Exhibit 10.32


 


EMPLOYMENT AGREEMENT


 


This
EMPLOYMENT AGREEMENT (“Agreement”) is effective this 1st day of January, 2007, between American Defense
Systems, Inc. (“the Company”) and Victor L. LaSala (“Executive”)
(sometimes referred to herein individually as “Party” or collectively as “Parties”).


 


WHEREAS,
the Company, having employed Executive on an ongoing basis, now wishes to
formalize the relationship and employ Executive on the terms and conditions
contained in this Agreement; and Executive wishes to accept such employment.


 


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


 


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


 


2.     EMPLOYMENT.


 


2.1.  Position and Term. 
The Company hereby employs Executive as Vice President of Research &
Development, reporting directly to the Company’s Chief Executive Officer, and
Executive hereby accepts said employment and agrees to render such services to
the Company on the terms and conditions set forth in this Agreement.  Unless terminated in accordance with Section 5
below, this Agreement shall terminate five (5) years from the Effective
Date of this Agreement (the “Initial Term”); provided, however, that, while
this Agreement is in effect, beginning one (1) year following the
Effective Date and continuing on each one-year anniversary of the Agreement
(the “Annual Renewal Date”), this Agreement shall be automatically extended for
an additional one (1) year (“Renewal Term”), unless one of the Parties
gives the other Party written notice of non-renewal (in accordance with Section 6.2
below) at least thirty (30) days before the impending Annual Renewal Date (in
which event this Agreement shall continue in effect for the remainder of the
then current Term).  Reference herein to “Term”
shall refer both to the Initial Term and any successive Renewal Term, as the
context requires.


 


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


 


3.     COMPENSATION
AND BENEFITS.


 


3.1.  Base Salary.  For
services rendered by Executive under this Agreement, the Company shall pay
Executive a minimum base salary of $173,880 per year (“Base Salary”).  The Company’s Chief Executive Officer shall
review and Executive’s Base Salary on an annual basis and may, in his sole
discretion, increase the Base Salary from time to time in such amounts as may
determined by him.  Said Base Salary
shall be


 


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payable
in accordance with the Company’s regular payroll practices for executive
employees.


 


3.2.  Bonus(es).  Executive shall be entitled
to the bonus or bonuses set forth in Schedule A hereto, which is incorporated
by reference hereto.


 


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


 


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


 


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


 


4.     SUPPORT
AND EXPENSES


 


4.1.  Support.  The Company shall provide Executive with
secretarial, administrative and support staff, and furnished offices and
conference facilities, in the Hicksville, New York area, and in such other
location, if any, in which Executive hereafter agrees to perform services on
behalf of the Company, all of which shall be consistent with Executive’s duties
and sufficient for the efficient performance of those duties.


 


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


 


5.     TERMINATION.


 


5.1.  Termination Due to Death.  This Agreement shall terminate automatically
upon Executive’s death, in which event the Company shall promptly pay his
spouse or estate, as applicable, all compensation, expenses and other amounts
owed to him as of the


 


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date
of his death and thereafter shall have no further obligation to pay him
compensation (unless required by applicable law).


 


5.2.  Termination Due to
Disability.  The Company
shall have the right to terminate Executive’s employment due to his Disability,
in which event the Company shall promptly pay him all compensation, expenses
and other amounts owed to him as of the Date of Termination (as defined in Section 5.10
below) and thereafter shall have no further obligation to pay him compensation
(unless required by applicable law).  “Disability”
for purposes of this Section shall mean Executive is unable to perform the
essential functions of his position with or without accommodation due to a
disability (as such term is defined in the Americans with Disabilities Act) for
at least six months in the aggregate during any twelve month period.  This definition shall be interpreted and
applied consistent with the Americans with Disabilities Act and other
applicable laws.


 


5.3.  Termination by Executive
without Good Reason.  Executive
shall have the right to terminate his employment at any time without Good
Reason (as that term is defined in Section 5.6 below, and subject to the
conditions specified in Section 5.10 below), in which event the Company
shall promptly pay him all compensation, expenses and other amounts owed to him
as of the Date of Termination (as defined in Section 5.10 below) and
thereafter shall have no further obligation to pay him compensation (unless
required by applicable law).


