EMPLOYMENT AGREEMENT , dated August 20, 2007 by, and
between DCAP Management Corp. ,
a New York corporation (the
“Company”) and a wholly owned subsidiary of
DCAP Group, Inc. (the “Parent”), and
Curt Hapward (the
“Employee”).
RECITALS
WHEREAS , the Company and the Employee desire to enter
into an employment agreement, which will set forth the terms and
conditions upon which the Employee shall be employed by the Company
and upon which the Company shall compensate the
Employee.
NOW, THEREFORE , in consideration of the foregoing and the
mutual covenants hereinafter set forth, the parties hereto have
agreed, and do hereby agree, as follows:
1.1
The
Company will employ the Employee in its business, and the Employee
will work for the Company therein, as its President for a term
commencing as of August 20, 2007 (the “Effective Date”)
and terminating on August 20, 2009 (the “Expiration
Date”), subject to earlier termination as hereinafter
provided (the employment period, as earlier terminated or as
extended as provided for herein, being referred to as the
“Term”).
1.2
This
Agreement will automatically renew for a one-year term upon its
initial expiration unless (a) the Employee has voluntarily
terminated his employment, or (b) the Employee's employment has
been earlier terminated as provided in this Agreement, or (c) the
Company provides to the Employee not less than one year's prior
express written notice that this Agreement is not to be
renewed.
1.3
Upon
the expiration of the Term or the termination of the
Employee’s employment with the Company for any reason
whatsoever, he shall be deemed to have resigned all of his
positions as an employee, officer and director of the Company, the
Parent and of each and every subsidiary thereof.
2.1
During
the Term, the Employee shall serve as the Company’s President
and shall perform duties of an executive character consisting of
administrative and managerial responsibilities on behalf of the
Company of the type and nature generally assigned to operating
officers and such further duties of an executive character as
shall, from time to time, be delegated or assigned to him by the
Chief Executive Officer or the Board of Directors of the Company or
Parent consistent with the Employee’s position.
3.1
During
the Term, the Employee shall expend all of his working time for the
Company; shall devote his best efforts, energy and skill to the
services of the Company and the promotion of its interests; and
shall not take part in activities detrimental to the best interests
of the Company. The Employee shall be permitted to
engage in charity work, tend to personal financial and legal
affairs and, subject to the prior written consent of the Company,
serve on the Board of Directors of other business organizations,
provided that such activities do not interfere with his full-time
services to the Company.
4.1
For
all services to be rendered by the Employee during the Term, and in
consideration of the Employee’s representations and covenants
set forth in this Agreement, the Employee shall be entitled to
receive from the Company compensation as set forth in Paragraphs
4.2, 4.3 and 4.4 below.
4.2
During
the Term, the Employee shall be entitled to receive a salary at the
rate of two hundred twenty thousand dollars ($220,000) per annum
(the “Base Salary”). The Employee shall be
entitled to increases in the Base Salary and other potential
additional compensation as may be determined from time to time by
the Board of Directors of the Company in its sole
discretion. All amounts due hereunder shall be payable
in accordance with the Company’s standard payroll
practices.
4.3
(a) During
the first twelve (12) month period of the Term only, the Employee
also shall be eligible to receive a commission payment in
connection with the generation and collection of initial franchise
fees during such twelve (12) month period. The potential
commission payment (which is a percentage amount of the initial
franchise fees actually paid to or for the benefit of the Company)
due to the Employee shall be determined by reference to the
following schedule:
Amount of Initial
Franchise Fees Actually Collected
Commission Percentage
less than
$150,000 0%
$150,000 - $500,000
17.5% and a special
payment
of $26,250 (the "Special Payment")
$501,000
-
$1,000,000
20.0%
$1,000,001
+
22.5%
In the event that there is
a commission payment due to the Employee based upon the
foregoing parameters, the amount of such payment shall be
equal to the product of the applicable amount of initial
franchise fees actually collected and the applicable
commission percentage. In the event that the
aggregate amount of the initial franchise fees for such
twelve (12) month period is between $150,000 and $500,000,
the Employee, in addition to 17.5% of such initial franchise
fees, shall be entitled to the Special Payment of
$26,250.
The Special Payment amount
of $26,250 will be paid to the Employee within 30 days of the
Employee passing the $150,000 threshold, provided that the
Company has enough cash on hand (to be analyzed on a deal to
deal basis) to make the Special Payment to the
Employee. If the Company does not have enough cash
on hand (after being analyzed on a deal to deal basis) to
make the Special Payment to the Employee within 30 days of
the Employee passing the $150,000 threshold, the Company will
make such payment as soon as it has enough cash on hand to
make the Special Payment.
