Document:

SECURITY AGREEMENT

 

DATE AND PARTIES. The date of this Security Agreement (Agreement) is December 30, 2011.  The parties and their addresses are:  

 

SECURED PARTY:

CARDINAL BANK

8270 Greensboro Drive

Suite 500

McLean, VA  22102

 

DEBTOR:

WIDEPOINT CORPORATION

a Delaware corporation

18W100 22nd Street, Suite 124

Oakbrook Terrace, Illinois 60181

 

WIDEPOINT SOLUTIONS CORP.

a Delaware corporation

18W100 22nd Street, Suite 124

Oakbrook Terrace, Illinois 60181

WIDEPOINT IL, INC.

an Illinois corporation

18W100 22nd Street, Suite 124

Oakbrook Terrace, Illinois 60181

WIDEPOINT NBIL, INC.

an Illinois corporation

18W100 22nd Street, Suite 124

Oakbrook Terrace, Illinois 60181

ADVANCED RESPONSE CONCEPTS CORPORATION

a Delaware corporation

18W100 22nd Street, Suite 124

Oakbrook Terrace, Illinois 60181

PROTEXX TECHNOLOGY CORPORATION

a Delaware corporation

18W100 22nd Street, Suite 124

Oakbrook Terrace, Illinois 60181

OPERATIONAL RESEARCH CONSULTANTS, INC.

a Virginia corporation

11250 Waples Mills, South Tower

Suite 250

Fairfax, Virginia 22030

ISYS LLC

a Virginia limited liability company

7926 Jones Branch Drive, Suite 520

McLean, Virginia 22102

WIDEPOINT OHIO REAL ESTATE CORP.

an Ohio corporation

18W100 22nd Street, Suite 124

Oakbrook Terrace, Illinois 60181

 

	
{00078873;v1}WidePoint Corporation

	  	  
	
Virginia Security Agreement

	  	
Initials ______

	
VA/4symathon00225400007854025122211Y

	
Wolters Kluwer Financial Services -1996, 2011 Bankers Systems*

	
Page 1

  

  

  

 

The pronouns "you" and "your" refer to the Secured Party.  The pronouns "I," "me" and "my" refer to each person or entity signing this Agreement as Debtor and agreeing to give the Property described in this Agreement as security for the Secured Debts.

 

1. SECURED DEBTS.  The term "Secured Debts" includes and this Agreement will secure each of the following:

 

A. Specific Debts.  The following debts and all extensions, renewals, refinancings, modifications and replacements.  Promissory notes and other agreements dated December 30, 2011, from me to you, in the amount of $8,000,000 and $4,000,000.00.  

 

B. Sums Advanced.  All sums advanced and expenses incurred by you under the terms of this Agreement.  

 

Loan Documents refer to all the documents executed in connection with the Secured Debts.  

 

2. SECURITY INTEREST.  To secure the payment and performance of the Secured Debts, I give you a security interest in all of the Property described in this Agreement that I own or have sufficient rights in which to transfer an interest, now or in the future, wherever the Property is or will be located, and all proceeds and products from the Property (including, but not limited to, all parts, accessories, repairs, replacements, improvements, and accessions to the Property).  Property is all the collateral given as security for the Secured Debts and described in this Agreement, and includes all obligations that support the payment or performance of the Property.  "Proceeds" includes cash proceeds, non-cash proceeds and anything acquired upon the sale, lease, license, exchange, or other disposition of the Property; any rights and claims arising from the Property; and any collections and distributions on account of the Property.  

 

This Agreement remains in effect until terminated in writing, even if the Secured Debts are paid and you are no longer obligated to advance funds to me under any loan or credit agreement.

 

3. PROPERTY DESCRIPTION.  The Property is described as follows:  

 

4. WARRANTIES AND REPRESENTATIONS.  I make to you the following warranties and representations which will continue as long as this Agreement is in effect: 

 

A. Power.  I am duly organized, and validly existing and in good standing in all jurisdictions in which I operate.  I have the power and authority to enter into this transaction and to carry on my business or activity as it is now being conducted and, as applicable, am qualified to do so in each jurisdiction in which I operate.  

 

B. Authority.  The execution, delivery and performance of this Agreement and the obligation evidenced by this Agreement are within my powers, have been duly authorized, have received all necessary governmental approval, will not violate any provision of law, or order of court or governmental agency, and will not violate any agreement to which I am a party or to which I am or any of my property is subject. 

 

C. Name and Location.  My name indicated in the DATE AND PARTIES section is my exact legal name.  WidePoint Corporation is an organization registered under the laws of Delaware.  Widepoint Solutions Corp. is an organization registered under the laws of Delaware. Widepoint IL, Inc. is an organization registered under the laws of Illinois.  WIDEPOINT NBIL, Inc. is an organization registered under the laws of Illinois.  Advanced Response Concepts Corporation is an organization registered under the laws of Delaware. Protexx Technology Corporation is an organization registered under the laws of Delaware.  Operational Research Consultants, Inc. is an organization registered under the laws of Virginia.  iSYS, LLC is an organization registered under the laws of Virginia. Widepoint Ohio Real Estate Corp. is an organization registered under the laws of Ohio. I will provide verification of registration and location upon your request.  I will provide you with at least 30 days notice prior to any change in my name, address, or state of organization or registration.  

