Exhibit 10.1
May 5, 2009
Mr. James Bazet
Cobra Electronics Corporation
6500 West Cortland Street
Chicago, Illinois 60707
Dear Jim:
This letter agreement (this
“Agreement”) is entered into as of May 5, 2009
(the “Effective Date”) and confirms the terms of your
continued employment with Cobra Electronics Corporation (the
“Company”). This Agreement supersedes the employment
agreement between you and the Company dated May 25, 2004, as
amended on December 31, 2008 (the “Prior Employment
Agreement”).
1. Employment . Commencing on
the Effective Date, you shall continue your employment as the
Chairman, President and Chief Executive Officer of the Company and
shall have the normal duties, responsibilities and attendant
authorities of those positions. Unless earlier terminated pursuant
to Paragraph 8, the term of your employment by the Company pursuant
to this Agreement shall end on July 31, 2012 (the
“Employment Period”). In any event, the Company agrees
to provide to you written notice, on or prior to October 31,
2011, if the Company elects to either (i) offer to you or not
offer to you a renewal of this Agreement or (ii) offer to you
a continuation of employment upon terms and conditions other than
those provided in this Agreement. In the event the Company either
offers to you a renewal of this Agreement or offers to you a
continuation of employment upon terms and conditions other than
those provided in this Agreement, the parties agree to proceed
promptly with good faith negotiations toward the end of fulfilling
their mutual intent to reach agreement, within 90 days thereafter,
as to the terms and conditions of such continuation of employment.
In the event the parties are unable to reach agreement as to such
terms and conditions within such 90 day period, it shall be deemed
to be a timely notice that the Company does not intend to continue
your employment beyond the Employment Period.
2. Salary and Bonuses
.
A. Base Salary. Commencing as
of the Effective Date and continuing during the Employment Period,
you shall receive a regular annual salary in installments payable
every two weeks. Such annual salary shall be at the rate of
$545,385 per annum until the first anniversary of the Effective
Date. As of each anniversary of the Effective Date during the
Employment Period, commencing as of the first such anniversary,
your annual salary will be reviewed by the Compensation Committee
of the Company’s Board of Directors (the “Compensation
Committee”), and shall be increased (but not decreased) as of
each such anniversary, as
determined by the Compensation Committee;
provided, however, that no such increase shall be less than 3% of
your annual salary in effect immediately prior to such increase.
Your annual salary in effect from time to time under this Paragraph
2.A is hereinafter referred to as your “Base
Salary.”
B. Annual Retention Bonus. In
addition to your Base Salary, on the Effective Date and on each of
the first and second anniversaries of the Effective Date, provided
that the Employment Period shall not have been terminated prior to
such anniversary, the Company shall pay to you an annual retention
bonus in the amount of $50,000 (the “Annual Retention
Bonus”).
C. Annual
Performance Bonus. In addition to your Base Salary and Annual
Retention Bonus, during each fiscal year of the Company ending
during the Employment Period you will also earn a bonus equal to
2.5% of operating profit of the Company (before taxes) for such
year, as reflected in the Company’s audited consolidated
financial statements (“Operating Profit”) without
regard to extraordinary or other nonrecurring or unusual items,
determined in accordance with generally accepted accounting
principles, unless the Compensation Committee determines that any
such item shall not be disregarded. If Operating Profit in any
fiscal year ending during the Employment Period equals or exceeds
$10 million, you will also receive an additional bonus of $50,000;
provided, however, that if Operating Profit in any fiscal year
ending during the Employment Period equals or exceeds $15 million,
such additional bonus shall be increased to $75,000. The bonus
described in this Paragraph 2.C is hereinafter referred to as the
“Annual Performance Bonus.” Any Annual Performance
Bonus for any fiscal year ending during the Employment Period shall
be paid to you by the Company on March 15
th
of the year
immediately succeeding the year for which such Annual Performance
Bonus was earned. If you voluntarily terminate your employment with
the Company other than because of a Change in Status (as defined
below) between December 31 of any fiscal year in which an
Annual Performance Bonus is earned and March 15
th
of the immediately
succeeding year, you will be entitled to payment of such earned
Annual Performance Bonus on March 15 th of the immediately succeeding
year.
