Exhibit 10.3
Graham Employment Agreement
 
EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of July 27, 2006 (this “Agreement”), between
NOVASTAR RESOURCES LTD., a Nevada corporation (the “Company”), and THOMAS
GRAHAM, JR., an individual (the “Executive”).

 
BACKGROUND

The Company wishes to secure the services of the Executive as the Chairman of
the Board of Directors for the Company (and to serve as Corporate Secretary
until this position is filled permanently with a suitable candidate) upon the
terms and conditions hereinafter set forth, and the Executive wishes to render
such services to the Company upon the terms and conditions hereinafter set
forth.

 
AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
 
1.  Employment by the Company. The Company agrees to employ the Executive as
Chairman of the Board of Directors (and to serve as Corporate Secretary until
this position is filled permanently with a suitable candidate) and the Executive
accepts such employment. The Executives’ responsibilities will be those
customary duties for Executives at similar companies. The Executive shall be
employed on a part-time basis working on average approximately three full days
per week (24 hours per week).
 
2.  Term of Employment. The term of this Employment Agreement (the "Term") shall
be for the initial period commencing on the date hereof and ending on the first
anniversary of the date thereof (provided that the provisions of Section 5
hereof shall survive any such termination), unless the Executive is earlier
terminated as provided in Section 4 hereof. The Term of this Agreement shall
automatically be extended for additional one year periods following the
expiration of the initial Term unless either party notifies the other party in
writing that it does not want to renew this Agreement within 30 days prior to
the expiration of the initial Term or any renewal Term.
 
3.  Compensation. As full compensation for all services to be rendered by the
Executive to the Company and/or its Subsidiaries and/or Affiliates in all
capacities during the Term, the Executive shall receive the following
compensation and benefits:
 
3.1  Salary. Beginning as of April 2, 2006, an annual base salary of $130,000
(the "Base Salary") payable not less frequently than monthly or at more frequent
intervals in accordance with the then customary payroll practices of the
Company. The Board of Directors of the Company shall review the Executive’s
performance on an annual basis and shall suggest increases (but not decreases)
to the Executive’s Base Salary as the Board of Directors of the Company in its
sole discretion deems appropriate.
 

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3.2  Equity Participation.
 
(a)  The Company shall grant to the Executive stock options for the purchase of
1,500,000 shares of the Company’s Common Stock. The Option’s exercise price will
be equal to the fair market value of the Company’s Common Stock on the date that
the Employment Agreement is entered into. The options shall vest in equal
monthly installments over a three-year period. If the Employee is terminated
without cause, then the options shall vest immediately.
 
3.3  Participation in Employee Benefit Plans; Other Benefits. The Executive
shall not be permitted during the Term to participate in employee benefit plans
now or hereafter maintained by or on behalf of the Company.
 
3.4  Vacation. The Executive shall be entitled to four (4) weeks of paid
vacation time per year which shall accrue monthly on a pro-rata basis.
 
3.5  Expenses. The Company shall pay or reimburse the Executive for all
reasonable and necessary expenses actually incurred or paid by the Executive
during the Term in the performance of the Executive's duties under this
Agreement, upon submission and approval of expense statements, vouchers or other
supporting information in accordance with the then customary practices of the
Company.
 
3.6  Withholding of Taxes. The Company may withhold from any benefits payable
under this Agreement all federal, state, city and other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
 
4.  Termination.
 
4.1  Termination upon Death. If the Executive dies during the Term, this
Agreement shall terminate as of the date of his death.
 
4.2  Termination upon Disability. If during the Term the Executive becomes
physically or mentally disabled, whether totally or partially, so that the
Executive is unable to perform his essential job functions hereunder for a
period aggregating 180 days during any twelve-month period, and it is determined
by a physician acceptable to both the Company and the Executive that, by reason
of such physical or mental disability, the Executive shall be unable to perform
the essential job functions required of him hereunder for such period or
periods, the Company may, by written notice to the Executive, terminate this
Agreement, in which event the Term shall terminate 10 days after the date upon
which the Company shall have given notice to the Executive of its intention to
terminate this Agreement because of the disability. The Executive shall have no
right to receive any compensation or benefit under this Employment Agreement
following the termination of this Employment Agreement as set forth above due to
disability.
 
