Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made as of October 12, 2018 (the
“Effective Date”) by and between CDTi Advanced Materials, Inc., a Delaware
corporation (“CDTI” or the “Company”), and Tracy Kern (“Executive”).

 

WHEREAS, CDTI and Executive desire to enter into an agreement setting forth the
terms and conditions of Executive’s continued employment with CDTI.

 

NOW THEREFORE, in consideration of the mutual promises of the parties and the
mutual benefits they will gain by the performance thereof, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties do hereby agree as follows:

 

1.                                      Employment.

 

CDTI continues to employ Executive, and Executive continues to accept employment
with CDTI, upon the terms and conditions set forth in this Agreement. This
Agreement supersedes and replaces any other employment or consulting agreement
between Executive and CDTI.

 

2.                                      Position and Duties.

 

(a)                                 Executive shall serve as Chief Financial
Officer of CDTI and shall have the normal duties, responsibilities and authority
of such position, subject to the power of the Chief Executive Officer or the
Board of Directors of CDTI (“Board”) to expand or limit such duties,
responsibilities and authority.

 

(b)                                 Executive shall report to the Chief
Executive Officer.  Executive shall devote Executive’s best efforts and all of
Executive’s business time and attention (except for permitted vacation periods,
reasonable periods of illness or other incapacity) to the business and affairs
of CDTI.  Executive shall perform Executive’s duties and responsibilities
hereunder to the best of Executive’s abilities in a diligent, trustworthy,
businesslike and efficient manner.

 

(c)                                  Executive will be subject to, and will
comply with, the policies, standards and procedures generally applicable to
senior management employees of CDTI from time to time.

 

3.                                      Compensation and Benefits.

 

(a)                                 Base Salary.  Executive will receive an
annual base salary of $220,000 per year, less applicable payroll withholdings
and payable in accordance with CDTI’s normal payroll practices.  This salary
shall be subject to annual review by CDTI in accordance with its general
policies as in effect from time to time.

 

(b)                                 Annual Bonus.  Executive shall be eligible
to receive an annual bonus based on CDTI’s achievement of financial objectives
established by the Board and the Executive’s achievement of agreed-to personal
business objectives. The amount of any Annual Bonus will be based upon the
degree to which such objectives are met, and will vary from 0% of Base Salary to
a maximum of 85% of Base Salary with a target of 50% of Base Salary and with
payout at the discretion of the Board.  The Annual Bonus will be prorated based
on the number of days Executive is employed during a calendar year.  The bonus
with respect to any calendar year shall be paid no later than 45 days from the
date on which audited financial statements covering such calendar year are filed
on Form 10-K.

 

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(c)                                  Equity Incentives.  All of Executive’s
unvested stock options will vest immediately upon Executive’s Termination
Without Cause or Resignation for Good Reason concurrent with or subsequent to a
Change in Control. “Change in Control” means a change in ownership or control of
CDTI effected through any of the following transactions:

 

(i)                                     A merger, consolidation or other
reorganization, unless securities representing more than fifty-one percent (51%)
of the total combined voting power of the voting securities of the successor
company are immediately thereafter beneficially owned, directly or indirectly,
by the persons who beneficially owned CDTI’s outstanding voting securities
immediately prior to such transaction; or

 

(ii)                                  A sale, transfer or other disposition of
all or substantially all of CDTI’s assets in liquidation or dissolution of CDTI;
or

 

(iii)                               The acquisition, directly or indirectly by
any person or related group of persons (other than CDTI or a person that
directly or indirectly controls, is controlled by, or is under common control
with, CDTI), of beneficial ownership of securities possessing more than
fifty-one percent (51%) of the total combined voting power of CDTI’s outstanding
securities pursuant to a transfer of the then issued and outstanding voting
securities of CDTI by one or more of CDTI’s shareholders; or

 

(iv)                              During any period of two (2) consecutive
years, individuals who, at the beginning of such period, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board, provided that any person becoming a director of the Board
subsequent to the date of adoption of this Plan whose election, or a nomination
for election by CDTI’s shareholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of any individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Board, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of 1934.

 

Notwithstanding the foregoing, a transaction shall not constitute a Change in
Control if its sole purpose is to change the legal jurisdiction of the
Corporation’s incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Corporation’s
securities immediately before such transaction. In the event of any conflict
between the terms of this Agreement and the terms of the Plan or the agreement
evidencing the Option, including without limitation vesting terms or the
definition of “Cause,” the terms of this Agreement shall govern.

