EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of the 19th day of
June, 2000, by and between TELKONET COMMUNICATIONS, INC., a Delaware corporation
(the "Company"), and XXXXXXX X. XXXXX (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive as its
Executive Vice-President, Secretary, Treasurer and Chief Operating Officer and
the Executive hereby accepts such employment, on the terms and subject to the
conditions hereinafter set forth.
2. TERM. Subject to the provisions for the termination of this
Agreement as provided for herein, the term of this Employment Agreement shall
commence on the date hereof and shall continue through June 18, 2003 (the "Base
Term") and shall automatically be extended for an additional one year (each a
"Renewal Year") at the end of the Base Term and each Renewal Term unless on or
before the sixtieth (60th) day prior to the end of the Base Term or an Renewal
Term, either party gives to the other party written notice of termination of
this Employment Agreement, in which case this Employment Agreement shall
terminate upon the completion of the then applicable employment period.
3. POSITION AND DUTIES.
(a) The Executive shall serve as the Executive Vice-President,
Secretary, Treasurer and Chief Operating Officer of the Company .The Executive's
exact duties and the scope of his authority without obtaining Board of Director
approval shall be set forth in a separate writing, and attached hereto as
Exhibit A. The duties and scope of authority may be changed by the Board of
Directors from time to time in the exercise of its reasonable business
judgement. The Executive shall be entitled to the full protection of applicable
indemnification provisions of the certificate of incorporation, bylaws of the
Company and the corporate law of Delaware, as the same may be amended from time
to time, for his service as a director, officer and employee of the Company or
any subsidiary of the Company or for services performed for any fringe benefit
program of the Company. Such indemnification shall include all permissive
provisions including advancement of payment. (b) (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)).
(c) The term "change in control" means the first to occur of
the following events:
(i) any person or group of commonly controlled
persons who are not currently stockholders, acquires, directly or indirectly,
thirty percent (30%) or more of the voting control or value of the equity
interests in the Company; or
(ii) the shareholders of the Company approve an
agreement to merge or consolidate with another corporation or other entity
resulting (whether separately or in connection with a series of transactions) in
a change in ownership of twenty percent (20%) or more of the voting control or
value of the equity interests in the Company, or an agreement to sell or
otherwise dispose of all or substantially all of the Company's assets
(including, without limitation, a plan of liquidation or dissolution), or
otherwise approve of a fundamental alteration in the nature of the Company's
business.
4. COMPENSATION.
During the term of this Employment Agreement the Company shall pay or provide,
as the case may be, to the Executive the compensation and other benefits and
rights set forth in this Paragraph 4.
(a) The Company shall pay to the Executive a base salary
payable in accordance with the Company's usual pay practices (and in any event
no less frequently than monthly) at the rate of One Hundred Thirty Thousand
Dollars ($130,000.00) per annum, which may be increased (but not decreased) from
time to time based upon the performance of the Company and the Executive.
Currently, this amount is payable bi-weekly.
(b) The Company may pay to the Executive bonus compensation
for each calendar or fiscal year of the Company, not later than ninety (90) days
following the end of each year or the termination of his employment, as the case
may be, prorated on a per diem basis for partial calendar or fiscal years. It is
acknowledged that these bonuses may be based in part on the Executive's
performance and in part on the Company's performance.
(c) During the Base Term of this Agreement and any Renewal
Term, the Company shall maintain in full force and effect, and the Executive
shall be entitled to participate in, all of the Company's employee benefit plan
and arrangements in effect on the date hereof in at least the same manner and
capacity as the officers and key management employees of the Company. This does
not include life insurance or disability insurance if the cost of coverage is
substantially in excess of the average cost for someone of the same age. The
Company shall not make any changes in such plans and arrangements which would
adversely affect the Executive's rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to all officers and key
management employees of the Company. The Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company in the future to its officers and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements as long as
the cost of coverage is not substantially in excess of the average cost of
someone of the same age. Nothing paid to the Executive under any plan or
arrangement presently in effect or made available to the Executive in the future
shall be deemed to be in lieu of any amounts payable to the Executive pursuant
to this Section 4.