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4.3  Termination for Cause. The Company may at any time by written notice to the
Executive terminate this Agreement immediately and the Executive shall have no
right to receive any compensation or benefit hereunder on and after the date of
such notice, in the event that an event of "Cause" occurs. For purposes of this
Agreement "Cause" shall mean (a) conviction of a felony, bad faith or willful
gross misconduct that, in any case, results in material damage to the business
or reputation of the Company; (b) the willful commission by the Executive of
acts that are dishonest and demonstrably or materially injurious to the Company,
monetarily or otherwise; (c) willful and continued failure to perform his duties
hereunder (other than such failure resulting from the Executive’s incapacity due
to physical or mental illness or after the issuance of a notice of termination
by the Executive for Good Reason) within 30 days after the Company delivers to
him a written demand for performance that specifically identifies the actions to
be performed; or (d) a material breach of any of the covenants set forth in the
Employment Agreement. For purposes of this Section 4.3, no act or failure to act
by the Executive shall be considered “willful” if such act is done by the
Executive in the good faith belief that such act is or was to be beneficial to
the Company or one or more of its businesses, or such failure to act is due to
the Executive’s good faith belief that such action would be materially harmful
to the Company or one of its businesses.
 
4.4  Termination without Cause. The Company may terminate this Employment
Agreement at any time, without cause, upon 60 days' written notice by the
Company to the Executive and the Executive shall have no right to receive any
compensation or benefit hereunder after such termination.
 
4.5  Termination for Good Reason. The Executive may terminate his employment for
Good Reason after giving the Company detailed written notice thereof, if the
Company shall have failed to cure the event or circumstance constituting Good
Reason within 30 business days after receiving such notice. “Good Reason” shall
mean the occurrence of any of the following without the written consent of the
Executive: (a) the assignment to the Executive of duties inconsistent with this
Agreement or a diminution in his titles or authority; (b) any failure by the
Company to comply with Section 3 hereof in any material way; (c) the requirement
of the Executive to relocate to a location that is more than 50 miles from the
Executive’s work location on the effective date of this Agreement (8300
Greensboro Drive, Suite 800, McLean, VA 22102), or (d) any material breach of
this Agreement by the Company. The Executive’s right to terminate his employment
hereunder for Good Reason shall not be affected by his incapacity due to
physical or mental illness. The Executive’s continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or failure
to act constituting Good Reason. The Executive shall have no right to receive
any compensation or benefit hereunder on and after the date of termination.
 
4.6  Without Good Reason. The Executive shall have the right to terminate his
employment hereunder without Good Reason by providing the Company with 60 days
advance written notice of termination. The Executive shall have no right to
receive any compensation or benefit hereunder on and after the date of
termination.
 
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5.  Certain Covenants of the Executive.
 
5.1  Covenants. The Executive acknowledges that: (i) his work for the Company
and its Subsidiaries and Affiliates, will bring him into close contact with many
confidential affairs, documents, and information not readily available to the
public; and (ii) the covenants contained in this Section 5 will not involve a
substantial hardship upon his future livelihood. In order to induce the Company
to enter into this Employment Agreement, the Executive covenants and agrees
that:
 
