THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and between
Safeguard Security Holdings, Inc., a Nevada Corporation (herein referred to as
the "Company" or "Safeguard") and Xxxxxxx Xxxxx (herein referred to as the
"Executive").
W I T N E S S E T H: For and in consideration of the mutual advantages and
benefits accruing respectively to the parties hereto, the mutual promises
hereinafter made and the acts to be performed by the respective parties hereto,
the Company and the Executive do hereby contract and agree as follows:
1. Employment. The Company hereby employs the Executive as the President of
Systems Group, Inc. which will, upon closing of the transaction contemplated
herein, become a wholly owned subsidiary of the Company. The Executive hereby
accepts such employment, to perform the duties and render services as herein set
forth. Such employment shall continue during the term of this Agreement. In
addition, the Executive will join the Board of the Company and serve as a
Director for a term of no less than that of this Employment Agreement.
2. Term. Except in the case of earlier termination as herein specifically
provided, the Executive's employment with the Company pursuant to this Agreement
shall be for the period beginning June 30, 2005 and ending June 29, 2009 (the
"Renewal" Date").
3. Base Compensation. As base compensation for the services of Executive
during the term hereof, the Company shall pay the Executive a salary at an
annual rate to be fixed from time to time by the Company but in no event less
than $150,000.00 plus annual bonuses which the Board of Directors of Safeguard
may from time to time determine. The Executive's salary hereunder shall be paid
in equal semi-monthly installments (subject to reduction for such payroll and
withholding deductions as may be required by law).
In addition to the Executive's base salary, the Executive shall be entitled to
each of the following (at the Company's expenses unless otherwise indicated):
(a) health insurance coverage which shall provide for payment of health, dental
and related expenses incurred during the term of this Agreement with respect to
the Executive and his immediate family and which shall contain benefits and
options similar to those that the Executive currently enjoys (c) the right to
participate in any and all 401(k) plans and Section 125 plans now in effect or
hereafter adopted by the Company or Safeguard.
4. Duties and Services. During the term of this Agreement, the Executive
agrees to (a) do his utmost to enhance and develop the best interests and
welfare of the Company, (b) give his best efforts and skill to advancing and
promoting the growth and success of the Company. The Executive's authority and
responsibility in the Company shall at all times be subject to the review of the
CEO and Board of Directors of Safeguard. It is understood that the Executive
shall report jointly to the CEO and Board.
5. Termination.
a. The Company may terminate the Executive's employment pursuant to this
Agreement at any time for "cause" as herein defined. The term "cause" shall
solely mean any of the following events set forth in this paragraph: (i) the
Executive's conviction or plea of guilty to a crime involving moral turpitude,
(ii) any will full acts of acts of dishonesty and theft or the willful violation
of any law, rule or regulation (other than traffic violation or other minor
offenses) on the part of the Executive which, in the opinion of the Board of
Directors of the Company, is detrimental to the best interests of the Company.
However, no act or failure to act on the Executive's part shall be considered
willful or detrimental to the best interests of the Company unless done or
omitted to be done in bad faith and without reasonable belief by the Executive
that the action or omission was in the best interest of the Company and (iii) a
will full, intentional and material violation by the Executive of any written
policy of the Company which is not corrected within ninety (90) days after
receipt by the Executive of a detailed written explanation from the Company.
b. The Company may terminate the Executive as an employee of the Company at
any time during the term of this Agreement if it is determined by the Company
that such action is in the best interests of the Company. However, unless the
Executive's employment is terminated for "cause" (as defined in paragraph 5(a)),
any termination of the Executive's employment shall not terminate the Company's
obligations to pay to the Executive the severance benefits as hereinafter set
forth, or to comply with the other requirements of this Agreement.
c. The Executive may terminate his employment with the Company at any time
by giving ninety (90) days written notice to the Company.
d. The Executive's employment by the Company shall automatically terminate
on the date of the Executive's death if the Executive dies during the term of
this Agreement.
e. If the Executive is incapacitated by an accident, sickness or otherwise,
so as to render him mentally or physically incapable of performing the services
required of him pursuant to this Agreement, Executive's employment by the
Company shall terminate at such time as the Company determines that the
Executive is so disabled and that this Agreement should be terminated by reason
of such disability. Notwithstanding the foregoing, the Executive shall have the
right to contest any determination of disability by the Company. In the event
that the Executive does contest such determination, such matter shall be
resolved by arbitration pursuant to Section 13(c) of this Agreement.
