EMPLOYMENT AGREEMENT
Exhibit
10.6
THIS
EMPLOYMENT AGREEMENT is
made
effective as of the 1st day
of
August, 2005 (the
“Effective Date”).
AMONG:
QUALITY
COMMUNICATIONS & ALARM COMPANY,
INC.
a
corporation formed pursuant to the laws of the State of New Jersey and having
an
office for business located at 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0, Xxxxxxxx, Xxx
Xxxxxx ("Employer"), and wholly owned subsidiary of WPCS
INTERNATIONAL INCORPORATED,
a
corporation formed pursuant to the laws of the State of Delaware
(“Parent”);
AND
XXXXXXX
XXXXXXXXX,
an
individual having an address at 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0, Xxxxxxxx,
Xxx
Xxxxxx (“Employee”)
WHEREAS,
Parent
and Employer are parties to that certain Stock Purchase Agreement of even date
herewith (the “Purchase Agreement”), pursuant to which Employee has agreed to
continue to serve as President of Employer, and Employer has agreed to hire
Employee as such, pursuant to the terms and conditions of this Employment
Agreement (the “Agreement”).
NOW
THEREFORE THIS AGREEMENT WITNESSETH THAT in
consideration of the premises and the mutual covenants, agreements,
representations and warranties contained herein, the Purchase Agreement, and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, Employee and Employer hereby agree as follows:
ARTICLE
1
EMPLOYMENT
Employer
hereby affirms, renews and extends the employment of Employee as President,
and
Employee hereby affirms, renews and accepts such employment by Employer for
the
“Term” (as defined in Article 3 below), upon the terms and conditions set forth
herein.
ARTICLE
2
DUTIES
During
the Term, Employee shall serve Employer and Parent faithfully, diligently and
to
the best of his ability, under the direction and supervision of the Board of
Directors of Employer and the Chief Executive Officer of Parent and shall use
his reasonable best efforts to promote the interests and goodwill of Employer,
Parent and any affiliates, successors, assigns, parent corporations,
subsidiaries, and/or future purchasers of Employer and Parent. Employee shall
render such services during the Term at Employer’s principal place of business
or at such other place of business as may be determined by the Board of
Directors of Employer, as Employer may from time to time reasonably require
of
him, and shall devote all of his time during normal business hours to the
performance thereof. Employee shall have those duties and powers as generally
pertain to each of the offices of which he holds, as the case may be, subject
to
the control of the Board of Directors.
ARTICLE
3
TERM
The
“Term” of this Agreement shall commence on the Effective Date and continue
thereafter for a term of three (3) years, as may be extended or earlier
terminated pursuant to the terms and conditions of this Agreement. The Term
of
this Agreement shall automatically renew for successive one (1) year periods
unless, prior to the 30th
calendar
day preceding the expiration of the then existing Term, either Employer or
Employee provides written notice to the other that it elects not to renew the
Term. Upon delivery of such notice, this Agreement shall continue until
expiration of the Term, whereupon this Agreement shall terminate and neither
party shall have any further obligation thereafter arising under this Agreement,
except as explicitly set forth herein to the contrary.
ARTICLE
4
COMPENSATION
Salary
4.1
Employer
shall pay to Employee an annual salary (the “Salary”) of One Hundred Forty
Thousand Dollars ($140,000.00), payable in equal installments at the end of
such
regular payroll accounting periods as are established by Employer, or in such
other installments upon which the parties hereto shall mutually agree, and
in
accordance with Employer’s usual payroll procedures, but no less frequently than
monthly. The Board of Directors of Employer or President of Parent shall review
the Salary annually to consider any increase thereof.
Benefits
4.2
During
the Term, Employee shall be entitled to participate in all medical and other
employee benefit plans, including vacation, sick leave, retirement accounts
and
other employee benefits provided by Employer to similarly situated employees
on
terms and conditions no less favorable than those offered to such employees.
Such participation shall be subject to the terms of the applicable plan
documents, Employer’s generally applicable policies, and the discretion of the
Board of Directors or any administrative or other committee provided for in,
or
contemplated by, such plan.
