Effective August 11, 2011

 

1.

Start Date.  Your start date for employment with the Company (the “Start Date”) will be on a date to be agreed upon, but not later than August 11, 2011.

 

2.

Responsibilities; Reporting.  You will be the Company’s Chief Executive Officer and will be named as a member of the Board of Directors (the “Board”).  You will have such duties and responsibilities that are commensurate with your position and such other duties and responsibilities as are from time to time assigned to you by the Board.  You will perform your duties at the Company's headquarters, located in Orangeburg, New York.

 

3.

Base Salary.  You will receive an annualized base salary of $350,000 (“Base Salary”), subject to applicable withholding, which will be paid in accordance with the Company’s payroll practices.  Future adjustments will be based upon the results of your annual performance review and are subject to the Board’s discretion.

 

4.

 

a.

Fiscal 2012 Bonus.  You will be eligible to earn a bonus of up to 75% of Base Salary based on your individual performance and the performance of the Company, in each case, awarded in shares of restricted shares (“Restricted Shares”) of Company common stock (“Common Stock”), calculated based on the closing price of the Common Stock on the day the Board approves this Agreement, expected to be the day before this Agreement is announced, as follows:

 

i.

Guaranteed Portion:  For your continued employment by the Company during Fiscal 2012, you will receive a portion equal to 37.5% of Base Salary.  The restrictions shall lapse as to these Restricted Shares in quarterly installments starting on each of June 30, 2012, September 30, 2012, December 31, 2012 and March 30, 2013.

 

ii.

Incentive Portion:  You will also be able to earn an additional bonus for your continued employment during Fiscal 2012, in an amount up to 37.5% of Base Salary, for achieving predetermined corporate milestones and individual performance objectives based on a plan developed by you and approved by the Board. These Restricted Shares will vest consistent with Company’s other Restricted Stock incentive programs (currently in four equal annual installments starting on the first anniversary of the date of grant).

 

b.

Fiscal 2013 and Subsequent Year Bonus.  The incentive compensation program described in 4.a above shall apply for the first year of your employment.  Thereafter, you will be able to participate in the management incentive program, in such form as established by the Board, with an annual target bonus of 75% of your Base Salary (as then in effect)

 

c.

Long-Term Incentive You will be granted options to purchase Company Common Stock (“Options”) as follows:

 

i.

750,000 Options (“First Grant”), vesting as follows:  25% (187,500) upon your Start Date and 25% on each of the first, second and third year anniversaries of your Start Date.

 

ii.

750,000 Options (“Second Grant”) to be granted on the first year anniversary of your start date, with this grant vesting over four years, with 25% vesting on each of the first, second, third and fourth anniversaries of the grant.

 

d.

Terms.   Options and Restricted Shares will be subject to the terms of VSI’s 2007 Stock Incentive Plan (as amended) and individual stock option and restricted stock agreements.  The exercise price of the initial Options shall be set the date the Board approves this Agreement, expected to be the day before this Agreement is announced.  The exercise price for the Second Grant will be set on the date of grant.  All granted Options and Restricted Shares will vest upon a change in control of the Company.

 

5.

Benefits.  You will be entitled to participate in benefit plans adopted by the Company for the benefit of all employees of the Company.  Some of these benefits include:  medical and dental insurance plan, long-term disability plan and 401k plan.

 

6.

Vacation.  You will be entitled to three (3) weeks paid vacation and all major United States holidays, consistent with Company policies.

 

7.

Expenses and Travel.  The Company will reimburse you for all reasonable travel and lodging expenses actually incurred or paid by you in performance of your services, on a monthly basis per Company policy.

 

8.

Car Allowance.  You will also receive a car allowance of $1,000 per month, which is subject to withholding.

 

9.

Reviews. The Company will perform annual performance reviews.  Base Salary increases are reviewed and decided on an annual basis by the compensation committee of the Board.

 

1.

 

a.

Trade Secrets and Confidential Information.  During the term of this Agreement, you may have access to trade secrets and other confidential or proprietary information about the Company and its customers, partners, agents, contractors, licensers and vendors, whether or not labeled as such, including Company information acquired or developed in the course of the Company’s operations.

 

i.

The term “Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique, equipment, or process, developed or acquired by the Company in the course of the Company’s operations, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

 

ii.

