EMPLOYMENT
AGREEMENT
THIS
AGREEMENT
is by
and between TELKONET,
INC. (“TKO”), a
Utah
corporation with corporate offices located in Germantown, Maryland and
WILLIAM
R. DUKES
(“Executive”).
WHEREAS,
TKO is acquiring
substantially all of the assets (the “Acquisition”) of SMART
SYSTEMS INTERNATIONAL
(“SSI”).
WHEREAS,
TKO will
continue to operate the SSI business following the Effective Date (as
hereinafter defined);
WHEREAS,
subject
to the Acquisition being completed (the “Effective Date”), TKO desires to employ
Executive, and Executive desires to be employed by TKO.
NOW
THEREFORE,
TKO
hereby employs Executive, and Executive hereby accepts employment with TKO
on
the following terms and conditions:
1. Duties.
TKO
hereby employs Executive in the capacity of __TBD______.
In such capacity, Executive shall perform his duties in a professional,
supervisory and managerial nature solely for the benefit of TKO and pertaining
to the business and affairs of TKO as determined by the Board of Directors
and/or the Executive Committee of TKO. Executive shall report directly to
TKO’s
Chief Executive Officer (the “Telkonet CEO”). Executive’s duties and
responsibilities shall also include, but not be limited to, the
following:
(a) provide
leadership the activities and operations of the SSI business;
(b) Hire,
compensate, discipline and terminate SSI staff within the approved budget,
establish job descriptions, duties and responsibilities of all SSI staff
in
accordance with TKO Bylaws, and the policies and procedures of TKO, perform
regular evaluations of all SSI staff, determine the level of compensation
of
such staff on the basis of such evaluations, within the approved budget and
in
accordance with the policies of TKO and have primary responsibility for the
day-to-day operations of SSI;
(c) Alert
and
advise the Board of Directors and/or the Executive Committee about reasonably
significant matters needing their attention and action;
(d) Serve
as
the representative of SSI in activities related to its objectives and
policies;
(e) Direct
the coordination of the activities of SSI’s committees and
projects;
(f) Oversee,
under the direction of the Board of Directors and with the assistance of
TKOs
outside certified public accountant (the “TKO Accountant”), the custody and use
of all funds, securities, property and, generally, all assets of SSI and
the
deposit of the funds of SSI;
(g) Oversee
the preparation of a proposed annual budget of SSI;
(h) Oversee
the receipt and disbursement of SSI funds in accordance with the adopted
budget
of TKO;
(i) Supervise
the sales, installation and support of all SSI subscriber acquisition
activities;
(j) Oversee,
develop and expand all aspects of SSI’s business, sales and production
operations;
(k) Present
an annual financial report to the Board of Directors;
(l) Present
to the Board of Directors an annual report of all activities of
SSI;
(m) Negotiate,
evaluate and execute all contracts, agreements and commitments arising in
the
ordinary course of SSI’s business for and on behalf of TKO, consistent with the
duties and responsibilities set forth above; and
(n) Implement
all Board directives and perform all such other duties that may be assigned
from
time-to-time by the Board of Directors in its discretion.
2. Term.
The term
of this Agreement (the “Term”) shall commence on the Effective Date and shall
continue for a minimum of six (6) months. At the end of that time period,
an
assessment will be made regarding the Executive’s continued employment. In the
event that he is involuntarily terminated (other than for “cause” or engaging in
any unethical, immoral or unprofessional conduct or violation of a Company
policy), Telkonet agrees to pay the Executive severance equal to three (3)
months of current base salary, and continue to provide and pay for health
insurance coverage for a period of three months following termination or
until
such time that the Executive is covered by another group benefits plan,
whichever occurs first.
3. Extent
of Services.
During
the Term and any extension thereof, Executive shall devote his full time
and
efforts to the performance, to the best of his abilities, of such duties
and
responsibilities inherent in his position hereunder, as described in Section
1
above, and as the Board of Directors and/or the Officers of TKO shall determine,
consistent therewith.
4. Compensation.
(a) Salary.
Executive shall be paid Two Hundred Forty Nine Thousand and Four Hundred
Ninety
Six Dollars ($249,496.00) per year, which shall be paid in accordance with
TKO’s
normal payroll practices, and subject to all lawfully required withholding.
The
base salary may be increased annually as determined by the Board of Directors
of
Telkonet in its sole discretion.
(b) Executive
Participation in TKO Staff Benefits Plans.
Following the Effective Date, Executive shall be entitled to participate
in any
group health programs and other benefit and incentive plans, which may be
instituted from time-to-time for TKO employees, and for which Executive
qualifies under the terms of such plans. All such benefits shall be provided
on
the same terms and conditions as generally apply to all other TKO employees
under these plans and may be modified by TKO from time-to-time.
(c) Expenses.
