EXECUTIVE EMPLOYMENT AGREEMENT
THIS
EXECUTIVE EMPLOYMENT AGREEMENT
(the
"Agreement") is entered into and made effective as of September 1, 2007 (the
"Effective Date"), by and between Homeland Security Capital Corporation., a
Delaware corporation, having its principal offices at 0000 Xxxxx Xxxxx Xxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000 (the
"Company"), and C. Xxxxxx XxXxxxxx, whose address is 0000 Xxxxx Xxxxxxxx Xxxxxx,
X.X., Xxxxxxxxxx, X.X.
00000 (the "Executive").
RECITALS:
WHEREAS,
the
Company desires to employ and retain the Executive for the term specified herein
in order to advance the business and interests of the Company on the terms
and
conditions set forth herein; and
WHEREAS,
the
Executive desires to provide his services to the Company in such capacities,
on
and subject to the terms and conditions hereof; and
WHEREAS,
the
Company desires to provide the Executive with certain options to acquire stock
in the Company in order that the Executive may have the opportunity to
participate in the growth and performance of the Company, as set forth
herein.
NOW,
THEREFORE,
for and
in consideration of the foregoing premises, the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt
and
adequacy of which is hereby acknowledged, the parties hereto, intending to
be
legally bound, hereby agree as follows:
1. Employment
and Term.
Subject
to the terms and conditions hereof, the Company does hereby employ and agree
to
employ the Executive as its President and Chief Executive Officer for and during
the Employment Term (as defined below), and the Executive does hereby accept
such employment. The initial term of employment shall commence on September
1,
2007 and shall continue for two (2) years thereafter unless earlier terminated
as herein provided (the "Employment Term"), and thereafter shall be renewed
for
additional terms of one (1) year, unless either party provides the other with
notice, as provided for herein, at least ninety (90) days prior to the date
the
Employment Term would otherwise renew, of that party's intention not to so
renew
such term.
2. Duties
of Executive.
The
Executive shall, during the Employment Term hereunder, perform the executive
and
administrative duties, functions and privileges incumbent with the position
of
President and Chief Executive Officer and such other duties as reasonably
determined by the Board of Directors of the Company (the "Board") from
time-to-time. The Executive shall report to the Board and if appointed by the
Board, shall serve as the Chairman of the Board without additional compensation
therefor. The Executive agrees to serve the Company faithfully, conscientiously
and to the best of his ability, and to devote at least twenty-five (25) hours
per week to the business and affairs of the Company (and, if requested by the
Board, any subsidiary or affiliate of the Company) so as to promote the profit,
benefit and advantage of the Company and, if applicable, any subsidiaries or
affiliates of the Company. The Executive agrees to accept the compensation
to be
made to him under this Agreement as full and complete compensation for the
services required to be performed by, and the covenants of, the Executive under
this Agreement.
3. Location
and Travel.
The
Executive shall not be required to relocate outside the greater Washington,
D.C.
metropolitan area without his consent. The Executive acknowledges, however,
that
significant domestic and international travel may be required as part of his
duties hereunder and the Executive agrees to undertake such travel as may be
reasonably required by the business of the Company from
time-to-time.
4. Compensation.
4.1 Base
Salary.
The
Executive shall initially be paid a base salary (the "Base Salary") of Two
Hundred Thousand Dollars ($200,000) per year, which shall be periodically
reviewed and increased by the Board, in its sole discretion, during the
Employment Term. The Base Salary shall be increased by Twenty Thousand Dollars
($20,000) or pro rata for every Ten Million Dollars ($10,000,000) or
pro rata of equity the Company sells during the Employment Term (“New
Equity”); provided, however, that any equity securities (i) issued to employees
or consultants as compensation, (ii) issued in any acquisition or merger or
(iii) purchased by employees, consultants or directors upon the exercise or
conversion of any Company stock option or other security issued for compensatory
purposes, shall not be deemed New Equity. All compensation shall be made in
accordance with the standard payroll practices of the Company.
4.2 Regular
Benefits.
The
Executive shall be entitled to participate in any health insurance, accident
insurance, hospitalization insurance, life insurance, pension, or any other
similar plan or benefit provided by the Company to its executives or employees
generally, including, but not limited to any stock option plan, if and to the
extent that the Executive is eligible to participate in accordance with the
provisions of any such insurance, plan or benefit generally (such benefits,
collectively, the "Regular Benefits").
