INTEGRATED ALARM SERVICES GROUP, INC. EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT made as
of this 2nd day of
March 2005 by and between
INTEGRATED ALARM SERVICES GROUP, INC., a
Delaware corporation, having an office at One Capital Center, 00 Xxxx Xxxxxx,
Xxxxxx, Xxx Xxxx 00000 (hereinafter referred to as "Employer") and Xxxxx
Xxxx, an
individual residing at 0 Xxxxxx Xxx Xxxx, Xxxxxx, Xxx Xxxx 00000 (hereinafter
referred to as "Employee");
W
I T N E S S E T H:
WHEREAS,
Employer desires to employ Employee as the Chief Operating Officer of Employer;
and
WHEREAS,
Employee is willing to be employed as the Chief Operating Officer of Employer in
the manner provided for herein, and to perform the duties of the Chief Operating
Officer of Employer upon the terms and conditions herein set forth;
NOW,
THEREFORE, in
consideration of the promises and mutual covenants herein set forth it is agreed
as follows:
1. Employment
of Chief Operating Officer. Employer
hereby employs Employee as Chief Operating Officer.
2. Term.
(a)
Subject
to Section 9 and Section 10 below, the term of this Agreement shall be for a
period of thirty-six (36) months commencing on a date to be agreed upon by
Employee and Employer but no later than April 4, 2005 (the A
Term@). The
Term of this Agreement shall be automatically extended for additional one (1)
year periods, unless either party notifies the other in writing at least one (1)
year prior to the expiration of the then existing Term of its intention not to
extend the Term. During the Term, Employee shall devote substantially all of his
business time and efforts to Employer and its subsidiaries and affiliates.
3. Duties. The
Employee shall perform those functions generally performed by persons of such
title and position, shall attend all meetings of the stockholders and the Board,
shall perform any and all related duties and shall have any and all powers as
may be prescribed by resolution of the Board, and shall be available to confer
and consult with and advise the officers and directors of Employer at such times
that may be required by Employer. Employee shall report directly to the
Employer=s
President and Chief Executive Officer and ultimately to the Board. Employee
shall not enter into any transaction on behalf of the Employer, except as
authorized by the CEO, other than in the ordinary course of
business.
4. Compensation.
a. (i) Employee
shall be paid a minimum of $360,000 per year during the Term of this Agreement.
Employee shall be paid periodically in accordance with the policies of the
Employer during the term of this Agreement, but not less than
monthly.
(ii) Employee
is eligible for an annual bonus, if any, which will be determined and paid in
accordance with policies set from time to time by the Board.
b. Employer
shall include Employee in its health insurance program available to Employer's
executive officers and shall pay 100% of the premiums for such
program.
c.
Employee shall have the right to participate in any other employee benefit plans
established by Employer.
d. Employee
shall be issued 25,000 options to purchase the Common Stock of Employer which
options shall have an exercise price equal to the closing bid price of the
Employer=s common
stock on the day prior to the date hereof. The options shall vest 1/3 upon
issuance, 1/3 one year from issuance and 1/3 two years from
issuance.
e. (i) In the
event of a "Change of Control" whereby:
(A) A person
(other than a person who is an officer or a Director of Employer on the
effective date hereof), including a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, becomes, or obtains the right to become,
the beneficial owner of Employer securities having 51% or more of the combined
voting power of then outstanding securities of the Employer that may be cast for
the election of directors of the Employer;
(B) At any
time, a majority of the Board-nominated slate of candidates for the Board is not
elected;
(C) Employer
consummates a merger in which it is not the surviving entity;
(D) Substantially
all Employer's assets are sold; or
(E) Employer's
stockholders approve the dissolution or liquidation of Employer; or
(F)
Xxxxxxx XxXxxx ceases to be CEO of Employer; then
(ii) (A) All stock
options and warrants ("Rights") granted by Employer to Employee under any plan
or otherwise prior to the effective date of the Change of Control, shall become
vested, accelerate and become immediately exercisable.
