Exhibit 10.7
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of the 15th, day of
February 2002, by and between TELKONET COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and Xxxxx X.Xxxxx, Ph.D. (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive desires
to be employed by the Company, on the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereby agree as follows:
1. EMPLOYMENT.
The Company hereby employs the Executive as its Chief Technology Officer
and the Executive hereby accepts such employment, on the terms and subject
to the conditions hereinafter set forth.
2. TERM.
Subject to the provisions for the termination of this Agreement as provided
for herein, the term of this Employment Agreement shall commence on the
date hereof and shall continue through February 15th, 2005 (the "Base
Term") and shall automatically be extended for an additional one year (each
a "Renewal Year") at the end of the Base Term and each Renewal Term unless
on or before the sixtieth (60th) day prior to the end of the Base Term or a
Renewal Term, either party gives to the other party written notice of
termination of this Employment Agreement, in which case this Employment
Agreement shall terminate upon the completion of the then applicable
employment period.
3. POSITION AND DUTIES.
(a) The Executive shall serve as the Chief Technology Officer of the
Company. The Executive's exact duties and the scope of his authority
without obtaining Board of Director approval shall be set forth in a
separate writing, and attached hereto as Exhibit A. The Board of
Directors from time to time in the exercise of its reasonable business
judgment may change the duties and scope of authority. The Executive
shall be entitled to the full protection of applicable indemnification
provisions of the certificate of incorporation, bylaws of the Company
and the corporate law of Delaware, as the same may be amended from time
to time, for his service as a director, officer and employee of the
Company or any subsidiary of the Company or for services performed for
any fringe benefit program of the Company. Such indemnification shall
include all permissive provisions including advancement of payment.
(b) The Executive shall have the right to terminate his employment with the
Company but such termination shall not be considered a voluntary
resignation or termination of such employment or of this Employment
Agreement by the Executive but rather a discharge of the Executive by
the Company without "cause" (as defined in 6(A)(ii)). This shall apply
in the following conditions:
(i) the Executive is required relocate from his current residence in
Gaithersburg, Maryland;
(ii)there occurs a material breach by the Company of any of its
obligations under this Employment Agreement (other than those
specified in this Section 3(b)) that has not been cured in all
material respects within ten (10) days after the Executive gives
notice thereof to the Company;
(iii)there occurs a "change in control" (as hereinafter defined) of the
Company; or
(iv) the Executive has not been paid for a cumulative sixty (60) day
period without Executive's written consent in excess of the period
of non-payment for similar Executives.
(c) The term "change in control" means the first to occur of the following
events:
(i) any person or group of commonly controlled persons who are not
currently stockholders, acquires, directly or indirectly, thirty
percent (30%) or more of the voting control or value of the equity
interests in the Company; or
(ii)the shareholders of the Company approve an agreement to merge or
consolidate with another corporation or other entity resulting
(whether separately or in connection with a series of transactions)
in a change in ownership of twenty percent (20%) or more of the
voting control or value of the equity interests in the Company, or
an agreement to sell or otherwise dispose of all or substantially
all of the Company's assets (including, without limitation, a plan
of liquidation or dissolution), or otherwise approve of a
fundamental alteration in the nature of the Company's business.
4. COMPENSATION.
During the term of this Employment Agreement the Company shall pay or
provide, as the case may be, to the Executive the compensation and other
benefits and rights set forth in this Paragraph 4.
(a) The Company shall pay to the Executive a base salary payable in
accordance with the Company's usual pay practices (and in any event no
less frequently than monthly) at the rate of One Hundred Thirty Thousand
Dollars ($130,000.00) per annum, which may be increased (but not
decreased) from time to time based upon the performance of the Company
and the Executive. Currently, this amount is payable bi-weekly.
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(b) The Executive shall receive options to purchase 300,000 shares of common
stock from the Employee Stock Option plan at the exercise price of $1.00
per share. The 300,000 shares vest ratably at 25,000 shares per
consecutive calendar quarter from the date of the Employment Agreement.
(c) The Company may pay to the Executive bonus compensation for each
calendar or fiscal year of the Company, not later than ninety (90) days
following the end of each year or the termination of his employment, as
the case may be, prorated on a per diem basis for partial calendar or
fiscal years. It is acknowledged that these bonuses may be based in part
on the Executive's performance and in part on the Company's performance.