Subject
to TKO Company policy, the Executive shall be reimbursed by TKO for all
ordinary, reasonable, customary and necessary expenses incurred by him in
the
performance of his duties and responsibilities under this Agreement Executive
agrees to prepare documentation for such expenses as may be necessary for TKO to
comply with the applicable rules and regulations of the Internal Revenue
Service.
5. Vacation.
At full
pay and without any adverse effect to his compensation, provided all other
terms
and conditions of this Agreement are satisfied, Executive shall be entitled
to
three (3) weeks of vacation for each full calendar year during the term of
this
Agreement. Executive agrees to schedule his vacation leave in advance upon
written notice to the TKO CEO and at a time with minimum disruption to TKO.
Carryover of vacation days in excess of two weeks is subject to the prior
approval of the CEO of TKO.
6. Termination.
This
Agreement shall terminate in accordance with Section 2 of this Agreement,
or
upon the first to occur of any of the following events:
(a) The
bankruptcy or dissolution of TKO;
(b) The
death
of Executive;
(c) The
mutual consent of Executive and TKO;
(d) “Cause”
exists for termination. For purposes of this Agreement, “cause” shall include,
but not be limited to, the following: (1) theft, fraud, embezzlement, dishonesty
or other similar behavior by Executive; (2) any material breach by Executive
of
any provision of this Agreement; (3) any habitual neglect of duty or misconduct
of Executive in discharging any of his duties and responsibilities under
this
Agreement; (4) any conduct of Executive which is detrimental to or embarrassing
to TKO, including, but not limited to, Executive being indicated or convicted
of
a felony or any offense involving moral turpitude; or (5) any default of
Executive’s obligations hereunder, or any failure or refusal of Executive to
comply with the policies, rules and regulations of TKO, which default, failure
or refusal is not cured within a reasonable time (but not to exceed thirty
(30)
days) after written notification thereof to Executive by TKO. If cause exists
for termination, Executive shall be entitled to no further compensation,
except
for accrued leave and vacation and except as may be required by applicable
law.
7. Surrender
of Books and Papers.
Upon
termination of this Agreement (irrespective of the time, manner, or cause
of
termination, be it for cause or otherwise), Executive shall immediately
surrender to TKO all books, records, or other written papers or documents
entrusted to him or which he has otherwise acquired pertaining to TKO and
all
other TKO property in Executive’s possession, custody or control.
8. Inventions
and Patents.
Executive agrees that Executive will promptly from time-to-time fully inform
and
disclose to TKO any and all ideas, concepts, copyrights, copyrightable material,
developments, inventions, designs, improvements and discoveries of whatever
nature that Executive may have or produce during the term of Executive’s
employment under this Agreement that pertain or relate to the then current
business of TKO (the “Creations”), whether conceived by Executive alone or with
others and whether or not conceived during regular working hours. All Creations
shall be the exclusive property of TKO and shall be “works made for hire” as
defined in 17 U.S.C. §101, and TKO shall own all rights in and to the Creations
throughout the world, without payment of royalty or other consideration to
Executive or anyone claiming through Executive. Executive hereby transfers
and
assigns to TKO (or its designee) all right, title and interest in and to
every
Creation. Executive shall assist TKO in obtaining patents or copyrights on
all
such inventions, designs, improvements and discoveries being patentable or
copyrightable by Executive or TKO and shall execute all documents and do
all
things necessary to obtain letters of patent or copyright, vest the TKO with
full and exclusive title thereto, and protect the same against infringement
by
others, and such assistance shall be given by Executive, if needed, after
termination of this Agreement for whatever cause or reason. Executive hereby
represents and warrants that Executive has no current or future obligation
with
respect to the assignment or disclosure of any or all developments, inventions,
designs, improvements and discoveries of whatever nature to any previous
Employer, entity or other person and that Executive does not claim any rights
or
interest in or to any previous unpatented or uncopyrighted developments,
inventions, designs, improvements or discoveries.
9. Trade
Secrets, Non-Competition and Non-Solicitation.
(a) Trade
Secrets.
Contemporaneous with the execution of this Agreement and during the term
of
employment under this Agreement, TKO shall deliver to Executive or permit
Executive to have access to and become familiar with various confidential
information and trade secrets of SSI and TKO, including without limitation,
data, production methods, customer lists, product format or developments,
other
information concerning the business of SSI and TKO, and other unique processes,
procedures, services and products of SSI and TKO, which are regularly used
in
the operation of the business of the SSI and TKO (collectively, the
“Confidential Information”). Executive shall not disclose any of the
Confidential Information that he receives from TKO or their clients and
customers in the course of his employment with TKO, directly or indirectly,
nor
use it in any way, either during the term of this Agreement or at any time
thereafter, except as required in the course of employment with TKO Executive
further acknowledges and agrees that Executive owes SSI and TKO a fiduciary
duty
to preserve and protect all Confidential Information from unauthorized
disclosure or unauthorized use. All files, records, documents, drawings,
graphics, processes, specifications, equipment and similar items relating
to the
business of SSI and/or TKO, whether prepared by Executive or otherwise coming
into Executive’s possession in the course of his employment with TKO, shall
remain the exclusive property of TKO and shall not be removed from the premises
of SSI and/or TKO without the prior written consent of TKO unless removed
in
relation to the performance of Executive’s duties under this Agreement. Any such
files, records, documents, drawings, graphics, specifications, equipment
and
similar items, and any and all copies of such materials which have been removed
from the premises of SSI and/or TKO, shall be returned by Executive to TKO.