4.3 Vacation.
The
Executive shall be entitled to four (4) weeks paid vacation with such vacation
to be taken at times mutually agreeable to the Executive and the Company. The
Executive shall further be entitled to the number of paid holidays, and leaves
for illness or temporary disability in accordance with the policies of the
Company for its senior executives.
4.4 Term
Life Insurance.
The
Company shall have the right from time-to-time to purchase, modify or terminate
insurance policies on the life of the Executive for the benefit of the Company
in such amount as the Company shall determine in its sole discretion. In
connection therewith the Executive shall, at such time(s) and at such place(s)
as the Company may reasonably direct, submit himself to such physical
examinations and execute and deliver such documents as the Company may deem
necessary or desirable; provided, however, that the eligibility of the Executive
for, or the availability of, such insurance shall not be deemed to be a
condition of continued employment hereunder.
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4.5 Expense
Reimbursement.
The
Company shall reimburse the Executive for all expenses reasonably incurred
by
him in connection with the performance of his duties hereunder and the business
of the Company upon the submission to the Company of appropriate receipts
therefor, in accordance with the expense reimbursement policy of the
Company.
4.6 Annual
Bonus.
The
Executive shall be eligible to receive an annual bonus equal to one hundred
percent (100%) of the Base Salary then in effect based on the achievement of
performance metrics established by the Board and the Executive on each
anniversary of the Effective Date during the Employment Term, with the metrics
for the first twelve months of the Employment Term to be established by the
Board and the Executive on or before the date which is sixty (60) days from
the
date hereof. All such metrics shall be evidenced in a document signed by the
Board and timely provided to the Executive.
4.7 Signing
Bonus.
The
Company shall pay to the Executive a signing bonus (the "Signing Bonus") in
the
amount of Fifty Thousand Dollars ($50,000), with such Signing Bonus to be paid
on the date on which this Agreement is executed by the last of the Company
or
the Executive, provided that the other party has already executed this
Agreement.
4.8 Options.
During
the Employment Term and within five (5) business days from the date, if any,
the
Company issues New Equity, the Company shall issue to the Executive options
to
acquire an amount of shares of the Company’s common stock, par value $0.001 per
share, equal to 8% of the additional shares of the Company's common stock
represented by the New Equity (on an as-converted or as-exercised basis), which
options shall vest ratably on a quarterly basis over the Employment Term. Except
as otherwise expressly provided in this Agreement, all terms and conditions
concerning the granting and exercise of any options awarded to the Executive
hereunder, including any cashless exercise provisions, shall be governed by
the
Company's option plan, as such plan may be amended from time to time. The
Executive options shall be memorialized by a stock option agreement between
the
Company and the Executive.
4.9 Automobile
Allowance.
The
Company shall pay to the Executive (or to an entity he designates) a monthly
automobile allowance in the amount of One Thousand Dollars
($1,000).
4.10 Tax
Reimbursement.
The
Company reimburse the Executive for any additional taxes (the “Tax Reimbursement
Payment”) he is required to pay as a result of the cancellation of any
provisions of that certain Promissory Note, dated August 29, 2005, issued
by the Executive to Cornell Capital Partners, L.P., as amended. Any Tax
Reimbursement Payment will be “grossed-up” by the Company to cover Executive’s
anticipated income tax obligations; provided, however, that the amounts to
be
received by the Executive pursuant to this Section 4.10 for the Tax
Reimbursement Payment and any “gross-up” thereof shall not exceed $200,000 in
the aggregate. For purposes of determining the amount of the “gross-up”, the
Executive shall be deemed to pay federal, state and/or local income taxes at
the
highest applicable marginal rate of income taxation for the calendar year in
which the Tax Reimbursement Payment is made or is to be made. Any payments
under
this Section 4.10 will be included in Executive's IRS Form W-2 for the year
in
which payments thereof are made to the Executive.
3
5. Termination
and Severance Arrangements.
5.1 Termination
by the Company.
Except
as set forth in Section 5.3 hereof, the Company may terminate this Agreement
at
any time by providing at least thirty (30) days' prior written notice to the
Executive. In the event that the Company terminates this Agreement (a) other
than in connection with a Change of Control (as defined in Section 6 hereof),
and (b) other than for Cause (as defined in Section 5.3 hereof), the Company
shall, notwithstanding such termination, in consideration for all of the
undertakings and covenants of the Executive contained herein, continue to pay
to
the Executive the Base Salary and the Regular Benefits for the remainder of
the
then-current Employment Term. In addition, in the event the Company terminates
this Agreement as described in the immediately preceding sentence, any and
all
options granted to the Executive by the Company shall become automatically
and
immediately vested and exercisable. In no event however, shall the continuation
of such payments during such post-termination period be deemed to be employment
hereunder for purposes of calculating any bonus due to the Executive or for
purposes of determining the vesting or exercise period of any stock options
granted hereunder, or otherwise.
