Exhibit 10.1
Executive Employment Agreement
This Employment Agreement
(the “Agreement”) is made and entered into as of July 13, 2022, by and between Christopher Donaghey (the “Executive”),
and Applied Energetics, Inc, (the “Company”) (collectively, the “Parties”).
RECITALS
WHEREAS, Employer is a corporation
that specializes in the development and manufacturing of innovative directed energy solutions, ultra-short pulse lasers, and related technologies
for the national security, medical technology, and advanced manufacturing markets (the “Business”).
WHEREAS, the Company desires
to employ the Executive on the terms and conditions set forth herein; and
WHEREAS, the Executive desires
to be employed by the Company on such terms and conditions.
AGREEMENT
NOW, THEREFORE, in consideration
of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1.
Term. The Executive’s employment hereunder shall commence on August
1, 2022 (the “Effective Date”) and continue for an initial period of four years thereafter. Following such initial
period, the Agreement shall automatically renew, upon the same terms and conditions, for successive periods of one year each until the
Executive’s employment terminates pursuant to Section 5 of this Agreement. The period during which the Executive is employed by
the Company hereunder is hereinafter referred to as the “Employment Term.”
2.
Position
and Duties.
2.1
Position. During the Employment Term, the Executive shall serve as Chief Operating and Financial Officer of the Company.
In such position, the Executive shall have such duties, powers, authority, and responsibilities as shall be determined from time to time
by Executive and the Board of Directors, which duties, powers, authority, and responsibilities are consistent with the Executive’s
position. The Executive shall maintain such professional credentials and satisfy any and all legal or regulatory requirements for the
performance of his services under this Agreement. The Executive agrees to perform the services hereunder to the best of his ability in
a diligent and conscientious manner, to devote appropriate time, energies and skill to those duties called for hereunder and to be available
as deemed necessary by mutual agreement of the parties during the term of this Agreement.
2.2
Duties. During the Employment Term, the Executive will devote his full business time and attention to the performance of
the Executive’s duties hereunder as he deems necessary and appropriate, for provision of services in a professional and competent
manner to the Company.
3.
Place of Performance. The principal place of Executive’s employment
shall be Arizona, and the Executive shall work an average of seven to ten days in the Company’s Tucson headquarters per month.
The Executive may perform the remainder of his obligations under this Agreement at any location he deems necessary and appropriate, subject
to reasonable approval of the Board of Directors and subject to his using a secure, NIST compliant connection to the Company’s
information technology system. Executive may be required to travel on Company business during the Employment Term.
4.
Compensation.
4.1
Base Salary.
The Company shall pay the Executive an annual base salary of $350,000 in periodic installments in accordance with the Company’s
customary payroll practices and applicable Arizona wage payment laws, but no less frequently than monthly (the “Base Salary”).
The Executive’s Base Salary may not be decreased during the Employment Term.
4.2 Equity
Compensation. The Company shall issue to the Executive, on the date hereof, Incentive Stock Options to purchase up to one million
(1,000,000) shares of the Company’s common stock at an exercise price of $2.36 per share, representing the fair market value on
the date hereof by reference to the last closing price of the common stock on the OTCQB which shall vest in equal annual installments
over four years, commencing on the first anniversary hereof. Such options shall have a term of ten years and be subject to the terms and
conditions of the Company’s 2018 Stock Incentive Plan and the standard form of Incentive Stock Option Agreement thereunder. The
parties acknowledge that the Executive has received 215,000 shares of common stock of the Company, all of which are fully vested, and
options to purchase up to 1,300,000 shares of common stock of the Company, which are vested as to 350,000 shares, as compensation for
his service on the Company’s Board of Advisors. The parties agree that the Executive shall be entitled to retain the 215,000 vested
shares and 350,000 vested options so received and that the Executive shall forfeit and return to the Company unvested options to purchase
up to 950,000 shares.
4.3 Signing
Bonus. The Company shall issue to the Executive, on the date hereof, a signing bonus of 400,000 Restricted Stock Units (“RSUs”).
Such RSUs shall vest in equal annual installments over four years, commencing on the date hereof, and shall be subject to such other terms
and conditions on which the parties shall mutually agree and set forth in a Restricted Stock Unit Agreement.
4.4
Annual Bonus.
