Document:

EX-10.7

Exhibit 10.7

EMPLOYMENT AGREEMENT

     This Employment Agreement is made and entered into as of this 6th day of January,
2004, by and between THE O’GARA GROUP, INC., an Ohio corporation (the “Company”), and MICHAEL J.
LENNON (the “Executive”).

     WHEREAS, the Executive and the Company desire to embody in this Agreement the terms and
conditions of the Executive’s employment by the Company;

     NOW, THEREFORE, in consideration of the premises and mutual promises contained in this
Agreement, including the compensation paid to the Executive, the parties hereby agree:

ARTICLE 1

Employment, Duties and Responsibilities

     1.1 Employment. The Company shall employ the Executive as Executive Vice President of
the Company and the Chief Operating Officer of Specialized Technical Services, Inc., a wholly owned
subsidiary of the Company (“STS”). The Executive hereby accepts such employment. The Executive
agrees to devote his full business time and best efforts to promote the interests of the Company,
and, if requested by the Board of Directors of the Company, for any subsidiary or affiliate of the
Company.

     1.2 Duties and Responsibilities. The Executive shall have such duties and
responsibilities as are consistent with his position and shall perform such services not
inconsistent with his position as shall, from time to time, be reasonably assigned to him by the
Board of Directors of the Company or any other officer of the Company in a position superior to the
Executive.

ARTICLE 2

Term

     2.1 Term. The term of the Executive’s employment under this Agreement (the “Term”)
shall commence on the date hereof and shall continue until the second (2nd) anniversary
of the date hereof, unless sooner terminated pursuant to Article 5 hereof. Thereafter, the Term
shall continue on a monthly basis unless terminated by either party upon one month’s prior written
notice.

 

 

ARTICLE 3

Compensation

     3.1 Salary, Bonuses and Benefits. As compensation and consideration for the
performance by the Executive of his obligations to the Company under this Agreement, the Executive
shall be entitled to the compensation and benefits described in the attached Exhibit A (subject, in
each case, to the provisions of Article 5 hereof).

     3.2 Expenses. The Company will reimburse the Executive for reasonable
business-related expenses incurred by him in connection with the performance of his duties
hereunder during the Term, subject, however, to the Company’s written policies relating to
business-related expenses as in effect, from time to time, during the Term, a copy of which has
previously been provided to the Executive.

ARTICLE 4

Exclusivity, Confidentiality and Noncompetition

     4.1 Exclusivity, Etc. The Executive agrees to perform his duties, responsibilities
and obligations hereunder efficiently and to the best of his ability. The Executive agrees that he
will devote his entire working time, care and attention and best efforts to such duties,
responsibilities and obligations throughout the Term. The Executive also agrees that he will not
engage in any other business activities pursued for gain, profit or other pecuniary advantage that
are competitive with the activities of the Company. The Executive agrees that all of his
activities as an employee of the Company shall be in conformity with all policies, rules and
regulations and directions of the Company not inconsistent with this Agreement.

     4.2 Other Business Ventures; Noncompetition.

     (a) The term “Confidential Information,” as employed in this Agreement, means, except to the
extent such information is otherwise publicly available and such public availability was not caused
in any manner by the Executive, (i) any object, material, device, substance, data, report, record,
forecast, interpretation or information, whether written or oral, not in the public domain and
relating to or reflecting any product, design, process, procedure, formula, research, idea,
invention, discovery, improvement, equipment, scientific or technical information, method of
production, business plan, financial information, listing of names, addresses or telephone numbers,
trade secret and/or know how, and all matters pertaining thereto, of the Company and its
affiliates, whether or not contained in any written document, which are or have been directly or
indirectly communicated to, acquired by, or learned by the Executive as a result of his
relationship (whether as an employee or otherwise) with the Company or any of its affiliates and
(ii) any analysis, compilation, note, study, sample, drawing, sketch, computer program, computer
file or other document, whether prepared by or under the direction of the Company or any of its
affiliates, the Executive or others, and all copies, facsimiles, replicas, photographs, and
reproductions thereof, which contain, relate to, or reflect any of the aforementioned items.

 

 

     (b) The Executive shall not, directly or indirectly, either disclose any Confidential
Information, except to the extent required in the performance of his duties as an employee of the
Company or use any Confidential Information for the benefit of himself or any person, firm,
corporation, or association other than the Company or any of its affiliates, during the Term or
thereafter.

     (c) All samples, drawings, sketches, documents and written information of any kind reflecting
any of the Confidential Information or relating to the Company’s or any of its affiliates’ business
or products which come into the possession of the Executive shall remain the sole property of the
Company or such affiliate and shall not be copied, photocopied, reprinted or otherwise reproduced
or disseminated by the Executive, except in the performance of his duties as an employee of the
Company. Upon the earlier of the Company’s request therefor or the termination of the Executive’s
employment by the Company, the Executive shall return all such samples, drawings, sketches,
documents and written information, and all copies, facsimiles, replicas, photocopies, and
reproductions of them, to the Company.