The term “Confidential Information” means information and data not generally known outside the Company concerning the Company or its business, and the Company’s business and technical information including, without limitation, computer technology and programs; pricing, accounting, selling, marketing, costs, profits, sales, product, personnel, research and development data; processes; techniques; know how; customer lists; accounts and contracts; financial and marketing data and plans; business plans; samples; models; illustrations; information regarding the abilities and expertise of the Company’s consultants; information relating to customers and customer preferences; and information customers or other third parties entrusted to the Company.  Materials such as customer, price and supplier lists; reports; or computer programs may contain such information or may constitute unwritten information, techniques, processes practices or knowledge.

 

iii.

Trade Secrets and Confidential Information (collectively “Proprietary Information”) collectively include hardware and software in various states of development, specifications and layouts, techniques, models, processes, procedures, know how, internal operating manuals, marketing techniques and data, prospect and customer lists, marketing data and strategy, cost and pricing data, budgets, forecasts, business plans, and any other information concerning the Company’s business and/or products that is not publicly available.

 

b.

Treatment of Information.  Disclosure of any Proprietary Information may damage the Company’s business and during and after the term of this Agreement, you will safeguard such Proprietary Information and will not use or disclose any Proprietary Information in any manner, except in performing employment services or as the law requires.  Upon termination of this Agreement, you will promptly return to the Company any documents and materials that you possess that contain or relate, in any manner, to any Proprietary Information.  You understand that your obligations pertaining to Proprietary Information shall remain in effect in perpetuity or until the Company has released it into the public domain, in which case your obligations hereunder shall cease with respect to only such information so released.

 

c.

Information of Others.  You will not disclose to the Company, use in its business, or cause it to use, any information or material that is confidential or proprietary to others.

 

d.

New Inventions and Creations.

 

i.

Disclosure and Assignment.  You shall disclose promptly and fully to the Company all inventions, discoveries, improvements, concepts or ideas, whether or not patentable, conceived or made by you, whether alone or with others, during the term of this Agreement and related in the sole judgment of Company to the products, business or activities of the Company (“Work”), and you hereby assign and will assign all of such interests therein to the Company or its nominee.  All copyrightable works created by you or under your direction in connection with the Company’s business are “works made for hire” within the meaning of the copyright laws of the United States and any similar laws of other jurisdictions, and shall be the sole and complete property of the Company and any and all copyrights to such works shall belong to the Company.  To the extent any Work is not deemed to be a “work made for hire” for the Company, you hereby assign all proprietary rights therein, including, without limitation, to patent rights, trade secrets, reproduction rights, adaptation rights, distribution rights, public display rights and copyrights, in such Work to the Company and any results or proceeds thereof, in perpetuity throughout the universe in all languages and formats, and in any and all media, whether now known or hereafter devised, without further compensation.  New rights to the Work may come into being and/or be recognized in the future, under the law and/or in equity (the “New Exploitation Rights”), and you intend to and do hereby grant and convey to the Company any and all such New Exploitation Rights in and to the Work and any other results or proceeds thereof.  You agree to execute any documents and do any other acts consistent herewith as may be reasonably required by the Company or its assignees or licensees to further evidence or effectuate the Company’s rights as set forth in this Section or as may be necessary, useful or convenient for the purposes of securing to the Company or the Company’s nominees any patent, trademark or copyright protections throughout the universe to any or all of the Work.

 

ii.

Appointment.  You hereby appoint the Company as your attorney-in-fact (which appointment is irrevocable and coupled with an interest), with full power of substitution and delegation, to execute any and all documents needed to secure to the Company or the Company’s nominees any patent, trademark or copyright protections throughout the universe to any or all of the Work (“Signing”) and do any and all such other acts consistent with this Agreement that you fail to do promptly after request to effectuate the Signing.  The obligations set forth in this Subsection ii. shall continue beyond the term of this Agreement with respect to any Work, including any inventions, discoveries, improvements, concepts or ideas, whether or not patentable, or copyrightable works, the Employee has conceived or made, whether alone or with others, during the term of this Agreement, and shall bind its assigns, executors, administrators and other legal representatives.

 

iii.

No Designation.  The Company and its licensees (direct and indirect) are not required to designate you as author of any design, computer program or related documentation, or other work of authorship, assigned hereunder when distributed publicly or otherwise.  You hereby waive and release, to the extent permitted by law, all rights to the foregoing.

 

e.