(a) For
each calendar year of the Employment Term, the Executive shall be eligible to receive an annual bonus (the “Annual Bonus”)
in an amount in cash or stock, if any, determined by the Board of Directors of the Company, in its sole discretion, with the Executive
abstaining from any vote or action by written consent on such Annual Bonus.
(b) The
Annual Bonus, if any, will be paid within two and a half (2 1/2) months after the end of the applicable calendar year.
4.5
Expense Reimbursements. The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket
business, entertainment, and travel expenses incurred by the Executive in connection with the performance of his duties under this Agreement.
The payment(s) shall be made on the day of the next regular payroll following submission by Executive of a reimbursement request to the
Company in accordance with the Company’s standard reimbursement policy.
4.6
Benefits.
During the Employment Term, the Executive shall be entitled to benefits consistent with the practices of the Company and governing benefit
plan requirements (including plan eligibility provisions). Notwithstanding the foregoing, during the Employment Term, the Company shall
provide the Executive with benefits equal or better to those benefits provided to or received by Executive from the Company as the date
this Agreement is executed.
(a) Employee
Benefits. During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices,
and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”) to
the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Executive may, in lieu of participating
in the Company’s health insurance plan for himself and his immediate family, elect COBRA coverage from his prior employer, in which
case, the Company will cover all premiums payable by the Executive for such coverage for a period of up to eighteen (18) months from the
date of this Agreement or such shorter period as the Executive may be entitled to receive such COBRA benefits.
(b) Vacation
and paid sick and family leave consistent with federal, state, and local laws and in an amount consistent with other executives in the
Company but no less than four weeks.
(c) The
Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business and travel expenses incurred by the
Executive in connection with the performance of his duties under this Agreement. The Company shall reimburse the Executive for expenses
of moving and relocation of the Executive and his immediate family to Tucson, AZ (including the Tucson metropolitan area) within eighteen
(18) months of the date of this Agreement.
4.7
Indemnification.
(a) In
the event that the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by the Executive or the Company related
to any contest or dispute between the Executive and the Company or any of its affiliates with respect to this Agreement or the Executive’s
employment hereunder, by reason of the fact that the Executive is or was a director or officer of the Company, or any affiliate of the
Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation
or a partnership, joint venture, trust, or other enterprise, the Executive shall be indemnified and held harmless by the Company to the
maximum extent permitted under applicable law from and against any liabilities, costs, claims, and expenses, including all costs and expenses
incurred in defense of any Proceeding (including attorneys’ fees). Costs and expenses incurred by the Executive in defense of such
Proceeding (including attorneys’ fees) shall be paid by the Company in advance of the final disposition of such litigation and in
no event more than 90 days after receipt by the Company of a written request for payment and appropriate documentation evidencing the
incurrence, amount, and nature of the costs and expenses for which payment is being sought.
(b) During
the Employment Term and for a period of six (6) years thereafter, the Company or any successor to the Company shall purchase and maintain,
at its own expense, directors’ and officers’ liability insurance providing coverage to the Executive on terms that are no
less favorable than the coverage provided to other directors and similarly situated executives of the Company.
5.
Termination
of Employment.
5.1 The
Executive’s employment hereunder may be voluntarily terminated by Executive or the Company at any time and for any reason upon 60
days’ prior written notice.
5.2 The
Executive’s employment hereunder may be terminated by the Company at any time, effective immediately, for Cause. For purposes of
this Section 5, the term “Cause” shall mean any (i) material breach of this Agreement by Executive which remains uncured for
ten days following written notice thereof, (ii) gross negligence or willful misconduct by Executive in the performance of services hereunder,
(iii) any action taken by Executive which is reasonably likely to cast the Company in an unfavorable light or bring negative publicity
to the Company or (iv) the unavailability, inability or refusal of Executive to perform and deliver the services hereunder in a reasonable
professional and timely manner.
5.3 Executive
may terminate his employment under this Agreement at any time, effective immediately, for “Good Reason.” "Good Reason"
shall mean: (a) material breach of this Agreement by the Company which remains uncured for ten days following written notice thereof;
(b) a material change to the services, duties, authority or responsibilities assigned to Executive under this Agreement, absent mutual
agreement; (c) a change to Executive’s title, absent mutual agreement; (d) any reduction to the compensation and/or benefits stated
in Section 4 hereof, absent mutual agreement or a general restructuring of compensation affecting all of management; (e) the Company becomes
either insolvent or in non-SEC reporting “shell” status within two years of the Commencement Date; or (e) a “change
in control” (as hereinafter defined) of the Company. "Change in control” for purposes of this Agreement shall mean: the
sale or disposition of more than 50% of the voting stock; a merger, consolidation, or share exchange that results in less than 50% of
the voting stock remaining with the current owners; or a sale of all or substantially all of the assets of the Company.