 

D. Business Name.  Other than previously disclosed in writing to you I have not changed my name or principal place of business within the last 10 years and have not used any other trade or fictitious name.  Without your prior written consent, I do not and will not use any other name and will preserve my existing name, trade names and franchises.

 

E. Ownership of Property.  To the extent this is a Purchase Money Security Interest, I will acquire ownership of the Property with the proceeds of the Purchase Money Loan.  Your claim to the Property is ahead of the claims of any other creditor, except as disclosed in writing to you prior to any advance on the Secured Debts.  I represent that I am the original owner of the Property and, if I am not, that I have provided you with a list of prior owners of the Property.  

 

5. DUTIES TOWARD PROPERTY.  

 

A. Protection of Secured Party's Interest.  I will defend the Property against any other claim.  I agree to do whatever you require to protect your security interest and to keep your claim in the Property ahead of the claims of other creditors. I will not do anything to harm your position.

 

I will keep books, records and accounts about the Property and my business in general. I will let you examine these and make copies at any reasonable time. I will prepare any report or accounting you request which deals with the Property.

 

B. Use, Location, and Protection of the Property.  I will keep the Property in my possession and in good repair.  I will use it only for commercial purposes.  I will not change this specified use without your prior written consent.  You have the right of reasonable access to inspect the Property and I will immediately inform you of any loss or damage to the Property.  I will not cause or permit waste to the Property.  

 

I will keep the Property at my address listed in the DATE AND PARTIES section unless we agree I may keep it at another location.  If the Property is to be used in other states, I will give you a list of those states.  The location of the Property is given to aid in the identification of the Property.  It does not in any way limit the scope of the security interest granted to you.  I will notify you in writing and obtain your prior written consent to any change in location of any of the Property.  I will not use the Property in violation of any law.  I will notify you in writing prior to any change in my address, name or, if an organization, any change in my identity or structure.   

 

Until the Secured Debts are fully paid and this Agreement is terminated, I will not grant a security interest in any of the Property without your prior written consent.  I will pay all taxes and assessments levied or assessed against me or the Property and provide timely proof of payment of these taxes and assessments upon request.  

 

	
{00078873;v1}WidePoint Corporation

	  	  
	
Virginia Security Agreement

	  	
Initials ______

	
VA/4symathon00225400007854025122211Y

	
Wolters Kluwer Financial Services -1996, 2011 Bankers Systems*

	
Page 2

  

  

  

 

C. Selling, Leasing or Encumbering the Property.  I will not sell, offer to sell, lease, or otherwise transfer or encumber the Property without your prior written permission, except for Inventory sold in the ordinary course of business at fair market value, or at a minimum price established between you and me.  If I am in default under this Agreement, I may not sell the Inventory portion of the Property even in the ordinary course of business.  Any disposition of the Property contrary to this Agreement will violate your rights.  Your permission to sell the Property may be reasonably withheld without regard to the creditworthiness of any buyer or transferee.  I will not permit the Property to be the subject of any court order affecting my rights to the Property in any action by anyone other than you.  If the Property includes chattel paper or instruments, either as original collateral or as proceeds of the Property, I will note your security interest on the face of the chattel paper or instruments.  

 

D. Additional Duties Specific to Accounts.  I will not settle any Account for less than its full value without your written permission.  Until you tell me otherwise, I will collect all Accounts in the ordinary course of business.  I will not dispose of the Accounts by assignment without your prior written consent.  I will keep the proceeds from all the Accounts and any goods which are returned to me or which I take back.  I will not commingle them with any of my other property.  I will deliver the Accounts to you at your request.  If you ask me to pay you the full price on any returned items or items retaken by me, I will do so.  I will make no material change in the terms of any Account, and I will give you any statements, reports, certificates, lists of Account Debtors (showing names, addresses and amounts owing), invoices applicable to each Account, and other data in any way pertaining to the Accounts as you may request. 

 

6. INSURANCE.  I agree to keep the Property insured against the risks reasonably associated with the Property.  I will maintain this insurance in the amounts you require.  This insurance will last until the Property is released from this Agreement.  I may choose the insurance company, subject to your approval, which will not be unreasonably withheld.  

 

I will have the insurance company name you as loss payee on any insurance policy.  I will give you and the insurance company immediate notice of any loss.  You may apply the insurance proceeds toward what is owed on the Secured Debts.  You may require added security as a condition of permitting any insurance proceeds to be used to repair or replace the Property.  

 

If you acquire the Property in damaged condition, my right to any insurance policies and proceeds will pass to you to the extent of the Secured Debts.  

 

I will immediately notify you of cancellation or termination of insurance.  If I fail to keep the Property insured, you may obtain insurance to protect your interest in the Property and I will pay for the insurance on your demand.  You may demand that I pay for the insurance all at once, or you may add the insurance premiums to the balance of the Secured Debts and charge interest on it at the rate that applies to the Secured Debts.  This insurance may include coverages not originally required of me, may be written by a company other than one I would choose, and may be written at a higher rate than I could obtain if I purchased the insurance.  I acknowledge and agree that you or one of your affiliates may receive commissions on the purchase of this insurance.  

