1
EXHIBIT 10.1
AWARE, INC.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
October 27, 1994
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Employment Agreement
Dear ▇▇. ▇▇▇▇▇▇:
The purpose of this letter is to set forth our agreement with respect
to your employment by Aware, Inc. (the "Company"), as follows:
1. TERM OF EMPLOYMENT. Subject to sections 5 and 6 of this agreement, the
term of your employment shall begin on October 31, 1994, and end on December
31, 1997, except that the term shall be extended for up to ten one-year
periods, the first to begin on January 1, 1998, unless the Company has given
you written notice of non-extension at least twelve months before the date on
which the one-year extension would otherwise begin.
2. SALARY AND BONUS. During the term of your employment, you shall be paid a
salary at the annual rate of $180,000.00, payable monthly. The Company, at the
discretion of its board of directors, may award you a bonus based upon the
Company's financial results and/or achievement of corporate objectives.
3. TITLE AND LINE OF AUTHORITY. The Company agrees that during the term of
your employment you shall have the title "President" and "Chief Executive
Officer" and agrees to use its best efforts to cause you to be appointed to its
board of directors as soon as possible after the date of this agreement and to
be reelected to the board at each election for directors held during the term
of your employment. You agree to resign from the board of directors upon
expiration of your term of employment or its termination in accordance with
this agreement. You shall report to the Company's board of directors.
Presently, the Board has designated ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to act for the Board in
this reporting arrangement.
4. EMPLOYEE BENEFITS. You shall be entitled to participate in all Company
sponsored insurance or other employee benefit programs, on the same basis as
other employees. If you elect not to participate in the Company's health
insurance program, the Company shall reimburse you for such health insurance
(medical/dental) as you elect to obtain from another source, up to
reimbursement of $500/month. The Company shall also pay or reimburse you for:
2
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
October 27, 1994
Page 2
annual dues for your membership in the Harvard Club (Boston); access and use
charges for one cellular telephone in each of two automobiles owned or leased
by you; monthly and use charges for a telephone line for operation of a fax
machine in your home and the cost of acquiring such machine; and other ordinary
and necessary expenses incurred by you in pursuit of the Company's business for
which you provide the Company with receipts appropriate to support deduction
thereof by the Company for federal income tax purposes to the extent permitted
by law. You shall be entitled to three (3) weeks paid vacation for each year
of your employment.
5. TERMINATION:
(a) EXPIRATION OF TERM, ETC. The term of your employment shall
end upon your death or your disability (as defined herein) or upon expiration
of your term of employment on December 31, 1997, or as extended pursuant to #1.
In the event of termination by reason of your death or disability, the Company
shall continue your compensation and benefits for a period of six (6) months
thereafter. All vested options may be exercised until the second anniversary
of your death. All vested non-statutory options may be exercised until the
third anniversary of your disability. All vested incentive options may be
exercised until the first anniversary of your disability. For the purpose of
the provision, "disability" shall mean your inability to perform any of the
material duties of your position with the Company, continuously for a period of
90 calendar days or for 120 days in any one year period, as mutually determined
by the Company and you or by a physician selected by the Company (for which
purpose you agree to submit to an examination by any such physician).
(b) TERMINATION WITH CAUSE. The Company may terminate you for
"cause" (as defined herein), provided that you have been given at least 10
days' prior written notice, specifying the cause in reasonable detail, and the
opportunity to appear with your legal counsel at a meeting of the Company's
board of directors or at a meeting of the Executive Committee of the Company's
board of directors, at which at least a quorum is continuously present, to
explain or refute the alleged actions or omissions specified in such notice.
For the purpose of the provision, "cause" shall mean solely (i) negligent acts
or omissions that have been or will be the sole or primary cause of material
harm, financial or otherwise, to the Company, or (ii) conviction of a crime
involving moral turpitude or conviction of a crime the principal victim of
which is the Company.
