EMPLOYMENT
AGREEMENT
AGREEMENT, dated as of November 22 nd
, 2006 (the " Effective Date") , by and between Integrated
Alarm Services Group, Inc., a Delaware corporation (the "
Company "), and Bruce Quay, an individual residing at 6
Shaker Bay Road, Latham, NY 12110 (the " Executive
").
WHEREAS, the Company has determined that it is
in the best interests of the Company and its shareholders to enter
into an employment agreement with the Executive, and the Executive
is willing to serve as an employee of the Company, subject to the
terms and conditions of this Agreement; and
WHEREAS, the Company and the Executive entered
into an employment agreement, dated as of March 2, 2005 (the "
Existing Employment Agreement "); and
WHEREAS, the Company and the Executive desire to
provide for the continued employment of the Executive and to
supersede the Existing Employment Agreement with this
Agreement;
NOW, THEREFORE, IT IS HEREBY AGREED AS
FOLLOWS:
1. Employment and Duties.
(a) General . The Executive shall serve as Chief Operating
Officer of the Company, reporting to the Chief Executive Officer
(the " CEO ") of the Company. The Executive shall have such
duties and responsibilities, commensurate with the Executive's
position, as may be assigned to the Executive from time to time by
the Board of Directors (the " Board ") or the CEO of the
Company. The Executive shall perform any and all duties related to
his position with the Company and shall be available to confer and
consult with and advise the officers and directors of the Company
at such times as the Company may require. The Executive's principal
place of employment shall be the principal offices of the Company
currently located in Albany, New York, provided ,
however , that the Executive understands and agrees that he
will be required to travel from time to time for business
reasons.
(b) Exclusive Services . For so long as the Executive is employed by
the Company, the Executive shall devote his full-time working time
to his duties hereunder, shall faithfully serve the Company, shall
in all respects conform to and comply with the lawful and good
faith directions and instructions given to him by the CEO and shall
use his best efforts to promote and serve the interests of the
Company. Further, the Executive shall not, directly or indirectly,
render services to any other person or organization without the
consent of the Company or otherwise engage in activities that would
interfere with the faithful performance of his duties
hereunder.
2. Term of Employment.
The Executive's employment under
this Agreement shall commence as of the Effective Date and shall
terminate on the earlier of (i) the date that is eighteen
months after the Effective Date and (ii) the termination of
the Executive's employment under this Agreement; provided, however,
that the term of the Executive's employment shall be automatically
extended without further action of either party for additional
eighteen-month periods unless written notice of either party's
intention not to extend has been given to the other party at least
90 days prior to the expiration of the then effective Term. The
period from the Effective Date until the termination of the
Executive's employment under this Agreement is referred to as the
"Term".
3. Compensation and Other Benefits. Subject to the
provisions of this Agreement, the Company shall pay and provide the
following compensation and other benefits to the Executive during
the Term as compensation for services rendered
hereunder:
(a) Base Salary . The Company shall pay to the Executive a
salary (the " Base Salary ") at the rate of $360,000 per
annum, payable in substantially equal installments at such
intervals as may be determined by the Company in accordance with
its ordinary payroll practices as established from time to
time.
(b)
Bonus . In addition to the Base Salary, the Executive
shall be eligible to earn for each calendar year ending during the
Term an annual incentive bonus (the “ Bonus ”)
based on the achievement of one or more performance goals, targets,
measurements and other factors (collectively, the “
Performance Goals” ) established for such year by the
Compensation Committee of the Board (the “ Committee
”). The Executive’s target annual bonus (the “
Target Bonus ”) and the applicable Performance Goals
will be established by the Committee within 90 days of the first
day of the year to which such Bonus relates. Payment of the
Executive’s Bonus for any year will be based upon the
achievement of the Performance Goals established by the Committee
for that year (including, without limitation, the exercise of the
Committee’s negative discretion under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the “ Code
”)). The actual bonus paid may be higher or lower than the
Target Bonus for over- or under-achievement of the Performance
Goals (including, without limitation, the exercise of the
Committee’s negative discretion under Section 162(m) of the
Code), as determined by the Committee. Subject to Section 4
hereof, a Bonus, if any, shall be payable by March 15 th
of the succeeding calendar year or as soon thereafter as may be
administratively practicable.
(d)
Savings and Retirement
Plans . The Executive
shall be entitled to participate in all savings and retirement
plans applicable generally to other senior executives of the
Company, in accordance with the terms of the plans, as may be
amended from time to time.
