EMPLOYMENTAGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”) is effective this 1st day of January 2009, between American Defense Systems, Inc. (“the Company”) and Russell Scales (“Executive”) (sometimes referred to herein individually as “Party” or collectively as “Parties”).

 

WHEREAS, the Company desires to retain the services of Executive as Senior Vice President of Business Development; and

 

WHEREAS, Company and Employee desire to enter into this Agreement to set forth the terms and conditions of the employment relationship between Company and Employee;

 

NOW THEREFORE, in consideration of the promises and the mutual agreements herein contained, the Parties hereto, intending to be legally bound, hereby agree as follows:

 

1.          Definitions. Those words and terms that have special meanings for purposes of this Agreement are specially defined through the use of parenthetical quotations and upper-lower case lettering.

 

 

2.1           Position and Term. The Company hereby employs Executive and Executive hereby accepts said employment and agrees to render such services to the Company on the terms and conditions set forth in this Agreement. Unless terminated in accordance with Section 5 below, the term of this Agreement will be for a term of three (3) years commencing on the Effective Date of this Agreement (the “Initial Term”); and following the Initial Term the Agreement will automatically renew for an additional term of one (1) year (“Renewal Term”) on each one-year anniversary of the Agreement (the “Annual Renewal Date”), unless one of the Parties gives the other Party written notice of non-renewal in accordance with Section 6.2 below) at least thirty (30) days before the impending Annual Renewal Date, in which event this Agreement shall terminate at the end of the then current Term. Reference herein to “Term” shall refer both to the Initial Term and any successive Renewal Term, as the context requires.

 

2.2           Duties.   During the Term, Executive shall devote his full working time, attention and best efforts to further the interests of the Company and shall perform such services for the Company as are consistent with his position.

 

 

3.1           Base Salary. For services rendered by Executive under this Agreement, the Company shall pay Executive a minimum base salary of $211,230.50 per year (“Base Salary”). The Company shall review Executive’s Base Salary on an annual basis and may, in its sole discretion modify the Base Salary from time to time in such amounts as may determined by the Board. Said Base Salary shall be payable in accordance with the Company’s regular payroll practices for executive employees.

 

 

 

3.3           Stock Options. Executive shall be eligible to participate in the Company’s Stock Option Plan as it may be amended from time to time. All grants under the Stock Option Plan shall be made in accordance with and subject to the terms thereof.

 

 

 3.4.1 Participation in Benefit Plans. Except as otherwise provided in this Agreement, Executive shall be entitled to participate in and receive the benefits of any benefit plans, benefits and privileges given to similar level employees of the Company, to the extent commensurate with his then duties and responsibilities (“Benefit Plans”) when and if such Benefit Plans are established by the Company. The Company shall not make any changes in such Benefit Plans that would adversely affect Executive’s rights or benefits thereunder unless such change occurs pursuant to a program applicable to all similar level employees of the Company and does not result in a proportionately greater adverse change in the rights of or benefits to Executive as compared with any other similar level employee of the Company.

 

 3.4.2 Vacation. Executive shall be entitled to four (4) weeks of paid vacation each calendar year.

 

 

4.1Expenses. The Company shall reimburse Executive or otherwise provide for or pay for all reasonable expenses incurred by Executive in furtherance of, or in connection with, the Company’s business, including, but not by way of limitation, traveling expenses, communication expenses, and all reasonable entertainment expenses (whether incurred at Executive’s residence, while traveling or otherwise), subject to such reasonable documentation and other limitations as may be established by the Company.

 

 

5.1           Termination Due to Death. The Company shall have the right to terminate Executive’s employment by reason of his death, in which event the Company shall promptly pay his spouse or estate, as applicable, all compensation, expenses and other amounts owed to him as of the Date of Termination (as defined in Section 5.10 below) and thereafter shall have no further obligation to pay compensation to his spouse or estate (unless required by applicable law).

 

5.2           Termination Due to Disability. The Company shall have the right to terminate Executive’s employment hereunder, if the Executive shall, as the result of mental and physical incapacity, illness, or disability become unable to perform his duties hereunder for in excess of ninety (90) days in any 12-month period.

 

 

5.3           Termination by Executive by Resignation. Executive shall have the right to resign his employment upon thirty (30) days notice, in which event the Company shall promptly pay him all compensation, expenses and other amounts owed to him as of the Date of Termination (as defined in Section 5.10 below) and thereafter shall have no further obligation to pay him compensation (unless required by applicable law).