3
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
October 27, 1994
Page 3
6. TERMINATION WITHOUT CAUSE. The Company may terminate your employment at
any time without cause, but in that event you shall be entitled to a severance
payment upon such termination equal to the salary that you would have been paid
pursuant to #2 of this agreement had your employment continued to the
expiration of its term, but not less than $180,000.00 nor more than
$270,000.00. Such payment shall be made irrespective of any other employment
that you may have and any effort that you may, or may not, have made to seek or
obtain other employment. For this purpose, the Company shall be deemed to have
terminated your employment without cause if the Company materially changes any
of your job titles or if there is a Change in Control of the Company. Change
in Control means the occurrence during the Term of any of the following events:
(a) The Company is merged, consolidated or reorganized into or with
another corporation (or other legal person) and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation (or person)
immediately after such transaction are held in the aggregate by the holders of
voting stock of the Company immediately prior to such transaction;
(b) The Company sells or otherwise transfers all or substantially all
of its assets to another corporation (or other legal person) and as a result of
such sale or transfer less than a majority of the combined voting power of the
then-outstanding securities of such corporation (or person) immediately after
such sale or transfer are held in the aggregate by the holders of voting stock
of the Company immediately prior to such sale or transfer.
The dissolution of Novon, L.P. (or any other entity now holding stock in the
Company) and the resulting distribution of the Company's stock to the holders
of an interest in Novon, L.P. (or any other entity now holding stock in the
Company) shall not constitute a Change in Control during the Term hereof. If
the Company elects to terminate your employment without cause during the Term
hereof, the effective date of termination of your employment for purposes of
the exercise of your stock options shall be thirty days after written notice is
given to you that the Company has elected to terminate your employment without
cause, even though you are no longer receiving compensation during said thirty
day period other than the severance pay referred to above.
7. STOCK OPTIONS: The Company does not currently have sufficient stock
available in its stock option plan to grant you the stock options that you
desire. The Company will use its best efforts to
4
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
October 27, 1994
Page 4
have the stockholders agree to increase the amount of stock available in the
Company's stock option plan. If the stockholders agree to the appropriate
increase in the amount of stock available in the stock option plan, the Company
will use its best efforts to have the Board of Directors grant you the
following stock options:
(a) FIRST OPTION. an option to purchase 230,769 shares of its
common stock for $1.30/share. This option shall become exercisable
cumulatively (i.e., "vest") at the rate of 6,410.25 shares at the end of each
consecutive calendar month starting with November 1994, such that it shall be
fully-vested and exercisable upon the last day of October 1997 and thereafter
until expiration. The options to be granted pursuant to this #7(a) shall be
incentive stock options as defined in Section 422 of the Internal Revenue Code
of 1986 and shall be granted pursuant to the Company's Stock Option Plan.
(b) SECOND OPTION. an option to purchase 269,231 shares of its
common stock for $1.30/share. This option shall become exercisable
cumulatively (i.e., "vest") at the rate of 7,478.64 shares at the end of each
consecutive calendar month starting with November 1994, such that it shall be
fully-vested and exercisable upon the last day of October 1997 and thereafter
until expiration.
(c) THIRD OPTION. an option to purchase 300,000 shares of its
common stock for $1.30/share. This option shall become exercisable (i.e.,
"vest") at the rate of fifty (50) shares for each $1,000 of pre-tax profit
realized by the Company during the period October 1, 1994 - December 31, 1997,
as such profit is shown on the statements of operations prepared by the Company
for each year and examined and reported upon by such independent accountants as
the Company engages for such purpose. If you are still employed by the
Company, on January 15, 1998 this option shall become exercisable as to 150,000
shares, even if the Company has not realized a pre-tax profit.
(d) The options to be granted pursuant to this #7(b) and (c) shall be
non-statutory stock options and shall be granted pursuant to the Company's
Stock Option Plan. Prior to execution of this Agreement, the Company has
provided you with a copy of the forms to be used for the options to be granted
to you pursuant to this Agreement. The options shall be granted as of November
1, 1994 and expire on the eighth anniversary of their date of grant.
The options shall become exercisable in full (i.e., "vest") upon any
Change of Control of the Company.
5
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
October 27, 1994
Page 5
8. NON-COMPETITION, ETC. You agree to execute and be bound by the Company's
standard "Employee Agreement" concerning inventions, confidentiality and
non-competition. A copy of this Employee Agreement is attached hereto.
