EXHIBIT 10.1

 

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December 18, 2013

 

Anders B. Axelsson

1290 Via Huerta

Los Altos, CA 94024

 

Dear Anders:

 

We are pleased to offer you a position with Sierra Monitor Corporation (“SMC” or
the “Company”) as its Vice President, Sales and Marketing, starting on or before
January 6, 2014 (your actual start date is referred to herein as the “Employment
Commencement Date”). While employed hereunder, you agree to devote your full
business efforts and time to the Company provided, however, that you may engage
in civic and not-for-profit activities and serve on the boards of directors or
serve as an advisor to non-competitive private or public companies so long as
such activities do not materially interfere with the performance of your duties
to the Company.

 

Your starting base salary will be $20,833.33 per month, which over a full year
would equal $250,000 (the “Base Salary”), less payroll deductions and all
required withholdings. Commencing in January, 2015, your Base Salary will be
reviewed at least annually for possible increases. You will also be eligible to
receive an annual bonus of up to fifty percent (50%) of your Base Salary in
2014, based upon achieving goals to be mutually agreed upon between you and the
CEO; provided, however, that the Company agrees that your annual bonus in 2014
will be no less than twenty five percent (25%) of your Base Salary. In years
subsequent to 2014, you will be eligible to receive an annual bonus of up to one
hundred percent (100%) of your Base Salary, based upon achieving goals to be
mutually agreed upon between you and the CEO. Any such annual bonuses will be
paid to you no later than March 15 following the year to which it relates,
provided you must be an employee of the Company at the time such annual bonus is
paid. You will also be eligible for SMC’s standard benefits package on terms
comparable to those provided to the Company’s executive officers. During your
term of employment with the Company, you shall be entitled to paid vacation in
accordance with the Company’s vacation accrual policies for its executive
officers.

 

In addition, you will be eligible to receive a signing bonus in the amount of
$25,000 (the “Signing Bonus”) less payroll deductions and all required
withholdings. The Signing Bonus will be payable on your first day of employment,
approximately January 6, 2014 in accordance with the Company’s normal payroll
procedures. To receive the Signing Bonus, you must be an employee of the Company
at the time the bonus is paid.

 

 

 

 

Within thirty (30) days following the Employment Commencement Date, SMC will
grant you a stock option covering 500,000 shares of Company common stock (the
“Equity Award”). The Equity Award will be an incentive stock option to the
maximum extent possible under the Internal Revenue Code, and the remaining
portion of the Equity Award shall be a nonqualified stock option. Subject to
your continued service with SMC, and further subject to accelerated vesting as
specified herein, your Equity Award will vest as to 1/4th of the covered shares
on the first anniversary of the Employment Commencement Date, and the remaining
unvested covered shares shall vest in 36 equal monthly installments thereafter,
so that the Equity Award will be 100% vested on the fourth anniversary of the
Employment Commencement Date. Your Equity Award will otherwise have the standard
terms and conditions of our form stock option agreement under our 2006 Stock
Plan, except as specified herein. Your stock option will be priced at 100% of
the fair market value of the underlying shares of common stock on the grant
date.

 

Subject to your executing and not revoking a release of claims in favor of SMC
in substantially the form attached hereto as Exhibit A (a “Release”), in the
event your employment is terminated by SMC or in the event you resign for Good
Reason outside of the “Change in Control Period,” then (A) you shall receive
severance payments of six (6) months’ Base Salary and six (6) months’ annual
target bonus, paid in a lump sum, (B) you shall receive continuation of
commission payments for a period of six (6) months following termination, each
of which payments shall be equal to the average of the commission payments
received by you in the six (6) prior to your date of termination, (C) you shall
receive six (6) monthly payments of $3,500 in lieu of Company-subsidized COBRA,
payable whether or not you or your covered dependents elect COBRA continuation
benefits, and (D) fifty percent (50%) of your then outstanding equity to acquire
shares of the Company’s common stock or other equity awards shall immediately
vest and become exercisable (the “Termination Release Payment”).

 

Subject to your executing and not revoking a Release, in the event your
employment is terminated by SMC other than for “Cause” within the period
beginning on the date three (3) months prior to, and ending on the date that is
twelve (12) months following the date upon which a “Change in Control” occurs
(the “Change in Control Period”), or in the event that within the Change in
Control Period you voluntarily terminate your employment for Good Reason, then
(A) you shall receive severance payments of twelve (12) months’ Base Salary and
twelve (12) months’ annual target bonus, paid in a lump-sum, (B) you shall
receive continuation of commission payments for a period of twelve (12) months
following termination, each of which payments shall be equal to the average of
the commission payments received by you in the six (6) months prior to your date
of termination, (C) you shall receive twelve (12) monthly payments of $3,500 in
lieu of Company-subsidized COBRA, payable whether or not you or your covered
dependents elect COBRA continuation benefits, and (D) all of your then
outstanding equity to acquire shares of the Company’s common stock or other
equity awards shall immediately vest and become exercisable (the “Change in
Control Release Payment”). For the avoidance of doubt, under no circumstances
will you be entitled to receive both the Termination Release Payment and the
Change in Control Release Payment.

