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%. The cash bonus for the Third
Bonus Period
shall be paid no later than March 15, 2008.
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,
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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
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.
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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
those set
forth herein, then the Corporation will pay the Employee, as
additional
compensation, an amount equal to the Employee's then current annual
Base Salary,
as determined under Section 4(a), payable semi-monthly in arrears
for the twelve
months ending December 31, 2008; such compensation is hereinafter
referred to as
the "Severance Payment".
(b) Notwithstanding the provisions of Section 8 (a)
above, the
Employee will not receive the Severance Payment if,
(i) the Corporation dec
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