3. Termination Date Payment .
In addition to your Base Salary, Annual Retention Bonus and Annual
Performance Bonus, you will be entitled to receive a one-time
payment of $32,000 (the “Termination Date Payment”)
upon the earlier of (i) the termination of the Employment
Period on July 31, 2012, provided that you are employed by the
Company on such date, and (ii) the date of termination of your
employment with the Company (other than on July 31, 2012),
other than (A) a termination of employment by the Company for
Cause (as defined below), (B) a termination of employment as a
result of your death or (C) a termination of employment by you
for any reason other than a Change in Status (as defined below).
Any Termination Date Payment to which you become entitled pursuant
to the preceding sentence shall be paid to you as follows:
(i) if you become entitled to the Termination Date Payment
pursuant to clause (i) of the preceding sentence, then the
Termination Date Payment shall be paid to you on July 31,
2012; or (ii) if you become entitled to the Termination Date
Payment pursuant to clause (ii) of the preceding sentence,
then the Termination Date Payment shall be paid to you on the first
business day that is six months after the day of your termination
of employment or, if earlier, on the first business day after the
day of your death.
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4. Perquisites . You also
shall receive the gross amount of $25,000 each year during the
Employment Period to be used for perquisites of your choice,
payable in monthly payments of $2,083.33, commencing as of the
Effective Date, in lieu of any other allowances. Each monthly
payment shall be paid to you by the Company during the month to
which the payment pertains.
5. Employee Benefits
.
A. Employee Benefits . During
the term of this Agreement, you shall be entitled to continue to
participate in such employee benefits including, but not limited
to, life, short- and long-term disability and health insurance and
other medical benefits as the Company makes available to
individuals serving at senior corporate levels.
B. Gap Insurance
Coverage. If termination of your employment by the Company
occurs prior to your 65 th birthday and such termination
of employment is not (i) by the Company for Cause (as defined
below) or (ii) by you for a reason other than a Change in
Status (as defined below), the Company will acquire and pay for
health insurance coverage for you and your spouse (the “Gap
Insurance Coverage”) from the date of termination of your
COBRA continuation health coverage under the Company’s health
insurance plan (or, under the circumstances specified in the third
sentence of this Paragraph 5.B, the date of your termination of
employment) until the earlier of (A) your 65
th
birthday and
(B) the date on which you become eligible to obtain coverage
for you and your spouse pursuant to the health plan of any other
employer or, in the event of your death prior to the earlier of the
events described in clauses (A) and (B) above, until the
date that would have been your 65 th birthday. The Gap Insurance
Coverage will provide coverage that is comparable overall to the
coverage under the Company’s then current health insurance
plan for active employees. The Company’s obligation to
acquire and pay for the Gap Insurance Coverage is contingent on you
and your spouse electing and maintaining COBRA continuation health
coverage under the Company’s health insurance plan for the
maximum period permitted under COBRA (with the Company reimbursing
you for continuation premium payments if you are eligible for Gap
Insurance Coverage under this Paragraph 5.B) or, at the
Company’s option, you and your spouse electing against COBRA
continuation health coverage (in which case the Gap Insurance
Coverage will commence upon your termination of employment). The
amount of Gap Insurance Coverage provided to you and your spouse in
a calendar year will not affect the Gap Insurance Coverage provided
to you and your spouse in any subsequent calendar year. Your right
to Gap Insurance Coverage is not subject to liquidation or exchange
for any other benefit.
