Exhibit 10.1
Execution Copy
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of
the 24th day of December, 2009, by and between Francis T. McCarron (the
“Executive”) and Harbinger Group Inc., a Delaware corporation (“Harbinger Group”
or the “Employer”). Unless the context otherwise requires, references to the
Employer shall include its successors and assigns, direct and indirect
subsidiaries, affiliates and parents.
RECITALS
     A. The Employer desires that the Executive provide services for the benefit
of the Employer and its affiliates and the Executive desires to accept such
employment with the Employer.
     B. The Employer and the Executive acknowledge that the Executive will be a
member of the senior management team of the Employer and, as such, will
participate in implementing the Employer’s business plan.
     C. In the course of employment with the Employer, the Executive will have
access to certain confidential information that relates to or will relate to the
business of the Employer and its affiliates.
     D. The Employer desires that any such information not be disclosed to other
parties or otherwise used for unauthorized purposes.
     NOW, THEREFORE, in consideration of the above premises and the following
mutual covenants and conditions, the parties agree as follows:
     1. Employment. Harbinger Group shall employ the Executive as its Executive
Vice President and Chief Financial Officer (“EVP-CFO”), and the Executive hereby
accepts such employment on the following terms and conditions. In the event that
the Executive ceases to be employed by the Employer for any reason, the
Executive shall tender his resignation from all positions he holds with the
Employer, effective on the date his employment is terminated.
     2. Duties. The Executive shall work for the Employer in a full-time
capacity. The Executive shall, during the term of this Agreement, have the
duties, responsibilities, powers, and authority customarily associated with the
position of EVP-CFO. The Executive shall report to, and follow the direction of,
Harbinger Group’s Chief Executive Officer (“CEO”). In addition to the foregoing,
the Executive also shall perform such services and duties as may be reasonably
assigned to him from time to time by Harbinger Group’s Board of Directors (the
“Board”). The Executive agrees to cooperate with reasonable requests of the
Employer to provide services to its affiliates (each, an “Affiliate”), with
approval from the Board, from time to time. The Executive shall devote
substantially all of his business time, energy, attention, and skill to the
performance of duties for the Employer or its Affiliates, and will use his best,
reasonable efforts to promote the interests of the Employer. It shall not be
considered a violation of the foregoing for the Executive to serve on industry,
civic, religious or charitable boards or committees, or to manage

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his personal investments, so long as such services and activities do not
individually or in the aggregate significantly interfere with the performance of
the Executive’s responsibilities as an employee of the Employer in accordance
with this Agreement.
     3. Executive Loyalty. The Employer shall be entitled to all benefits and
profits arising from or incident to any and all work, services, and advice of
the Executive. The Executive expressly agrees that during the period of this
Agreement, he shall not engage, directly or indirectly, as a partner, officer,
director, member, manager, stockholder, advisor, agent, employee, or in any
other form or capacity, in any other business similar to the then current
business of the Employer. The foregoing notwithstanding, and except as otherwise
set forth in Paragraph 9, nothing herein contained shall be deemed to prevent
the Executive from investing his money in the capital stock or other securities
of any corporation whose stock or securities are publicly-owned or are regularly
traded on any public exchange, nor shall anything herein contained be deemed to
prevent the Executive from investing his money in real estate, or to otherwise
manage his personal investments and financial affairs.
     4. Period of Employment. The Executive understands and agrees that he is an
at-will employee at all times and the Executive and the Employer can, and shall
have the right to, terminate the employment relationship at any time for any or
no reason, with or without notice, and with or without Cause (as hereinafter
defined), subject to this Agreement. Nothing contained in this Agreement or any
other agreement shall alter the at-will relationship. Notwithstanding the
foregoing, the parties agree that on or prior to December 31, 2010 they shall,
if mutually agreed, renegotiate the terms of the Executive’s employment. If
(i) the Employer elects not to renegotiate the terms of the Executive’s
employment or (ii) in connection with such renegotiation, the parties are unable
to reach mutually acceptable terms after negotiating in good faith, the
Executive will be entitled to the severance payments described in Paragraph 8
hereof as if his employment was terminated by the Company without Cause.
     5. Compensation.
          A. The Employer shall pay the Executive an annualized base salary of
$500,000 (the “Base Salary”), payable in substantially equal installments in
accordance with the Employer’s payroll policy applicable to senior executives
from time to time in effect, which payments shall be made not less frequently
than monthly. The Executive’s salary shall be subject to any payroll or other
deductions as may be required to be made pursuant to law, government order, or
by agreement with, or consent of, the Executive. The Base Salary shall be
reviewed no less frequently than annually for increase in the discretion of the
Company. If the Executive is requested to perform significant services for an
Affiliate, the Executive shall be entitled to receive additional reasonable
compensation at a level commensurate with the services performed for such
Affiliate.
          B. The Executive shall be eligible to earn an annual cash bonus (the
“Annual Bonus”) targeted at three hundred percent (300%) of his Base Salary upon
the attainment of certain reasonable performance objectives to be set by, and in
the sole discretion of, the Board or the Compensation Committee of the Board, in
consultation with the Executive. Notwithstanding the foregoing, the Executive’s
Annual Bonus for the year ended December 31, 2010, only, shall