 

7. COLLECTION RIGHTS OF THE SECURED PARTY.  Account Debtor means the person who is obligated on an account, chattel paper, or general intangible.  I authorize you to notify my Account Debtors of your security interest and to deal with the Account Debtors' obligations at your discretion.  You may enforce the obligations of an Account Debtor, exercising any of my rights with respect to the Account Debtors' obligations to make payment or otherwise render performance to me, including the enforcement of any security interest that secures such obligations.  You may apply proceeds received from the Account Debtors to the Secured Debts or you may release such proceeds to me.  

 

I specifically and irrevocably authorize you to exercise any of the following powers at my expense, without limitation, until the Secured Debts are paid in full:

 

A. demand payment and enforce collection from any Account Debtor or Obligor by suit or otherwise.  

 

B. enforce any security interest, lien or encumbrance given to secure the payment or performance of any Account Debtor or any obligation constituting Property.  

 

C. file proofs of claim or similar documents in the event of bankruptcy, insolvency or death of any person obligated as an Account Debtor.  

 

D. compromise, release, extend, or exchange any indebtedness of an Account Debtor.  

 

E. take control of any proceeds of the Account Debtors' obligations and any returned or repossessed goods.  

 

F. endorse all payments by any Account Debtor which may come into your possession as payable to me.  

 

G. deal in all respects as the holder and owner of the Account Debtors' obligations.  

 

8. AUTHORITY TO PERFORM.  I authorize you to do anything you deem reasonably necessary to protect the Property, and perfect and continue your security interest in the Property.  If I fail to perform any of my duties under this Agreement or any other Loan Document, you are authorized, without notice to me, to perform the duties or cause them to be performed.  

 

These authorizations include, but are not limited to, permission to:  

 

A. pay and discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Property.  

 

B. pay any rents or other charges under any lease affecting the Property.  

 

C. order and pay for the repair, maintenance and preservation of the Property.  

 

D. file any financing statements on my behalf and pay for filing and recording fees pertaining to the Property.  

 

E. place a note on any chattel paper indicating your interest in the Property.  

 

F. take any action you feel necessary to realize on the Property, including performing any part of a contract or endorsing it in my name.  

 

G. handle any suits or other proceedings involving the Property in my name.  

 

H. prepare, file, and sign my name to any necessary reports or accountings.  

 

I. make an entry on my books and records showing the existence of this Agreement.  

 

J. notify any Account Debtor of your interest in the Property and tell the Account Debtor to make payments to you or someone else you name.  

 

If you perform for me, you will use reasonable care.  If you exercise the care and follow the procedures that you generally apply to the collection of obligations owed to you, you will be deemed to be using reasonable care.  Reasonable care will not include:  any steps necessary to preserve rights against prior parties; the duty to send notices, perform services or take any other action in connection with the management of the Property; or the duty to protect, preserve or maintain any security interest given to others by me or other parties.  Your authorization to perform for me will not create an obligation to perform and your failure to perform will not preclude you from exercising any other rights under the law or this Agreement.  All cash and non-cash proceeds of the Property may be applied by you only upon your actual receipt of cash proceeds against such of the Secured Debts, matured or unmatured, as you determine in your sole discretion.

 

	
{00078873;v1}WidePoint Corporation

	  	  
	
Virginia Security Agreement

	  	
Initials ______

	
VA/4symathon00225400007854025122211Y

	
Wolters Kluwer Financial Services -1996, 2011 Bankers Systems*

	
Page 3

  

  

  

 

If you come into actual or constructive possession of the Property, you will preserve and protect the Property.  For purposes of this paragraph, you will be in actual possession of the Property only when you have physical, immediate and exclusive control over the Property and you have affirmatively accepted that control.  You will be in constructive possession of the Property only when you have both the power and the intent to exercise control over the Property.

 

9. PURCHASE MONEY SECURITY INTEREST.  This Agreement creates a Purchase Money Security Interest to the extent you are making advances or giving value to me to acquire rights in or the use of collateral and I in fact use the value given for that purpose.  Purchase Money Loan means any loan or advance used to acquire rights in or the use of any Property.  The portion of the Property purchased with loan proceeds will remain subject to the Purchase Money Security Interest until the Secured Debts are paid in full. I authorize you, at your option, to disburse the loan proceeds directly to the seller of the Property. Payments on any non-Purchase Money Loan also secured by this Agreement will not be applied to the Purchase Money Loan.  Payments on the Purchase Money Loan will be applied first to the non-purchase money portion of the loan, if any, and then to the purchase money portion in the order in which the purchase money Property was acquired.  If the purchase money Property was acquired at the same time, then payments will be applied in the order you select.  No security interest will be terminated by application of this formula.

 

10. DEFAULT.  I will be in default if any of the following events (known separately and collectively as an Event of Default) occur:  

 

A. Payments.  I fail to make a payment in full when due.  

 

B. Insolvency or Bankruptcy.  The death, dissolution or insolvency of, appointment of a receiver by or on behalf of, application of any debtor relief law, the assignment for the benefit of creditors by or on behalf of, the voluntary or involuntary termination of existence by, or the commencement of any proceeding under any present or future federal or state insolvency, bankruptcy, reorganization, composition or debtor relief law by or against me, Obligor, or any co-signer, endorser, surety or guarantor of this Agreement or any other obligations Obligor has with you.

