Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of
February 3, 2009 and is effective on the 9th day of March,
2009 (the “Effective Date”), by and between
Optelecom-NKF, Inc., a Delaware corporation (the
“Company”), and David Patterson (the
“Executive”).
Recitals
WHEREAS , the Company desires to employ the Executive, and
the Executive desires to work for the Company, all pursuant to the
terms and conditions set forth in this Agreement.
NOW, THEREFORE , in consideration of the mutual promises
made below, the parties agree as follows:
1.
Employment, Duties and Acceptance .
1.1
Employment .
(a) Effective upon the Effective Date, the Company shall
employ the Executive as its President. In such capacity, the
Executive shall report to the Chief Executive Officer of the
Company and shall perform such duties and assume such
responsibilities as may be assigned by the Chief Executive Officer
or the Board of Directors of the Company from time to time.
Six (6) months after the Effective Date (the “Six Month
Anniversary Date”), upon satisfactory performance of his
duties and responsibilities as determined at the sole discretion of
the Board of Directors of the Company, the Executive will be
appointed as Chief Executive Officer (CEO), reporting to the
Chairman of the Board. The Executive accepts such employment
and shall perform his duties faithfully and to the best of his
abilities.
(b) The Executive shall devote his full working time and
creative energies to the performance of his duties hereunder and
will at all times devote such additional time and efforts as are
reasonably sufficient for fulfilling the significant
responsibilities entrusted to him. The Executive shall
be permitted a reasonable amount of time to participate (as board
member, officer or volunteer) in civic, political and charitable
activities.
1.2
Place of Employment . The
Executive’s principal place of employment shall be in the
Washington, D.C. metropolitan area, subject to such travel as may
be reasonably required by his employment pursuant to the terms
hereof.
2.
Term of Employment .
Unless terminated earlier in accordance with the provisions of this
Agreement, the Executive’s employment hereunder shall
continue until the two (2) year anniversary of the Effective
Date (the “Term”).
3.
Compensation .
3.1
Salary . As compensation for all
services to be rendered pursuant to this Agreement, the Company
shall pay to the Executive during the Term a salary of $280,000 per
annum (the “Base Salary”) less such deductions as shall
be required to be withheld by applicable laws and regulations or as
otherwise authorized by the Executive. The Base Salary shall
accrue from and after the Effective Date, and shall be payable
during the Term, in arrears in equal periodic installments, in
accordance with the Company’s customary payroll practices in
effect at the time of payment. The Executive’s Base
Salary shall be reviewed annually by the Board of Directors of the
Company or the Compensation Committee thereof (collectively, the
“Board”) and may be increased (but not decreased) based
upon the evaluation of the Executive’s performance and the
compensation policies of the Company in effect at the time of each
such review.
3.2
Sign-on Bonus .
(a) On
the Effective Date, the Executive will be paid a one-time signing
bonus of $32,000, less such deductions as shall be required to be
withheld by applicable laws and regulations or as otherwise
authorized by the Executive.
(b) As
further compensation, on the Effective Date, the Executive shall be
granted non-qualified stock options to purchase 36,000 shares of
the Company’s common stock (the “Options”).
The Options shall have an exercise price equal to the fair market
value of the Company’s common stock on the Effective Date and
shall vest as follows: 25% shall vest on the day after the Six
Month Anniversary Date, an additional 50% shall vest on the one
year anniversary of the Effective Date, and the remaining 25% shall
vest on the two year anniversary of the Effective Date. All
of the terms of the Options shall be in accordance with the
provisions of the Optelecom-NKF, Inc 2008 Stock Incentive Plan, as
amended from time to time (the “Incentive Plan”).
The Executive acknowledges that he has been provided with a copy of
the Incentive Plan.
3.3
Incentive Compensation . The Executive
will be entitled to participate in the Company’s Incentive
Bonus Plan for Plan Year 2009 (the “2009 Incentive
Plan”). Provided the Company’s annual defined
goals as determined by the Board and set forth in the 2009
Incentive Plan are met, the Executive’s potential estimated
bonus under the 2009 Incentive Plan would be targeted at 55% of the
earned Base Salary. In addition, during the Term, the
Executive shall be entitled to participate in any subsequent bonus
or incentive plan or program adopted by the Board in which
executive officers of the Company are eligible to participate, in
accordance with such terms as are determined by the
Board.
