Exhibit 10.1


EMPLOYMENT AGREEMENT


 


                THIS EMPLOYMENT AGREEMENT is entered into as of February 3,
2009 and is effective on the 9th day of March, 2009 (the “Effective Date”), by
and between Optelecom-NKF, Inc., a Delaware corporation (the “Company”),
and David Patterson (the “Executive”).


 


Recitals


 


                WHEREAS, the Company desires to employ the Executive, and
the Executive desires to work for the Company, all pursuant to the terms and
conditions set forth in this Agreement.


 


                NOW, THEREFORE, in consideration of the mutual promises made
below, the parties agree as follows:


 


                1.             Employment,
Duties and Acceptance.


 


                                1.1           Employment.


 


                                (a) 
Effective upon the Effective Date, the Company shall employ the Executive as
its President.  In such capacity, the
Executive shall report to the Chief Executive Officer of the Company and shall
perform such duties and assume such responsibilities as may be assigned by the
Chief Executive Officer or the Board of Directors of the Company from time to
time.  Six (6) months after the Effective
Date (the “Six Month Anniversary Date”), upon satisfactory performance of his
duties and responsibilities as determined at the sole discretion of the Board
of Directors of the Company, the Executive will be appointed as Chief Executive
Officer (CEO), reporting to the Chairman of the Board.  The Executive accepts such employment and
shall perform his duties faithfully and to the best of his abilities.


 


                                (b) 
The Executive shall devote his full working time and creative energies to the
performance of his duties hereunder and will at all times devote such
additional time and efforts as are reasonably sufficient for fulfilling the
significant responsibilities entrusted to him.  
The Executive shall be permitted a reasonable amount of time to
participate (as board member, officer or volunteer) in civic, political and
charitable activities.


 


                                1.2           Place of Employment.  The Executive’s principal place of employment
shall be in the Washington, D.C. metropolitan area, subject to such travel as
may be reasonably required by his employment pursuant to the terms hereof.


 

















 


                2.             Term
of Employment.


 


                                Unless
terminated earlier in accordance with the provisions of this Agreement, the
Executive’s employment hereunder shall continue until the two (2) year
anniversary of the Effective Date (the “Term”).


 


                3.             Compensation.


 


                                3.1           Salary.  As compensation for all services to be
rendered pursuant to this Agreement, the Company shall pay to the Executive
during the Term a salary of $280,000 per annum (the “Base Salary”) less such
deductions as shall be required to be withheld by applicable laws and
regulations or as otherwise authorized by the Executive.  The Base Salary shall accrue from and after
the Effective Date, and shall be payable during the Term, in arrears in equal
periodic installments, in accordance with the Company’s customary payroll
practices in effect at the time of payment. 
The Executive’s Base Salary shall be reviewed annually by the Board of
Directors of the Company or the Compensation Committee thereof (collectively,
the “Board”) and may be increased (but not decreased) based upon the evaluation
of the Executive’s performance and the compensation policies of the Company in
effect at the time of each such review.


 


                                3.2           Sign-on Bonus.


 


                                 (a)          On
the Effective Date, the Executive will be paid a one-time signing bonus of
$32,000, less such deductions as shall be required to be withheld by applicable
laws and regulations or as otherwise authorized by the Executive.


 


                                 (b)          As
further compensation, on the Effective Date, the Executive shall be granted
non-qualified stock options to purchase 36,000 shares of the Company’s common
stock (the “Options”).  The Options shall
have an exercise price equal to the fair market value of the Company’s common
stock on the Effective Date and shall vest as follows:  25%
shall vest on the day after the Six Month Anniversary Date, an additional 50%
shall vest on the one year anniversary of the Effective Date, and the remaining
25% shall vest on the two year anniversary of the Effective Date.  All of the terms of the Options shall be in
accordance with the provisions of the Optelecom-NKF, Inc 2008 Stock Incentive
Plan, as amended from time to time (the “Incentive Plan”).  The Executive acknowledges that he has been
provided with a copy of the Incentive Plan.