Expense
Reimbursement
4.3
Employer
shall reimburse Employee for reasonable and necessary expenses incurred by
him
on behalf of Employer in the performance of his duties hereunder during the
Term, in accordance with Employer's then customary policies, provided that
such
expenses are adequately documented.
Bonus
4.4 In
addition to the Salary, Employee shall be entitled to receive an incentive
bonus
for calendar year 2005 equal to 30% (the "2005 Bonus") of $120,000, the
Employee’s salary prior to the effective date of this agreement, if Employer,
for the calendar year 2005, achieves $13 million in revenue, provided, however,
that the revenue yields a minimum of 12% in earnings before interest and taxes
(“EBIT”). For purposes of determining EBIT, the Employer’s revenue will include
revenue from all business generated by Employer and all business allocated
to
Employer by Parent. For clarification purposes, the EBIT number will be
calculated without any costs imposed by Parent for management fees, director
fees, indirect or direct corporate overhead, non-business related expenses,
non-recurring corporate expenses, corporate discretionary expenses and
non-operating expenses, if any. The determination of revenue and EBIT for
calendar 2005 shall be made by the independent auditor regularly engaged by
the
Employer to complete the Employer’s year-end audit. Such auditor shall be
engaged solely with the approval of the Parent. The 2005 Bonus shall be paid
the
Employee within 110 days of the Employer’s calendar year end. The Employer shall
prepare and send to Employee as soon as practicable after the end of the first
three calendar quarters in any calendar year, statements showing the Employer’s
estimated revenue and EBIT as of the end of each such calendar
quarter.
4.5
Effective
January 1, 2006, Employee shall be entitled to receive an annual bonus equal
to
three percent (3.0%) (the "Bonus") of Employer’s EBIT without
any
costs imposed by Parent for management fees, director fees, indirect or direct
corporate overhead, non-business related expenses, non-recurring corporate
expenses, corporate discretionary expenses and non-operating expenses, if any.
The
amount of the Bonus shall be determined based upon the EBIT reported in the
financial statements of Employer, as calculated based on U.S. generally accepted
accounting principles consistently applied. Employer shall instruct the
independent auditor regularly engaged by the Employer to calculate the Bonus
for
each fiscal year, or portion thereof (an “Auditor’s Bonus Report”), within 105
days after each fiscal year end. Employer shall provide a copy of each Auditor’s
Bonus Report to Employee promptly upon receipt thereof. Employee shall have
the
right to review and independently verify the conclusions of any Auditor’s Bonus
Report by delivering notice in writing to Employer within thirty (30) days
after
receipt of any such Auditor’s Bonus Report indicating that Employee wishes to
exercise his right of review and verification. Within ten (10) business days
after receipt of any such notice, Employer shall make available to Employee
and
his representatives, at reasonable times during normal business hours, the
books
and records of Employer which are reasonably necessary to conduct such review
and verification. Employee shall cause such review to be conducted and concluded
as quickly as reasonably practicable and in such a manner so as not to
unreasonably interfere with the business and operations of Employer. Any
representatives conducting such review shall, prior to being given access to
such books and records, be required to enter into confidentiality and
non-disclosure agreements with Employer on terms and conditions satisfactory
to
Employer, acting reasonably. The costs of any such review shall be borne by
Employee unless the review indicates a discrepancy between the Bonus figure
contained in the Auditor’s Bonus Report and the figure, if any, agreed to by
Employer and Employee following such review of greater than five percent (5%).
If Employee and Employer shall be unable to resolve any dispute respecting
any
determination contained in any Auditor’s Bonus Report, then any disputed matters
(“Disputed Items”) shall, within 20 days after notice is delivered by Employee
to Employer that there exist Disputed Items, be submitted to arbitration as
set
forth below. Within five (5) business days of Employee’s delivery of written
acceptance of the Auditor’s Bonus Report (as may have been amended or adjusted
pursuant to the foregoing procedures) to Employer, Employer shall pay Employee
the Bonus in a lump sum, subject to Employer’s statutory and customary
withholdings.