(e)
Welfare Benefit Plans
. The Executive and/or his family
shall be eligible to participate in and shall receive all benefits
under the Company's welfare benefit plans and programs applicable
generally to other senior executives of the Company, in accordance
with the terms of the plans, as may be amended from time to time.
The Company shall include the Executive in its health insurance
program available to the Company's executive officers and shall pay
100% of the premiums for such program.
(f) Expenses . The Company shall reimburse the Executive for
reasonable travel and other business-related expenses incurred by
the Executive in the fulfillment of his duties hereunder upon
presentation of written documentation thereof, in accordance with
the applicable expense reimbursement policies and procedures of the
Company as in effect from time to time.
(g) Paid Time Off . The Executive shall be entitled to
22 vacation days and 4 sick/personal days each year during the
Term, which shall be referred to together as "paid time off." The
extent to which unused paid time off from one year shall be carried
forward to any later year shall be governed by the Company's paid
time off policy in effect from time to time. Upon separation of
employment, for any reason, paid time off accrued and not used
shall be paid in accordance with the Company's paid time off policy
then in effect, and the determination of the amount of paid time
off accrued and not used shall be made by the Company in its sole
discretion pursuant to such policy.
4. Termination of Employment
.
(a) Termination for Cause; Resignation
. (i) If, prior to the expiration of
the Term, the Company terminates the Executive's employment for
Cause, as defined in Section 4(a)(ii) hereof, or if the
Executive resigns from his employment hereunder, the Executive
shall only be entitled to payment of unpaid Base Salary through and
including the date of termination or resignation and any other
amounts or benefits required to be paid or provided by law or under
any plan, program, policy or practice of the Company (" Other
Accrued Compensation and Benefits "). The Company shall have no
further obligation to compensate the Executive under any other
provision of this Agreement or any other severance or salary
continuation arrangement of the Company.
(ii)Termination for " Cause " shall mean
termination of the Executive's employment because of:
(A) any act or omission that constitutes a material
breach by the Executive of any of his obligations under this
Agreement;
(B) the willful and continued failure or refusal of
the Executive to satisfactorily perform the duties reasonably
required of him as an employee of the Company;
(C) the Executive's conviction of, or plea of
nolo contendere to, (1) any felony or
(2) another crime involving dishonesty or moral turpitude or
which could reflect negatively upon the Company or any of its
subsidiaries or affiliates (the " Company Group") or
otherwise impair or impede its operations;
(D) the Executive's willful engaging in any
misconduct, negligence, act of dishonesty, violence or threat of
violence (including any violation of federal securities laws) that
is injurious to the Company Group;
(E) the Executive's material breach of a written
policy of the Company, the Company's Code of Ethics, or the rules
of any governmental or regulatory body applicable to the
Company;
(F) the Executive's willful refusal to follow the
lawful and good faith directions of the Board;
(G) the Executive's engaging in conduct that
constitutes activity in competition with the Company Group;
or
(I) any other willful misconduct by the Executive
which is materially injurious to the financial condition, business,
or reputation of the Company Group.
(b) Termination without Cause
. (i) If, prior to the expiration of
the Term, the Executive's employment is terminated by the Company
without Cause, the Company (A) shall pay (x) the Other Accrued
Compensation and Benefits and (y) declared and unpaid Bonus, if
any, and (B) shall continue to pay the Executive the Base Salary at
the rate in effect on the date the Executive's employment is
terminated, for the period remaining in the Term on the day prior
to the date the Executive's employment is terminated, in accordance
with the Company's ordinary payroll practices. The Company shall
have no further obligation to compensate the Executive under
Section 4(c) or any other provision of this Agreement or any other
severance or salary continuation arrangement of the
Company.
(ii)The Company shall not be required to make
the payments and provide the benefits provided for under
Section 4(b)(i) unless the Executive executes and delivers to
the Company a release substantially in the form attached as
Exhibit A and the release has become effective and irrevocable
in its entirety.
(iii) The obligation of the Company to make the
payments and provide the benefits provided for under Section
4(b)(i) shall not be affected by any compensation or other payments
made to the Executive by any subsequent employer or other
person.
(iv)If, following a termination of employment
without Cause, the Executive breaches the provisions of
Sections 5 through 8 hereof, the Executive shall not be
eligible, as of the date of such breach, for the payments described
in Section 4(b)(i), and any and all obligations and agreements
of the Company with respect to such payments shall thereupon
cease.
(c)
Termination upon Change in
Control .
(i) Upon a Change in Control during the Term, the
Term shall automatically be extended for 18 months following the
Change in Control.
