FALCONSTOR SOFTWARE, INC. EMPLOYMENT AGREEMENT Employee: ReiJane Huai
Exhibit
10.1
FALCONSTOR
SOFTWARE, INC. EMPLOYMENT AGREEMENT
Employee:
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EMPLOYMENT
AGREEMENT made this 31st day of December, 2007 (hereinafter referred to as
this
"Employment Agreement"), by FalconStor Software, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), and ▇▇▇▇▇▇▇ ▇▇▇▇ with an address
at REDACTED (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 January 1, 2008 (the "Effective Date")
and
ending on December 31, 2010 (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 for each calendar year of the Employment Period as set
forth below, 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:
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Calendar
Year
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Salary
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2008
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$310,000
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2009
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$341,000
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2010
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$375,100
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(b)
The
Employee shall be entitled to receive a bonus (the “Bonus”) for each calendar
year of the Employment Period in an amount equal to four percent (4%) 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 (i) Statement
of Financial Accounting Standard 123R, or (ii) such other extraordinary,
non-recurring and/or other unusual items as determined by the Compensation
Committee of the Corporation’s Board of Directors and agreed by a majority of
the independent directors of the Corporation’s Board of Directors (hereinafter
referred to as the “Operating Income”), provided that the Operating Income for
the particular calendar year exceeds the Operating Income for the previous
calendar year. The Bonus shall be paid in shares of Restricted Stock
of the Corporation issued in accordance with the terms of the 2006 FalconStor
Software, Inc., Incentive Stock Plan, including Section 6
thereof. The Restricted Stock shall vest thirty three percent (33%)
on January 1 of each of the first two years following the issuance of the
Restricted Stock and thirty four percent (34%) on January 1 of the third year
following the issuance of the Restricted Stock. The number of shares
of Restricted Stock to be issued shall be determined by dividing the Bonus
amount by the average price of Corporation common stock on the Nasdaq Global
Market (or any market on which the Corporation’s common stock is subsequently
registered) for the calendar year for which the Bonus is being paid (the “Bonus
Formula”). For purposes of this Employment Agreement, the average
price shall be the average of the daily closing prices of the Corporation common
stock. The Employee shall not be entitled to any fractional
shares. In the event the Bonus Formula results in a fractional
number, the number of Restricted Shares to be paid shall be rounded down to
the
nearest whole number. The Bonus shall be paid within seventy five (75) days
of
the end of the applicable calendar year.
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 vacation time during each year
of
the Employment Period at the discretion of the Board.
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(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 Corporation 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, 2011, 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, 2011 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 declines to enter into a renewal agreement with the Employee
because
the Employee breached the confidentiality and/or non-compete provisions of
this
Employment Agreement or any other material terms or conditions of his
employment;
(ii)
the
Employee has been terminated for Cause hereunder;
(iii)
the
Employee declines to enter into a renewal agreement with the Corporation,
and
the Corporation has offered a renewal agreement for a period of
not less than two years, containing similar terms and conditions as
discussed herein; or
(iv)
the
Employee has received a change of control payment from the Corporation that
provides change of control benefits that are at least equal to the amount
that
would be received by the Employee pursuant to Section 8(a) above.
(c)
If
the Employee’s employment is terminated for Cause, the Corporation’s sole
obligation hereunder shall be to pay the Employee (i) any accrued and unpaid
Base Salary as of the date of termination, (ii) an amount equal to such
reasonable and necessary business expenses incurred by the Employee in
connection with the Employee’s employment on behalf of the Corporation on or
prior to the date of termination, but not previously paid to the Employee,
and
(iii) if the basis for such termination arises under clause (i) of the
definition of “Cause,” his base Salary (at the rate in effect on the date of
termination) through the twelve–month anniversary of the date of termination in
accordance with the normal payroll practices of the Corporation with respect
to
Base Salary.
(d)
If at
the time his employment is terminated the Employee is a “specified employee”
within the meaning of Section 409A of the Internal Revenue Code and the
regulations thereunder, to the extent required to comply with Section 409A,
payment of the Severance Payment and the Non-Renewal Severance, as applicable,
shall not commence until one day after the day which is six months following
the
termination date, with the first payment equaling six months of Base
Salary. Reimbursements pursuant to this Section 8 shall be made
on or before the last day of the Employee’s taxable year following the taxable
year in which the expense was incurred.
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9.
Disclosure of Information. All memoranda, notes,
records or other documents made or compiled
by the Employee or made
available to him during the term of his employment concerning
the business of the Corporation shall be the Corporation's property and
shall be
delivered to the Corporation on the termination of the Employee's employment.
