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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT (the “ Agreement
”), made as of this 30 th day
of July 2007, is entered into by Nestor, Inc. a Delaware
corporation (the “ Company ”),
and Clarence A. Davis (the “ Employee
”).
The
Company desires to employ the Employee, and the Employee
desires to be employed by the Company. In
consideration of the mutual covenants and promises contained
in this Agreement, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged
by the parties to this Agreement, the parties agree as
follows:
1.
Term of Employment . The Company hereby
agrees to employ the Employee, and the Employee hereby accepts
employment with the Company, upon the terms set forth in this
Agreement, for the period commencing on the date hereof (the
“ Commencement Date ”) and ending
on July 31, 2008 (such period, the “ Initial
Employment Period ” and as it may be extended,
the “ Employment Period ”),
unless sooner terminated in accordance with the provisions of
Section 4. On July 31, 2008, if not previously
terminated, this Agreement shall automatically renew and the
Employment Period be extended until July 31, 2009 unless the
Company shall elect not to so extend the Employment Period and
shall have given written notice to the Employee of such
election on or before May 1, 2008.
2.
Title; Capacity . The Employee shall serve
as Chief Executive Officer or in such other position as the
Company’s Board of Directors (the “
Board ”) may determine from time to
time. The Employee shall be based at the
Company’s headquarters in Rhode Island or at such place
or places in the continental United States as the Board and
the Employee shall mutually determine. The Employee
shall be subject to the supervision of, and shall have such
authority as is delegated to the Employee by, the Board or the
Chief Executive Officer of the Company.
The
Employee hereby accepts such employment and agrees to
undertake the duties and responsibilities inherent in such
position and such other duties and responsibilities as the
Board shall from time to time reasonably assign to the
Employee, provided that such duties and responsibilities are
generally consistent with Employee’s experience and
customary duties and responsibilities of a chief executive
officer of a similarly situated company. The
Employee agrees to devote such business time, attention and
energies consistent with his past practice to the business and
interests of the Company during the Employment Period as he
deems reasonably necessary to the accomplishment to his
duties. The Employee agrees to abide by the
reasonable rules, regulations, instructions, personnel
practices and policies of the Company and any changes therein
which may be adopted from time to time by the
Company.
3.
Compensation and Benefits .
3.1
Salary . The Company shall pay the Employee,
in periodic installments in accordance with the
Company’s customary payroll practices, an annual base
salary $360,000. Such salary shall be subject to
increase but not decrease thereafter as determined by the
Board and shall be reviewed at least annually by the
Board.
3.2
Bonus . The Compensation Committee, in its
sole discretion, may award the Employee a bonus or bonuses
during the term hereof.
CD_EMPLOYMENT
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3.3
Equity Incentive .
(a) The
Company shall, upon the execution hereof, grant to the
Employee an option to purchase 500,000 shares of the common
stock of the Company (“ Common Stock
”). To the extent permitted by the Internal
Revenue Code, said options shall be incentive stock
options. Said options shall be granted at the fair
market value and expire on the eighth anniversary of their
grant. Said options shall vest as
follows:
|
Number of Shares
|
Vesting Date
|
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166,667
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Immediate
|
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166,667
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January
30, 2008
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166,666
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July
30, 2008
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Such
grants shall provide that after a Change in Control Event (as
defined in Schedule A hereto), all restrictions on the
exercise thereof shall lift and such options shall vest and
become exercisable immediately. In addition, upon
(a) the termination by the Company of the Employee’s
employment, unless such termination is for Cause (as defined
in Section 4.2) or (b) the resignation of Employee for Good
Reason (as defined in Section 4.3), all restrictions on the
exercise shall lift and such options shall vest and become
exercisable immediately.
3.4
Fringe Benefits; Vacation The
Employee shall be entitled to participate in all bonus and
benefit programs that the Company establishes and makes
available to its employees, if any, to the extent that
Employee’s position, tenure, salary, age, health and
other qualifications make him eligible to
participate. The Employee shall be entitled to four
weeks vacation annually, accruing in accordance with the
Company’s policies and procedures.
3.5
Reimbursement of Expenses . The Company
shall reimburse the Employee for all reasonable travel,
entertainment and other expenses incurred or paid by the
Employee in connection with, or related to, the performance of
his duties, responsibilities or services under this Agreement,
in accordance with policies and procedures, and subject to
limitations, adopted by the Company from time to
time.
3.6
Withholding . All salary, bonus and other
compensation payable to the Employee shall be subject to
applicable withholding taxes.
4.
