Vice President-finance Employment Agreement

AM COMMUNICATIONS, INC.
EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of March 20, 2003, by and between AM Communications, Inc., a Delaware corporation ("Company") and Howard Bashford, an individual residing at 2249 APPLE RD, FOGELSVILLE, PA 18051 ("Employee").


WHEREAS, the Employee has corporate finance experience with public companies; and


WHEREAS, the Company has a need to fill a senior management position with an individual that has corporate finance experience with public companies; and


WHEREAS, the Company desires to employ the Employee and the Employee desires to be employed by the Company, in the capacity and upon the terms and conditions set forth in this Agreement.


NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, and intending to be legally bound, the parties, agreed as follows:


1. Employment and Term. From the date hereof through the term of this Agreement the Employee shall be employed in the position of Vice President - Finance of the Company. The initial term of employment under this Agreement shall commence as of April 1, 2003, and expire on March 31, 2006; provided, however, that this Agreement shall automatically renew on April 1, 2006, and on April 1 of each succeeding year for renewal terms of one year each unless either Employee or the Company gives contrary written notice to the other party hereto not less than sixty (60) days before the scheduled expiration of the Term of this Agreement. The initial term and the renewal terms are collectively referred to herein as the "Term" of this Agreement.


2. Duties. The Employee shall devote substantially all of his working time and his best efforts to the Company and his position, which shall include such duties as AM's Chairman and/or CEO may from time to time reasonably direct that are reasonably consistent with the Employee's education, experience and background. During the Term of this Agreement, Employee shall report directly to the Chairman of the Company and there shall be no material increase or decrease in the duties and responsibilities of the Employee other than as provided herein, unless the parties otherwise agree in writing.


3. Other Business Activities. The Employee may engage, directly or indirectly, during the Term, in other business activities or pursuits; provided, however, that such activities shall not, other than in an incidental manner, interfere with or detract from the performance of Employee's responsibilities and obligations pursuant to this Agreement and shall not be related to the Business of the Company in a manner that violates the provisions of Section 10 of this Agreement.


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4. Compensation.


(a) Salary. The Company shall pay to the Employee during the Term of this Agreement a base salary at an annual rate of One Hundred Twenty Thousand Dollars ($120,000) with such subsequent increases in salary during the Term of this Agreement as may be authorized by the Compensation and Stock Option Committee of the Board. In determining salary increases, the Compensation and Stock Option Committee may compensate the Employee for increases in the cost of living and may also provide for performance or merit increases. Participation in deferred compensation, bonus, discretionary bonus, retirement and other employee benefit plans in the fringe benefits shall not reduce the salary payable to the Employee under this Section 4(a).


(b) Bonus. The Employee shall be eligible to participate in a bonus program under which he will be eligible for an annual bonus in an amount up to thirty-five percent (35%) of Employee's base salary as described above. The amount of such annual bonus, if any, to be paid shall be determined by the Chairman based on three criteria: Company performance, Employee performance and Chairman's discretion.


(c) Stock Option Awards. As of the effective date of this Agreement the Employee shall be awarded 650,000 stock options. At such time as the Company closes on a transaction or series of transactions resulting in the renegotiation of terms of the Company's secured line of credit with LaSalle Business Credit, Inc. and the acquisition of the Company of additional debt or equity financing necessary to fund its operations during the Term, the Employee shall be awarded an additional 300,000 stock options All stock options shall be issued from the Company's authorized stock option plan, at an exercise price which shall equal the fair market value of the Company's stock as of the date of issuance, which shall be determined in accordance with the provisions of the stock option plan under which the options are issued. For purposes of this paragraph 4(c) "fair market value of the AM's stock as of the date of issuance" shall mean the average of closing bid price and ask price as quoted on the OTC Bulletin Board of the NASD, Inc. on such date.


(d) Company Vehicle and Housing Allowance. During the Term, the Company shall provide Employee with a company vehicle and shall also provide a housing allowance of $800.00 per month.


