Exhibit 10.1

 

Qualstar Corporation

130 West Cochran Street, Unit C

Simi Valley, California  93065

 

 

 

EMPLOYMENT AGREEMENT

 

 

This EMPLOYMENT AGREEMENT (the “Agreement”), entered into on April 13, 2019 but
effective as of January 1, 2019, is entered into between Qualstar Corporation, a
California corporation with principal offices located at 130 West Cochran
Street, Unit C, Simi Valley, California 93065 (“Qualstar” or the “Company”) and
Steven N. Bronson, an individual residing at 2751 Queens Garden Court, Westlake
Village, California 91361 (“Executive”) (each a “Party” and collectively, the
“Parties”).

 

W I T N E S S E T H :

 

WHEREAS, Qualstar desires to employ Executive and Executive is willing to accept
such employment on such terms and conditions as set forth below.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, Qualstar and Executive agree as follows:

 

1.            Employment. Qualstar hereby employs Executive as its Chief
Executive Officer and President, subject to the terms and conditions set forth
in this Agreement.

 

2.            Term. The term of this Agreement shall commence effective as of
January 1, 2019 and terminate on December 31, 2020 (the “Term”), subject to
earlier termination pursuant to the provisions herein. If Executive’s employment
has not been sooner terminated, it shall end automatically upon expiration of
the Term. If Executive continues to provide services to Company following
expiration of the Term without having entered into a new written employment
agreement or written amendment to this Agreement extending Executive’s
employment, Executive’s continued employment shall be “at will,” which means
that Executive and Company shall thereafter each be free to terminate the
employment relationship at any time for any reason or for no reason, with or
without cause and with or without advance notice.

 

3.             Duties and Location. Executive shall serve as Chief Executive
Officer and President and shall perform all duties commensurate with his
positions and as may be assigned to him by the Board of Directors of the Company
(the “Board”). It is understood that Executive shall not be required to devote
his full business time and energies to the business and affairs of the Company,
however Executive shall use his best efforts, skills and abilities to perform
all duties and obligations required of him by the Company, promote the interests
of the Company and diligently and competently perform the duties of his
positions for the Company. Executive will be based in the Los Angeles area,
California, but will travel as necessary to fulfill his duties and
responsibilities. Executive is eligible for reimbursement of related and
necessary office and travel expenses consistent with Section 5.

 

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4.            Compensation and Benefits.

 

4.1     Base Salary. During the Term, as compensation for the satisfactory
performance of all duties to be performed by Executive hereunder, Qualstar shall
pay Executive a base salary of $200,000 per annum (the “Base Salary”), to be
paid in accordance with the Company’s usual payroll policies and practices less
required deductions for state and federal withholding tax, Social Security, and
any other applicable employee benefit contributions and taxes.

 

4.2      Bonus Compensation. Executive shall be eligible to earn up to 50% of
his Base Salary during each calendar year during the Term, in the form of a
bonus based on the Company’s achievement of financial objectives established by
the Board and the Executive’s achievement of agreed-to personal business
objectives. Whether Executive earns a bonus for an applicable calendar year will
be determined solely in the discretion of the Compensation Committee of the
Company’s Board of Directors (the “Compensation Committee”), or if such
committee does not then exist at the time of determination, the Company’s Board
(excluding Executive). Any such bonus shall not be earned by or vest in
Executive until the date such amount, if any, is determined by the Compensation
Committee. If earned, the amount earned (the “Bonus Payment”) shall be paid
within 30 calendar days of the date that the bonus vests in Executive.

 

4.3     Restricted Stock Units. Within ninety (90) days following the execution
of this Agreement on a date to be determined by the Compensation Committee, the
Company shall grant to Executive 50,000 restricted stock units (the “Restricted
Stock Units”) for shares of the Company’s common stock. The Restricted Stock
Units (including the distribution of any shares of the Company’s common stock
issuable pursuant thereto) shall be granted under and shall be subject to the
terms of the Qualstar Corporation 2017 Stock Option and Incentive Plan and a
Restricted Stock Unit Agreement in a form acceptable to the Compensation
Committee (the “RSU Agreement”), which RSU Agreement shall include the terms
provided herein. For each of the fiscal years ended December 31, 2019 and
December 31, 2020, Restricted Stock Units for 25,000 shares of the Company’s
common stock shall vest and become issuable subject to the Company’s achievement
of financial and performance objectives for the applicable fiscal year
established by the Compensation Committee. Whether Executive’s Restricted Stock
Units for the applicable fiscal year become vested and issuable shall be
determined solely in the discretion of the Compensation Committee, or if such
committee does not then exist at the time of determination, the Company’s Board
(excluding Executive). Subject to Sections 9.7(b) and 9.7(d), any such
Restricted Stock Units shall not be earned by or vest in Executive until the
date such number, if any, is determined by the Compensation Committee.