9. SECURITY CLEARANCE. If requested to do so by the Company, you agree to
apply for a federal security clearance and to comply with all the regulations
regarding the same.
10. INDEMNIFICATION. The Company has provided you with a copy of the
provision(s) of its by-laws or articles of organization providing
indemnification to officers and directors of the Company in respect of their
acts and omissions as such. The Company agrees that you shall be entitled to
the indemnification provided thereby. A copy of such provision(s) is attached
hereto and incorporated herein.
11. ARBITRATION. Any dispute arising hereunder or related hereto shall be
resolved exclusively by arbitration by a single arbitrator in Boston in
accordance with the rules for commercial arbitration of the American
Arbitration Association, except that the Company shall be entitled to seek
injunctive relief from any Court of competent jurisdiction for any violation by
you of your obligation under Sections 8 and 9. Such arbitration shall be final
and binding. Judgment may be entered upon any arbitral award in any court of
competent jurisdiction. No arbitrator may award punitive, multiple, statutory,
or other non-compensatory damages.
12. MISCELLANEOUS. This Agreement is to be construed and enforced under the
laws of Massachusetts. This Agreement expresses the complete understanding of
the parties with respect to the subject matter hereto and is intended to
supersede any prior or contemporaneous written or oral agreements.
AWARE, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Chairman of the Board
Accepted and agreed to:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
6
[AWARE, INC. LOGO]
A W A R E
December 20, 1996
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Aware, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: Amendment to Employment Agreement
---------------------------------
Dear ▇▇. ▇▇▇▇▇▇:
The purpose of this letter is to set forth our agreement to amend the
employment agreement between Aware, Inc. (the "Company") and yourself dated
October 27, 1994 (the "Original Employment Agreement"), as follows:
1. TERM OF EMPLOYMENT. Section 1 of the Original Employment Agreement is
hereby amended to read as follows in its entirety:
"1. Term of Employment. Subject to Section 6 of this agreement, the
term of your employment shall begin on January 1, 1997 and end on
December 31, 2000, except that the term shall be extended for up to
(5) one-year periods, the first to begin on January 1, 2003, unless
the company or you has given the other written notice of non-extension
at least six (6) months before the date on which the one-year extension
would otherwise begin."
2. SALARY AND BONUS: Section 2 of the Original Employment Agreement is hereby
amended by deleting the term "$180,000.00" and replacing it with the term
"$200,000.00.
3. EMPLOYEE BENEFITS. Section 4 of the Original Employment Agreement is
hereby amended to insert the following phrase in the third sentence:
"initiation fees up to a maximum of $40,000, and annual dues up to a maximum of
$6,000, at a golf or country club;"
7
4. TERMINATION. Section 5(a) of the Original Employment Agreement is hereby
amended by deleting the date December 31, 1997" from the first sentence and
replacing it with the date "December 31, 2002.
5. TERMINATION WITHOUT CAUSE. Section 6 of the Original Employment Agreement
is hereby deleted in its entirety and the following new Section 6 is
substituted therefor:
6. TERMINATION BY YOU. You may terminate your employment with the
Company by providing the Company at least three (3) months' prior
written notice. If such termination occurs on or before December 31,
1997 you shall forfeit thirty percent (30%) of the portion of each of
the stock options described in Section 7 that is vested and unexercised
on the date on which you give the Company such notice and no further
vesting of any such option shall thereafter occur. If such termination
occurs between January 1, 1998 and December 31, 1998 you shall forfeit
twenty percent (20%) of the portion of each of the stock options
described in Section 7 that is vested and unexercised on the date on
which you give the Company such notice and no further vesting of any
such option shall thereafter occur.
7. LIFE INSURANCE. A new Section 6A is hereby added to the Original
Employment Agreement, to read as follows in its entirety:
"6A. LIFE INSURANCE. During the term of your employment by the Company,
the Company shall pay or reimburse you (as you may elect) for premiums
on a term life insurance policy (renewable to age 65) on your life in
the principal amount of $1 million, subject to the Company's prior
approval of the insurance contract (including amount of premiums
payable), which shall not be unreasonably withheld or delayed."