(B) If at any
time within 6 months of the said Change of Control, Employee is not retained by
Employer or the surviving entity, as applicable, under terms and conditions
substantially similar to those herein, or if Employee=s duties
require employee to move to a location not acceptable to Employee, then in
addition, Employee shall be eligible to receive a one-time cash bonus, equal on
an after-tax basis to his average compensation for the three previous fiscal
years. Such compensation shall include salary, bonus, and any other compensation
pursuant hereto. Said bonus shall be paid within thirty (30) days of the Change
of Control.
5. Expenses.
Employee shall be reimbursed for all of his actual out-of-pocket expenses
incurred in the performance of his duties hereunder, provided such expenses are
acceptable to Employer, which approval shall not be unreasonably withheld, for
business related travel and entertainment expenses, and that Employee shall
submit to Employer reasonably detailed receipts with respect
thereto.
6. Vacation. Employee
shall be entitled to receive four (4) weeks paid vacation time after each year
of employment upon dates agreed upon by Employer. Upon separation of employment,
for any reason, vacation time accrued and not used shall be paid at the salary
rate of Employee in effect at the time of employment separation.
7. Secrecy. At no
time shall Employee disclose to anyone any confidential or secret information
(not already constituting information available to the public) concerning the
internal affairs, business operations, and trade secrets of Employer.
8. Covenant
Not to Compete.
(a)
Subject to, and limited by, Section 10(b), Employee will not, at any time,
during the term of this Agreement, and for one (1) year thereafter, either
directly or indirectly, engage in, with or for any enterprise, institution,
whether or not for profit, business, or company, competitive with the business
(as identified herein) of Employer as such business may be conducted on the date
thereof, as a creditor, guarantor, or financial backer, stockholder, director,
officer, consultant, advisor, employee, member, or otherwise of or through any
corporation, partnership, association, sole proprietorship or other entity;
provided, that an investment by Employee, his spouse or his children is
permitted if such investment is not more than four percent (4%) of the total
debt or equity capital of any such competitive enterprise or business and
further provided that said competitive enterprise or business is a publicly held
entity whose stock is listed and traded on a national stock exchange, the NASDAQ
Stock Market, or the over-the-counter bulletin board or any successor thereto.
As used in this Agreement, the business of Employer shall be deemed to include
wholesale monitoring and related support services, and financing solutions and
products, within the security alarm industry.
(b) For a
period one year from the date of termination of this agreement Employee shall
not contact or solicit any of the Employers
dealers, customers, employees or suppliers.
9.
Termination.
a.
Termination
by Employer
(i)
Employer may terminate this Agreement upon written notice for Cause. For
purposes hereof, "Cause" shall mean (A) Employee's failure or refusal to perform
his/her duties and responsibilities as set forth in paragraph 3 hereof, or the
failure of Employee to devote all of his/her business time and attention
exclusively to the business and affairs of the Employer in accordance with the
terms hereof, in each case if such failure or refusal is not cured (if curable)
within 10 days after receipt of written notice thereof to Employee by the
Employer; (B) the willful misappropriation of the funds or property of the
Employer (except for immaterial amounts of office supplies); (C) the use of
alcohol or illegal drugs, interfering with the performance of
Employees
obligations under this Agreement; (D) the conviction in a court of law of, or
entering a plea of guilty or nolo contendere, to a charge that either Employee
committed a felony or any crime involving moral turpitude, dishonesty or theft;
(E) the commission in bad faith by Employee of any act which injures the
reputation, business or business relationships of the Employer, or the
commission of an act which constitutes a nonconformance with the
Employer=s
policies against racial or sexual discrimination or harassment; (F) the gross or
habitual misconduct or gross or habitual negligence by Employee in the
performance of his/her duties, continuing after warning; (G)
Employee=s
engagement in any activity which constitutes a conflict of interest with the
Employer; and (H) any breach (not covered by any of the classes (a) through (a)
above) of any provision of this Agreement not cured within ten (10) days after
written notice thereof; Notwithstanding anything to the contrary in this Section
9(a)(i), Employer may not terminate Employee's employment under this Agreement
for Cause unless Employee shall have first received notice from the Board
advising Employee of the specific acts or omissions alleged to constitute Cause,
and such acts or omissions continue after Employee shall have had a reasonable
opportunity (at least 10 days from the date Employee receives the notice from
the Board) to correct the acts or omissions so complained of. However, Employee
shall have the right at any time during such notice periods, to relieve the
Employee of his office duties and responsibilities and to place Employee on a
paid leave of absence status.