 

4.4     Paid Time Off. Executive shall accrue Paid Time Off (PTO) on a pro-rated
basis at the rate of five weeks (200 hours) per year, up to a maximum of 300
hours that may be accrued. After the maximum accrual is met, Executive will not
accrue additional PTO until he uses PTO and brings the balance below the maximum
accrual. This PTO allowance shall be in addition to the paid holidays that are
provided as part of the standard benefit package for all Company employees.

 

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4.5     Benefit Package. Executive shall be eligible to receive any benefit and
participate in any benefit plan generally available to officers of the Company,
subject only to any waiting-time period or other requirement set forth in the
applicable plan. Nothing in this Agreement shall preclude the Company from
terminating or amending any employee benefit plan or program from time to time.

 

5.           Reimbursement of Business Expenses. During the Term, upon
submission of proper invoices, receipts or other supporting documentation
satisfactory to Qualstar and in specific accordance with such guidelines as may
be established from time to time, Executive shall be reimbursed by Qualstar for
all reasonable business expenses actually and necessarily incurred by Executive
on behalf of Qualstar in connection with Executive’s performance of services
under this Agreement.

 

6.           Representations as to Employability.

 

6.1     Absence of prior restrictions. Executive represents and warrants that
Executive is not party to, or bound by, any agreement or commitment, or subject
to any restriction, including, but not limited to agreements related to previous
employment containing confidentiality, non-solicitation, non-poaching or
non-compete covenants, which would adversely affect the business of Qualstar or
Executive’s performance of duties under this Agreement.

 

6.2     Absence of third party proprietary information. Executive represents and
warrants that Executive is not in possession of and will not bring onto the
Company’s premises or access or utilize any proprietary information of any prior
employer or other third-party that Executive is not permitted to have. Executive
represents, further, that Executive will be able to fulfill Executive’s duties
hereunder without such proprietary information by utilizing only information
that is generally available in the public domain or the rightful property of
Executive or the Company.

 

7.           Confidentiality and Proprietary Information.

 

7.1      Non-Disclosure. During the course of Executive’s employment with
Qualstar, Executive has and will continue to learn of Confidential Information
(as defined below) and Executive may develop Confidential Information on behalf
of Qualstar. Executive agrees that Executive will not use or disclose to any
person (except as required by applicable law or for the proper performance of
Executive’s duties and responsibilities for Qualstar) any Confidential
Information obtained or created by Executive incident to Executive’s employment
or any other association with Qualstar. Executive understands that this
restriction shall continue to apply after Executive’s employment terminates,
regardless of the reason for such termination.     

 

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7.2      Protection of Information. All information, trade secrets, data,
documents, records and files, in any kind of media, relating to the business
(whether past, present or future) of Qualstar (“Confidential Information”),
whether or not prepared by Executive, shall be the sole and exclusive property
of Qualstar. Executive agrees to safeguard all Confidential Information and to
surrender to Qualstar, at the time Executive’s employment terminates or at such
earlier time as requested, all tangible forms of Confidential Information of
Qualstar then in Executive’s possession or control, and to destroy or retrieve
any copies, such that no Confidential Information which was at any time in
Executive’s possession or control will exist in tangible form other than what
Executive has turned over to Qualstar or destroyed. Notwithstanding any other
provisions of this Agreement, pursuant to 18 USC § 1833(b), Executive will not
be held criminally or civilly liable under any federal or state trade secret law
for the disclosure of a trade secret that is made: (i) solely for the purpose of
reporting or investigating a suspected violation of law and in confidence to a
federal, state, or local government official (either directly or indirectly) or
to an attorney; or (ii) in a complaint or other document filed in a lawsuit or
other proceeding, if such filing is made under seal.

 

8.           Application of IRC Section 409A.

 

8.1      If Executive is a “specified employee” within the meaning of Internal
Revenue Code (“IRC”) Section 409A(a)(2)(B)(i) at the time of termination of
employment, any payments and benefits provided under this Agreement that
constitute "nonqualified deferred compensation" subject to IRC Section 409A that
are provided to the Executive on account of his separation from service and are
otherwise payable during the period ending on the date that is six (6) months
after the separation from service shall be paid in a lump sum on the date that
is six (6) months after Executive’s separation from service instead of the date
on which it would otherwise be paid to the extent required by IRC Section 409A.