 

 

 

 

For the purposes of this offer letter agreement, “Cause” means (A) your
continued failure to perform your employment duties and responsibilities, other
than a failure resulting from your complete or partial incapacity due to
physical or mental illness or impairment after you have received a written
demand of performance from the Company which describes the factual basis for the
Company’s belief that you have not substantially performed your duties and
responsibilities and provides you with thirty (30) calendar days to cure such
non-performance to the Company’s satisfaction, (B) any material act of personal
dishonesty taken by you in connection with your duties and responsibilities as
an employee, (C) your commission of an act of fraud resulting in material
economic or financial injury to the Company, (D) your conviction of, or plea of
nolo contendere to, a felony or any crime involving fraud, embezzlement or any
other act of moral turpitude or that the Company reasonably believes has had or
will have a material detrimental effect on the Company’s reputation or business,
(E) your willful breach of any fiduciary duty owed by you to the Company that
the Company reasonably believes has had or will have a material detrimental
effect on the Company’s reputation or business, (F) you being found liable in
any Securities and Exchange Commission or other civil or criminal securities law
action or any cease and desist order is entered with respect to any such action
(regardless of whether or not you admit or deny liability in such action), (G)
you obstructing or impeding, endeavoring to influence, obstruct or impede, or
failing to materially cooperate with, any investigation authorized by the
Company, its Board of Directors or any governmental or self-regulatory
organization, or (H) your material breach of this Agreement or the Proprietary
Information Agreement (as defined herein).

 

For the purposes of this offer letter agreement, “Change in Control” shall have
the meaning ascribed to such term in the 2006 Stock Plan. Notwithstanding the
foregoing, a Company transaction that does not constitute a change in control
event under Treasury Regulation Section 1.409A-3(i)(5)(v) or Treasury Regulation
Section 1.409A-3(i)(5)(vii) shall not be considered a Change in Control for
purposes of this Agreement.

 

For the purposes of this offer letter agreement, “Good Reason” means that your
employment terminates pursuant to your resignation within 180 days after any of
the following is undertaken by the Company (or its acquirer) without your
consent: (i) a reduction of your Base Salary or target annual bonus, (ii) a
material reduction in your duties, authority or responsibilities; (iii) your
office is relocated to a location more than thirty (30) miles from your then
current office location; provided, however, that Good Reason shall not exist
unless you have provided written notice to the CEO of the purported grounds for
the Good Reason within ninety (90) days of its initial existence and the Company
has been provided at least thirty (30) days to remedy the condition.

 

If any payment or benefit you would receive pursuant to this offer letter
agreement or otherwise, including accelerated vesting of any equity compensation
(“Payment”) would (i) constitute a “parachute payment” within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and
(ii) but for this sentence, be subject to the excise tax imposed by Section 4999
of the Code (the “Excise Tax”), then such Payment shall be reduced to the
Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of
the Payment that would result in no portion of the Payment being subject to the
Excise Tax or (y) the largest portion, up to and including the total, of the
Payment, whichever amount, after taking into account all applicable federal,
state and local employment taxes, income taxes, and the Excise Tax (all computed
at the highest applicable marginal rate), results in your receipt, on an
after-tax basis, of the greater amount of the Payment notwithstanding that all
or some portion of the Payment may be subject to the Excise Tax. If a reduction
in payments or benefits constituting “parachute payments” is necessary so that
the Payment equals the Reduced Amount, reduction shall occur in the following
order: (A) cash payments shall be reduced first and in reverse chronological
order such that the cash payment owed on the latest date following the
occurrence of the event triggering such excise tax will be the first cash
payment to be reduced; and (B) accelerated vesting of the equity compensation
awards shall be cancelled/reduced next, with full-value awards reduced/cancelled
prior to stock option/stock appreciation awards. The Company shall appoint a
nationally recognized accounting firm to make the determinations required
hereunder and perform the foregoing calculations. The Company shall bear all
expenses with respect to the determinations by such accounting firm required to
be made hereunder.

