Exhibit 10.1

 

ACTIVIDENTITY CORPORATION

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of
August 1, 2008 by and between ActivIdentity Corporation, a Delaware corporation
(the “Company”), and Jacques Kerrest (the “Employee”).

 

1.                                       Position.  You will serve as the Chief
Financial Officer and Chief Operating Officer of the Company.  You will be
responsible for all of the duties normally attributed to the offices of the
Chief Financial Officer and Chief Operating Officer of similar publicly traded
companies.  Your office will be located at the Company’s headquarters at 6623
Dumbarton Circle, Fremont, California.  Your service will commence on a
part-time basis on August 4, 2008 (the “Effective Date”) and will commence on a
full-time basis on August 18, 2008.  You will report to the Company’s Chairman
and Chief Executive Officer and shall perform such duties as the Chairman and
Chief Executive Officer may from time to time require.  You will be employed on
an at-will basis, which means that you may resign and the Company may terminate
your employment or change your job title and duties at any time for any reason
or for no reason.

 

You agree to the best of your ability and experience that you will at all times
loyally and conscientiously perform all of the duties and obligations required
of you pursuant to the terms of this Agreement, and will do so to the reasonable
satisfaction of the Chairman and Chief Executive Officer.  During the term of
your full-time employment, you further agree that you will devote all of your
business time and attention to the business of the Company.  The Company will be
entitled to all of the benefits and profits arising from or incident to all such
work services and advice.  You will not render commercial or professional
services of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the  Board of Directors.  You
will not directly or indirectly engage or participate in any business that is
competitive in any manner with the business of the Company.  Nothing in this
Agreement will prevent you from accepting speaking or presentation engagements
in exchange for honoraria or from serving on boards or charitable organizations,
or from owning no more than one percent (1%) of the outstanding equity
securities of a corporation whose stock is listed on a national stock exchange.

 

2.                                       Compensation.

 

a.                                       Salary.  You will be paid a monthly
salary of $27,083.33, which is equivalent to $325,000 on an annualized basis. 
Your salary will be payable twice a month pursuant to the Company’s regular
payroll practices (or in the same manner as other employees of the Company), and
shall be subject to the usual, required withholding of income and employment
taxes.  Your annual salary of $325,000, together with any increases thereto,
shall be referred to as your “Base Salary.”  Base Salary will be subject to
annual review by the Compensation Committee of the Board of Directors (the
“Compensation Committee”).

 

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b.                                      Bonus.  You will be eligible for a
target bonus (“Target Bonus”) equivalent to a certain percentage of your Base
Salary, which for fiscal 2008 has been set at 65% of your Base Salary, with the
potential for payment of up to two times that amount in a given year for
extraordinary performance (the actual bonus amount for fiscal 2008 is expected
to be pro rated for a partial year).  Your Target Bonus percentage, the
performance goals and objectives that your Target Bonus will be based upon and
ultimate determination of the Target Bonus payment you receive will be
determined by the Compensation Committee.

 

c.                                       Equity Awards.  On the Effective Date,
you will be awarded the two stock options described below to purchase 650,000
and 700,000 shares of Company common stock, respectively.  The options will be
exercisable at a price per share equal to the last reported closing price of the
Company’s common stock on the day before the Effective Date, as reported on the
Nasdaq Global Market, and the options will be granted outside of the Company’s
stockholder-approved equity compensation plans as an “inducement award,” but
will be subject to the terms and conditions of the Company’s 2004 Equity
Incentive Plan as if granted thereunder.

 

(i)                                     The first option, which represents the
right to purchase up to 650,000 shares of common stock, (the “First Option”)
will vest with respect to one-quarter of the underlying shares on the first
anniversary of the Effective Date and then with respect to the remaining shares
monthly thereafter over the next three years so that it is fully vested on the
fourth anniversary of the Effective Date.  The First Option will vest
immediately if, following a Change of Control (defined below), you are removed
as Chief Financial Officer or Chief Operating Officer and such removal is other
than for Cause (defined below).

