| Item 5.02. |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers. |
Employment Agreements
On February 1, 2023, Telkonet, Inc. (the “Company”)
entered into employment agreements with John M. Srouji, the Company’s Chief Sales and Operating Officer (“Mr. Srouji”),
Jeffrey J. Sobieski, the Company’s Chief Technology Officer (“Mr. Sobieski”) and Richard E. Mushrush, the Company’s
Chief Financial Officer (“Mr. Mushrush”). The material terms of the employment agreements are set forth below.
John M. Srouji
Effective February 1, 2023, Mr. Srouji entered into an Amended Employment Agreement pursuant to which Mr. Srouji will continue to
serve as the Company’s Chief Sales and Operating Officer.
Under the agreement, Mr. Srouji will receive a base salary of $300,000,
which may be increased, at any time, as determined by the board of directors of the Company (the “Board”). Mr. Srouji will
also be eligible for a Retention Bonus Agreement (the “Bonus Agreement”) pursuant to which he will be eligible to receive
up to 30% of his base salary should targets set forth in the Bonus Plan be hit. The agreement provides that Mr. Srouji will have a guaranteed
2022 bonus of $25,000, which Mr. Srouji received prior to January 1, 2023.
Mr. Srouji will also be paid a retention bonus of $90,000 in January
2026 if he remains employed by the Company through the end of 2025. Finally, Mr. Srouji will be eligible to participate in the Company’s
2023 Long-Term Cash Incentive Plan (the “Incentive Plan”) for the 2023-2025 period.
The Incentive Plan, form of the Bonus Plan and descriptions thereof
have previously been filed as Exhibits 10.1 and 10.3, respectively, to the Company’s Form 8-K filed on February 3, 2023 and are
incorporated herein by reference.
The term of Mr. Srouji’s agreement runs through May 2026, and
will automatically renew for an additional twelve months unless Mr. Srouji or the Company take action to not renew the Agreement. If Mr.
Srouji’s employment is terminated without cause, or if he resigns with Good Reason (as that term is defined in the Agreement), Mr.
Srouji, upon signing a release of employment-related claims, will be entitled to one year of base salary, and upon termination without
cause, the Company will reimburse Mr. Srouji for health insurance costs in compliance with COBRA for the shorter of: one year or Mr. Srouji’s
securing new employment providing similar benefits.
The foregoing description of the agreement between the Company and
Mr. Srouji is qualified in its entirety by reference to the actual terms of the agreement, which has been filed as Exhibit 10.1 to this
Current Report on Form 8-K, and which is incorporated herein by reference.
Jeffrey J. Sobieski
Effective February 1, 2023, Mr. Sobieski entered into an Amended Employment
Agreement pursuant to which Mr. Sobieski will continue to serve as the Company’s Chief Technology Officer.
Under the agreement, Mr. Srouji will receive a base salary of $250,000.
Mr. Sobieski will also participate in the Bonus Plan, pursuant to which he will be eligible to receive up to 15% of his base salary should
targets set forth in the Bonus Plan be hit. Mr. Sobieski will also be paid a retention bonus of $75,000 in January 2026 if he remains
employed by the Company through the end of 2025. Finally, Mr. Sobieski will be eligible to participate in the Incentive Plan for the 2023-2025
period.
The term of Mr. Sobieski’s agreement runs through May 2026, and
will automatically renew for an additional twelve months unless Mr. Srouji or the Company take action to not renew the agreement. If Mr.
Sobieski’s employment is terminated without cause, or if he resigns with Good Reason (as that term is defined in the agreement),
Mr. Sobieski, upon signing a release of employment-related claims, will be entitled to one year of base salary, and upon termination without
cause, the Company will reimburse Mr. Sobieski for health insurance costs in compliance with COBRA for the shorter of: one year or Mr.
Sobieski’s securing new employment providing similar benefits.
The foregoing description of the agreement between the Company and
Mr. Sobieski is qualified in its entirety by reference to the actual terms of the agreement, which has been filed as Exhibit 10.2 to this
Current Report on Form 8-K, and which is incorporated herein by reference.
Richard E. Mushrush
Effective February 1, 2023, Richard E. Mushrush entered into an Amended
Employment Agreement pursuant to which Mr. Mushrush will continue to serve as the Company’s Chief Financial Officer.
Under the agreement, Mr. Mushrush will receive a base salary of $122,000.
Mr. Mushrush will also participate in the Company’s Bonus Plan, pursuant to which he will be eligible to receive up to 20% of his
base salary should targets set forth in the Bonus Plan be hit. Mr. Mushrush will also be paid a retention bonus of $36,600 in January
2026 if he remains employed by the Company through the end of 2025. Finally, Mr. Mushrush will be eligible to participate in the Incentive
Plan for the 2023-2025 period.
The term of Mr. Mushrush’s agreement runs through May 2026, and
will automatically renew for an additional twelve months unless Mr. Srouji or the Company take action to not renew the Agreement. If Mr.
Mushrush’s employment is terminated without cause, or if he resigns with Good Reason (as that term is defined in the Agreement),
Mr. Mushrush, upon signing a release of employment-related claims, will be entitled to one year of base salary, and upon termination without
cause, the Company will reimburse Mr. Mushrush for health insurance costs in compliance with COBRA for the shorter of: one year or Mr.
Mushrush’s securing new employment providing similar benefits.
The foregoing description of the agreement between the Company and
Mr. Mushrush is qualified in its entirety by reference to the actual terms of the agreement, which has been filed as Exhibit 10.3 to this
Current Report on Form 8-K, and which is incorporated herein by reference.
Services Agreement
Effective February 1, 2023, the Company entered into a Services Agreement
with VDA Group S.p.A., which is the Company’s largest shareholder. Pursuant to the Services Agreement, the Company will provide
VDA Group with outsourced services traditionally associated with the role of a Chief Technology Officer (the “Services”).
The Services will primarily be provided by Mr. Sobieski and will require Mr. Sobieski to regularly travel to VDA Group’s offices
in Italy. Pursuant to the Services Agreement, VDA Group will pay to the Company 50% of the cost of labor and expenses associated with
the provision of the services.
The Services Agreement can be terminated by either party upon at least
30 days’ notice, and the Services Agreement will automatically terminate should the Mr. Sobieski’s employment terminate. The
Services Agreement explicitly states that no employment relationships are created thereby.
The foregoing description of the agreement between the Company and
VDA Group S.p.A. is qualified in its entirety by reference to the actual terms of the agreement, which has been filed as Exhibit 10.4
to this Current Report on Form 8-K, and which is incorporated herein by reference.