 


                                3.3           Incentive Compensation.  The Executive will be entitled to participate
in the Company’s Incentive Bonus Plan for Plan Year 2009 (the “2009 Incentive
Plan”).  Provided the Company’s annual
defined goals as determined by the Board and set forth in the 2009 Incentive
Plan are met, the Executive’s potential estimated bonus under the 2009
Incentive Plan would be targeted at 55% of the earned Base Salary.  In addition, during the Term, the Executive
shall be entitled to participate in any subsequent bonus or incentive plan or
program adopted by the Board in which executive officers of the Company are
eligible to participate, in accordance with such terms as are determined by the
Board.


 


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                                3.4           Participation in Executive
Benefit Plans.  The
Executive shall be permitted during the Term, if and to the extent eligible, to
participate in any group medical, dental, long-term and short-term disability
insurance, life insurance, and 401(k) plan of the Company available to
other executives of the Company generally on the same terms as such other
executives.  Nothing herein shall affect
the Company’s ability to modify, alter, terminate or otherwise change any
benefit plan it has in effect at any given time, to the extent permitted by
law.


 


                                3.5           Vacation.  The Executive shall be entitled to accrue
twenty (20) days of paid vacation and such number of days of paid sick leave
per year as is provided under the Company’s Paid Time Off program, to be
scheduled and taken at the Executive’s option at such times as his duties may
permit.  The established vacation year is
the calendar year, January 1 through December 31.  Vacation leave can be accrued in accordance
with the Company’s policies.


 


                                3.6           Expenses.  Subject to such policies as may from time to
time be established by the Board, the Company shall pay or reimburse the
Executive for all ordinary, necessary and reasonable business expenses actually
incurred or paid by the Executive during the Term in the performance of the
Executive’s services under this Agreement, upon presentation of expense
statements or vouchers or such other supporting information as the Board may
require.


 


                                3.7           Withholding.  The Company is authorized to withhold from
the amount of any Base Salary and incentive compensation and any other things
of value paid to or for the benefit of the Executive, all sums authorized by
the Executive or required to be withheld by law, court decree, or executive
order, including (but not limited to) such things as income taxes, employment
taxes, and employee contributions to fringe benefit plans sponsored by the
Company.


 


                4.             Termination.


 


                                4.1           General.  This Agreement shall terminate upon the
expiration of the Term, unless earlier terminated in accordance with the
provisions of this Section 4.


 


                                4.2           Termination
Upon Mutual Agreement.  The Company and the Executive may, by mutual
written agreement, terminate this Agreement and/or the employment of the
Executive at any time.


 


                                4.3           Death or
Disability of Executive.


 


                                (a)           The employment of the Executive
hereunder shall terminate upon (i) the death of the Executive, which shall
not be considered a breach of this Agreement, or (ii) at the option of the
Company upon not less than thirty (30) days’ prior written notice to the
Executive or his personal representative or guardian, if the Executive suffers
a Total Disability (as defined in Section 4.3(b) below).


 


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                                (b)           For purposes of this Agreement, “Total
Disability” shall mean (i) if the Executive is subject to a legal decree
of incompetency (the date of such decree being deemed the date on which such
disability occurred), or (ii) the written determination by a physician
selected by the Company that, because of a medically determinable disease,
injury or other physical or mental disability, the Executive is unable to
substantially perform each of the material duties of the Executive required
hereby, and that such disability has lasted for the immediately preceding
ninety (90) days and is, as of the date of determination, reasonably expected
to last an additional ninety (90) days or longer after the date of
determination, in each case based upon medically available reliable
information, and the provision of clear and convincing evidence by the Company
of the Executive’s inability substantially to perform each material duty
hereunder in support of such determination by the physician.  The Company hereby agrees to provide all
written documentation of such diagnosis to: (A) the Executive’s spouse, (B) the
Executive’s personal representative, or (C) the Executive’s Trustee.


