exv10w2



 







Draft of 10 June 2002




SERVICE AGREEMENT




     This SERVICE AGREEMENT is made and entered into as of June 10, 2002, by and between Optelecom,
Inc., a Delaware corporation (the “Company”), and James Armstrong, an individual (“Employee”).
Other capitalized terms shall have the respective meanings set forth in Section 15 and elsewhere
herein.



RECITALS:




     WHEREAS, the Company desires to employ Employee on terms that will encourage the attention
and dedication of Employee to the Company as one of its key employees; and



     WHEREAS, Employee is willing to accept such employment by the Company on the terms and
conditions set forth herein.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the
parties agree as follows:



     1. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company, on the terms and conditions set forth in this Agreement,
which terms and conditions shall supersede all terms and conditions of any other oral or
written
employment agreement(s) entered into between the Company and Employee prior to the date
hereof.



     2. Term
of Agreement. The Employee’s employment is intended to be on an “at-will”
basis and shall continue until terminated as provided in Section 14 hereof.



     3. Duties. Employee shall serve as the Chief Financial Officer of the Company,
reporting to Edmund Ludwig, Chief Executive Officer of the Company, or such other person(s) as
may be designated from time to time by the Company. Employee shall perform the duties required
of Employee to the best of Employee’s ability, experience and talents, all to the reasonable
satisfaction of the Company. Employee agrees to devote his entire working time, energy and
skills to such employment during the Employment Period, and shall not during the Employment Period
render any services of a business, commercial or professional nature to any person or
organization other than the Company or be engaged in any other business activity, except as permitted by
Section 10 of this Agreement. Such duties shall be rendered at such place or places as the Company
shall in good faith require; provided that Employee’s place of employment during the Employment Period
shall not be more than forty (40) miles from the Seller’s current location without Employee’s
prior consent.



     Employee represents and warrants that he is not a party to or bound by any agreement or
contract or subject to any restrictions, particularly, but without limitation, in connection with
any previous employment, which prevent Employee from entering into and performing his obligations
under this Agreement.



 









 





Draft of 10 June 2002




     4. Compensation. During the Employment Period, Employee shall be compensated for
his services as follows:




     (a) Base Salary. Employee shall be paid a basic salary in the annualized amount
of not less than $117,500 payable in substantially equal bi-monthly or other
installments in
accordance with the general practice of the Company, subject to any and all customary
payroll deductions for the FICA, federal, state and local taxes, and fringe benefits.
Employee’s base salary will be reviewed annually and subject to adjustment by the
Company,
in its sole discretion.




     (b) Bonus. Employee shall be eligible for an annual bonus based upon
Employee’s individual performance and specified sales, sales growth and profitability
goals and objectives for the Company to be developed annually in good faith by the Company
in consultation with Employee.




     (c) Stock Options. Employee shall be eligible for the award if stock options
in the Company as provided in the Employee Stock Option Plan then in effect.




     (e) Other Benefits. Employee shall also be a participant, to the extent he
meets all eligibility requirements of general application, in any and all employee benefit
plans in which the Company’ s employees are entitled to participate, including, but not
limited to, a 401(k) plan, group hospitalization, medical and disability plans.



     5. Employee Expenses. During the Employment Period, Employee shall be entitled to
be reimbursed for reasonable or necessary expenditures incurred in the performance of
Employee’s
duties hereunder and approved by the Company, subject to the submission by Employee of the
documentation necessary to support the deductibility of such expenses by the Company on its
federal, state and local income tax returns.



     6. Vacation. During the Employment Period, Employee shall be entitled to three (3)
weeks paid vacation in accordance with the Company’s regular vacation policies in effect from
time to time.



     7. No Competing Business. Employee hereby agrees to adhere to the non-competition
policy of the Company as acknowledged by the Employee.



     8. No Interference with the Business. Employee hereby agrees to adhere to the post-
employment non-interference policy of the Company as acknowledged by the Employee.



     9. No Disclosure of Confidential Information. Employee hereby agrees to
adhere to the
confidentiality policy of the Company as acknowledged by the Employee.



     10. Permitted Activities. The restrictions set forth in Sections 7, 8 and 9 of this
Agreement shall not apply to Permitted Activities or to actions taken by Employee during the time



2









 





Draft of 10 June 2002



Employee may be employed by the Company to the extent, but only to the extent, that such
actions
are (i) necessary in connection with such employment, or (ii) expressly approved in writing by the
Company.




     12. Reduction
of Restrictions by Court Action. If the length of time, type of
activity,
geographic area or other restrictions set forth in the restrictions of Sections 7, 8 or 9 are
deemed unreasonable in any court proceeding, the parties hereto agree that the court may reduce such
restrictions to ones it deems reasonable to protect the substantial investment of the Company
and Affiliates in their business and the goodwill attached thereto.



