Document:

Exhibit
10.10

 

EMPLOYMENT AGREEMENT

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

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

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

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

2.  EMPLOYMENT.

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

 

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

 

3.  COMPENSATION AND BENEFITS.

3.1.  Base Salary.  For services rendered by Executive under this
Agreement, the Company shall pay Executive a minimum base salary of $250,000
per year (“Base Salary”).  The Company’s
Chief Executive Officer shall review and Executive’s Base Salary on an annual
basis and may, in his sole discretion, increase the Base Salary from time to
time in such amounts as may determined by him. 
Said Base Salary shall be

 

1

 

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

 

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

 

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

 

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

 

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

 

4.  SUPPORT AND EXPENSES

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

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

5.  TERMINATION.

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

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

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

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

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

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

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

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

 

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

 

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

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

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

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

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

6.  GENERAL PROVISIONS.

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

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

	
  To the Company:

  	
   

  	
  American Defense Systems,
  Inc.

  
	
   

  	
   

  	
  230 Duffy Ave., Unit C

  
	
   

  	
   

  	
  Hicksville, NY 11801

  
	
   

  	
   

  	
   

  
	
  To Executive:

  	
   

  	
  [INSERT APPLICABLE ADDRESS]

  

 

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

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

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

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

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

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

 

American Defense Systems, Inc. 

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Anthony J. Piscitelli

  	
   

  	
  /s/ John F. Rutledge

  	
   

  
	
   

  	
  Anthony J. Piscitelli

  	
   

  	
  John F. Rutledge

  	
   

  
	
   

  	
  Chief Executive Officer

  	
   

  	
   

  	
   

  

 

8

 

SCHEDULE
A

JOHN F.
RUTLEDGE EMPLOYMENT AGREEMENT

 

3.2.  Bonus(es).

 

3.2.1.  Commissions.  For the fiscal year 2007, Executive shall be
entitled to receive commissions in the amount of 1.5% of all military vehicular
armor sales revenue in excess of $33 million collected by the Company in fiscal
year 2007.  All commissions shall be paid
out to the Executive within 90 days of the end of fiscal year 2007.  If otherwise eligible, Executive need not be
employed by the Company at the time the 2007 commissions are calculated and/or
paid out in order to receive the 2007 commissions.  The commissions formula shall be adjusted on
an annual basis for each fiscal year after fiscal year 2007.  In adjusting the formula, the Company shall
seek input from Executive and shall determine the appropriate adjusted formula
reasonably and in good faith.

 

3.5 Benefits.

 

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

 

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

 

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

 

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

 

9Exhibit 10.11

                                                                    EMPLOYMENT
AGREEMENT

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

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

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

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

2.  EMPLOYMENT.

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

 

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

 

3.  COMPENSATION AND BENEFITS.

3.1.  Base Salary.  For services rendered by Executive under this
Agreement, the Company shall pay Executive a minimum base salary of $186,300
per year (“Base Salary”).  The Company’s
Chief Executive Officer  shall review
and Executive’s Base Salary on an annual basis and may, in his sole discretion,
increase the Base Salary from time to time in such amounts as may determined by
him.  Said Base Salary shall be

 

1

 

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

 

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

 

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

 

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

 

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

 

4.  SUPPORT AND EXPENSES

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

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

5.  TERMINATION.

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

2

 

date
of his death, including without limitation those set forth in Section 5.1 of
Schedule A hereto.

5.2.  Termination Due to Disability.  The Company shall have the right to terminate
Executive’s employment due to his Disability, in which event the Company shall
promptly pay him all compensation, expenses and other amounts owed to him as of
the Date of Termination (as defined in Section 5.10 below), including without
limitation those set forth in Section 5.2 of Schedule A hereto.  “Disability” for purposes of this Section
shall mean Executive is unable to perform the essential functions of his
position with or without accommodation due to a disability (as such term is
defined in the Americans with Disabilities Act) for at least six months in the
aggregate during any twelve month period. 
This definition shall be interpreted and applied consistent with the
Americans with Disabilities Act and other applicable laws.

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

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

3

 

operation of this sentence) as a result of
the acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities owned by the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;  (ii) there is
consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company if, immediately after the consummation of such
merger, consolidation or similar transaction, the stockholders of the Company
immediately prior thereto do not own, directly or indirectly, either (A)
outstanding voting securities representing more than fifty percent (50%) of the
combined outstanding voting power of the surviving entity in such merger,
consolidation or similar transaction or (B) more than fifty percent (50%) of
the combined outstanding voting power of the parent of the surviving entity in
such merger, consolidation or similar transaction; (iii)  there is consummated a sale, lease, license
or other disposition of all or substantially all of the consolidated assets of
the Company and its subsidiaries, other than a sale, lease, license or other
disposition of all or substantially all of the consolidated assets of the
Company and its subsidiaries to an entity, more than fifty percent (50%) of the
combined voting power of the voting securities of which are owned by stockholders
of the Company in substantially the same proportion as their ownership of the
Company immediately prior to such sale, lease, license or other disposition; or
(iv)  during any period of 12 consecutive
months, individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by stockholders, of
each new director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of the
period.  In addition, upon termination
without Cause, the Company shall be obligated to provide Executive any
additional benefits set forth in Section 5.4 of Schedule A hereto.