 

(d)                                 Fringe Benefits.  Executive shall be
entitled to participate in all of CDTI’s employee benefit programs for which
CDTI employees are generally eligible, subject to the terms and conditions of
such programs.  Those programs currently include group medical, dental and
vision insurance; 401(k) plan; life insurance; short-term and long-term
disability insurance; and paid vacation and sick leave.  All benefits are
subject to change at the sole discretion of the Board and/or CDTI.

 

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(i)                                     Executive shall be entitled to four
(4) weeks of vacation per year, with a maximum accrual of eight (8) weeks. Such
vacation time shall accrue and will be paid out upon termination of employment
subject to customary payroll withholding in accordance with CDTI’s general
practices.

 

(e)                                  Reimbursement of Business Expenses.  CDTI
shall reimburse Executive for all reasonable expenses incurred by Executive in
the course of performing Executive’s duties under this Agreement which are
consistent with CDTI’s policies in effect from time to time with respect to
travel, entertainment and other business expenses, subject to CDTI’s
requirements with respect to reporting and documentation of such expenses.  Such
reimbursements shall be payable in accordance with CDTI’s general reimbursement
practices. Notwithstanding the foregoing, any reimbursement of expenses or
in-kind benefit Executive is entitled to receive shall, to the extent subject to
Section 409A of the Internal Revenue Code, be subject to the following: (x) such
reimbursements shall be paid no later than the last day of Executive’s taxable
year following the taxable year in which the expense was incurred, (y) the
amount of expenses eligible for reimbursement, or in-kind benefits to be
provided, during any taxable year of Executive shall not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other
taxable year of Executive, and (z) the right to reimbursement or in-kind
benefits shall not be subject to liquidation or exchange for another benefit.

 

4.                                      Termination.

 

(a)                                 Employment At-Will and Termination. 
Executive’s employment with CDTI will be “at will” (i.e., either Executive or
CDTI may terminate Executive’s employment at any time for any reason, with or
without Cause).  Executive’s employment and this Agreement may be terminated as
follows:

 

(i)                                     Either party may terminate this
Agreement and Executive’s employment for any reason upon thirty (30) days’
written notice to the other party that this Agreement is being terminated;

 

(ii)                                  The parties may terminate this Agreement
and Executive’s employment for any reason without notice upon mutual written
agreement of the parties;

 

(iii)                               CDTI may terminate Executive’s employment
and this Agreement immediately upon written notice to Executive at any time that
the Board has determined that there is Cause for such termination.  For purposes
of this Agreement, “Cause” shall mean Executive’s (A) gross negligence or severe
or continued misconduct in the performance of Executive’s material duties;
(B) commission of or pleas of “guilty” or “no contest” to a felony offense or
commission of any unlawful or criminal act which would be detrimental to the
reputation or character of CDTI; (C) participation in fraud or an act of
dishonesty against CDTI; (D) intentional material damage to or misappropriation
of CDTI property; material breach of company policies or regulations, or
(E) material breach of this Agreement that is not cured to CDTI’s reasonable
satisfaction within five (5) days after written notice thereof to Executive
(provided that any such breach which is not capable of cure, shall immediately
constitute “Cause”);

 

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(iv)                              This Agreement shall terminate immediately
upon Executive’s death or Disability.  “Disability” means Executive’s physical
or mental incapacity to perform a substantial portion of his duties and
responsibilities for any period or periods which, in the aggregate, total 90 or
more calendar days within any 12-month period; or

 

