EXHIBIT 10.20
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made as of May 3,
2006 (the “Effective Date”) between CNS, Inc. a
Delaware corporation (“CNS”) and Susan Horvath
(“Employee”).
WHEREAS, CNS considers the
establishment and maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of CNS and
its shareholders; and
WHEREAS, Employee has made and is
expected to continue to make, due to Employee’s experience
and knowledge, a significant contribution to the profitability,
growth and financial strength of CNS; and
WHEREAS, CNS, as a publicly held
corporation, recognizes that the possibility of a change in control
may exist and that such possibility and the uncertainty and
questions which it may raise among management may result in the
departure of Employee or distraction to the performance of
Employee’s duties to the detriment of CNS and its
shareholders; and
WHEREAS, Employee is willing to
continue Employee’s employment with CNS upon the
understanding that CNS will provide income security if
Employee’s employment is terminated under certain terms and
conditions; and
WHEREAS, it is in the best interests
of CNS and its stockholders to employ Employee and to reinforce and
encourage Employee’s continued attention and dedication to
Employee’s assigned duties without distraction and to ensure
Employee’s continued availability to CNS in the event of a
Change in Control; and
WHEREAS, it is in CNS’s best
interests to receive certain assurances from Employee regarding
CNS’s confidentiality, competition and other proprietary
business concerns;
THEREFORE, in consideration of the
foregoing and of this agreement, certain change in control
protection, continued employment and other benefits hereunder, as
well as other mutual covenants and obligations hereinafter set
forth, CNS and Employee agree as follows:
|
1.
|
Employment
. CNS agrees to continue to employ
Employee as its Vice President and Team Leader, International under
the terms, conditions and benefits set forth herein and Employee
accepts continued employment with CNS on said terms, conditions and
benefits.
|
|
2.
|
Term . The term of Employee’s employment shall
continue until terminated pursuant to paragraph 6, 7, or 8
herein.
|
|
3.
|
Duties . In Employee’s position as Vice President
and Team Leader, International, Employee will continue to
faithfully and diligently perform such executive
management
|
responsibilities as may be assigned
to Employee from time to time by the Chief Executive Officer,
President or Chairman of the Board of Directors of CNS (the
“Board”); devote Employee’s full time, energy and
skill to CNS’s business, as is reasonably necessary to
execute fully Employee’s duties hereunder, except for
vacations, absences made necessary because of illness, and service
on other corporate, civic, or charitable boards or committees not
significantly interfering with Employee’s duties hereunder;
and promote CNS’s best interests. The principal place of
employment and the location of Employee’s principal office
and normal place of work shall be in the Minneapolis, Minnesota
metropolitan area. Employee will be expected to travel to other
locations, as necessary, in the performance of Employee’s
duties during the term of this Agreement. Employee shall notify the
Chief Executive Officer of any other paid position which Employee
is considering accepting, including but not limited to a board of
directors position, a position as an employee or an independent
consultant, or any position, whether or not for pay, which could
constitute a conflict of interest with CNS. The Employee agrees not
to accept any such position without the Chief Executive
Officer’s prior approval.
|
4.
|
Compensation
. For all services rendered by
Employee, CNS shall pay Employee the annualized base salary
(“Annual Base Salary”) described in Exhibit A, payable
at such times as salaried employees of CNS are customarily paid.
The Board shall, from time to time during Employee’s
employment, review Employee’s Annual Base Salary in
connection with possible increases, giving consideration to
inflation factors, performance of Employee and CNS, salaries paid
for positions of similar responsibility for other companies, and
other relevant factors, and shall provide for such increases when
deemed appropriate. Employee shall in addition be eligible to
participate in the annual management incentive bonus program, as
approved by the Board of Directors, the initial amount, as a
percentage of Annual Base Salary, is described in Exhibit
A.
|
|
5.
|
Benefits . Employee shall be entitled to Paid Time Off
consistent with CNS policy and such insurance, 401(k) program and
other benefits available to all salaried employees of CNS, subject
to any limitations on such benefits to officers, directors or
highly paid employees in order that such benefit programs qualify
under federal or state law for favored tax or other treatment. Such
benefit programs may be changed from time to time by the Board.