     13. Remedies. Employee understands that the Company will not have an adequate
remedy at law for the material breach or threatened breach by Employee of any one or more of
the covenants set forth in this Agreement and agrees that in the event of any such material breach
or threatened breach, Company may, in addition to the other remedies which may be available to
it, to injunctive relief (without bond) and to enjoin Employee from the breach or threatened breach
of such covenants.



     14. Termination.




	 	(a)	 	The Employment Period shall terminate upon the first to occur
of:






	 	(i)	 	the Employee’s death,
	 
	 	(ii)	 	the Disability of Employee,
	 
	 	(iii)	 	the termination of the Agreement by the Company for Cause,
	 
	 	(iv)	 	at any time by the Company for any reason upon thirty (30)
day’s prior written notice to Employee, or
	 
	 	(v)	 	at any time by Employee for any reason upon thirty (30)
day’s prior written notice to Company.






	 	(b)	 	The termination of the Employment Period as provided above shall not relieve
Employee of his obligations under Sections 7, 8 and 9 of this Agreement.
	 
	 	(c)	 	If this Agreement is terminated pursuant to Paragraph 14(a)(i) or 14(a)(ii)
above,
Employee or Employee’s estate will continue to receive his Base Salary for two (2)
months following termination, notwithstanding the terms and conditions of any death
or disability payments due under applicable benefit plans of the Company then in
effect.




3









 











Draft of 10 June 2002





	 	(d)	 	If this Agreement is terminated by the Company pursuant to Section 14(a)(iii) or
Section 14(a)(v) of this Agreement, Employee shall not be entitled to receive any
further pay or benefits following the date on which employment ends.
	 
	 	(e)	 	If this Agreement is terminated pursuant to Paragraph 14(a)(iv) above, Employee
shall be entitled to receive his Base Salary and any bonus earned by Employee for a
period of eight (8) months following termination. Employee shall also receive any
and all employee benefits accrued through the termination date, the amount, form and
payment of which shall be determined in accordance with the terms of such employee
benefit plans.





     15. Survival following Change of Control. Notwithstanding any other provision within this
Agreement, this Agreement shall survive any Change in Control, as defined herein, that shall
occur within one
(1) year from the effective date of this Agreement



     16. Definitions. As used in this Agreement, terms defined in the preamble and
recitals of
this Agreement shall have the meanings set forth therein and the following terms shall have the
meanings set forth below:




     “Cause” shall include, without limitation, (i) Employee’s gross negligence in the
performance or non-performance of any of Employee’s responsibilities to the Company
hereunder, (ii) Employee’s failure to follow the Company’s reasonable instructions with
respect to the performance of Employee’s duties hereunder, (iii) Employee’s inability,
refusal or failure to continue to perform the duties required hereunder at any time, (iv)
excessive absenteeism or flagrant neglect of work, (v) serious misconduct or conviction of
a felony or fraud, (vi) disclosure of any proprietary information of the Company without
the consent of the Company, (vii) aiding a competitor of the Company to the detriment of
the Company, and/or (viii) the breach of any other covenants or agreements of Employee
under this Agreement; provided Employee shall be given written notice by the Company and
twenty (20) days to cure any conduct which the Company in good faith determines qualifies
under subclauses (i) through (iv) above.




     “Change of Control” shall mean:




(a) Any Person (as defined conventionally in the context of corporate ownership)
becomes the beneficial owner directly or indirectly (within the meaning of Rule 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of more than 50% of
the Employer’s then outstanding voting securities (measured on the basis of voting power);
(b) The closing of an agreement of merger or consolidation with any other corporation or
business entity, other than (x) a merger or consolidation which would result in the voting
securities of the Employer outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of the
surviving
entity), in combination with the ownership of any trustee or other fiduciary holding
securities
under an employee benefit plan of the Employer, at least 50% of the combined voting power
of the voting securities of the Employer or such surviving entity outstanding immediately



4









 





Draft of 10 June 2002





after such merger or consolidation, or (y) a merger or consolidation effected to
implement a re-capitalization of the Employer (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the Employer’s then outstanding
securities; or (c) The liquidation or dissolution of the Employer or upon the closing of a
sale or disposition by the Employer of all or substantially all of the Employer’s assets.




     “Disability” shall mean any illness, disability or incapacity of such a character as
to render Employee unable to perform his duties hereunder (which determination shall be
made by the Company) for a total period of ninety (90) days, whether or not such days are
consecutive, during any consecutive twelve (12) month period.




     “Employment Period” shall mean the period between the date of execution of this
agreement and the termination of employment pursuant to Paragraph 14 of this Agreement.