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be a minimum of $500,000. The parties agree that the performance targets for the
2010 Annual Bonus shall be determined no later than ninety (90) days following
the Executive’s employment start date. Except as otherwise provided herein, the
Executive must be actively employed by the Employer on the date the Annual Bonus
is paid to receive a bonus for a given year. Annual Bonus compensation earned
and payable pursuant hereto shall be paid in the calendar year following the
fiscal year for which the bonus is earned, and promptly following the completion
of the audit of the Employer’s annual financial statements, and in no event
shall such payment be made later than April 15 of such following calendar year.
          C. The Executive shall be entitled to receive stock options pursuant
and subject to the terms of the Employer’s Amended and Restated 1996 Long-Term
Incentive Plan (the “Plan”). The Employee shall receive, on his first day of
employment and subject to the approval of the Board, an initial option grant
(the “Initial Option”) to purchase 125,000 shares of the Employer’s common
stock, par value $.01 per share. The Initial Option shall have an exercise price
equal to the closing price of the Employer’s common stock as listed on the New
York Stock Exchange on the date of grant. The Initial Option shall vest in three
(3) substantially equal annual installments, with such vesting to occur on the
first, second and third anniversaries of the date of grant, so long as the
Executive continues to be employed by the Employer on each such date. The
foregoing notwithstanding, upon a termination of the Executive’s employment by
the Employer without Cause (including pursuant to the last sentence of
Paragraph 4 hereof), or by the Executive for Good Reason (as hereinafter
defined), the Initial Option shall become one hundred percent (100%) vested as
of the date of such termination. The definitive terms of the Initial Option
shall be set forth in a stock option agreement in the Employer’s standard form
(the “Stock Option Agreement”), which shall describe the foregoing and the other
terms and conditions of the Initial Option. For years beginning on or after
January 1, 2011, the Executive shall be eligible to receive an additional annual
option or similar equity grant having a fair value (using market standard
valuation methodologies) targeted at between twenty-five percent (25%) and fifty
percent (50%) of the Executive’s total annual compensation earned, accrued or
received for the immediately preceding year, subject to the sole discretion of
the Board or the Compensation Committee of the Board (including the discretion
of the Board, or the Compensation Committee of the Board, to grant awards higher
than the targeted amount). Such additional option or equity grant shall vest in
three (3) substantially equal annual installments, with such vesting to occur on
the first, second and third anniversaries of the date of grant, so long as the
Executive continues to be employed by the Employer on each such date. Subject to
applicable securities law, the Employer shall register a sufficient number of
shares of common stock of the Employer on a Form S-8 to satisfy its obligations
under the Plan.
          D. During the period of this Agreement, the Employer shall:
     (1) include the Executive in any life insurance, disability insurance,
medical, dental or health insurance, savings, pension and retirement plans and
other benefit plans or programs maintained by the Employer for the benefit of
its senior executive employees, subject to the terms of such plans and programs;
and
     (2) provide the Executive with twenty (20) days paid vacation per annum,
which shall accrue pro-rata during the course of such year.

