Cto Employment Agreement

GUARDIAN TECHNOLOGIES INTERNATIONAL, INC.


EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (this " Agreement" ) is made and entered into effective as of November 18, 2005, by and between Guardian Technologies International, Inc., a Delaware corporation (the " Corporation" ), and William J. Donovan (the " Employee" ).


WITNESSETH:


WHEREAS, the Corporation wishes to employ the Employee and the Employee wishes to accept such employment on the terms and conditions set forth below.


WHEREAS , the Parties hereby agree to terminate that certain Employment Agreement by and between the Corporation and Employee, dated as of August 18, 2003 (the " Old Employment Agreement" ) and that this Agreement shall supersede the Old Employment Agreement in its entirety.


NOW, THEREFORE, in consideration of the promises and the mutual agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:


1. DEFINITIONS


1.1. The following words and terms shall have the meanings set forth below for the purposes of this Agreement:


1.1.1

Affiliates. " Affiliates" of the Corporation, or a person " affiliated" with the Corporation, shall mean any persons or entities which, directly or indirectly, through one or more intermediaries, controls or are controlled by or are under common control with, the persons or entities specified.


1.1.2

Base Salary. " Base Salary" shall have the meaning set forth in Section 3.1 hereof.


1.1.3

Cause. Termination of the Employee' s employment for " Cause" shall mean termination because the Corporation determines in its sole discretion that the Employee has: (a) engaged in conduct which, when proven, would constitute a crime involving breach of professional ethics or moral turpitude or a felony of any type; (b) engaged in conduct which injures the business or reputation of the Corporation, or which compromises the Employee's ability to perform the Employee' s job duties; (c) failed to perform duties assigned in accordance with this Agreement or to follow reasonable policies of the Corporation; (d) engaged in negligence, incompetence or willful misconduct in the performance of the Employee' s duties; or (e) breached this Agreement; provided that in the case of subparagraphs (b), (c) or (e), the Corporation shall have given written notice to Employee sett ing forth in reasonable detail the conduct, failure or breach and giving the Employee thirty (30) days in which to correct any such conduct, failure or breach.


1.1.4

Change in Control.

"Change in Control" shall mean:


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(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Corporation (the "Outstanding Corporation Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of Directors (the "Outstanding Corporation Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Corporation, (ii) any acquisition by the Corporation, (iii) any acquis ition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Section 1.1.4(c) hereinbelow; or


(b) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least two-thirds of the Board; provided, however, that any individual becoming a Director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least three-quarters of the Directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or


(c) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of Directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all o r substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the Board of Directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or


(d) approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation.


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1.1.5

Date of Termination. " Date of Termination" shall mean: (i) if the Employee' s employment is terminated by reason of Employee' s death, the date of Employee' s death; (ii) if the Employee' s employment is terminated for Cause or Disability, the date specified in the Notice of Termination, and (iii) if the Employee' s employment is terminated for any other reason, the date on which a Notice of Termination is given or as specified in such Notice of Termination.


1.1.6

Disability. Termination by the Corporation of the Employee' s employment based on " Disability" shall mean termination because the Employee is, in the reasonable opinion of the Corporation as confirmed by reasonable medical advice, unable to perform the essential functions of the Employee' s position with or without accommodation due to a disability (as such term is defined in the Americans with Disabilities Act) for 90 consecutive days or for 120 days in the aggregate during any 12-month period. This definition shall be interpreted and applied consistent with the Americans with Disabilities Act, the Family and Medical Leave Act and other applicable law. This provision is in effect provided the Corporation makes available to the Employee Short and Long-Term Disability Insurance (regardless of whether the insurance coverage is paid by the Employee or the Corporation). In the event that such insurance is not made available to the Employee, termination shall be treated consistent with the provisions of Section 5.6 .


1.1.7

Notice of Termination . A " Notice of Termination" shall mean a written, dated notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee' s employment under the provision so indicated, (iii) specifies a Date of Termination, which shall be not less than 15 days nor more than 90 days after such Notice of Termination is given, except in the case of the Corporation' s termination of Employee' s employment for Cause or Disability, for which the Date of Termination may be the date of the notice; and (iv) is given in the manner specified in Section 9.2 ; provided that no Notice of Termination shall be required in the event this Agreement is terminated by reason of Employee' s death.


1.1.8

Subsidiary. " Subsidiary" shall mean any subsidiary of the Corporation.