 

(ii)                                  The second option, which represents the
right to purchase up to 700,000 shares of common stock, (the “Second Option”)
will vest only in the event that the Company’s average closing price of its
common stock over a 90-day period, as reported on the Nasdaq Global Market, is
equal to or greater than $4.50 per share (the “Stock Target”).  Once the Stock
Target has been satisfied, the Second Option will vest immediately with respect
to 350,000 shares and will then vest with respect to the remaining shares
monthly thereafter over the next 12 months, provided that you continue to
provide service to the Company during that time.  If the Stock Target is not
achieved by the fourth anniversary of the Effective Date, then the Second Option
will be forfeited in its entirety.  The Second Option will vest immediately if,
following a Change of Control (defined below), you are removed as Chief
Financial Officer or Chief Operating Officer and such removal is other than for
Cause (defined below).

 

(iii)                               Both options will have a seven-year term and
will be treated as non-qualified under the Internal Revenue Code.

 

3.                                       Employee Benefits.  You will be
eligible to participate in the employee benefits plan currently and hereafter
maintained by the Company of general applicability to other senior

 

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executives of the Company, including the Company group health insurance, dental
insurance and 401(k) plans.  The Company reserves the right to cancel or change
the employee benefit plans and programs it offers to its employees at any time. 
You will be given a copy of, and must abide by, the Company’s employee handbook
and employee benefit plan documents which will describe more fully these and
other benefits of your employment, as well as the personal policies and
procedures which apply to employment with the Company.

 

4.                                       Relocation and Expense Reimbursement.

 

a.                                       Relocation Reimbursement. You will be
entitled to reimbursement of all reasonable and properly documented expenses, up
to a reasonable limit to be mutually agreed upon, incurred by you in connection
with your relocation to the Bay Area, which expenses may include moving
expenses, temporary housing and expenses relating the sale of your home in
McLean.

 

b.                                      Expense Reimbursement.  You will be
entitled to reimbursement of all reasonable and properly documented expenses
incurred by you in the performance of your duties, in accordance with the
Company’s policies and procedures.

 

5.                                       Severance.  In the absence of a Change
of Control, if your employment with the Company is terminated by the Company
without “Cause” (as defined below) or you resign your employment for “Good
Reason” (as defined below), then you shall be entitled to receive the following
severance benefits:

 

a.                                       You will receive 12 months’ Base
Salary, plus the Target Bonus for that year, less applicable withholding taxes
(the “Severance Payment”).

 

b.                                      The same level of health (i.e. medical
and dental) coverage and benefits as in effect for you on the day immediately
preceding the day of termination of employment; provided however, that (i) you
constitute a qualified beneficiary, as defined in Section 4980B(g)(1) of the
Internal Revenue Code of 1986, as amended (the “Code”); and (ii) you elect
continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended (“COBRA”), within the time period prescribed pursuant to
COBRA.  The Company shall continue to provide you with such health coverage
until the earlier of (i) the date you are no longer eligible to receive
continuation coverage pursuant to COBRA, or (ii) 12 months from termination
date.

 

c.                                       Partial acceleration of the vesting of
the First Option such that it vests with respect to an additional 162,500 shares
as of the date of termination.

 

The Severance Payment will be paid as a single lump sum upon termination. 
Payment by the Company of any of the foregoing severance benefits is conditioned
upon your resignation from the Board of Directors, if applicable, and your
execution of a general release in the form of the Settlement Agreement and
Release attached hereto as Exhibit A (the “Release”) no later than 21 days of
your termination date.

 

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6.                                       Change of Control Termination.  If
there is a “Change of Control” (as defined below) and within one year following
the Change of Control, the Company or successor corporation terminates your
employment without “Cause” (as defined below) or you resign your employment for
“Good Reason” (as defined below), then you shall be entitled to receive the
following severance benefits:

 

a.                                       You will receive 18 months’ Base
Salary, plus the Target Bonus for that year, less applicable withholding taxes
(the “Change of Control Severance Payment”).