(v)                                 Executive may resign for Good Reason.  For
purposes of this Agreement, Executive will have Good Reason to terminate
Executive’s employment with CDTI upon the occurrence of any of the following: 
(A) a material diminution in the nature or scope of Executive’s
responsibilities, duties or authority; (B) CDTI’s requirement that Executive be
based at any location more than 50 miles from CDTI’s office location in Oxnard,
CA; (C) any other action or inaction that constitutes a material breach by CDTI
of this Agreement; or (D) a material diminution in Executive’s Base Salary
unless such reduction is part of an across-the-board reduction for the Chief
Executive Officer and his/her direct reports (except that an across-the-board
reduction resulting in the diminution in Executive’s Base Salary due to or
within six (6) months of a Change in Control is excluded and still constitutes
Good Reason). Executive may not resign for Good Reason unless (A) Executive
provides written notice of Executive’s intent to resign to the Board and of the
occurrence of a condition constituting Good Reason for resignation under this
paragraph within ninety (90) days of the initial existence of such, (B) CDTI has
not remedied the alleged violation(s) within thirty (30) days of receipt of such
written notice, and (C) Executive’s employment terminates no later than one
hundred twenty (120) days following the initial existence of such condition. 
For purposes of this paragraph written notice must include a detailed
description of the facts and circumstances of the violation allegedly
constituting Good Reason and such notice must be given in accordance with
applicable CDTI policy, or in the absence of such policy, to the Chair of the
Board or the General Counsel of CDTI.

 

(b)                                 Payments Upon Termination.  Upon termination
of Executive’s employment for any reason, Executive shall be entitled to receive
any salary and benefits that are accrued and unpaid as of the date of
termination.

 

(i)                                     Termination for Cause or Resignation. 
If Executive resigns Executive’s employment for any reason other than for Good
Reason pursuant to Paragraph 4(a)(v) above, is terminated by CDTI or the Board
for Cause pursuant to Paragraph 4(a)(iii), or is terminated by mutual agreement
of the parties pursuant to Paragraph 4(a)(ii) above, all compensation and
benefits will cease immediately and Executive will receive none of the Severance
Benefits (as defined below) or any other severance pay.

 

(ii)                                  Termination Without Cause or Executive’s
Resignation for Good Reason.  If Executive resigns for Good Reason under
Paragraph 4(a)(v) above or Executive’s employment with CDTI is terminated by
CDTI for any reason other than for Cause (and not as a result of Executive’s
death or Disability) or Disability or by mutual agreement of the parties
pursuant to Paragraph 4(a)(ii) above, subject to Paragraph 4(c) below, Executive
will receive the following compensation (“Severance Benefits”):

 

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(A)                               an amount equal to six (6) months of
Executive’s current base salary at the time of termination (less required
withholdings) payable in installments pursuant to the Company’s regular payroll
practices commencing on the first payroll date occurring on or after the later
of the expiration of the revocation period of the Release (as defined below) or
35 days after Executive’s termination date;

 

(B)                               for a period of six (6) months following
Executive’s termination date, Company payment of continuation coverage under
COBRA (section 4980 of the Internal Revenue Code of 1986) of Executive’s
medical, dental and vision coverage under the Company’s group health plan as in
effect immediately before Executive’s termination, after which Executive may
elect continuation coverage at his own expense under COBRA and the California
Continuation Benefits Replacement Act (“Cal-COBRA”); provided, however, that
such extended Company-paid coverage will only be provided to the extent that it
is not determined by the Company to be discriminatory under section 105(h) of
the Code or under any other section of the Code or other applicable law.  If the
extension of such Company-paid coverage is determined by the Company to be
discriminatory under section 105(h) of the Code or other applicable law,
(including but not limited to the 2010 Patient Protection and Affordable Care
Act, as amended by the 2010 Health Care and Education Reconciliation Act), then
in lieu of paying the COBRA premiums for such continuation coverage, the
Company, in its sole discretion, may elect to instead pay Executive on the first
day of each month of any remaining portion of such twelve-month period, a fully
taxable cash payment equal, on an after-tax basis, to the COBRA premiums for
that month, subject to applicable tax withholdings (such amount, the “Special
Severance Payment”), for the remainder of such period.  Executive may, but is
not obligated to, use such Special Severance Payment toward the cost of COBRA
premiums; and

 

(C)                               an amount equal to a prorated portion (based
on the number of full months of Executive’s employment during the year of
termination) of Executive’s Annual Bonus for the year in which the termination
occurs calculated and payable pursuant to the terms of the applicable bonus
program in effect as determined by the Board; provided, however, that such
payment shall be made to the Executive no later than 45 days from the date on
which audited financial statements covering such calendar year are filed on
Form 10-K.

