EXHIBIT
10.1
EMPLOYMENT
AGREEMENT
This EMPLOYMENT
AGREEMENT (this “ Agreement ”) is made as of the
1 st day of January, 2009, by and between Sielox, Inc.,
a Delaware corporation (the “ Company ”),
and James Pritchett (the “ Executive
”).
W I T N E S S E T
H :
WHEREAS
, the Executive is
currently the President of Costar Video Systems, LLC (“
Costar ”), a Delaware limited liability company and a
wholly-owned subsidiary of the Company, pursuant to an employment
agreement dated as of June 20, 2006 (the “ Underlying
Employment Agreement ”);
WHEREAS
, the Company wishes to
ensure that it will continue to have the benefits of
Executive’s services on the terms and conditions hereinafter
set forth, and desires to enter into this Agreement to employ
Executive as its President and Chief Executive Officer;
and
WHEREAS
, Executive desires to
work directly for the Company on the terms and conditions
hereinafter set forth.
NOW,
THEREFORE ,
in consideration of the mutual covenants hereinafter contained and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1.
Employment;
Term .
The Company hereby employs Executive, and Executive hereby
accepts employment with the Company, in accordance with and subject
to the terms and conditions set forth herein. The term of
this Agreement shall commence upon the date hereof (the “
Effective Date ”) and shall continue for a period of
thirty-six (36) months (the “ Initial Term ”),
unless earlier terminated in accordance with Section 9 hereof.
The Initial Term may be extended for subsequent twelve (12)
month periods (each a “ Renewal Term ”) upon
mutual agreement of the Company and Executive at any time prior to
the end of the then-current term, it being understood and agreed
that the Company shall endeavor to provide the Executive with at
least six (6) months notice of its desire to extend the
agreement and that the Executive will endeavor to agree or disagree
to extend the agreement within 30 days thereafter. The
Initial Term together with the Renewal Terms may be referred to
herein as the “ Term ”.
2.
Employment .
(a)
The Company hereby
agrees to employ Executive as its President and Chief Executive
Officer during the Term. Executive agrees to serve in such
capacity with the duties and responsibilities reasonably requested
by the Company consistent with such position. During the
Term, Executive shall report to the Board of Directors of the
Company, or its designee.
(b)
Executive shall perform
his duties with diligence and faithfulness to the best of his
abilities and shall devote his full business time (excluding
periods of vacation and sick leave), attention and energy to such
duties. Executive shall not, without the prior written
consent of the Company, actively engage in any other business
activity during the Term.
3.
Compensation
. The Company
shall pay Executive a base salary (the “ Base Salary
”) of Two Hundred Forty Thousand Dollars ($240,000) per
annum, payable at least semi-monthly, in accordance with the
Company's then existing payroll practices and subject to all
legally required or customary withholdings and other applicable
taxes. The Board of Directors shall conduct a review of the
performance of the Executive following the first and second
anniversary of the date hereof and shall consider making cost of
living or other adjustments to the Executive’s Base Salary,
it being understood that any such adjustment shall be made in the
Board of Directors’ sole and absolute discretion.
4.
Incentive
Payment .
(a)
Provided that the
Executive’s employment under this Agreement is not terminated
pursuant to the provisions of Section 9(a), (b), (d) or (e) prior
to the end of calendar year 2009, the Executive shall be eligible
to receive, in respect of services rendered to the Company for
calendar year 2009, an incentive payment as additional compensation
hereunder (the “ 2009 Incentive Payment
”), pursuant to and subject to the terms of this Section 4.
(b)
Calculation of 2009
Incentive Payment .
(i)
The 2009 Incentive
Payment shall equal 45% of the Annual Available Bonus Pool
calculated in accordance with the provisions set forth on
Schedule A hereto.
(ii)
For the avoidance of
doubt, the parties acknowledge that the 2009 Incentive Payment
shall never be less than zero.
(c)
2009 EBITDA
Statement .