 

8.2     To the extent applicable, it is intended that this Agreement comply with
the provisions of IRC Section 409A, so as to prevent inclusion in gross income
of any amounts payable or benefits provided hereunder in a taxable year that is
prior to the taxable year or years in which such amounts or benefits would
otherwise actually be distributed, provided or otherwise made available to
Executive. This Agreement shall be construed, administered, and governed in a
manner consistent with this intent and the following provisions of this
paragraph shall control over any contrary provisions of this Agreement.

 

8.3      Payments and benefits under this Agreement payable upon Executive’s
termination or severance of employment with Qualstar that constitute deferred
compensation under IRC Section 409A shall not be paid or provided prior to
Executive’s “separation from service” within the meaning of IRC Section 409A.

 

8.4     For purposes of IRC Section 409A, the right to a series of installment
payments under this Agreement shall be treated as a right to a series of
separate payments so that each payment is designated as a separate payment for
purposes of IRC Section 409A.

 

8.5     References in this Agreement to IRC Section 409A include both that
Section of the IRC itself and any guidance promulgated thereunder.

 

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

 

9.           Termination. This Agreement may be terminated prior to the
expiration of the Term set forth in Section 2 upon the occurrence of any of the
events set forth in, and subject to the terms of, this Section 9.

 

9.1      Voluntarily. Executive may terminate this Agreement at any time by
giving no less than ninety (90) days written notice to Qualstar.

 

9.2     Death. This Agreement will terminate immediately and automatically upon
Executive’s death.

 

9.3     Disability. Qualstar may terminate this Agreement immediately upon
providing Executive with written notice of termination for disability at any
time after Executive has been unable to perform the essential duties of his job
for more than ninety (90) consecutive days or for more than one hundred twenty
(120) days in any calendar year due to a physical or mental disability, even
when Executive has been provided with such reasonable accommodation as the
Company can provide without undue hardship.

 

9.4     Termination by Qualstar for Cause. Company may terminate Executive’s
employment at any time for “Cause.” For purposes of this Agreement, “Cause” for
termination shall exist if Executive engages in any of the following conduct:
(a) Executive willfully breaches or habitually neglects his duties; (b)
Executive habitually fails to comply with any of Company’s policies or
procedures, or deliberately interferes with such compliance by any other
employee of Company; (c) Executive engages in misconduct or commits any act in
connection with his employment which, in the subjective judgment of Company,
causes injury to Company, its reputation or business relationships; (d)
Executive abandons or purports to resign his employment with Company prior to
the expiration of the Term; (e) Executive is convicted of or pleads no contest
to any felony, any crime of moral turpitude or any crime which, in the
subjective judgment of Company, adversely affects Company, its reputation or
business relationships; or (f) Executive otherwise breaches any material
provision of this Agreement. Notwithstanding the foregoing, before any
termination pursuant to 9.4(a), (b) or (f) shall become effective, the Company
shall provide Executive with written notice of its intent to terminate Executive
based on the applicable subsection (“Notice”), and Executive shall be granted a
one-time opportunity to cure such conduct within twenty (20) days after
receiving such Notice.

 

9.5     Termination by Executive for Good Reason. Executive may terminate his
employment by written notice to Qualstar for “Good Reason,” as defined below.
“Good Reason” means one or more of the following: (a) Executive’s assignment by
Qualstar, without Executive’s written consent, to duties or responsibilities
which are not materially consistent with that of duties and responsibilities as
set forth herein; (b) material reduction by Qualstar, without Executive’s
written consent, of Executive’s Base Salary and bonus target pursuant to Section
4.1 and Section 4.2, above; or (c) Qualstar’s material breach of its obligations
under this Agreement, which breach has continued uncured for a period of twenty
(20) days after Company’s receipt of written notice from Executive.

 

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9.6       Termination by Qualstar Without Cause. Qualstar may terminate this
Agreement without Cause effective immediately, subject to the payment
obligations in Sections 9.7 or 10, if applicable.

 

9.7       Compensation in Event of Termination.

 

a.       Voluntary Termination. Upon Executive’s voluntary termination of this
Agreement pursuant to Section 9.1, Qualstar’s only obligation to Executive shall
be (1) to pay Executive any salary earned on or before the Executive’s last day
of employment, regardless of the reason (“Separation Date”), (2) reimburse
Executive for any reimbursable expenses properly incurred by Executive through
and including the Separation Date, and (3) pay Executive for any unused vacation
Executive has accrued as of the Separation Date (collectively, the “Final Pay”).
Executive shall retain vested benefits, if any exist, which vested benefits will
be handled in accordance with their controlling plans and documents. All further
vesting shall cease on the date of termination.