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     6. Expenses. The Employer shall reimburse the Executive for all reasonable
and approved business expenses in accordance with its expense reimbursement
policy, provided the Executive submits paid receipts or other documentation
acceptable to the Employer and as required by the Internal Revenue Service to
qualify as ordinary and necessary business expenses under the Internal Revenue
Code of 1986, as amended (the “Code”). The payment or reimbursement of any
expense pursuant to this Paragraph 6 in one of the Executive’s taxable years
shall not affect the amount of the payment or reimbursement of any other
expenses pursuant to such paragraph in any other taxable years. Any payment or
reimbursement for expenses under this Paragraph 6 shall in any event be made on
or before the last day of the Executive’s taxable year following the taxable
year in which the expense was incurred. Any right to payment or reimbursement
under this Paragraph 6 may not be liquidated or exchanged for any other benefit.
     7. Termination. Notwithstanding anything in Paragraph 4 of this Agreement
to the contrary, the Executive’s services shall terminate upon the first to
occur of the following events:
          A. Upon the Executive’s date of death or the date the Executive is
given written notice that he has been determined to be disabled by the Employer.
For purposes of this Agreement, the Executive shall be deemed to be disabled if
the Executive, as a result of illness or incapacity, shall be unable to perform
substantially his required duties for a period of four (4) consecutive months or
for any aggregate period of six (6) months in any twelve (12) month period. A
termination of the Executive’s employment by the Employer for disability shall
be communicated to the Executive by written notice and shall be effective on the
tenth (10th) business day after receipt of such notice by the Executive, unless
the Executive returns to full-time performance of his duties before such tenth
(10th) business day.
          B. On the date the Employer provides the Executive with written notice
that he is being terminated for “Cause.” For purposes of this Agreement, the
Executive shall be deemed terminated for Cause if the Employer terminates the
Executive’s employment in writing after the Executive:
     (1) shall have been convicted, indicted for, or entered a plea of nolo
contendere to, any felony or any other act involving fraud, theft,
misappropriation, dishonesty, or embezzlement;
     (2) shall have committed intentional and willful acts of misconduct that
materially impair the goodwill or business of the Employer or its Affiliates or
cause material damage to its or their property, goodwill, or business; or
     (3) shall have willfully refused to, or willfully failed to, perform in any
material respect his duties hereunder, provided, however, that no such
termination for Cause under this subparagraph 7B(3) shall be effective unless
the Executive does not cure such refusal or failure to the Employer’s reasonable
satisfaction as soon as practicable after the Employer gives the Executive
written notice

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identifying such refusal or failure (and, in any event, within ten (10) calendar
days after receipt of such written notice).
For purposes of determining Cause, no act or failure to act by the Executive
shall be considered “willful” unless it is done or omitted to be done by the
Executive in bad faith and without reasonable belief that his action or omission
was in the best interests of the Employer or its Affiliates. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by the
Board or the written instructions of the CEO, or based upon the written advice
of counsel for the Employer, shall be presumed to be done by the Executive in
good faith and in the best interests of the Employer. Any voluntary termination
by the Executive in anticipation of a termination for Cause under this
subparagraph B shall be deemed a termination for Cause.
          C. On the date the Executive terminates his employment for any reason,
other than a reason set forth in Paragraph 7E, provided that the Executive shall
give the Employer thirty (30) days written notice prior to such date of his
intention to terminate such employment.
          D. On the date the Employer terminates the Executive’s employment for
any reason (including pursuant to the last sentence of Paragraph 4 hereof),
other than a reason otherwise set forth in this Paragraph 7, provided that the
Employer shall give the Executive thirty (30) days written notice prior to such
date of its intention to terminate such employment.
          E. On the date the Executive provides written notice terminating his
employment with Good Reason, which termination shall have occurred no later than
4 months following the date the Executive learns of the event constituting Good
Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence
of any of the following events without either (x) the Executive’s express prior
written consent or (y) full cure within 30 days after the Executive gives
written notice to the Employer requesting cure, such notice to be given by the
Executive no later than 60 days after the date he first learns that the event
has occurred: (i) any material diminution in the Executive’s title,
responsibilities or authorities, (ii) the assignment to him of duties that are
materially inconsistent with his duties as the principal financial officer of
Harbinger Group; (iii) any change in the reporting structure so that he reports
to any person or entity other than CEO and/or the Board; (iv) the relocation of
the Executive’s principal office, or principal place of employment, to a
location that is outside the borough of Manhattan, New York; (v) a breach by the
Employer or any of its Affiliates of any material terms of this Agreement; or
(vi) any failure of the Employer to obtain the assumption (in writing or by
operation of law) of its obligations under this Agreement by any successor to
all or substantially all of its business or assets upon consummation of any
merger, consolidation, sale, liquidation, dissolution or similar transaction.
     8. Compensation Upon Termination.
          A. If the Executive’s services are terminated pursuant to Paragraph 7,
the Executive shall be entitled to his salary through his final date of active
employment plus any accrued but unused vacation pay. The Executive also shall be
entitled to any benefits mandated under the Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) or required under the terms of any death,
insurance, or retirement plan, program, or agreement provided by