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3.4
Participation in Executive Benefit Plans
. The Executive shall be permitted during the Term, if and to
the extent eligible, to participate in any group medical, dental,
long-term and short-term disability insurance, life insurance, and
401(k) plan of the Company available to other executives of
the Company generally on the same terms as such other
executives. Nothing herein shall affect the Company’s
ability to modify, alter, terminate or otherwise change any benefit
plan it has in effect at any given time, to the extent permitted by
law.
3.5
Vacation . The Executive shall be
entitled to accrue twenty (20) days of paid vacation and such
number of days of paid sick leave per year as is provided under the
Company’s Paid Time Off program, to be scheduled and taken at
the Executive’s option at such times as his duties may
permit. The established vacation year is the calendar year,
January 1 through December 31. Vacation leave can
be accrued in accordance with the Company’s
policies.
3.6
Expenses . Subject to such policies as
may from time to time be established by the Board, the Company
shall pay or reimburse the Executive for all ordinary, necessary
and reasonable business expenses actually incurred or paid by the
Executive during the Term in the performance of the
Executive’s services under this Agreement, upon presentation
of expense statements or vouchers or such other supporting
information as the Board may require.
3.7
Withholding . The Company is authorized
to withhold from the amount of any Base Salary and incentive
compensation and any other things of value paid to or for the
benefit of the Executive, all sums authorized by the Executive or
required to be withheld by law, court decree, or executive order,
including (but not limited to) such things as income taxes,
employment taxes, and employee contributions to fringe benefit
plans sponsored by the Company.
4.
Termination .
4.1
General . This Agreement shall terminate
upon the expiration of the Term, unless earlier terminated in
accordance with the provisions of this Section 4
.
4.2
Termination Upon Mutual Agreement . The
Company and the Executive may, by mutual written agreement,
terminate this Agreement and/or the employment of the Executive at
any time.
4.3
Death or Disability of Executive .
(a) The
employment of the Executive hereunder shall terminate upon
(i) the death of the Executive, which shall not be considered
a breach of this Agreement, or (ii) at the option of the
Company upon not less than thirty (30) days’ prior written
notice to the Executive or his personal representative or guardian,
if the Executive suffers a Total Disability (as defined in
Section 4.3(b) below).
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(b) For
purposes of this Agreement, “Total Disability” shall
mean (i) if the Executive is subject to a legal decree of
incompetency (the date of such decree being deemed the date on
which such disability occurred), or (ii) the written
determination by a physician selected by the Company that, because
of a medically determinable disease, injury or other physical or
mental disability, the Executive is unable to substantially perform
each of the material duties of the Executive required hereby, and
that such disability has lasted for the immediately preceding
ninety (90) days and is, as of the date of determination,
reasonably expected to last an additional ninety (90) days or
longer after the date of determination, in each case based upon
medically available reliable information, and the provision of
clear and convincing evidence by the Company of the
Executive’s inability substantially to perform each material
duty hereunder in support of such determination by the
physician. The Company hereby agrees to provide all written
documentation of such diagnosis to: (A) the Executive’s
spouse, (B) the Executive’s personal representative, or
(C) the Executive’s Trustee.
(c) If
the Executive dies during the Term of employment by the Company,
the Company hereby agrees to pay outright to the Executive’s
estate, or Trustee, or surviving spouse, (i) the lesser of
(A) the Executive’s remaining Base Salary for the Term
or (B) twelve (12) months of then Base Salary, (ii) all
employee benefits which have accrued, and (iii) all bonus
payments due. If the date of death is on or after the day
after the Six Month Anniversary Date, all unvested stock options
held by the Executive on the date of death shall immediately vest
as of such date and all options held by the Executive shall remain
exercisable for a period of twelve (12) months after the date of
death. Any options that remain unexercised at the end of such
12-month period shall terminate.
(d) Any
leave on account of illness or temporary disability which is short
of “Total Disability” shall not constitute a breach of
this Agreement by the Executive and in no event shall any party be
entitled to terminate this Agreement for “cause” or
“good reason” (as such terms are defined herein) due to
any such leave. All physicians selected hereunder shall be
board certified in the specialty most closely related to the nature
of the disability alleged to exist.
4.4
Termination by the Company .
(a)
Without Cause . The Company may terminate
Executive’s employment without “cause” (as
defined in Section 4.4(b)) at any time.