 

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

5.6.  Termination by Executive for Good Reason.  Executive shall have the right to terminate
his employment for Good Reason, in which event he shall be entitled to receive
the same payments and benefits specified in Section 5.4 of this Agreement.  “Good

 

4

 

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

 

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

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

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

5.10.  Notice of Termination. 
Any purported termination of Executive’s employment by the Company for
any reason, or by Executive for any reason, shall be communicated by a written “Notice
of Termination” to the other Party.  A “Notice
of Termination” shall mean a dated notice that: (a) indicates the specific
termination provision in this Agreement relied on; (b) sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of Executive’s employment

5

 

under
the provision so indicated; (c) specifies a Date of Termination; and (d) is
given in the manner specified in Section 6.2. 
“Date of Termination” shall mean the later of: (i) the date specified in
the Notice of Termination required by this Section; and (ii) the date Notice of
Termination is deemed to have been duly given in accordance with Section 6.2 of
this Agreement.

6.  GENERAL PROVISIONS.

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

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

	
  To the Company:

  	
   

  	
  American
  Defense Systems, Inc.

  
	
   

  	
   

  	
  230
  Duffy Ave., Unit C

  
	
   

  	
   

  	
  Hicksville,
  NY 11801

  
	
   

  	
   

  	
   

  
	
  To
  Executive:

  	
   

  	
  [INSERT
  APPLICABLE ADDRESS]

  
	
   

  	
   

  	
   

  

 

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

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

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

6

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

mediation,
whichever occurs first.  The mediation
may continue after the commencement of arbitration if the Parties so
agree.  Unless otherwise agreed by the
Parties, the mediator shall be disqualified from serving as arbitrator.  The arbitrator may, in the
award, allocate all or part of the costs, fees and expenses of the arbitration,
including the arbitrator’s fees and the prevailing Party’s attorneys’
fees.  Judgment on the arbitration award
may be entered in any court having jurisdiction.  The
provisions of this Section may be enforced by any court of competent
jurisdiction, and the Party seeking enforcement shall be entitled to an award
of all costs, fees and expenses, including attorneys’ fees, to be paid by the
Party against whom enforcement is ordered.

 

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

 

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

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

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

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

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

 

American Defense Systems, Inc. 

 

	
  By:

  	
  /s/ Anthony J. Piscitelli

  	
   

  	
  /s/ Curtis Taufman 

  	
   

  
	
   

  	
  Anthony J. Piscitelli

  	
   

  	
  Curtis Taufman

  	
   

  
	
   

  	
  Chief Executive Officer

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

8

 

SCHEDULE
A

CURTIS
TAUFMAN EMPLOYMENT AGREEMENT

 

3.2.  Bonus(es).  Executive shall be entitled to earn and be
paid an annual bonus each fiscal year (“Annual Bonus”), which shall be not less
than an amount equal to 2.5% of the Company’s increase in net income before
extraordinary and non-recurring items and income taxes over the prior fiscal
year.  The Annual Bonus shall be paid in
cash not later than the ninetieth (90th) day following the last day
of the fiscal year with respect to which such Annual Bonus was earned and in a
manner in accordance with the Company’s regular payroll practices for executive
employees.  Executive shall also be
eligible for additional bonuses based on his performance.  The payment of the Annual Bonus and any other
bonus(es) shall be prorated for any partial fiscal year during the Term.  The Company shall determine, reasonably and
in good faith, the amount of the Annual Bonus and any other bonus(es).  If otherwise eligible, Executive: (a) need
not be employed by the Company at the time the Annual Bonus or other bonus(es)
is/are calculated and/or paid out in order to receive the Annual Bonus or such
other bonus(es), as applicable; and (b) is entitled to a pro-rated portion of
the Annual Bonus and such other bonus(es) if his employment terminates for any
reason before the end of the applicable fiscal year.

 

3.5.  Benefits.

 

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

 

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

 

3.5.3.  Life Insurance.  If the Company has not done so already,
promptly following the execution of this Agreement, the Company shall acquire a
$1,000,000 term life insurance policy on Executive’s life.  So long as Executive is employed by the
Company, the Company shall pay the premiums on such policy as and when due and
shall maintain the policy in full force and effect and Executive shall have the
right to designate the beneficiary/ies under such policy.  In the event that the Company terminates
Executive’s employment without Cause or Executive terminates his employment for
Good Reason, the Company shall promptly assign the policy.  The Company shall not, at any time, pledge or
otherwise encumber the policy.