Employee shall also be entitled to reimbursement of
Employee’s reasonable and necessary expenses incurred in
connection with the performance of Employee’s duties
hereunder.
|
|
6.
|
Resignation by
Employee . Employee may
resign Employee’s employment with CNS effective upon 30
days’ advance written notice to the Chief Executive Officer.
If Employee resigns under this paragraph, the Chief Executive
Officer retains the right to terminate Employee’s employment,
effective upon written notice to Employee, at any time during the
30-day notice period, provided, however, that Annual Base Salary
and the employer portion of Employee’s health, dental and
life insurance premiums will continue to be paid by CNS for the
duration of the 30-day notice period. In connection with
Employee’s termination, Employee will receive any accrued
unused Paid Time Off to which Employee is entitled.
|
2
|
7.
|
Termination of
Employment .
Employee’s employment with CNS may be terminated in any of
the following ways:
|
|
|
a.
|
CNS may, by written notice to
Employee, terminate Employee’s employment without Good Cause
(as defined in paragraph 7.b.) prior to a Change in Control (as
defined in paragraph 8.a), in which event CNS shall:
|
|
|
i.
|
pay Employee her Annual Base Salary
up to the date of termination
|
|
|
ii.
|
pay the Employee Salary Continuation
for one (1) year from Employee’s Date of Termination, as
additional consideration for Employee’s obligations under
Sections 9, 10, 11 and 12 of this Agreement. For purposes of
this Agreement, “Salary Continuation” shall mean a
total payment by CNS of one times (1X) the Employee’s Annual
Base Salary as of Employee’s Date of Termination, the total
amount to be payable to Employee over the one (1) year period on
the same schedule and in the same amount as the payment of Annual
Base Salary prior to termination of Employee’s employment,
until such time as the full Salary Continuation
obligation/non-compete shall be discharged, as provided in this
paragraph 7.a., but subject to earlier termination and the
rights as provided in Section 13.b;
|
|
|
iii.
|
continue to pay the employer’s
portion of the premium cost for any group health, dental and life
insurance benefit during the Salary Continuation period or the
applicable continuation period required by law, whichever is
shorter, provided, however, that Employee shall be responsible to
pay the employee’s portion of cost of any such benefits and
the continuation period required under applicable law will not be
extended as a result of CNS’s payment provided for in this
clause;
|
|
|
iv.
|
pay to Employee any accrued unused
Paid Time Off to which Employee is entitled; and
|
|
|
v.
|
provide qualified outplacement
services to Employee through an entity selected by CNS for a period
of up to six months at the sole cost of CNS.
|
As a condition of receiving the
Salary Continuation and other benefits provided in this paragraph
7.a., Employee shall be required to sign a standard release
agreement in the form of Exhibit B with CNS in which Employee
agrees to release any and all claims and causes of action which
Employee might have against CNS and its releasees, in which
Employee affirms and acknowledges Employee’s obligations
under paragraphs 9, 10, 11 and 12 of this Agreement, and which
includes an obligation not to speak negatively about or harm CNS,
confidentiality with regard to the termination process and
cooperation with the transition of responsibilities. Payments under
paragraph 7.a. shall begin after all rescission periods provided in
the standard release agreement have run or have been
waived.