2. EMPLOYMENT


2.1. Agreement and Term. The Corporation hereby employs the Employee, and the Employee hereby accepts said employment and agrees to render such services to the Corporation, on the terms and conditions set forth in this Agreement. The term of this Agreement shall commence on November 21, 2005, and shall continue from that date for three (3) years unless terminated prior thereto by either the Corporation or the Employee as provided herein, and thereafter shall automatically renew for successive terms unless terminated prior thereto by either the Corporation or the Employee as provided herein. If either the Corporation or the Employee does not wish to renew this Agreement when it expires at the end of the initial or any renewal hereof as provided herein or if either the Corporation or the Employee wishes to renew this Agreement on different terms than those contained herein, the C orporation or the Employee shall give written notice in accordance with Section 9.2 of such intent to the other party at least 30 days prior to the expiration date. In the absence of such notice, this Agreement shall be automatically renewed on the same terms and conditions contained herein for a term of one (1) year from the date of expiration. The parties expressly agree that designation of a term and renewal provisions in this Agreement does not in any way limit the right of the parties to terminate this Agreement at any time as provided herein. Reference herein to the term of this Agreement shall refer both to the initial term and any successive term, as the context requires.


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2.2.

Duties. During the term of this Agreement, the Employee shall devote the Employee' s full time, attention and energies and to use the Employee' s best efforts to further the interests of the Corporation and to perform such services for the Corporation as is consistent with the Employee' s position, and as directed, from time to time, by the Corporation, including, but not limited to, by the Board of Directors of the Corporation. During the term of this Agreement, Employee shall use such titles as assigned and approved by the Corporation. Employee' s title shall be President and Chief Operating Officer. As of the date of this Agreement, Employee holds the title of Chief Financial Officer of the Corporation. Employee understands and agrees that it is the Corporation' s intention to hire a Chief Financial Officer to replace Employee as Chief Financial Officer. However, until the Corporation has selected and appointed a Chief Financial Officer to replace Employee as Chief Financial Officer, Employee shall continue to hold the title of Chief Financial Officer and fulfill the responsibilities of such position and Employee hereby understands and agrees that he shall relinquish such title upon the selection of a new Chief Financial Officer; provided that the relinquishment of such title shall not in any way constitute a Termination for Material Reason (as hereinafter defined). The Employee shall not, during the term hereof, be employed or involved in any other business activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage, except for (i) volunteer services for or on behalf of such religious, educational, non-profit and/or other eleemosynary organization as Employee may wish to serve as approved by the Corporation, (ii) service as a director of for-profit business activities as approved by the Corporation, and (iii) such other activitie s as may be specifically approved by the Corporation. This restriction shall not, however, preclude the Employee, unless otherwise in violations of any applicable law or regulation, from (x) owning less than 2% of the total outstanding shares of a publicly traded company, (y) investing in real estate as a limited or otherwise passive partner or (z) employment in any capacity with Affiliates of the Corporation.


3. COMPENSATION AND BENEFITS


3.1. Base Salary . For services rendered hereunder by the Employee, the Corporation shall compensate and pay Employee an annual salary of $265,000 (" Base Salary" ) payable in equal biweekly installments, or in such other manner or on such days as the Corporation may prescribe for the payment of salaries to employees of the Corporation. The Corporation agrees to review Employee's salary annually while this Agreement is in effect and may adjust the Employee's salary, as it deems appropriate in its sole discretion.


3.2 Bonuses. In addition to the Base Salary, the Employee shall be eligible for an annual performance bonus based on the Employee' s having met goals established by the Corporation and mutually agreed to by the Employee and the Corporation.


3.3. Withholding . All payments required to be made by the Corporation hereunder to the Employee shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Corporation may reasonably determine should be withheld pursuant to any applicable law or regulation.


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3.4. Benefits.


3.4.1 Vacation. The Employee shall be entitled to the number of paid vacation days provided to other employees at the Employee' s level in accordance with the Corporation' s applicable policy for such other employees.


3.4.2 Automobile Allowance. The Employee will receive a monthly automobile allowance of $500.


3.4.3 Other Benefits. The Employee shall be entitled to participate in benefit policies or plans adopted by the Corporation on the same basis as other employees at the Employee' s level as such policies or plans may be changed, altered or terminated from time to time by the Corporation in its sole discretion.


3.4.4 Personnel Policies. Except as otherwise provided herein, Employee' s employment shall be subject to the personnel policies which apply generally to employees at the same level as the Employee, any code or codes of ethics, or corporate governance standards adopted by the Corporation or its Affiliates from time to time, as the same may be interpreted, adopted, revised or deleted from time to time by the Corporation in its sole discretion, during the term of this Agreement.


3.5 Stock Options. Employee shall be entitled to participate in any stock option plan or similar plan then in effect and to receive grants of stock options or other awards thereunder as may be authorized and approved by the Board of Directors of the Corporation (or any compensation or similar committee thereof). Notwithstanding the foregoing or any other provision of this Agreement or any agreement pursuant to which any stock options are, or have been, granted, all of such stock options or other awards granted or issued to Employee shall automatically and immediately vest and become exercisable upon Employee' s death or Disability or upon a Change in Control of the Corporation (or the surviving corporation of a Business Combination that complies with Section 1.1.4(c), above).