(d) During the Base Term of this Agreement and any Renewal Term, the Company
shall maintain in full force and effect, and the Executive shall be
entitled to participate in, all of the Company's employee benefit plan
and arrangements in effect on the date hereof in at least the same
manner and capacity as the officers and key management employees of the
Company. This does not include life insurance or disability insurance if
the cost of coverage is substantially in excess of the average cost for
someone of the same age. The Company shall not make any changes in such
plans and arrangements which would adversely affect the Executive's
rights or benefits thereunder, unless such change occurs pursuant to a
program applicable to all officers and key management employees of the
Company. The Executive shall be entitled to participate in or receive
benefits under any employee benefit plan or arrangement made available
by the Company in the future to its officers and key management
employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements as
long as the cost of coverage is not substantially in excess of the
average cost of someone of the same age. Nothing paid to the Executive
under any plan or arrangement presently in effect or made available to
the Executive in the future shall be deemed to be in lieu of any amounts
payable to the Executive pursuant to this Section 4.
(e) The Company shall reimburse the Executive or provide him with an expense
allowance during the term of this Employment Agreement for travel,
entertainment and other expenses reasonably and necessarily incurred by
the Executive in connection with the Company's business. The Executive
shall furnish such documentation with respect to reimbursements or
allowances to be made hereunder as the Company shall reasonably request.
Depending on the individual's exact duties, a company owned vehicle may
be provided.
(f) Upon dissolution or liquidation of the Company, or upon a merger or
consolidation in which the Company is not the surviving corporation, all
Options awarded to the Executive under the ESOP and not previously
exercised and vested shall become fully exercisable and vested no later
than the date of such dissolution, merger or consolidation, and the
Executive shall have the right, immediately prior to such dissolution or
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liquidation, or such merger or consolidation, to exercise such
Executive's Options in whole or in part, but only to the extent that
such Options are otherwise exercisable under the terms of the Plan.
5. PAYMENT IN THE EVENT OF DISABILITY.
(a) In the event of the Executive's "permanent disability" (as hereinafter
defined) during the term of this Employment Agreement, for a period of 6
months after determination of a permanent disability years the Company
shall pay to the Executive an annual amount equal to the Executive's
then effective per annum rate of salary, as determined under Paragraph
4(a). The Company, to the extent prudent, shall insure against
disability through an insurance company. Such coverage shall contain a
benefit for total, as well as partial and residual, disabilities and
shall be in addition to the payment obligation contained in this
Paragraph 5 (a). The Company shall review and revise the amount of
coverage not less than annually in accordance with the prior year's
total cash compensation as soon as the amount of cash compensation,
including all cash bonuses, can be calculated.
(b) For purposes of this Employment Agreement, the Executive's "permanent
disability" shall be deemed to have occurred after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month
period, or after ninety (90) consecutive days, during which one hundred
twenty (120) or ninety (90) days, as the case may be, the Executive, by
reason of his physical or mental disability or illness, shall have been
unable to substantially discharge his duties under this Employment
Agreement. The date of permanent disability shall be such one hundred
twentieth (120th) or ninetieth (90th) day, as the case may be. In the
event either the Company or the Executive, after receipt of notice of
the Executive's permanent disability from the other, dispute that the
Executive's permanent disability shall have occurred, the Executive
shall promptly submit to a physical examination by the chief of medicine
of any major accredited hospital and, unless such physician shall issue
his written statement to the effect that in his opinion, based on his
diagnosis, the Executive is capable of resuming his employment and
devoting his full time and energy to discharging his duties within
thirty (30) days after the date of such statement, such permanent
disability shall be deemed to have occurred. In lieu of any such
examination, a determination by the disability insurance carrier for the
Company shall suffice.
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6. TERMINATION.
(A) The employment of the Executive under this Employment Agreement, and the
terms hereof, may be terminated by the Company:
(i) on the death or permanent disability of the Executive (as defined in
Paragraph 4(b), or
(ii) for cause at any time by action of the Board. For purposes hereof,
the term "cause" shall mean:
(a) The Executive's fraud, commission of a felony or of an act
or series of acts which result in material injury to the
business reputation of the Company, commission of an act
or series of repeated acts of dishonesty which are
materially inimical to the best interests of the Company,
or the Executive's willful and repeated failure to perform
his lawful duties under this Employment Agreement, which
failure has not been cured within fifteen (15) days after
the Company gives notice thereof to the Executive,
provided, however, that the Executive shall not be
entitled to any more than two notice cure opportunities
during each fiscal year of the Company; or
(b) The Executive's material breach of any material provision
of this Employment Agreement not involving performance of
his duties, which breach has not been cured in all
substantial respects within ten (10) days after the
Company gives notice thereof to the Executive. (Provided,
however, that Executive shall not be entitled to any more
than two weeks notice cure opportunities during each
fiscal year of the Company.
Upon any termination of this Employment Agreement, the Executive shall be
deemed to have resigned from all offices held by the Executive in the Company.