If this letter accurately sets forth our agreement regarding amendment of
the original Employment Agreement, please sign and return to the Company the
enclosed copy of this letter.
AWARE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman of the Board
Accepted and agreed to:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President & CEO
8
Aware, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
April 23, 1998
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Aware, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇:
The purpose of this letter is to set forth our agreement to amend the
employment agreement between Aware, Inc. (the "Company") and yourself dated
October 27, 1994 as amended by letter agreement between us dated December 20,
1996 (the "Amended Employment Agreement"), as follows:
1. TERM OF EMPLOYMENT. Section 1 of the Amended Employment Agreement is
hereby further amended to read as follows in its entirety:
"1. TERM OF EMPLOYMENT. The term of your employment shall end on
December 31, 2000, subject to earlier termination upon your
written resignation or at such time as you no longer hold any
unexercised option to purchase stock of the Company."
2. COMPENSATION. Section 2 of the Amended Employment Agreement is
hereby further amended to read as follows in its entirety:
"2. COMPENSATION. During the term of your employment, your
compensation shall be at the annual rate of $200,000. Such
compensation shall be reduced to an annual rate of $25,000
beginning January, 1999 if you have realized "economic benefit" of
at least $7.5 million as of December 31, 1998 from options
previously granted to you by the Company. For such purpose, such
economic benefit shall be deemed equal to the sum of the
following:
(a) The total amount of the sale prices of any shares of
stock of the Company that you acquire by exercise of any such
option and sell after the date hereof and on or before December
31, 1998 minus the exercise price, PROVIDED that, if you sell more
than 500,000 such shares, the sale price of the shares that you
sell in excess of 500,000 shall be deemed to be the greater of the
actual
9
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
April 23, 1998
Page 2.
sale price or the last sale price reported on NASDAQ on
December 31, 1998; plus
(b) In the case of unexercised options held by you at the
close of business on December 31, 1998, the last sale price
reported by NASDAQ on December 31, 1998, less the exercise price,
multiplied by the number of shares that could have been acquired
by exercise; plus
(c) In the case of shares of stock of the Company held by
you at the close of business on December 31, 1998 that you
acquired after the date hereof by exercise of such options, the
last sale price reported on NASDAQ on December 31, 1998, less the
exercise price, multiplied by the number of such shares.
For the purpose of subparagraph (a), any gift or other
transfer by you for less than fair value shall be deemed a sale at
the last sale price reported on NASDAQ on the date of such sale on
transfer.
You agree that you will not, on or before December 31, 1998,
sell short (including short "against the box") any stock of the
Company, or purchase or sell put or call options on the Company's
stock, or purchase or establish a "collar" on stock of the Company
owned by you, or effect any other transactions intended to reduce
or eliminate the risk of your ownership of the Company's stock,
and if you effect any transaction in breach of this obligation you
shall be deemed to have realized economic benefit of $7.5 million
as of December 31, 1998 without regard to the calculations that
would otherwise be required by paragraphs (a), (b), and (c)
above."
3. TITLE AND LINE OF AUTHORITY. Section 3 of the Amended Employment
Agreement is hereby amended to read as follows in its entirety:
"3. TITLE AND LINE OF AUTHORITY. You hereby resign as President
and Chief Executive Officer of the Company and as a member of the
board of directors of the Company. During the remaining term of
your employment, you will report to the Chairman of the board of
directors of the Company, and perform such executive duties as the
Chairman may reasonablely assign to you, consistent with your
previous titles and responsibilities with the Company, at times
and places that are mutually acceptable to the Company and you. It
is understood that your employment hereunder is not intended to
require a material amount of your time or your presence in the
Company's offices, and that you are free to accept other
employment during your employment term hereunder, consistent
10
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
April 23, 1998
Page 3.
with your obligations under the June 4, 1996 agreement referred to
below."