(ii) This
agreement automatically shall terminate upon the death of Employee, except that
Employee's estate shall be entitled to receive any amount accrued under Section
4(a).
b. Termination
by Employee
(i) Employee
shall have the right to terminate his employment under this Agreement upon 30
days' notice to Employer given within 90 days following the occurrence of any of
the following events (A) through (F) or within six month following the
occurrence of event (G):
(A) Employee
is not elected or retained as Chief Operating Officer.
(B) Employer
acts to materially reduce Employee's duties and responsibilities hereunder.
Employee's duties and responsibilities shall not be deemed materially reduced
for purposes hereof solely by virtue of the fact that Employer is (or
substantially all of its assets are) sold to, or is combined with, another
entity, provided that Employee shall continue to have the same duties and
responsibilities with respect to Employer's business, and Employee shall report
directly to the chief executive officer and/or board of directors of the entity
(or individual) that acquires Employer or its assets.
(C) Employer
acts to change the geographic location of the performance of Employee's duties
from the Albany, New York area, subject to necessary travel requirements of his
position and duties hereunder. For purposes of this Agreement, the Albany, New
York area shall be deemed to be the area within 60 miles of the current address
of the Employer as set forth above.
(D) A
Material Reduction (as hereinafter defined) in Employee's rate of base
compensation, or Employee's other benefits. "Material Reduction" shall mean a
ten percent (10%) differential;
(E) A failure
by Employer to obtain the assumption of this Agreement by any
successor;
(F) A
material breach of this Agreement by Employer, which is not cured within thirty
(30) days of written notice of such breach by Employer;
(G) A Change
of Control.
(ii)
Anything herein to the contrary notwithstanding, Employee may terminate this
Agreement upon thirty (30) days written notice.
(iii) If
Employee shall terminate this Agreement under Section 9(b)(i), Employee shall be
entitled to receive twelve months salary. Other than the payment of twelve
months salary to Employee and the immediate vesting of all options of Employee,
Employer shall have no further obligation to compensate Employee pursuant to
Section 4 above. If
Employee shall terminate this Agreement pursuant to Section 9(b)(ii), Employee
shall only be entitled to any accrued and unpaid compensation as of the date of
termination as provided in Section 4(a)(i).
10. Consequences
of Breach by Employer; Employment Termination
a. If this
Agreement is terminated pursuant to Section 9(b)(i) hereof, or if Employer shall
terminate Employee's employment under this Agreement in any way that is a breach
of this Agreement by Employer, the following shall apply:
(i) Employee
shall be entitled to payment of twelve months salary; and
(ii) Employee
shall be entitled to payment of any previously declared bonus as provided in
Section 4(a) above.
b. In the
event of termination of Employee's employment pursuant to Section 9(b)(i) of
this Agreement, the provisions of Section 8 shall not apply to
Employee.
11. Remedies.
Employer recognizes that because of Employee's special talents, stature and
opportunities in the alarm industry, and because of the special creative nature
of and compensation practices of said industry and the material impact that
individual projects can have on the Company's results of operations, in the
event of termination by Employer hereunder (except under Section 9(a)(i) or
(iii), or in the event of termination by Employee under Section 9(b)(i) before
the end of the agreed term), the Employer acknowledges and agrees that the
provisions of this Agreement regarding further payments of base salary, bonuses
and the exercisability of rights constitute fair and reasonable provisions for
the consequences of such termination, do not constitute a penalty, and such
payments and benefits shall not be limited or reduced by amounts' Employee might
earn or be able to earn from any other employment or ventures during the
remainder of the agreed term of this Agreement.