 

b.                                      The same level of health (i.e. medical
and dental) coverage and benefits as in effect for you on the day immediately
preceding the day of termination of employment; provided however, that (i) you
constitute a qualified beneficiary, as defined in Section 4980B(g)(1) of the
Code; and (ii) you elect continuation coverage pursuant to COBRA, within the
time period prescribed pursuant to COBRA.  The Company shall continue to provide
you with such health coverage until the earlier of (i) the date you are no
longer eligible to receive continuation coverage pursuant to COBRA, or (ii) 12
months from termination date.

 

c.                                       Accelerated vesting of both the First
Option and the Second Option such that they are fully vested and immediately
exercisable upon termination.

 

The Change of Control Severance Payment will be paid as a single lump sum upon
termination.  Payment by the Company of any of the foregoing severance benefits
is conditioned upon your resignation from the Board of Directors, if applicable,
and your execution and delivery of the Release no later than 21 days of your
termination date.

 

7.                                       Confidential Information and Invention
Assignment Agreement.  Your acceptance of this offer and commencement of
employment with the Company is contingent upon the execution, and delivery to an
officer of the Company, of the Company’s Proprietary Information and Inventions
Agreement (the “Confidentiality Agreement”) a copy of which is enclosed for your
review and execution.

 

8.                                       Certain Definitions.

 

a.                                       “Good Reason.”  As used in this
Agreement, a resignation for “Good Reason” will occur if you comply with the
Good Reason Process and resign your employment as a result of (a) a material
reduction without Cause in your primary duties and responsibilities as Chief
Financial Officer and Chief Operating Officer, or (b) a reduction without Cause
by more than fifteen percent (15%) in your starting Base Salary, or (c) a
relocation to an office or location that is more than 50 miles from the office
you were originally hired to work for the Company.  “Good Reason Process” shall
mean that (1) you reasonably determine in good faith that a “Good Reason”
condition has occurred; (2) you notify the Company in writing of the occurrence
of the Good Reason condition within 60 days of the occurrence of such condition;
(3) you cooperate in good faith with the Company’s efforts, for a period not
less than 30 days following such notice (the “Cure Period”), to remedy the
condition; (4) notwithstanding such efforts, the Good

 

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Reason condition continues to exist; and (5) you terminate your employment
within 60 days after the end of the Cure Period.  If the Company cures the Good
Reason condition during the Cure Period, Good Reason shall be deemed not to have
occurred.

 

b.                                      “Cause.”  As used in this Agreement,
“Cause” shall mean any of the following:

 

(i)                                     Failure to Perform Duties.  You continue
to fail to perform your duties for the Company after a written demand for
performance has been delivered to you by the Board of Directors that identifies
with reasonable specificity how you have failed to perform;

 

(ii)                                  Adverse Conduct.  You are convicted of,
plea “guilty” or “no contest” to a felony offense or any unlawful act which
would be materially detrimental to the reputation of the Company, or commit a
material act of dishonesty, fraud, embezzlement, misappropriation or financial
dishonesty against the Company; or

 

(iii)                               Breach Agreement or Policy.  You materially
breach this Agreement, the Proprietary Information and Inventions Agreement, or
any other material written agreement between you and the Company or you
materially breach or violate any lawful material employment policy of the
Company, including those prohibiting harassment of another employee.

 

c.                                       “Change of Control.”  As used in this
Agreement, “Change of Control” shall mean (i) the sale of all or substantially
all of the assets of the Company to a non-affiliate, (ii) any merger or
consolidation of the Company with or into another corporation or other
transaction in each case in which the holders of more than 50% of the shares of
capital stock of the Company outstanding immediately prior to such transaction
do not continue to hold (either by the voting securities remaining outstanding
or by their being converted into voting securities of the surviving entity) 50%
or more of the total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction or (iii) as a
result of, or in connection with, a contested election of directors of Board of
Directors of the Company, the persons who were directors of the Company
immediately prior to the election cease to constitute a majority of the Board of
Directors.  For further clarification, a reorganization or similar transaction
among the Company and/or its affiliates  shall not be deemed to constitute a
Change of Control.

