Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of August 16, 2006, by and between
Cognitronics Corporation, a New York corporation (the "Company"), and Xxxxxxx
Xxxxxxxx (hereinafter called the "Employee").
WITNESSETH:
WHEREAS, the Company desires that the Employee serve as the President
and Chief Executive Officer of the Company and the Employee is willing to
serve the Company in such capacities.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the parties hereto agree as
follows:
Section 1. Employment
Effective as of August 16, 2006, the Company will employ the Employee
and the Employee will perform services for the Company and its subsidiaries on
the terms and conditions set forth in this Agreement and for the period
specified in Section 3 hereof ("Term of Employment").
Section 2. Duties
The Employee, during the Term of Employment, will serve the Company as
its President and Chief Executive Officer. The Employee will have such duties
and responsibilities as are assigned to him by the Board of Directors of the
Company commensurate with his position as President and Chief Executive
Officer of the Company. The Employee will perform his duties hereunder
faithfully and to the best of his abilities and in furtherance of the business
of the Company and its subsidiaries, and will devote his full business time,
energy, attention and skill to the business of the Company and its
subsidiaries and to the promotion of its interests, except as otherwise agreed
by the Company. The Employee warrants and represents that he is free to enter
into this Agreement and is not restricted by any prior or existing agreement
and the Company may rely on such representation in entering into this
Agreement.
Section 3. Term of Employment
The Employee's employment hereunder shall be "at will" and is terminable
at any time by either party, subject to the provisions of Sections 10 and 11
hereof.
Section 4. Salary
The Employee will receive, as compensation for his duties and
obligations to the Company pursuant to this Agreement, a base salary at the
annual rate of Two Hundred Fifty Thousand Dollars ($250,000), payable in
substantially equal installments in accordance with the Company's payroll
practice. It is agreed between the parties that the Company will review the
base annual salary annually and in light of such review may (but will not be
obligated to), in the discretion of the Compensation Committee of the Board of
Directors of the Company, increase such annual base salary taking into account
any change in the Employee's responsibilities, increases in the cost of
living, performance by the Employee, and other pertinent factors.
Section 5. Bonus
During the Term of Employment, the Employee will be eligible for an
annual cash bonus as determined at the sole discretion of the Compensation
Committee of the Board of Directors.
Section 6. Restricted Stock Grant
Concurrently herewith, the Company will grant to the Employee, subject
to listing approval of the American Stock Exchange, an "inducement" grant of
200,000 shares of restricted common stock of the Company (the "Employee
Restricted Shares"). All of the Employee Restricted Shares will vest (i.e.
the restrictions thereon shall lapse) on the fourth anniversary of the date
hereof. The Employee Restricted Shares will also vest in full upon a change
of control of the Company as further described in the Restricted Stock
Agreement between the parties with respect to the Employee Restricted Shares.
Section 7. Employee Benefits
Subject to any applicable probationary or similar periods, during the
Term of Employment, the Employee will be entitled to participate in all
employee benefit programs of the Company, as such programs may be in effect
from time to time Subject to any applicable probationary or similar periods,
during the Term of Employment, the Employee will also be entitled to
participate in all retirement programs of the Company for which current
employees are eligible, as such programs may be in effect from time to time
(including the Company's 401(k) plan, but not including the Company's defined
benefit retirement plan or other terminated postretirement plans).
Section 8. Business Expenses
All reasonable travel and other out-of-pocket expenses incidental to the
rendering of services by the Employee hereunder will be paid by the Company
and if expenses are paid in the first instance by the Employee, the Company
will reimburse him therefor upon presentation of proper invoices; subject in
each case to compliance with the Company's reimbursement policies and
procedures.
Section 9. Vacations and Sick Leave
The Employee will be entitled to holidays, reasonable vacation and
reasonable sick leave each year, in accordance with policies of the Company,
as determined by the Board of Directors, provided, however, that the Employee
will be entitled to a minimum of four (4) weeks vacation per year.