3
|
|
b.
|
CNS, by written notice to Employee,
may terminate Employee’s employment for Good Cause, as
defined below, prior to a Change in Control. In the event of
termination under this paragraph 7.b., CNS shall continue to
pay Employee’s Annual Base Salary up to the Date of
Termination. For purposes of this Agreement, “Good
Cause” shall mean one or more of the following:
|
|
|
i.
|
willful and premeditated failure or
refusal of Employee to render services to CNS in accordance with
Employee’s obligations under paragraph 3;
|
|
|
ii.
|
the commission by Employee of a
willful breach of fiduciary duty to CNS or an intentional and
knowing fraud against CNS or any customer, supplier, client, agent
or employee thereof;
|
|
|
iii.
|
the engaging by Employee in
intentional or willful misconduct that violates a material
provision of any written policy, code of conduct or directive of
the Board or that could result in an enforcement action or
sanctions against the Company or Employee by any state or federal
agency or department or any foreign government or agency having
jurisdiction over the Company or Employee (it being understood that
mere negligence in performance of duties is not Good Cause under
this Agreement);
|
|
|
iv.
|
the breach by Employee of any
provision of this Agreement;
|
|
|
v.
|
the commission of a felony by
Employee; or
|
|
|
vi.
|
prior to a Change in Control,
Employee’s unsatisfactory performance after specific notice
by CNS of Employee’s performance deficiencies, description of
expectations and a 60-day opportunity to cure.
|
|
|
c.
|
CNS, by written notice to Employee,
may terminate Employee’s employment under this Agreement if
Employee becomes physically or mentally disabled (as determined
under the Americans with Disabilities Act) during the term so that
Employee has not been able to substantially perform, for a period
of 120 consecutive days, with reasonable accommodation, the usual
duties assigned to Employee hereunder (“Disability”).
Upon such determination by CNS of Employee’s Disability, CNS
shall pay to Employee the Annual Base Salary up to the Date of
Termination.
|
|
|
d.
|
This Agreement shall terminate upon
the Employee’s death during its term, except that CNS shall
pay to the legal representative of Employee’s estate
Employee’s Annual Base Salary due Employee up to the date of
Employee’s death.
|
|
8.
|
Termination Following a Change in
Control .
|
|
|
a.
|
For purposes of this Agreement,
“Change in Control” shall mean the occurrence of one of
the following events:
|
4
|
|
i.
|
Acquisition of 25% of Stock of
CNS . Any
“person” [as such term is used in Section 13(d) and
4(d) of the Securities Exchange Act of 1934, as amended
(“Exchange Act”)], is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly of securities representing 25% or more of
the combined voting power of CNS’s then outstanding
securities, but shall not include CNS, any direct or indirect
subsidiary of CNS or any employee benefit plan of CNS or of any
subsidiary of CNS or any entity holding shares of common stock of
the Company organized, appointed or established for, or pursuant to
the terms of, any such plan.
|
|
|
ii.
|
Change in Board of
Directors . During any
period of two consecutive years (not including any period ending
prior to the effective date of this Agreement), individuals who at
the beginning of such period constitute the Board of Directors of
CNS, and any new director (other than a director designated by a
person who has entered into agreement with CNS to effect a
transaction constituting a Change in Control under Section 8.a.i.,
8.a.iii. or 8.a.iv.) whose election by the Board of Directors of
CNS or nomination for election by CNS’s stockholders was
approved by vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so
approved (“Continuing Directors”), cease for any reason
to constitute at least a majority of the Board of Directors of
CNS.
|
|
|
iii.
|
Merger or
Consolidation. Consummation of a merger or consolidation of CNS
with any other corporation, other than (A) a merger or
consolidation (1) which would result in the voting securities of
CNS outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the merged or consolidated entity) 50% or more of the
combined voting power of the voting securities of CNS or such
merged or consolidated entity outstanding immediately after such
merger or consolidation and (2) after which at least a majority of
the members of the board of directors of the resulting entity were
Continuing Directors at the time of the action of the Board of
Directors of CNS approving the merger or consolidation, or
(B) a merger or consolidation effected to implement a
recapitalization of CNS or similar transaction in which no person
(as defined in subparagraph 8.a.i.) acquires more than 25% of the
combined voting power of CNS’s then outstanding
securities.
|
|
|
iv.