The Company shall prepare or cause to be prepared, (i)
audited consolidated financial statements of the Company for
calendar year 2009, (ii) a statement which shall explain in
reasonable detail the calculations of Annual EBITDA and the 2009
Incentive Payment (the “ Incentive Payment Statement
”) and (iii) reasonable supporting
documentation
sufficiently detailed to enable Executive to verify in all material
respects the calculations of Annual EBITDA and the 2009 Incentive
Payment, and deliver or cause to be delivered each of the forgoing
to Executive promptly after the audited consolidated financial
statements of the Company for calendar year 2009 have been
completed.
(d)
Payment of Incentive
Payment .
The 2009 Incentive Payment shall be paid by the Company to
the Executive in cash no later than thirty-five (35) days after the
issuance of the audited financial statements of the Company for
calendar year 2009.
5.
Definitions . The following terms used in
this Agreement shall have the meanings indicated:
(a)
“
Affiliate ” with respect to any Person shall mean any
other Person which, directly or indirectly, is in control of, is
controlled by or is under common control with such specified
Person. For the purposes of this definition,
“control,” when used with respect to any Person, means
the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
(b)
“ Annual
EBITDA ” shall mean the EBITDA of Costar during calendar
year 2009.
(c)
“ Bonus
Eligible Years ” shall mean calendar year 2010 and each
complete calendar year thereafter during the Term.
(d)
“ EBITDA of
the Costar ” shall mean the consolidated net income of
Costar (based on the business of Costar as existing on the date
hereof) before interest, income taxes, depreciation and
amortization.
(e)
“ GAAP
” shall mean United States generally accepted accounting
principles in effect on the date hereof applied on a consistent
basis.
(f)
“ Person
” shall mean an individual, partnership, venture,
unincorporated association, organization, syndicate, corporation,
limited liability company, or other entity, trust, trustee,
executor, administrator or other legal or personal representative
or any government or any agency or political subdivision
thereof.
6.
Additional Bonus
Compensation .
(a)
In respect of calendar
year 2009, Executive shall be eligible to receive a discretionary
annual bonus in addition to the payment of the 2009 Incentive
Payment (the “ 2009 Performance Bonus ”).
The 2009 Performance Bonus shall be determined by the
Compensation Committee of the Company (the “ Compensation
Committee ”) based upon the Compensation
Committee’s assessment of (i) the Executive’s
performance of his duties to the Company during calendar year 2009
and (ii) the overall performance of the Company. The amount
of the 2009 Performance Bonus, if any, shall be determined by the
Compensation Committee in its sole and absolute discretion based
upon such methods and metrics as may be established by the
Compensation Committee.
(b)
Executive shall be
eligible to receive an annual bonus of up to 50% of
Executive’s Base Salary in respect of each Bonus
Eligible Year (the “ Performance Bonus ”), which
shall be determined pursuant to the terms and conditions of a bonus
plan which shall be established by the Board of Directors of the
Company for executive level employees of the Company in its sole
and absolute discretion.
7.
Benefits
.
(a)
The Company agrees to
reimburse Executive for all reasonable and necessary documented
out-of-pocket travel and other business expenses incurred by
Executive in connection with the performance of his duties under
this Agreement in accordance with the Company’s corporate
policy regarding such expenses as it may be amended from time to
time. Such reimbursements shall be made by the Company within
a reasonable amount of time after submission by Executive of
vouchers in accordance with the Company's then applicable policies
and procedures. It is understood and agreed between the
parties that (i) the Executive shall only be required to travel for
reasonable business purposes and (ii) the Executive shall only be
entitled to reimbursement of travel and business expenses incurred
in connection with business activities and prospects that are in
accordance with the Company’s business plan, as approved by
the Board of Directors of the Company.
(b)
Executive shall be
entitled to participate in any and all medical insurance, group
health, dental and vision care programs, disability insurance,
pension, and other benefit plans which are made generally available
by the Company to its senior executives, as the same may be amended
or modified from time to time. The Company may at any time
amend or terminate its benefit plans or programs, provided ,
however , that the Company shall not terminate any health
plan or program provided to the Executive during the Term unless it
shall provide the Executive with comparable benefits under a
replacement plan or program.
(c)
Executive shall be
entitled to an annual paid vacation in accordance with the
Company’s vacation policy applicable to senior executives,
but in no event less than three (3) weeks per calendar year.
8.
