EXHIBIT 10.1 EMPLOYMENT AGREEMENT

 

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                                                                    EXHIBIT 10.1

 

 

                              EMPLOYMENT AGREEMENT

 

         EMPLOYMENT AGREEMENT ("Agreement") effective as of January 1, 2005 (the

"Effective Date") between HARRIS INTERACTIVE INC., a Delaware corporation

("Company"), and FRANK J. CONNOLLY, JR. ("Executive").

 

1.       CAPACITY AND DUTIES

 

         1.1      Employment; Acceptance of Employment. Company hereby employs

Executive and Executive hereby accepts employment by Company for the period and

upon the terms and conditions hereinafter set forth.

 

         1.2      Capacity and Duties.

 

                  (a)      Executive shall serve as the Executive Vice

President, Chief Financial Officer and Treasurer of the Company. Executive shall

perform duties and shall have authority as may from time to time be specified by

the Chief Executive Officer and the Board of Directors of Company (the "Board").

Executive's title and duties may be changed from time to time by the Chief

Executive Officer and the Board; provided, however, that (i) Executive's

position, authority, duties, and responsibilities shall be no less senior and

executive in nature than those of Chief Financial Officer and shall be

consistent with those of a chief financial officer of a public company of the

size and type similar to the Company, (ii) the duties assigned to the Executive

shall be in all respects consistent with all applicable laws and regulations,

and (iii) Executive's title shall include at least "Chief Financial Officer".

Executive will report to the Chief Executive Officer of the Company. Executive's

principal business location shall be located within the City of New York,

Westchester County, New York, or Fairfield County, Connecticut, but he

acknowledges and agrees that travel to Company's and its affiliates' various

offices, and to other locations in furtherance of Company's business, will be

required in connection with the performance of Executive's duties hereunder.

 

                  (b)      Executive shall devote full time efforts to the

performance of Executive's duties hereunder, in a manner that will faithfully

and diligently further the business and interests of Company; provided, however,

that nothing in this Section 1.2(b) shall prevent or limit the Executive from

serving on boards of directors (or similar governing bodies) of non-profit

corporations and other non-profit entities.

 

                  (c)      Executive acknowledges that Company's reputation is

important in the continued success of its business, and agrees that he will not

discuss or comment in such a manner as may adversely impact the reputation or

public perception, or otherwise disparage, Company or its officers, employees,

or directors in any manner; provided, however, that Executive may make such

disclosures as may be required by law. Company acknowledges that Executive's

reputation is important to his continued success. Company agrees that it will

not, and that it will use all reasonable efforts to cause its officers,

employees, and directors not to, defame, disparage, or otherwise discuss or

comment about Executive in such a manner as may adversely impact his reputation

or public perception; provided, however, that Company may make such disclosures

as may be required by law.

 

 

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2.       TERM OF EMPLOYMENT

 

         2.1      Term. The term of Executive's employment hereunder, for all

purposes of this Agreement, shall commence on the Effective Date (the

"Commencement Date") and continue through and including the earliest to occur of

(i) June 30, 2006, if and as further extended to subsequent June 30ths as

provided in this Section 2.1, (ii) the date on which Executive dies, and (iii)

the date on which either the Company or Executive terminates Executive's

employment for any reason (the "Termination Date"). Except as hereinafter

provided, on June 30, 2006 this Agreement shall be automatically extended for an

additional one-year term, and if so extended shall be automatically extended for

successive additional one-year terms, unless either the Executive or Company

shall have given the other written notice of nonrenewal of this Agreement at

least three (3) months prior to June 30, 2006, or if applicable any one-year

extension term then in effect. If written notice of nonrenewal is given as

provided above, Executive's employment under this Agreement shall terminate on

June 30, 2006, or if the term of this Agreement has automatically renewed, on

the June 30 immediately following the date of the non-renewal notice.

 

3.       COMPENSATION

 

         3.1      Base Compensation. As compensation for Executive's services,

Company shall pay to Executive base compensation in the form of salary ("Base

Compensation") in the amount of $315,000 per annum. The salary shall be payable

in periodic installments in accordance with Company's regular payroll practices

for its executive personnel at the time of payment, but in no event less

frequently than monthly. The Compensation Committee of the Board shall review

Base Compensation periodically for the purpose of determining, in its sole

discretion, whether Base Compensation should be adjusted; provided, however,

that Executive's Base Compensation shall not be less than $315,000.

 

         3.2      Signing and Performance Bonus.

 

                  (a)      As additional compensation for the services rendered

by Executive to Company, Executive shall be paid a signing bonus of $67,500

payable on June 30, 2005 provided only that a Termination Date has not yet

occurred caused by a termination by the Company for Cause or a termination by

the Executive without Good Reason.