 

 

 

 

The severance benefits described herein are, as noted herein, subject to your
execution of a Release, and such Release becoming effective in accordance with
its terms within twenty-eight (28) days following the termination date. No
vesting acceleration or severance benefits pursuant to such section shall be
paid or provided unless and until the Release becomes effective. Any severance
payment or benefit to which you would otherwise be entitled during such
twenty-eight (28) day period shall be paid or provided by the Company in full
arrears on the twenty-ninth (29th) day following your employment termination
date or such later date as is required to avoid the imposition of additional
taxes under Internal Revenue Code Section 409A (“Section 409A”).

 

Notwithstanding any provision to the contrary herein, no Deferred Compensation
Separation Payments (as defined below) that become payable under this offer
letter agreement by reason of your termination of employment the Company (or any
successor entity thereto) will be made unless such termination of employment
constitutes a “separation from service” within the meaning of Section 409A.
Further, if you are a “specified employee” of the Company (or any successor
entity thereto) within the meaning of Section 409A on the date of your
termination of employment (other than a termination of employment due to death),
then the severance payable to you, if any, under this letter, when considered
together with any other severance payments or separation benefits that are in
each case considered deferred compensation under Section 409A (together the
“Deferred Compensation Separation Payments”) that are payable within the first
six (6) months following your termination of employment, shall be delayed until
the first payroll date that occurs on or after the date that is six (6) months
and one (1) day after the date of your termination of employment, when they
shall be paid in full arrears. All subsequent Deferred Compensation Separation
Payments, if any, will be paid in accordance with the payment schedule
applicable to each payment or benefit. Notwithstanding anything herein to the
contrary, if you die following your employment termination but prior to the six
(6) month anniversary of your employment termination, then any payments delayed
in accordance with this paragraph will be payable in a lump sum as soon as
administratively practicable after the date of death and all other Deferred
Compensation Separation Payments will be payable in accordance with the payment
schedule applicable to each payment or benefit. Each payment and benefit payable
under this offer letter agreement is intended to constitute a separate payment
for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

 

The foregoing provisions are intended to comply with the requirements of Section
409A so that none of the severance payments and benefits to be provided
hereunder will be subject to the additional tax imposed under Section 409A, and
any ambiguities herein will be interpreted to so comply. The Company and you
agree to work together in good faith to consider amendments to this offer letter
agreement and to take such reasonable actions which are necessary, appropriate
or desirable to avoid imposition of any additional tax or income recognition
prior to actual payment to you under Section 409A.

 

 

 

 

The Company agrees to reimburse you up to Three Thousand Five Hundred Dollars
($3,500) in reasonable legal fees and costs incurred by you in connection with
the discussion and review of the matters addressed herein.

 

Enclosed is a copy of our Employment, Confidential Information, Invention
Assignment and Arbitration Agreement (the “Proprietary Information Agreement”).
This document assigns rights to all inventions to SMC and requires you to keep
confidential all matters regarding SMC technology and business relationships
until SMC has made such information public. Please read, sign, and return this
agreement on your first day of work.

 

You and SMC understand and acknowledge that your employment with SMC constitutes
“at-will” employment. Subject to the provision of any severance benefits
required above, you and SMC acknowledge that this employment relationship may be
terminated at any time, with or without good cause or notice or for any or no
cause, at the option of either you or SMC.

 

You represent that you (a) are not a party to an employment agreement or other
contract or arrangement which prohibits your full time employment with SMC, and
(b) do not know of any conflict which would restrict your employment with SMC.

 

This offer letter agreement, the agreement relating to the Equity Award
referenced herein and the Proprietary Information Agreement are the entire
agreement and understanding between you and SMC as to the subject matter hereof,
and supersede all prior or contemporaneous agreements, whether written or oral.
No waiver, alteration, or modification, if any, of the provisions of this offer
letter agreement shall be binding unless in writing and signed by duly
authorized representatives of you and SMC.

 

This offer letter agreement shall be governed by and construed in accordance
with the internal substantive laws, but not the choice of law rules, of the
State of California. You hereby consent to the personal jurisdiction of the
state and federal courts located in California for any action or proceeding
arising from or relating to this offer letter agreement.

 

Federal legislation requires all employers to verify the authorization to work
of all employees. Under this law, you will be required to furnish documentation
within 72 hours of starting work.

 

If you wish to accept employment at SMC under the terms set out above, please
sign and date this offer letter agreement and return it to me no later than the
end of the day on December 1, 2013.

 

  Sincerely,       /s/ Gordon R. Arnold   Gordon R. Arnold

 

I have read and accept the above:

 

/s/ Anders B. Axelsson   December 21, 2013 Anders B. Axelsson   Date Signed