EMPLOYMENT AGREEMENT
EXHIBIT
10.1
This
EMPLOYMENT
AGREEMENT ("Agreement"),
effective as of the 15th day of May, 2007, by and between Homeland Security
Capital Corporation, a Delaware corporation (the "Company"),
and
Xxxxxxx X. Xxxxxxxx (the "Employee").
RECITALS
In
consideration of the mutual representations, warranties, covenants and
agreements contained in this Agreement and other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:
1. Employment.
(a) Employment
Period.
Subject
to the terms and conditions set forth herein and unless sooner terminated as
hereinafter provided, Company shall employ Employee and Employee agrees to
serve
as an employee of Company for a three-year period, from May 15, 2007 (the
“Commencement Data”) to the third anniversary of the date of the Commencement
Date (the “Employment
Term”),
which
Employment Term shall automatically renew for consecutive one year periods,
unless a written notice of a party’s intention to terminate this Agreement at
the expiration of the Employment Term (or any renewal term) is delivered by
either party three (3) months prior to the expiration of the Employment Term
or
any renewal term, as applicable. For purposes of this Agreement, the Employment
Term and any renewal term thereof are collectively referred to herein as the
“Employment
Period.”
Any
existing employment agreements between the parties are hereby terminated.
(b) Duties
and Responsibilities.
During
the Employment Period, the Employee shall serve initially as Senior Vice
President of Finance and Chief Financial Officer. In such roles, Employee shall
have such authority and responsibility and perform such duties as may be
assigned to him from time to time by the Company’s chief executive officer, and
in the absence of such assignment, such duties as are customary to Employee's
office and as are necessary or appropriate to the business and operations of
the
Company and its subsidiaries. During the Employment Period, the Employee's
employment shall be full time, Employee shall perform his duties honestly,
diligently, in good faith and in the best interests of the Company and its
subsidiaries, and Employee shall use his best efforts to promote the interests
of the Company and its subsidiaries.
(c) Other
Activities.
Except
upon the prior written consent of the Company, the Employee, during the
Employment Period, will not accept any other employment or consulting
arrangement, except as approved by the Company’s chief executive officer. The
Employee shall be permitted to serve in ventures such as passive real estate
investments, serving on charitable and civic boards and organizations, and
similar activities, so long as such activities do not materially interfere
with
or detract from the performance of Employee's duties or constitute a breach
of
any of the provisions contained in this Agreement.
2. Compensation.
(a) Base
Salary.
In
consideration for the Employee's services hereunder and the restrictive
covenants contained herein, the Employee shall be paid an annual base salary
of
$190,000 (the "Salary"),
which
salary shall be payable commencing as of date hereof and shall be payable in
accordance with the Company's customary payroll practices. Notwithstanding
the
foregoing, Employee's annual Salary may be increased, but not decreased, at
anytime and from time to time to levels greater than the level set forth in
the
preceding sentence at the discretion of the Board of Directors (the
"Board")
of the
Company to reflect merit or other increases.
(b) Bonus.
In
addition to the Salary, Employee shall be entitled to such bonuses and benefits
as may be determined by the Board with the advice of the Company’s chief
executive officer. The bonus of the Employee may be in an amount up to 50%
of
his Salary. The bonus review for the Employee shall occur at the end of each
fiscal year. Any bonus granted pursuant to this Section 2(b) shall be paid
within ninety (90) days after the end of the fiscal year for which such bonus
is
earned. Additionally, upon the execution of this Agreement and the commencement
of the Employment Term, the Employee will be paid a one time bonus of $5,000.00
to be included with the next scheduled payroll term under the Company’s normal
payroll practices.
(i) Equity
Incentives.
Employee shall be eligible to receive such stock options or other equity
incentives as may be determined by the Board, in its sole discretion. Initially,
the Employee shall receive options to purchase 51,921,000 shares
of
the Company’s common stock (the “Common Stock”) with such options having an
exercise price equal to the closing stock price of the Company’s common stock as
quoted on the Over-the-Counter Bulletin Board as of the date of Board's approval
of this Agreement. The options to purchase the Common Stock mentioned above
shall vest pro rata at the end of each calendar quarter (5,769,000 per
quarter) for nine (9) quarters beginning on June 30, 2007; provided, however,
that vesting term shall be governed by stock option agreement between the
Employer and the Company.