Stock
Options .
Within thirty (30) days of the date hereof (the “
Grant Date ”), the Company will grant to the Executive
an option to purchase two hundred thousand (200,000) shares of the
Company’s Common Stock, with an exercise price
equal to the fair
market value of the Company’s Common Stock on the Grant Date
(the “ Option Grant ”). The Option Grant
will be evidenced by an option agreement pursuant to, and be
subject to the terms and conditions of, the Company’s 2000
Stock Option and Incentive Plan (the “ Option Plan
”). Subject to the terms of the Option Plan, the Option
Grant will vest ratably over a three (3) year period with one-third
(1/3) of the number of shares of common stock subject to the Option
Grant vesting on the first anniversary of the Grant Date, an
additional one-third (1/3) of the number of shares of common stock
subject to the Option Grant vesting on the second anniversary of
the Grant Date and the remaining one-third (1/3) of the number of
shares of common stock subject to the Option Grant vesting on the
third anniversary of the Grant Date; provided, in each case, that
the Executive is an employee of the Company as of each applicable
vesting date.
9.
Termination . Executive's employment
hereunder may be terminated prior to the end of the Term under the
following circumstances:
(a)
Death
. Executive's
employment hereunder shall terminate upon Executive's
death.
(b)
Total
Disability .
The Company may terminate Executive's employment hereunder at
any time after Executive becomes “Totally Disabled.”
For purposes of this Agreement, Executive shall be
“Totally Disabled” upon the earlier of (i) the date
Executive becomes entitled to receive disability benefits under the
Company's long-term disability plan, if any, or (ii) Executive's
inability to perform the duties and responsibilities contemplated
under this Agreement for a period of more than 90 consecutive days,
or 120 days in any 365-day period, due to physical or mental
incapacity or impairment. Such termination shall become
effective five days after the Company gives notice of such
termination to Executive, or to his spouse or legal representative,
in accordance with Section 13 hereof.
(c)
Termination by the
Company without Cause . The Company may terminate
Executive’s employment hereunder without Cause (as
hereinafter defined) at any time after providing written notice to
Executive.
(d)
Termination by the
Company for Cause . The Company may terminate
Executive's employment hereunder for Cause at any time after
providing written notice to Executive. For purposes of this
Agreement, the term “ Cause ” shall mean any of
the following: (i) Executive's willful or intentional failure or
refusal to perform or observe any of his duties, responsibilities
or obligations set forth in, or as contemplated under, this
Agreement, unless such failure or refusal is susceptible to cure
and is corrected within thirty (30) days following written notice
by the Company specifying the details thereof; (ii) acts or
omissions by Executive involving Executive's gross negligence
related to the discharge of his duties; (iii) any act or failure to
act involving fraud, a material, knowing or intentional
misrepresentation, theft, misappropriation, embezzlement,
dishonesty or moral turpitude; (iv) conviction of (or a plea of
nolo contendere to) an offense which is a felony in
the jurisdiction involved or which is a misdemeanor in the
jurisdiction involved but which involves an act set forth in
Section 9(d)(iii) above; (v) any willful or intentional act or
omission which could reasonably be expected to materially injure
the reputation, business or business relationships of the Company,
or Executive's reputation or business relationships; or (vi)
Executive's willful or intentional failure to comply with any
reasonable request or direction of the Company not contrary to the
provisions of this Agreement, unless such failure to comply is
susceptible to cure and is corrected within thirty (30) days
following written notice by the Company specifying the details
thereof.
(e)
Termination by
Executive for Good Reason . Executive may terminate his
employment hereunder at any time if Executive has “Good
Reason” and gives written notice thereof to the Company
within thirty (30) days after the occurrence of such Good Reason.
For purposes of this Agreement, the term “ Good
Reason ” shall mean: (i) a material reduction in
Executive’s salary or other benefits, except to the extent
permitted pursuant to the terms of this Agreement; or (ii) a
material breach by the Company of any material provision of this
Agreement; which, in each case, is not cured by the Company within
thirty (30) days after the Company receives written notice thereof
from Executive.
10.