(d) The Company shall reimburse the Executive or provide him
with an expense allowance during the term of this Employment Agreement for
travel, entertainment and other expenses reasonably and necessarily incurred by
the Executive in connection with the Company's business. The Executive shall
furnish such documentation with respect to reimbursements or allowances to be
made hereunder as the Company shall reasonably request. Depending on the
individual's exact duties, a company owned vehicle may be provided.
5. PAYMENT IN THE EVENT OF DISABILITY.
(a) In the event of the Executive's "permanent disability" (as
hereinafter defined) during the term of this Employment Agreement, for a period
of 6 months after determination of a permanent disability years the Company
shall pay to the Executive an annual amount equal to the Executive's then
effective per annum rate of salary, as determined under Paragraph 4(a). The
Company, to the extent prudent, shall insure against disability through an
insurance company. Such coverage shall contain a benefit for total, as well as
partial and residual, disabilities and shall be in addition to the payment
obligation contained in this Paragraph 5 (a). If such insurance is obtained, the
premium shall be added to the Employee's W2 as other compensation. The Company
shall review and revise the amount of coverage not less than annually in
accordance with the prior year's total cash compensation as soon as the amount
of cash compensation, including all cash bonuses, can be calculated.
(b) For purposes of this Employment Agreement, the
Executive's "permanent disability" shall be deemed to have occurred after one
hundred twenty (120) days in the aggregate during any consecutive twelve (12)
month period, or after ninety (90) consecutive days, during which one hundred
twenty (120) or ninety (90) days, as the case may be, the Executive, by reason
of his physical or mental disability or illness, shall have been unable to
substantially discharge his duties under this Employment Agreement. The date of
permanent disability shall be such one hundred twentieth (120th) or ninetieth
(90th) day, as the case may be. In the event either the Company or the
Executive, after receipt of notice of the Executive's permanent disability from
the other, dispute that the Executive's permanent disability shall have
occurred, the Executive shall promptly submit to a physical examination by the
chief of medicine of any major accredited hospital in the State of Maryland,
and, unless such physician shall issue his written statement to the effect that
in his opinion, based on his diagnosis, the Executive is capable of resuming his
employment and devoting his full time and energy to discharging his duties
within thirty (30) days after the date of such statement, such permanent
disability shall be deemed to have occurred. In lieu of any such examination, a
determination by the disability insurance carrier for the Company shall suffice.
6. TERMINATION.
(a) The employment of the Executive under this Employment
Agreement, and the terms hereof, may be terminated by the Company:
(i) on the death or permanent disability of the
Executive (as defined in Paragraph 4(b), or
(ii) for cause at any time by action of the Board.
For purposes hereof, the term "cause" shall mean:
(A) The Executive's fraud, commission of a
felony or of an act or series of acts which result in material injury to the
business reputation of the Company, commission of an act or series of repeated
acts of dishonesty which are materially inimical to the best interests of the
Company, or the Executive's willful and repeated failure to perform his lawful
duties under this Employment Agreement, which failure has not been cured within
fifteen (15) days after the Company gives notice thereof to the Executive,
provided, however, that shall not be entitled to any more than two notice cure
opportunities during each fiscal year of the Company; or
(B) The Executive's material breach of any
material provision of this Employment Agreement not involving performance of his
duties, which breach has not been cured in all substantial respects within ten
(10) days after the Company gives notice thereof to the Executive. (Provided,
however, that Executive shall not be entitled to any more than two weeks notice
cure opportunities during each fiscal year of the Company.
Upon any termination of this Employment Agreement, the Executive shall be deemed
to have resigned from all offices held by the Executive in the Company.
(b) In the event of a termination claimed by the Company to be
for "cause" pursuant to Paragraph 5(a)(ii), the Executive shall have the right
to have the justification for said termination determined forthwith by
arbitration. In order to exercise such right, the Executive shall serve on the
Company within thirty (30) days after termination a written request for
arbitration. The Company immediately shall request the appointment of an
arbitrator by the American Arbitration Association and thereafter the question
of "cause" shall be determined under the rules of the American Arbitration
Association, and the decision of the arbitrator or arbitrators shall be final
and binding on both parties. The parties shall use all reasonable efforts to
facilitate and expedite the arbitration and shall act to cause the arbitration
to be completed as promptly as possible. Expenses of the arbitration shall be
borne equally by the parties, unless apportioned otherwise by the arbitrators.