6. Retirement Plan .
Following the termination of your employment with the Company for
any reason other than Cause (as defined in Paragraph 8.B), the
Company agrees to pay to you during each year for a period of 11
years (to be extended one year, commencing on August 1, 2009,
for each full year in excess of 11 years that you are employed by
the Company, provided that such payments shall not continue for
more than a total of 15 years) an amount equal to 60% of the
average of your salary and bonuses (including your Annual Retention
Bonus and Annual Performance Bonus) paid, pursuant to Paragraph 2,
for the three years of your employment with the Company during
which the sum of your salary and bonuses (including your Annual
Retention Bonus and Annual Performance Bonus) was the highest. For
purposes of this Paragraph 6, your employment by the Company shall
be deemed to have commenced on August
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1, 1997. The amounts to be paid pursuant to this
Paragraph 6 shall commence on the first regular Company pay day
following the termination of your employment, and be paid every two
weeks in the same manner as you are paid your salary as provided in
Paragraph 2 hereof. For purposes of this Paragraph 6, you will be
deemed to have completed 12 full years of service if, prior to
August 1, 2009 (i) your employment is terminated by the
Company for a reason other than Cause or (ii) you terminate
your employment as a result of a Change in Status (as defined in
Paragraph 8.D).
In addition, for purposes of this
Paragraph 6, you will be deemed to have completed 15 full years of
service if, within 24 months following a Change of Control (as
defined in Paragraph 8.A), (i) your employment with the
Company is terminated by the Company for any reason other than for
Cause, disability or death, (ii) your employment with the
Company terminates as a result of the Company’s election not
to renew this Agreement or the failure of the Company to deliver to
you a timely written notice of intent to either offer to renew this
Agreement or to offer you employment upon other terms and
conditions, as provided in Paragraph 1, or (iii) your
employment with the Company terminates by reason of a Change in
Status (as defined in Paragraph 8.D). Any additional payments to be
made to you pursuant to this Paragraph 6 by virtue of you being
deemed to have completed 15 full years of service pursuant to the
preceding sentence (the “Additional Payments”) shall be
reduced (but not below zero) so that the present value, as
determined in accordance with Section 280G(d)(4) of the
Internal Revenue Code of 1986, as amended (the “IRC”),
of the Additional Payments plus any other payments that must be
taken into account for purposes of any computation relating to you
under Section 280G(b)(2)(A)(ii) of the IRC, shall not, in the
aggregate, exceed 2.99 times your “base amount,” as
such term is defined in Section 280G(b)(3) of the IRC.
Notwithstanding any other provision of this Agreement to the
contrary, no reduction in the Additional Payments under the
limitation contained in the immediately preceding sentence shall be
applied to payments hereunder which do not constitute “excess
parachute payments” within the meaning of the IRC. Any
reduction in the Additional Payments required by this paragraph
shall be made by first reducing the latest of the Additional
Payments to be made and then reducing the next latest of the
Additional Payments to be made until no further reductions are
required by this paragraph. If, after reducing the Additional
Payments to zero, the payments that must be taken into account for
purposes of the computation under Section 280G(b)(2)(A)(ii) of
the IRC exceed 2.99 times your base amount, the payments to be made
to you pursuant to Paragraph 8 hereof shall be reduced so that
the payments that must be taken into account for purposes of such
computation do not exceed 2.99 times your base amount, provided
that the payments to be made to you pursuant to Paragraph 8
hereof shall be reduced only if it is determined that (A) the
amount remaining after the payments to be made to you are reduced
by an amount equal to all applicable federal and state taxes
(computed at the highest applicable marginal rate), including the
excise tax imposed by Section 4999 of the IRC (the
“Excise Tax”), is less than (B) the maximum amount
that may be paid to you after taking into account all applicable
federal and state taxes (computed at the highest applicable
marginal rate), without imposition of the Excise Tax. Any payments
in excess of the limitation of this paragraph determined to be
“excess parachute payments” made to you hereunder shall
be deemed to be overpayments which shall constitute an amount owing
from you to the Company with interest from the date of receipt by
you to the date of repayment (or offset) at the applicable federal
rate under Section 1274(d) of the IRC, compounded
semi-annually, which shall be payable to the Company upon demand;
provided, however, that no repayment shall be required under this
sentence if in the written opinion of tax counsel satisfactory to
you
4
and delivered to you and the Company such
repayment does not allow such overpayment to be excluded for
federal income and excise tax purposes from your income for the
year of receipt or afford you a compensating federal income tax
deduction for the year of repayment.