 


                                (c)           If the Executive dies during the Term
of employment by the Company, the Company hereby agrees to pay outright to the
Executive’s estate, or Trustee, or surviving spouse, (i) the lesser of (A) the
Executive’s remaining Base Salary for the Term or (B) twelve (12) months
of then Base Salary, (ii) all employee benefits which have accrued, and (iii) all
bonus payments due.  If the date of death
is on or after the day after the Six Month Anniversary Date, all unvested stock
options held by the Executive on the date of death shall immediately vest as of
such date and all options held by the Executive shall remain exercisable for a
period of twelve (12) months after the date of death.  Any options that remain unexercised at the
end of such 12-month period shall terminate.


 


                                (d)           Any leave on account of illness or
temporary disability which is short of “Total Disability” shall not constitute
a breach of this Agreement by the Executive and in no event shall any party be
entitled to terminate this Agreement for “cause” or “good reason” (as such
terms are defined herein) due to any such leave.  All physicians selected hereunder shall be
board certified in the specialty most closely related to the nature of the
disability alleged to exist.


 


                                4.4           Termination
by the Company.


 


                                (a)           Without Cause.  The Company may terminate Executive’s
employment without “cause” (as defined in Section 4.4(b)) at any time.


 


                                (b)           For Cause.  The Company may, upon action of the Board,
and upon written notice to the Executive specifying in reasonable detail the
reason therefor, terminate the employment of the Executive at any time for “cause”
(as defined below), provided, however, that if the reason for termination for “cause”
is susceptible of cure, the Executive shall have a period of thirty (30) days
after such written notice to effect a cure. 
For purposes of this Agreement, “Cause” means (i) the material
failure of the Executive to perform his duties under this Agreement which
failure materially adversely affects the Company or its business after notice
and a reasonable opportunity to cure; (ii) willful malfeasance by the
Executive in connection with the performance of his duties under this Agreement
that could in the good faith judgment of the Board (x) have a material
adverse impact on the Company’s business, (y) subject the Company to
criminal penalties in excess of $50,000, or (z) result in


 


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the incarceration of any officer, director or employee of the Company; (iii) the
Executive being convicted of, or pleading guilty or nolo contendere to, or
being indicted for a felony or other crime involving theft, fraud or moral
turpitude; (iv) fraud or embezzlement against the Company; (v) the
failure of the Executive to obey in all material respects any proper written
direction of the Chairman of the Board or the Board that is not inconsistent
with this Agreement and which failure to obey has a material adverse effect on
the Company; or (vi) the violation by the Executive of the non-competition
and confidentiality provisions of Section 5
of this Agreement.


 


                                4.5           Termination
For Good Reason.  The
Executive may resign (and thereby terminate his employment under this
Agreement) at any time for “good reason” (as defined below), upon not less than
thirty (30) days’ prior written notice to the Company specifying in reasonable
detail the reason therefor, provided, however, that if the reason for
resignation for “good reason” is susceptible of cure, the Company shall have a
period of thirty (30) days after such written notice to effect a cure.  For purposes of this Agreement, “good reason”
shall mean (i) any material failure by the Company to comply with any
material obligation imposed by this Agreement after notice and a reasonable
opportunity to cure; or (ii) a substantial reduction in the Executive’s
title, position, duties, responsibilities or Base Salary, without Executive’s
written consent.


 


                                4.6           Payments
Upon Termination.


 


                                (a)           In
the event that the Executive’s employment is terminated (i) by the Company  without “cause,” or (ii) by the Executive for “good
reason,” then, if no Change of Control (as defined below) has occurred on or
before the date of such termination, the following provisions shall apply:


 


                                                (1) The
Company shall pay the Executive the Base Salary to which the Executive would
have been entitled pursuant to Section 3.1
of this Agreement had the Executive remained in the employ of the Company for a
period of twelve (12) months from the date of termination (the “Termination
Payment Period”).  Such payments shall be
paid on the same schedule used to pay Base Salary to the Executive during the
Term.  All payments under this Section 4 shall be subject to applicable withholding.


 


                                                (2) Unless
prohibited by law or, with respect to any insured benefit, the terms of the
applicable insurance contract, the Executive shall continue to participate in,
and be covered under, the Company’s medical, dental, long-term and short-term
disability insurance, and life insurance plan on the same basis as other
executives of the Company during the Termination Payment Period.