5.2 Termination
by Executive.
The
Executive may terminate his employment at any time for Good Reason and receive
the payments and benefits specified in Section 5.1 hereof in the same manner
as
if the Company had terminated his employment without Cause. For purposes of
this
Agreement, "Good Reason" will exist if any one or more of the following occur:
failure by the Company to honor any of its material obligations under this
Agreement, including, without limitation, its obligations under Section 4 hereof
concerning compensation, Section 9 hereof concerning indemnification, and
Section 11.4 hereof concerning successor obligations.
5.3 Termination
for Cause.
Notwithstanding the Employment Term, the Company may terminate the Executive
for
Cause upon a resolution duly adopted by the affirmative vote of not less than
a
majority of the entire membership of the Board (excluding the Executive, if
a
director at such time). In the event that the employment of the Executive is
terminated by the Company for Cause, no severance or other post-termination
payment shall be due or payable by the Company to the Executive (except solely
such Base Salary or other payments as may have been accrued but not yet paid
prior to such termination). For purposes hereof, "Cause" shall mean: (a) the
conviction with respect to any felony or misdemeanor involving theft, fraud,
dishonesty or misrepresentation; (b) any misappropriation, embezzlement or
conversion of the Company's or any of its subsidiary's or affiliate's property
by the Executive; (c) willful misconduct by the Executive in respect of the
material duties or obligations of the Executive under this Agreement; or (d)
a
material breach by the Executive of any of his material obligations hereunder,
after written notice thereof and a reasonable opportunity of thirty (30) days
to
cure the same, provided that the same is not caused by the physical disability
including mental disease or defect of the Executive, in which event Section
5.4
hereof shall apply.
5.4 Death
or Disability.
In the
event that the employment of the Executive by the Company is terminated by
reason of the death of the Executive or by reason of medical or psychiatric
disability which prevents the Executive from satisfactorily performing a
material portion of his duties for ninety (90) consecutive calendar days or
one
hundred twenty (120) days in any three hundred sixty-five (365) day period (a
"Disability"), the Company shall, promptly upon such termination, pay the
Executive an amount equal to six (6) months of his then-current Base Salary,
in
a single lump sum.
4
6. Proprietary
Rights.
6.1 Non
Competition.
Except
for (i) the Executive's position as an officer of Fortress International Group
and its successors, (ii) the Executive's ownership interest in Global Secure
Corporation, and (iii) the Executive's ownership interest and/or position in
any
future special purpose acquisition corporations, the Executive covenants and
agrees that for so long as he shall be employed by the Company and for a period
of two (2) years from the date of the termination of such employment for any
reason (the "Restricted Period") the Executive shall not directly or indirectly,
own, manage, control, operate invest in or become principal of employee of,
director of, or consultant to, any business, entity or venture which is
competitive with the business of the Company as conducted at such time;
provided, however, that it shall not be a violation of this Agreement for the
Executive to have beneficial ownership of less than five percent (5%) of the
outstanding amount of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such securities
are listed on a national securities exchange or quoted on an inter-dealer
quotation system.
6.2 Confidentiality.
The
Executive recognizes and acknowledges that certain confidential business and
technical information used by the Employee in connection with his duties
hereunder that includes, without limitation, certain confidential and
proprietary information relating to the designing, development, construction
and
marketing of computer hardware, is a valuable and unique asset of the Company.
Executive agrees that he shall at all times maintain the confidentiality of
the
proprietary information and trade secrets of the Company, and that he shall
during the Restricted Period refrain from disclosing any such information to
the
disadvantage of the Company.
6.2.1
During the Restricted Period the Executive shall not, directly or indirectly:
(a) solicit, in competition with the Company, any person who is a customer
of
any business conducted by the Company, or (b) in any manner whatsoever induce,
or assist others to induce, any supplier of the Company to terminate its
association with such entity or do anything, directly or indirectly, to
interfere with the business relationship between the Company, and any of their
respective current or prospective suppliers.
6.2.2
During the Restricted Period the Executive shall not, directly or indirectly,
solicit or induce any employee of the Company to terminate his or her employment
for any purpose, including without limitation, in order to enter into employment
with any entity which competes with any business conducted by the
Company.