 

                  (b)      For fiscal years ending after June 30, 2005, as

additional compensation for the services rendered by Executive to Company

Executive shall be paid a performance bonus ("Performance Bonus") payable in

full at the same time as payment of other executive bonuses by the Company

(generally targeted for payment within ninety (90) days after the end of the

relevant fiscal year of the Company). The Performance Bonus award criteria and

amounts shall be those established on an annual basis by the Compensation

Committee of the Board of Directors of the Company based upon performance

guidelines established for executive officers of the Company; provided, however,

that the target bonus for Executive for the fiscal year ending June 30, 2006

shall be $135,000 provided that performance guidelines are met. No bonus will be

due in the event that award criteria established by the Compensation Committee

are not met.

 

 

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         3.3      Employee Benefits. Executive shall be entitled to participate

in such of Company's employee benefit plans and benefit programs, including

medical, hospitalization, dental, disability, accidental death and dismemberment

and travel accident plans and programs, as may from time to time be provided by

Company for its senior executives generally. In addition, Executive shall be

eligible to participate in all pension, retirement, savings and other employee

benefit plans and programs maintained from time to time by Company for the

benefit of its senior executives generally. Company shall have no obligation,

however, to maintain any particular program or level of benefits referred to in

this Section 3.3.

 

         3.4      Vacation. Executive shall be entitled to the normal and

customary amount of paid vacation provided to senior executive officers of the

Company, but in no event less than 20 days during each 12 month period. Any

vacation days that are not taken in a given 12 month period shall accrue and

carry over from year to year up to a maximum aggregate of 5 days. The Executive

may be granted leaves of absence with or without pay for such valid and

legitimate reasons as the Board in its sole and absolute discretion may

determine, and is entitled to the same sick leave and holidays provided to other

executive officers of Company.

 

         3.5      Expense Reimbursement. Company shall reimburse Executive for

all reasonable and documented expenses incurred by him in connection with the

performance of Executive's duties hereunder, including without limitation travel

cost and expense including to Company offices other than his principal office,

in accordance with its regular reimbursement policies as in effect from time to

time. In addition, the Company shall reimburse the Executive for his reasonable

costs up to a maximum of $10,000 incurred in the negotiation of this Employment

Agreement and the related agreements related to stock options granted to

Executive on the Effective Date.

 

         3.6      Stock Options.

 

                  (a)      On the Effective Date, the Company shall grant

Executive options to purchase 300,000 shares of the Company's stock with an

exercise price equal to the fair market value of the stock as of the close of

trading on the Effective Date.

 

                  (b)      65,000 of the options described in Section 3.6(a)

shall be granted under and pursuant to the terms of the Company's Long Term

Incentive Plan pursuant to the form of Incentive Stock Option Agreement annexed

hereto as Exhibit A.

 

                  (c)      235,000 of the options described in Section 3.6(a)

shall be granted under and pursuant to the Non-Qualified Stock Option Agreement

annexed hereto as Exhibit B. The Company agrees to file, as soon as practicable

after the Effective Date, to the extent it is then eligible to do so, a Form S-8

registration statement covering the shares of Company common stock underlying

the options. The Company is eligible to file Form S-8 registration statements on

the date of this Agreement.

 

         3.7      Withholding. All payments under this Agreement shall be

subject to any required withholding of Federal, state and local taxes pursuant

to any applicable law or regulation.

 

 

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4.       TERMINATION OF EMPLOYMENT

 

         4.1      Accrued Obligations. For purposes of this Agreement, "Accrued

Base Obligations" shall mean amounts for Base Compensation, expense

reimbursement, and employee benefits which have accrued, vested, and are unpaid

as of the Termination Date, and (ii) "Accrued Bonus Obligations" shall mean (i)

any unpaid Performance Bonus earned for any fiscal year ending on or after July

1, 2005 and before the Termination Date, (ii) for the year in which the

Termination Date occurs if the Termination Date is subsequent to June 30, 2005,

a prorated Performance Bonus for the partial-year period ending before the

Termination Date if the Termination Date occurs in the last six months of the

applicable fiscal year calculated by annualizing the short period before

termination, and no prorated Performance Bonus if the Termination Date occurs in

the first six months of the applicable fiscal year, and (iii) for the year in

which the Termination Date occurs, if and only if the Termination Date is on or

prior to June 30, 2005, $67,500 if such amount is otherwise payable pursuant to

Section 3.2(b). Accrued Base Obligations shall be paid within thirty (30) days

after the Termination Date, and Accrued Bonus Obligations shall be paid on the

date on which they would have been paid under this Agreement absent the

occurrence of the Termination Date.

 

         4.2      Termination Procedures. Except as otherwise provided in this

Agreement, any termination of Executive's employment by the Company or by

Executive (other than termination pursuant to death) shall be communicated by

written Notice of Termination to the other party hereto. For purposes of this

Agreement, a "Notice of Termination" shall mean a notice which shall indicate

the specific termination provision in this Agreement relied upon and, if

applicable, shall set forth in reasonable detail the facts and circumstances

claimed to provide a basis for termination of Executive's employment under the

provision so indicated.