4. EMPLOYEE BENEFITS. Section 4 of the Amended Employment Agreement is
hereby amended to read as follows in its entirety:
"4. EMPLOYEE BENEFITS. So long as you are not employed by another
employer or self-employed, on a substantially full-time basis, you
shall be entitled to participate in all Company-sponsored insurance or
other employee benefit programs, on the same basis as other employees.
If the nature of your employment during the remaining term of your
employment with the Company renders you ineligible for such
participation in any such insurance or benefit program, the Company
shall reimburse you for the expense incurred by you in obtaining
reasonably equivalent insurance or benefits on an individual basis."
5. TERMINATION. Section 5(a) of the Amended Employment Agreement is
hereby amended by deleting the date "December 31, 2002" from the first sentence
and replacing it with the date "December 31, 2000."
6. TERMINATION WITHOUT CAUSE. Section 6 of the Amended Employment
Agreement is hereby deleted in its entirety.
7. OTHER AGREEMENTS. You agree that the "Invention, Non-Disclosure and
Non-Competition Agreement" between the Company and you dated June 4, 1996
remains in effect. The Company and you also agree that nothing in this letter
agreement is intended to amend any option to purchase stock of the Company now
held by you.
8. RELEASES. You hereby release the Company, its officers, directors,
employees, consultants, attorneys, and agents from any and all claims that you
may have against all or any of them, for any matter relating to or arising from
your employment with the Company. The Company hereby releases you from any and
all claims that it may have against you for any and all matters relating to or
arising from your employment with the Company. The preceding two sentences shall
not apply to any claim arising under or relating to this agreement or to any
claim based on facts that a party has actively concealed and were not known to
the other party or to any breach by you of your obligations under the June 4,
1996 agreement referred to in Section 7.
9. NON-DISPARAGEMENT. You agree that, during the term of your
employment and thereafter, you will not disparage the Company; its business,
products or plans; or its officers, directors, employees, consultants,
attorneys, or agents, in written or oral communications with any person. The
Company agrees that, for itself and on behalf of its officers, directors,
employees, consultants, attorneys, or agents, not to disparage you during the
term of your employment or thereafter, in written or oral communications with
any person.
11
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
April 23, 1998
Page 4.
10. PRESS RELEASE AND RESTRICTION ON SALES. The Company and you agree
that your resignation described above shall be publically announced in a press
release and oral communications substantially similar to, or consistent with,
Exhibit A attached hereto. The Company and you agree that, in addition to your
non-disparagement obligations set forth in Section 9 above, each will describe
your resignation and related matters, in oral and written communications, in
terms that are substantially similar to, and not inconsistent with, said Exhibit
A. You agree to make no sales of stock of the Company before the second business
day after the date on which the Company issues said press release. [Attached
draft press release or a paragraph or two generally describing the termination
and transition]
11. SEC MATTERS. You agree to provide the Company with timely
information regarding any sale or transfer of stock of the company by you, to
the extent necessary to enable the Company to comply with its SEC filing
obligations, and you agree to comply with your SEC filing obligations under SEC
Rule 144, Section 16(b) of the Securities Exchange Act of 1934, and otherwise.
12. MISCELLANEOUS. During your employment term, you shall have an
office and secretarial support at the Company reasonably appropriate to your
duties, and an e-mail address and voice mailbox. You agree to surrender for
cancellation any Company credit card, simultaneous with the execution of this
agreement. You also recognize and acknowledge that you are not entitled to any
compensation, or "fringe" or other employee benefits, or reimbursement of
expenses except as expressly provided herein. The Company agrees not to seek
cancellation or refund of any employee benefits for which it may have already
made payment, e.g. dues at a golf or country club and premiums on your $1
million individual life insurance policy.
13. OTHER PROVISIONS. Sections 7, 8, 9, 10, 11, and 12 of the Amended
Employment Agreement are to remain in effect, and Section 6A is hereby deleted.
* * *
12
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
April 23, 1998
Page 5.
If this letter accurately sets forth our agreement regarding amendment
of the Amended Employment Agreement, please sign and return to the Company the
enclosed copy of this letter.
Sincerely,
AWARE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman of the Board
Accepted and agreed to:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
