sfg8k100407ex10-1.htm


    
      

      

    

     

    
      EMPLOYMENT
        AGREEMENT

      


      This
        Employment Agreement (“Agreement”) is entered into as of October 4, 2007
        (“Effective Date”) between SFG Financial Corporation (“Company”) and Leonard
        Neuhaus (“Executive”).

      


      RECITALS

      


      Company
        wishes to retain Executive as its Chief Executive Officer and President and
        Executive wishes to accept such employment under the terms and conditions
        set
        forth in this Agreement.

      


      IT
        IS AGREED as follows:

      


      1.         Employment.
        Company hereby offers Executive employment as its Chief Executive Officer
        and
        President. Executive accepts such employment.

      


      2.         Term.
        The term of employment under this Agreement shall commence on the
        Effective Date and shall continue thereafter for a period of three (3) years,
        unless otherwise terminated earlier under Section 9 (the “Term”). The Term shall
        be automatically extended for an additional one (1) year period unless at
        least
        sixty (60) days prior to its expiration, either Company or Executive furnishes
        the other with written notice that the Term not be so extended.

      


      3.         Duties.
        Executive shall devote his full-time efforts to the proper and faithful
        performance of all duties customarily discharged by a Chief Executive Officer
        and President, consistent with Company policies and budgets and directives
        of
        Company’s Board of Directors together with any additional duties assigned to him
        from time to time by the Board of Directors. Executive agrees to use his
        best
        efforts and comply with all fiduciary and professional standards in the
        performance of his duties. Executive shall provide services to any subsidiary
        or
        affiliate of Company without additional compensation and benefits beyond
        those
        set forth in this Agreement.  For so long as he serves as Chief
        Executive Officer and President of the Company, the Executive shall also
        serve
        as a Director of the Company, subject to election by the
        shareholders.

      


      Provided
        that the activities listed
        below do not materially interfere with the duties and responsibilities under
        this Agreement, nothing in this Agreement shall preclude Executive from devoting
        reasonable periods required for:

      


      
        	
                 

              	
                (a)

              	
                Serving
                  as a member of any organization involving no conflict of interest
                  with the
                  Company;

              


      

      


      
        	
                 

              	
                (b)

              	
                Serving
                  as a consultant in his area of expertise to government, commercial
                  and
                  academic panels where it does not conflict with the interests of
                  Executive; and

              


      

      


      
        	
                 

              	
                (c)

              	
                Managing
                  his personal investments or engaging in any other non-competing
                  business
                  activity during his non-business
                  time;

              


      

      



      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      
        	
                 

              	
                (d)

              	
                Serving
                  as a member of the Board of Directors or in an advisory capacity
                  to
                  government, commercial and academic panels where it does not conflict
                  with
                  the interests of Executive.

              


      

      


      4.         Base
        Salary. Executive shall be paid a base salary of Two Hundred Thousand
        Dollars ($200,000.00) per annum for the first year of the Term, Two Hundred
        Fifteen Thousand Dollars ($215,000.00) per annum for the second year of the
        Term
        and Two Hundred Twenty Five Thousand Dollars ($225,000.00) per annum for
        the
        third year of the Term, payable, less applicable withholding, in equal monthly
        payments or more frequently in accordance with Company’s regular practice.
        Notwithstanding the foregoing, the base salary for the period from the Effective
        Date through December 31, 2007 (“Deferred Salary”) shall be accrued but not paid
        to the Executive in accordance with Company’s regular practice and the Deferred
        Salary shall be due and payable to the Executive anytime on or after January
        1,
        2008, upon demand of the Executive. Upon any extension of the Term, Executive’s
        base salary will be set by the Compensation Committee of Company; provided,
        however, that Executive’s base salary shall not be reduced from the base salary
        in effect immediately prior to extension of the Term.

      


      5.         Bonus.
        Executive shall be eligible to receive an
        incentive bonus during each fiscal year of the Term as determined by the
        Compensation Committee of Company.