5. Other Benefits and Perquisites; Business Expenses.


(a) Other Benefits and Perquisites. The Employee shall be entitled to participate in any plan of the Company relating to stock options, pension, profit sharing, group life insurance, medical or dental coverage, education or other retirement or employee benefit plans or arrangements that the Company has adopted or may adopt for the benefit of its employees or executive officers. The Employee shall also be entitled to participate in, or enjoy the benefit of, any other fringe benefits or prerequisites that are now or may be or become applicable to the Company's executive employees.


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(b) Business Expenses. During the term of the Employee's employment by the Company, the Company shall promptly reimburse the Employee for all reasonable and customary expenses incurred by the Employee in performing services for the Company, including all expenses of travel, food and lodging expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses are incurred and accounted for in accordance with the reimbursement policies and procedures established by the Company.


6. Voluntary Absences; Vacations. The Employee shall be entitled, without loss of pay, to be absent voluntarily for reasonable periods of time from the performance of the duties and responsibilities under this Agreement. All such voluntary absences shall count as paid vacation time, unless the Board otherwise approves. The Employee shall be entitled to an annual paid vacation equal to that accorded to other executive employees of the Company, or such longer period as the Board may approve. The timing of paid vacations shall be scheduled in a reasonable manner by the Employee.


7. Termination of Employment. The Employee's employment may be terminated without any breach of this Agreement only under the following circumstances:


(a) Death. The Employee's employment shall terminate upon his death.


(b) Disability. The Company may terminate the Employee's employment because of disability. For this purpose, "Disability" shall mean the inability of the Employee to perform his duties under this Agreement because of physical or mental illness or incapacity for a continuous period of one hundred twenty (120) days, or more that one hundred twenty (120) days in the aggregate during any 365-day period, during which the Employee shall have been absent from his duties under this Agreement on a substantially full-time basis.


(c) Cause. The Company may terminate the Employee's employment for Cause. For purposes of this Agreement, the Company shall have "Cause" to terminate the Employee's employment only in the event of (1) the failure by the Employee to substantially perform his duties hereunder (other than any such failure resulting from the Employee's inability to perform such duties as a result of physical or mental illness or incapacity) or any such actual or anticipated failure after the delivery of a Notice of Termination, as defined in Section 7(e) after delivery to the Employee of a written demand for substantial performance that specifically identifies the manner in which the Company believes that the Employee has not substantially performed his duties and a reasonable opportunity to cure; (2) misconduct by the Employee that causes substantial and material injury to the business and operations of the Company, the continuation of which, in the reasonable judgment of the Board, will continue to substantially and materially injure the business and operations of the Company in the future; (3) habitual intoxication or drug addiction; or (4) conviction of the Employee of a felony. The Employee shall not be deemed to have been terminated for Cause unless the Employee shall have been provided with (i) a reasonable notice setting forth the reasons that the Company believes constitute Cause for the termination of his employment; and (ii) a Notice of Termination as defined in Section 7(e), from the Company finding that, in the reasonable good faith opinion of the CEO or such other executive officer designated by the Company, Cause for the termination exists and specifying the particulars thereof in reasonable detail.


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(d) Termination by the Employee. The Employee may terminate his employment at any time without cause by giving sixty (60) days prior written notice to the Company. The Employee may terminate his employment for cause only in the event of a material default by Company under the provisions of this Agreement and the failure of Company to cure such default within a reasonable period of time after Company has received written notice of such asserted default.


(e) Notice of Termination. Any termination of the Employee's employment by the Company or by the Employee (other than termination pursuant to Section 7(a) or 7(b) hereof) shall be communicated to the other party by a written Notice of Termination. Any Notice of Termination given by a party shall specify the particular termination provision of this Agreement relied upon by such party and shall set forth in reasonable detail the facts and circumstances relied upon as providing a basis for the termination under the provision so specified.


(f) Termination Date. The Termination Date shall mean (1) if the Employee's employment is terminated by his death, the date of his death; (2) if the Employee's employment is terminated pursuant to Section 7(b) hereof, the date specified in the Notice of Termination, which shall be after the expiration of the 120-day period specified in that subsection; (3) if the Employee's employment is terminated by the Company for Cause, the date specified in the Notice of Termination; (4) if terminated by Employee under Section 7(d), sixty (60) days following the date on which the Notice of Termination is given; or (5) if the Employee's employment is terminated for any other reason, fifteen (1 ...