 

b.       Termination for Death or Disability. If Executive’s employment is
terminated due to Executive’s Death or Disability pursuant to Sections 9.2 or
9.3, then Executive or his beneficiaries will be entitled to receive the Final
Pay and all equity, including Restricted Stock Units, issued to Executive by
Qualstar but not yet vested as of the Separation Date shall immediately fully
vest and be earned as of the Separation Date provided that Executive satisfies
the conditions for Severance in Section 9.7(d). In addition, Company shall pay
to Executive a pro-rated portion of any earned target bonus pursuant to Section
4.2 (pro-rated to reflect the portion of the applicable calendar year Executive
worked prior to the ending of Executive’s employment). Except as provided in
this Section 9.7(b), upon termination pursuant to Sections 9.2 or 9.3, Executive
will not be entitled to any further compensation or payments.

 

c.        Termination for Cause. Upon the termination of this Agreement pursuant
to Section 9.4, Executive shall be entitled to receive the Final Pay. If
Qualstar terminates Executive’s employment pursuant to Section 9.4, all
compensation described in this Agreement will cease as of the Separation Date,
and Executive will have no rights to any other compensation or payments other
than the Final Pay.

 

d.       Termination by Executive for Good Reason or by Qualstar Without Cause.
If Executive’s employment is terminated by Executive for Good Reason pursuant to
Section 9.5, or by Qualstar without Cause pursuant to Section 9.6, then
Executive will be entitled to receive the Final Pay. In addition, if Executive’s
employment is terminated by Executive for Good Reason pursuant to Section 9.5,
or by Qualstar without Cause pursuant to Section 9.6, then Executive will be
entitled to receive the following (collectively, the “Severance”), subject to
the conditions specified below:

 

 

●

a severance payment equal to 12 months of Executive’s Base Salary in lieu of
Executive’s Base Salary that would otherwise be payable to Executive for the
duration of the Term following the Separation Date;

 

●

a pro-rated portion of any earned target bonus pursuant to Section 4.2
(pro-rated to reflect the portion of the applicable calendar year Executive
worked prior to the ending of Executive’s employment);

 

●

COBRA Benefits (as defined below); and

 

●

all equity awards, including the Restricted Stock Units, issued to Executive by
Qualstar but not yet vested as of the Separation Date shall immediately fully
vest and be earned.

 

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Severance is expressly conditioned upon (1) Executive’s execution and delivery
to Qualstar of a separation agreement in a form acceptable to Qualstar, which
will include a full waiver and release of all claims by Executive against
Qualstar, its affiliates, and their officers, directors, employees, and agents;
(2) Executive not rescinding or revoking the separation agreement; and (3)
Executive being and remaining in full compliance with this Agreement and all
other obligations to Qualstar. Except as provided in this Section 9.7(d), if
Executive’s employment is terminated by Executive for Good Reason pursuant to
Section 9.5 or by Qualstar without Cause pursuant to Section 9.6, Executive will
not be entitled to any further compensation, payments, or severance.

 

For purposes of this section, “COBRA Benefits” mean if Executive timely elects
continued coverage under COBRA, the Company will pay Executive’s COBRA premiums
to continue Executive’s coverage (including coverage for eligible dependents, if
currently provided) at the same level of employer contribution as is currently
provided (“COBRA Premiums”) for the 12-month period following the separation
date (the “COBRA Premium Period”); provided, however, that the Company will
cease to pay the COBRA Premiums if: (A) Executive becomes eligible for
comparable and comparably paid group health insurance coverage through a new
employer, or (B) Executive and Executive’s covered eligible dependents ceases to
be eligible for COBRA continuation coverage. Notwithstanding the foregoing, if
the Company determines, in its sole discretion, that it cannot pay the COBRA
Premiums without a substantial risk of violating applicable law (including,
without limitation, Section 2716 of the Public Health Service Act), the Company
instead shall pay to Executive, on the first day of each month, a fully taxable
cash payment equal to the applicable COBRA premiums for that month, subject to
applicable tax withholdings (such amount, the “Special Cash Payment”), for the
remainder of the COBRA Premium Period (or such shorter period if Executive
otherwise becomes covered by another employer’s group health plan ). In the
event Executive becomes covered under another employer’s comparable and
comparably paid group health plan during the COBRA Premium Period, Executive
must immediately notify the Company of such event and the Company shall cease
payment of the COBRA Premiums or the Special Cash Payments as the case may be.