Prior Inventions.  You represent to the Company that there exist no prior inventions (“Prior Invention(s)”) including any unpatented inventions, improvements or developments, whether patentable or unpatentable, which you made or conceived prior to its retention by the Company and for which you claim or may wish to claim ownership now or in the future.  As used herein, the term “Prior Inventions” does not include any matter which would constitute Proprietary Information of any person other than you, arising out of your prior employment or consulting relationships or out of any of your other engagements or commitments.

 

f.

Covenant Not To Compete.  During the term of this Agreement and for a period of twelve (12) months after its termination by either party, you will not, directly or indirectly be employed by or own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected in any manner with, any business (whether in corporate, proprietorship, or partnership form) which competes with the business of the Company.  By way of example only, a business designing, manufacturing, distributing, or selling endoscopes, borescopes, or any equipment or materials used in connection with endoscopes or borescopes is an example of a company that directly competes with the business of the Company.

 

g.

No Solicitation of Employees or Consultants.  For a period of eighteen months (18 ) months after termination of this Agreement, you will not, without the prior written consent of the Company, directly or indirectly, solicit or attempt to solicit for employment any person the Company employs, either on a full time, part time or consulting basis.

 

h.

No Solicitation of Clients or Suppliers. For a period of two (2) years after the expiration or earlier termination of this Agreement for any reason, you will not, directly or indirectly, solicit or attempt to solicit any person or entity which is a customer, client or supplier of the Company, or proposed customer, client or supplier of the Company on the date of termination, with respect to products or services competitive with those the Company offers or proposes to offer on the date this Agreement terminates.

 

i.

Nondisparagement. Neither the Company nor you shall directly or indirectly, in any communications with any reporter, author, producer or any similar person or entity, the press or other media, or any customer, client or supplier of the Company, or any future business associate or employer of yours, or person or entity seeking references, criticize, ridicule or make any statement which is negative, disparages or is derogatory of either party, or any of the Company’s directors or senior officers

 

j.

Remedies.  The parties recognize that irreparable injury, which monetary damages could not fully compensate, will result to if a party breaches the covenants contained in this Agreement.  Accordingly, the parties agree that, as a remedy for a breach of those covenants, the party claiming injury shall be entitled, in addition to other legal and equitable damages and remedies, to temporary and permanent injunctive relief to restrain you and all other persons, firms or entities acting for or with the other party, from any violations of this Agreement. In any action to enforce the provisions of any Section or party of this Agreement, the prevailing party, in addition to any other remedy, shall be entitled to recover reasonable attorney’s fees and all other reasonable costs associated with any such action both on the trial and appellate level and in any creditor’s proceedings.   If a court of competent jurisdiction determines by final non-appealable judgment that the scope, time period, or geographical limitations of any of the restrictive covenants specifically set forth in this Agreement are too broad to be capable of enforcement, the court is authorized, and the parties stipulate that it shall modify said restrictive covenants and enforce such provisions as to scope, time, and geographical areas as the court deems equitable, just and appropriate considering the intent of the parties.

2.

 

a.

Exclusive Basis.

Your employment with the Company is on an exclusive and full-time basis, and while employed by the Company you may not engage in any other business activity that conflicts with your duties and obligations (including your commitment of full-time employment) to the Company.   Nothing contained in this Agreement shall be deemed to prohibit you from continuing to sit on the boards or committees of professional organizations or associations or participating in professional development activities, or from speaking to professional organizations or committees, so long as such activities would not otherwise violate Section 1 of this Agreement or interfere with your ability to perform your duties.

 

b.

Equipment.

Any computer or other equipment the Company provides to you is the sole property of the Company, and you must return it to the Company upon request or upon termination of this Agreement for any reason.  All use of such equipment shall be subject to the terms of the Company’s policies then in effect.

 

c.

Data.

All documents, data, recordings, or other property, whether tangible or intangible, including all information stored in electronic form, obtained or prepared by or for you and utilized by you (other than materials, including lists of business contacts you have brought with you) in the course of your employment with the Company shall remain the exclusive property of the Company and shall remain in the Company’s exclusive possession at the conclusion of your employment.

 

d.

No Conflict.

You represent and warrant to the Company that the execution and performance of this Agreement does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which you are a party or which you are bound and you are not a party to or have not been released from any conflicting consulting agreement, employment agreement, noncompete agreement or confidentiality agreement with any other person or entity.