(c) In the event of termination for any of the reasons set
forth in subparagraph (a)(i) or (a)(ii) of this Paragraph 5, or if the Executive
terminates his employment unless under subparagraph 3b, the Executive shall be
entitled to no further compensation or other benefits under this Employment
Agreement, except as to that portion .of any unpaid salary and other benefits
accrued and earned by him hereunder up to and including the effective date of
such termination. If the Company terminates the Executive's employment other
than pursuant to subparagraph 5(a)(i) or 5(a)(ii) or the Executive terminates
his employment pursuant to subparagraph 3(b), all of the compensation and
benefits payable to the Executive pursuant to this Employment Agreement shall be
paid to the Executive for a period of eighteen (18) months following the date of
such termination (the "Severance Period"). For purposes of this Paragraph 5(c),
with respect to any benefits payable to the Executive following termination, the
Company may elect to (i) pay to the Executive in cash an amount equivalent to
the value of the benefits to be paid for the duration of the Severance Period;
or (ii) continue to provide benefits to the Executive for the duration of the
Severance Period. If there occurs a change of control, or take over, of the
Company and the acquiring or controlling entity, terminates the Executive, then
the Executive shall be paid for a period of thirty-six (36) months following the
date of such termination (the "Severance Period"), including all of the
compensation and other benefits payable to the Executive pursuant to this
Employment Agreement.
7. NON-COMPETITION AND CONFIDENTIALITY. The Executive acknowledges the
Company's reliance and expectation of the Executive's continued commitment to
performance of his duties and responsibilities during the term of this
Employment Agreement. In light of such reliance and expectation on the part of
the Company, the Executive hereby agrees to be bound by the terms of the
Noncompetition and Confidentiality Agreement, of even date herewith, a copy of
the form of which is attached hereto and made a part hereof as Exhibit B.
8. MISCELLANEOUS.
(a) The Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether employment or
otherwise, which would restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this Employment
Agreement.
(b) The provisions of this Employment Agreement are severable
and if any one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any partially
unenforceable provision, to the extent enforceable in any jurisdiction,
nevertheless shall be binding and enforceable.
(c) The rights and obligations of the Company under this
Employment Agreement shall inure to the benefit of, and shall be binding on, the
Company and its successors and assigns, and the rights and obligations (other
than obligations to perform services) of the Executive under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
(d) Any notice to be given under this Employment Agreement
shall be personally delivered in writing or shall have been deemed duly given
when received after it is posted in the United States mail, postage prepaid,
registered or certified, return receipt requested, and if mailed to the Company,
shall be addressed to its principal place of business and if mailed to the
Executive, shall be addressed to him at his home address last known on the
records of the Company, or at such other address or addresses as either the
Company or the Executive may hereafter designate in writing to the other. Notice
by regular mail postage prepaid, shall be given at the same time the registered
certified copy is mailed and shall be sufficient if not returned and the
registered or certified copy is returned either refused or because not picked
up.
(e) The failure of either party to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations thereof,
or prevent that party thereafter from enforcing each and every other provision
of this Employment Agreement. The rights granted the parties herein are
cumulative and the waiver of any single remedy shall not constitute a waiver of
such party's right to assert all other legal remedies available to it under the
circumstances.
(f) This Employment Agreement supersedes all prior agreements
and understandings between the parties and may not be modified or terminated
orally. No modification, termination or attempted waiver shall be valid unless
in writing and signed by the party against whom the same is sought to be
enforced.
(g) This Employment Agreement (other than the statutory rights
or indemnification which shall be under Delaware law) shall be governed by and
construed according to the laws of the State of Maryland without giving effect
to applicable conflicts of law provisions.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
TELKONET COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief Technology Officer
Xxxxxxx X. Xxxxx
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XXXXXXX X. XXXXX