(c) Vacations.
The
Employee shall be entitled to four (4) weeks of vacation on an annual basis.
(d) Other
Benefits.
During
the term of this Agreement, the Employee, shall be entitled to participate
in
any life insurance programs, disability programs, stock option plans, bonus
plans, pension plans and other fringe benefit plans and programs as are from
time to time established and maintained for the benefit of the Company's
employees or executive officers, subject to the provisions of such plans and
programs. The Company will provide the Employee the use of an automobile during
the Employment Term.
(e) Expenses.
The
Employee shall be reimbursed for all out-of-pocket expenses reasonably incurred
by him on behalf of or in connection with the business of the Company including
travel and lodging to visit the Company’s headquarters (which shall include
either (i) the use of a corporate apartment in the Washington, DC area to be
mutually agreed upon or (ii) a housing stipend) and other offices, pursuant
to
the normal standards and guidelines followed from time to time by the
Company.
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3. Termination.
(a) For
Cause.
The
Company shall have the right to terminate this Agreement and to discharge the
Employee for Cause (as defined below), at any time during the Employment Period.
Termination for “Cause”
shall
mean, during the Employment Period, (i) Employee's conduct that would constitute
under federal or state law either a felony or a misdemeanor involving moral
turpitude, or a determination by the Board, after consideration of all available
information and following the procedures set forth below, that Employee has
willfully violated Company policies or procedures involving discrimination,
harassment, alcohol or substance abuse, or work place violence,
(ii) Employee's actions or omissions that constitute fraud, dishonesty or
gross misconduct, (iii) Employee's intentional breach of any fiduciary duty,
(iv) the Employee’s gross negligence or willful misconduct in the performance of
his duties hereunder, (v) Employee engages in any conduct, action or behavior
that has or may reasonably be expected to have a material adverse effect on
the
reputation of Company, or Employee’s reputation or that is not befitting of an
executive of the Company; or (vi) a material failure on the part of Employee
to
perform his obligations hereunder, which failure is not remedied within thirty
(30) days after notice thereof is furnished by Company to Employee, or (vii)
the
Employee’s inability to perform his duties and responsibilities as provided
herein due to his death or Disability. Any termination for Cause pursuant to
this Section shall be given to the Employee in writing and shall set forth
in
detail all acts or omissions upon which the Company is relying to terminate
the
Employee for Cause. If an Employee is terminated for Cause, the Employee shall
only be entitled to receive his accrued and unpaid Salary, bonus and other
benefits through the termination date and the Company shall have no further
obligations under this Agreement from and after the date of
termination.
(b) Termination
by Employee.
If the
Employee shall resign or otherwise terminate his employment with the Company
at
anytime during the term of this Agreement, the Employee shall only be entitled
to receive his accrued and unpaid Salary, bonus and other benefits through
the
termination date and the Company shall have no further obligations under this
Agreement from and after the date of termination.
(c) Termination
by Company Without Cause.
At any
time during the term of this Agreement, the Company shall have the right to
terminate this Agreement and to discharge the Employee without Cause effective
upon delivery of written notice to the Employee. Upon any such termination
by
the Company without Cause, the Company shall pay to the Employee all of the
Employee's accrued but unpaid Salary through the date of termination, and
continue to pay to or provide for the Employee his Salary payable in accordance
with Section 2(a) for the lesser of (y) the remaining Employment Term or (z)
six
(6) months from the date of termination, when and as the same would have been
due and payable hereunder but for such termination (the "Severance
Payments").
Other
than the Severance Payments, the Company shall have no further obligation to
the
Employee except for the obligations set forth in this Section 3 of the Agreement
after the date of such termination; provided,
however,
that
the Employee shall only be entitled to continuation of the Severance Payments
as
long as he is in compliance with the provisions of Sections 4 and 5 of this
Agreement.