      


      6.         Restricted
        Stock. The Company shall issue to Executive on each anniversary of the
        date hereof, the following number of shares of restricted common
        stock:  first year – 250,000 shares; second year – 300,000 shares,
        and; third year – 350,000 shares. In the event the Company shall have earnings
        before interest, taxes, depreciation and amortization (“EBITDA”), for the
        following years, the Company shall issue additional restricted shares of
        common
        stock to the Executive, as set forth below:

      


      
        	
                 

              	 	
                Target

              	 	 	
                Bonus

              	 
	
                
                  Year
                    Ended January 31,

                

              	 	
                EBITDA

              	 	 	
                Shares

              	 
	 	 	 	 	 	 	 
	
                2009

              	 	$	
                1

              	 	 	 	
                500,000

              	 
	
                2010

              	 	$	
                2,000,000

              	 	 	 	
                600,000

              	 
	
                2011

              	 	$	
                10,000,000

              	 	 	 	
                1,000,000

              	 


      

      


      In
        the
        event the Company achieves EBITDA of at least 25% of the target EBITDA during
        the second or third years of the Term of this Agreement, the Executive shall
        earn and be issued a pro rata amount of the bonus shares for achievement
        of 25%,
        50% and 75% of the target EBITDA.  In the event the Company changes it
        fiscal year, the year end target date shall be adjusted
        accordingly.

      


      All
        shares amounts referenced herein
        assume completion of a one-for-7.351808 reverse stock split which has been
        authorized by the Board of Directors but not yet effectuated.  In the
        event the restricted shares are issued to the effectuation of such reverse
        stock
        split, all share amounts referenced above shall be multiplied by
        7.351808.

      



      
        
          
          

        

        
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                7.

              	
                Benefits.

              


      

      


      
        	
                 

              	
                (a)

              	
                Executive
                  shall be entitled to participate in all Company sponsored retirement
                  plans, 401(k) plans, life insurance plans, medical insurance plans,
                  short-term and long-term disability insurance plans, and such other
                  benefit plans generally available from time to time to executive
                  management of the Company for which he qualifies under the terms
                  of the
                  plans. Executive’s participation in and benefits under any benefit plan
                  shall be on the terms and subject to the conditions specified in
                  such
                  plan.

              


      

      


      
        	
                 

              	
                (b)

              	
                Executive
                  will receive at least four (4) weeks of paid vacation per
                  year,

              


      

      


      
        	
                 

              	
                (c)

              	
                The
                  Company shall maintain directors’ and officers’ insurance for the benefit
                  of Executive.

              


      

      


      
        	
                 

              	
                (d)

              	
                Executive
                  shall be entitled to participate in any stock options enacted,
                  as
                  determined by the compensation committee or Board of
                  Directors.

              


      

      


      8.         Reimbursement
        of Expenses. The Company will reimburse Executive for the ordinary and
        necessary expenses incurred by him in the performance of his duties under
        this
        Agreement, including but not limited to travel and entertainment, automobile
        and
        cellular phone expenses.

      


      
        	
                 

              	
                9.

              	
                Termination
                  of Employment.

              


      

      


      (a)        Executive’s
        employment under this Agreement may be terminated at any time by the Board
        of
        Directors of Company for Cause.

      


      (b)        Executive’s
        employment under this Agreement shall terminate upon expiration of the Term
        without extension as described in Section 2.

      


      (c)        Executive’s
        employment under this Agreement shall terminate upon his retirement, resignation
        or death,

      


      (d)        Executive’s
        employment under this Agreement shall terminate upon written notice by Company
        to Executive of a termination due to Disability.

      


      (e)        If
        Executive’s employment terminates for Cause, Company shall be obligated only to
        continue to pay Executive’s base salary and, to the extent earned, accrued and
        unpaid, annual incentive bonus and furnish the then existing benefits under
        Section 7 up to the date of termination; provided, that if Executive’s
        employment is terminated as a result of Executive’s Disability, Executive shall
        remain eligible for benefits under any long-term disability program of Company,
        as amended from time to time, as long as his Disability continues. Executive
        shall also he entitled to reimbursement of all expenses and payment of any
        Deferred Salary.