 

C. Business Termination.  I merge, dissolve, reorganize, end my business or existence, or a partner or majority owner dies or is declared legally incompetent. 

 

D. Failure to Perform.  I fail to perform any condition or to keep any promise or covenant of this Agreement.  

 

E. Other Documents.  A default occurs under the terms of any other Loan Document. 

 

F. Other Agreements.  I am in default on any other debt or agreement I have with you. 

 

G. Misrepresentation.  I make any verbal or written statement or provide any financial information that is untrue, inaccurate, or conceals a material fact at the time it is made or provided.  

 

H. Judgment.  I fail to satisfy or appeal any judgment against me. 

 

I. Forfeiture.  The Property is used in a manner or for a purpose that threatens confiscation by a legal authority. 

 

J. Name Change.  I change my name or assume an additional name without notifying you before making such a change. 

 

K. Property Transfer.  I transfer all or a substantial part of my money or property. 

 

L. Property Value.  You determine in good faith that the value of the Property has declined or is impaired.  

 

M. Material Change.  Without first notifying you, there is a material change in my business, including ownership, management, and financial conditions. 

 

N. Insecurity.  You determine in good faith that a material adverse change has occurred in my financial condition from the conditions set forth in my most recent financial statement before the date of this Agreement or that the prospect for payment or performance of the Secured Debts is impaired for any reason.

 

11. DUE ON SALE OR ENCUMBRANCE.  You may, at your option, declare the entire balance of this Agreement to be immediately due and payable upon the creation of, or contract for the creation of, any lien, encumbrance, transfer or sale of all or any part of the Property.  This right is subject to the restrictions imposed by federal law (12 C.F.R. 591), as applicable.  However, if I am in default under this Agreement, I may not sell the inventory portion of the Property even in the ordinary course of business.  

 

12. REMEDIES.  After I default, you may at your option do any one or more of the following.  

 

A. Acceleration.  You may make all or any part of the amount owing by the terms of the Secured Debts immediately due.   

 

B. Sources.  You may use any and all remedies you have under state or federal law or in any Loan Document.  

 

C. Insurance Benefits.  You may make a claim for any and all insurance benefits or refunds that may be available on my default.

 

D. Payments Made On My Behalf.  Amounts advanced on my behalf will be immediately due and may be added to the Secured Debts.  

 

E. Assembly of Property.  You may require me to gather the Property and make it available to you in a reasonable fashion.

 

F. Repossession.  You may repossess the Property so long as the repossession does not involve a breach of the peace.  You may sell, lease or otherwise dispose of the Property as provided by law.  You may apply what you receive from the disposition of the Property to your expenses, your reasonable attorneys' fees and legal expenses (where not prohibited by law), and any debt I owe you.  If what you receive from the disposition of the Property does not satisfy the debt, I will be liable for the deficiency (where permitted by law).  In some cases, you may keep the Property to satisfy the debt.  

 

Where a notice is required, I agree that ten days prior written notice sent by first class mail to my address listed in this Agreement will be reasonable notice to me under the Virginia Uniform Commercial Code.  If the Property is perishable or threatens to decline speedily in value, you may, without notice to me, dispose of any or all of the Property in a commercially reasonable manner at my expense following any commercially reasonable preparation or processing.  

 

	
{00078873;v1}WidePoint Corporation

	  	  
	
Virginia Security Agreement

	  	
Initials ______

	
VA/4symathon00225400007854025122211Y

	
Wolters Kluwer Financial Services -1996, 2011 Bankers Systems*

	
Page 4

  

  

  

 

If any items not otherwise subject to this Agreement are contained in the Property when you take possession, you may hold these items for me at my risk and you will not be liable for taking possession of them.  

 

G. Use and Operation.  You may enter upon my premises and take possession of all or any part of my property for the purpose of preserving the Property or its value, so long as you do not breach the peace.  You may use and operate my property for the length of time you feel is necessary to protect your interest, all without payment or compensation to me.  

 

H. Waiver.  By choosing any one or more of these remedies you do not give up your right to use any other remedy.  You do not waive a default if you choose not to use a remedy.  By electing not to use any remedy, you do not waive your right to later consider the event a default and to use any remedies if the default continues or occurs again.  

 

13. WAIVER OF CLAIMS.  I waive all claims for loss or damage caused by your acts or omissions where you acted reasonably and in good faith.

 

14. PERFECTION OF SECURITY INTEREST AND COSTS.  I authorize you to file a financing statement and/or security agreement, as appropriate, covering the Property.  I will comply with, facilitate, and otherwise assist you in connection with obtaining perfection or control over the Property for purposes of perfecting your security interest under the Uniform Commercial Code.  I agree to pay all taxes, fees and costs you pay or incur in connection with preparing, filing or recording any financing statements or other security interest filings on the Property.  I agree to pay all actual costs of terminating your security interest.  

 

15. APPLICABLE LAW.  This Agreement is governed by the laws of Virginia, the United States of America, and to the extent required, by the laws of the jurisdiction where the Property is located, except to the extent such state laws are preempted by federal law.  In the event of a dispute, the exclusive forum, venue and place of jurisdiction will be in Virginia, unless otherwise required by law.  