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the Employer and to which the Executive is a party or in which the Executive is
a participant, including, but not limited to, any short-term or long-term
disability plan or program, if applicable.
          B. In addition to the salary and benefits set forth in Paragraph 8A,
if the Executive’s services are terminated pursuant to Paragraph 7D or 7E at
anytime on or prior to December 31, 2010, the Executive shall be entitled to:
(i) the continuation of his Base Salary until December 31, 2010, payable in
substantially equal installments in accordance with the Employer’s payroll
policy from time to time in effect; (ii) the guaranteed Annual Bonus for the
year ending December 31, 2010, or, if greater, the Annual Bonus the Executive
would have earned based on the performance goals actually achieved during the
2010 calendar year multiplied by a fraction, the numerator of which shall equal
the number of days the Executive was employed by the Employer during 2010 and
the denominator of which shall equal three hundred sixty five (365), to be paid
at the time otherwise set forth above in Paragraph 5B; and (iii) full and
immediate vesting of the Initial Option. In addition to the salary and benefits
set forth in Paragraph 8A, if the Executive’s services are terminated pursuant
to Paragraph 7D or 7E at anytime after December 31, 2010, the Executive shall be
entitled to (1) the continuation of his Base Salary for a period of three
(3) months following such termination, (2) the amount payable pursuant to clause
(ii) of this Paragraph 8B, if not already paid and (3) full and immediate
vesting of the Initial Option. The Executive’s entitlement to the payments set
forth in this Paragraph 8B shall be conditioned upon his execution of an
agreement acceptable to the Employer that (x) waives any rights the Executive
may otherwise have against the Employer, (y) releases the Employer from actions,
suits, claims, proceedings and demands related to the period of employment
and/or the termination of employment, and (z) contains certain other obligations
which shall be set forth at the time of the termination; provided , however ,
that any such waiver and release shall not include a waiver or release of the
Executive’s rights (I) arising under, or preserved by, this Agreement, (II) to
continued coverage under the Employer’s Directors & Officers insurance policies,
(III) to indemnification pursuant to the Indemnification Agreement (as defined
in Paragraph 9N below), or (IV) as a shareholder of the Employer. The Executive
must sign and tender the release as described above not later than sixty
(60) days following the Executive’s last day of employment, and if the Executive
fails or refuses to do so, the Executive shall forfeit the right to such
termination compensation as would otherwise be due and payable.
          C. The Employer and the Executive intend that the payments and
benefits provided for in this Agreement either be exempt from Section 409A of
the Code, or be provided for in a manner that complies with Section 409A of the
Code, and any ambiguity herein shall be interpreted so as to be consistent with
the intent of this subparagraph (C). In no event whatsoever shall the Employer
be liable for any additional tax, interest or penalty that may be imposed on the
Executive by Code Section 409A or damages for failing to comply with Section
409A. Notwithstanding anything contained herein to the contrary, all payments
and benefits under this Paragraph 8 shall be paid or provided only at the time
of a termination of Executive’s employment that constitutes a “separation from
service” from the Employer within the meaning of Section 409A of the Code and
the regulations and guidance promulgated thereunder (determined after applying
the presumptions set forth in Treas. Reg. Section 1.409A-1(h)(1)). Further, if
the Executive is a “specified employee” as such term is defined under
Section 409A

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of the Code and the regulations and guidance promulgated thereunder, any
payments described in Paragraph 8B shall be delayed for a period of six
(6) months following the Executive’s separation of employment to the extent and
up to an amount necessary to ensure such payments are not subject to the
penalties and interest under Section 409A of the Code.
     9. Protective Covenants. The Executive acknowledges and agrees that solely
by virtue of his employment by, and relationship with, the Employer, he has
acquired and will acquire “Confidential Information”, as hereinafter defined, as
well as special knowledge of the Employer’s relationships with its customers and
suppliers, and that, but for his association with the Employer, the Executive
would not or will not have had access to said Confidential Information or
knowledge of said relationships. The Executive further acknowledges and agrees
(i) that the Employer has long term, near-permanent relationships with its
customers and suppliers, and that those relationships were developed at great
expense and difficulty to the Employer over several years of close and
continuing involvement; (ii) that the Employer’s relationships with its
customers and suppliers are and will continue to be valuable, special and unique
assets of the Employer and that the identity of its customers and suppliers is
kept under tight security with the Employer and cannot be readily ascertained
from publicly available materials or from materials available to the Employer’s
competitors; and (iii) that the Employer has certain protectable interests that
are critical to its competitive advantage in the industry and would be of
demonstrable value in the hands of a competitor. In return for the consideration
described in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and as a condition
precedent to the Employer entering into this Agreement, and as an inducement to
the Employer to do so, the Executive hereby represents, warrants, and covenants
as follows:
          A. The Executive has executed and delivered this Agreement as his free
and voluntary act, after having determined that the provisions contained herein
are of a material benefit to him, and that the duties and obligations imposed on
him hereunder are fair and reasonable and will not prevent him from earning a
comparable livelihood following the termination of his employment with the
Employer.
          B. The Executive has read and fully understands the terms and
conditions set forth herein, has had time to reflect on and consider the
benefits and consequences of entering into this Agreement, and has had the
opportunity to review the terms hereof with an attorney or other representative,
if he so chooses.
          C. The execution and delivery of this Agreement by the Executive does
not conflict with, or result in a breach of or constitute a default under, any
agreement or contract, whether oral or written, to which the Executive is a
party or by which the Executive may be bound. In addition, the Executive has
informed the Employer of, and provided the Employer with copies of, any
non-competition, confidentiality, work-for-hire or similar agreements to which
the Executive is subject or may be bound.
          D. The Executive agrees that, during the period of his employment with
the Employer and, except as set forth below in this subparagraph D, for a period
of three (3) months after the termination of the Executive’s employment
hereunder (or, if longer, until December 31,