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(d) Termination
by the Employee for Good Reason.
The
Employee shall have the right to terminate this Agreement for Good Reason (as
defined below), at any time during the Employment Period. Termination for
“Good
Reason”
shall
mean, during the Employment Period, (i) Employer’s assignment to the Employee,
without his consent, of any duties other than those contemplated by Section
1(b)
hereof, or any limitation of the powers of the Employee in any respect not
contemplated by Section 1(b) hereof, (ii) removal of the Employee from or
any failure to re-elect the Employee to the positions indicated in Section
1(b)
hereof, (iii) any reduction in the Employee’s Salary, Bonuses, Equity
Incentives, Vacations, Other Benefits or Expenses effected without the agreement
of the Employee or as otherwise permitted by this Agreement, (iv) Employer’s
requirement for Employee to permanently carry on his Duties and Responsibilities
in any location other than the Washington, DC area, (v) Employer’s requirement
for Employee to perform acts that constitute fraud, dishonestly or violation
of
the codes of professional ethics or conduct (as defined by the American
Institute of Certified Public Accountants (AICPA)), (vi) a material failure
on
the part of Employer to perform its obligations hereunder, which failure is
not
remedied within thirty (30) days after written notice thereof is furnished
by
Employee to Company, (vii) any failures by the Employer to comply with Sections
1, 11 or 18 of this Agreement, or (viii) failure of the Employer to maintain
Directors and Officers liability insurance, with a minimum coverage of three
(3)
million dollars throughout the Employment Term. Any termination by the Employee
for Good Reason pursuant to this Section shall be given to the Employer in
writing and shall set forth in detail all acts or omissions upon which the
Employee is relying to terminate his Employment for Good Reason. If the Employee
terminates his Employment for Good Reason, as defined in this Section 3(d)
the
Employee shall be entitled to receive his accrued and unpaid Salary, bonus
and
other benefits through the termination date and receive Severance Payments
as
defined in Section 3(c) above.
(e) Disability
of the Employee.
This
Agreement may be terminated by the Company upon the Disability of the Employee.
"Disability"
shall
mean any mental or physical illness, condition, disability or incapacity which
prevents the Employee from reasonably discharging his duties and
responsibilities under this Agreement for a period of ninety (90) days in any
one hundred eighty (180) day period. In the event that any disagreement or
dispute shall arise between the Company and the Employee as to whether the
Employee suffers from any Disability, then, in such event, the Employee shall
submit to the physical or mental examination of a physician licensed under
the
laws of the State of Delaware, who is mutually agreeable to the Company and
the
Employee, and such physician shall determine whether the Employee suffers from
any Disability. In the absence of fraud or bad faith, the determination of
such
physician shall be final and binding upon the Company and the Employee. The
entire cost of such examination shall be paid for solely by the Company. In
the
event the Company has purchased Disability insurance for Employee, the Employee
shall be deemed disabled if he is completely (fully) disabled as defined by
the
terms of the Disability policy. On the date that the Employee is deemed to
have
a Disability, this Agreement will be deemed to have been terminated and (i)
the
Employee shall be entitled to receive from the Company his accrued and unpaid
Salary, bonus and other benefits through the termination date and (ii) the
amounts set forth in clause (i) of Section
3(c). Other than as set forth in the preceding sentence, the Company shall
have
no further obligations under this Agreement from and after the date of
termination due to Disability.
(f) Death
of the Employee.
In
the
event of the death of Employee, the employment of the Employee by the Company
shall automatically terminate on the date of the Employee's death and the
Company shall be obligated to pay Employee’s estate (i) the Employee’s accrued
and unpaid Salary, bonus and other benefits through the termination date and
(ii) the amounts set forth in clause (i) of Section 3(c). Other than as set
forth in the preceding sentence, the Company shall have no further obligations
under this Agreement from and after the date of termination due to the death
of
the Employee.
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4. Restrictive
Covenants.