 


                                                (3) Notwithstanding
the foregoing, the Company shall not be required to make any payment to the
Executive or maintain the Executive’s participation or coverage under any plan
pursuant to this Section 4.6(a) if the
Executive breaches any of the provisions of Section 5
hereof.  In such event, the Company shall
provide written notice to the Executive detailing such violation.


 


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                                                (4) 
All options held by the Executive that are vested as of the date of termination
shall remain exercisable for a period of ninety (90) days after termination and
any such options that remain unexercised at the end of such 90-day period shall
terminate.  All unvested options held by
the Executive on the date of termination shall terminate as of such date.


 


                                (b)           In the event the Executive’s employment
is terminated (i) by the Company for “cause,” or (ii) by the
Executive without “good reason,” then the Company shall have no duty to make
any payments or provide any benefits to the Executive pursuant to this
Agreement other than payment of the amount of the Executive’s Base Salary
accrued through the date of termination of his employment.


 


                                (c)           Upon termination of Executive’s
employment for death or Total Disability, the Company shall pay to the
Executive, guardian or personal representative, as the case may be, in addition
to any insurance or disability benefits to which he may be entitled hereunder,
all amounts accrued or vested prior to such termination.


 


                                (d)           In
the event that the Executive’s employment is terminated by the Company without “cause,”
or by the Executive for “good reason,” then, if a Change of Control (as defined
below) has occurred on or before the date of such termination or the Company
has entered into a definitive agreement for a Change of Control on or before
the date of termination and such termination is effected in contemplation of
such Change of Control, the following provisions shall apply:


 


                                                (i) The
Company shall pay the Executive the Base Salary to which the Executive would
have been entitled pursuant to Section 3.1
of this Agreement had the Executive remained in the employ of the Company for a
period of twenty four (24) months from the date of termination (the “Change of
Control Payment Period”) and any bonus payments earned through the date of
termination.  Such payments shall be paid
on the same schedule used to pay Base Salary to the Executive during the Term
and shall be subject to applicable withholding.


 


                                                (ii) Unless
prohibited by law or, with respect to any insured benefit, the terms of the
applicable insurance contract, the Executive shall continue to participate in,
and be covered under, the Company’s medical, dental, long-term and short-term
disability insurance, and life insurance plan on the same basis as other
executives of the Company during the Change of Control Payment Period.


 


                                                (iii) Notwithstanding
the foregoing, the Company shall not be required to make any payment to the
Executive or maintain the Executive’s participation or coverage under any plan
pursuant to this Section 4.6(d) if the
Executive breaches any of the provisions of Section 5
hereof.  In such event, the Company shall
provide written notice to the Executive detailing such violation.


 


                                                (iv) 
All unvested options held by the Executive on the date of termination shall
immediately vest and all options held by the Executive on such date shall
remain exercisable until the end of the stated term of such options.


 


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                                (e)           For purposes of this Agreement, the
term “Change of Control” shall mean:


 


                  (i)          Any
person (as defined conventionally in the context of corporate ownership) or
affiliated group of persons other than the owners of the Company’s capital
stock as of the date of this Agreement becoming the beneficial owner directly
or indirectly (within the meaning of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended) of more than 50% of the Company’s then outstanding
voting securities (measured on the basis of voting power);


 


                  (ii)         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 Company 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 Company, at least 50% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (y) a merger or
consolidation effected to implement a re-capitalization of the Company (or
similar transaction) in which no person acquires more than 50% of the combined
voting power of the Company’s then outstanding securities as a result of such
merger or consolidation; or


 


                  (iii)        The
liquidation or dissolution of the Company or upon the closing of a sale or
disposition by the Company of all or substantially all of the Company’s assets.


 


                                (f)            Notwithstanding the above, the Executive
shall, as a condition to receipt of the payments and benefits provided under
this Section 4.6, execute a release in
such form as is reasonably requested by the Company releasing rights and claims
in existence at such time relating to the Executive’s employment with the
Company, but excluding (i) the Executive’s rights under this Agreement, (ii) the
Executive’s rights under the Incentive Plan or any other employee benefit plan
of the Company, and (iii) the Executive’s right to indemnification under
the Company’s certificate of incorporation or bylaws or under any agreement
addressing such subject matter between the Executive and the Company.  The Executive acknowledges that, upon termination of his employment, he is
entitled to no other compensation, severance, or other benefits other than
those specifically set forth in this Agreement or any applicable grant
agreement under the Incentive Plan or any subsequent equity plan of the
Company.