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2010) (the “Restricted Period”) for any reason whatsoever or for no reason,
whether voluntary or involuntary, the Executive will not, except on behalf of
the Employer, anywhere in the United States of America or in any other place or
venue where the Employer or any affiliate, subsidiary, or division thereof now
conducts or operates, or may conduct or operate, its business prior to the date
of the Executive’s termination of employment:
     (1) directly or indirectly, contact, solicit or accept if offered to the
Executive, or direct any person, firm, corporation, association or other entity
to contact, solicit or accept if offered to it, any of the Employer’s customers,
prospective customers, or suppliers (as hereinafter defined) for the purpose of
providing any products and/or services that are the same as or similar to the
products and services provided by the Employer to its customers during the term
hereof; or
     (2) solicit or accept if offered to him, with or without solicitation, on
his own behalf or on behalf of any other person, the services of any person who
is a then current employee of the Employer (or was an employee of the Employer
during the year preceding such solicitation), nor solicit any of the Employer’s
then current employees (or an individual who was employed by or engaged by the
Employer during the year preceding such solicitation) to terminate employment or
an engagement with the Employer, nor agree to hire any then current employee (or
an individual who was an employee of the Employer during the year preceding such
hire) of the Employer into employment with himself or any company, individual or
other entity; or
     (3) directly or indirectly, whether as an investor (excluding investments
representing less than one percent (1%) of the common stock of a public
company), lender, owner, stockholder, officer, director, consultant, employee,
agent, salesperson or in any other capacity, whether part-time or full-time,
become associated with any business involved in the design, manufacture,
marketing, or servicing of products then constituting ten percent (10%) or more
of the annual revenues of the Employer; or
     (4) act as a consultant, advisor, officer, manager, agent, director,
partner, independent contractor, owner, or employee for or on behalf of any of
the Employer’s customers, prospective customers, or suppliers (as hereinafter
defined), with respect to or in any way with regard to any aspect of the
Employer’s business and/or any other business activities in which the Employer
engages during the term hereof.
     The foregoing notwithstanding, in the event of a termination of employment
pursuant to Paragraph 7D or 7E after December 31, 2010, the Restricted Period
may, in the Employer’s discretion, be shortened or eliminated and a
corresponding reduction or elimination shall be made to the period of time over
which the Employer is otherwise obligated to continue the Executive’s Base
Salary pursuant to Paragraph 8B. In the event of any breach of this subparagraph
D, the

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Executive agrees that the applicable Restricted Period shall be tolled during
the time of such breach.
          E. The Executive acknowledges and agrees that the scope described
above is necessary and reasonable in order to protect the Employer in the
conduct of its business and that, if the Executive becomes employed by another
employer, he shall be required to disclose the existence of this Paragraph 9 to
such employer and the Executive hereby consents to and the Employer is hereby
given permission to disclose the existence of this Paragraph 9 to such employer.
          F. For purposes of this Paragraph 9, “customer” shall be defined as
any person, firm, corporation, association, or entity that purchased any type of
product and/or service from the Employer or is or was doing business with the
Employer or the Executive within the twelve (12) month period immediately
preceding termination of the Executive’s employment. For purposes of this
Paragraph 9, “prospective customer” shall be defined as any person, firm,
corporation, association, or entity contacted or solicited by the Employer or
the Executive (whether directly or indirectly) or who contacted the Employer or
the Executive (whether directly or indirectly) within the twelve (12) month
period immediately preceding termination of the Executive’s employment for the
purpose of having such persons, firms, corporations, associations, or entities
become a customer of the Employer. For purposes of this Paragraph 9, “supplier”
shall be defined as any person, firm, corporation, association, or entity who is
or was doing business with the Employer or the Executive or who was contacted or
solicited by the Employer or the Executive (whether directly or indirectly) or
who contacted or solicited the Employer or the Executive (whether directly or
indirectly) within the twelve (12) month period immediately preceding
termination of the Executive’s employment.
          G. The Executive agrees that during his employment (other than to the
extent reasonably necessary to perform his services under this Agreement) and
thereafter the Executive will not, for any reason whatsoever, use for himself or
disclose to any person not employed by the Employer any “Confidential
Information” of the Employer acquired by the Executive during his relationship
with the Employer, both prior to and during the period of this Agreement. The
Executive further agrees to use Confidential Information solely for the purpose
of performing duties with, or for, the Employer and further agrees not to use
Confidential Information for his own private use or commercial purposes or in
any way detrimental to the Employer. The Executive agrees that “Confidential
Information” includes but is not limited to: (1) any financial, engineering,
business, planning, operations, services, potential services, products,
potential products, technical information and/or know-how, organization charts,
formulas, business plans, production, purchasing, marketing, pricing, sales,
profit, personnel, customer, broker, supplier, or other lists or information of
the Employer; (2) any papers, data, records, processes, methods, techniques,
systems, models, samples, devices, equipment, compilations, invoices, customer
lists, or documents of the Employer; (3) any confidential information or trade
secrets of any third party provided to the Employer in confidence or subject to
other use or disclosure restrictions or limitations; and (4) any other
information, written, oral, or electronic, whether existing now or at some time
in the future, whether pertaining to current or future developments, and whether
previously accessed during the Executive’s tenure with the Employer or to be
accessed during his future employment with the Employer, which pertains to the