6. Severance and Other Payments.
a. If the Executive's employment pursuant to this Agreement is terminated
for "cause" (pursuant to paragraph 5(a)) or due to the death or disability (as
determined pursuant to paragraph 5(e) of this Agreement) of the Executive, the
Company shall not be obligated to pay or provide any severance compensation or
benefits to the Executive.
b. If the Executive ceases to be an employee of the Company (either during
the term of this Agreement or at any time subsequent to the termination of this
Agreement) for any reason other than pursuant to Paragraphs 5(a), 5(c) (except
for a "Good Reason" termination by the Executive as defined below), 5(d) or 5(e)
of this Agreement, the Company agrees to pay to the Executive an amount equal to
the base compensation which would have been paid to the Executive during the
period of time from the date of the termination of the Executive's employment
with the Company for a period of twelve (12) months following the date the
Executive ceases to be an employee of the Company and the Subsidiaries (such
time period is herein referred to as the "Severance Period"). In addition to the
foregoing severance payment, the Executive shall continue to participate in any
health plan in force during the Severance Period. Notwithstanding the foregoing,
in the event of a Special Change in Control of the Company (as hereinafter
defined) and if the Executive's employment with the Company is terminated for
any reason other than Voluntary Termination (as hereinafter defined) or
termination for cause as provided for herein during the twenty-four (24) month
period beginning on the Effective Date of such Special Change in Control, (i)
the Severance Period shall be extended by six (6) months so that the Severance
Period shall be eighteen (18) months following the date the Executive ceases to
be an employee of the Company and the Subsidiaries (such extended time period is
herein referred to as the "Extended Severance Period"), and (ii) the payments to
the Manager hereunder with respect to the Extended Severance Period shall be
accelerated and paid to the Manager immediately upon termination, and (iii) all
un-vested options granted to the Executive will vest immediately
c. Notwithstanding a Special Change in Control, if the Executive's
employment is terminated during the term of this Agreement, for any reason other
than cause, the Executive (i) shall be entitled to receive a pro-rata share
(based upon the number of months employed during the calendar year in which
employment with the Company is terminated) of any bonus or incentive
compensation which the Executive would otherwise have been entitled to receive
had he remained employed for the entirety of the calendar year involved, and
(ii) shall have twelve (12) months to exercise any stock options heretofore or
hereafter granted to the Executive by the Board of Directors of the Company .
7. Working Conditions. The Company will provide the Executive with an office and
secretarial services.
8. Relocation. In the event that the Board of Directors of the Company relocates
the primary office of the Executive outside of the Houston, Texas metropolitan
area, the Executive may elect to terminate his employment with the Company. In
such case, the termination will be considered termination without cause and
trigger severance under 5 (b). In the event the Executive chooses to relocate,
the Company shall pay all moving expenses of the Executive to the place of the
new office. Absent the written consent of the Executive, the Company shall not
relocate the primary office of the Executive to an office location, which is not
the general corporate office of the Company.
9. Non-Competition Agreement. In the event that the termination of employment of
the Executive pursuant to this Agreement is effectuated by the Executive
electing to terminate his employment pursuant to this Agreement, and subject to
the condition that the Company shall pay the severance compensation as provided
in Paragraph 6(b) of this Agreement, the Executive agrees that he shall not, for
a one year period of time following the date of termination of this Agreement,
within Texas enter into or engage generally in direct competition with the
Company either as an individual on his own or as a partner or joint venture, or
as an employee or agent for any person, or as an officer, director, shareholder
or otherwise of any entity other than the Company or an affiliate of the Company
..
10. Notices. All notices or other instruments or communications provided for in
this Agreement shall be in writing and signed by the party giving same and shall
be deemed properly given if delivered in person, including delivery by overnight
courier, or if sent by registered or certified United States mail, postage
pre-paid, addressed to such party at the address listed below. Each party may,
by notice to the other party, specify any other address for the receipt of such
notices, instruments or communications. Any notice, instrument or communication
sent by telegram shall be deemed properly given only when received by the person
to whom it is sent.
11. Certain Conditions.
a. "Special Change in Control" means (i) any person or entity, including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), other than the Company, Pegasus Funds LP or
affiliates, Xxxxx Xxxxxxxxx and affiliates, a majority-owned subsidiary thereof,
or current Executives and any affiliates, becomes the beneficial owner (as
defined pursuant to Schedule 13(d) under the Exchange Act) of the Company's
securities having twenty-five percent (25%) or more of the combined voting power
of the then outstanding securities of the Company that may be cast for the
election of directors of the Company, or (ii) as the result of, or in connection
with, any cash tender or exchange offer, merger or other business combination,
sales of assets or contested election, or any combination of the foregoing
transactions, less than a majority of the combined voting power of the then
outstanding securities of the Company or any successor corporation or entity
entitled to vote generally in the election of the directors of the Company, or
such other corporation or entity after such transaction, are beneficially owned
(as defined pursuant to Section 13(d) of the Exchange Act) in the aggregate by
the holders of the Company's securities entitled to vote generally in the
election of directors of the Company immediately prior to such transaction, or
(iii) during any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board of Directors of the Company
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Company's shareholders, of each
director of the Company first elected during such period was approved by a vote
of at least two-thirds of the directors of the Company then still in office who
were directors of the Company at the beginning of any such period.