 

(iii)                               Disability.  If Executive’s employment is
terminated due to Disability, subject to Paragraph 4(c) below, Executive will
receive the following compensation (“Severance Benefits”):

 

(A)                               an amount equal to three (3) months of
Executive’s current base salary at the time of termination (less required
withholdings) payable in installments pursuant to the Company’s regular payroll
practices commencing on the first payroll date occurring on or after the later
of the expiration of the revocation period of the Release (as defined below) or
35 days after Executive’s termination date;

 

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(B)                               for the period of three (3) months following
Executive’s termination date, Company payment of continuing coverage under COBRA
of medical, dental and vision coverage under the Company’s group health plan in
effect immediately before Executive’s termination, after which Executive may
elect continuation coverage at his own expense under COBRA (and Cal-COBRA;
provided, however, that such Company-paid extended coverage will only be
provided to the extent that it is not determined by the Company to be
discriminatory under section 105(h) of the Code or under any other section of
the Code or other applicable law.  If the extension of such Company-paid
coverage is determined by the Company to be discriminatory under section
105(h) of the Code or other applicable law, (including but not limited to the
2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health
Care and Education Reconciliation Act), then in lieu of paying the COBRA
premiums for such continuation coverage, the Company, in its sole discretion,
may elect to instead pay Executive on the first day of each month of any
remaining portion of such six-month period, a fully taxable cash payment equal,
on an after-tax basis, to the COBRA premiums for that month, subject to
applicable tax withholdings (such amount, the “Special Severance Payment”), for
the remainder of such period.  Executive may, but is not obligated to, use such
Special Severance Payment toward the cost of COBRA premiums; and

 

(C)                               an amount equal to a prorated portion (based
on the number of full months of Executive’s employment during the year of
termination) of Executive’s Annual Bonus for the year in which the termination
occurs calculated and payable pursuant to the terms of the applicable bonus
program in effect as determined by the Board; provided, however, that such
payment shall be made to the Executive no later than 45 days from the date on
which audited financial statements covering such calendar year are filed on
Form 10-K.

 

Notwithstanding the foregoing, any benefits that Executive shall become entitled
to receive under CDTI’s long-term disability insurance program as it may from
time to time be in effect shall reduce the Severance Benefits payable under this
Paragraph 4(b)(iii).

 

(c)                                  Release and Commencement of Severance
Benefits.  As a condition of receiving any Severance Benefits under this
Paragraph 4, Executive is required to sign (and not revoke) a Severance
Agreement and Release of All Claims (“Release”) against CDTI and related
entities and individuals, in a form to be provided by CDTI, within 45 days after
his termination date.  Payment of Severance Benefits shall not commence until
after the time for revocation of the Release has expired (if the period for
signing and not revoking the Release begins in one taxable year for the
Executive and ends in the subsequent taxable year, the payment of any Severance
Benefits will begin in the second taxable year).

 

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(d)                                 409A.  The parties intend that the Severance
Benefits provided under this Agreement will be deemed not to be deferred
compensation subject to section 409A of the Code (“section 409A”) to the maximum
extent provided in the exceptions provided in the Treasury Regulations for short
term deferrals (section 1.409A-1(b)(4)) and separation pay plans (section
1.409A-1(b)(9)).  All Severance Benefits shall be paid within the period ending
no later than the last day of the second taxable year of the Executive following
the taxable year in which the Executive’s separation from service occurs, in
conformance with section 1.409A-1(b)(9) of the Treasury Regulations.  To the
extent that the payment of any amount under this Paragraph 4 constitutes
deferred compensation, any payment or benefit due upon Executive’s termination
of employment will only be paid or provided to Executive once Executive’s
termination qualifies as a “separation from service” under section 409A.  If
Executive is a “specified employee” within the meaning of section 409A, any such
payment scheduled to occur during the first six (6) months following Executive’s
separation from service shall not be paid until the earlier of the date of
Executive’s death or the first regularly scheduled payroll date following the
six (6) month anniversary date of such separation from service and shall include
payment of any amount that was otherwise scheduled to be paid prior thereto. It
is the intent of the Company and Executive that any right of Executive to
receive installment payments hereunder shall, for all purposes of Section 409A,
be treated as a right to a series of separate payments. While the Company
intends that income provided to Executive pursuant to this Agreement will not be
subject to taxation under Section 409A, the Company does not guarantee any
particular tax effect for income provided to Executive pursuant to this
Agreement.  In any event, except for the Company’s responsibility to withhold
applicable income and employment taxes from compensation paid or provided to
Executive, the Company shall not be responsible for the payment of any
applicable taxes on compensation paid or provided to Executive pursuant to this
Agreement.