5.2  Non-Compete. During the Term and for a period of twelve (12) months
following the termination of the Executive's employment with the Company or any
of its Subsidiaries or Affiliates (the "Restricted Period"), the Executive shall
not, directly or indirectly, (i) in any manner whatsoever engage in any capacity
with any business competitive with the Company, any of its Subsidiaries or any
of its Affiliates (the "Company's Business") for the Executive's own benefit or
for the benefit of any person or entity other than the Company or any Subsidiary
or Affiliate; or (ii) have any interest as owner, sole proprietor, shareholder,
partner, lender, director, officer, manager, employee, consultant, agent or
otherwise in any business competitive with the Company's Business; provided,
however, that the Executive may hold, directly or indirectly, solely as an
investment, not more than two percent (2%) of the outstanding securities of any
person or entity which are listed on any national securities exchange or
regularly traded in the over-the-counter market notwithstanding the fact that
such person or entity is engaged in a business competitive with the Company's
Business. In addition, during the Restricted Period, the Executive shall not
develop any property or invention for use in the Company's Business on behalf of
any person or entity other than the Company, its Subsidiaries and Affiliates.
 
5.3  Confidential Information. During the Restricted Period, the Executive shall
not, directly or indirectly, disclose to any person or entity who is not
authorized by the Company or any Subsidiary or Affiliate to receive such
information, or use or appropriate for his own benefit or for the benefit of any
person or entity other than the Company or any Subsidiary or Affiliate, any
documents or other papers relating to the Company's Business or the customers of
the Company or any Subsidiary or Affiliate, including, without limitation,
files, business relationships and accounts, pricing policies, customer lists,
computer software and hardware, or any other materials relating to the Company's
Business or the customers of the Company or any Subsidiary or Affiliate or any
trade secrets or confidential information, including, without limitation, any
business or operational methods, drawings, sketches, designs or product
concepts, know-how, marketing plans or strategies, product development
techniques or plans, business acquisition plans, financial or other performance
data, personnel and other policies of the Company or any Subsidiary or
Affiliate, whether generated by the Executive or by any other person, except as
required in the course of performing his duties hereunder or with the express
written consent of the Company; provided, however, that the confidential
information shall not include any information readily ascertainable from public
or published information, or trade sources (other than as a direct or indirect
result of unauthorized disclosure by the Executive).
 
5.4  Employees of and Consultants to the Company. During the Restricted Period,
the Executive shall not, directly or indirectly (other than in furtherance of
the business of the Company), initiate communications with, solicit, persuade,
entice, induce or encourage any individual who is then or who has been within
the 12-month period preceding the Executive’s termination of employment with the
Company, an employee of or consultant to the Company or any of its Subsidiaries
or Affiliates to terminate employment with, or a consulting relationship with,
the Company or such Subsidiary or Affiliate, as the case may be, or to become
employed by or enter into a contract or other agreement with any other person,
and the Executive shall not approach any such employee or consultant for any
such purpose or authorize or knowingly approve the taking of any such actions by
any other person.
 
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5.5  Solicitation of Customers. During the Restricted Period, the Executive
shall not, directly or indirectly, initiate communications with, solicit,
persuade, entice, induce, encourage (or assist in connection with any of the
foregoing) any person who is then or has been within the 12-month period
preceding the Executive’s termination of employment with the Company a customer
or account of the Company or its Subsidiaries or Affiliates, or any actual
customer leads whose identity the Executive learned during the course of his
employment with the Company, to terminate or to adversely alter its contractual
or other relationship with the Company or its Subsidiaries or Affiliates.
 
5.6  Rights and Remedies Upon Breach. If the Executive breaches, or threatens to
commit a breach of, any of the provisions of Section 5 hereof (collectively, the
"Restrictive Covenants"), the Company and its Subsidiaries and Affiliates shall,
in addition to the rights set forth this Employment Agreement, have the right
and remedy to seek from any court of competent jurisdiction specific performance
of the Restrictive Covenants or injunctive relief against any act which would
violate any of the Restrictive Covenants, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to the
Company and its Subsidiaries and Affiliates and that money damages will not
provide an adequate remedy to the Company and its Subsidiaries and Affiliates.
 