 

5.4           Termination by the Company Without Cause. The Company shall have the right to terminate Executive’s employment without Cause with thirty (30) days written notice (subject to and in accordance with Sections 5.10 and 6.2 below), in which event the Company:

 

 

 

5.5           Termination by the Company for Cause. The Company shall have the right to terminate Executive’s employment for Cause subject to the conditions set forth herein. If the Company terminates Executive’s employment for Cause, the Company shall promptly pay Executive all compensation, expenses and other amounts owed to him as of the Date of Termination (as defined in Section 5.10 below) and thereafter shall have no further obligation to pay him compensation. As used in this Agreement, “Cause” shall mean any of the following: (i) Executive’s repeated failure or refusal to perform reasonably assigned duties; (ii) Executive’s commission of fraud or theft, conviction of a felony or crime involving moral turpitude, or substance abuse; (iii) Executive’s disclosure of Confidential Information (as defined herein) or trade secrets, except in connection with his duties to Company; (iv) the association, directly or indirectly, of Executive, for his profit or financial benefit, with any person firm, partnership, association, entity, or corporation that competes in any material way, with the Company; (v) Executive’s willful misconduct or gross negligence in the performance of his duties or obligations to the Company; or (vi) Executive’s material breach of the Agreement.

 

5.6           Benefits Upon Termination. Except as otherwise provided in this Agreement, in the event of termination of Executive’s employment under Sections 5.1 through 5.6 above, Executive’s entitlement to benefits under any Benefit Plan (as defined in Section 3.5 above) shall be determined in accordance with applicable law and the provisions of such Benefit Plan.

 

 

 

5.8           Withholding. All payments required to be made by the Company to Executive under Section 5 of this Agreement shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as must be withheld pursuant to any applicable law or regulation.

 

 

 

 

 

 

 

 

 

In consideration of Executive’s employment, Executive acknowledges and agrees that the Company shall have exclusive, unlimited ownership rights to all materials, information and other items created, prepared, derived or developed in connection with or arising from Executive’s employment relationship with the Company, whether individually or jointly with others, whether original or considered enhancements, improvement or modifications, whether or not completed, and whether or not protectable as trade secrets, service or trademarks, or through patent, copyright, mask work or any other intellectual, industrial or other form of property protection or proprietary rights (“Inventions”). Executive further agrees that all Inventions shall be deemed made in the course and scope of Executive’s employment with the Company and shall belong exclusively to the Company, with the Company having the sole right to obtain, hold and renew, in its own name and for its own benefit, all registrations and other protections that may be available by contract, license, law, equity and/or regulation. To the extent that exclusive title or ownership rights do not originally vest in the Company as contemplated, Executive hereby irrevocably assigns, transfers and conveys (and agrees to assign, transfer and convey in the future) to the Company all such rights. Executive agrees to give the Company all reasonable assistance and execute all documents reasonably necessary to assist and enable the Company to perfect, preserve, enforce, register and record its rights. To the extent that Executive has signed any other assignment of inventions agreement, such agreement continues in full force and effect.

 

 

 

The term “compete” as used herein means to engage in, assist, or have any interest in, including without limitation as a principal, consultant, employee, owner, shareholder, director, officer, partner, member, advisor, agent, or financier, any entity that is, or that is about to become engaged in, any activity that is in competition with, or competes with the Company, provided that the Executive shall not be deemed to “compete” with the Company if he does not perform any duties or services for the competing entity that relate, directly or indirectly, to managing, producing, soliciting or selling services, programs or products that provide similar functions to any of the Company’s services, programs or proposed products .

 

 

 

 

 

 

 

 

 

 

 

Because the Executive’s services are personal and unique and because the Executive may have access to and become acquainted with the Proprietary Information of the Company, and because the parties agree that irrepressible harm would result in the event of a breach of Sections 6, 7, 8, and 9 by the Executive, the Company may not have an adequate remedy at law, the Company will have the right to enforce Sections 6, 7, 8, and 9 and any of their provisions by injunction, restraining order, specific performance or other injunction relief, without bond, and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement. The Company’s remedies under this Section 10 are not exclusive and shall not prejudice or prohibit any other rights or remedies under this Agreement or otherwise.