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Employer’s affairs or interests or with whom or how the Employer does business.
The Employer acknowledges and agrees that Confidential Information does not
include (i) information properly in the public domain, or (ii) information in
the Executive’s possession prior to the date of his original employment with the
Employer, except to the extent that such information is or has become a trade
secret of the Employer or is or otherwise has become the property of the
Employer.
          H. During and after the period of employment hereunder, the Executive
will not remove from the Employer’s premises any documents, records, files,
notebooks, correspondence, reports, video or audio recordings, computer
printouts, computer programs, computer software, price lists, microfilm,
drawings or other similar documents containing Confidential Information,
including copies thereof, whether prepared by him or others, except as his duty
shall require, and in such cases, will promptly return such items to the
Employer. Upon termination of his employment with the Employer, all such items
including summaries or copies thereof, then in the Executive’s possession, shall
be returned to the Employer immediately.
          I. The Executive recognizes and agrees that all ideas, inventions,
patents, copyrights, copyright designs, trade secrets, trademarks, processes,
discoveries, enhancements, software, source code, catalogues, prints, business
applications, plans, writings, and other developments or improvements and all
other intellectual property and proprietary rights and any derivative work based
thereon (the “Inventions”) made, conceived, or completed by the Executive, alone
or with others, during the period of his employment, whether or not during
working hours, that are within the scope of the Employer’s business operations
or that relate to any of the Employer’s work or projects (including any and all
inventions based wholly or in part upon ideas conceived during the Executive’s
employment with the Employer), are the sole and exclusive property of the
Employer. The Executive further agrees that (1) he will promptly disclose all
Inventions to the Employer and hereby assigns to the Employer all present and
future rights he has or may have in those Inventions, including without
limitation those relating to patent, copyright, trademark or trade secrets; and
(2) all of the Inventions eligible under the copyright laws are “work made for
hire.” At the request of the Employer, the Executive will do all things
reasonably necessary to perfect title to the Inventions in the Employer and to
assist in obtaining for the Employer such patents, copyrights or other
protection as may be provided under law and desired by the Employer, including
but not limited to executing and signing any and all relevant applications,
assignments or other instruments. Notwithstanding the foregoing, the Employer
hereby notifies the Executive that the provisions of this Paragraph 9 shall not
apply to any Inventions for which no equipment, supplies, facility or trade
secret information of the Employer was used and which were developed entirely on
the Executive’s own time, unless (1) the Invention relates (i) to the business
of the Employer, or (ii) to actual or demonstrably anticipated research or
development of the Employer, or (2) the Invention results from any work
performed by the Executive for the Employer.
          J. The Executive acknowledges and agrees that all customer lists,
supplier lists, and customer and supplier information, including, without
limitation, addresses and telephone numbers, are and shall remain the exclusive
property of the Employer, regardless of whether such information was developed,
purchased, acquired, or otherwise obtained by the Employer or the Executive. The
Executive agrees to furnish to the Employer on demand at any time during the
period of this Agreement, and upon the termination of this Agreement, any

