Exhibit 10.4
AMENDMENT TO EMPLOYMENT AGREEMENT
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THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made this
12 day of April, 2002 by and between TELKONET COMMUNICATIONS, INC., a Utah
corporation (the "Company") and XXXXXXX X. XXXXX (the "Executive").
WHEREAS, the Executive is employed as Executive Vice President and
Chief Operating Officer of the Company pursuant to a June 19, 2000 Employment
Agreement (the "Initial Agreement");
WHEREAS, the Initial Agreement was amended by the parties on January
12, 2002 (the "Initial Amendment," together with the Initial Agreement, the
"Agreement"); and
WHEREAS, the Executive and the Company desire to amend the Agreement as
set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Unless otherwise defined herein, capitalized terms shall have the
same meaning as in the Agreement.
2. Paragraph 3(b) of the Agreement is amended and restated in its
entirety as follows:
(b) The Executive shall have the right to terminate
his employment with the Company but such
termination shall not be considered a voluntary
resignation or termination of such employment or
of this Employment Agreement by the Executive but
rather a discharge of the Executive by the Company
without "cause" (as defined in 6(A)(ii)). This
shall apply in the following conditions:
(i) the Executive's place of employment or
the principal executive offices of the
Company are moved to a location more
than fifty (50) miles from the
geographical center of Severna Park,
Maryland;
(ii) there occurs a material breach by the
Company of any of its obligations under
this Employment Agreement (other than
those specified in this Section 3(b))
that has not been cured in all material
respects within ten (10) days after the
Executive gives notice thereof to the
Company;
(iii) there occurs a "change in control" (as
hereinafter defined) of the Company; or
(iv) the Executive has not been paid for a
cumulative sixty (60) day period without
Executive's 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 5(a)(ii)).
3. The Stock Lock-up Provision of the Initial Amendment is superceded
in its entirety by the Lock-up Agreement, attached hereto and made a part hereof
as SCHEDULE A.
4. The Stock Surrender Provision of the Initial Amendment is amended
and restated in its entirety as follows:
The Executive agrees that, should he voluntarily terminate his
employment with Telkonet for any reason, other than the events
enumerated in paragraph 3(b) of the Employment Agreement or
death of the Executive, at any time between January 12, 2002
and January 12, 2005 (the "Stock Surrender Period"), the
Executive shall forfeit 40,000 shares of the Founders Stock
(as hereinafter defined) held by him for each month of the
Stock Surrender Period remaining following such termination.
For purposes of this paragraph, "Founders Stock" means
1,500,000 shares of the shares of common stock, par value
$0.001 per share, of Telkonet (the "Common Stock") owned by
the Executive on January 12, 2002. Notwithstanding the
foregoing, the number of shares of Founders Stock subject to
this Stock Surrender Provision shall be decreased upon each
exercise by the Executive of an option to purchase Common
Stock (each, an "Option") by a percentage calculated by
dividing the number of shares of Common Stock acquired upon
exercise of each Option by the total number of shares of
Common Stock subject to purchase pursuant to Options on such
date.
The Executive also agrees to the terms and conditions of the
Non-Competition and Confidentiality Agreement, which is
attached hereto and made a part hereof as ATTACHMENT A.
5. In the event of any inconsistency or discrepancy between the
Agreement and this Amendment, the provisions of this Amendment shall govern and
control.
6. This Amendment shall be governed by, and construed in accordance
with, the laws of the state of Maryland, without giving effect to applicable
conflict of laws principles.
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IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the date first written above.
TELKONET COMMUNICATIONS, INC.,
a Maryland corporation
By:_______________________________
Name:_____________________________
Title:____________________________
__________________________________
Xxxxxxx X. Xxxxx
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SCHEDULE A
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LOCK-UP AGREEMENT
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THIS LOCK-UP AGREEMENT (this "Agreement") is made as of the
______ day of _______, 2002, by and between Xxxxxxx X. Xxxxx ("Stockholder") and
TELKONET, INC., a Utah corporation ("Telkonet").
WHEREAS, Stockholder is the owner of the shares of Telkonet
common stock, par value $0.001 ("Common Stock"), listed on EXHIBIT A, as may be
amended from time to time, attached hereto and made a part hereof (the "Telkonet
Stock");
WHEREAS, Stockholder has been granted options to purchase the
shares of Common Stock listed on EXHIBIT B, as may be amended from time to time,
attached hereto and made a part hereof (the "Telkonet Options");
WHEREAS, the parties have agreed that Stockholder shall not
make any Transfer (defined herein) of shares of Telkonet Stock, except in
accordance with this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein contained, the parties hereto hereby agree as
follows:
1. RESTRICTIONS ON TRANSFER OF TELKONET STOCK. (a) Stockholder
hereby agrees that, without the consent of Telkonet, it will not, directly or
indirectly, sell, assign, transfer, pledge or otherwise dispose of (collectively
"Transfer") the Telkonet Stock prior to the end of the thirty-six (36) month
period following the date hereof, except in accordance with the release schedule
set forth in paragraph 1(b).
