Exhibit 10.1
FALCONSTOR SOFTWARE, INC. SECOND AMENDED AND RESTATED EMPLOYMENT
AGREEMENT
Employee: ReiJane Huai
SECOND
AMENDED
AND
RESTATED
EMPLOYMENT
AGREEMENT
made this 7th day of
November,
2005
(hereinafter
referred to as this "Employment
Agreement"),
by
FalconStor Software,
Inc., a Delaware corporation
(hereinafter
referred to as
the
"Corporation"),
and ReiJane Huai with an address at 3 Carlisle Drive,
Old
Brookville, NY 11545 (hereinafter referred to as the "Employee").
WHEREAS, the Employee desires to continue to be employed by the
Corporation
as President and Chief Executive
Officer ("CEO"),
and the Corporation
desires
that the
Employee
continue to be so
employed,
upon the terms and
conditions
hereinafter set forth.
NOW,
THEREFORE,
in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties intending to be
legally bound,
agree as follows:
1. TERM OF
EMPLOYMENT.
The Board hereby employs the Employee as President
and CEO,
and the
Employee
hereby
agrees
to serve
the
Corporation
in such
capacity for the period
commencing on September 1, 2004 (the "Effective
Date")
and ending on December
31,
2007
(hereinafter
referred to as the
"Employment
Period"), unless sooner terminated as hereinafter provided.
2. SCOPE OF DUTIES.
The Employee
shall serve as a President
and CEO. The
Employee shall report and be solely responsible to the Board of
Directors of the
Corporation (the "Board").
The Employee's
performance shall be reviewed by the
Board annually.
3. TIME TO BE DEVOTED TO
EMPLOYMENT.
The Employee
shall,
except
during
vacation periods or absences due to temporary illness,
devote substantially all
of his professional and business time,
attention and energies to his duties and
responsibilities
hereunder,
and
except
for
business
trips
which
shall be
necessary or desirable in the Corporation's business, shall render
such services
at the
principal
office of the
Corporation.
Nothing
herein
contained or in
Section 10 hereof shall prevent or be construed as preventing
the Employee from
holding
or
purchasing
five
(5%)
percent
or less of any
class
of stock or
securities of a corporation which is listed on a national
securities exchange or
regularly traded in the over-the-counter
market, or making other investments or
participating
in business
ventures not in competition with the business of the
Corporation, as long as such investments and business ventures
shall not require
any time during
normal
business
hours and do not conflict
with his duties or
obligations to the Corporation as provided in this Employment
Agreement.
4. DIRECT
COMPENSATION.
(a) In consideration for services rendered and to
be rendered by the Employee hereunder during the Employment Period,
the Employee
shall
receive a salary of Two
Hundred
and
Seventy-Five
Thousand
($275,000)
Dollars per year, or such greater amount as the Board shall
determine from year
to year based on the Employee's performance (the "Base Salary"),
which shall be
paid
semi-monthly
in arrears or at such other intervals as other employees are
paid.
(b) The
Employee
shall be
entitled
to
receive a cash bonus (i) for the
period from
September
1, 2004
through
December
31,
2005 (the "First
Bonus
Period") in an amount equal to 2.50% of the
Corporation's
net operating income
for
such
period
as
determined
by
reference
to
the
Corporation's
income
statements,
but without giving effect to (a) Statement of Financial
Accounting
Standard
123R,
or (b) such other
extraordinary,
non-recurring
and/or
other
unusual items as determined by the Compensation Committee of the
Company's Board
of
Directors
and
agreed by a majority
of the
independent
directors
of the
Company's Board of Directors (hereinafter referred to as the
"Operating Income")
during
the First
Bonus
Period,
(ii) for the fiscal
year of the
Corporation
ending
December 31, 2006 (the "Second Bonus
Period") in an amount equal to the
product
of (A)
the
Applicable
Percentage
(as
defined
below)
and
(B) the
Operating
Income for the Second
Bonus
Period and (iii) for the fiscal year of
the Corporation ending December 31, 2007 (the "Third Bonus Period")
in an amount
equal to the
product of (A) the
Applicable
Percentage
and (B) the
Operating
Income for the Third Bonus Period.
Each bonus payable to the Employee
shall be
paid
within 75 days
after the last day of the
applicable
Bonus
Period.