 


                                4.7           No Disparaging Comments
Upon Termination.


 


                                Upon
termination of this Agreement, the Company will refrain from making any
disparaging remarks about the Executive. 
Similarly, the Executive shall refrain from making any disparaging remarks
about the businesses, services, products, stockholders, officers, directors or
other personnel of the Company or any of its affiliates.


 


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5.                                       Certain Covenants of the
Executive.


 


5.1                                 Necessity for Covenants.  The
Executive acknowledges that (i) the Company is engaged and will in the
future be engaged in the Business (as defined below); (ii) his employment
pursuant to this Agreement will give him access to customers and suppliers of,
and trade secrets of and confidential information concerning, the Company; and (iii) the
agreements and covenants contained in this Section 5
are essential to protect the business and goodwill of the Company.  In order to induce the Company to enter into
this Agreement and pay the compensation and other benefits at the levels
requested by the Executive, the Executive enters into the following covenants:


 


5.2                                 Definitions.


 


(a)                                  “Company” for purposes of this Article 5
shall include the Company and all of the Company’s majority owned subsidiaries
and affiliates.


 


(b)                                 “Business” shall mean the development,
manufacturing, marketing, sale and/or supply of network video equipment,
including video servers, Ethernet switches, fiber optic systems and video
management software.


 


(c)                                  “Business Contact” shall mean any (i) customer
which has purchased goods or services provided by the Company during period of
Executive’s employment with the Company, (ii) prospective customer whom the
Executive or persons working for or directly with the Executive has contacted
during the period of Executive’s employment with the Company for the purpose of
endeavoring to sell the goods or services of the Company to the prospective
customer, or (iii) provider of goods or services to the Company.


 


(d)                                 “Service Area” means the geographic
area in which the Company markets and sells its goods and services.


 


5.3                                 Restrictions. 
During the period of Executive’s employment with the Company and for a
period of one (1) year after the date (the “Termination Date”) the
Executive’s employment with the Company is terminated (the “Restricted Period”),
the Executive shall not, directly or indirectly, for himself or on behalf of
any other person, firm, corporation or other entity, whether as a principal,
agent, employee, stockholder, partner, officer, member, director, sole
proprietor, or otherwise:


 


(a)                                  call upon or solicit any Business Contact for
the purpose of persuading the Business Contact to engage the Executive or any
other person, firm, corporation or other entity to provide goods or services
which are the same or similar to those the Company provided to the Business
Contact or to engage the Business Contact to provide goods or services which
are the same or similar to those the Business Contact provided to the Company
to any other person, firm, corporation or other entity;


 


(b)                                 solicit, participate in or promote the
solicitation of any person who was employed by the Company at any time during
the twelve (12) months preceding the Termination Date to leave the employ of
the Company, or hire or engage any of those persons;


 


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(c)                                  make any disparaging remarks about the
Company’s business, services or personnel;


 


(d)                                 interfere in any way with the Company’s
business, prospects or personnel; or


 


(e)                                  become affiliated with or render services to
any person engaged in any business that competes with the Business within the
Service Area, directly or indirectly, in any capacity, including, without
limitation, as an individual, partner, shareholder, officer, director,
principal, agent, employee, trustee or consultant; provided, however, that the
Executive may own, directly or indirectly, solely as an investment, securities
which are publicly traded if the Executive (a) is not a controlling person
of, or a member of a group which controls, the issuer and (b) does not,
directly or indirectly, own 5% or more of any class of securities of the
issuer.