With respect to any
payments to be made under this Paragraph 4.3 after the
Special Payment, such commission payments will be made within
30 days of the annual anniversary of the Effective Date,
provided that the Company has enough cash on hand at such
time to make the payments. Again, each commission
will be analyzed on a deal to deal basis (i.e. cash paid to
the Company vs. receipt of promissory notes with no payments
made). If the Company does not have enough cash on
hand (after being analyzed on a deal to deal basis) to make
such payments to the Employee within 30 days of the annual
anniversary of the Effective Date, the Company will make such
payments as soon as it has enough cash on hand. If
a commission payment has not been paid by the second
anniversary of the Effective Date due to a lack of available
cash on hand to make such payment, such commission shall be
deemed to be forfeited and the Company shall have no
obligation to pay such forfeited commission.
(b)
Notwithstanding
the foregoing, the Employee shall not be entitled to any commission
payments from franchise sales that do not generate collected
initial franchise fees. In the event that the Board of
Directors of the Company determines that there is substantial
revenue derived from such franchise sales without collected initial
franchise fees, the Board of Directors of the Company will take
such circumstances into consideration in determining whether the
Employee should be paid a bonus or other commission payment in
connection with such franchise sales.
4.4
Subject
to the following sentence, any bonus or other commission payment to
be made to the Employee by the Company for any period of time after
the initial twelve (12) month period of the Term shall be governed
by the Parent’s corporate and executive bonus plan, which the
Company anticipates will be in effect on or prior to the start of
the second twelve (12) month period of the Term. In the
event that the Parent’s corporate and executive bonus plan is
not in effect by July 31, 2008, any bonus or other commission
payment to be made to the Employee for any period of time during
the Term shall be governed by the provisions of Section 4.3 above,
until such time as the Parent’s corporate and executive bonus
plan is put into effect, if ever.
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5.
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REIMBURSEMENT OF EXPENSES
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5.1
Subject
to Section 5.3 hereof, the Company shall pay directly, or reimburse
the Employee for, all reasonable and necessary expenses and
disbursements incurred by the Employee for and on behalf of the
Company in the performance of his duties during the
Term.
5.2
The
Employee shall submit to the Company, not less than once in each
calendar month, reports of such expenses and disbursements in form
normally used by the Company and receipts with respect thereto and
the Company’s obligations under Paragraph 5.1 hereof shall be
subject to compliance therewith.
5.3
During
the Term and, in the event of an Entitlement Termination (as
hereinafter defined), during the Entitlement Restrictive Covenant
Period (as hereinafter defined), the Employee shall be entitled to
receive a monthly automobile allowance of one thousand dollars
($1,000) for any and all expenses related to the Employee’s
automobile (i.e. lease payments, insurance, gas, tolls, parking,
etc.). Except for reimbursement of directly related
automobile expenses (i.e. parking and tolls) incurred by the
Employee while fulfilling his duties and responsibilities to the
Company, but which are outside of the Employee’s normal day
to day usage of his automobile, the Employee will not be entitled
to any additional or alternative reimbursement for any other
automobile related expenses.
6.1
If, during the Term, the Employee, in the opinion of a
majority of all of the members of the Board of Directors of
the Company (excluding the Employee if he is a member), as
confirmed by competent medical evidence, shall become
physically or mentally incapacitated to perform his duties for
the Company hereunder (“Disabled”) for a
continuous period, then for the first six (6) months of such
period he shall receive his full salary. In no
event, however, shall the Employee be entitled to receive any
payments under this Paragraph 6.1 beyond the expiration or
termination date of this Agreement. Effective with
the date of his resumption of full employment, the Employee
shall be re-entitled to receive his full salary. If
such illness or other incapacity shall endure for a continuous
period of at least nine (9) months or for at least two hundred
fifty (250) business days during any eighteen (18) month
period, the Company shall have the right, by written notice,
to terminate the Employee’s employment hereunder as of a
date (not less than thirty (30) days after the date of the
sending of such notice) to be specified in such
notice. The Employee agrees to submit himself for
appropriate medical examination to a physician of the
Company’s designation as necessary for purposes of this
Paragraph 6.1.
6.2
The obligations of the Company under this Paragraph 6 may be
satisfied, in whole or in part, by payments to the Employee
under disability insurance provided by the
Company.
6.3
Notwithstanding the foregoing, in the event, at the time of
any apparent incapacity, the Company has in effect a
disability policy with respect to the Employee, the Employee
shall be considered Disabled for purposes of Paragraph 6.1
only if he is considered disabled for purposes of the
policy.