For
purposes hereof, "Applicable Percentage" shall mean (I) 1.50%, if
the percentage
obtained by dividing (x) the Operating Income for the Second Bonus
Period or the
Third Bonus Period,
as the case may be, by (y) the
shareholders
equity of the
Corporation
during the Second
Bonus Period or the Third Bonus
Period,
as the
case may be, as determined by reference to the annual
audited
balance sheet of
the
Corporation
for
the
year
ending
as of the
end of
such
Bonus
Period
(hereinafter referred to as "Shareholders
Equity") is less than or equal to 5%,
(II) 2.00%, if the percentage
obtained by dividing (x) the Operating Income for
the Second
Bonus Period or the Third Bonus
Period,
as the case may be, by (y)
the
Shareholders
Equity is more
than 5% but less than or equal to 10%,
(III)
2.25%, if the percentage
obtained by dividing (x) the Operating
Income for the
Second
Bonus Period or the Third Bonus
Period,
as the case may be, by (y) the
Shareholders
Equity is more than 10% but less than or equal to 15%, (IV) 2.50%,
if the percentage
obtained by dividing (x) the Operating
Income for the Second
Bonus
Period
or the
Third
Bonus
Period,
as the
case
may
be,
by (y) the
Shareholders
Equity
is more
than
15% but
less
than or equal to 20% and (V)
3.00%, if the percentage
obtained by dividing (x) the Operating
Income for the
Second
Bonus Period or the Third Bonus
Period,
as the case may be, by (y) the
Shareholders Equity is more than 20%.
2
5. FRINGE
BENEFITS.
(a) The Employee
shall be entitled to participate in
any and all fringe benefits and/or plans,
generally afforded to other employees
of the
Corporation
(to the extent the Employee
otherwise
qualifies under the
specific
terms
and
conditions
of
each
such
benefit),
including,
without
limitation,
group
disability,
life insurance,
medical
insurance and pension
plans
(401K)
which are,
or which may
become
available
generally
to senior
personnel of the
Corporation.
The Employee shall be entitled to four (4) weeks
of vacation time during each year of the Employment Period.
(b) If the Corporation has a group disability plan in force at the
time the
Employee's employment
terminates,
the Corporation shall offer the Employee the
opportunity
to continue
disability
coverage at the Employee's own expense for
such
period as the
Employee
desires;
provided,
that the
Employee
shall be
required to make all insurance premium contributions.
(c) Upon termination of the Employee's
employment,
the Corporation
shall
offer the Employee the opportunity to continue the Employee's
health
insurance
coverage in effect
immediately
prior to such
termination or health
insurance
coverage generally
available at such time to executives of the Corporation,
at
the Employee's own expense,
for such period as the Employee desires;
provided,
that the Employee shall be required to make all insurance premium
contributions.
6. TERMINATION OF EMPLOYMENT.
During the Employment Period, the Employee's
employment
may be terminated by the Board on the
occurrence of any one or more
of the following events:
(a) The death of the Employee;
(b) For "Cause",
which shall mean (i) the willful
failure by the Employee
to
substantially
perform
his duties
hereunder
(including
the breach of any
provision
of
Section 9 and/or 10
hereof),
for
reasons
other
than death or
disability;
(ii) the willful engaging by the Employee in misconduct
materially
injurious to the Corporation;
or (iii) the commission by the Employee of an act
constituting (A) common law fraud against the Corporation or (B) a
felony; or
(c) If the
Employee
is unable
substantially
to perform
the
Employee's
duties and
responsibilities
hereunder to the full extent required by the Board
by reason of illness,
injury or incapacity for three consecutive months, or for
more than four
months in the
aggregate
during any
period of twelve
calendar
months
(such
condition
constituting
"disability"
for the
purposes
of this
Employment Agreement); provided, however, that the Corporation
shall continue to
pay the Employee's
then current Base Salary until the Company acts to terminate
the Employee.
The Employee agrees, in the event of a dispute under this Section
6(c), to submit to a physical
examination by a licensed
physician
selected by
the Board and consented to by the Employee.
7. DEATH
BENEFIT.
In addition to all other
insurance
and similar
death
benefits
generally
made
available
to employees
of the
Corporation,
if the
Employee's
death
occurs
during
the
term
of
the
Employment
Period,
the
3
Corporation shall provide a death benefit to the estate of the
Employee equal to
the Employee's then current annual Base Salary at the date of
death.
Such death
benefit shall be payable as may be determined by the
Corporation,
but not less
often than six (6) equal monthly
installments,
payable on the last day of each
month,
commencing
in the
month
subsequent
to the
month in which
the death
occurs.
8. SEVERANCE PAYMENT.
(a) If the Corporation and the Employee do not enter
into a renewal
agreement
to be effective
January 1, 2008,
for a period of at
least two years and
containing
similar terms and conditions to