 

16. JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS.  Each Debtor's obligations under this Agreement are independent of the obligations of any other Debtor.  You may sue each Debtor individually or together with any other Debtor.  You may release any part of the Property and I will still be obligated under this Agreement for the remaining Property.  Debtor agrees that you and any party to this Agreement may extend, modify or make any change in the terms of this Agreement or any evidence of debt without Debtor's consent.  Such a change will not release Debtor from the terms of this Agreement.  If you assign any of the Secured Debts, you may assign all or any part of this Agreement without notice to me or my consent, and this Agreement will inure to the benefit of your assignee to the extent of such assignment.  You will continue to have the unimpaired right to enforce this Agreement as to any of the Secured Debts that are not assigned.  This Agreement shall inure to the benefit of and be enforceable by you and your successors and assigns and any other person to whom you may grant an interest in the Secured Debts and shall be binding upon and enforceable against me and my personal representatives, successors, heirs and assigns.

 

17. AMENDMENT, INTEGRATION AND SEVERABILITY.  This Agreement may not be amended or modified by oral agreement.  No amendment or modification of this Agreement is effective unless made in writing and executed by you and me.  This Agreement and the other Loan Documents are the complete and final expression of the understanding between you and me.  If any provision of this Agreement is unenforceable, then the unenforceable provision will be severed and the remaining provisions will still be enforceable.

 

18. INTERPRETATION.  Whenever used, the singular includes the plural and the plural includes the singular.  The section headings are for convenience only and are not to be used to interpret or define the terms of this Agreement. 

 

19. NOTICE AND ADDITIONAL DOCUMENTS.  Unless otherwise required by law, any notice will be given by delivering it or mailing it by first class mail to the appropriate party's address listed in the DATE AND PARTIES section, or to any other address designated in writing.  Notice to one Debtor will be deemed to be notice to all Debtors.  I will inform you in writing of any change in my name, address or other application information.  I will provide you any other, correct and complete information you request to effectively grant a security interest on the Property.  I agree to sign, deliver, and file any additional documents or certifications that you may consider necessary to perfect, continue, and preserve my obligations under this Agreement and to confirm your lien status on any Property.  Time is of the essence.  

 

	
{00078873;v1}WidePoint Corporation

	  	  
	
Virginia Security Agreement

	  	
Initials ______

	
VA/4symathon00225400007854025122211Y

	
Wolters Kluwer Financial Services -1996, 2011 Bankers Systems*

	
Page 5

  

  

  

 

SIGNATURES.  By signing under seal, I agree to the terms contained in this Agreement.  I also acknowledge receipt of a copy of this Agreement.

 

DEBTOR:

	  	  	  	
WidePoint Corporation

	  
	  	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	  	
James T. McCubbin, Executive Vice President

	  	  	  
	  	
WidePoint Solutions Corp.

	  
	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	
James T. McCubbin, Vice President

	  
	  	  	  	  	  
	  	
Widepoint IL, Inc.

	  
	  	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	  	
James T. McCubbin, Vice President

	  	  	  	  	  
	  	
WIDEPOINT NBIL, Inc.

	  
	  	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	  	
James T. McCubbin, Vice President

	  	  	  	  	  
	  	
Widepoint Ohio Real Estate Corp.

	  
	  	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	  	
James T. McCubbin, Vice President

	  	  	  	  	  
	  	
Operational Research Consultants, Inc.

	  	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	  	
James T. McCubbin, Vice President

	  	  	  	  	  
	  	
iSYS, LLC

	  
	  	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	  	
James T. McCubbin , Vice President

	  
	  	  	  	  	  
	  	
Advanced Response Concepts Corporation

	  
	  	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	  	
James T. McCubbin, Vice President

	  
	  	  	  	  	  
	  	
Protexx Acquistion Corporation

	  
	  	  	  	  	  
	  	  	
By

	  	
 (Seal)

	  	  	
James T. McCubbin, Vice President

	  

 

	
{00078873;v1}WidePoint Corporation

	  	  
	
Virginia Security Agreement

	  	
Initials ______

	
VA/4symathon00225400007854025122211Y

	
Wolters Kluwer Financial Services -1996, 2011 Bankers Systems*

	
Page 6EMPLOYMENT AND NON-COMPETE AGREEMENT

This Employment and Non-Compete Agreement (“Agreement”) is made as of December 31, 2011, between WidePoint Solutions Corporation, a Delaware corporation (the “Company”); WidePoint Corporation, a Delaware corporation (“WidePoint”); and Michael Mansouri ("Employee").  The parties agree that the terms and provisions of this Agreement are subject to and contingent upon the closing of the acquisition of certain of the assets of Avalon Global Solutions, Inc. (“AGS”) by the Company (the “Acquisition”).  Subject to the foregoing, the Company, WidePoint and Employee hereby agree as follows:

1.           Employment.  The Company agrees to employ Employee in the position(s) set forth herein, and Employee accepts such employment by the Company upon the terms and conditions set forth in this Agreement, for the period beginning on the date of this Agreement and ending upon termination pursuant to Section 4 (the "Employment Period").