5.4 If
(a) the Company terminates the Executive’s employment for any reason other than Cause or (b) the Executive terminates his employment
hereunder for “Good Reason,” then the Company shall pay to Executive severance pay in an amount representing 90 days’
Base Salary hereunder as of the date of such termination. In the event of a change in control, any unvested equity compensation awarded
by the Company to Executive prior to the date of such change in control shall vest in full immediately prior to termination. The severance
pay shall be paid to Executive in equal monthly payments for the 90-day period following the date of Executive’s termination.
5.5 This
Agreement and Executive’s employment with the Company will terminate upon the Executive’s death or if the Executive becomes
incapacitated by disability (as determined by a qualified medical professional). If this Agreement and Executive’s employment with
the Company terminate by reason of death or disability, the Company shall pay to Executive’s designated beneficiary or, if no beneficiary
has been designated by the Executive, to his estate, payment in an amount representing 90 days’ Base Salary under this Agreement
immediately prior to the date of death or incapacitation. The foregoing payment shall be made to Executive’s designated beneficiary
or, if no beneficiary has been designated by the Executive, to his estate in equal monthly installments for 90-day period following the
date of death or incapacitation.
6.
Cooperation.
The parties agree that certain matters in which the Executive will be involved during the Employment Term may necessitate the Executive’s
cooperation in the future. Accordingly, following the termination of the Executive’s employment for any reason, to the extent reasonably
requested by the Board, the Executive shall cooperate with the Company in connection with matters arising out of the Executive’s
service to the Company; provided, however, that the Company shall make reasonable efforts to minimize disruption of the Executive’s
other activities. The Company shall reimburse the Executive for reasonable expenses incurred in connection with such cooperation and,
to the extent that the Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at
an hourly rate of $550 per hour.
7.
Confidential Information.
7.1 Executive
understands that his relationship to the Company creates a relationship of confidence and trust with respect to any information of a confidential
or secret nature that may be disclosed to Executive by the Company or by the business of any affiliate, customer or supplier of the Company
or any other party with whom the Company agrees to hold information of such party in confidence (“Confidential Information”).
Such Confidential Information includes but is not limited to plans, research, know-how, trade secrets, specifications, drawings, sketches,
models, samples, data, technology, computer programs, documentation, relating to software, computer systems, source code, object code
methodologies, product development, distribution plans, contractual arrangements, profits, sales, pricing policies, operational methods,
technical processes, other business affairs and methods, plans for future developments and other technical and business information, including
information related to inventions, which is not publicly available and can be communicated by any means whatsoever, including without
limitation oral, visual, written and electronic transmission.
7.2 At
all times, both during the term of this Agreement and after its termination, Executive will keep and hold all Confidential Information
in strict confidence and trust and will not use or disclose any of such Confidential Information without the prior written consent of
the Company, whether such Confidential Information was obtained prior to or during the term of this Agreement. Upon termination of his
relationship with the Company, Executive will promptly deliver to the Company all documents and materials of any nature pertaining to
his work with the Company, and she will not take any documents or materials or copies thereof containing any Confidential Information,
except as may be required for professional record keeping purposes. Executive represents and warrants that during any period prior to
this Agreement in which he may have received or otherwise had access to Confidential Information, Executive did not disclose any such
Confidential Information.
7.3 Executive
agrees to notify the Company immediately upon discovery of (1) any unauthorized disclosure of Confidential Information, (2) any use of
Confidential Information other than in pursuance of Executive’s business relationship with the Company, and (3) any other breach
of this Agreement by Executive, and Executive will cooperate with the Company in every reasonable way to help the Company regain possession
of the Confidential Information and prevent its further unauthorized use.
7.4 Confidential
Information shall not include that information otherwise defined as Confidential Information that (1) entered the public domain without
a breach by Executive of any obligation owed the Company, (2) became demonstrably known to Executive prior to the Company’s disclosure
of such information to his, or (3) became known by or available to Executive from a source other than the Company subsequent to the Company’s
disclosure of such information to Executive, without any breach of any obligation of confidentiality owed to the Company.