(b)
For Cause . The Company may, upon action of the
Board, and upon written notice to the Executive specifying in
reasonable detail the reason therefor, terminate the employment of
the Executive at any time for “cause” (as defined
below), provided, however, that if the reason for termination for
“cause” is susceptible of cure, the Executive shall
have a period of thirty (30) days after such written notice to
effect a cure. For purposes of this Agreement,
“Cause” means (i) the material failure of the
Executive to perform his duties under this Agreement which failure
materially adversely affects the Company or its business after
notice and a reasonable opportunity to cure; (ii) willful
malfeasance by the Executive in connection with the performance of
his duties under this Agreement that could in the good faith
judgment of the Board (x) have a material adverse impact on
the Company’s business, (y) subject the Company to
criminal penalties in excess of $50,000, or (z) result
in
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the incarceration of any officer,
director or employee of the Company; (iii) the Executive being
convicted of, or pleading guilty or nolo contendere to, or being
indicted for a felony or other crime involving theft, fraud or
moral turpitude; (iv) fraud or embezzlement against the
Company; (v) the failure of the Executive to obey in all
material respects any proper written direction of the Chairman of
the Board or the Board that is not inconsistent with this Agreement
and which failure to obey has a material adverse effect on the
Company; or (vi) the violation by the Executive of the
non-competition and confidentiality provisions of
Section 5 of this Agreement.
4.5
Termination For Good Reason . The Executive
may resign (and thereby terminate his employment under this
Agreement) at any time for “good reason” (as defined
below), upon not less than thirty (30) days’ prior written
notice to the Company specifying in reasonable detail the reason
therefor, provided, however, that if the reason for resignation for
“good reason” is susceptible of cure, the Company shall
have a period of thirty (30) days after such written notice to
effect a cure. For purposes of this Agreement, “good
reason” shall mean (i) any material failure by the
Company to comply with any material obligation imposed by this
Agreement after notice and a reasonable opportunity to cure; or
(ii) a substantial reduction in the Executive’s title,
position, duties, responsibilities or Base Salary, without
Executive’s written consent.
4.6
Payments Upon Termination .
(a)
In the event that the Executive’s employment is terminated
(i) by the Company without “cause,” or
(ii) by the Executive for “good reason,” then, if
no Change of Control (as defined below) has occurred on or before
the date of such termination, the following provisions shall
apply:
(1) The Company shall pay the Executive the Base Salary to
which the Executive would have been entitled pursuant to
Section 3.1 of this Agreement had the Executive
remained in the employ of the Company for a period of twelve (12)
months from the date of termination (the “Termination Payment
Period”). Such payments shall be paid on the same
schedule used to pay Base Salary to the Executive during the
Term. All payments under this Section 4 shall be
subject to applicable withholding.
(2) Unless prohibited by law or, with respect to any insured
benefit, the terms of the applicable insurance contract, the
Executive shall continue to participate in, and be covered under,
the Company’s medical, dental, long-term and short-term
disability insurance, and life insurance plan on the same basis as
other executives of the Company during the Termination Payment
Period.
(3) Notwithstanding the foregoing, the Company shall not be
required to make any payment to the Executive or maintain the
Executive’s participation or coverage under any plan pursuant
to this Section 4.6(a) if the Executive breaches
any of the provisions of Section 5 hereof. In
such event, the Company shall provide written notice to the
Executive detailing such violation.
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(4) All options held by the Executive that are vested as of
the date of termination shall remain exercisable for a period of
ninety (90) days after termination and any such options that remain
unexercised at the end of such 90-day period shall terminate.
All unvested options held by the Executive on the date of
termination shall terminate as of such date.
(b) In
the event the Executive’s employment is terminated
(i) by the Company for “cause,” or (ii) by
the Executive without “good reason,” then the Company
shall have no duty to make any payments or provide any benefits to
the Executive pursuant to this Agreement other than payment of the
amount of the Executive’s Base Salary accrued through the
date of termination of his employment.
(c)
Upon termination of Executive’s employment for death or Total
Disability, the Company shall pay to the Executive, guardian or
personal representative, as the case may be, in addition to any
insurance or disability benefits to which he may be entitled
hereunder, all amounts accrued or vested prior to such
termination.
(d)
In the event that the Executive’s employment is terminated by
the Company without “cause,” or by the Executive for
“good reason,” then, if a Change of Control (as defined
below) has occurred on or before the date of such termination or
the Company has entered into a definitive agreement for a Change of
Control on or before the date of termin