Section 10. Termination
(a) Termination by the Company for Serious Cause. In the event of
Serious Cause (as defined below), the Company may terminate the Employee's
employment and the Term of Employment upon written notice of such termination
stating the Serious Cause upon which the Company relies for its termination.
The Employee's employment and the Term of Employment will be terminated
effective as of the date specified in such notice, which will in no event be
earlier than the effective date of such notice as provided in Section 20.
"Serious Cause" means (i) the willful and continued failure by the
Employee to perform substantially his duties hereunder, other than by reasons
of health, after demand for substantial performance is delivered by the
Company that identifies the manner in which the Company believes the Employee
has not substantially performed his duties; (ii) the Employee will have been
indicted by any federal, state or local authority in any jurisdiction for, or
will have pleaded guilty or nolo contendere to, an act constituting a felony,
(iii) the Employee will have habitually abused any controlled substance (such
as narcotics or alcohol), or (iv) the Employee will have (A) engaged in acts
of fraud, material dishonesty or gross misconduct in connection with the
business of the Company, or (B) committed a material breach of this Agreement.
(b) Termination by Employee for Good Reason. The Employee may
terminate his employment and the Term of Employment in the event of Good
Reason (as defined below) upon thirty (30) days' prior written notice of such
termination stating the Good Reason upon which the Employee relies for his
termination. The Employee's employment and the Term of Employment will be
terminated effective as of the date specified in such notice, which in no
event will be earlier than the effective date of such notice as provided in
Section 20.
"Good Reason" means (i) a reduction in the Employee's salary or benefits
other than an across-the-board reduction affecting all members of senior
management, (ii) a material reduction of the Employee's duties and significant
responsibilities hereunder (not including reasonable changes in title or in
corporate structure), or (iii) a material breach of this Agreement by the
Company.
(c) Effect of Termination for Serious Cause or Without Good Reason.
In the event of termination of the Employee's employment and the Term of
Employment by the Company for Serious Cause or by the Employee without Good
Reason, the Employee will forfeit all bonus amounts for the then current
fiscal year, and the Company will be liable to the Employee only for (i) any
accrued but unpaid base salary and vacation, (ii) any earned but unpaid bonus
from a prior fiscal year (subject, if applicable, to the terms of any deferred
compensation arrangements), and (iii) reimbursement of business expenses
incurred prior to the date of termination.
(d) Death, Retirement, Disability. In the event of the death,
Retirement or Disability of the Employee, the Employee's employment and Term
of Employment will be terminated as of the date of such death, Retirement or
Disability and the Company will pay the Employee, or the Employee's estate or
legal representative, as appropriate, (i) any accrued but unpaid base salary
and vacation, (ii) any earned but unpaid bonus from a prior fiscal year
(subject, if applicable, to the terms of any deferred compensation
arrangements), and (iii) reimbursement of business expenses incurred prior to
the date of termination.
"Disability" means the Employee's inability, for reasons of health, to
carry out the functions of his position for a total of one hundred eighty
(180) days during any twelve (12) month period. "Retirement" will mean
retirement from employment upon or after attaining age sixty-five (65) or such
earlier age agreed to by the Company.
(e) Effect of Termination Without Serious Cause or With Good Reason.
If (i) the Company terminates the Term of Employment and the Employee's
employment herein without Serious Cause, or (ii) the Employee terminates the
Term of Employment and his employment hereunder for Good Reason, the Company
will continue to pay the Employee his then-current base salary for a period of
six (6) months from the date of such termination. In addition, the Employee
will be entitled to prompt payment of (A) any accrued but unpaid salary and
vacation, (B) any earned but unpaid bonus from a prior fiscal year (subject,
if applicable, to the terms of any deferred compensation arrangements), (C)
the Company's health benefit plans (with standard employee payment in an
amount not to exceed the payment level immediately prior to termination) for
the period of one (1) year, and (D) reimbursement of business expenses
incurred prior to the date of termination.
(f) No Other Obligations. In the event of the termination of the
Employee's employment and the Term of Employment pursuant to Sections 10 or 11
herein, the Company will have no obligations to the Employee other than those
set forth in Sections 10 and 11 herein.