(b) The Telkonet Stock subject to restriction on Transfer (the
"Lock-up Restriction") hereunder shall be released from such Lock-up Restriction
in accordance with the following schedule:
(i) Upon execution of this Agreement, 139,280 shares
of the Telkonet Stock shall be released from the Lock-up Restriction;
(ii) On December 1, 2002, 50,000 shares of the
Telkonet Stock shall be released from the Lock-up Restriction;
(iii) On December 1, 2003, 50,000 shares of the
Telkonet Stock shall be released from the Lock-up Restriction;
(iv) On January 1, 2005, 50,000 shares of the
Telkonet Stock shall be released from the Lock-up Restriction;
(v) Upon execution of all or a portion of the
Telkonet Options, that number of shares of Telkonet Stock determined by
multiplying the Telkonet Stock subject to the Lock-up Restriction by a
percentage calculated by dividing the number of shares of Common Stock acquired
upon exercise of the Telkonet Options by the number of shares of Common Stock
subject to purchase pursuant to the Telkonet Options on such date, shall be
released from the Lock-up Restriction.
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(c) Notwithstanding the foregoing, Stockholder may Transfer
the Telkonet Stock to (i) the spouse or children of such Stockholder, whether
directly or in trust (including pursuant to the uniform gift to minors
provisions) for their sole benefit, provided that the transferee agrees in
writing to be bound by the terms of this Agreement, and provided further that
Stockholder may not disclaim beneficial ownership of such Telkonet Stock for
purposes of any filing pursuant to any securities law, or (ii) a trust in which
Stockholder owns all of the beneficial interest therein provided that the
transferee agrees in writing to be bound by the terms of this Agreement, and
provided further that Stockholder may not disclaim beneficial ownership of such
Telkonet Stock for purposes of any filing pursuant to any securities law, or
(iii) a third party making a cash tender or exchange offer in compliance with
Regulations 14D and 14E under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), following the filing with the SEC by Tekonet, in
compliance with the Exchange Act, a Recommendation Statement on Schedule 14D-9
pursuant to which Telkonet affirmatively recommends to the Telkonet stockholders
the acceptance of such cash tender or exchange offer.
2. MISCELLANEOUS
(a) CHANGE OF CONTROL. In the event of a Change of Control (as
hereinafter defined) of Telkonet, all shares of Telkonet Stock still subject to
the Lock-up Restriction on the date of such Change of Control shall be
immediately released from the Lock-up Restriction.
For purposes of this paragraph 2(a), "Change of Control" means
any consolidation, merger or share exchange, regardless of whether Telkonet is
the surviving company, in which any person or affiliated persons acquires in
excess of 20% of the combined voting power of the then outstanding securities of
Telkonet, inclusive of the voting power represented by any outstanding
securities of Telkonet, owned by such person or persons prior to the
consummation of such transaction, and regardless of whether such person or
persons are deemed to be affiliates or in control of Telkonet by virtue of their
ownership of outstanding securities of Telkonet, representation on Telkonet's
Board of Directors or otherwise prior to the consummation of such transaction.
(b) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
(c) BINDING EFFECT AND ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but except
as otherwise specifically provided, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by any of
the parties hereto without the prior written consent of the other.
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(d) AMENDMENTS AND MODIFICATION. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(e) SPECIFIC PERFORMANCE. The parties hereto acknowledge that
Telkonet will be irreparably harmed and that there will be no adequate remedy at
law for a violation of any of the covenants or agreements of Stockholder set
forth herein. Therefore, it is agreed that, in addition to any other remedies
which may be available to Telkonet upon such violation, Telkonet shall have the
right to enforce such covenants and agreements by specific performance,
injunctive relief or by any other means available to Telkonet at law or in
equity.
(f) NOTICES. All notices and other communications hereunder
shall be in writing and shall be acceptable if (a) delivered personally or by
telecopy, or (b) if sent by registered or certified mail (return receipt
requested) and postage prepaid, or (c) if sent by reputable overnight courier,
so long as the parties to this Agreement receive such notices at the following
addresses or at such other address for a party as shall be specified by like
notice.
If to Stockholder: Xxxxxxx X. Xxxxx
________________________
________________________
If to Telkonet: Telkonet, Inc.
000 X Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
All such notices and communications shall be deemed to have been received on the
date of delivery if delivered personally or by telecopy, or on the date of
receipt, if mailed, or one day after mailing, if by overnight courier. Any party
giving notice under this Agreement to one party to this Agreement shall be
required to give such notice to all parties to this Agreement in order for such
notice to be effective.
(g) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, written and oral.
(h) APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without giving
effect to applicable conflict of laws principles.
(i) SECTION HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
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(j) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be a single agreement.
IN WITNESS WHEREOF, the undersigned have signed their names as
of the date first written above.
STOCKHOLDER:
_____________________________
Xxxxxxx X. Xxxxx
TELKONET, INC.
By:__________________________
Name:________________________
Title:_______________________
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EXHIBIT A
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Telkonet Stock: 3,500,000 shares
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EXHIBIT B
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Telkonet Options: options to purchase 1,000,000 shares of Common Stock
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