8.
Non-Competition. During the term of this Agreement and for a period of one year following termination of his relationship with
the Company for any reason, Executive will not, either alone or jointly with others or as an agent, consultant or employee of any person,
firm or company, directly or indirectly, voluntarily or involuntarily, carry on or engage in any activity or business which is or may
reasonably be in direct competition with the business of the Company or any of its affiliates, successors or assigns.
9.
Non-Solicitation. During the term of this Agreement and for a period of two years following termination of his relationship with
the Company for any reason, Executive will not, either alone or in association with others (i) solicit, divert, take away, encourage
or attempt to divert or take away the business or patronage of any of the clients, customers or business partners of the Company which
were contacted, solicited or served by the Company or any of its affiliates during the 12-month period prior to the termination or cessation
of the Executive’s service to the Company; (ii) solicit, induce or attempt to induce any employee or independent contractor of
the Company or its affiliates to terminate their employment or other engagement with the Company or any such affiliate; (iii) hire, recruit
or attempt to hire, or engage or attempt to engage as an independent contractor, any person who was employed or otherwise engaged by
the Company or any of its affiliates at any time during the term of this Agreement.
10.
Non-Contravention. The Executive hereby represents and warrants to the Company that nothing contained in this Agreement constitutes
a breach of any other agreement or covenant to which the Executive is a party or by which he is bound, including without limitation,
any covenant not to compete or confidentiality or similar agreement.
11.
Governing Law. Jurisdiction and Venue. This Agreement, for all purposes, shall
be construed in accordance with the laws of Arizona without regard to conflicts of law principles. Any action or proceeding by either
of the parties to enforce this Agreement shall be brought only in a state or federal court located in the State of Arizona. The parties
hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance
of any such action or proceeding in such venue.
12.
Entire Agreement. Unless specifically provided herein, this Agreement contains
all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes
all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such
subject matter. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal
proceedings alleging breach of the Agreement.
13.
Modification and Waiver. No provision of this Agreement may be amended or
modified unless such amendment or modification is agreed to in writing and signed by the Executive and the Company. No waiver by either
of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party
hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor
shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a waiver thereof
to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
14.
Severability.
Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion
of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and
treated as though originally set forth in this Agreement. The parties expressly agree that this Agreement as so modified by the court
shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held
to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other
provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such
invalid, illegal, or unenforceable provisions had not been set forth herein.
15.
Captions. Captions and headings of the sections and paragraphs of this Agreement
are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any
section or paragraph.
16.
Counterparts. This Agreement may be executed in separate counterparts, each
of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
17.
Notice. Notices and all other communications provided for in this Agreement
shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight
carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
If to Employer: Attn: Gregory Quarles, President
and CEO
Applied Energetics,
Inc.
9070 S. Rita Road, Suite 1500
Tucson, Arizona 85747
Copy to: Mary P. O’Hara, Esq.
Applied Energetics, Inc.
9070 S. Rita Road, Suite 1500
Tucson, Arizona 85747
mohara@aergs.com
If to Employee: Christopher Donaghey
207 McLean Pl
Severna Park, MD 21146
Chris.donaghey.ae@gmail.com
18.
Withholding. The Company shall have the right to withhold from any amount
payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have
under any applicable law or regulation. If the Executive incurs any state or local income tax liability whatsoever by virtue of his performance
of any obligation under this Agreement, the Company shall reimburse Executive for any such payment(s) he remits to any state or local
taxing authority within 15 days of the date Executive submits the reimbursement request to the Company.
19.
Acknowledgement
of Full Understanding. The parties acknowledge and agree that they have fully read, understand and voluntarily enter into
this Agreement. The parties acknowledge and agree they have had an opportunity to ask questions and consult with an attorney of his or
its choice before signing this Agreement.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
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EMPLOYER: |
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Applied Energetics, Inc. |
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By: |
/s/
Gregory Quarles |
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Name: |
Gregory Quarles |
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Its: |
President and CEO |
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Date: July 13, 2022 |
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EXECUTIVE: |
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By: |
/s/
Christopher Donaghey |
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Name: |
Christopher Donaghey |
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Date: July 13, 2022 |
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