Section 11. Change of Control
(a) Effect of Termination. If (i) the employment of the Employee is
terminated by the Company (or successor thereto) without Serious Cause or (ii)
the Employee terminates employment with the Company (or successor thereto) for
Good Reason, within the period commencing on the date that a Change of Control
is formally proposed to the Company's Board of Directors and ending on the
second anniversary of the date on which such Change of Control occurs, then
the Employee will be entitled to receive his then-current base salary for a
period of one (1) year from the date of such termination and in addition, the
Employee will be entitled to prompt payment of (A) any accrued but unpaid
salary and vacation, (B) any earned but unpaid bonus from a prior fiscal year
(subject, if applicable, to the terms of any deferred compensation
arrangements), (C) the Company's health benefit plans (with standard employee
payment in an amount not to exceed the payment level immediately prior to the
Change of Control) for the period of one (1) year, and (D) reimbursement of
business expenses incurred prior to the date of termination.
If any portion of the payments which the Employee has the right to
receive from the Company, or any affiliated entity or successor, hereunder
would constitute "excess parachute payments" (as defined in Section 280G of
the Internal Revenue Code) subject to the excise tax imposed by Section 4999
of the Internal Revenue Code, such excess parachute payments shall be reduced
to the largest amount that will result in no portion of such excess parachute
payments being subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code.
The Employee will not be entitled to any benefits or other entitlements
under this section unless a Change of Control actually occurs. Any amounts
payable pursuant to this Section 11 shall not duplicate amounts payable under
Section 10 and vice versa.
(b) Change of Control. A "Change of Control" of the Company will be
deemed to have occurred if (i) any "person" (as such term is defined in
Section 3(a)(9) and as used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, an underwriter
temporarily holding securities pursuant to an offering of such securities or a
corporation owned, directly or indirectly, by shareholders of the Company in
substantially the same proportion as their ownership of the Company, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing an increase
from less than Twenty Percent (20%) to Fifty Percent (50%) or more of the
combined voting power of the Company's then outstanding securities ("Voting
Securities"); (ii) during any period of not more than two (2) years,
individuals who constitute the Board of Directors of the Company (the "Board")
as of the beginning of the period and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (i) or (iii) of this sentence) whose
election by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at such time or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; (iii) the stockholders of the Company approve a
merger, consolidation or reorganization or a court of competent jurisdiction
approves a scheme or arrangement of the Company, other than a merger,
consolidation, reorganization or scheme which would result in the Voting
Securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least Fifty Percent (50%) of the
combined voting power of the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger, consolidation,
reorganization or scheme or arrangement, and such transaction is completed; or
(iv) the stockholders of the Company approve a plan of complete liquidation of
the Company or any agreement for the sale of substantially all of the
Company's assets, and such transaction is completed.
Section 13. Agreement Not to Compete or Solicit
(a) Covenant Not to Compete. The Employee hereby covenants and agrees
that at no time during the Term of Employment nor for a period of six (6)
months (such period to be one (1) year in the case of a termination resulting
in payments pursuant to Section 11) immediately following the termination of
the Employee's employment will he for himself or on behalf of any other
person, partnership, company or corporation, directly or indirectly, acquire
any financial or beneficial interest in (except as provided in the next
sentence), provide consulting or other services to, be employed by, or own,
manage, operate or control any entity engaged in the telecommunications
business similar to the business engaged in by the Company or its subsidiaries
at the time of such termination of employment. Notwithstanding the preceding
sentence, the Employee will not be prohibited from owning less than one
percent (1%) of any publicly traded corporation, whether or not such
corporation is in competition with the Company.
(b) Non-Solicitation. The Employee hereby covenants and agrees that,
at all times during the Term of Employment and for a period of six (6) months
(such period to be one (1) year in the case of a termination resulting in
payments pursuant to Section 11) immediately following the termination
thereof, the Employee will not directly or indirectly employ or seek to employ
any person or entity employed at that time by the Company or any of its
subsidiaries, or otherwise encourage or entice such person or entity to leave
such employment.