 


5.4                                 Trade Secrets and Confidential
Information


 


5.4.1                        Trade Secrets Defined.  The
term “Trade Secrets,” as used in this Agreement, includes, without limitation, (i) all
information concerning the Company and all aspects of the Business, including
costs, revenues, profits, pricing, customer information, product information,
supply sources, marketing, prospective and executed contracts, budgets and
business plans, (ii) all information which is unique to the Company or to
any aspect of the Business which has a significant business purpose and is not
known or generally available from sources outside the Company or typical of
industry practice, and which would have a material adverse effect on the
Company or the Business if disclosed, and (iii) all formulae, innovations,
inventions, improvements, compilations, programs, devices, lists, methods,
techniques, practices, procedures or processes of the Company and all
information relating thereto.


 


5.4.2                        Confidential Information Defined.  Any
other information not qualifying as a Trade Secret, but relating to the
business of the Company which is disclosed by the Company to the Executive, or
is discovered by the Executive in the course of employment, is Confidential
Information.


 


5.4.3                        Duty to Maintain Secrecy and
Confidentiality.  During the period of the Executive’s
employment with the Company, and for a period of three (3) years
thereafter, the Executive shall maintain the secrecy and confidentiality of the
Trade Secrets and the Confidential Information and shall not (i) divulge,
furnish or make accessible to anyone or in any way use, for his own benefit or
for the benefit of any other individual firm or entity (other than in the
ordinary course of the Company’s business), any Trade Secret or Confidential
Information; (ii) take or permit any action to be taken which would reduce
the value of the Trade Secrets or Confidential Information to the Company; or (iii) otherwise
misappropriate or suffer the misappropriation of the Trade Secrets or the
Confidential Information.


 


5.4.4                        Information Which is Publicly
Known.  Notwithstanding anything herein to the
contrary, the obligations of secrecy and confidentiality set forth herein


 


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shall
not apply to any information which is now generally publicly known or which
subsequently becomes generally publicly known other than as a direct or
indirect result of the breach of this Agreement by the Executive, or which is
required by law or order of any court to be disclosed.


 


5.5                                 Property of the Company.  All
memoranda, notes, lists, records and other documents or papers (and all copies
thereof), including but not limited to, such items stored in computer memories,
on microfiche or by any other means, made or compiled by or on behalf of the
Executive, or made available to the Executive concerning the Business, are and
shall be the property of the Company and shall be delivered to the Company
promptly upon the termination of the Executive’s employment with the Company or
at any other time on request.


 


5.6                                 Executive’s Ideas, Etc.  All
inventions, prototypes, discoveries, improvements, innovations and the like (“Inventions”)
and all works of original authorship or images that are fixed in any tangible
medium of expression and all copies thereof (“Works”) which are designed, created
or developed by Executive, solely or in conjunction with others, in the course
of performance of the Executive’s duties which relate to the Business, shall be
made or conceived for the exclusive benefit of and shall be the exclusive
property of the Company.  The Executive
shall immediately notify the Company upon the design, creation or development
of all Inventions and Works.  At any time
thereafter, the Executive, at the request and expense of the Company, shall
execute and deliver to the Company all documents or instruments which may be
necessary to secure or perfect the Company’s title to or interest in the
Inventions and Works, including but not limited to applications for letters of
patent, and extensions, continuations or reissues thereof, applications for
copyrights and documents or instruments of assignment or transfer.  All Works are agreed and stipulated to be “works
made for hire,” as that term is used and understood within the Copyright Act of
1976, as amended or any successor statute. 
To the extent any Works are not deemed to be works made for hire as
defined above, and to the extent that title to or ownership of any Invention or
Work and all other rights therein are not otherwise vested exclusively in the
Company, the Executive shall and hereby does, without further consideration but
at the expense of the Company, assign and transfer to the Company the Executive’s
entire right, title and interest (including copyrights and patents) in or to
those Inventions and Works.


 


5.7                                 Rights and Remedies Upon Breach.  If
the Executive breaches, or threatens to commit a breach of, any of the
provisions of Sections 5.1 through 5.6 (the “Restrictive Covenants”), the Company shall, in
addition to its right immediately to terminate this Agreement, have the right
and remedy (which right and remedy shall be independent of others and severally
enforceable, and which shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity) to have
the Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach could cause irreparable injury to the Company or its
affiliates and that money damages may not provide adequate remedy to the
Company.