2.           Compensation and Benefits.

(a)           In consideration for the valuable services to be rendered by Employee and for Employee’s agreement not to compete against the Company or WidePoint as described in Section 6, the Company hereby agrees that commencing on the closing date of the Acquisition and for a period of two (2) years immediately thereafter, the Company will pay Employee a bi-monthly gross salary at the annual rate of $150,000.00 per annum (the “Base Salary”). During such two (2) – year period, the Base Salary will be reviewed annually by WidePoint for merit increases and may, in WidePoint’s discretion, be increased. The Base Salary of Employee after the second (2nd) anniversary of this Agreement shall be determined by the Board of Directors of the Company and the Compensation Committee of the Board of Directors of WidePoint.

(b)           Employee also shall be entitled to (i) reimbursement for actual business expenses in accordance with WidePoint’s policies and procedures in effect at that time; (ii) comparable combined paid vacation, sick leave, and medical and other benefits consistent with those received by other similarly situated employees of the Company except that a minimum annual vacation benefit of 4 weeks shall apply; and (iii) bonus compensation, in an amount up to Fifty Thousand Dollars ($50,000.00) per annum, as determined in the reasonable discretion of the Board of Directors of the Company and the Compensation Committee of the Board of Directors of WidePoint. Employee shall also be entitled to receive stock options from WidePoint as determined in the reasonable discretion of the Compensation Committee of the Board of Directors of WidePoint.  Employee shall be covered by the directors and officers liability insurance policy of WidePoint so long as Employee is the Chief Executive Officer of the Company.

  

Page 1 

  

3.           Services.  During the Employment Period, Employee agrees (a) to devote Employee's best efforts and substantially all of Employee's business time and attention to the business affairs of the Company as its Chief Executive Officer; (b) to render such services as the Company may from time to time direct; (c) that Employee will not, except with the prior written consent of the Company and WidePoint, become engaged in or render services for any business other than the business of the Company and WidePoint; and (d) to follow the policies and procedures of the Company and WidePoint, as set forth by the Company and WidePoint from time to time, as well as all applicable federal, state and local laws, rules and regulations.  Notwithstanding the provisions of Section 3(c) above, it shall not be a violation of this Agreement for Employee to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking or writing engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not interfere with the performance of Employee’s responsibilities to the Company in accordance with this Agreement or violate any provision of this Agreement.

4.           Termination.

(a)           The Employment Period will continue from the date of this Agreement unless terminated earlier by (i) Employee’s death or permanent disability, (ii) Employee’s resignation (other than for Good Reason, as hereinafter defined) upon two hundred seventy (270) days prior written notice to the Company and WidePoint, (iii) the Company and/or WidePoint for Cause, as hereinafter defined or (iv) the Company without Cause. For the purposes of this Agreement, the term “permanent disability” shall be as determined by the relevant insurance company under the then-current health care and insurance policies of the Company and/or WidePoint which are applicable to Employee.

(b)           For purposes of this Agreement, “Good Reason” shall mean the occurrence, without Employee’s written consent, of any of the following circumstances (except in each case in connection with the termination of Employee’s employment for Cause or disability or as a result of Employee’s death or temporarily as a result of Employee’s illness or other absence): (i) a material breach by the Company of any provision of this Agreement including, but not limited to, (A) failure to pay Base Salary or benefits after the date when due or (B) the failure to appoint Employee to the position provided for herein, provided that, Employee provides the Company with written notice of such breach specifying in reasonable detail the facts and circumstances alleged to constitute such breach and the Company fails to cure such breach within thirty (30) days after receipt of such notice; (ii) any material adverse alteration or diminution of Employee’s position, duties or responsibilities under this Agreement or the assignment to Employee of duties or responsibilities materially inconsistent with Employee’s position as Chief Executive Officer of the Company, provided that, Employee provides the Company with written notice of such breach within ninety (90) days following the occurrence of such alteration, diminution or assignment specifying in reasonable detail the facts and circumstances alleged to constitute such alteration, diminution or assignment and the Company fails to cure such alteration, diminution or assignment within thirty (30) days after receipt of such notice, (iii) without Employee’s prior written consent, the Company (or a successor, if appropriate) requires Employee to relocate to a facility or location more than fifty (50) miles away from the location at which Employee was working immediately prior to the required relocation, or (iv) a reduction of more than fifteen percent (15%) in Employee’s then-current Base Salary (other than as part of an across-the-board, proportional salary reduction applicable to all similarly situated employees of the Company).

  

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(c)           For purpose of this Agreement, “Cause” shall mean (i) the repeated failure or refusal of Employee to follow the lawful directives of the CEO of the Company, WidePoint or their designee (except due to sickness, injury or disabilities), provided that, the Company provides Employee with written notice of such breach specifying in reasonable detail the facts and circumstances alleged to constitute such breach and Employee fails to cure such breach within thirty (30) days after receipt of such notice, (ii) gross inattention to duty or any other willful, reckless or grossly negligent act (or failure to act when directed) by Employee, which, in the good faith judgment of the Company and WidePoint, materially injures the Company or WidePoint, including the repeated failure to follow the lawful policies and procedures of the Company or WidePoint, provided that, the Company provides Employee with written notice of such breach specifying in reasonable detail the facts and circumstances alleged to constitute such breach and Employee fails to cure such breach within thirty (30) days after receipt of such notice, (iii) a material breach of this Agreement by Employee, provided that, the Company provides Employee with written notice of such breach specifying in reasonable detail the facts and circumstances alleged to constitute such breach and Employee fails to cure such breach within thirty (30) days after receipt of such notice, (iv) the conviction by Employee of (other than traffic violations) a felony or other crime involving moral turpitude or the commission by Employee of an act of financial dishonesty (which for purposes of this Agreement shall be defined as an intentional act by Employee to obtain a financial benefit from the Company that Employee is not legally or contractually entitled to) against the Company or WidePoint, or (v) the failure by the Company in any calendar year to earn annual gross revenue of no less than sixty percent (60%) of the annual gross revenue earned by the Company in the immediately preceding calendar year.

