EXHIBIT 10.8
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as
of the 1st, day of February, 2003, by and between TELKONET COMMUNICATIONS, INC.,
a Delaware corporation (the "Company"), and Xxxxxx Xxxxxx (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
Executive 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 January 31st, 2006 (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 Executive Officer
of the Company. Without limiting the general scope of the Executive's position:
(i) the Executive shall not be required to report to any single individual other
than the Chairman and the Board of Directors, (ii) no other individual shall be
elected or appointed as Chief Executive Officer of the Company, and (iii) no
individual or group of individuals (including a committee established or other
designee appointed by the Board) shall have any authority over or equal to the
authority of the Executive in his role as Chief Executive Officer or could have
the effect of, or appear to have the effect of, giving such authority to any
such individual or group. The Executive shall be entitled to the full protection
of applicable indemnification provisions of the certificate of incorporation and
bylaws of the Company, as the same may be amended from time to time, for his
service as a director, officer and employee of the Company.
(b) If:
(i) the Company materially changes the Executive's
duties and responsibilities as set forth in Paragraph 3(a) without his consent
(including, without limitation, violation of any of the provisions of clause
(i), (ii) or (iii) of Paragraph 3(a));
(ii) the Executive's place of employment is moved to
a location more than fifty (50) miles from the geographical center of Xxxxx,
Pennsylvania;
(iii) 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;
(iv) there occurs a "change in control" (as
hereinafter defined) of the Company; or
(v) the Board or any nominating committee thereof or
committee performing a Board nomination function fails to nominate the Executive
for election to the Board in connection with any shareholders' meeting to be
held or action to be taken for the election of directors;
(vi) the Executive has not been paid for a cumulative
sixty (60) day period without Executive's consent in excess of the period of
non-payment for similar Executives.
Then, 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 Paragraph 6(a)(ii)).
(c) The term "change in control" means the first to occur of
the following events:
(i) any person or group of commonly controlled
persons 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) 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.
(b) The Executive shall receive options to purchase One
Million (1,000,000) shares of common stock from the Employee Stock Incentive
Plan at the exercise price of $1.00 per share.
(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. 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 and does not result in a proportionately
greater reduction in the rights of or benefits to the Executive as compared with
any other officers 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. 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 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 to exercise such Executive's Options in whole or in part at any time
within the next four (4) years.
(g) The Company shall pay the full cost of providing health
and group life insurance for the Executive, his spouse and eligible dependent
children and any other such benefits as the Company may choose to offer the
employees of the Company.
(h) The Company will reimburse the Executive for the monthly
cost of his cellular phone service.
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 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). If such insurance is obtained, the premiums
shall be added to the employees W-2 as other compensation. 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 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
in the State of Maryland, 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 carrier for the
Company shall suffice.
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 5(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 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 2 week notice cure opportunities during each fiscal
year of the Company.
The exercise by the Company of its rights of termination under this Paragraph 6
shall be the Company's sole remedy in the event of the occurrence of an event as
a result of which such right to terminate arises. 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.
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 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 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.
(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.
(D) NON-COMPETITION AND CONFIDENTIALITY AGREEMENT 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
Noncompetition and Confidentiality Agreement, and is acknowledged by the
Executive's signature on this Employment Agreement.
To induce Telkonet Communications, Inc., a Delaware corporation ("Telkonet") to
employ the Employee pursuant to this Employment Agreement, the Employee agrees
that for the term of the Employment Agreement and a period of One (1) year
following termination of the Employment Agreement (the "Noncompetition Period"),
he will not (a) Participate In (as hereinafter defined) any other business or
organization which at any time during the Noncompetition Period is engaged in
the same business as or in competition with Telkonet within the geographic
confines of the markets where Telkonet's products are sold or targeted; (b)
directly or indirectly solicit for business any person or enterprise that at any
time during the two (2) year period preceding the date of termination of the
Employment Agreement was a customer of Telkonet; or (c) directly or indirectly
employ any person who, at any time during the two (2) year period preceding the
date of termination of the Employment Agreement was, or during the
Noncompetition Period is, an employee of Telkonet. As used in this Agreement,
"Participate In" shall mean "directly or indirectly, for his own benefit or for,
with, or through any other person or entity, own, manage, operate, control, loan
money to, or participate in the ownership, management, operation, or control of,
or be connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of his name
in, provided, nothing contained herein shall prohibit the Employee from owning,
directly or indirectly up to 5.0% of the outstanding voting securities of any
company, the securities of which are traded on a national securities exchange or
listed for quotation on an automated system of quotation.
In consideration of the execution, delivery and performance of this
Noncompetition Agreement by the Employee, Telkonet has executed the Employment
Agreement, which confers a substantial economic benefit upon the Employee.
Notwithstanding anything in this Noncompetition Agreement to the contrary, if at
any time the Employment Agreement is terminated by either Telkonet or the
Employee for any reason (whether or not constituting cause) or for no reason,
the provisions of this Noncompetition Agreement shall remain binding upon the
Employee. Nothing in this Noncompetition Agreement shall be deemed to entitle or
confer upon the Employee the right to be employed by Telkonet for a term or
otherwise alter the employment status of the Employee with Telkonet.
A material breach of this Noncompetition Agreement by the Employee could not
adequately be compensated by money damages and will constitute irreparable harm
and injury to Telkonet. In the event of any such material breach or threatened
or anticipated breach, Telkonet shall be entitled, in addition to any other
right and remedy available, to an injunction restraining such breach or a
threatened breach, and no bond or other security shall be required in connection
therewith provided Telkonet satisfies the applicable burden of proof with
respect to all legal requirements applicable to the issuance of an injunction
other than with respect to the inadequacy of money damages and/or irreparable
harm or injury. The Employee agrees that the provisions of this Noncompetition
Agreement are necessary and reasonable to protect Telkonet in the conduct of its
business. If any restriction contained in this Noncompetition Agreement shall be
deemed to be invalid, illegal, or unenforceable by reason of the extent,
duration, or geographical scope thereof, or otherwise, then the court making
such determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, to the minimal extent necessary
to comply with applicable law or equitable considerations, and in its reduced
form such restriction shall then be enforceable in the manner contemplated
hereby.
This Noncompetition Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to conflict of
laws principles.
7. 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.
(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.
(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 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: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Chairman
/s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx, Chief Executive Officer