 

(e)                                  Return of Property.  Upon termination of
Executive’s employment or whenever requested by CDTI, Executive will immediately
return all CDTI property, tangible or (where returnable) intangible, in
Executive’s possession.

 

(f)                                   Upon termination of Executive’s employment
with CDTI for any reason, Executive shall promptly resign from any position as
an officer, director or fiduciary of CDTI.

 

5.                                      Protection of Confidential Information.

 

(a)                                 Executive acknowledges that in connection
with his employment with CDTI, Executive will be given access to or will obtain
Confidential Information (as defined below) with respect to CDTI’s business and
employees.  Executive will use the Confidential Information only to carry out
Executive’s job duties under this Agreement.  Executive will hold this
information strictly confidential and will not use or disclose it, except in
performance of Executive’s obligations to CDTI, without CDTI’s express written
consent.  Executive’s obligation to maintain the confidentiality of the
Confidential Information of CDTI and to refrain from using such information for
any improper purpose will continue during Executive’s employment with CDTI and
at all times thereafter, unless and to the extent that such Confidential
Information (i) was otherwise available to Executive from a source other than
CDTI, (ii) becomes generally known to, and available for use by, the public
other than as a result of the acts or omissions of the Executive in
contravention of this Paragraph 5, or (iii) is required to be disclosed by
applicable law, court order or other legal process.

 

(b)                                 Executive shall deliver to CDTI at the
termination of his employment, or at any other time CDTI may request, all
memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product (as defined below) or the business of
CDTI which Executive may then possess or have under Executive’s control.

 

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(c)                                  “Confidential Information” includes but is
not limited to the following:  (i) trade secrets, ideas, processes, formulas,
data, programs, other works of authorship, knowhow, improvements, discoveries,
developments, designs and techniques; (ii) information regarding plans for
research, development, new products, marketing and selling, business plans,
budgets and unpublished financial statements, licenses, prices, costs, supplies,
customers and information regarding the skills and compensation of other
employees, directors or consultants of CDTI or any Affiliate; (iii) confidential
marketing information (including without limitation marketing strategies,
customer or client names and requirements for product and services, prices,
margins and costs); and (iv) other confidential business information of CDTI or
any Affiliate.  For purposes of this Agreement, “Affiliate” means any trade or
business under common control with CDTI, as that term is defined in sections
414(b) and 414(c) of the Code.

 

(d)                                 The U.S. Defend Trade Secrets Act of 2016,
as amended (the “DTSA”), provides that an individual will not be held criminally
or civilly liable under any federal or state trade secret law for the disclosure
of a trade secret that is made in (A) confidence to a federal, state or local
government official, either directly or indirectly, or to an attorney, and
solely for the purpose of reporting or investigating a suspected violation of
law, or (B) a complaint or other document filed in a lawsuit or other proceeding
if such filing is made under seal. In addition, the DTSA provides that an
individual who files a lawsuit for retaliation by an employer for reporting a
suspected violation of law may disclose the trade secret to the attorney of the
individual and use the trade secret information in the court proceeding if the
individual files any document containing the trade secret under seal and does
not disclose the trade secret, except pursuant to court order.

 

6.                                      Protection of Intellectual Property.

 

Executive agrees that all inventions, innovations, improvements, developments,
methods, techniques, processes, algorithms, data, databases, designs, analyses,
drawings, reports, and all similar or related information, all software,
copyrights, and other works of authorship, all other intellectual property or
proprietary rights (including any patents, registrations or similar rights that
may issue from the foregoing), and all tangible embodiments of any of the
foregoing (in any form or medium, whether now known or hereafter existing),
which relate to CDTI’s or any Affiliate’s actual or anticipated business,
research and development or existing or future products or services and which
are conceived, developed, contributed to, or made by Executive while employed by
CDTI or any Affiliate thereof (collectively, “Work Product”), belong to and are
the property of CDTI or such Affiliate, as applicable, and Executive hereby
assigns to CDTI or such Affiliate, as applicable, any right, title and interest
Executive may have in and to the Work Product, free and clear of any claims for
compensation or restrictions on the use or ownership thereof.  Executive will
promptly disclose such Work Product to CDTI and perform all actions reasonably
requested by CDTI (whether during or after his employment) to establish, record,
perfect and otherwise confirm such ownership, and protect, maintain and enforce
CDTI’s and the Affiliate’s rights, as applicable, in such Work Product
(including, without limitation, by executing assignments, consents, powers of
attorney, and other instruments and providing affidavits and testifying in any
proceeding).