Notwithstanding the preceding
paragraphs of this Paragraph 6, any amounts to be paid pursuant to
this Paragraph 6 shall not be made before the day that is six
months after the day of your termination of employment or, if
earlier, the day of your death. To the extent any such payments
would otherwise be made before such six-month anniversary day or
the day of your death, as applicable, if not for the preceding
sentence, such payments will be made to you by the Company on the
first business day that is six months after the day of your
termination of employment or, if earlier, on the first business day
after the day of your death.
Notwithstanding Paragraph 14 or any
other provision of this Agreement to the contrary, you and the
Company acknowledge and agree that amounts payable to you pursuant
to the terms of the Cobra Electronics Corporation Executive
Deferred Compensation Plan are in satisfaction of the
Company’s obligations pursuant to this Paragraph 6 and not in
addition to the amounts to be paid as provided herein. Furthermore,
notwithstanding Paragraph 14 or any other provision of this
Agreement to the contrary, the terms and provisions of the Cobra
Electronics Corporation Executive Deferred Compensation Plan shall
in all respects supplement and supersede the terms and provisions
of this Paragraph 6 and govern with respect to the determination of
the payment amounts described herein and the times at which such
amounts shall be paid.
7. Reimbursement of Expenses
. You shall be reimbursed for all of your reasonable and necessary
business expenses incurred in performing your duties for the
Company, upon presentation of the Company’s standard forms
for expense reimbursement. In order for any such reimbursement to
be made, the expense must be incurred while you are employed by the
Company, and you must complete and submit such standard forms for
reimbursement in a timely manner and in no event any later than
required by the Company in order for the Company to make such
reimbursement no later the last day of the calendar year following
the calendar year in which you incur the expense. In no event will
the Company make any such reimbursement later than the last day of
the calendar year following the calendar year in which you incur
the expense. Your right to reimbursement is not subject to
liquidation or exchange for any other benefit, and the amount of
expenses eligible for reimbursement in a calendar year will not
affect the amount of expenses eligible for reimbursement, or
in-kind benefits to be provided, in any subsequent calendar
year.
8. Termination of Employment
.
A. Termination for Reasons Other
Than For Cause . In the event that your employment with the
Company is terminated by the Company for any reason other than for
Cause, disability or death, or in the event that your employment
terminates as a result of the Company’s election not to renew
this Agreement or the failure of the Company to deliver to you a
timely written notice of intent to either offer to renew this
Agreement or to offer you employment upon other terms and
conditions, as provided in Paragraph 1, you shall be entitled, as
of the effective date of your termination of employment, to:
(i) salary through and including the effective date of your
termination of employment; (ii) any Annual Performance Bonus
earned but not yet paid for any fiscal year of the Company ended on
or prior to the effective date of your
5
termination of employment; (iii) other
employee benefits in accordance with applicable plans and programs
of the Company for claims incurred, or benefits accrued and vested,
on or prior to the effective date of your termination of
employment; (iv) the benefits described in Paragraphs 5.B and
6, subject to the provisions of such paragraphs; (v) the
Termination Date Payment; and (vi) severance payments, payable
every two weeks, in an amount equal to your Base Salary for
(A) 18 months in the case of termination for any reason other
than for Cause, disability or death, or (B) six months in the
case of a termination resulting from the Company’s election
not to renew this Agreement or the failure of t