Compensation
Following Termination Prior to the End of the Term
. In the event
that Executive's employment hereunder is terminated prior to the
end of the Term, Executive shall be entitled only to the following
compensation and benefits upon such termination:
(a)
Termination by
Reason of Death or Total Disability, by the Company for Cause, or
by Executive other than for Good Reason . In the event that
Executive's employment is terminated prior to the expiration of the
Term by reason of Executive's death or Total Disability, or
termination by the Company for Cause, or termination by Executive
other than for Good Reason, respectively, the Company shall pay the
following amounts to Executive (or Executive's spouse or estate, as
the case may be):
i.
any accrued but unpaid
Base Salary (as determined pursuant to Section 3 hereof) for
services rendered to the date of termination, which amount shall be
paid to the Executive within thirty (30) days following the date of
termination;
ii.
any accrued but unpaid
expenses required to be reimbursed pursuant to Section 7(a)
hereof, which amount shall be paid to the Executive within thirty
(30) days following the date of termination;
iii.
any accrued but unpaid
vacation time pursuant to Section 7(c) hereof, which amount
shall be paid to the Executive within thirty (30) days following
the date of termination;
iv.
the 2009 Incentive
Payment, if any, in the event that Executive was employed for the
entire 2009 calendar year, due and payable pursuant to Section 4
hereof in accordance with the provisions thereof;
v.
the 2009 Performance
Bonus, if any, in the event that Executive was employed for the
entire 2009 calendar year, due and payable pursuant to Section 6(a)
hereof in accordance with the provisions thereof; and
vi.
for each full Bonus
Eligible Year worked by the Executive for the Company, any
Performance Bonus due and payable pursuant to Section 6(b)
hereof in accordance with the provisions thereof.
Except as otherwise
specifically provided herein, in the event Executive's employment
is terminated pursuant to this Section 10(a), the benefits to which
Executive and/or his family may be entitled upon such termination
pursuant to the plans, programs and arrangements referred to in
Section 7(b) hereof shall be determined and paid in accordance with
the terms of such plans, programs and arrangements.
(b)
Termination by the
Company Without Cause . In the event that
Executive's employment is terminated by the Company without Cause,
the Company shall pay the following amounts to
Executive:
i.
any accrued but unpaid
Base Salary (as determined pursuant to Section 3 hereof) for
services rendered to the date of termination, which amount shall be
paid to the Executive within thirty (30) days following the date of
termination;
ii.
any accrued but unpaid
expenses required to be reimbursed pursuant to Section 7(a) hereof,
which amount shall be paid to the Executive within thirty (30) days
following the date of termination;
iii.
any accrued but unpaid
vacation time pursuant to Section 7(c) hereof, which amount
shall be paid to the Executive within thirty (30) days following
the date of termination;
iv.
one-half of the
Executive’s Base Salary (as determined pursuant to Section 3
hereof), to be paid in accordance with the Company’s standard
payroll practices then in effect over a period of twelve (12)
months following the termination of Executive’s employment,
it being understood that the Board of Directors shall conduct a
review of the performance of the Executive following the first and
second anniversary of the date hereof and shall consider whether or
not it is appropriate to increase the potential payment that
Executive shall be entitled to receive pursuant to this Section
10(b)(iv), it being further understood that any such increase shall
be made in the Board of Directors’ sole and absolute
discretion;
v.
the 2009 Incentive
Payment, if any, in the event that Executive was employed for the
entire 2009 calendar year, due and payable pursuant to Section 4
hereof in accordance with the provisions thereof and in the event
that the Executive was employed for a portion of calendar year
2009, a pro-rata portion of any 2009 Incentive Payment that would
be due and payable pursuant to Section 4 in accordance with the
provisions thereof assuming that the Executive worked for the
Company for the entire 2009 calendar year;
vi.
the 2009 Performance
Bonus, if any, in the event that Executive was employed for the
entire 2009 calendar year, due and payable pursuant to Section 6(a)
hereof in accordance with the provisions thereof; and
vii.
for each full Bonus
Eligible Year worked by the Executive for the Company, any
Performance Bonus due and payable pursuant to Section 6(b)
hereof in accordance with the provisions thereof.
In the event
Executive’s employment is terminated pursuant to this Section
10(