In
consideration of his employment and the other benefits arising under this
Agreement, the Employee agrees that during the Employment Period, and for (i)
the greater of the balance of the Employment Term or one (1) year following
the
termination of this Agreement by the Company “for cause” or termination of this
Agreement by the Employee or (ii) six months in the event the Employee is
terminated “without cause” or terminates his Employment for “good reason”
(provided that he Company continues to make the payments due the Employee
hereunder), the Employee (or any affiliate) shall not directly or
indirectly:
(a) own,
manage, operate, join, control or participate in the ownership, management,
operation or control of, or be employed or retained by, render services to,
provide financing (equity or debt) or advice to, or otherwise be connected
in
any manner with any business that at any time competes with any business of
the
Company, including the Business (as defined in the Purchase Agreement), anywhere
in the United States; provided, however, that nothing contained herein shall
prevent the purchase or ownership by the Employee of less than 1% of the
outstanding equity securities of any class of securities of a company registered
under Section 12 of the Securities Exchange Act of 1934, as amended;
or
(b) for
any
reason, (i) induce any customer or supplier of the Company or any of its
subsidiaries or affiliates to patronize or do business with any business
directly or indirectly in competition with the businesses conducted by the
Company or any of its subsidiaries or affiliates in any market in which the
Company or any of its subsidiaries or affiliates does business; (ii) canvass,
solicit or accept from any customer or supplier of the Company or any of its
subsidiaries or affiliates any such competitive business; or (iii) request
or
advise any customer or vendor of the Company or any of its subsidiaries or
affiliates to withdraw, curtail or cancel any such customer's or vendor's
business with the Company or any of its subsidiaries or affiliates;
or
(c) for
any
reason, employ, or knowingly permit any company or business directly or
indirectly controlled by him, to employ, any person who was employed by the
Company or any of its subsidiaries or affiliates at or within the
prior one
(1)
year,
or
in any
manner seek to induce any such person to leave his or her
employment.
5. Confidentiality;
Work Product.
(a) The
Employee agrees that at all times during the term of this Agreement and after
the termination of employment with the Company for as long as such information
remains non-public information, the Employee shall (i) hold in confidence and
refrain from disclosing to any other party all information, whether written
or
oral, tangible or intangible, of a private, secret, proprietary or confidential
nature, of or concerning the Company or any of its subsidiaries or affiliates
and their business and operations, and all files, letters, memoranda, reports,
records, computer disks or other computer storage medium, data, models or any
photographic or other tangible materials containing such information
("Confidential
Information"),
including without limitation, any sales, promotional or marketing plans,
programs, techniques, practices or strategies, any expansion plans (including
existing and entry into new geographic and/or product markets), and any customer
lists, (ii) use the Confidential Information solely in connection with his
employment with the Company or any of its subsidiaries or affiliates and for
no
other purpose, (iii) take all precautions necessary to ensure that the
Confidential Information shall not be, or be permitted to be, shown, copied
or
disclosed to third parties, without the prior written consent of the Company
or
any of its subsidiaries or affiliates, and (iv) observe all security policies
implemented by the Company or any of its subsidiaries or affiliates from time
to
time with respect to the Confidential Information. In the event that the
Employee is ordered to disclose any Confidential Information, whether in a
legal
or regulatory proceeding or otherwise, the Employee shall provide the Company
or
any of its subsidiaries or affiliates with prompt notice of such request or
order so that the Company or any of its subsidiaries or affiliates may seek
to
prevent disclosure. In addition to the foregoing the Employee shall not at
any
time libel, defame, ridicule or otherwise disparage the Company.
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(b) For
the
purposes of this Agreement, "Work
Product"
shall
mean the data, materials, documentation, computer programs, inventions (whether
or not patentable), and all works of authorship, including all worldwide rights
therein under patent, copyright, trade secret, confidential information, or
other proprietary right. The
Employee hereby assigns to the Company all rights, title and interest in such
Work Product made or conceived by the Employee alone or jointly with
others
(whether
during
the Employment Period or
any
period of employment with the Company or any of its affiliates following the
Employment Period) which
relates
to
the
business of the Company or any such affiliate. This assignment shall include
(a)
the right to file and prosecute patent applications on such Work Product in
any
and all countries, (b) the patent applications filed and patents issuing thereon
and (c) the right to obtain copyright, trademark or trade name protection for
any such Work Product. The Employee shall promptly and fully disclose all such
Work Product to the Company and reasonably assist the Company, at the Company's
expense, in obtaining and protecting the rights therein (including patents
thereon) in any and all countries; provided, however, that said Work Product
will be the property of the Company, whether or not patented or registered
for
copyright, trademark or trade name protection, as the case may be. Work Product
conceived by the Employee, which is not related to the business of the Company,
will remain the property of the Employee.