7.1
(a) The
services of the Employee are unique and extraordinary and essential
to the business of the Company, especially since the Employee shall
have access to the Company’s customer lists, trade secrets
and other privileged and confidential information essential to the
Company’s business. Therefore, the Employee agrees
that, if the term of his employment hereunder shall expire or his
employment shall at any time terminate for any reason whatsoever,
with or without Cause (as hereinafter defined) and with or without
Good Reason (as hereinafter defined), the Employee will not at any
time during the one year period commencing with the date on which
the Employee ceases to be employed by the Company because this
Agreement has expired or this Agreement has been terminated by
either party for any reason whatsoever (the “Cessation
Date”) (the “Restrictive Covenant Period”),
without the prior written consent of the Company, directly or
indirectly, anywhere within five (5) miles of the location of any
office of the Company or any franchisee thereof, whether
individually or as a principal, officer, employee, partner,
shareholder, member, manager, director, agent of, or consultant or
independent contractor to, any entity,
(i)
engage
or participate in a business which, as of the Cessation Date, is
similar to or competitive with, directly or indirectly, that of the
Company, including, without limitation, those businesses of the
Parent described in its Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2006 (collectively, the “Current
Businesses”) and shall not make any investments in any such
similar or competitive entity, except that the foregoing shall not
restrict the Employee from (A) acquiring up to one percent (1%) of
the outstanding voting stock of any entity whose securities are
listed on a stock exchange or Nasdaq or (B) engaging or
participating in a business other than a Current Business (a
“New Business”) if the revenues of such New Business
for the preceding fiscal year are less than one percent (1%) of the
consolidated revenues of the Parent for such preceding fiscal
year;
(ii)
cause
or seek to persuade any director, officer, employee, customer,
client, account, agent or supplier of, or consultant or independent
contractor to, the Company, or others with whom the Company has a
business relationship (collectively “Business
Associates”), to discontinue or materially modify the status,
employment or relationship of such person or entity with the
Company, or to become employed in any activity similar to or
competitive with the activities of the Company;
(iii)
cause
or seek to persuade any prospective customer, client, account or
other Business Associate of the Company (which at or about the
Cessation Date was then actively being solicited by the Company) to
determine not to enter into a business relationship with the
Company or to materially modify its contemplated business
relationship;
(iv)
hire,
retain or associate in a business relationship with, directly or
indirectly, any director, officer or employee of the Company;
or
(v)
solicit
or cause or authorize to be solicited, or accept, for or on behalf
of him or any third party, any business from, or the entering into
of a business relationship with, (A) others who are, or
were within one (l) year prior to the Cessation Date, a customer,
client, account or other Business Associate of the Company, or (B)
any prospective customer, client, account or other Business
Associate of the Company which at or about the Cessation Date was
then actively being solicited by the Company.
The
foregoing restrictions set forth in this Paragraph 7.1(a)
shall apply likewise during the Term.
(b) Notwithstanding
the foregoing, in the event that the Employee’s
employment is terminated by the Company without Cause, or by
the Employee for Good Reason, or ceases following a
non-renewal of this Agreement beyond the Expiration Date (or,
if this Agreement is renewed for a one year period beyond the
Expiration Date pursuant to Paragraph 1.2, beyond such
additional one-year period) (i.e., this Agreement is not
renewed for a one-year term upon its initial expiration or, if
renewed for a one-year period pursuant to Paragraph 1.2, it is
not further renewed upon its expiration after such additional
one-year period) (in each case, an “Entitlement
Termination”), then the Restrictive Covenant Period
shall instead be the six (6) month period commencing with the
Cessation Date (the “Entitlement Restrictive Covenant
Period”), except that, in such event, the Company may,
upon written notice given to the Employee within one (1) month
following the Cessation Date, extend the Entitlement
Restrictive Covenant Period from six (6) months to one (1)
year (an “Extension”).
(c) During
the initial six (6) months of the Entitlement Restrictive
Covenant Period, the Employee shall be entitled to receive
from the Company an amount per annum equal to his Base Salary
at the Cessation Date (payable over such six (6) month
period), less all amounts the Employee is entitled to receive
from the Company pursuant to Paragraph 11.5 hereof for such
period and/or from third parties in consideration of services
rendered, directly or indirectly, by the Employee to or for
the third parties during such period (the “Initial
Restrictive Covenant Amount”). (For purposes
of clarity, if the Base Salary at the Cessation Date is
$110,000 for such six month period, the base Initial
Restrictive Covenant Amount will be
$110,000). During the second six (6) months of the
Entitlement Restrictive Covenant Period (if an Extension
notice is given by the Company), the Employee shall be
entitle