12. Excise
Tax. In the
event that any payment or benefit received or to be received by Employee in
connection with a termination of his employment with Employer would constitute a
"parachute payment" within the meaning of Code Section 280G or any similar or
successor provision to 280G and/or would be subject to any excise tax imposed by
Code Section 4999 or any similar or successor provision then Employer shall
assume all liability for the payment of any such tax and Employer shall
immediately reimburse Employee on a "grossed-up" basis for any income taxes
attributable to Employee by reason of such Employer payment and
reimbursements.
13. Attorneys'
Fees and Costs. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
he may be entitled.
14. Entire
Agreement; Survival. This
Agreement contains the entire agreement between the parties with respect to the
transactions contemplated herein and supersedes, effective as of the date hereof
any prior agreement or understanding between Employer and Employee with respect
to Employee's employment by Employer. The unenforceability of any provision of
this Agreement shall not effect the enforceability of any other provision. This
Agreement may not be amended except by an agreement in writing signed by the
Employee
and the Employer, or any waiver, change, discharge or modification as sought.
Waiver of or failure to exercise any rights provided by this Agreement and in
any respect shall not be deemed a waiver of any further or future
rights.
b. The
provisions of Sections 4, 7, 8, 9(a)(ii), 9(c), 10, 11, 12, 14, 16, 17 and 18
shall survive the termination of this Agreement.
15. Assignment. This
Agreement shall not be assigned to other parties.
16. Governing
Law. This
Agreement and all the amendments hereof, and waivers and consents with respect
thereto shall be governed by the internal laws of the State of New York, without
regard to the conflicts of laws principles thereof.
17. Notices. All
notices, responses, demands or other communications under this Agreement shall
be in writing and shall be deemed to have been given when
a. delivered
by hand;
b. sent be
telex or telefax, (with receipt confirmed), provided that a copy is mailed by
registered or certified mail, return receipt requested; or
c. received
by the addressee as sent be express delivery service (receipt requested) in each
case to the appropriate addresses, telex numbers and telefax numbers as the
party may designate to itself by notice to the other parties:
(i) if to
the Employer:
Integrated
Alarm Services Group, Inc.
00 Xxxx
Xxxxxx, 0xx
Xxxxx
Xxxxxx,
Xxx Xxxx
Attention:
Xxxxxxx XxXxxx
Telefax:
(000) 000-0000
Telephone:(000)
000-0000
Xxxxxxx,
Savage, Kaplowitz,
Wolf
& Marcus LLP
000 Xxxx
00xx Xxxxxx
0xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
Telefax:
(000) 000-0000
Telephone:
(000) 000-0000
(ii) if
to the Employee:
Xxxxx
Xxxx
0 Xxxxxx
Xxx Xxxx
Xxxxxx,
Xxx Xxxx 00000
18. Severability
of Agreement. Should
any part of this Agreement for any reason be declared invalid by a court of
competent jurisdiction, such decision shall not affect the validity of any
remaining portion, which remaining provisions shall remain in full force and
effect as if this Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties that they
would have executed the remaining portions of this Agreement without including
any such part, parts or portions which may, for any reason, be hereafter
declared invalid.
IN
WITNESS WHEREOF, the
undersigned have executed this Agreement as of the day and year first above
written.
INTEGRATED
ALARM SERVICES GROUP, INC.
By:
/s/
Xxxxxxx X. McGinn___________________
Xxxxxxx
X. XxXxxx
Co-Chief
Executive Officer
/s/
Xxxxx Xxxx
Xxxxx
Xxxx