     (d) The Executive hereby covenants and agrees to refrain, during the Term hereof and any
extension (including month-to-month extensions) or renewal thereof and for a period of eighteen
(18) months after the date of termination of the Executive’s employment (i) if such termination
during the Term was for Cause (as hereinafter defined) or (ii) if the Executive terminates
employment during the Term on his own volition, from, directly or indirectly, (a) engaging on his
own behalf in a business competitive to the Company or (b) owning any interest in or engaging in or
performing any service for any person, firm, corporation or other entity, either as a partner,
owner, employee, consultant, agent officer, director or shareholder that is competitive with the
Company. The Executive will not at any time during the period of the Executive’s employment by the
Company and for a period of eighteen (18) months thereafter induce or assist others to induce or
attempt to induce, in any manner, directly or indirectly, any employee, agent, representative,
customer or any other person or concern dealing with or in any way associated with the Company or
any of its affiliates to terminate or to modify in any other fashion to the detriment of the
Company or any of its affiliates such association with the Company or any of its affiliates. The
Executive represents that his experience and capabilities are such that the provisions of this
paragraph will not prevent him from earning a livelihood. Notwithstanding any provision of this
Section 4.2(d), it shall not be a violation of this Section 4.2(d) for the Executive to own two
percent (2%) or less of a public company, provided that the Executive does not exert or
have the power to exert any management or other control over such public company.

     (e) The parties hereto agree that the Executive’s agreements contained in paragraph (b)
through (d) of this Article relate to matters of unique character and peculiar value impossible of
replacement, that breach of such agreements by the Executive will cause the Company great and
irreparable injury therefore, that the remedy at law for any breach of the agreements contained
(b) through (d) will be inadequate and that the Company, in addition to any other relief available
to it, shall be entitled to temporary restraining orders and temporary and permanent injunctive
relief or other equitable relief without the necessity of proving actual damage or of providing any
bond so as to prevent a breach of any of the agreements contained in (b) through (d) of this
Article and to secure the enforcement thereof.

 

 

ARTICLE 5

Termination

     5.1 Termination by the Company. The Company shall have the right to terminate the
Executive’s employment at any time, without or without “Cause.” For purposes of this Agreement,
“Cause” shall mean (i) substantial failure by the Executive to undertake a good faith effort to
perform his duties as described in this Agreement, which substantial failure is not cured within
fifteen (15) days after written notice of such failure, (ii) a breach by the Executive of any of
the other terms and conditions of this Agreement, or (iii) pleading no contest or guilty to a
felony charge or being convicted of a felony.

     5.2 Death. In the event the Executive dies during the Term, this Agreement shall
automatically terminate, such termination to be effective on the date of the Executive’s death.

     5.3 Disability. In the event that the Executive shall suffer a disability which shall
have prevented him from performing satisfactorily his obligations hereunder for a period of at
least ninety (90) consecutive days or one hundred eighty (180) non-consecutive days within any
three hundred sixty-five (365) day period, the Company shall have the right to terminate the
Executive’s employment, such termination to be effective upon the giving of notice thereof to the
Executive in accordance with Section 6.3 hereof.

     5.4 Effect of Termination.

     (a) In the event of termination of the Executive’s employment for any reason, the Company
shall pay to the Executive (or his beneficiary, heirs or estate in the event of his death) any base
salary or other compensation in accordance with the normal pay practices of the Company upon a
termination of employees for similar reasons.

     (b) In the event of termination of the Executive’s employment (i) by the Company for Cause,
(ii) by the Executive for any reason, (iii) because of the Executive’s death, or (iv) pursuant to
Section 5.3, because of the Executive’s disability, neither the Executive nor any beneficiary, heir
or estate of the Executive shall be entitled to any further compensation other than the amounts
described in Section 5.4(a) hereof.

     (c) In the event of termination of the Executive’s employment by the Company other than for
Cause, the Company shall pay the Executive, in addition to the amounts described in Section 5.4(a)
hereof, the greater of (i) an amount equal to the value of the continued payment of the Executive’s
base salary for the remainder of the Term (excluding any renewal periods), or (ii) an amount equal
to Executive’s then current base salary for eighteen (18) months (such period, the “Severance
Period”). Such amount shall be payable, at the discretion of the Company, either (A) in a lump sum
or (B) in equal monthly installments. During the Severance Period, Executive shall continue to be
eligible to receive health, prescription drug and dental insurance coverage consistent with that
provided to other executives of the Company, from time to
time, subject to the same limits and deductibles.