5.           Consequences of Termination.

(a)           Upon any termination by the Company for Cause, the death or permanent disability of Employee or upon Employee’s decision to leave the Company other than for Good Reason, Employee shall be entitled to be paid Employee’s Base Salary to the date of termination and the Company shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination and any other vested benefits).

(b)           Upon any termination by the Company without Cause or by Employee for Good Reason, the Company shall pay to Employee (i) any unpaid Base Salary accrued as of the date of termination, (ii) in the event that the termination occurs prior to the second (2nd) anniversary of the Acquisition, Base Salary at the annual rate in effect on the date of termination from such date of termination until the second anniversary of the Acquisition (assuming for this purpose that a termination had not occurred) in installments in accordance with the Company’s ordinary Base Salary payroll practices, as well as any earned bonuses and (iii) reimbursement of any outstanding business expenses for which Employee is entitled to be reimbursed in accordance with this Agreement up to and including the date of termination.  The Company shall have no further liability hereunder (other than for any other vested benefits).

  

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(c)           In the event that Employee shall terminate Employee’s employment with the Company for “Good Reason” under Section 4(b)(i) above as a result of a material breach of this Agreement by the Company, then the amount of any reduction in the principal amount of the Three Million Dollar Note Payable (as such term is defined in that certain Asset Purchase Agreement, dated as of December 30, 2011, by and among WidePoint, the Company, AGS and certain shareholders of AGS (the “Purchase Agreement”)) shall be adjusted as set forth on Annex A to the Purchase Agreement.

6.           Non-Compete.

(a)           In the event the Employment Period is terminated under Sections 4(a)(ii) or 4(a)(iii) above, then the non-compete provisions of this Section 6 will apply to Employee.  In the event the Employment Period is otherwise terminated, such as without Cause, then no part of this Section 6 will apply to Employee.

(b)           Employee recognizes and acknowledges that by virtue of accepting employment hereunder, Employee will acquire valuable training and knowledge, enhance Employee's professional skills and experience, and learn proprietary trade secrets and Confidential Information of the Company and WidePoint.  Employee further recognizes and acknowledges that the customers, clients, suppliers and targeted customers of each of the Company, WidePoint and AGS, the entity with which Employee was previously employed prior to the Acquisition by the Company of substantially all the business assets of AGS, are located throughout the United States of America.  In consideration of the foregoing and this employment contract, Employee agrees that during the Employment Period and for twelve (12) months thereafter (the "Non-Compete Period"), Employee will not, at any location within the United States of America, directly or indirectly (whether as employee, director, owner, stockholder, consultant, partner (limited or general) or otherwise) own, manage, control, participate in, consult with, advertise on behalf of, render services for or in any manner engage in any competitive business of soliciting or providing wireless and wire line telecommunications management services, including expense management, information security consulting services, wireless warranty, wireless equipment replacement, repair and rental, wireless helpdesk services and telecom expense optimization, invoice billing, management and payment services, telecommunications asset management, telecommunication device management (both mobile and fixed), and telecommunications consulting services, such as network, wireline and wireless contract negotiations, permission based audits, accounts payable audits and compliance reviews, or any other related business in which the Company and/or WidePoint is engaged as of the termination of the Employment Period and in which business Employee was actively involved during the Employment Period; nor shall Employee (A) solicit any other Person to engage in the foregoing activities or (B) knowingly request, induce, solicit, recruit or otherwise attempt to influence any then-existing customers, clients, suppliers or targeted customers of the Company or WidePoint to curtail any business they are currently, or in the last 24 months have been, transacting with the Company or WidePoint (the “Non-Compete”).  For purposes of this Agreement, the term “targeted customer” shall mean prospective customers or clients that the Company or WidePoint has contacted within the last 12 months or included in a sales or strategic plan of the Company or WidePoint prior to the date of termination of the Employment Period.  Nothing herein will prevent Employee from being a passive owner of not more than 1% of the outstanding stock of any class of a corporation which is engaged in a competitive business of the Company or WidePoint and which is publicly traded, so long as Employee has no participation in the business of such corporation.  Furthermore, during the Non-Compete Period, Employee shall not, without the Company’s or WidePoint’s prior written consent, directly or indirectly, knowingly solicit, encourage or attempt to influence any existing employee or recruit to leave the employment of WidePoint or the Company or discourage their employment with the Company or WidePoint.  Employee agrees that the restraint imposed under this Section 6 is reasonable and not unduly harsh or oppressive.