 

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7.                                      Post-Employment Covenants.

 

(a)                                 Non-Solicitation of Employees.  For a period
of two (2) years following termination of Executive’s employment with CDTI,
Executive shall not knowingly solicit or encourage, directly or indirectly, in
person or through others, any employee of the Company whom Executive worked with
at the Company or any Affiliate to terminate his or her relationship with the
Company or its Affiliate or to alter his or her relationship with the Company to
the Company’s detriment; provided, however, that generalized advertisement of
employment opportunities including in trade or industry publications (not
focused specifically on or directed in any way at the employees or an employee
of CDTI) shall not be deemed to cause a breach of this Paragraph 7(a).

 

(b)                                 Non-Solicitation of Customers. For a period
of two (2) years following termination of Executive’s employment with CDTI,
Executive shall not knowingly solicit, divert or take away, or attempt to
solicit, divert or take away, any person, firm or company that was, at any time
during the period of twelve (12) months preceding the termination of Executive’s
employment, a client of CDTI and with whom during that twelve (12) month period
Executive had business dealings on behalf of CDTI or any Affiliate, for the
purpose of selling or providing a product or service that competes with or
displaces a product or service of CDTI that Executive had some material
involvement in or received Confidential Information about while employed by
CDTI.

 

(c)                                  If, at the time of enforcement of this
Paragraph 7, a court of competent jurisdiction holds that the restrictions
stated herein are unreasonable under circumstances then existing with respect to
(i) any part of the time period covered by these covenants, (ii) any activity
covered by these covenants, or (iii) any other aspect of these covenants, any
adverse determination will be implemented as narrowly as possible and will not
affect these covenants with respect to any other time period, activity or other
aspect covered by these covenants.

 

(d)                                 Enforcement.  Each of the parties
acknowledges that (i) the covenants and restrictions contained in this Paragraph
7, and the protections for Confidential Information and Work Product under
Paragraphs 5 and 6, are necessary, fundamental and required for the protection
and continued conduct of CDTI’s business, (ii) such covenants and restrictions
relate to matters which are of a special, unique and extraordinary character and
which give these covenants a special, unique value and (iii) breach of these
covenants may cause CDTI or its Affiliates irreparable harm which cannot be
adequately compensated by monetary damages, and therefore in the event of a
breach or threatened breach of this Agreement, CDTI or its Affiliates or their
applicable successors or assigns may, in addition to other rights and remedies
existing in their favor, apply to any court of competent jurisdiction for
specific performance and/or immediate injunctive or other relief in order to
enforce, or prevent any breaches of, the provisions of this Agreement. 
Executive agrees that the restrictions contained in Paragraphs 5, 6 and 7 are
reasonable.

 

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8.                                      General Provisions.

 

(a)                                 Arbitration.  Except for claims for
injunctive relief brought pursuant to Paragraph 7, any dispute or controversy
arising out of or relating to this Agreement, or the employment relationship
created by this Agreement, including the termination of that relationship and
any allegations of unfair or discriminatory treatment arising under state or
federal law or otherwise, will be resolved exclusively by final and binding
arbitration, except where the law specifically forbids the use of arbitration as
a final and binding remedy.  The arbitration shall be administered by the
Judicial Arbitration and Mediation Service (“JAMS”) (www.jamsadr.com) and shall
be conducted exclusively under the then-current Employment Arbitration Rules &
Procedures and JAMS Policy on Employment Arbitration Minimum Standards of
Procedural Fairness, and the California Code of Civil Procedure (available at
www.jamsadr.com). The arbitration will take place before a single neutral
arbitrator in Ventura, California.  CDTI shall be responsible for the fees and
expenses of the arbitrator in connection with the Arbitration.  Executive shall
be responsible for his attorney fees and any costs required by JAMS necessary to
commence the arbitration, if so commenced at Executive’s request, but in no
event shall Executive be responsible for any costs beyond those which Executive
would be required to incur if Executive filed a civil action in court concerning
the dispute or controversy.  The parties shall have all the rights, remedies and
defenses available in a civil action for the dispute or controversy.  The
arbitrator shall issue a written award that includes the arbitrator’s essential
findings and conclusions, and shall have the authority to assess attorneys’ fees
and costs of the prevailing party to the losing party.  The arbitrator will not
have the authority to amend, modify, supplement or change the terms and
conditions of employment as set forth in this Agreement.  This arbitration
provision will not prohibit either party from seeking injunctive relief pending
the outcome of the arbitration or an order confirming or vacating the award in a
court of competent jurisdiction.