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records, notes, computer printouts, computer programs, computer software, price
lists, microfilm, or any other documents related to the Employer’s business,
including originals and copies thereof. The Executive recognizes and agrees that
he has no expectation of privacy with respect to the Employer’s
telecommunications, networking or information processing systems (including,
without limitation, stored computer files, email messages and voice messages)
and that the Executive’s activity and any files or messages on or using any of
those systems may be monitored at any time without notice.
          K. The Executive acknowledges that he may become aware of “material”
nonpublic information relating to the Employer or any of its customers whose
stock is publicly traded. The Executive acknowledges that he is prohibited by
law as well as by Employer policy from trading in the shares of the Employer or
such customers while in possession of such information or directly or indirectly
disclosing such information to any other persons so that they may trade in these
shares. For purposes of this Paragraph K, “material” information may include any
information, positive or negative, which might be of significance to an investor
in determining whether to purchase, sell or hold the stock of publicly traded
customers. Information may be significant for this purpose even if it would not
alone determine the investor’s decision. Examples include a potential business
acquisition, internal financial information that departs in any way from what
the market would expect, the acquisition or loss of a major contract, or an
important financing transaction.
          L. The Employer does not wish to incorporate any unlicensed or
unauthorized material into its products or services or those of its
subsidiaries. Therefore, the Executive agrees that he will not knowingly
disclose to the Employer, use in the Employer’s business, or cause the Employer
to use, any information or material which is confidential or proprietary to any
third party including, but not limited to, any former employer, competitor or
client, unless the Employer has a right to receive and use such information. The
Executive will not incorporate into his work any material which is subject to
the copyrights of any third party unless the Employer has a written agreement
with such third party or otherwise has the right to receive and use such
information.
          M. It is agreed that any breach or anticipated or threatened breach of
any of the Executive’s covenants contained in this Paragraph 9 will result in
irreparable harm and continuing damages to the Employer and its business and
that the Employer’s remedy at law for any such breach or anticipated or
threatened breach will be inadequate and, accordingly, in addition to any and
all other remedies that may be available to the Employer at law or in equity in
such event, any court of competent jurisdiction may issue a decree of specific
performance or issue a temporary and permanent injunction, without the necessity
of the Employer posting bond or furnishing other security and without proving
special damages or irreparable injury, enjoining and restricting the breach, or
threatened breach, of any such covenant, including, but not limited to, any
injunction restraining the Executive from disclosing, in whole or part, any
Confidential Information.
          N. Contemporaneous with the execution and delivery of this Agreement,
the Employer and Executive shall enter into an Indemnification Agreement in the
form attached hereto as Exhibit A (the “Indemnification Agreement”).

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     10. Notices. Any and all notices required in connection with this Agreement
shall be deemed adequately given only if in writing and (a) personally
delivered, or sent by first class, registered or certified mail, postage
prepaid, return receipt requested, or by recognized overnight courier, (b) sent
by facsimile, provided a hard copy is mailed on that date to the party for whom
such notices are intended, or (c) sent by other means at least as fast and
reliable as first class mail. A written notice shall be deemed to have been
given to the recipient party on the earlier of (a) the date it shall be
delivered to the address required by this Agreement; (b) the date delivery shall
have been refused at the address required by this Agreement; (c) with respect to
notices sent by mail or overnight courier, the date as of which the Postal
Service or overnight courier, as the case may be, shall have indicated such
notice to be undeliverable at the address required by this Agreement; or
(d) with respect to a facsimile, the date on which the facsimile is sent and
receipt of which is confirmed. Any and all notices referred to in this
Agreement, or which either party desires to give to the other, shall be
addressed to his residence in the case of the Executive, or to its principal
office in the case of the Employer.
     11. Waiver of Breach. A waiver by one party of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
or estoppel of any subsequent breach by such party. No waiver shall be valid
unless in writing and signed by the Executive and an authorized officer of the
Employer.
     12. Assignment. The Executive acknowledges that the services to be rendered
by him are unique and personal. Accordingly, the Executive may not assign any of
his rights or delegate any of his duties or obligations under this Agreement.
The rights and obligations of the Employer under this Agreement shall inure to
the benefit of and shall be binding upon the successors and assigns of the
Employer.
     13. Entire Agreement/Survival. This Agreement, the Indemnification
Agreement and the Stock Option Agreement set forth the entire and final
agreement and understanding of the parties and contain all of the agreements
made between the parties with respect to the subject matter hereof. This
Agreement supersedes any and all other agreements, either oral or in writing,
between the parties hereto, with respect to the subject matter hereof. No change
or modification of this Agreement shall be valid unless in writing and signed by
the Employer and the Executive. Notwithstanding anything herein to the contrary,
Paragraphs 8 through 21 of this Agreement shall survive the expiration of the
Executive’s period of employment.
     14. Severability. If any provision of this Agreement shall be found invalid
or unenforceable for any reason, in whole or in part, then such provision shall
be deemed modified, restricted, or reformulated to the extent and in the manner
necessary to render the same valid and enforceable, or shall be deemed excised
from this Agreement, as the case may require, and this Agreement shall be
construed and enforced to the maximum extent permitted by law, as if such
provision had been originally incorporated herein as so modified, restricted, or
reformulated or as if such provision had not been originally incorporated
herein, as the case may be. The parties further agree to seek a lawful
substitute for any provision found to be unlawful; provided, that, if the
parties are unable to agree upon a lawful substitute, the parties desire and
request that a court or other authority called upon to decide the enforceability
of this Agreement modify those restrictions in this Agreement that, once
modified, will result in an agreement that is enforceable