b. The "Effective Date" of such Special Change in Control shall be the
earlier of the date on which an event described in Section 11(a) (i), (ii), or
(iii) occurs, or if earlier, the date of the occurrence of (i) the approval by
shareholders of an agreement by the Company, the consummation of which would
result in an event described in Section 12(a) (i), (ii), or (iii), or (ii) the
acquisition of beneficial ownership (as defined pursuant to Section 13(d) of the
Exchange Act), directly or indirectly, by any entity, person or group (other
than the Company, a majority-owed subsidiary of the Company, or the Executive
and any affiliate of the Executive) of securities of the Company representing
five percent (5%) or more of the combined voting power of the Company's
outstanding securities, provided, however, that the events described in Section
12(b)(i) and (ii) will be considered the Effective Date of a Special Change in
Control if they are followed within six (6) months by an event described in
Section 11(a) (i), (ii), or (iii) .
c. "Voluntary Termination" shall mean Executive's resignation from the
Company unless such resignation is for Good Reason. Good Reason shall mean the
following (i) without Executive's express written consent, the assignment to
Executive of any duties materially inconsistent with his position, duties,
responsibilities and status (including his removal from the Board of Directors)
with the Company, (ii) a reduction of Executive's base compensation and bonus
compensation (other than a reduction in payments under the Company's incentive
bonus program based on a reduction in net profits of the Company) to an amount
that is greater than ten percent (10%) lower than such compensation, (iii)
relocation of Executive's principal location of work to any location that is
both (A) in excess of fifty (50) miles from the location of Executive's
principal location of work, and (B) in excess of the sum of the distance from
the Executive's principal residence to the location of the Executive's principal
location of work plus fifty (50) miles, (iv) at the effective Date of a Special
Change in Control the Company fails to 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, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform this Agreement if no such
succession had taken place, or (v) any material breach of this Agreement as in
effect on the Effective Date of the Special Change in Control by the Company .
12. Miscellaneous.
a. Subject to the condition that this Agreement is not assignable by either
party without the prior written consent of the other party, the terms and
provisions of this Agreement shall inure to the benefit of, and shall be binding
on, the parties hereto and their respective heirs, representatives, successors
and assigns.
b. This Agreement supersedes any other agreements, either oral or in
writing, between the parties to this Agreement, with respect to the employment
of the Executive by the Company. This Agreement contains the entire
understanding of the parties and all of the covenants and agreement between the
parties with respect to such employment. Any such prior agreements related to
employment of the Executive by the Company are hereby terminated without
obligation for any payments due thereunder, except for unpaid obligations which
accrued and become payable prior to the termination of any such agreements.
c. Any controversy between the parties to this Agreement involving the
construction or application of any of the terms, covenants, or conditions of
this Agreement (including, but not by way of limitation, the determination of
any amounts payable under the terms of this Agreement) shall be submitted to
arbitration if either party to this Agreement shall request arbitration by
notice in writing to the other party. In such event, the parties to this
Agreement shall, within thirty (30) days after this Paragraph 12(c) is invoked,
both appoint one person as an arbitrator to hear and determine the dispute, and
if such arbitrators shall be unable to agree within fifteen (15) days after
selection of the second of the two, then the two arbitrators so chosen shall,
within fifteen (15) days, select a third impartial arbitrator whose decision
shall be final and conclusive upon the parties to this Agreement. The decision
of the third arbitrator shall be rendered within fifteen (15) days after
selection. The individual parties expenses of the initial arbitration
proceedings conducted pursuant to this Agreement shall be borne separately, by
each party to this Agreement; the expenses of a third arbitrator shall be borne
equally by the Company and the Executive.
d. In the event of any litigation between the parties related to the
compliance with the terms and conditions of this Agreement, the parties hereto
acknowledge and agree that such litigation proceedings must be held in Houston,
Texas.
e. This Agreement has been made under and shall be governed by the laws of
the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the __ day of ______, 2005
COMPANY:
Safeguard Security Holdings, Inc.
By: ----------------------------------------
X. Xxxxx Xxxxx Xx.
CEO
By: ___________________________
Xxxxxxx Xxxxx
President