 

 

     (d) In the event that the Company fails to offer Executive to renew the terms of this
Agreement for at least one (1) year following the end of the Term at a salary level at least equal
to Executive’s then current base salary, the Company shall pay Executive an amount equal to
Executive’s then current base salary for eighteen (18) months. During such period, Executive shall
be entitled to receive the benefits described in Section 5.4(c) to be received during the Severance
Period.

ARTICLE 6

Miscellaneous

     6.1 Benefit of Agreement; Assignment; Beneficiary.

     (a) This Agreement shall inure to the benefit of and be binding upon the Company and their
successors and assigns (but only to the extent the Agreement relates to such entity), including,
without limitation, any corporation or person which may acquire all or substantially all of the
Company’s assets or business or with or into which the Company may be consolidated or merged. This
Agreement shall also inure to the benefit of, and be enforceable by, the Executive and his personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be payable to the Executive
hereunder if he had continued to live, all such amounts shall be paid in accordance with the terms
of this Agreement to the Executive’s beneficiary, devisee, legatee or other designee, or if there
is no such designee, to the Executive’s estate.

     (b) The Company shall require any successor (whether direct or indirect, by operation of law,
by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no such succession had
taken place.

     6.2 Notices. Any notice required or permitted hereunder shall be in writing and shall
be sufficiently given if personally delivered or if sent by registered or certified mail, postage
prepaid, with return receipt requested, addressed: (a) in the case of the Company to the Chief
Executive Officer of the Company, and (b) in the case of the Executive, to the Executive’s last
known address as reflected in the Company’s records, or to such other address as the Executive
shall designate by written notice to the Company. Any notice given hereunder shall be deemed to
have been given at the time of receipt thereof by the person to whom such notice is given if
personally delivered or at the time of mailing if sent by registered or certified mail.

     6.3 Entire Agreement; Amendment. This Agreement contains the entire agreement of the
parties hereto with respect to the terms and conditions of the Executive’s employment during the
Term and supersedes any and all prior agreements and understandings, whether written or oral,
between the parties hereto with respect to compensation due for services rendered hereunder. This
Agreement may not be changed or modified except by an instrument in writing signed by both of the
parties hereto.

 

 

     6.4 Waiver. The waiver of either party of a breach of any provision of this Agreement
shall not operate or be construed as a continuing waiver or as a consent to or waiver of any
subsequent breach hereof.

     6.5 Headings. The Article and Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.

     6.6 Governing Law. This Agreement shall be governed by, and construed and interpreted
in accordance with, the internal laws of the State of Ohio without reference to the principles of
conflict of laws.

     6.7 Agreement to Take Actions. Each party hereto shall execute and deliver such
documents, certificates, agreements and other instruments and shall take such other actions, as may
be reasonably necessary or desirable in order to perform his or its obligations under this
Agreement or to effectuate the purposes hereof.

     6.8 Venue and Jurisdiction. Any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement may be brought against any of the parties
hereto in the courts of the State of Ohio, County of Hamilton or in the United States District
Court for the Southern District of Ohio, Western Division, and each of the parties hereto consents
to the jurisdiction of such courts (and the appropriate appellate courts) in any such action or
proceeding and waives any objections to venue laid therein.

     6.9 Survivorship. The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to effectuate the intended
preservation of such rights and obligations.

     6.10 Validity. The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other provision or provisions
of this Agreement, which shall remain in full force and effect. If any provision of this Agreement
is held to be invalid, void or unenforceable, any court so holding shall substitute a valid,
enforceable provision that preserves, to the maximum lawful extent, the terms and intent of this
Agreement.

     6.11 Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together will constitute one and the
same instrument.

 

 

          Each of the parties hereto has duly executed this Agreement effective as of the date first
written above.

	 	 	 	 	 
	 	THE O’GARA GROUP, INC.

 	 
	 	By:  	/s/ Wilfred T. O’Gara
 	 
	 	Name: 	Wilfred T. O’Gara 	 
	 	Title: 	CEO 	 
	 
	 	EXECUTIVE:

 	 
	 	/s/ Michael J. Lennon
 	 
	 	Michael J. Lennon 	 
	 	 	 

 

 

	 	 	 	 	 

EXHIBIT A TO EMPLOYMENT AGREEMENT

     The Executive shall receive as compensation for his performance under the attached Employment
Agreement the following:

     (a) Salary. The Company shall pay the Executive a base salary during the Term,
payable in accordance with the normal payment procedures of the Company, subject to such
withholdings and other normal employee deductions as may be required by law, at the annual rate of
not less than $148,000. The Board of Directors of the Company shall review such compensation not
less frequently than annually during the Term, but any adjustment in Executive’s salary may only be
upward.