 

9

 

3.5.3.  Long-Term Disability Insurance and Disability
Benefits.  If the
Company has not done so already, promptly following the execution of this
Agreement, the Company shall acquire a disability insurance policy with respect
to Executive and shall maintain such policy in full force and effect during the
Term.  Such policy shall provide for the
payment of Executive’s Base Salary for a period of not less than two years from
the date of disability (calculated after giving effect to any exclusion period)
regardless of whether that two-year period extends beyond the Term.  To the extent such payments are unavailable
under the terms of the policy, the Company shall provide such payments to
Executive directly.  Except as otherwise
set forth herein, any determination of disability shall be made in a manner
consistent with the manner provided for in the policy.  If the policy has been terminated or
cancelled, any determination of disability shall be made in a manner consistent
with the definition of “Disability” in Section 5.2.

 

5.  Benefits Upon Termination.

 

5.1.  Termination Due to Executive’s Death.  In the event of Executive’s death during the
Term, Executive’s family shall be entitled to receive benefits at least equal
to those provided by the Company to surviving families of executives of the
Company in comparable positions under such plans, programs and policies
relating to family death benefits, if any. 
Executive’s family shall also be entitled to receive the prior years’
bonuses or any portion thereof remaining unpaid at the time of Executive’s
death, plus a current year’s bonus equal to the product of the prior year’s
bonus multiplied by a fraction, the numerator of which is the number of months
Executive was employed during the year of death and the denominator of which is
twelve.  The Company shall make payments
required pursuant to this section to Executive’s family as soon as practicable
following Executive’s death, and in any event, within 30 days thereafter.

 

5.2.  Termination Due to Executive’s Disability.  If Executive’s employment is terminated during
the Term by reason of Executive’s Disability, the Company shall pay Executive,
in addition to any accrued benefits payable hereunder, a lump sum amount equal
to one year’s annual salary in effect at the time of Executive’s
Disability.  Executive also shall be
entitled to receive benefits equal to those provided by the Company to disabled
employees of the Company in accordance with such plans, programs and policies
relating to disability, if any. 
Executive also shall be entitled to receive the prior years’ bonuses or
any portion thereof remaining unpaid at the time of Executive’s termination,
plus a current year’s bonus equal to the product of the prior year’s bonus
multiplied by a fraction, the numerator of which is the number of months
Executive was employed during the year of termination and the denominator of
which is twelve.  Executive shall not be
entitled to any salary or bonus payments hereunder if Executive’s Disability is
self-induced through drugs or alcohol.

 

5.4
(Termination by the Company Without Cause) and 5.6 (Termination by Executive
for Good Reason).  Executive shall
be entitled to the following additional benefits in the event of termination of
his employment under Section 5.4 or 5.6: (a) The Company shall pay Executive on
the Date of

 

10

 

Termination a lump sum amount equal to: (i)
the prior year’s Bonus(es) or any portion thereof remaining unpaid as of the
Date of Termination; and (ii) two times the average of the two prior years’
Bonuses; (b) for a period of 24 months following the Date of Termination, the
Company shall continue benefits (or equivalent coverage) to Executive and
Executive’s family at least equal to those which would have been provided to
them in accordance with the plans, programs and policies in effect as of the
Date of Termination; (c) for a period of 24 months following the Date of
Termination, the Company shall furnish Executive with office space in Nassau
County, New York that is comparable to the office space now occupied by
Executive; provided, however, that the Company’s obligation to provide such
office space shall terminate upon Executive’s commencement of other employment;
and (d) all options to purchase shares of the Company’s Common Stock held by
Executive shall vest and be subject to immediate exercise by Executive,
notwithstanding any provision in the Stock Option Plan or any option award
certificate issued to Executive to the contrary; and, if Executive informs the
Company that he does not intend to exercise any or all options held by the
Executive, the Company shall pay Executive a lump sum in an amount equal to the
value of the options that Executive does not exercise; the value of the
unexercised options shall be determined as of the Date of Termination, using
the Black-Scholes option pricing method with the following assumptions: a
dividend yield of 0%; volatility equal to the volatility assumed for the
Company’s most recent ended fiscal year as specified in the audited financial
statements for such fiscal year; a risk free interest rate equal to the
interest rate borne by 90-day Treasury Bills as of the Date of Termination; and
an expected holding period equal to the remaining duration of the unexercised
options.

 

6.4.  Tax Treatment of Payments
and/or Benefits.  If Executive is
subject to a federal excise tax on all or any part of any payment made pursuant
to this Agreement under Code Section 4999 (or any successor thereto), the
Company shall pay Executive an additional amount sufficient, considering the state
and federal income and other taxes that Executive will be required to pay with
respect to such additional amount, to provide Executive on an after-tax basis
an amount equal to the amounts to be paid to Executive under this Agreement
without regard to such excise tax.

11

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