Arbitration
4.6 An
independent chartered accountant chosen by Employer (hereinafter referred to
as
“Employer’s Accountant”) and an independent chartered accountant chosen by
Employee (hereinafter referred to as “Employee’s Accountant”) shall together
within 20 days, appoint a representative from an accounting firm (other than
Employer’s Accountant or Employee’s Accountant) to arbitrate the dispute
(hereinafter referred to as the “Arbitrator”). The parties shall, within 20 days
after the appointment of the Arbitrator, present their position with respect
to
the Disputed Items to the Arbitrator together with such other materials as
the
Arbitrator deems appropriate. The Arbitrator shall within 20 days after the
submission of such evidence, submit its written decision on each Disputed Item
to the parties. Any determination by the Arbitrator with respect to any Disputed
Item shall be final and binding on such parties. The Arbitrator shall comply,
and the arbitration shall be conducted in accordance with, the Commercial
Arbitration Rules of American Arbitration Association then in force. If the
Arbitrator determines that the Auditor’s Bonus Report was correct so that the
Bonus presented therein was equal to or greater than the actual Bonus, or less
than the actual Bonus by a less than five percent (5%) variance, the costs
of
any such arbitration shall be borne by Employee. If the Arbitrator determines
that the Auditor’s Bonus Report was incorrect so that the Bonus presented
therein was less than the actual Bonus by more than five percent (5%), the
costs
of any such arbitration shall be borne by Employer.
ARTICLE
5
OTHER
EMPLOYMENT
During
the Term of this Agreement, Employee shall devote substantially all of his
time
during normal business hours, and effort, attention, knowledge, and skill to
the
management, supervision and direction of Employer’s business and affairs as
Employee’s highest professional priority. Except as provided below, Employer
shall be entitled to all benefits, profits or other issues arising from or
incidental to all work, services and advice performed or provided by Employee.
Nothing
in this Agreement shall preclude Employee from devoting reasonable periods
required for:
|
(a)
|
serving
as a director or member of a committee of any organization or corporation
involving no conflict of interest with the interests of Employer,
provided
that Employee must obtain the written consent of
Employer;
|
|
(b)
|
serving
as a consultant in his area of expertise (in areas other than in
connection with the business of Employer), to government, industrial,
and
academic panels where it does not conflict with the interests of
Employer;
and
|
|
(c)
|
managing
his personal investments or engaging in any other non-competing
business;
|
provided
that such activities do not materially interfere with the regular performance
of
his duties and responsibilities under this Agreement.
ARTICLE
6
CONFIDENTIAL
INFORMATION/INVENTIONS
Confidential
Information
6.1 Employee
shall not, in any manner, for any reasons, either directly or indirectly,
divulge or communicate to any person, firm or corporation, any confidential
information concerning any matters not generally known in the wireless
communications industry or otherwise made public by Employer which affects
or
relates to Employer’s business, finances, marketing and/or operations, research,
development, inventions, products, designs, plans, procedures, or other data
(collectively, “Confidential Information”) except in the ordinary course of
business or as required by applicable law. Without regard to whether any item
of
Confidential Information is deemed or considered confidential, material, or
important, the parties hereto stipulate that as between them, to the extent
such
item is not generally known in the wireless communications industry, such item
is important, material, and confidential and affects the successful conduct
of
Employer’s business and goodwill, and that any breach of the terms of this
Section 6.1 shall be a material and incurable breach of this Agreement.
Confidential Information shall not include: (i) information obtained or which
became known to Employee other than through his employment by Employer; (ii)
information in the public domain at the time of the disclosure of such
information by Employee; (iii) information that Employee can document was
independently developed by Employee; (iv) information that is disclosed by
Employee with the prior written consent of Parent; and (v) information that
is
disclosed by Employee as required by law, governmental regulation or court
order.
Documents
6.2 Employee
further agrees that all documents and materials furnished to Employee by
Employer and relating to the Employer’s business or prospective business are and
shall remain the exclusive property of Employer. Employee shall deliver all
such
documents and materials, uncopied, to Employer upon demand therefore and in
any
event upon expiration or earlier termination of this Agreement. Any payment
of
sums due and owing to Employee by Employer upon such expiration or earlier
termination shall be conditioned upon returning all such documents and
materials, and Employee expressly authorizes Employer to withhold any payments
due and owing pending return of such documents and materials.