 

                  No Notice of Termination of Executive for Cause shall be given

by the Company unless and until (i) adoption by the Board of Directors of Harris

of a resolution, finding that in the good faith opinion of the Board of

Directors Executive is guilty of the conduct described in the definition of

Cause, after at least five (5) business days notice is provided to Executive,

such notice to include in reasonable specificity the alleged conduct justifying

such termination for Cause, and (ii) an opportunity is given to Executive,

together with counsel, to be heard by the Board of Directors of Harris at a

meeting (which may be held by telephonic conference call). This Section 4.2

shall not prevent Executive from challenging, pursuant to Section 6.1, the

Board's determination that Cause exists, or that Executive has failed to cure

any act (or failure to act), to the extent permitted by this Agreement, that

purportedly formed the basis for the Board's determination.

 

         4.3      Death of Executive. If Executive dies prior to a Termination

Date that otherwise occurs, Company shall not thereafter be obligated to make

any further payments hereunder other than amounts for Accrued Base Obligations

and Accrued Bonus Obligations.

 

         4.4      Disability of Executive. If Executive is permanently disabled

(as defined in Company's long-term disability insurance policy then in effect),

then the Board shall have the right to terminate Executive's employment upon 30

days' prior written notice to Executive at any time during the continuation of

such disability ("Disability"). In the event Executive's employment is

terminated for Disability in accordance with this Section 4.4, Company shall not

 

 

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be obligated to make any further payments hereunder except for Accrued Base

Obligations and Accrued Bonus Obligations.

 

         4.5      Termination for Cause.

 

                  (a)      Executive's employment hereunder shall terminate

immediately upon a Notice of Termination from the Company that Executive is

being terminated for Cause (as defined herein), in which event Company shall not

thereafter be obligated to make any further payments hereunder other than

Accrued Base Obligations and Accrued Bonus Obligations.

 

                  (b)      "Cause" shall be limited to the following:

 

                           (i)      willful failure to substantially perform

Executive's duties as described in Section 1.2 after demand for substantial

performance is delivered by Company in writing that specifically identifies the

manner in which Company believes Executive has not substantially performed

Executive's duties and Executive's failure to cure such non-performance within

ten (10) days after receipt of the Company's written demand; provided, however,

that a failure to perform such duties during the remedy period set forth in

subsection (i) of the definition of Good Reason set forth in Section 4.7 hereof,

following the issuance of a Notice of Termination (as herein defined) by

Executive for Good Reason, shall not be Cause unless an arbitrator acting

pursuant to Section 6.1 hereof finds Executive to have acted in bad faith in

issuing such Notice of Termination;

 

                           (ii)     willful conduct that is materially and

demonstrably injurious to Company or any of its subsidiaries, but not including

good faith conduct taken without intention to injure the Company or its

subsidiaries that, at the time engaged in, could not reasonably be expected to

be more likely than not to be materially injurious to the Company; or

 

                           (iii)    conviction or plea of guilty or nolo

contendere to a felony or to any other crime which involves moral turpitude or,

if not including moral turpitude, provided the act giving rise to such

conviction or plea is materially and demonstrably injurious to the Company or

any of its subsidiaries;

 

                           (iv)     material violation of Section 5 of this

Agreement, or material violation of Company polices set forth in Company manuals

or written statements of policy provided in the case of violation of policy that

such violation is either materially and demonstrably injurious to Company or, if

curable, continues for more then three (3) days after written notice thereof is

given to Executive by the Company; and

 

                           (v)      material breach of any material provision of

this Agreement by Executive, which breach continues for more than ten days after

written notice thereof is given by the Company to Executive.

 

         4.6      Termination without Cause or by Executive for Good Reason.

 

                  (a)      The Company reserves the right to terminate

Executive's employment at any time. If, however, a Termination Date occurs (not

including termination in the ordinary course on any applicable June 30 if the

term of this Agreement is not automatically renewed,

 

 

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which circumstance is covered by Section 4.6(b)) for any reason other than Cause

under Section 4.5, termination by Executive under Section 4.7, death, or

Disability, then Company shall have no further obligations under this Agreement

except that Company shall pay to Executive:

 

                           (i)      the Accrued Base Obligations through the

Termination Date, payable promptly after the Termination Date,

 

                           (ii)     any unpaid Performance Bonus earned for any

fiscal year ended before the Termination Date payable the later of (A) the date

on which such Performance Bonus would be paid absent termination and (B) a date

no later than 30 days after the Termination Date,

 

                           (iii)    the Performance Bonus, if any is earned, for

the fiscal year in which the Termination Date occurs, allocable to and prorated

for the period prior to termination, calculated by annualizing any short period

before termination, calculated and payable when Performance Bonuses for the

applicable year are paid to all other Company senior executives,

 

                           (iv)     Base Compensation through and including the

date one year after the Termination Date, payable at the same times as paid

under Section 3.1; and

 

                           (v)      benefits as required by Section 3.3 of this

Agreement during the same period that Base Compensation is due under Section

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