6.3 Ownership
by Company.
The
Executive acknowledges and agrees that any of his work product created, produced
or conceived in connection with his association with the Company shall be deemed
work for hire and shall be deemed owned exclusively by the Company. The
Executive agrees to execute and deliver all documents required by the Company
to
document or perfect the Company's proprietary rights in and to the Executive's
work product.
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6.4 Remedies.
It is
expressly understood and agreed that the services to be rendered hereunder
by
the Executive are special, unique, and of extraordinary character, and in the
event of the breach by the Executive of any of the terms and conditions of
this
Agreement on his part to be performed hereunder, or in the event of the breach
or threatened breach by the Executive of the terms and provisions of this
Section 6, then the Company shall be entitled, if it so elects, to institute
and
prosecute any proceedings in any court of competent jurisdiction, either in
law
or equity, for such relief as it deems appropriate, including without limiting
the generality of the foregoing, any proceedings, to obtain damages for any
breach of this Agreement, or to enforce the specific performance thereof by
the
Executive.
7. Market
Standoff Agreement.
The
Executive hereby agrees that if so requested by the Company or by any
representative of any underwriters in connection with any registration of the
offering of any securities of the Company under the Securities Act, the
Executive shall not sell or otherwise transfer any securities of the Company
during the ninety (90) day period following the effective date of a registration
statement of the Company filed under the Securities Act of 1933, as
amended.
8. Director's
and Officer's Liability Insurance.
To
protect the Executive from any liability, loss, claims, damages, or costs,
including legal fees and costs, prior to any public offering of any securities
of the Company, the Company may purchase and maintain director's and officer's
liability insurance (the "D&O Insurance") in an amount not less than Two
Million Dollars ($2,000,000), or in such amount as is later agreed upon by
the
Executive and the Company.
9. Indemnification.
As an
employee, officer and director of the Company, the Executive shall be
indemnified against all liabilities, damages, fines, costs and expenses by
the
Company in accordance with the indemnification provisions of the Company's
Certificate of Incorporation as in effect on the date hereof, and otherwise
to
the fullest extent to which employees, officers and directors of a corporation
organized under the laws of the state of incorporation of the Company may be
indemnified pursuant to the laws of such state, as the same may be amended
from
time-to-time (or any subsequent statute of similar tenor and effect), subject
to
the terms and conditions of such statute.
10. Independent
Representation.
The
Executive acknowledges that he has had the opportunity to seek independent
legal
counsel and tax advice in connection with the execution of this Agreement,
and
the Executive represents and warrants to the Company (a) that he has sought
such
independent counsel and advice as he has deemed appropriate in connection with
the execution hereof and the transactions contemplated hereby, and (b) that
he
has not relied on any representation of the Company as to tax matters, or as
to
the consequences of the execution hereof.
10.1 Neutral
Construction.
No
party may rely on any drafts of this Agreement in any interpretation of the
Agreement. Each party to this Agreement has reviewed this Agreement and has
participated in its drafting and, accordingly, no party shall attempt to invoke
the normal rule of construction to the effect that ambiguities are to be
resolved against the drafting party in any interpretation of this
Agreement.
10.2 Attorneys'
Fees.
In the
event that either party hereto commences litigation against the other to enforce
such party's rights hereunder, the prevailing party shall be entitled to recover
all costs, expenses and fees, including reasonable attorneys' fees (including
in-house counsel), paralegals, fees, and legal assistants' fees through all
appeals.
6
11. General.
11.1 Applicable
Law.
This
document shall in all respects be governed by the laws of the State of
Delaware.
11.2 Successor
Obligations.
The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume by written agreement and to
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place.
11.3 Survival.
The
parties hereto agree that the covenants contained in Section 6 hereof shall
survive any termination of employment by the Executive and any termination
of
this Agreement.
11.4 Assignability.
All of
the terms and provisions contained herein shall inure to the benefit of and
shall be binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns. The obligations of the Executive
however, may not be assigned, and the Executive may not, without the Company's
written consent, assign, transfer, convey, pledge, encumber, hypothecate or
otherwise dispose of this Agreement or any interest therein. Any such attempted
assignment or disposition shall be null and void and without effect.