Inventions
6.3 All
ideas, inventions, and other developments or improvements conceived or reduced
to practice by Employee, alone or with others, during the Term of this
Agreement, whether or not during working hours, that are within the scope of
the
business of Employer or that relate to or result from any of Employer’s work or
projects or the services provided by Employee to Employer pursuant to this
Agreement, shall be the exclusive property of Employer. Employee agrees to
assist Employer, at Employer’s expense, to obtain patents and copyrights on any
such ideas, inventions, writings, and other developments, and agrees to execute
all documents necessary to obtain such patents and copyrights in the name of
Employer.
Disclosure
6.4 During
the Term, Employee will promptly disclose to the Board of Directors of Employer
full information concerning any interest, direct or indirect, of Employee (as
owner, shareholder, partner, lender or other investor, director, officer,
employee, consultant or otherwise) or any member of his family (as defined
in
Section 10.3) in any business that is reasonably known to Employee to purchase
or otherwise obtain services or products from, or to sell or otherwise provide
services or products to, Employer or to any of its suppliers or customers,
other
than ownership interests of Employee or any member of his family of 1% or less
of the outstanding stock of a corporation that is publicly traded.
ARTICLE
7
COVENANT
NOT TO COMPETE
Except
as
expressly permitted in Article 5 above, during the Term of this Agreement,
Employee shall not engage in any of the following competitive activities: (a)
engaging directly or indirectly in any business or activity substantially
similar to any business or activity engaged (or scheduled to be engaged) in
by
Employer; (b) engaging directly or indirectly in any business or activity
competitive with any business or activity engaged in (or scheduled to be
engaged) by Employer; (c) soliciting or taking away any employee, agent,
representative, contractor, supplier, vendor, customer, franchisee, lender
or
investor of Employer, or attempting to so solicit or take away; (d) interfering
with any contractual or other relationship between Employer and any employee,
agent, representative, contractor, supplier, vendor, customer, franchisee,
lender or investor; or (e) using, for the benefit of any person or entity other
than Employer, any Confidential Information of Employer. The foregoing covenant
prohibiting competitive activities shall survive the termination of this
Agreement and shall extend, and shall remain enforceable against Employee,
for
the period of two (2) years following the date this Agreement is terminated.
In
addition, during the two-year period following such expiration or earlier
termination, neither Employee nor Employer shall make or permit the making
of
any negative statement of any kind concerning Employer or its affiliates, or
their directors, officers or agents or Employee.
ARTICLE
8
SURVIVAL
Employee
agrees that the provisions of Articles 6, 7 and 9 shall survive expiration
or
earlier termination of this Agreement for any reasons, whether voluntary or
involuntary, with or without cause, and shall remain in full force and effect
thereafter.
ARTICLE
9
INJUNCTIVE
RELIEF
Employee
acknowledges and agrees that the covenants and obligations of Employee set
forth
in Articles 6 and 7 with respect to non-competition, non-solicitation,
confidentiality and Employer’s property relate to special, unique and
extraordinary matters and that a violation of any of the terms of such covenants
and obligations will cause Employer irreparable injury for which adequate
remedies are not available at law. Therefore, Employee agrees that Employer
shall be entitled to an injunction, restraining order or such other equitable
relief (without the requirement to post bond) as a court of competent
jurisdiction may deem necessary or appropriate to restrain Employee from
committing any violation of the covenants and obligations referred to in this
Article 9. These injunctive remedies are cumulative and in addition to any
other
rights and remedies Employer may have at law or in equity.
ARTICLE
10
TERMINATION
Termination
by Employee
10.1 Employee
may terminate this Agreement for Good Reason at any time upon 30 days’ written
notice to Employer, provided the Good Reason has not been cured within such
period of time.
Good
Reason
10.2 In
this
Agreement, “Good Reason” means, without Employee’s prior written consent, the
occurrence of any of the following events, unless Employer shall have fully
cured all grounds for such termination within thirty (30) days after Employee
gives notice thereof:
|
(i)
|
any
reduction in his then-current
Salary;
|
|
(ii)
|
any
material failure to timely grant, or timely honor, any equity or
long-term
incentive award;
|
|
(iii)
|
failure
to pay or provide required compensation and
benefits;
|
|
(iv)
|
any
failure to appoint, elect or reelect him to the position of President
of
Employer; the removal of him from such position; or any changes in
the
reporting structure so that Employee reports to someone other than
the
Board of Directors of Employer in connection with such
position;
|
|
(v)
|
any
material diminution in his title or duties or the assignment to him
of
duties not customarily associated with Employee’s position as President of
Employer;
|
|
(vi)
|
any
relocation of Employee’s office as assigned to him by Employer, to a
location more than 25 miles from Employer’s current office;
or
|
|
(vii)
|
any
unreasonable travel required of Employee by Employer, which is materially
inconsistent with Employer’s past practices.