 


5.4.  Termination by the Company
Without Cause.  The Company
shall have the right to terminate Executive’s employment without Cause upon sixty
(60) days written notice (subject to and in accordance with Sections 5.10 and
6.2 below), in which event the Company shall: (a) on the Date of
Termination, pay Executive all compensation, expenses and other amounts owed to
him as of the Date of Termination (as defined in Section 5.10 below); and (b) continue
to pay Executive’s Base Salary (in effect as of the Date of Termination) for
the remainder of the Term or for two (2) years after the Date of
Termination, whichever is greater; provided however, that upon a termination
pursuant to this Section 5.4 within six (6) months before the
effective date of a Change in Control (as defined herein), or within eighteen
(18) months following the effective date of such a Change in Control, the
Company shall continue to pay Executive’s Base Salary for the remainder of the
Term or for three (3) years after the Date of Termination, whichever is
greater.  “Change in Control” as used in
this Agreement means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:  (i)  any “person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (an “Exchange Act Person”) becomes the “beneficial owner” (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the combined voting
power of the Company’s then outstanding securities other than by virtue of a
merger, consolidation or similar transaction. 
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because the level of ownership held by any Exchange Act Person
(the “Subject Person”) exceeds the designated percentage threshold of the
outstanding voting securities as a result of a repurchase or other acquisition
of voting securities by the Company reducing the number of shares outstanding,
provided that if a Change in Control would occur (but for the


 


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operation
of this sentence) as a result of the acquisition of voting securities by the
Company, and after such share acquisition, the Subject Person becomes the owner
of any additional voting securities that, assuming the repurchase or other
acquisition had not occurred, increases the percentage of the then outstanding
voting securities owned by the Subject Person over the designated percentage
threshold, then a Change in Control shall be deemed to occur;  (ii) there is consummated a merger, consolidation or
similar transaction involving (directly or indirectly) the Company if,
immediately after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior thereto do not
own, directly or indirectly, either (A) outstanding voting securities
representing more than fifty percent (50%) of the combined outstanding voting
power of the surviving entity in such merger, consolidation or similar
transaction or (B) more than fifty percent (50%) of the combined
outstanding voting power of the parent of the surviving entity in such merger,
consolidation or similar transaction; (iii)  there is consummated a sale,
lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its subsidiaries, other than a sale,
lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its subsidiaries to an entity, more than
fifty percent (50%) of the combined voting power of the voting securities of
which are owned by stockholders of the Company in substantially the same
proportion as their ownership of the Company immediately prior to such sale,
lease, license or other disposition; or (iv)  during any period of 12
consecutive months, individuals who at the beginning of such period constitute
the Board of Directors of the Company cease for any reason to constitute at
least a majority thereof unless the election, or the nomination for election by
stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.


 


5.5.  Termination by the Company
for Cause.  The Company
shall have the right to terminate Executive’s employment for Cause subject to
the conditions set forth herein.  If the
Company terminates Executive’s employment for Cause, the Company shall promptly
pay Executive all compensation, expenses and other amounts owed to him as of
the Date of Termination (as defined in Section 5.10 below) and thereafter
shall have no further obligation to pay him compensation.  As used in this Agreement, “Cause” shall mean
any of the following: (a) Executive’s conviction of a felony crime; (b) Executive’s
commission of fraud against, or embezzlement or material misappropriation from,
the Company; or (c) Executive’s material breach of this Agreement.  With respect to matters relating to
subsections 5.5(b) and (c) herein, the Board shall give Executive
prompt notice (in accordance with Section 6.2 below), and shall afford
Executive thirty days after his receipt of such written notice to cure such
grounds.  Cause shall be determined in
good faith by the affirmative vote of a majority of the whole Board (excluding
Executive if he is a member of the Board) after Executive has been provided the
opportunity to make a presentation to the Board (which presentation may be with
counsel).


 


5.6.  Termination by Executive for Good Reason.  Executive shall have the right to terminate
his employment for Good Reason, in which event he shall be entitled to receive
the same payments and benefits specified in Section 5.4 of this
Agreement.  “Good Reason” shall mean the
occurrence of any of the following without Executive’s prior express written
consent: (a) the Company, or a successor as contemplated in Section 6.1


 