 


5.8                                 Covenants Currently Binding
Executive.  The Executive warrants that his employment by
the Company will not (a) violate any non-disclosure agreements, covenants


 


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against
competition, or other restrictive covenants made by the Executive to or for the
benefit of any previous employer or partner, or (b) violate or constitute
a breach or default under, any statute, law, judgment, order, decree, writ,
injunction, deed, instrument, contract, lease, license or permit to which the
Executive is a party or by which the Executive is bound.


 


5.9                                 Litigation.  There
is no litigation, proceeding or investigation of any nature (either civil or
criminal) which is pending or, to the best of the Executive’s knowledge,
threatened against or affecting the Executive or which would adversely affect
his ability to substantially perform the duties herein.


 


5.10                           Review.  The
Executive has received or been given the opportunity to review the provisions of
this Agreement, and the meaning and effect of each provision, with independent
legal counsel of the Executive’s choosing.


 


5.11                           Severability of Covenants.  The
Executive acknowledges and agrees that the Restrictive Covenants are reasonable
and valid in geographical and temporal scope and in all respects.  If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.


 


5.12                           Blue-Penciling.  If
any court determines that any of the Restrictive Covenants, or any part
thereof, is unenforceable because of the duration or geographic scope of such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable and shall be enforced.  If any such court declines to so revise such
covenant, the parties agree to negotiate in good faith a modification that will
make such duration or scope enforceable.


 


5.13                           Continuing Applicability.  The
obligations established in Section 5 of this Agreement shall continue in
full force and effect throughout Executive’s employment with the Company,
including during any continuing period of employment subsequent to the Term.    In addition, any post-termination obligations
established in Section 5 of this Agreement, shall remain in full force and
effect, and shall remain enforceable as to Executive subsequent to the
Term.  If Executive’s employment with the
Company continues beyond the Term, Executive shall be required to honor the
post-termination obligations set forth in Section 5 subsequent to the time
his employment with the Company ultimately terminates.


 


6.                                       Dispute Resolution.


 


6.1                                 Costs of Arbitration.  If
either party brings an arbitration proceeding to enforce its rights under this
Agreement, the prevailing party shall be entitled to recover from the other
party all expenses incurred by it in preparing for and in trying the case,
including, but not limited to, investigative costs, arbitration and court costs
and reasonable attorneys’ fees.


 


6.2                                 No Jury Trial. 
NEITHER PARTY SHALL ELECT A TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.


 


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6.3                                 Personal Jurisdiction.  Both
parties agree to submit to the jurisdiction and venue of the federal or state
courts in the State of Maryland as to matters involving enforcement of this
Agreement, including any award under an arbitration proceeding.


 


6.4                                 Arbitration.                              SUBJECT TO THE COMPANY’S RIGHT TO SEEK
INJUNCTIVE RELIEF AS SPECIFIED IN THIS AGREEMENT, ANY DISPUTE BETWEEN THE
PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT (INCLUDING, BUT NOT
LIMITED TO, THE AMOUNT OF DAMAGES, THE NATURE OF THE EXECUTIVE’S TERMINATION OR
THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) SHALL BE RESOLVED
IN ACCORDANCE WITH THE PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION.  ANY RESULTING HEARING SHALL BE HELD IN THE
WASHINGTON, D.C. METROPOLITAN AREA.  THE
RESOLUTION OF ANY DISPUTE ACHIEVED THROUGH SUCH ARBITRATION SHALL BE BINDING
AND ENFORCEABLE BY A COURT OF COMPETENT JURISDICTION.  THE ARBITRATOR(S) SHALL HAVE NO
AUTHORITY TO MODIFY ANY PROVISION OF THIS AGREEMENT OR TO AWARD A REMEDY FOR A
DISPUTE INVOLVING THIS AGREEMENT OTHER THAN A BENEFIT SPECIFICALLY PROVIDED
UNDER OR BY VIRTUE OF THE AGREEMENT.


 


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, telegraphed, telexed, sent by
facsimile transmission or sent by certified, registered or express mail,
postage paid, and shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission or, if mailed, four days
after the date of mailing, as follows:


 


(i)                                     if to the Company, to:


 


Optelecom-NKF, Inc.