(B) In the event of a termination claimed by the Company to be for "cause"
pursuant to Paragraph 6 (a)(ii), the Executive shall have the right to
have the justification for said termination determined forthwith by
arbitration. In order to exercise such right, the Executive shall serve
on the Company within thirty (30) days after termination a written
request for arbitration. The Company immediately shall request the
appointment of an arbitrator by the American Arbitration Association and
thereafter the question of "cause" shall be determined under the rules
of the American Arbitration Association, and the decision of the
arbitrator or arbitrators shall be final and binding on both parties.
The parties shall use all reasonable efforts to facilitate and expedite
the arbitration and shall act to cause the arbitration to be completed
as promptly as possible. Expenses of the arbitration shall be borne
equally by the parties, unless apportioned otherwise by the arbitrators.
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(C) In the event of termination for any of the reasons set forth in
subparagraph (A)(i) or (A)(ii) of this Paragraph 6, or if the Executive
terminates his employment, unless as under subparagraph 3b, the
Executive shall be entitled to no further compensation or other benefits
under this Employment Agreement, except as to that portion of any unpaid
salary and other benefits accrued and earned by him hereunder up to and
including the effective date of such termination. If the Company
terminates the Executive's employment other than pursuant to
subparagraph 6(A)(i) or 6(A)(ii) or if the Executive terminates his
employment pursuant to subparagraph 3(b), all of the compensation and
benefits payable to the Executive pursuant to this Employment Agreement
shall be paid to the Executive for a period of eighteen (18) months
following the date of such termination (the "Severance Period"). For
purposes of this Paragraph 6(C), with respect to any benefits payable to
the Executive following termination, the Company may elect to (i) pay to
the Executive in cash an amount equivalent to the value of the benefits
to be paid for the duration of the Severance Period; or (ii) continue to
provide benefits to the Executive for the duration of the Severance
Period. If there occurs a change of control, or take over, of the
Company and the acquiring or controlling entity terminates the
Executive, then the Executive shall be paid for a period of thirty-six
(36) months following the date of such termination (the "Severance
Period"), including all of the compensation and other benefits payable
to the Executive pursuant to this Employment Agreement.
7. NON-COMPETITION AND CONFIDENTIALITY. The Executive acknowledges the
Company's reliance and expectation of the Executive's continued commitment
to performance of his duties and responsibilities during the term of this
Employment Agreement. In light of such reliance and expectation on the part
of the Company, the Executive hereby agrees to be bound by the terms of the
Non-competition and Confidentiality Agreement, of even date herewith, a
copy of the form of which is attached hereto and made a part hereof as
EXHIBIT B.
8. MISCELLANEOUS.
(a) The Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise,
which would restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this
Employment Agreement.
(b) The provisions of this Employment Agreement are severable and if any
one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any
partially unenforceable provision, to the extent enforceable in any
jurisdiction, nevertheless shall be binding and enforceable.
(c) The rights and obligations of the Company under this Employment
Agreement shall inure to the benefit of, and shall be binding on, the
Company and its successors and assigns, and the rights and obligations
(other than obligations to perform services) of the Executive under
this Employment Agreement shall inure to the benefit of, and shall be
binding upon, the Executive and his heirs, personal representatives and
assigns.
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(d) Any notice to be given under this Employment Agreement shall be
personally delivered in writing or shall have been deemed duly given
when received after it is posted in the United States mail, postage
prepaid, registered or certified, return receipt requested, and if
mailed to the Company, shall be addressed to its principal place of
business and if mailed to the Executive, shall be addressed to him at
his home address last known on the records of the Company, or at such
other address or addresses as either the Company or the Executive may
hereafter designate in writing to the other. Notice by regular mail
postage prepaid, shall be given at the same time the registered
certified copy is mailed and shall be sufficient if not returned and
the registered or certified copy is returned either refused or because
not picked up.
(e) The failure of either party to enforce any provision or provisions of
this Employment Agreement shall not in any way be construed as a waiver
of any such provision or provisions as to any future violations
thereof, or prevent that party thereafter from enforcing each and every
other provision of this Employment Agreement. The rights granted the
parties herein are cumulative and the waiver of any single remedy shall
not constitute a waiver of such party's right to assert all other legal
remedies available to it under the circumstances.
(f) This Employment Agreement supersedes all prior agreements and
understandings between the parties and may not be modified or
terminated orally. No modification, termination or attempted waiver
shall be valid unless in writing and signed by the party against whom
the same is sought to be enforced.
(g) This Employment Agreement (other than the statutory rights or
indemnification which shall be under Delaware law) shall be governed by
and construed according to the laws of the State of Maryland without
giving effect to applicable conflicts of law provisions.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
TELKONET COMMUNICATIONS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
___________________________________
Xxxxx X.Xxxxx, Ph.D.
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