 

9.                                       Applicable Law; Severability.  This
Agreement shall be governed by the laws of the State of California, without
reference to rules relating to conflicts of law.  In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement
shall continue in full force and effect without said provision.

 

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10.                                 Successors and Assigns.  This Agreement
shall be binding upon the Company’s successors and assigns and upon your heirs,
executors, administrators, estate, successors and assigns.  For all purposes
under this Agreement, the term “Company” shall include any affiliates of the
Company and any successor to the Company’s business and/or assets, which becomes
bound by this Agreement.  You may not assign this Agreement.

 

11.                                 No Inconsistent Obligations.  By signing
this Agreement and accepting this offer of employment, you represent and warrant
to the Company that you are under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with your obligations set forth
in this Agreement.  You also represent and warrant that you will not use or
disclose, in connection with your employment by the Company, any trade secrets
or other proprietary information or intellectual property in which you or any
other person has any right, title, or interest and that your employment by the
Company as contemplated by this Agreement will not infringe upon or violate the
rights of any other person or entity.  You represent and warrant to the Company
that you have returned all property and confidential information belonging to
any prior employers.

 

12.                                 Section 409A.

 

a.                                       Anything in this Agreement to the
contrary notwithstanding, if at the time of your separation from service within
the meaning of Section 409A of the Code, the Company determines that you are a
“specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code,
then to the extent any payment or benefit that you become entitled to under this
Agreement would be considered deferred compensation subject to the 20 percent
additional tax imposed pursuant to Section 409A(a) of the Code as a result of
the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not
be payable and such benefit shall not be provided until the date that is the
earlier of (A) six months and one day after your separation from service, or
(B) your death.  The determination of whether and when a separation from service
has occurred shall be made in accordance with the presumptions set forth in
Treasury Regulation Section 1.409A-1(h).

 

b.                                      You and the Company intend that this
Agreement will be administered in accordance with Section 409A of the Code.  To
the extent that any provision of this Agreement is ambiguous as to its
compliance with Section 409A of the Code, the provision shall be read in such a
manner so that all payments hereunder comply with Section 409A of the Code.  You
and the Company agree that this Agreement may be amended, as reasonably
requested by either party, and as may be necessary to fully comply with
Section 409A of the Code and all related rules and regulations in order to
preserve the payments and benefits provided hereunder without additional cost to
either party.

 

c.                                       The Company makes no representation or
warranty and shall have no liability to you or any other person if any
provisions of this Agreement are determined to constitute deferred compensation
subject to Section 409A of the Code but do not satisfy an exemption from, or the
conditions of, such Section.

 

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13.                                 Entire Agreement.  This Agreement together
with the Confidentiality Agreement, sets forth the full and complete agreement
between the Company and you regarding the subject matter hereof and supersedes
any and all prior representations or agreements between you and the Company, if
any, whether written or oral.  This Agreement may not be modified or amended
except by a written agreement, signed by you and the Company’s Chief Executive
Officer or other agent authorized by the Board of Directors.  No failure on the
part of the Company or you to exercise any power, right or privilege or remedy
under this Agreement, and no delay on the part of the Company or you in such
exercise shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other further exercise thereof or any other power, right,
privilege or remedy.  Any waiver must be in writing and executed by the
parties.  The captions contained in this Agreement are for convenience only and
shall not be considered part of this Agreement.

 

 

DATED: August 1, 2008

ActivIdentity Corporation

 

 

 

 

 

 

 

By:

/s/ Grant Evans

 

Name:

Grant Evans

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

 

 

 

 

 

DATED: August 1, 2008

Jacques Kerrest

 

 

 

 

 

/s/ Jacques Kerrest

 

(Signature)

 

 

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