The Employee shall not use for himself or others, or divulge to others,
any
proprietary or confidential information of the Corporation, obtained
by him as a
result of his employment, unless authorized by the Corporation. For
purposes of this Section 9, the term "proprietary or confidential information"
shall mean all information which is known only to the Employee or to
the
Employee and employees, former employees, consultants or others in a
confidential relationship with the Corporation and relates to specific
matters
such as trade secrets, customers, potential customers and vendor lists,
pricing
and credit techniques, program codes, software design know-how, research
and
development activities, private processes, and books and records, as
they may
exist from time to time, which the Employee may have acquired or obtained
by
virtue of work heretofore or hereafter performed for or on behalf of
the
Corporation or which he may acquire or may have acquired knowledge of
during the
performance of said work, and which is not known to others, or readily
available
to others from sources other than the Employee or officers or other employees
of
the Corporation, or is not in the public domain. In the event of a breach
or a
threatened breach by the Employee of the provisions of this Section 9,
the
Corporation shall be entitled to an injunction restraining the
Employee from disclosing, in whole or in part, the aforementioned proprietary
or
confidential information of the Corporation, or from rendering any services
to
any person, firm, corporation, association or other entity to whom such
proprietary or confidential information, in whole or in part, has been
disclosed
or is threatened to be disclosed. Nothing herein contained shall be
construed as prohibiting the Corporation from pursuing any other remedies
available to the Corporation for such breach or threatened breach, including
the
recovery of damages from the Employee.
10.
Restrictive Covenants. (a) The Employee hereby acknowledges and
recognizes the highly competitive nature of the Corporation's business and
accordingly agrees that, in consideration of the premises contained herein,
he
will not from and after the date hereof and during the Employment Period until
the Designated Date (as hereinafter defined): (i) directly or indirectly engage
in any Competitive Activity (as hereinafter defined), whether
such engagement shall be as an officer, director, employee,
consultant, agent, lender, stockholder, or other participant or (ii) assist
others in engaging in Competitive Activity. As used herein, the term
"Competitive Activity" shall mean and include the development and/or marketing
of computer hardware and/or software for Storage Networking applications and
other similar systems.
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(b)
As
used in this Section 10, the "Designated Date" shall mean the
following:
(i)
if
the Employee terminates his employment with the Corporation prior to the
expiration of the Employment Period (other than as a result of a breach by
the
Corporation of a material term or condition of this Employment Agreement),
then
the "Designated Date" shall mean the second (2nd) anniversary of the effective
date of such termination;
(ii)
if
the Corporation terminates the employment of the Employee under this Employment
Agreement for Cause, then the "Designated Date" shall be the second (2nd)
anniversary of the effective date of such termination;
(iii)
if
the Corporation, during the Employment Period, terminates the
employment of the Employee without Cause, then the "Designated Date" shall
mean
the effective date of such termination; or
(iv)
if
the Corporation offers the Employee a renewal agreement pursuant to Section
8(a)
hereof and the Employee does not accept such agreement, then the "Designated
Date" shall mean December 1, 2011.
(c)
It is
the desire and intent of the parties that the provisions of this Section 10
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular provision of this Section 10
shall be adjudicated to be invalid or unenforceable, such provision of this
Section 10 shall be deemed amended to delete from the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provisions of this Section 10 in the particular
jurisdiction in which such adjudication is made and, further, only to the extent
required in order for this Section 10 to be enforceable.
(d)
With
respect to Inventions (including but not limited to software) made or conceived
by the Employee, whether or not during the hours of his employment or with
the
use of the Corporation's facilities, materials or personnel, either solely
or
jointly with others during the Employee’s employment by the
Corporation:
(i)
The
Employee shall inform the Corporation promptly and fully of such Inventions
by
written report, setting forth in detail the procedures employed and the results
achieved. A report shall be submitted by the Employee upon completion
of any studies or research projects undertaken on the Corporation's behalf
whether or not in the Employee's opinion a given
project has resulted in an Invention.
(ii)
The
Employee shall apply, at the Corporation's request and expense, for the United
States and/or foreign letters patent or other registrations either in the
Employee's name or otherwise, as the Corporation shall desire.
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(iii)
The
Employee hereby assigns and agrees to assign to the Corporation all of his
right
and interest to any and all such Inventions and to make applications for United
States and/or foreign letters patent or other registrations granted upon such
Invention.