Notwithstanding anything in this Section 11.4 to the contrary, the Company
and
the Executive agree that this Agreement and all of the Company's rights and
obligations hereunder may be assigned or transferred by the Company to and
may
be assumed by and become binding upon and may inure to the benefit of any
affiliate of or successor to the Company. The term "successor" shall mean,
with
respect to the Company or any of its subsidiaries, and any other corporation
or
other business entity which, by merger, consolidation, purchase of the assets,
or otherwise, acquires all or a material part of the assets of the Company,
including but not limited to HSCC. Any assignment by the Company of its rights
and obligations hereunder to any affiliate of or successor shall not be
considered a termination of employment for purposes of this Agreement.
11.5 Notices.
Any and
all notices required or desired to be given hereunder by any party shall be
in
writing and shall be validly given or made to another party if delivered either
personally, by telex, facsimile transmission, same-day delivery service,
overnight expedited delivery service, or if deposited in the United States
Mail,
certified or registered, postage prepaid, return receipt requested. If notice
is
served personally, notice shall be deemed effective upon receipt. If notice
is
served by telex or by facsimile transmission, notice shall be deemed effective
upon transmission, provided that such notice is confirmed in writing by the
sender within one (1) day after transmission. If notice is served by same day
delivery service or overnight expedited delivery service, notice shall be deemed
effective the day after it is sent, and if notice is given by United States
mail, notice shall be deemed effective five (5) days after it is sent. In all
instances, notice shall be sent to the parties at the following
addresses:
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If
to the Company:
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0000
Xxxxx Xxxxx Xxxx, Xxxxx 000
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Xxxxxxxxx,
Xxxxxxxx 00000
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Fax:
(000) 000-0000
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Attention:
Board of Directors
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With
a copy to:
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Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx, LLP
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000
Xxxxx Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
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Xxxxx,
XX 00000
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Fax:
(000) 000-0000
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Attention:
Xxxxxxx Xxxxxx, Esq.
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If
to the Executive:
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C.
Xxxxxx XxXxxxxx
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0000
Xxxxx Xxxxxxxx Xxxxxx, X.X.
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Xxxxxxxxxx,
X.X. 00000
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Fax:
(000) 000-0000
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Any
party
may change its address for the purpose of receiving notices by a written notice
given to the other party.
11.6 Modifications
or Amendments.
No
amendment, change or modification of this document shall be valid unless in
writing and signed by all of the parties hereto.
11.7 Waiver.
No
reliance upon or waiver of one or more provisions of this Agreement shall
constitute a waiver of any other provisions hereof.
11.8 Severability.
If any
provision of this Agreement as applied to either party or to any circumstances
shall be adjudged by a court of competent jurisdiction to be void or
unenforceable, the same shall in no way affect any other provision of this
Agreement or the validity or enforceability of this Agreement. If any court
construes any of the provisions to be unreasonable because of the duration
of
such provision or the geographic or other scope thereof, such court may reduce
the duration or restrict the geographic or other scope of such provision and
enforce such provision as so reduced or restricted.
11.9 Separate
Counterparts; Signatures Transmitted Via Facsimile Machines.
This
document may be executed in one or more separate counterparts, each of which,
when so executed, shall be deemed to be an original. Such counterparts shall,
together, constitute and shall be one and the same instrument. This Agreement,
and the counterparts thereto, may be executed by the parties using their
respective signatures transmitted via facsimile machines.
11.10 Headings.
The
captions appearing at the commencement of the sections hereof are descriptive
only and are for convenience of reference. Should there be any conflict between
any such caption and the section at the head of which it appears, the
substantive provisions of such section and not such caption shall control and
govern in the construction of this document.
8
11.11 Further
Assurances.
Each of
the parties hereto shall execute and deliver any and all additional papers,
documents and other assurances, and shall do any and all acts and things
reasonably necessary in connection with the performance of their obligations
hereunder and to carry out the intent of the parties hereto.
11.12 Entire
Agreement.
This
Agreement constitutes the entire understanding and agreement of the parties
with
respect to the subject matter of this Agreement, and any and all prior
agreements or representations are hereby terminated and canceled in their
entirety (including the Executive Employment Agreement, dated August 30, 2005,
by and between the Company and the Executive).
[SIGNATURE
PAGE FOLLOWS; REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN
WITNESS WHEREOF,
the
parties hereto have caused this Executive Employment Agreement to be effective
as of the Effective Date.
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THE
COMPANY:
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By:
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/s/ Xxxxxxx
X. Xxxxxxxx
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Name:
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Xxxxxxx X. Xxxxxxxx | |
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Title:
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Chief Financial Officer | |
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THE
EXECUTIVE:
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/s/
C. Xxxxxx XxXxxxxx
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C.
Xxxxxx XxXxxxxx
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