|
The
written notice given hereunder by Employee to Employer shall specify in
reasonable detail the cause for termination, and such termination notice shall
not be effective until thirty (30) days after Employer’s receipt of such notice,
during which time Employer shall have the right to respond to Employee’s notice
and cure the breach or other event giving rise to the termination.
Termination
by Employer
10.3 Employer
may terminate its employment of Employee under this Agreement for cause at
any
time by written notice to Employee. For purposes of this Agreement, the term
“cause” for termination by Employer shall be (a) a conviction of or plea of
guilty or nolo
contendere by
Employee to a felony, or any crime involving fraud or embezzlement; (b) the
refusal by Employee to perform his material duties and obligations hereunder;
(c) Employee’s willful and intentional misconduct in the performance of his
material duties and obligations; or (d) if Employee or any member of his family
makes any personal profit arising out of or in connection with a transaction
to
which Employer is a party or with which it is associated, other than personal
profits arising from any non-controlling interest by Employee or his immediate
family members in a corporation that is publicly traded, without making
disclosure to and obtaining the prior written consent of Parent. The written
notice given hereunder by Employer to Employee shall specify in reasonable
detail the cause for termination. For purposes of this Agreement, “family” shall
mean Employee’s spouse and/or minor children. In the case of a termination for
the causes described in (a) and (d) above, such termination shall be effective
upon receipt of the written notice. In the case of the causes described in
(b)
and (c) above, such termination notice shall not be effective until thirty
(30)
days after Employee’s receipt of such notice, during which time Employee shall
have the right to respond to Employer’s notice and cure the breach or other
event giving rise to the termination.
Severance
10.4 Upon
a
termination of this Agreement without Good Reason by Employee or with cause
by
Employer, Employer shall pay to Employee all accrued and unpaid compensation
as
of the date of such termination, subject to the provision of Section 6.2. Upon
a
termination of this Agreement with Good Reason by Employee or without cause
by
Employer, Employer shall pay to Employee all accrued and unpaid compensation
and
expense reimbursement as of the date of such termination and the “Severance
Payment.” The Severance Payment shall be payable in a lump sum, subject to
Employer’s statutory and customary withholdings. If the termination of Employee
hereunder is by Employee with Good Reason, the Severance Payment shall be paid
by Employer within fifteen (15) business days of the expiration of any
applicable cure period. If the termination of Employee hereunder is by Employer
without cause, the Severance Payment shall be paid by Employer within five
(5)
business days of termination, provided that the bonus portion of the Severance
Payment, if any, shall be payable within 110 days of the calendar year end
in
which Employee was terminated. The “Severance Payment” shall equal the total
amount of the Salary payable to Employee under Section 4.1 of this Agreement
from the date of such termination until the end of the Term of this Agreement
(prorated for any partial month), together with a prorated amount of any bonus
payable under Section 4.4. The prorated amount of any bonus shall be calculated
based on revenues and EBIT for the entire calendar year during which Employee
was terminated and prorated for the portion of such year that Employee was
employed by Employer.
Termination
Upon Death
10.5 If
Employee dies during the Term of this Agreement, this Agreement shall terminate,
except that Employee’s legal representatives shall be entitled to receive any
earned but unpaid compensation or expense reimbursement due hereunder through
the date of death, together with a prorated amount of any bonus payable under
Section 4.4.