Section 14. Confidential Information
The Employee agrees to keep secret and retain in the strictest
confidence all confidential matters which relate to the Company or any
affiliate of the Company, including, without limitation, customer lists,
client lists, trade secrets, pricing policies and other business affairs of
the Company and any affiliate of the Company learned by him from the Company
or any such affiliate or otherwise before or after the date of this Agreement,
and not to disclose any such confidential matter to anyone outside the
Company, or any of its affiliates, whether during or after his period of
service with the Company, except as may be required in the course of a legal
or governmental proceeding. Upon request by the Company, the Employee agrees
to deliver promptly to the Company upon termination of his services for the
Company, or at any time thereafter as the Company may request, all Company or
affiliate memoranda, notes, records, reports, manuals, drawings, designs,
computer files in any media and other documents (and all copies thereof)
relating to the Company's or any affiliate's business and all property of the
Company or any affiliate associated therewith, which he may then possess or
have under his control.
Section 15. Remedy
(a) Should the Employee engage in or perform, either directly or
indirectly, any of the acts prohibited by Sections 13 or 14 hereof, it is
agreed that any and all severance payments and related benefits hereunder
shall immediately terminate and the Company will also be entitled to full
injunctive relief, to be issued by any competent court of equity, enjoining
and restraining the Employee and each and every other person, firm,
organization, association, or corporation concerned therein, from the
continuance of such violative acts. The foregoing remedies available to the
Company will not be deemed to limit or prevent the exercise by the Company of
any or all further rights and remedies which may be available to the Company
hereunder or at law or in equity.
(b) The Employee acknowledges and agrees that the covenants contained
in this Agreement are fair and reasonable in light of the consideration paid
hereunder, and the invalidity or unenforceability of any particular provision,
or part of any provision, of this Agreement will not affect the other
provisions or parts hereof. If any provision hereof is determined to be
invalid or unenforceable and if any such provision will be so determined to be
invalid or unenforceable by reason of the duration or geographical scope of
the covenants contained therein, such duration or geographical scope, or both,
will be reduced to a duration or geographical scope solely to the extent
necessary to cure such invalidity.
Section 16. Successors and Assigns
This Agreement will be binding upon and inure to the benefit of the
Employee, his heirs, executors, administrators and beneficiaries, and the
Company and its successors and assigns.
Section 17. Governing Law
This Agreement will be governed by and construed and enforced in
accordance with the laws of the State of Connecticut, without reference to
rules relating to conflicts of law.
Section 18. Entire Agreement
This Agreement constitutes the full and complete understanding and
agreement of the parties and supersedes all prior understandings and
agreements as to employment of the Employee. This Agreement cannot be
amended, changed, modified or terminated without the written consent of the
parties hereto.
Section 19. Waiver of Breach
The waiver of either party of a breach of any term of this Agreement
will not operate nor be construed as a waiver of any subsequent breach
thereof.
Section 20. Notices
Any notice, report, request or other communication given under this
Agreement will be written and will be effective upon delivery when delivered
personally, by overnight courier or by fax. Unless otherwise notified by any
of the parties, notices will be sent to the parties as follows: (i) if to the
Employee, at the address set forth in the Company's records, and (ii) if to
the Company, to Cognitronics Corporation, 0 Xxxxxxxxx Xxxxx, Xxxxxxx, XX
00000, Attention: Chairman of the Compensation Committee of the Board of
Directors.
Section 21. Severability
If any one or more of the provisions contained in this Agreement will be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions contained
herein will not in any way be affected or impaired thereby.
Section 22. Counterparts
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original but all of which together will
constitute one and the same instrument. Delivery of signatures by facsimile
or electronic image shall be valid for all purposes hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
The Company:
COGNITRONICS CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
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Name: Xxxxxxx Xxxxxxxx
Title: Treasurer
Employee:
/s/ Xxxxxxx Xxxxxxxx
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Xxxxxxx Xxxxxxxx