      



      
        
          
          

        

        
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      (f)         If
        Executive’s employment is terminated by Company other than for Cause, or upon
        expiration of the Term without extension, or by Executive for Good Reason,
        in
        addition to the amounts payable under Section 9(e), Executive shall be entitled
        to receive all compensation due for the remaining term of the agreement and
        a
        lump sum severance payment equivalent to one week of his then current base
        salary for every month of service, with a minimum of three months equivalent,
        and medical and other insurance benefits under Section 7(a) for a period
        of
        twelve (12) months. Further, any restricted stock earned at the time of
        termination, will be issued to Executive. As a condition to the salary and
        benefit continuation under this Section 9(f), Executive must first execute
        and
        deliver to Company, in a form prepared by Company, a release of all claims
        against Company and other appropriate parties, excluding Company’s performance
        under this Section 9(f) and of Executive’s vested rights under any Company
        sponsored retirement plans, 401(k) plans and stock ownership plans. Executive
        shall also be entitled to reimbursement of all expenses.

      


      (g)        Resignation
        from Board. Upon any termination of the Executive’s employment
        hereunder, the Executive shall be deemed to have resigned as a member of
        the
        Board of the Company or any subsidiaries on which he serves, including any
        committees thereof, effective as of his date of termination.

      


      


      
        	
                10.

              	
                Definitions.
                  The meaning of certain terms in this Agreement are as
                  follows:

              


      

      


      
        	
                (a)

              	
                “Cause”
                  shall consist of any of the
                  following:

              


      

      


      
        	
                 

              	
                (i)

              	
                the
                  Executive is convicted of, or has pleaded guilty or entered a plea
                  of nolo
                  contendere to, a felony (under the laws of the United States or
                  any state
                  there of);

              


      

      


      
        	
                 

              	
                (ii)

              	
                fraudulent
                  conduct by the Executive in connection with the business or other
                  affairs
                  of the Company or any related company or the theft, embezzlement,
                  or other
                  criminal misappropriation of funds by the Executive from the Company
                  or
                  any related company;

              


      

      


      
        	
                 

              	
                (iii)

              	
                the
                  Executive’s failure to perform the duties of the Chief Executive Officer,
                  after reasonable notice has been provided of such non-performance
                  and, if
                  such failure is curable, Executive has not cured such failure within
                  a
                  reasonable period following such notice;
                  or

              


      

      


      
        	
                 

              	
                (iv)

              	
                the
                  Executive’s failure to comply with reasonable directives of the Board
                  which are communicated to him in writing, after reasonable notice
                  has been
                  provided of such non-performance and, if such failure is curable,
                  Executive has not cured such failure within a reasonable period
                  following
                  such notice.

              


      

      



      
        
          
          

        

        
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                (b)

              	
                “Disability”
                  means the inability of Executive, due to injury, illness, disease
                  or
                  bodily or mental infirmity, to engage in the performance of his
                  material
                  duties of employment with Company as determined in good faith by
                  Company,
                  for (i) any period of ninety (90) consecutive days or (ii) a period
                  of one
                  hundred eighty days (180) in any continuous twenty-four (24) month
                  period,
                  provided that interim returns to work of less than ten (10) consecutive
                  business days in duration shall not be deemed to interfere with
                  a
                  determination of consecutive absent days if the reason for absence
                  before
                  and after the interim return are the same. Benefits to which Executive
                  is
                  entitled under any disability policy or plan provided by Company
                  shall
                  reduce the base salary paid to Executive during any period of Disability
                  on a dollar-for-dollar basis.

              


      

      


      
        	
                 

              	
                (c)

              	
                “Good
                  Reason” means (A) any material reduction in the Base Salary or duties and
                  responsibilities of Executive or (B) any material breach by the
                  Company of
                  this Agreement or any other agreement between Executive and the
                  Company,
                  or any affiliate of’ the Company, that continues without cure for a period
                  of thirty (30) days after notice of such breach is given by Executive
                  to
                  the Company.

              


      

      


      


      11.       Confidential
        Information. During Executive’s employment with the Company and at all
        times after the termination of such employment, regardless of the reason
        for’
such termination, Executive shall hold all Confidential Information relating
        to
        the Company in strict confidence and shall not use, disclose or otherwise
        communicate the Confidential Information to anyone other than the Company
        without the prior written consent of the Company. “Confidential Information”
includes, without limitation, financial information, trade secrets, business
        plans, business methods or practices, market studies, customer lists, referral
        lists and other proprietary business information of the Company. “Confidential
        Information” shall not include information which is or becomes in the public
        domain through no action by Executive or information which is generally
        disclosed by the Company to third parties without restrictions on such third
        parties. Executive shall return all Confidential Information to the Company
        upon
        termination of employment.