Executive further acknowledges that the covenants of Executive herein are
intended to include the protection of the confidential information of SSI's
and
TKO’s customers and clients, that come into the possession of Executive as a
result of his employment with TKO, and that such customers and clients of
TKO
shall be entitled to rely on and enforce these covenants against Executive
for
their own benefit.
(b) Non-Competition.
Executive acknowledges that he will be provided with and have access to the
Confidential Information, the authorized use or disclosure of which would
cause
irreparable injury to TKO, that TKO’s willingness to enter into this Agreement
is based in material part on Executive’s agreement to the provisions of this
Section 9(b) and that Executive’s breach of the provisions of this Section would
materially and irreparably damage TKO. In consideration for TKO’s disclosure of
Confidential Information to Executive, Executive’s access to the Confidential
Information, and the salary paid to Executive by TKO hereunder, Executive
agrees
that during the term and for a period of three (3) months following termination
of the Employment (the "Noncompetition Period"), he will not (a) Participate
In
(as hereinafter defined) any other business or organization which at any
time
during the Noncompetition Period be engaged in the same business as or in
competition with TKO within Continental USA; (b) directly or indirectly solicit
for business any person or enterprise that at any time during the one (1)
year
period preceding the date of termination of the Employment who was a customer
of
TKO; or (c) directly or indirectly employ any person who, at any time during
the
one (1) year period preceding the date of termination pursuant to the terms
of
the Employment Contract was, or during the Noncompetition Period is, an employee
of TKO.
(c) Reasonableness
of Restrictions.
Executive acknowledges that the restrictions set forth in Section
9(b)
of this
Agreement are reasonable in scope and necessary for the protection of the
business and goodwill of TKO. Executive agrees that should any portion of
the
covenants in Section
9
be
unenforceable because of the scope thereof or the period covered thereby
or
otherwise, the covenant shall be deemed to be reduced and limited to enable
it
to be enforced to the maximum extent permissible under the laws and public
policies applied in the jurisdiction in which enforcement is
sought.
(d) Soliciting
Executives.
Executive shall not during the term of this Agreement or for a period of
one (1)
year after termination of Executive’s employment hereunder for any reason,
whether by resignation, discharge or otherwise, either directly or indirectly,
employ, enter into agreement with, or solicit the employment of, Executives
of
TKO and/or SSI for the purpose of causing them to leave the employment of
SSI or
TKO or take employment with any business that is in competition in any manner
whatsoever with the business of SSI or TKO.
(e) Injunctive
Relief; Extension of Restrictive Period.
In the
event of a breach of any of the covenants by Executive or TKO contained in
this
Agreement, it is understood that damages will be difficult to ascertain,
and
either party may petition a court of law or equity for injunctive relief
in
addition to any other relief which Executive or TKO may have under the law,
including but not limited to reasonable attorneys’ fees.
10. Miscellaneous.
(a) This
Agreement shall be binding upon the parties and their respective heirs,
executors, administrators, successors and assigns. Executive shall not assign
any part of his rights under this Agreement without the prior written consent
of
TKO.
(b) This
Agreement contains the entire agreement and understanding between the parties
and supersedes any and all prior understandings and agreements between the
parties regarding Executive’s employment.
(c) No
modification hereof shall be binding unless made in writing and signed by
the
party against whom enforcement is sought. No waiver of any provisions of
this
Agreement shall be valid unless the same is in writing and signed by the
party
against whom it is sought to be enforced, unless it can be shown through
custom,
usage or course of action.
(d) This
Agreement is executed in, and it is the intention of the parties hereto that
it
shall be governed by, the laws of the State of Maryland, without regard to
applicable conflicts of laws provisions.
(e) The
provisions of this Agreement shall be deemed to be severable, and the invalidity
or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
(f) Any
notice or communication permitted or required by this Agreement shall be
in
writing and shall become effective upon personal service, or service by wire
transmission, which has been acknowledged by the other party as being received,
or two (2) days after its mailing by certified mail, return receipt requested,
postage prepaid addressed as follows:
(1) If
to
TKO, to:
Lorna
M.
Kleinrock, PHR
Vice
President, Human Resources
Telkonet,
Inc.
20374
Seneca Meadows Parkway
Germantown,
Maryland 20876
(2) If
to
Executive, to:
Mr.
William R Dukes
SSI
3271
S.
Highland Drive, #715
Las
Vegas, NV 89109
IN
WITNESS WHEREOF,
TKO and
Executive have executed this Agreement as of the Effective
Date.