 

(b)                                 Severability.  Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.

 

(c)                                  Complete Agreement.  This Agreement
embodies the complete agreement and understanding of the parties with respect to
the subject matter hereof and supersedes and preempts any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof.  There are no other agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter of this Agreement, unless expressly referenced in this Agreement.

 

(d)                                 Counterparts.  This Agreement may be
executed in separate counterparts, each of which is deemed to be an original and
all of which taken together constitute one and the same agreement.  Facsimile or
scanned and emailed counterpart signatures to this Agreement shall be acceptable
and binding on the parties hereto.

 

(e)                                  Successors and Assigns.  Except as
otherwise provided herein, this Agreement shall bind and inure to the benefit of
and be enforceable by Executive, CDTI and their respective successors and
assigns; provided that the rights and obligations of Executive under this
Agreement shall not be assignable.

 

(f)                                   Governing Law and Jurisdiction.  All
issues and questions concerning the construction, validity, enforcement and
interpretation of this Agreement and the exhibits hereto shall be governed by,
and construed in accordance with, the laws of the State of California.  Except
as provided in Paragraph 8(a), each of the parties hereto submits to the
exclusive jurisdiction and venue of any state or federal court sitting in the
County of Ventura, California.

 

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(g)                                  Waiver of Jury Trial.  AS A SPECIFICALLY
BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO ENTER INTO THIS
AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH COUNSEL), EACH PARTY
HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING
RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR THE MATTERS
CONTEMPLATED HEREBY.

 

(h)                                 Amendment and Waiver.  The provisions of
this Agreement may be amended or waived only with the prior written consent of
CDTI (as approved by the Board) and Executive.

 

(i)                                     Representations and Warranties of
Executive.  Executive hereby represents and warrants that Executive’s employment
with CDTI on the terms and conditions set forth herein and Executive’s execution
and performance of this Agreement do not constitute a breach or violation of any
other agreement, obligation or understanding with any third party.  Executive
represents that Executive is not bound by any agreement or any other existing or
previous business relationship which conflicts with, or may conflict with, the
performance of Executive’s obligations hereunder or prevent the full performance
of Executive’s duties and obligations hereunder.

 

(j)                                    No Strict Construction.  The language
used in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction shall
be applied against any party.

 

(k)                                 No Third Party Beneficiaries.  Nothing in
this Agreement, express or implied, is intended or shall be construed to give
any Person other than the parties to this Agreement and their respective heirs,
executors, administrators, successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.

 

(l)                                     Notices.  All notices, requests and
other communications under this Agreement must be in writing and shall be deemed
to have been duly given only if delivered by email or facsimile transmission,
personal delivery with written receipt, or mail delivery by overnight courier
prepaid, using the following contact information:

 

If to Executive:

Tracy Kern

 

 

 

 

 

 

 

 

email:

 

 

 

 

If to CDTI:

CDTi Advanced Materials, Inc.

 

 

1700 Fiske Place

 

 

Oxnard, CA 93033

 

 

Attention:

 

 

 

Fax:

 

 

 

email:

 

 

 

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(m)                             Survival.  The covenants contained in Paragraphs
4(b), 5, 6 and 7 will survive any termination or expiration of this Agreement.

 

(n)                                 Review and Enforceability of Agreement. 
Executive represents and warrants that prior to executing this Agreement,
Executive reviewed each and every provision of this Agreement and understands
same, and that Executive had a full opportunity to have this Agreement review by
legal counsel of Executive’s own choosing.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first written above.

 

TRACY KERN, Executive:

 

CDTI ADVANCED MATERIALS, INC.,

 

 

 

 

 

 

By:

/s/ Matthew Beale

 

 

 

Matthew Beale

/s/ Tracy Kern

 

Title: Chief Executive Officer

[Signature]

 

 

 

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