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below,
breaches any material term of this Agreement; (b) the Company, or a
successor as contemplated in Section 6.1 below, makes or causes a material
adverse change in his functions, duties or responsibilities; (c) the
Company, or a successor as contemplated in Section 6.1 below, reduces his
Base Salary (as the same may be increased from time to time); (d) the
Company, or a successor as contemplated in Section 6.1 below, causes or
allows a material reduction in his entitlement to benefits under Section 3
above (except to the extent permitted by Section 3.5 thereof); (e) the
Company, or a successor as contemplated in Section 6.1 below, requires him
to work in an office more than twenty-five (25) miles from the location of his
current principal executive office (except for required travel on the Company’s
business to an extent substantially consistent with Executive’s business travel
obligations); (f) the Company, or a successor as contemplated in Section 6.1
below, terminates Victor L. LaSala’s employment without Cause, or Victor L.
LaSala terminates his employment for Good Reason; and (g) the Company, or
a successor as contemplated in Section 6.1 below, fails to obtain the
assumption of, and agreement to perform, this Agreement by a successor as
contemplated in Section 6.1 below. 
In order to terminate his employment under this Section, Executive
shall: (i) give the Company written notice of termination under this Section (subject
to and in accordance with Sections 5.10 and 6.2 below) within ninety (90) days
of the most recent event(s) constituting grounds for termination under
this Section; and (ii) give the Company thirty (30) days written notice
(subject to and in accordance with Sections 5.10 and 6.2 below) of such
termination, during which thirty (30) day period the Company shall be afforded
the opportunity to cure the deficiencies giving rise to such termination.


 


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


 


5.8.  Termination by Mutual
Consent. 
Notwithstanding any of the foregoing provisions of this Section 5,
if, at any time during the Term, the Parties by mutual consent decide to
terminate this Agreement, they may and shall do so by separate agreement
setting forth the terms and conditions of such termination.


 


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


 


5.10.  Notice of Termination. 
Any purported termination of Executive’s employment by the Company for
any reason, or by Executive for any reason, shall be communicated by a written “Notice
of Termination” to the other Party.  A “Notice
of Termination” shall mean a dated notice that: (a) indicates the specific
termination provision in this Agreement relied on; (b) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated; (c) specifies
a Date of Termination; and (d) is given in the manner specified in Section 6.2.  “Date of Termination” shall mean the later
of: (i) the


 


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date
specified in the Notice of Termination required by this Section; and (ii) the
date Notice of Termination is deemed to have been duly given in accordance with
Section 6.2 of this Agreement.


 


6.     GENERAL
PROVISIONS.


 


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


 


6.2.  Notice.  All Notices of Termination and other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:


 


	
  To
  the Company:

  	
   

  	
  American
  Defense Systems, Inc.

  
	
   

  	
   

  	
  230
  Duffy Ave., Unit C

  
	
   

  	
   

  	
  Hicksville,
  NY 11801

  
	
   

  	
   

  	
   

  
	
  To
  Executive:

  	
   

  	
  [INSERT
  APPLICABLE ADDRESS]

  



 


Either
Party may change the address to which Notices of Termination and other
communications provided for in this Agreement shall be sent to that Party, by
giving the other Party notice in the manner provided in this Section.


 


6.3.  Indemnification.  The Company shall indemnify Executive and
hold him harmless for any and all liabilities arising from the performance of
his duties under this Agreement and services for the Company, subject to and in
accordance with applicable law and any applicable indemnification provisions in
the Company’s Articles of Incorporation and/or Bylaws.


 


6.4.  Tax Treatment of Payments
and/or Benefits.  Each payment
made pursuant to the terms of this Agreement is intended as a separate payment
within the meaning of Code Section 409A and Department of Treasury
regulations and other interpretive guidance issued thereunder.  To the extent applicable and notwithstanding
any other provision in this Agreement, this Agreement and payments or benefits
hereunder shall be administered, operated and interpreted in accordance with
Code Section 409A and Department of Treasury regulations and other
interpretive guidance issued thereunder, including without limitation any such
regulations or other guidance that may be issued after the Effective Date of
this Agreement; provided, however, in the event that the Company determines
that any payments or benefits hereunder may be taxable to


 


6

















 


Executive
under Code Section 409A and related Department of Treasury guidance prior to
the payment and/or delivery of such amount, the Company may (i) adopt such
amendments to the Agreement that the Company reasonably and in good faith
determines necessary or appropriate to preserve the intended tax treatment of
the benefits provided under this Agreement and/or (ii) take such other
actions, including delaying the payment or delivery hereunder, as the Company
determines necessary or appropriate to comply with or exempt the payments or
benefits from the requirements of Code Section 409A.