 

10.     Change In Control Provision. In the event there occurs a Change in
Control with respect to Qualstar that results in the termination of Executive’s
employment for Good Reason or Without Cause within one hundred eighty (180) days
after the effective date of the Change in Control and subject to the conditions
specified below, then Executive shall be entitled to receive the compensation,
payments and Severance set forth in Section 9.7(d). For the purposes of this
Section, “Change In Control” means the consummation of any of the following
transactions effecting a change in ownership or control of the Company: (i) a
merger, consolidation or reorganization, unless securities representing more
than fifty percent (50%) of the total combined voting power of the voting
securities of the successor corporation are immediately thereafter beneficially
owned, directly or indirectly and in substantially the same proportion, by the
persons who beneficially owned the Company's outstanding voting securities
immediately prior to such transaction; or (ii)  any transfer, sale or other
disposition of all or substantially all of the Company's assets on a
consolidated basis; or (iii)  the acquisition, directly or indirectly by any
person or related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made directly to
the Company's beneficial holders. In no event, however, shall a Change in
Control be deemed to occur in connection with (i) a merger of the Company, the
sole purpose of which is to reincorporate the Company in another jurisdiction,
or (ii) any public offering of Common Stock, the primary purpose of which is to
raise capital; or (iii) an increase or decrease of Executive’s beneficial
ownership in the Company. Executive’s ability to receive the payment under this
Section 10 is conditioned on Executive satisfying the conditions for Severance
in Section 9.7(d).

 

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11.         Miscellaneous.

 

11.1      Survival. The provisions of Sections 7, 8, 9, 10, and 11 shall survive
the termination of this Agreement.

 

11.2      Modification. This Agreement may not be modified unless in writing and
signed by the Party against whom the same is sought to be enforced.

 

11.3     Waiver. Failure of a Party to enforce one or more of the provisions of
this Agreement or to require at any time performance of any of the obligations
hereof shall not be construed to be a waiver of such provisions by such Party
nor to in any way affect the validity of this Agreement or such Party's right
thereafter to enforce any provision of this Agreement, nor to preclude such
Party from taking any other action at any time which it would legally be
entitled to take.

 

11.4     Assignment. This Agreement and all any rights or obligations hereunder
are not assignable by Executive, but may be assigned by Qualstar upon the sale
of substantially all of its assets.

 

11.5     Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and transmitted via email, and shall be
deemed to have been given at the time of transmittal, as follows:

 

  To Qualstar: Qualstar Corporation     130 West Cochran Street, Unit C     Simi
Valley, CA 93065     Attn.:     Nick Yarymovych, Chairman     Compensation
Committee     of Qualstar Corporation         To Executive: Steven N. Bronson  
  2751 Queens Garden Court     Westlake Village, California 91361

 

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11.6     Severability. If any provision of this Agreement is held to be invalid
or unenforceable by a court of competent jurisdiction, such invalidity or
unenforceability shall not affect the validity and enforceability of the other
provisions of this Agreement, and the provision held to be invalid or
unenforceable shall be modified so as to be enforced as nearly as possible
according to its original terms and intent but only to the extent necessary to
eliminate such invalidity or unenforceability.

 

11.7     Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to its
principles of conflict of laws.

 

11.8     Fees. In any suit or action brought to enforce this Agreement, or to
obtain an adjudication, declaratory or otherwise, of rights hereunder, the
losing party will pay to the prevailing party reasonable attorneys’ fees and all
other costs and expenses that may be incurred by the prevailing party in such
suit or action.

 

11.9     Entire Agreement. This Agreement sets forth the entire understanding of
the Parties relating to Executive’s employment with Qualstar and merges and
supersedes any prior or contemporaneous agreements between the Parties
pertaining to the subject matter hereof. Notwithstanding the foregoing, nothing
in this Agreement supersedes or restricts any of Executive’s existing
obligations to Qualstar or under other agreements between Executive and Qualstar
(including all Executive’s obligations to Qualstar to protect the
confidentiality of information of Company and to assign intellectual property
rights to it or otherwise protect its intellectual property and/or business
interests), all of which remain in full force and effect.

 

11.10     Counterparts. This Agreement may be executed in any number of
counterparts, including facsimile and email with pdf signatures which shall be
deemed as original signatures. All executed counterparts shall constitute one
agreement, notwithstanding that all signatories are not signatories to the
original or the same counterpart.

 

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IN WITNESS WHEREOF, each Party hereto has duly executed this Agreement as of the
date set forth above.

 

 

QUALSTAR CORPORATION    STEVEN N. BRONSON                           /s/ Nicholas
A. Yarymovych   /s/ Steven N. Bronson   Nicholas A. Yarymovych, Chairman  
Steven N. Bronson   Compensation Committee       of Qualstar Corporation      

              

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