      


      12.       Solicitation
        of Customers. During his employment with the Company and for a period
        after the termination of Executive’s employment, regardless of the reason for
        the termination, equal to the greater of (a)one (1) year or (b) the period
        for
        which Executive receives payment of his base salary under Section 9(f) (the
        “Non-Competition Period”), Executive shall not influence or attempt to
        influence, directly or indirectly, any customer of the Company to divert
        its
        business away from the Company.

      


      13.       Soliciting
        Employees. Executive agrees that during his employment with the Company
        and during the Non-Competition Period, he will not directly or indirectly
        solicit any person who is then, or at any time within six months prior thereto
        was, an employee of the Company to work for any person or entity then in
        competition with the Company.

      


      14.       Non-Competition.
        During his employment with the Company and for a one-year period
        after
        termination of Executive’s employment, Executive shall not, directly or
        indirectly, in any capacity:

      



      
        
          
          

        

        
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                (a)

              	
                Engage,
                  own or have any interest in;

              


      

      


      
        	
                 

              	
                (b)

              	
                Manage,
                  operate, join, participate in, accept employment with, render advice
                  to,
                  or become interested in or be connected
                  with;

              


      

      


      
        	
                 

              	
                (c)

              	
                Furnish
                  consultation or advice to; or

              


      

      


      
        	
                 

              	
                (d)

              	
                Permit
                  his name to be used in connection
                  with;

              


      

      


      any
        person or entity that competes with the business of the Company. Notwithstanding
        the foregoing, holding five percent (5%) or less of an interest in the equity,
        stock options or debt of any publicly traded company shall
        not be considered a violation of this Section
        14.

      


      15.       Remedies.
        In the event of a material breach or threatened material breach of Section
        11,
        Section 12, Section 13 or Section 14, Company, in addition to its other remedies
        at law or in equity, shall be entitled to injunctive or other equitable relief
        in order to enforce or prevent any violations of the aforementioned Sections.
        In
        the event of any such material breach, if applicable Company may immediately
        cease payment of Executive’s base salary and the providing to Executive of
        benefits under Section 9(f).

      


      16.       Severability
        and Savings. Each provision in this Agreement is separate. If necessary
        to effectuate the purpose of a particular provision, the Agreement shall
        survive
        the termination of Executive’s employment with the Company. If any provision of
        this Agreement, in whole or in part, is held to he invalid or unenforceable,
        the
        parties agree that any such provision shall be deemed modified to make such
        provision enforceable to the maximum extent permitted by applicable law.
        As to
        any provision held to he invalid or unenforceable, the remaining provisions
        of
        this Agreement shall remain in effect.

      


      17.       Binding
        Effect. This Agreement shall he binding upon and shall inure to the
        benefit of Company and its successors and assigns. This Agreement shall be
        binding upon and inure to the benefit of Executive, his heirs and personal
        representatives. This Agreement is not assignable by Executive.

      


      18.       Indemnification.
        The Company shall defend, indemnify and hold harmless Executive
        (and
        his heirs and personal representatives) in his capacity as an officer and
        director of the Company to the fullest extent permitted by applicable law
        against any losses or damages incurred by Executive in connection with any
        action, suit or proceeding to which Executive may be made a party by reason
        of
        his being or having been an officer or director of the Company, or because
        of
        actions taken by Executive which were believed by Executive to be in the
        best
        interests of the Company and not in violation of applicable law, and Executive
        shall be entitled to be covered by any directors’ and officers’ liability
        insurance policies which the Company maintains for the benefit of its directors
        and officers, subject to the limitations of any such policies. The Company
        shall
        have the right to assume, with legal counsel of its choice, who shall be
        reasonably acceptable to Executive, the defense of Executive in any such
        action,
        suit or proceeding for which the Company is providing indemnification to
        Executive. Should Executive determine to employ separate legal counsel in
        any
        such action, suit or proceeding, any costs and expenses of such separate
        legal
        counsel shall be the sole responsibility of Executive unless the Executive
        shall
        have reasonably concluded, based upon the written of legal counsel to the
        Executive, a copy of which shall be furnished to the Company, that there
        may be
        conflicts in the defenses available to the Executive which are different
        from or
        additional to those available to the Company (if the Company is also a party
        or
        potential party to the claim), in which case the reasonable costs and expenses
        of such separate legal counsel shall he borne by the Company. If the Company
        does not assume the defense of any such action, suit or proceeding, the Company
        shall, upon the request of the Executive, promptly advance or pay any amount
        for
        costs or expenses, including the reasonable fees of counsel retained by
        Executive, incurred by Executive in connection with such action, suit or
        proceeding; provided that Executive agrees in writing to repay any such amounts
        advanced if it is ultimately determined by a court of competent jurisdiction
        that Executive is not entitled to such indemnification. Executive shall be
        entitled to indemnification under this clause regardless of any subsequent
        amendments of the Certificate of Incorporation or By-Laws of the
        Company.