6. Specific
Performance; Injunction.
The
parties agree and acknowledge that the restrictions contained in Sections 4
and
5 are reasonable in scope and duration and are necessary to protect the Company
or any of its subsidiaries or affiliates. If any provision of Sections 4 or
5 as
applied to any party or to any circumstance is adjudged by a court to be invalid
or unenforceable, the same shall in no way affect any other circumstance or
the
validity or enforceability of any other provision of this Agreement. If any
such
provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court making such determination shall have the power to reduce the duration
and/or area of such provision, and/or to delete specific words or phrases,
and
in its reduced form, such provision shall then be enforceable and shall be
enforced. The Employee agrees and acknowledges that the breach of Sections
4 or
5 will cause irreparable injury to the Company or any of its subsidiaries or
affiliates and upon breach of any provision of such Sections, the Company or
any
of its subsidiaries or affiliates shall be entitled to injunctive relief,
specific performance or other equitable relief, without being required to post
a
bond; provided,
however,
that,
this shall in no way limit any other remedies which the Company or any of its
subsidiaries or affiliates may have (including, without limitation, the right
to
seek monetary damages).
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7. Notices.
All
notices, requests, demands, claims and other communications hereunder shall
be
in writing and shall be deemed given if delivered by hand delivery, by certified
or registered mail (first class postage pre-paid), guaranteed overnight delivery
or facsimile transmission if such transmission is confirmed by delivery by
certified or registered mail (first class postage pre-paid) or guaranteed
overnight delivery to, the following addresses and telecopy numbers (or to
such
other addresses or telecopy numbers which such party shall designate in writing
to the other parties): (a) if to the Company, at its principal executive
offices, addressed to the President, with a copy to Xxxxxxx Xxxxxx, Esq.,
Xxxxxxxxxxx & Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP, 000 Xxxxx Xxxxxxxx Xxxx,
Xxxxx 0000, Xxxxx, Xxxxxxx 00000; and (b) if to the Employee, at the address
listed on the signature page hereto.
8. Amendment;
Waiver.
This
Agreement may not be modified, amended, or supplemented, except by written
instrument executed by all parties. No failure to exercise, and no delay in
exercising, any right, power or privilege under this Agreement shall operate
as
a waiver, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision,
nor shall any waiver be implied from any course of dealing between the parties.
No extension of time for performance of any obligations or other acts hereunder
or under any other agreement shall be deemed to be an extension of the time
for
performance of any other obligations or any other acts. The rights and remedies
of the parties under this Agreement are in addition to all other rights and
remedies, at law or equity, that they may have against each other.
9. Assignment;
Third Party Beneficiary.
This
Agreement, and the Employee's rights and obligations hereunder, may not be
assigned or delegated by him. The Company may assign its rights, and delegate
its obligations, hereunder to any affiliate of the Company, or any successor
to
the Company, specifically including the restrictive covenants set forth in
Sections 4 and 5 hereof. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon its respective
successors and assigns.
10. Severability;
Survival.
In the
event that any provision of this Agreement is found to be void and unenforceable
by a court of competent jurisdiction, then such unenforceable provision shall
be
deemed modified so as to be enforceable (or if not subject to modification
then
eliminated herefrom) to the extent necessary to permit the remaining provisions
to be enforced in accordance with the parties intention. The provisions of
Sections 4 and 5 will survive the termination for any reason of the Employee's
relationship with the Company.