     “Permitted Activities” shall mean (i) owning Company common stock, (ii) serving as an
officer or employee of the Company, (iii) Employee’s equity investments in the equity shares or debt securities of publicly-traded companies provided that Employee is not
involved in the management of such business and such activities do not interfere with the
Company’s business or Employee’s duties and responsibilities under this Agreement, or (iv)
any other activities approved in writing by the Company.



     16. Notices. All notices, demands or other communications required or provided
hereunder shall be in writing and shall be deemed to have been given and received when delivered
in person or transmitted by facsimile transmission (telecopy) to the respective parties, or five
(5) days after dispatch by certified mail, postage prepaid, addressed to the parties at the
addresses set forth below or at such other addresses as such parties may designate by notice to
the other parties:



	 	 	 	 
		If to Company:

	 	Clyde A. Heintzelman
		 

	 	9300 Gaithe Road
		 

	 	GAITHE’S BURG, MD 20877
		 

	 	 
		 
	 	 
		If to Employee:

	 	Jim Armstrong
		 

	 	47425 RIVER FALLS DRIVE
		 

	 	POTOMAC FALLS, VA 20165






5









 






Draft of 10 June 2002




     17. Binding Effect; Assignment. This Agreement shall be binding upon and inure to
the
benefit of and be enforceable by the parties’ successors and permitted assigns. This Agreement and
the rights and obligations of the parties hereunder may not otherwise be assigned or delegated by
either party without the prior written consent of the other party hereto.



     18. Entire Agreement. This Agreement constitutes the entire agreement between the
parties concerning the subject matter hereof and supercedes any and all prior and
contemporaneous
agreements, written or oral, between the parties relating to the subject matter hereof.



     19. Amendment. No amendment or modification of the terms of this Agreement shall be
binding upon either party unless reduced to writing and signed by a duly appointed officer of
the Company and Employee.



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



     21. Waiver. The failure of either party to insist, in any one or more instances, upon
performance of the terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any right granted hereunder or of the future performance of any such term,
covenant or condition.



     22. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed the original without, but all of which together shall constitute one and
the same instrument.



     23. Headings. Headings of the sections and subsections of this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof.



     24. Litigation Expenses. All litigation expenses of the Company or Employee in
enforcing any of the provisions of this Agreement, including reasonable attorneys’ fees, shall
be borne by the party who may be found in default or noncompliance with the provisions of this
Agreement.



     25. Governing Law. This Agreement and the rights and obligations of the parties
hereunder shall be governed, construed and enforced in accordance with the internal laws of
the State



6









 





Draft of 10 June 2002



of Maryland, excluding any choice of law rules which may direct the application of the laws
of another jurisdiction.




     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.



	 	 	 	 	 
	 	 	OPTELECOM, Inc.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Clyde A. Heintzelman
	 

	 	 	 	 
	 

	 	Name:
	 	Clyde A. Heintzelman
	 

	 	 	 	 
	 

	 	Title:
	 	Chairman
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	EMPLOYEE
	 
	 	 	 	 
	 

	 	     /s/
James Armstrong
	 

	 	 
	 

	 	     James
Armstrong






7









 






FIRST AMENDMENT TO SERVICE AGREEMENT




     This FIRST AMENDMENT TO SERVICE AGREEMENT is made and entered into this 6 day of June, 2005
by and between Optelecom-NKF, Inc., a Delaware corporation (the “Company”) and James Armstrong,
and individual ( “Employee”). All capitalized terms used and not defined herein shall have the
respective meanings set forth in the Service Agreement between the Company and Employee dated as
of June 10, 2002 (the “Service Agreement”).



     WHEREAS the Company and the Employee have entered into the Service Agreement setting forth
the terms and conditions of Employee’s employment by the Company; and



     WHEREAS the Company and Employee are desirous of amending the Service Agreement and such
Amendment has been reviewed and approved by the Compensation Committee of the Board of Directors
of the Company.



     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in the
Service Agreement and herein, the parties agree as follows:



     1. Paragraph 14 (a) (iv) of The Service Agreement shall be and hereby is
deleted in its entirety and replaced with the following:




     “(iv) at any time by the Company for any reason other than for Cause upon thirty (30)
days’ prior written notice to Employee, or”



     2. Paragraph 14 (e) of The Service Agreement shall be and hereby is deleted
in its entirety and replaced with the following:




     “(e) If this Agreement is terminated pursuant to Paragraph 14(a)(iv) above, Employee
shall be entitled to receive his Base Salary, any bonus earned through the termination date
and to participate in all employee benefit plans for a period of twelve (12) months
following termination. Employee shall also receive any and all employee benefits accrued
through the termination date, the amount, form and payment of which shall be determined in
accordance with the terms of such employee benefit plans then in place at the Company.
Notwithstanding, should the employee be terminated pursuant to Paragraph 14(a)(iv) above
following a Change of Control as defined herein, the employee shall be entitled to receive
his Base Salary, any bonus earned through the termination date and to participate in all
employee benefit plans for twenty-four (24) months following termination pursuant to
Paragraph 14(a)(iv) above.”