|
Liquidation or Sale of
Assets. Consummation of
(A) a plan of complete liquidation or (B) a sale or disposition by
CNS of all or substantially all of CNS’s assets. “The
sale or disposition by CNS of all or substantially all of
CNS’s assets” shall mean a sale or other disposition
transaction or series of related transactions involving assets of
CNS or of any direct or indirect subsidiary of CNS (including the
stock of any direct or indirect subsidiary of CNS) in which the
value of the assets or stock being sold or
|
5
otherwise disposed of (as measured
by the purchase price being paid therefor or by such other method
as the Board of Directors of CNS determines is appropriate in a
case where there is no readily ascertainable purchase price)
constitutes more than 75% of the fair market value of CNS. For
purposes of the preceding sentence, the “fair market value of
CNS” shall be the aggregate market value of CNS’s
outstanding common stock (on a fully diluted basis) plus the
aggregate market value of CNS’s other outstanding equity
securities. The aggregate market value of CNS’s common stock
shall be determined by multiplying the number of shares of CNS
common stock (on a fully diluted basis) outstanding on the date of
the execution and delivery of a definitive agreement
(“Transaction Date”) with respect to the sale or
disposition by CNS of all or substantially all of CNS’s
assets by the average closing price for CNS’s common stock
for the ten trading days immediately preceding the Transaction
Date. The aggregate market value of any other equity securities of
CNS shall be determined in a manner similar to that prescribed in
the immediately preceding sentence for determining the aggregate
market value of CNS’s common stock or by such other method as
the Board of Directors of CNS shall determine is
appropriate.
Employee agrees that, subject to the
terms and conditions of this Agreement, in the event of a Change in
Control of CNS occurring after the date hereof, Employee will
remain in the employ of CNS for a period of 30 days from the
occurrence of such Change in Control.
|
|
b.
|
Applicability
. In the event of a Change in
Control, the terms of this paragraph 8.b shall be effective for a
period of 24 months following the Change in Control. At the
expiration of such 24-month period, this Agreement in its entirety
shall be terminated and be of no further effect, except as provided
in paragraph 23. Notwithstanding the foregoing provisions of
this Section 8.b., Employee shall be entitled to receive the
benefits set forth in paragraph 8.f if, within 24 months following
such Change in Control, Employee’s employment is terminated
by CNS or its successor without Good Cause (as defined in paragraph
7.a above), or by Employee for Good Reason (as defined in
subparagraph 8.b.i. below). As a condition to receiving such
benefits, Employee shall be required to sign a standard release
agreement with CNS in the form of Exhibit B. Payments required
under this paragraph 8.b shall begin after all rescission periods
provided in the standard release agreement have run or have been
waived.
|
|
|
i.
|
Termination for Good Reason shall be
effective immediately upon written notice from the Employee to the
Chief Executive Officer. For purposes of this Agreement,
“Good Reason” shall exist if: (A) CNS has materially
breached any of the terms of this Agreement; (B) Employee is
assigned duties which are materially inconsistent with
Employee’s position, duties, responsibilities and status as
Vice President and Team Leader, International; (C) Employee’s
Annual Base Salary, or Target Bonus (as defined below), or the face
value of annual equity grants, is reduced below
|
6
the amount in effect immediately
prior to the Change in Control; (D) the aggregate monetary value of
Employee’s participation in, or payment or benefit under all
benefit plans, arrangements and perquisites, is materially reduced
from the aggregate monetary value of those plans, arrangements or
perquisites that were in effect immediately prior to the Change in
Control; or (E) relocation of CNS would require Employee to
relocate Employee’s principal residence outside reasonable
commuting distance of the Twin Cities Metropolitan area.
|
|
ii.
|
Termination without Good Cause shall
be effective upon 30 days’ advance notice by CNS to the
Employee. For purposes of this paragraph 8, Good Cause shall be
defined as in paragraph 7.b.
|
|
|
c.
|
Notice of Termination
. Any purported termination of
employment under this paragraph 8 and also under paragraphs 6 and 7
shall be communicated by written Notice of Termination to the other
party hereto in accordance with paragraph 22 hereunder. For
purposes of this Agreement, a “Notice of Termination”
shall mean a notice that indicates the specific termination
provision in this Agreement relied upon and which sets forth the
facts and circumstances claimed to provide a basis for termination
of Employee’s employment.