11. Indemnification.
The
Company agrees to indemnify the Employee during the term and after termination
of this Agreement in accordance with the provisions of the Company's certificate
of incorporation and bylaws and the laws of the State of Delaware and grant
indemnification to the Employee on the same terms and limits as that of any
executive employee, past, present or future, as, if and when the Company enters
into such other indemnification agreement with such other executive
employee(s).
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12. Counterparts.
This
Agreement may be signed in any number of counterparts, each of which shall
be an
original but all of which together shall constitute one and the same
instrument.
13. Governing
Law.
This
Agreement shall be construed in accordance with and governed for all purposes
by
the laws of the State of Delaware applicable to contracts executed and to be
wholly performed within Delaware.
14. Entire
Agreement.
This
Agreement contains the entire understanding of the parties in respect of its
subject matter and supersedes all prior agreements and understandings (oral
or
written) between or among the parties with respect to such subject matter.
15. Headings.
The
headings of Paragraphs and Sections are for convenience of reference and are
not
part of this Agreement and shall not affect the interpretation of any of its
terms.
16. Construction.
This
Agreement shall be construed as a whole according to its fair meaning and not
strictly for or against any party. The parties acknowledge that each of them
has
reviewed this Agreement and has had the opportunity to have it reviewed by
their
respective attorneys and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not apply in
the
interpretation of this Agreement.
17. Resolution
of Disputes.
Any
disputes arising under or in connection with this Agreement shall be resolved
by
third party mediation of the dispute and, failing that, by binding arbitration
to be held in Wilmington, Delaware in accordance with the rules and procedures
of the American Arbitration Association. Judgment upon the award rendered by
the
arbitrator(s) may be entered in any court having jurisdiction thereof. Each
party shall be responsible for its own costs and expenses (including attorney’s
fees) with respect any dispute hereunder.
18. Withholding.
All
payments made to the Employee shall be made net of any applicable withholding
for income taxes and the Employee's share of FICA, FUTA or other taxes. The
Company shall withhold such amounts from such payments to the extent required
by
applicable law and remit such amounts to the applicable governmental authorities
in accordance with applicable law.
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19. Indemnification.
Employee
represents and warrants that his execution and performance of this Agreement
will not conflict or cause a breach of any other agreement of the Employee
(including, but not limited to, any previous employment agreement of the
Employee). In the event that the execution and performance of this Agreement
results in any claim or action against the Company pursuant to any other
agreement of the Employee, the Employee agrees to indemnify and hold harmless
the Company and, where applicable, its directors, officers, employees, agents,
advisors and shareholders from and against any and all loss, liability, claim,
damage and expense whatsoever (including, without limitation, any and all
fees,
costs and expenses whatsoever reasonably incurred in investigating, preparing
or
defending against any claim, lawsuit, administrative proceeding or investigation
whether commenced or threatened) arising out of or based upon the breach
of
representation of the Employee in the preceding sentence. Notwithstanding
the
above, the Employee only indemnifies the aforementioned parties to the extent
of
damages or claims, commenced or threatened, resulting from the representations
or warrantees of the Employee specific to any previous employment or consulting
agreements and not against any damages or claims, commenced or threatened,
specific to any conflicts, breaches or actions, past, present or future,
of the
other parties mentioned in this section.
[REMAINDER
OF PAGE BLANK]
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IN
WITNESS WHEREOF,
the
parties have executed this Agreement effective as of the date first above
written.
HOMELAND SECURITY CAPITAL CORPORATION, | ||
a Delaware corporation | ||
|
|
|
By: | /s/ C. Xxxxxx XxXxxxxx | |
Name: C. Xxxxxx XxXxxxxx |
||
Title: Chief Executive Officer |
EMPLOYEE: | ||
|
|
|
By: | /s/ Xxxxxxx X. Xxxxxxxx | |
Name: Xxxxxxx X. Xxxxxxxx |
||
Address for Notices: | ||
00 Xxxxxx Xxxxx | ||
Xxxxxxxxxxxx, XX 00000 | ||
Signature
Page for Employment Agreement
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Exhibit
A
Exceptions
to Non-Compete
None