     3. Paragraph 15 of the Service Agreement shall be and hereby is deleted in
its entirety and replaced with the following:



 









 






     “15. Survival following Change of Control. Notwithstanding any other provision
within this Agreement, this Agreement shall survive any Change in Control, as defined
herein, that shall occur within two (2) years from the effective date of this Agreement.”



     3. All other terms and conditions of the Service Agreement shall remain unchanged.



     IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed this First
Amendment to the Service Agreement as of the date set forth above.



	 	 	 	 	 
	 	 	OPTELECOM-NKF, INC.
	 
	 	 	 	 
	 

	 	By:
	 	     /s/ Edmund Ludwig
	 

	 	 	 	 
	 

	 	 	 	     Edmund Ludwig, President
	 
	 	 	 	 
	 	 	EMPLOYEE
	 
	 	 	 	 
	 

	 	     /s/
James Armstrong
	 

	 	 
	 

	 	     James
Armstrong






2 





 










 









SECOND AMENDMENT TO SERVICE AGREEMENT




          This SECOND AMENDMENT TO SERVICE AGREEMENT is made and entered into this 28th day of
November, 2005 by and between Optelecom-NKF, Inc., a Delaware corporation (the “Company”) and
James Armstrong, and individual (“Employee”). All capitalized terms used and not defined herein
shall have the respective meanings set forth in the Service Agreement between the Company and
Employee dated as of June 10, 2002 (the “Service Agreement”).




          WHEREAS the Company and the Employee have entered into the Service Agreement setting forth
the terms and conditions of Employee’s employment by the Company; and




          WHEREAS the Company and Employee are desirous of amending the Service Agreement and such
Amendment has been reviewed and approved by the Compensation Committee of the Board of Directors
of the Company.




          NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in the
Service Agreement and herein, the parties agree as follows:




          1. Paragraph 3 of The Service Agreement shall be and hereby is deleted in its entirety and
replaced with the following:




          “3. Duties. Employee shall serve as the Executive Vice President and Chief Operating
Officer, North American Operations of the Company, reporting to Edmund Ludwig, President and Chief
Executive Officer of the Company, or such other person(s) as may be designated from time to time by
the Company. Employee shall perform the duties required of Employee to the best of Employee’s
ability, experience and talents, all to the reasonable satisfaction of the Company. Employee agrees
to devote his entire working time, energy and skills to such employment during the Employment
Period, and shall not during the Employment Period render any services of a business, commercial or
professional nature to any person or organization other than the Company or be engaged in any other
business activity, except as permitted by Section 10 of this Agreement. Such duties shall be
rendered at such place or places as the Company shall in good faith require; provided that
Employee’s place of employment during the Employment Period shall not be more than forty (40) miles
from the Seller’s current location without Employee’s prior consent.




          Employee represents and warrants that he is not a party to or bound by any agreement or
contract or subject to any restrictions, particularly, but without limitation, in connection with
any previous employment, which prevent Employee from entering into and performing his obligations
under this Agreement.”




 









 








          2. Paragraph 4 (a) of The Service Agreement shall be and hereby is deleted
in its entirety and replaced with the following:





          “(a) Base Salary. Employee shall be paid a basic salary in the annualized
amount of not less than $190,000 payable in substantially equal bimonthly or other
installments in accordance with the general practice of the Company, subject to any and all
customary payroll deductions for the FICA, federal, state and local taxes, and fringe
benefits. Employee’s base salary will be reviewed annually and subject to adjustment by the
Company, in its sole discretion.”



          3. Paragraph 6 of the Service Agreement shall be and hereby is deleted in its
entirety and replaced with the following:




          “6. Vacation. During the Employment Period, Employee shall be entitled to four (4)
weeks paid vacation in accordance with the Company’s regular vacation policies in effect from time
to time.”




          4. All other terms and conditions of the Service Agreement and its
Amendments shall remain unchanged.




          IN WITNESS WHEREOF, the parties, intending to be legally bound, have executed this First
Amendment to the Service Agreement as of the date set forth above.




	 	 	 	 	 	 	 
	 	 	OPTELECOM-NKF, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	     /s/ Edmund Ludwig	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     Edmund Ludwig, President and CEO	 	 
	 
	 	 	 	 	 	 
	 	 	EMPLOYEE	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ James Armstrong	 	 
	 	 	 	 	 
	 

	 	 	 	     James Armstrong	 	 






2