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to the maximum extent permitted by the law in existence at the time of the
requested enforcement.
     15. Headings. The headings in this Agreement are inserted for convenience
only and are not to be considered a construction of the provisions hereof.
     16. Execution of Agreement. This Agreement may be executed in several
counterparts, each of which shall be considered an original, but which when
taken together, shall constitute one agreement.
     17. Recitals. The recitals to this Agreement are incorporated herein as an
integral part hereof and shall be considered as substantive and not precatory
language.
     18. Non-Disparagement. During the Executive’s employment with the Employer
and thereafter, the Executive agrees not to make, publish or communicate at any
time to any person or entity, including, but not limited to, customers, clients
and investors of the Employer, its affiliates, or any entity affiliated with
Philip A. Falcone, any Disparaging (defined below) remarks, comments or
statements concerning the Employer, its affiliates, any entity affiliated with
Philip A. Falcone, or any of their respective present and former members,
partners, directors, officers, employees or agents. During the Executive’s
employment with the Employer and thereafter, senior officers and directors of
the Employer and its Affiliates agree not to make, publish or communicate at any
time to any person or entity any Disparaging remarks, comments or statements
concerning the Executive. “Disparaging” remarks, comments or statements are
those that impugn the character, honesty, integrity, morality, business acumen
or abilities of the individual or entity being disparaged. This provision does
not apply to truthful statements to a government or regulatory agency or to
truthful testimony or pleadings in an arbitration, lawsuit or other judicial or
administrative proceeding.
     19. Arbitration. Any controversy, claim or dispute between the parties
relating to the Executive’s employment or termination of employment, whether or
not the controversy, claim or dispute arises under this Agreement (other than
any controversy or claim arising under Paragraph 9), shall be resolved by
arbitration in accordance with the Employment Arbitration Rules and Mediation
Procedures (“Rules”) of the American Arbitration Association through a single
arbitrator selected in accordance with the Rules. The decision of the arbitrator
shall be rendered within thirty (30) days of the close of the arbitration
hearing and shall include written findings of fact and conclusions of law
reflecting the appropriate substantive law. Judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof in the
State of New York. In reaching his or her decision, the arbitrator shall have no
authority (a) to authorize or require the parties to engage in discovery
(provided, however, that the arbitrator may schedule the time by which the
parties must exchange copies of the exhibits that, and the names of the
witnesses whom, the parties intend to present at the hearing), (b) to interpret
or enforce Paragraph 9 of the Agreement (for which Paragraph 20 shall provide
the sole and exclusive venue), (c) to change or modify any provision of this
Agreement, (d) to base any part of his or her decision on the common law
principle of constructive termination, or (e) to award punitive damages or any
other damages not measured by the prevailing party’s actual damages and may not
make any ruling, finding or award that does not conform to this

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Agreement. Each party shall bear all of his or its own legal fees, costs and
expenses of arbitration and one-half (1/2) of the costs of the arbitrator.
     20. Governing Law and Venue. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without
reference to its conflict of law provisions. Furthermore, as to Paragraph 9, the
Executive agrees and consents to submit to personal jurisdiction in the state of
New York in any state or federal court of competent subject matter jurisdiction
situated in New York County, New York. The Executive further agrees that the
sole and exclusive venue for any suit arising out of, or seeking to enforce, the
terms of Paragraph 9 of this Agreement shall be in a state or federal court of
competent subject matter jurisdiction situated in New York County, New York. In
addition, the Executive waives any right to challenge in another court any
judgment entered by such New York County court or to assert that any action
instituted by the Employer in any such court is in the improper venue or should
be transferred to a more convenient forum. Further, the Executive waives any
right he may otherwise have to a trial by jury in any action to enforce the
terms of this Agreement.
     21. Beneficiaries/References. The Executive shall be entitled, to the
extent permitted under applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit hereunder following the
Executive’s death by giving written notice thereof. In the event of the
Executive’s death or a judicial determination of his incompetence, references in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative.
     22. No Mitigation/No Offset. The Executive shall be under no obligation to
seek other employment or to otherwise mitigate the obligations of the Employer
under this Agreement.
     IN WITNESS WHEREOF, the parties have set their signatures on the date first
written above.

              HARBINGER GROUP INC.   EXECUTIVE:    
 
            a Delaware corporation        
 
           
By:
  /s/ Philip A. Falcone
 
Chairman, CEO and President   /s/ Francis T. McCarron
 
Francis T. McCarron    

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