 


6.5.  Amendment and Waiver.  No amendment or modification of this
Agreement shall be valid or binding upon the Parties unless made in writing and
signed by each of the Parties for that express purpose.


 


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


 


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


 


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


 


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


 


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shall be disqualified from serving as
arbitrator.  The arbitrator may, in the
award, allocate all or part of the costs, fees and expenses of the arbitration,
including the arbitrator’s fees and the prevailing Party’s attorneys’
fees.  Judgment on the arbitration award
may be entered in any court having jurisdiction.  The
provisions of this Section may be enforced by any court of competent
jurisdiction, and the Party seeking enforcement shall be entitled to an award
of all costs, fees and expenses, including attorneys’ fees, to be paid by the
Party against whom enforcement is ordered.


 


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


 


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


 


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


 


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


 


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


 


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


 


 


	
  American Defense
  Systems, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Anthony J. Piscitelli

  	
   

  	
  /s/ Victor L. La Sala

  
	
   

  	
  Anthony J. Piscitelli

  	
   

  	
  Victor L. La. Sala

  
	
   

  	
  Chief Executive Officer

  	
   

  	
   

  



 


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SCHEDULE A


VICTOR L. LASALA EMPLOYMENT AGREEMENT


 


3.2.  Annual Bonuses.  For the 2007 fiscal year, Executive shall be
entitled to earn and be paid an annual bonus (“2007 Annual Bonus”) based on his
performance.  The Company shall
determine, reasonably and in good faith, the amount of the 2007 Annual
Bonus.  The 2007 Annual Bonus shall be
paid in cash not later than the ninetieth (90th) day following the last day of the 2007 fiscal year
and in a manner in accordance with the Company’s regular payroll practices for
executive employees.  Beginning with the
2008 fiscal year, Executive shall be entitled to earn and be paid an annual
bonus each fiscal year of 1.25% of the increase in the Company’s EBITDA over
the preceding fiscal year (“Annual Bonus”). 
(For example, in 2008 Executive would be entitled to 1.25% of the amount
by which EBITDA for the fiscal year ended in 2008 is greater than the FYE in
2007.)  The Annual Bonus, if earned,
shall be paid in cash within sixty (60) days following the date the Company’s
auditors issue their audit report on the Company’s financial statements for the
fiscal year with respect to which such Annual Bonus relates, and in any event
not later than one hundred (120) days after the last day of such fiscal year,
and in a manner in accordance with the Company’s regular payroll practices for
executive employees.  The payment of the
Annual Bonus shall be prorated for any partial fiscal year during the
Term.  The term “EBITDA” means earnings
before interest income, interest expense, taxes, depreciation and amortization
of the Company’s consolidated businesses each as determined in accordance with
U.S. generally accepted accounting principles. 
If otherwise eligible, Executive: (a) need not be employed by the
Company at the time the 2007 Annual Bonus and/or the Annual Bonus is/are
calculated and/or paid out in order to receive the 2007 Annual Bonus or Annual
Bonus, as applicable; and (b) is entitled to a pro-rated portion of 2007
Annual Bonus or the Annual Bonus, as applicable, if his employment terminates
for any reason before the end of the applicable fiscal year.


 


3.5  Benefits.


 


3.5.1.  Vacation.  Executive shall be entitled to four (4) weeks
of paid vacation each calendar year.  In
the event that the Company terminates Executive’s employment without Cause or
Executive terminates his employment for Good Reason, the Company shall pay
Executive for all unused vacation for the remainder of the Company’s then
current fiscal year.


 


3.5.2.  D&O Liability Insurance. 
The Company shall provide
Executive with directors’ and officers’ liability insurance coverage in an
amount that the Company, reasonably and in good faith, determines to be
appropriate and affordable.  After the
expiration of Executive’s employment and/or the termination of this Agreement,
the Company shall provide Executive with directors’ and officers’ liability
insurance coverage in an amount and for a period of time that the Company,
reasonably and in good faith, determines to be appropriate and affordable.


 


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3.5.3.  Life Insurance.  The Company shall provide Executive with life
insurance in accordance with the terms of any applicable life insurance plan
established by the Company.


 


3.5.4.  Long-Term Disability
Insurance.  The Company
shall provide Executive with long-term disability insurance in accordance with
the terms of any applicable long-term disability plan established by the
Company.


 


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