     (b) Annual Bonus. In addition to base salary, the Executive shall be eligible to earn
incentive compensation (“incentive compensation”). The Company shall pay each fiscal year, or any
fractional period thereof during the Term, incentive compensation as approved by the Board of
Directors of the Company.

     (c) Benefits. The Executive shall participate during the Term in such pension, life
insurance, health, death, disability and major medical insurance plans, and in such other employee
benefit plans and programs, for the benefit of the employees of the Company, as may be maintained,
from time to time, during the Term, in the Company’s discretion, in each case to the extent and in
the manner available to other officers of the Company and subject to the terms and provisions of
such plans or programs. In addition to the employment benefit plans and programs mentioned above
the Company will provide, (i) a term life insurance policy for the Executive with a face value of
$500,000, (ii) a supplemental disability insurance policy (up to an annual premium of $6,000), and
(iii) a car expense reimbursement for travel to and from Beavercreek, OH, of $5,000 per annum.

     (d) Vacation. The Executive shall be entitled to paid vacation of at least four (4)
weeks per annum in accordance with Company policy during the Term.EX-10.8

Exhibit 10.8

[Specialized Technical Services, Inc. Letterhead]

“STRICTLY CONFIDENTIAL”

DATE: 12/4/03

SUBJECT: General Henry H. Shelton Arrangement Summary

The following is a summary of the elements regarding Mr. Henry H. Shelton’s working arrangement
with The O’Gara Group, Inc. of 8180 Corporate Park Drive, Suite 301, Cincinnati, Ohio. This
arrangement will be finalized with a formal agreement and will be effective January 1, 2004.

	 	•	 	Description of Services: Beginning on January 1, 2003, Mr. Shelton will provide the
following services: Participate as a member of The O’Gara Group, Inc. Board of Advisors.
Represent The O’Gara Group, Inc. (TOG) and Specialized Technical Services, Inc. (STS) in
both the US and International military marketplace.
	 
	 	•	 	Performance of Services: TOG & STS will rely on Mr. Shelton to work as many hours as may
be reasonably necessary to fulfill the intent of this arrangement.
	 
	 	•	 	Payment for Services: As a member of the Board of Advisors Mr. Shelton will receive an
annual retainer of $16,000 to be paid quarterly. Mr. Shelton will receive $1,000 for each
Board meeting attended in person and $250 for each meeting attended telephonically.
Transportation to and from board meetings held outside the Washington D.C. area will be
provided by The O’Gara Group. Any additional expenses related to board meetings will be
paid by The O’Gara Group. In addition, the O’Gara Group will pay a fee of $7,000 per month
to Mr. Shelton for the Services of representing TOG and STS and assisting it to grow
revenues and the company, in general. This fee will be paid monthly during the first week
of the month following the period during which the Services were performed.
	 
	 	•	 	Commission Payments: A sales commission will be paid to Mr. Shelton for each award made
to TOG/STS that Mr. Shelton has developed and is instrumental in bringing to fruition.
Commissions will be paid at the following percentage of gross sales a) for orders totaling
less than $100,000 the commission rate will be 5%, b) for orders $100,000 up to $500,000
the commission rate will be 4%, c) and for orders totaling greater than $500,000 the
commission rate will be 3%. In the event there are multiple individuals involved in the
sales process, the portion of the total commission (calculated as noted above) paid to each
party involved will be determined based on the amount of effort/influence each party has on
the overall outcome of the award. Chip Lennon will determine any split of the commission
payments required at the time of contract award. Commissions will be paid when STS
receives full payment from the customer for the order.

 

 

	 	•	 	Equity Participation: In addition to the retainer and sales commissions, a stock option
grant will be made annually to Mr. Shelton for Services provided. The amount of the stock
option grant is to be in line with current public company practices as noted in attached
memo from Bill O’Gara which references recent industry survey on Board member compensation.
Mr. Shelton will be granted one tenth of a share of stock in TOG at the current valuation
of $1,300 per share. The stock options would vest immediately and could be exercised in
the event of a liquidating event in the next five years or converted if the company is
taken public.
	 
	 	•	 	Relationship of Parties: It is understood by all parties that Mr. Shelton is an
independent contractor with respect to TOG and STS and not an employee. As such, any
normal employee benefits will not be provided as part of this arrangement.
	 
	 	•	 	Termination: Either party may terminate this agreement at any time upon 15 days prior
written notice to the other party.

	 	 	 	 	 
	 	 	 
	 	                                            /s/ Chip Lennon
 	 
	Tom O’Gara 	                           Chip Lennon 	 
	Chairman & CEO, The O’Gara Group	      Executive VP, The O’Gara Group

and President, STS

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