 

 

 

11.1         Assignment. The Company shall assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any corporation or other entity with or into which the Company may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its assets, if in any such ease said corporation or other entity shall by operation of law or expressly in writing assume all obligations of the Company hereunder as fully as if it had been originally made a party hereto; the Company may not otherwise assign this Agreement or its rights and obligations hereunder. Executive may not assign or transfer this Agreement or any rights or obligations hereunder.

 

 

 

 

 

11.4         Tax Treatment of Payments and/or Benefits. Each payment made pursuant to the terms and Agreement is intended as a separate payment within the meaning of Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder. To the extent applicable and notwithstanding any other provisions of this Agreement, this Agreement and payments and benefits hereunder shall be administered, operated and interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulation or other guidance that may be issued after the Effective Date of this agreement; provided however, in the event that the Company determines that any payments or benefits hereunder may be taxable to Executive under Code 409A and related Treasury guidance prior to the payment and/or delivery of such amount, the Company, may adopt such amendments to the Agreement that the Company reasonably and in good faith determines necessary or appropriate to preserve the intended tax treatment of the benefits provided under this Agreement and/or (ii) take such other actions, including delaying the payment or delivery hereunder, as the Company determines necessary or appropriate to comply with or exempt the payments or benefits from the requirements of Code Section 409A including but not limited to delaying any separation payments under this Agreement to the sixth month anniversary of the date of Executive’s separation from service.

 

 

 

11.6         Non-Waiver of Breach. No failure by either Party to declare a default due to any breach of any obligation under this Agreement by the other, nor failure by either Party to act with regard thereto, shall be considered to be a waiver of any such obligation, or of any future breach.

 

11.7         Severability. In the event that any provision or portion of this Agreement, shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect.

 

11.8         Governing Law. The validity and effect of this Agreement and the rights and obligations of the Parties hereto shall be construed and determined accordance with the law of the State of New York without regard to its conflicts of laws or principles.

 

11.9         Dispute Resolution. Any controversy, dispute or claim arising out of or relating to this Agreement or breach thereof shall first be resolved through good faith negotiation between the Parties. If the Parties are unsuccessful at resolving the dispute through such negotiation, the Parties agree to attempt in good faith to resolve the dispute by mediation in New York City, New York (or such other location agreed upon between the Parties), administered by JAMS. Either Party may commence such mediation by providing the other Party (in accordance with Section 6.2 above) and JAMS a written request for mediation, setting forth the subject of the dispute and the relief requested. The Parties covenant that they will cooperate in good faith with JAMS and one another in selecting a mediator from JAMS panel of neutrals and in scheduling and participating in the mediation proceedings. If the Parties are unsuccessful at resolving the dispute through such mediation, the Parties agree to final and binding arbitration in New York City, New York (or such other location agreed upon between the Parties), administered by JAMS pursuant to its Employment Arbitration Rules & Procedures (except insofar as they conflict with the express provisions of this Section) and subject to JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness. Either Party initiating such arbitration must do so by filing a written demand for arbitration (and giving the other Party notice in accordance with Section 6.2 above) at any time following the initial mediation session or 45 days after the date of filing the written request for mediation, whichever occurs first. The mediation may continue after the commencement of arbitration if the Parties so agree. Unless otherwise agreed by the Parties, the mediator shall be disqualified from serving as arbitrator. The arbitrator may, in the award, allocate all or part of the costs, fees and expenses of the arbitration. Judgment on the arbitration award may be entered in any court having jurisdiction. The provisions of this Section may be enforced by any court of competent jurisdiction, and the Party seeking enforcement shall be entitled to an award of all costs, fees and expenses, including attorneys’ fees, to be paid by the Party against whom enforcement is ordered.

 

 

11.10      Entire Agreement. Unless otherwise specified this Agreement contains all of the terms agreed upon by the Company and Executive with respect to the subject matter hereof and supersedes all prior agreements, arrangements and communications between the Parties dealing with such subject matter, whether oral or written.

 

11.11      Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the transferees, successors and assigns of the Company, including any corporation or entity with which the Company may merge or consolidate.

 

11.12      Headings. Numbers and titles to Sections hereof are for information purposes only and, where inconsistent with the text, are to be disregarded.

 

11.13      Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which when taken together, shall be and constitute one and the same instrument.

 

11.14      Executive’s Warranties. Executive expressly warrants that he has carefully read and filly understands all the provisions of this Agreement and is hereby advised by the Company to consult an attorney of his own choosing in deciding whether to sign this Agreement

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the date and year first written above.