Termination
Upon Disability
10.6
If,
during the Term of this Agreement, Employee suffers and continues to suffer
from
a “Disability” (as defined below), then Employer may terminate this Agreement by
delivering to Employee thirty (30) calendar days’ prior written notice of
termination based on such Disability, setting forth with specificity the nature
of such Disability and the determination of Disability by Employer. For the
purposes of this Agreement, “Disability” means Employee’s inability, with
reasonable accommodation, to substantially perform Employee’s duties, services
and obligations under this Agreement due to physical or mental illness or other
disability for a continuous, uninterrupted period of sixty (60) calendar days
or
ninety (90) days during any twelve month period. Upon any such termination
for
Disability, Employee shall be entitled to receive any earned but unpaid
compensation or expense reimbursement due hereunder through the date of
termination, together with a prorated amount of any bonus payable under Section
4.4.
ARTICLE
11
PERSONNEL
POLICIES, CONDITIONS, AND BENEFITS
Except
as
otherwise provided herein, Employee’s employment shall be subject to the
personnel policies and benefit plans which apply generally to Employer’s
similarly situated employees as the same may be interpreted, adopted, revised
or
deleted from time to time, during the Term of this Agreement, by Parent in
its
sole discretion. During the Term hereof, Employee shall be entitled to vacation
during each year of the Term at the rate of four (4) weeks per year. Within
30
days after the end of each year of the Term, Employer shall elect to (a) carry
over and allow Employee the right to use any accrued and unused vacation of
Employee, or (ii) pay Employee for such vacation in a lump sum in accordance
with its standard payroll practices. Employee shall take such vacation at a
time
approved in advance by the Chairman of Employer or the President of the Parent,
which approval will not be unreasonably withheld but will take into account
the
staffing requirements of Employer and the need for the timely performance of
Employee's responsibilities.
ARTICLE
12
BENEFICIARIES
OF AGREEMENT
This
Agreement shall inure to the benefit of Employer and any affiliates, successors,
assigns, parent corporations, subsidiaries, and/or purchasers of Employer or
Parent as they now or shall exist while this Agreement is in
effect.
ARTICLE
13
GENERAL
PROVISIONS
No
Waiver
13.1 No
failure by either party to declare a default based on any breach by the other
party of any obligation under this Agreement, nor failure of such party to
act
quickly with regard thereto, shall be considered to be a waiver of any such
obligation, or of any future breach.
Modification
13.2 No
waiver
or modification of this Agreement or of any covenant, condition, or limitation
herein contained shall be valid unless in writing and duly executed by the
parties to be charged therewith.
Choice
of Law/Jurisdiction
13.3 This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New Jersey, without regard to any conflict-of-laws principles. Employer
and Employee hereby consent to personal jurisdiction before all courts in the
State of New Jersey, and hereby acknowledge and agree that New Jersey is and
shall be the most proper forum to bring a complaint before a court of
law.
Entire
Agreement
13.4 This
Agreement embodies the whole agreement between the parties hereto regarding
the
subject matter hereof and there are no inducements, promises, terms, conditions,
or obligations made or entered into by Employer or Employee other than contained
herein.
Severability
13.5
All
agreements and covenants contained herein are severable, and in the event any
of
them, with the exception of those contained in Articles 1 and 4 hereof, shall
be
held to be invalid by any competent court, this Agreement shall be interpreted
as if such invalid agreements or covenants were not contained
herein.
Headings
13.6 The
headings contained herein are for the convenience of reference and are not
to be
used in interpreting this Agreement.
Independent
Legal Advice
13.7 Employer
has obtained legal advice concerning this Agreement and has requested that
Employee obtain independent legal advice with respect to same before executing
this Agreement. Employee, in executing this Agreement, represents and warranties
to Employer that he has been so advised to obtain independent legal advice,
and
that prior to the execution of this Agreement he has so obtained independent
legal advice, or has, in his discretion, knowingly and willingly elected not
to
do so.
No
Assignment
13.8
Employee
may not assign, pledge or encumber his interest in this Agreement nor assign
any
of his rights or duties under this Agreement without the prior written consent
of Parent.
IN
WITNESS WHEREOF the
parties have executed this Agreement effective as of the day and year first
above written.
|
QUALITY
COMMUNICATIONS & ALARM COMPANY, INC.
|
||
| |
|
|
| By: | /s/ XXXXXX XXXXXXX | |
|
XXXXXX
XXXXXXX
|
||
| Title: Director | ||
|
|
||
| |
|
|
| /s/ XXXXXXX XXXXXXXXX | ||
|
XXXXXXX
XXXXXXXXX
|
||