(ii) In the event of the Executive's Involuntary
Termination within 18 months after a Change in Control, provided
such Change in Control occurs during the Term, (A) the Company
shall pay the Executive a one-time cash bonus in the amount of
$540,000, such bonus to be paid within 30 days of such Involuntary
Termination, and (B) all stock options and warrants granted by the
Company to the Executive under any plan prior to such termination
shall vest, accelerate, and become immediately exercisable. The
Company shall have no further obligation to compensate the
Executive under Section 4(b)(i) or any other provision of this
Agreement or any other severance or salary continuation arrangement
of the Company. The Company shall not be required to make the
payments and provide the benefits provided for under this
Section 4(c)(ii) unless the Executive executes and delivers to
the Company a release substantially in the form attached as
Exhibit A and the release has become effective and irrevocable
in its entirety.
(iii) " Involuntary Termination " shall mean
termination of the Executive's employment by the Company and its
subsidiaries other than for Cause. The Executive shall be deemed to
have incurred an Involuntary Termination if: (A) there is a Change
in Control during the Term; and (B) within 18 months after such
Change in Control, (1) the location of his principal place of
employment is moved to a location that is more than 50 miles from
the location of his principal place of employment immediately prior
to such Change in Control, or (2) the Executive's Base Salary as in
effect immediately prior to such Change in Control is reduced by
more than 10%, or (3) the Executive is not retained in a management
position at the Company; and (C) he thereafter resigns from
employment within 30 days of such change of location of principal
place of employment, reduction in Base Salary or non-retention in a
management position. Except as provided in this Section 4(c),
resignation from employment for any reason shall not be considered
an Involuntary Termination.
(iv)
A " Change in Control "
shall occur if:
(A) any "person" within the meaning of Section
14(d) of the Securities Exchange Act of 1934, as amended, and any
successor provisions thereto is or becomes the "beneficial owner"
(as defined in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities entitled to vote in
the election of directors of the Company;
(B) during any twelve-month period (not including
any period prior to the consummation of a Change in Control),
individuals who at the beginning of such period constituted the
Board and any new directors, whose election by the Board or
nomination for election by the Company's stockholders was approved
by a vote of at least one-half of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority
thereof;
(C) there occurs a reorganization, merger,
consolidation or other corporate transaction involving the Company
(a " Transaction "), in each case with respect to which the
stockholders of the Company immediately prior to such Transaction
do not, immediately after the Transaction, own more than 50% of the
combined voting power of the Company or another corporation
resulting from such Transaction, in substantially the same
proportion of ownership as prior to such Transaction; or
(D) all or substantially all of the assets of the
Company are sold, liquidated or distributed.
(d) Termination Due to Death or
Disability . The
Executive's employment with the Company shall terminate
automatically on the Executive's death. In the event of the
Executive's disability, the Company shall be entitled to terminate
his employment. In the event of termination of the Executive's
employment by reason of Executive's death or disability, the
Company shall pay to the Executive (or his estate, as applicable)
the Executive's Base Salary through and including the date of
termination. For purposes of this Agreement, " disability "
shall have the meaning set forth in the Company's long-term
disability plan.
(e) Notice of Termination . Any termination of employment by the Company
or the Executive shall be communicated by a written " Notice of
Termination " to the other party hereto given in accordance
with Section 22 of this Agreement. In the event of a
termination by the Company for Cause, the Notice of Termination
shall (i) indicate the specific termination provision in this
Agreement relied upon, (ii) set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated and
(iii) specify the date of termination, which date shall not be
more than 30 days after the giving of such notice. The failure
by the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Cause shall not
waive any right of the Company hereunder or preclude the Company
from asserting such fact or circumstance in enforcing the Company's
rights hereunder.
(f) Resignation from Directorships and
Officerships . The
termination of the Executive's employment for any reason will
constitute the Executive's resignation from (i) any director,
officer or employee position the Executive has with the Company and
(ii) all fiduciary positions (including as a trustee) the
Executive holds with respect to any employee benefit plans or
trusts established by the Company. The Executive agrees that this
Agreement shall serve as written notice of resignation in this
circumstance; provided , however , that the Executive
shall execute such other documents as may be required by the
Company in connection with such resignation.
5. Confidentiality.
(a) Confidential Information . (i) The Executive agrees that he will not at
any time, except with the prior written consent of the Company
Group or, to the extent permitted pursuant to subsection 5(a)(ii),
as required by law, directly or indirectly, reveal to any person,
entity or other organization (other than any member of the Company
Group or its respective employees, officers, directors,
shareholders or agents) or use for the Executi