5.7  Severability of Covenants. If any of the Restrictive Covenants, or any part
thereof, is held by a court of competent jurisdiction or any foreign, federal,
state, county or local government or other governmental, regulatory or
administrative agency or authority to be invalid, void, unenforceable or against
public policy for any reason, the remainder of the Restrictive Covenants shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated, and such court, government, agency or authority shall be empowered
to substitute, to the extent enforceable, provisions similar thereto or other
provisions so as to provide to the Company and its Subsidiaries and Affiliates,
to the fullest extent permitted by applicable law, the benefits intended by such
provisions.
 
5.8  Enforceability in Jurisdictions. The parties intend to and hereby confer
jurisdiction to enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Covenants. If the courts of
any one or more of such jurisdictions hold the Restrictive Covenants wholly
invalid or unenforceable by reason of the breadth of such scope or otherwise, it
is the intention of the parties that such determination not bar or in any way
affect the Company's right to the relief provided above in the courts of any
other jurisdiction within the geographical scope of such Restrictive Covenants,
as to breaches of such Restrictive Covenants in such other respective
jurisdictions, such Restrictive Covenants as they relate to each jurisdiction
being, for this purpose, severable into diverse and independent covenants.
 
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6.  Indemnification. 
 
6.1  General. The Company agrees that if the Executive is made a party or is
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), other than a
Proceeding initiated by the Company to enforce its rights under this Agreement,
by reason of the fact that the Executive is or was a trustee, director or
officer of the Company, or any predecessor to the Company or any of their
Affiliates or is or was serving at the request of the Company, any predecessor
to the Company, or any of their affiliates as a trustee, director, officer,
member, employee or agent of another corporation or a partnership, joint
venture, limited liability company, trust or other enterprise, including,
without limitation, service with respect to employee benefit plans, whether or
not the basis of such Proceeding is alleged action in an official capacity as a
trustee, director, officer, member, employee or agent while serving as a
trustee, director, officer, member, employee or agent, the Executive shall be
indemnified and held harmless by the Company to the fullest extent authorized by
Nevada law, as the same exists or may hereafter be amended, against all Expenses
incurred or suffered by the Executive in connection therewith, and such
indemnification shall continue as to the Executive even if the Executive has
ceased to be an officer, director, trustee or agent, or is no longer employed by
the Company and shall inure to the benefit of his heirs, executors and
administrators. Notwithstanding the foregoing, the Executive shall not be
entitled to indemnification by the Company in respect of, and to the extent
that, any Expenses arising as a result of the bad faith, willful misconduct or
gross negligence of the Executive, or the Executive’s conviction of a felony.
 
6.2  Expenses. As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements, and costs, attorneys' fees, accountants' fees, and
disbursements and costs of attachment or similar bonds, investigations, and any
expenses of establishing a right to indemnification under this Agreement.
 
6.3  Enforcement. If a claim or request under this Section 6 is not paid by the
Company or on its behalf, within thirty (30) days after a written claim or
request has been received by the Company, the Executive may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, the Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Nevada law.
 
6.4  Partial Indemnification. If the Executive is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of any
Expenses, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify the Executive for the portion of such Expenses to which
the Executive is entitled.
 
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6.5  Advances of Expenses. Expenses incurred by the Executive in connection with
any Proceeding shall be paid by the Company in advance upon request of the
Executive that the Company pay such Expenses, but only in the event that the
Executive shall have delivered in writing to the Company (i) an undertaking to
reimburse the Company for Expenses with respect to which the Executive is not
entitled to indemnification and (ii) a statement of his good faith belief that
the standard of conduct necessary for indemnification by the Company has been
met.
 
6.6  Notice of Claim. The Executive shall give to the Company notice of any
claim made against him for which indemnification will or could be sought under
this Agreement. In addition, the Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
the Executive's power and at such times and places as are convenient for the
Executive.
 