  

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(c)           If, at the time of enforcement of any provision of Section 6(b) above, a court or arbitrator holds that the restrictions stated therein are unreasonable or unenforceable under circumstances then existing, the Company, WidePoint and Employee agree that the maximum period, scope, or geographical area reasonable or permissible under such circumstances will be substituted for the stated period, scope or area.

(d)           Since a material purpose of this Agreement is to protect the Company's and WidePoint’s investment in the Employee and to secure the benefits of Employee's background and general experience in the industry and as a material inducement to cause the Company and WidePoint to engage in the Acquisition, the parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Section 6 or Section 7.  Therefore, in the event of a breach by Employee of any of the provisions of this Section 6 or Section 7, the Company, WidePoint and their successors and assigns may, in addition to other rights and remedies existing in their favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions of this Agreement.

7.           Confidential Information.  Employee acknowledges that the information, data and trade secrets (collectively, "Confidential Information") obtained by Employee during the course of Employee's performance under this Agreement, and previously during Employee’s employment with AGS or its subsidiaries or affiliates prior to the Acquisition, concerning the business or affairs of WidePoint or the Company (before and after the Acquisition of the business assets of AGS) are the property of the Company and WidePoint, respectively.  For purposes of this Agreement, "trade secret" means any method, program or compilation of information which is used in the business of WidePoint, the Company and/or the business acquired from AGS, including but not limited to: (a) techniques, plans and materials used by the Company, WidePoint or the business acquired from AGS, (b) marketing methods and strategies employed by the Company, WidePoint or the business acquired from AGS, and (c) all lists of past or present customers, targeted customers, clients or suppliers of the Company, WidePoint or the business acquired from AGS.  Employee agrees that Employee will not disclose to any unauthorized Person or use for Employee's own account any of such Confidential Information without the written consent of the Company and WidePoint, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Employee's acts or omissions to act or become known to Employee lawfully outside the scope of Employee's employment under this Agreement.  Employee agrees to deliver to the Company and WidePoint at the termination of Employee's employment, or at any other time the Company or WidePoint may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the business of the Company, WidePoint or the AGS business acquired by the Company which Employee may then possess or have under Employee's control.

  

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8.           Notices.  Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by overnight courier (e.g., Federal Express) or mailed by first class certified mail, return receipt requested, to the recipient at the address below indicated:

	 	
To the Company or WidePoint:

	
Mr. James T. McCubbin

c/o WidePoint Corporation

7926 Jones Branch Drive, Suite 520

McLean, Virginia 22102

	 	
To Employee:

	
Michael Mansouri

	 	
  

	
_________________________

	 	
  

	
_________________________

or such other address or to the attention of such other Person as the recipient party shall have specified by prior written notice to the sending party.  Any notice under this Agreement will be deemed to have been given when so delivered, sent or mailed.

  

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9.           Miscellaneous.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law.  The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are for any reason whatsoever invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the fullest extent permitted by law.  This Agreement embodies the complete agreement and understanding among the parties and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.  This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.  The parties further agree that facsimile signatures or signatures scanned into .pdf (or similar) format and sent by electronic mail or otherwise shall be deemed original signatures.  This Agreement is intended to bind and inure to the benefit of and be enforceable by Employee and the Company and WidePoint, and their respective successors and assigns.  Employee may not assign Employee's rights or delegate Employee's obligations hereunder without the prior written consent of the Company and WidePoint.  The Company and WidePoint may assign their respective rights and delegate their duties hereunder without the consent of Employee to Permitted Transferees.  All questions concerning the construction, validity and interpretation of the Agreement will be governed by the internal law of the State of Maryland.  The parties hereby agree that the exclusive venue for any action arising under or relating to this Agreement shall be any federal or state court sitting in Montgomery County, Maryland.  The parties hereby waive any and all objections to personal jurisdiction and venue solely as they may relate to the enforcement of the terms of this Agreement in Montgomery County, Maryland.  Any provision of this Agreement may be amended or waived only with the prior written consent of the Company, WidePoint and Employee.  If either party breaches this Agreement, the prevailing party shall be entitled to recover costs, including reasonable attorney’s fees, from the non-prevailing party.  In the event of a breach by either party, the Employee has the right to use Employee’s own choice of Legal Counsel, not limited to but including Westlake Legal Group, Potomac Falls, Virginia.

10.           Definitions.  "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a governmental entity or any department or agency thereof.  "Permitted Transferee" shall mean WidePoint or a subsidiary, affiliate or successor of WidePoint or the Company.

[The next page is the signature page]

  

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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.

	
WITNESS:

	  	EMPLOYEE:	 
	  	  	  	  	 
	
     

	  	  	
     

	 
	  	  	Michael Mansouri	 
	  	  	  	  	 
	
Attest (Seal):

	  	WIDEPOINT SOLUTIONS CORP.	 
	  	  	  	  	 
	
    

	  	
By:

	
   

	 
	
James T. McCubbin

	  	  	
Steve L. Komar

	 
	
Secretary

	  	  	
President

	 
	  	  	  	  	 
	
Attest (Seal):

	  	WIDEPOINT CORPORATION	 
	  	  	  	  	 
	
   

	  	
By: 

	
  

	 
	
James T. McCubbin

	  	  	
Steve L. Komar

	 
	
Secretary

	  	  	
Chairman & Chief Executive Officer

	 

 

  

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