12920
Cloverleaf Center Drive


Germantown,
Maryland  20874


Facsimile:  (301) 528-8190


Attention:
Chairman of the Board


 


with
copies to:


 


Thomas
W. France, Esquire


Venable
LLP


8010
Towers Crescent Drive, Suite 300


Vienna,
Virginia 22182


Facsimile:  (703) 821-8949


 


(ii)                                  if to the Executive, to the Executive at the
address most recently on the books and records of the Company,


 


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with
copies to:


 


Lorren
T. Johnston, Esq.


Lorren
T. Johnston, PC


101
Wirt Street, SW, Suite A


Leesburg,
Virginia 20175


 


Any
party may by notice given in accordance with this Section to the other
party designate another address or person for receipt of notices hereunder.


 


7.2                                 Entire Agreement.  This
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
written or oral, with respect thereto. 
In the event there is any conflict or ambiguity between the provisions of
this Agreement and any other agreement, plan or policy of the Company relating
to the Executive’s employment with the Company, the resolution of any such
conflict or ambiguity shall be governed by the terms of this Agreement.


 


7.3                                 Waivers and Amendments.  This
Agreement may be amended, modified, superseded, canceled, renewed or extended,
and the terms and conditions hereof may be waived, only by a written instrument
signed by the Executive and a duly authorized officer (other than the
Executive) of the Company (each, in such capacity, a party) 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 has been negotiated and is to be performed in the State of Maryland,
and shall be governed and construed in accordance with the laws of the State of
Maryland applicable to agreements made and to be performed entirely within such
State.


 


7.5                                 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.


 


7.6                                 Confidentiality. 
Neither party shall disclose the contents of this Agreement or of any
other agreement they have simultaneously entered into to any person, firm or
entity, except the agents or representatives of the parties (including any tax
advisors or attorneys of a party) and immediate family members, or except as
required by law.


 


7.7                                 Word Forms. 
Whenever used herein, the singular shall include the plural and the
plural shall include the singular.  The
use of any gender or tense shall include all genders and tenses.


 


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7.8                                 Headings.  The Section headings
have been included for convenience only, are not part of this Agreement, and
are not to be used to interpret any provision hereof.


 


7.9                                 Binding Effect and Benefit;
Assignment.  This Agreement shall be binding upon and
inure to the benefit of the parties, their successors, heirs, personal
representatives and other legal representatives.  This Agreement may be assigned by the Company
to any entity in connection with a Change of Control; provided, however, that
notwithstanding any other provision within this Agreement, this Agreement shall
survive any Change in Control that shall occur for the remainder of the
Term.  The Executive may not assign this
Agreement without the prior written consent of the Company.


 


7.10                           Rule 409A.                                  If any compensation or benefits provided by
this Agreement may result in the application of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), the Company shall in
consultation with the Executive, modify the Agreement in the least restrictive
manner necessary in order to exclude such compensation from the definition of “deferred
compensation” within the meaning of such Section 409A or in order to
comply with the provisions of Section 409A, other applicable provision(s) of
the Code and/or any rules, regulations or other regulatory guidance issued
under such statutory provisions and without any diminution in the value of the
payments to the Executive.


 


7.11                           Separability.  The
covenants contained in this Agreement are separable, and if any court of competent
jurisdiction declares any of them to be invalid or unenforceable, that
declaration of invalidity or unenforceability shall not affect the validity or
enforceability of any of the other covenants, each of which shall remain in
full force and effect.


 


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IN WITNESS WHEREOF, the parties, intending to
be legally bound, have executed this Agreement or caused it to be executed and
attested by their duly authorized officers as a document under seal on the day
and year first above written.


 


	
  WITNESS:

  	
   

  	
  OPTELECOM-NKF,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  (SEAL)

  
	
   

  	
   

  	
   

  	
  Edmund
  Ludwig

  	
   

  
	
   

  	
   

  	
   

  	
  Chief
  Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXECUTIVE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (SEAL)

  
	
   

  	
   

  	
  David
  Patterson

  	
   

  



 


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