|
|
|
d.
|
Date of Termination
. For purposes of this paragraph 8
and also paragraphs 6 and 7 of this Agreement, “Date of
Termination” shall mean:
|
|
|
i.
|
if Employee’s employment is
terminated for Disability, as defined in paragraph 7.c. hereunder,
30 days after Notice of Termination is given (provided that
Employee shall not have returned to the full-time performance of
Employee’s duties during such 30 day period); and
|
|
|
ii.
|
if Employee’s employment is
terminated pursuant to a provision contained in paragraph 6, 7 or 8
herein or for any other reason (other than Disability), the date
specified in the Notice of Termination, consistent with the
provisions in said paragraphs.
|
|
|
e.
|
Dispute of Termination
. If, within ten days after any
Notice of Termination is given under this paragraph 8, the party
receiving such Notice of Termination notifies the other party that
a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, or
as provided in paragraph 16, (which is not appealable or the time
for appeal therefrom having expired and no appeal having been
perfected); provided, that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in
good faith and the party giving such notice pursues the resolution
of such dispute with reasonable diligence. Notwithstanding the
pendency of any such dispute, CNS shall continue to pay Employee
full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Annual Base
Salary) and continue Employee as a participant in all compensation,
benefit and insurance
|
7
plans in which Employee was
participating when the notice giving rise to the dispute was given,
to the extent permissible under the terms of the applicable group
plans and state and federal law, until the dispute is finally
resolved in accordance with this subparagraph. Amounts paid under
this subsection are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other
amounts under this Agreement.
|
|
f.
|
Compensation Upon
Termination . Following a
Change in Control, as defined in paragraph 8.a. above, to the
extent provided in paragraph 8.b. above, and subject to the
limitation under paragraph 8.j., CNS shall pay or provide Employee
the following benefits in lieu of any benefits which would
otherwise be available to Employee upon termination under
paragraphs 6 or 7 hereunder:
|
|
|
i.
|
pay Employee through the Date of
Termination Employee’s Annual Base Salary at the rate in
effect at the time the Notice of Termination is given, and any
other form or type of compensation otherwise payable for such
period, including any applicable incentive bonus, commensurate with
her performance and the performance of CNS;
|
|
|
ii.
|
in lieu of any further salary
payments for periods subsequent to the Date of Termination, CNS
shall pay a severance payment (the “Severance Payment”)
equal to 24 months of Employee’s Compensation, as defined
below, based on the average monthly Compensation paid to Employee
during the 24-month period ending immediately prior to the Date of
Termination (without giving effect to any reduction in such
Compensation which would constitute a breach of this Agreement). If
the Employee has not been employed by CNS for 24 months as of the
Date of Termination, average monthly Compensation shall be the
Employee’s average monthly Compensation for the number of
months during which the Employee has been employed at CNS. For
purposes of this subparagraph, Compensation shall mean and include
every type and form of compensation paid to Employee by CNS (or any
corporation (“Affiliate”) affiliated with CNS within
the meaning of Section 1504 of the Internal Revenue Code of
1986, as may be amended from time to time (the “Code”))
and included in Employee’s gross income for federal income
tax purposes, but excluding compensation income arising from (1)
hiring bonuses, and (2) compensation income recognized as a result
of the exercise of stock options or sale of the stock so acquired.
All of Employee’s contributions to any qualified plan
pursuant to Section 401(k) of the Code or any flexible benefit
plan pursuant to Section 125 of the Code shall be deemed to be
included in gross income for federal tax purposes for purposes of
this subparagraph. The Severance Payment shall be made: (A) as to
one-half in a single lump sum within 60 days after the Date of
Termination; and (B) as to the remaining one-half in 12 equal
monthly installments beginning on the first of the month following
the Date of Termination (as additional consideration for
Employee’s obligations under Sections 9, 10, 11 and
12
|
8
of this Agreement), subject to
earlier termination and the rights as provided in
Section&
|