(iv)
The
Employee shall acknowledge and deliver promptly to the Corporation, without
charge to the Corporation, but at its expense, such written instruments and
do
such other acts in support of his inventorship, as may be necessary in the
opinion of the Corporation to obtain and maintain United States and/or foreign
letters patent or other registration and to vest the entire right in such
Inventions, patents and patent applications in the Corporation. The Employee
agrees that if the Corporation is unable because of the Employee’s mental or
physical incapacity or unavailability or for any other reason to secure the
Employee’s signature to apply for or to pursue any application for any United
States or foreign patents or copyright registrations covering Inventions
assigned to the Corporation as above, the Employee hereby irrevocably designates
and appoints the Corporation and its duly authorized officers and agents as
the
Employee’s agent and attorney in fact, to act for and in the Employee’s behalf
and stead to execute and file any such applications and to do all other lawfully
permitted acts to further the application for, prosecution, issuance,
maintenance or transfer of letters patent or copyright registrations thereon
with the same legal force and effect as if originally executed by the
Employee. The Employee hereby waives and irrevocably quitclaims to
the Corporation any and all claims, of any nature whatsoever, which the Employee
now or hereafter may have for infringement of any and all proprietary rights
assigned to the Corporation.
(v)
The
Corporation shall also have the royalty-free right to use in its business,
and
to make, use, and sell products and/or services derived from any Inventions,
discoveries, concepts and ideas, whether or not patentable, including, but
not
limited to applications, methods, formulas and techniques, as well as
improvements or know-how, whether or not within the scope of Inventions, but
which are obtained, created or made by the Employee during the Employment
Period, without payment of any additional compensation to the
Employee.
(vi)
For
the purposes of this Employment Agreement, "Inventions" means discoveries,
concepts and ideas, whether patentable or not, including but not limited to
processes, methods, formulas and techniques as well as improvements or
know-how.
(e)
If
there is a breach or threatened breach by the Employee of the provisions of
this
Section 10, the Corporation shall be entitled to an injunction restraining
him
from such breach. Nothing herein contained shall be construed as
prohibiting the Corporation from pursuing any other remedies available for
such
breach or threatened breach or any other breach of this Employment
Agreement.
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(f)
The
Employee hereby warrants and represents that he is not prohibited by any
agreement or the order of any court from entering into and carrying out the
terms of this Employment Agreement. In particular, the Employee
warrants and represents that the scope of his activity is not restricted in
any
way with respect to the design, development, enhancement, sale, marketing and/or
promotion of computer software and hardware.
11.
(a)
Notices. All notices required or permitted to be given under the
provisions of this Employment Agreement shall be in writing and delivered
personally or by certified or registered mail, return receipt requested, postage
prepaid to the following persons at the following addresses, or to such other
person at such other address as either party may request by notice in writing
to
the other party to this Employment Agreement:
If
to the
Employee:
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REDACTED
If
to the
Corporation:
FalconStor
Software, Inc.
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Attn: Chief
Financial Officer
(b)
Construction. This Employment Agreement shall be construed in accordance
with, and be governed by, the laws of the State of New York for contracts
entered into and to be performed in New York.
(c)
Successor and Assigns. This Employment Agreement and the various rights
and obligations arising hereunder shall inure to the benefit of and be binding
upon the Employee and his heirs, executors and administrators and upon the
Corporation and its successors (including, without limitation, by way of
merger)
and assigns. This Employment Agreement is personal in nature and may
not be assigned or transferred by the Employee without the prior written
consent
of the Corporation.
(d)
Entire Agreement; Amendment and Restatement. This instrument contains the
entire understanding and agreement between the parties relating to the subject
matter hereof, and neither this Employment Agreement nor any provision hereof
may be waived, modified, amended, changed, discharged or terminated, except
by
an agreement in writing signed by the party against whom enforcement of any
waiver, modification, change, amendment, discharge or termination is
sought.
(e)
Counterparts. This Employment Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, and both of which
counterparts shall together constitute a single agreement.
(f)
Illegality. Without limitation of Section 10(c)
hereof, if any one or more of the provisions of this Employment Agreement
shall
be invalid, illegal or unenforceable in any respect, the validity, legality
and
enforceability of the remaining provisions contained herein shall not in
any way
be affected or impaired thereby.
(g)
Captions. The captions of the sections hereof are for convenience only
and shall not control or affect the meaning or construction of any of the
terms
or provisions of this Employment Agreement.
IN
WITNESS WHEREOF, the parties hereto have set their hands and executed this
Employment Agreement the day and year first above written.
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FalconStor
Software, Inc.
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By:
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Vice
President and Chief Financial Officer
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By:
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/s/
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