Termination of Employment Period . The
employment of the Employee by the Company pursuant to this
Agreement shall terminate upon the occurrence of any of the
following:
4.1 Expiration
of the Employment Period;
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4.2 At
the election of the Company, for Cause (as defined below),
immediately upon written notice by the Company to the
Employee, which notice shall identify the Cause upon which the
termination is based. For the purposes of this
Section 4.2, “ Cause ” shall
mean (a) a good faith finding by the Company’s
Board of Directors that (i) the Employee has failed in
any material respect to perform his reasonably assigned duties
for the Company and has failed to remedy such failure within
10 days following written notice from the Company to the
Employee notifying him of such failure, or (ii) the
Employee has engaged in dishonesty, gross negligence or
misconduct with respect to the Company, or (b) the
conviction of the Employee of, or the entry of a pleading of
guilty or nolo contendere by the Employee to, any crime
involving dishonesty or any felony;
4.3 At
the election of the Employee, for Good Reason (as defined
below), immediately upon written notice by the Employee to the
Company, which notice shall identify the Good Reason upon
which the termination is based. For the purposes of
this Section 4.3, “ Good Reason ”
for termination shall mean (i) a material adverse change in
the Employee’s authority, duties or compensation without
the prior written consent of the Employee, (ii) a material
breach by the Company of the terms of this Agreement, which
breach is not remedied by the Company within 10 days following
written notice from the Employee to the Company notifying it
of such breach (iii) any requirement imposed by Section 307 of
the Sarbanes-Oxley Act or any rule promulgated thereunder, or
(iv) a requirement by the Company that the Employee must
relocate his residence for any reason.
4.4 Upon
the death or disability of the Employee. As used in
this Agreement, the term “disability” shall mean
the inability of the Employee, due to a physical or mental
disability, for a period of 90 days, whether consecutive,
during any 360-day period to perform the services contemplated
under this Agreement, with or without reasonable accommodation
as that term is defined under state or federal
law. A determination of disability shall be made by
a physician satisfactory to both the Employee and the Company,
provided that if the Employee and the Company do
not agree on a physician, the Employee and the Company shall
each select a physician and these two together shall select a
third physician, whose determination as to disability shall be
binding on all parties;
4.5 At
the election of either party, upon not less than 30
days’ prior written notice of termination.
5.
Effect of Termination .
5.1
At-Will Employment . If the Employment
Period expires pursuant to Section 1 hereof, then, unless the
Company notifies the Employee to the contrary, the Employee
shall continue his employment on an at-will basis following
the expiration of the Employment Period. Such
at-will employment relationship may be terminated by either
party at any time and shall not be governed by the terms of
this Agreement.
CD_EMPLOYMENT
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5.2
Payments Upon Termination .
(a) In
the event the Employee’s employment is terminated
pursuant to Section 4.1, Section 4.2 or by the Employee
pursuant to Section 4.5, the Company shall pay to the Employee
the compensation and benefits otherwise payable to him under
Section 3 through the last day of his actual employment by the
Company.
(b) In
the event the Employee’s employment is terminated by the
Employee pursuant to Section 4.3 or by the Company pursuant to
Section 4.5, the Company shall continue to pay to the Employee
his salary as in effect on the date of termination and
continue to provide to the Employee the other benefits owed to
him under Section 3.4 (to the extent such benefits can be
provided to non-employees, or to the extent such benefits
cannot be provided to non-employees, then the cash equivalent
thereof) until the date one year after the date of termination
and for the purposes of the vesting of options to purchase
common stock granted to the Employee pursuant to Section 3.3,
the Employee shall be deemed to be employed by the Company
until the date three years after the date of
termination. The payment to the Employee of the
amounts payable under this Section 5.2(b) (i) shall be
contingent upon the execution by the Employee of a release in
a form reasonably acceptable to the Company and (ii) shall
constitute the sole remedy of the Employee in the event of a
termination of the Employee’s employment in the
circumstances set forth in this Section 5.2(b).
(c) In
the event the Employee’s employment is terminated
pursuant to Section 4.4, the Company shall continue to pay to
the Employee (or his estate) his salary as in effect on the
date of termination and the amount of the annual bonus paid to
him for the fiscal year immediately preceding the date of
termination (payable in annualized monthly installments) and,
if such termination was on account of disability, continue to
provide to the Employee the other benefits owed to him under
Section 3.4 (to the extent such benefits can be provided to
non-employees, or to the extent such benefits cannot be
provided to non-employees, then the cash equivalent thereof)
until the date one year after the date of termination and for
the purposes of the vesting of options to purchase common
stock granted to the Employee pursuant to Section 3.3, the
Employee shall be deemed to be employed by the Company until
the date one year after the date of
termination. The amounts payable to the Employee
under this Section 5.2(c) shall be reduced by the aggregate
amount of all insurance proceeds paid to the Employee or his
beneficiaries pursuant to insurance policies paid for by the
Company.
5.3
Survival . The provisions of
Sections 5.2, 6 and 7 shall survive the termination of
this Agreement.
6.
Non-Competition and Non-Solicitation .
6.1
Restricted Activities . While the Employee
is employed by the Company and for a period of one year after
the termination or cessation of such employment for any
reason, the Employee will not directly or
indirectly:
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(a) Engage
in any business or enterprise (whether as owner, partner,
officer, director, employee, consultant, investor, lender or
otherwise, except as the holder of not more than 1% of the
outstanding stock of a publicly-held company) that develops,
manufactures, markets, licenses, sells or provides any product
or service that competes with any product or service
developed, manufactured, marketed, licensed, sold or provided,
or planned to be developed, manufactured, marketed, licensed,
sold or provided, by the Company while the Employee was
employed by the Company; or
(b) Either
alone or in association with others
(i) solicit
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