      



      
        
          
          

        

        
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                19.

              	
                Miscellaneous.

              


      

      


      
        	
                 

              	
                (a)

              	
                No
                  provision of this Agreement may be modified, waived or discharged
                  unless
                  such waiver, modification or discharge is agreed to in writing
                  and signed
                  by the Company and Executive. The waiver or non-enforcement by
                  the Company
                  of a breach by Executive of any provision of this Agreement shall
                  not be
                  constructed as a waiver of any subsequent breach by
                  Executive.

              


      

      


      
        	
                 

              	
                (b)

              	
                Any
                  notice under this Agreement must be in writing and delivered personally
                  or
                  by overnight courier, sent by facsimile transmission or mailed
                  by
                  registered or certified mail to the parties at their
                  respective addresses.

              


      

      


      
        	
                 

              	
                (c)

              	
                This
                        Agreement shall be governed by the laws of the State of’ New
                  York.

              


      

      


      
        	
                 

              	
                (d)

              	
                This
                  Agreement may be executed in counterparts, which together shall
                  constitute
                  one Agreement.

              


      

      


      
        	
                 

              	
                (e)

              	
                By
                  their signatures below, the parties acknowledge that they have
                  had
                  sufficient opportunity to read and consider, and that they have
                  carefully
                  read and considered, each provision of this Agreement and that
                  they are
                  voluntarily signing this Agreement.

              


      

      


      
        	
                 

              	
                (f)

              	
                All
                  notices and other communications under this Agreement shall be
                  in writing
                  and may be given by personal delivery, registered or certified
                  mail,
                  postage prepaid, return receipt requested or generally recognized
                  overnight delivery service. Notices shall be sent to the appropriate
                  party
                  at the following addresses:

              


      

      


      
        	
                 

              	
                Executive:

              	
                315 East
                  72 Street

              


      

      Apartment
        18 H

      New
        York,
        NY 10021

      



      
        
          
          

        

        
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                Company:

              	
                255
                  Executive Dr.

              


      

      Suite
        408

      Plainview,
        NY 11803

      Attn:  Ralph
        Balzano, Chairman

      


      All
        such
        notices and communications shall be deemed received upon (a) actual receipt
        by
        addressee or (b) actual delivery to the appropriate address.

      


      
        	
                 

              	
                (g)

              	
                This
                  Agreement may he executed in counterparts, both of which shall
                  be
                  considered an original, but both of which together shall constitute
                  the
                  same instrument.

              


      

      


      
        	
                 

              	
                (h)

              	
                This
                  Agreement contains the complete statement of all arrangements between
                  the
                  parties with respect to its subject matter, supersedes all prior
                  agreements between them with respect to that subject matter, and
                  may not
                  be changed or terminated orally. Any amendment or modification
                  must be in
                  writing and signed by the party to be
                  charged.

              


      

      


      


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

      


      


      
        	 	
                SFG
                  FINANCIAL CORPORATION

              
	 	 	 
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/
                  RALPH BALZANO

              
	 	 	
                Name:
                  Ralph Balzano

              
	 	 	
                Title:
                  Chairman

              
	 	 	 
	 	 	 
	 	 	 
	 	 	
                /s/
                  LEONARD NEUHAUS

              
	 	 	
                Leonard
                  Neuhaus

              


      

      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


      


       

       

      
 

      

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