6.7  Defense of Claim. With respect to any Proceeding as to which the Executive
notifies the Company of the commencement thereof:
 
(a)  The Company will be entitled to participate therein at its own expense;
 
(b)  Except as otherwise provided below, to the extent that it may wish, the
Company will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to the Executive, which in the Company's sole discretion may be
regular counsel to the Company and may be counsel to other officers and
directors of the Company or any subsidiary. The Executive also shall have the
right to employ his own counsel in such action, suit or proceeding if he
reasonably concludes that failure to do so would involve a conflict of interest
between the Company and the Executive, and under such circumstances the fees and
expenses of such counsel shall be at the expense of the Company.
 
(c)  The Company shall not be liable to indemnify the Executive under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Company shall not settle any action or claim in
any manner which would impose any penalty that would not be paid directly or
indirectly by the Company or limitation on the Executive without the Executive's
written consent. Neither the Company nor the Executive will unreasonably
withhold or delay their consent to any proposed settlement.
 
(d)  Non-exclusivity. The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 6 shall not be exclusive of any other right which the Executive
may have or hereafter may acquire under any statute or certificate of
incorporation or by-laws of the Company or any subsidiary, agreement, vote of
shareholders or disinterested directors or trustees or otherwise.
 
7.  Other Provisions.
 
7.1  Notices. Any notice or other communication required or which may be given
hereunder shall be in writing and shall be delivered personally, telecopied,
telegraphed or telexed, or sent by certified, registered or express mail,
postage prepaid, to the parties at the addresses specified on the signature page
hereto, or at such other addresses as shall be specified by the parties by like
notice, and shall be deemed given when so delivered personally, telecopied,
telegraphed or telexed, or if mailed, two days after the date of mailing, to the
addresses specified on the signature page hereto, or, in the case of the
Company, to such other address as the Company may specify as the address for its
executive offices in any reports filed by the Company with the Securities and
Exchange Commission.
 
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7.2  Entire Agreement. This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
contracts and other agreements, written or oral, with respect thereto.
 
7.3  Waivers and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
 
7.4  Governing Law. This Agreement shall be governed by, and construed in
accordance with and subject to, the laws of the State of Nevada applicable to
agreements made and to be performed entirely within such state.
 
7.5  Binding Effect; Benefit. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and any successors and assigns permitted or
required by Section 7.6 hereof. Nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or such
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
 
7.6  Assignment. This Agreement, and the Executive's rights and obligations
hereunder, may not be assigned by the Executive. The Company may assign this
Agreement and its rights, together with its obligations, hereunder in connection
with any sale, transfer or other disposition of all or substantially all of its
assets or business, whether by merger, consolidation or otherwise.
 
7.7  Definitions. For purposes of this Agreement:
 
(a)  "Affiliate" shall mean a person that, directly or indirectly, controls or
is controlled by, or is under common control with the Company;
 
(b)  “Subsidiary" shall mean any person or entity as to which the Company,
directly or indirectly, owns or has the power to vote, or to exercise a
controlling influence with respect to, fifty percent (50%) or more of the
securities of any class of such person, the holders of which class are entitled
to vote for the election of directors (or persons performing similar functions)
of such person.
 
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7.8  D&O Insurance. During the term of this Agreement, the Company shall
maintain D&O insurance with the level of coverage of at least $5 million.
 
7.9  Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
 
7.10  Headings. The headings in this Agreement are for reference purposes only
and shall not in any way affect the meaning or interpretation of this
Employ-ment Agreement.
 
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

    NOVASTAR RESOURCES LTD..            By:  /s/ Seth Grae      
Seth Grae 
   
Chief Executive Officer  
          Address:    8300 Greensboro Drive, Suite 800      
McLean, VA 22102 
          EXECUTIVE:            /s/ Thomas Graham, Jr.      Thomas Graham, Jr. 
    Address:   c/o 8300 Greensboro Drive, Suite 800      
McLean, VA 22102  

 

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