and, as applicable, shall
be fully enforceable thereafter in accordance with the terms of this Agreement.
If it is determined by a court of competent jurisdiction in any state that any
restriction in this Section 6 is excessive in duration or scope or is
unreasonable or unenforceable under the laws of that state, it is the intention
of the parties that such restriction may be modified or amended by the court to
render it enforceable to the maximum extent permitted by the law of that state.
7. NOTICES. All notices and other communications under this Agreement shall
be in writing and shall be given by fax or first-class mail, certified or
registered with return receipt requested, and shall be deemed to have been duly
given three (3) days after mailing or twenty-four (24) hours after transmission
of a fax to the respective persons named below:
If to Company:
Aura Systems
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Secretary
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Executive: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Phone:
Fax:
Either party may change such party's address for notices by notice duly given
pursuant hereto.
8. DISPUTE RESOLUTION: ATTORNEYS' FEES. The Company and Executive agree
that any dispute arising as to the parties' rights and obligations hereunder,
other than with respect to Section 6, shall be resolved by binding arbitration
in accordance with the rules of the American Arbitration Association then in
effect before a private judge to be determined by mutually agreeable means. Each
party shall have the right, in addition to any other relief granted by such
arbitrator (or by any court with respect to relief granted with respect to
Section 6), to attorneys' fees based on a determination by the arbitrator (or,
with respect to Section 6, the court) of the extent to which each party has
prevailed as to the material issues raised in determination of the dispute.
9. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
supersedes any and all prior agreements and understandings between the parties
with respect to Executive's employment and compensation by the Company, but only
with respect to the matters expressly addressed herein.
10. ASSIGNMENT: SUCCESSORS. This Agreement is personal in its nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder; provided that,
in the event of the merger, consolidation, transfer, or sale of all or
substantially all of the assets of the Company with or to any other individual
or entity, this Agreement shall, subject to the provisions hereof, be binding
upon and inure to the benefit of such successor and, such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder.
11. GOVERNING LAW. This Agreement and the legal relations thus created
between the parties hereto shall be governed by and construed under and in
accordance with the laws of the State of California.
12. WITHHOLDING. The Company shall make such deductions and withhold such
amounts from each payment made to the Executive hereunder as may be required
from time to time by law, governmental regulation or order.
13. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
14. WAIVER: MODIFICATION. Failure to insist upon strict compliance with any
of the terms, covenants, or conditions hereof shall not be deemed a waiver of
such term, covenant, or condition, nor shall any waiver or relinquishment of, or
failure to insist upon strict compliance with, any right or power hereunder at
any one or more times be deemed a waiver or relinquishment of such right or
power at any other time or times. This Agreement shall not be modified in any
respect except by a writing executed by each party hereto.
15. SEVERABILITY: POOLING.
(a) In the event that a court of competent jurisdiction determines that any
portion of this Agreement is in violation of any statute or public policy, only
the portions of this Agreement that violate such statute or public policy shall
be stricken. All portions of this Agreement that do not violate any statute or
public policy shall continue in full force and effect. Further, any court order
striking any portion of this Agreement shall modify the stricken terms as
narrowly as possible to give as much effect as possible to the intentions of the
parties under this Agreement.
(b) In the event that the Company is party to a transaction which is
otherwise intended to qualify for "pooling of interests" accounting treatment
then (A) this Agreement shall, to the extent practicable, be interpreted so as
to permit such accounting treatment,, and (13) to the extent that the
application of clause (A) of this Section 15(b) does not preserve the
availability of such accounting treatment, then, to the extent that any
provision of the Agreement disqualifies the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement), such provision
shall be null and void as of the date hereof. All determinations under this
Section 15(b) shall be made by the accounting firm whose opinion with respect to
"pooling of interests" is required as a condition to the consummation of such
transaction.
16. INDEMNIFICATION. The Company and its subsidiaries shall indemnify and
hold Executive harmless for acts and omissions in his capacity as an officer,
director or employee of the Company and its subsidiaries to the maximum extent
permitted under applicable law.
17. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Executive has hereunto signed this
Agreement, as of the date first above written.
AURA SYSTEMS, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President
[signature]
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