4. EXPENSES


4.1. Expenses. The Corporation shall reimburse Employee or otherwise provide for or pay for all reasonable expenses incurred by Employee in furtherance of, or in connection with, the business of the Corporation, including, but not limited to, traveling expenses, communication expenses and all reasonable entertainment expenses (whether incurred at the Employee' s residence, while traveling or otherwise), subject to such reasonable documentation and other limitations as may be established by the policies of the Corporation and/or the Board from time to time.


5. TERMINATION


5.1. Termination Due to Death. This Agreement shall automatically terminate upon the death of Employee. If the Employee' s employment is terminated by reason of the Employee' s death, the Corporation shall have no further obligation to pay compensation to the Employee effective as of the date of such death. The entitlement of any beneficiary of the Employee to benefits under any benefit plan shall be determined in accordance with the provisions of such plan.


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5.2. Termination Due to Disability. This Agreement may be terminated by the Corporation upon the Disability of the Employee. If the Employee is terminated due to Disability, the Corporation shall have no further obligation to pay compensation to the Employee effective as of the Date of Termination, consistent with the provisions of Section 1.1.6 . The entitlement of the Employee to benefits under a plan described in Section 3.4.3 or Section 3.5 upon such termination shall be determined in accordance with the provisions of such plans.


5.3. Termination for Cause. This Agreement may be terminated by the Corporation for Cause. Upon the termination of the Employee for Cause, the Corporation shall have no further obligation to pay any amounts to the Employee. The entitlement of the Employee to benefits under a plan described in Section 3.4.3 or Section 3.5 upon such termination shall be determined in accordance with the provisions of such plans.


5.4. Termination for a Material Reason. Employee may elect (but shall not be obligated to) terminate his employment hereunder, upon 30 days' prior written notice to the Corporation, in the event that any one or more of the following circumstances occur (and in which event the Employee' s election to terminate shall be construed as a " Termination for a Material Reason" hereunder):


i.

a written demand by the Corporation to change the principal workplace of Employee to a location outside of a 50-mile radius from the principal address of Corporation set forth in Section 9.2 of this Agreement;

ii.

a material reduction in the number or seniority of Corporation personnel reporting to the Employee or a material reduction in the frequency with which, or in the nature of matters with respect to which such personnel are to report to the Employee, other than as part of an Employer-wide reduction in staff;

iii.

an adverse change in the Employee' s title;

iv.

a material decrease in the Employee' s responsibilities; or

v.

a material demotion of Employee.


In the event Employee shall terminate this Agreement for any reason set forth in subsections i. through v. hereinabove, then the Corporation shall pay to Employee, in equal monthly installments (or, in the Corporation' s sole discretion, as a lump sum based upon the net present value of the future payments using the Corporation' s incremental borrowing rate, if any), the greater of the Base Salary remaining under this Agreement or twelve (12) months. During such twelve (12) month period, the Corporation shall not be obligated to pay any additional amounts to the Employee pursuant to this Agreement. The entitlement of the Employee to benefits under a plan described in Section 3.4.3 or Section 3.5 upon such termination shall be determined in accordance with the provisions of such plans.


5.5. Termination in the Event of a " Change in Control." If, and only if, (a) a Change in Control shall occur during the initial term or any renewal term of this Agreement, (b) Employee is employed by the Corporation immediately prior to the occurrence of the Change in Control, and (c) Employee is terminated by the Corporation or the acquirer (within the first twelve (12) months following the Change in Control) in the Change in Control transaction, or the Corporation or the acquiror as part of the Change in Control transaction impose circumstances as defined under " Termination of Material Reason," then the Corporation or any successor entity shall pay Employee, in equal monthly installments (or, in the Corporation' s sole discretion, as a lump sum based upon the net present value of the future payments using the Corporation' s incremental borrowing rate, if any), the Base Salary for eighteen (18) months following such termination. During such eighteen (18) month period, the Corporation shall not be obligated to pay any additional amounts to the Employee pursuant to this Agreement. The entitlement of the Employee to benefits under a


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plan described in Section 3.4.3 or Section 3.5 upon such termination shall be determined in accordance with the provisions of such plans.


5.6. Termination by the Corporation Other Than for Death, Disability, Cause, or Change in Control. This Agreement may be terminated by the Corporation for any reason and at any time; provided that if this Agreement is terminated by the Corporation for reasons other than death, Disability, Cause, or pursuant to Section 5.5 , and other than as provided by Sections 5.9 , then the Corporation shall pay to the Employee, in equal monthly installments (or, in the discretion of the Corporation, as a lump sum based upon the net present value of the future payments usi ...