 

3.

EFFECTS OF TERMINATION. You understand that you are employed “at will.”  You have the right to resign from employment with the Company at any time you desire.  The Company similarly has the right to terminate your employment at any time it desires to do so, subject to the following:

 

a.

Without Cause.

If VSI terminates you without Cause or you resign your employment for Good Reason (each as defined below) after your Start Date, you will receive an amount equal to 100% your annual base salary.

 

b.

Notice.

Upon notice by Company to you that it is terminating your employment pursuant to a Termination for Cause, the “Termination Date” shall be the date on which such notice is mailed or hand-delivered, or as otherwise specified in the notice of termination, to you.  Upon termination for Cause, you shall not be entitled to receive any further compensation or payments hereunder (except for Base Salary relating to your services prior to the Termination Date and any earned but unpaid bonus payments). Any unvested Options or Restricted Shares shall immediately cancel as of the Termination Date. Vested Options and vested shares of Restricted Stock shall be subject to the provisions of your stock option agreement and the Plan.

 

c.

Definitions.  For purposes of this Agreement:

 

i.

“Good Reason” means

 

1.

a substantial reduction by Company of your duties or responsibilities; or

 

2.

a reduction by Company of your base salary, other than in connection with a Company-wide salary reduction.

 

ii.

You must provide written notice to Company within 20 days after the occurrence of an event constituting Good Reason.  The Company shall have 20 days after receipt of written notice to cure the event. If Company fails to cure and you resign within 30 days after the end of the 20-day cure period, then such resignation shall constitute resignation for Good Reason.

 

iii.

“Cause” means

 

1.

conviction of a felony; or conviction of a crime of moral turpitude;

 

2.

breach of the terms of Section 1 of this Exhibit A; or

 

3.

fraud or embezzlement; intentional misconduct; or gross negligence which has caused serious and demonstrable injury to the Company or its affiliates, except that a good faith exercise of business judgment shall not be deemed gross negligence;  or

 

4.

egregious performance or failure to perform your responsibilities (other than for reason of disability) which performance or failure to perform continues beyond twenty-one (21) days after a written demand for substantial improvement in your performance, identifying specifically and in detail the manner in which improvement is sought, is delivered to you by Company, provided that a failure to achieve performance objectives shall not by itself constitute Cause.

 

d.

Release.  Your entitlement to the payments and benefits described in this Section 3 are conditioned on your execution and delivery to the Company, within ten (10) days after your termination of employment (the “Release Deadline”), of a release in the Company’s then approved form that remains in effect and becomes irrevocable after the expiration of any statutory period in which you are permitted to revoke a release (the “Release”).  If you fail to execute and deliver the Release by the Release Deadline, or if you thereafter effectively revoke the Release, the Company shall be under no obligation to make any further payments or provide any further benefits to you.

4.

 

a.

Waivers.  Waiver of a breach of any provision of this Agreement by a party shall not operate or be construed as a waiver of any subsequent breach.  Any delay in asserting any of remedies hereunder shall not be construed as a waiver.

 

b.

Successors and Assigns.  The rights and obligations of the parties under this Agreement shall continue in effect to the benefit of and shall bind the successors and assigns of the parties.

 

c.

Severability.  Each covenant set forth above is an independent and separate covenant.  If the provisions of any of the covenants set forth above should ever be judicially determined to exceed the time or geographic limitations permitted by applicable law, you agree that such provisions shall be reformed to set forth the maximum limitations permitted.  The invalidity of any provision or any covenant will not affect the validity or enforceability of any other provision or covenant.

 

d.

Law; Jurisdiction; Venue.  This Agreement has been made and will be at least partly performed in the State of New York and the laws of the State of New York shall govern without regards to its conflicts of laws provisions.  Each of the parties hereto submits to the exclusive jurisdiction and venue of any competent court located in the County of Rockland, State of New York.

 

e.

Entire Agreement; Amendment.  This Agreement, which includes the Offer Letter, supersedes any and all prior understandings or agreements with respect to the subject matter herein.  Only a writing signed by the parties may amend this Agreement.

 

f.

Assignment and Nondelegation.  The Company may assign this Agreement to any business, enterprise, person, firm, corporation, partnership, association or other entity acquiring (by purchase, merger, share exchange, or otherwise), directly or indirectly, any business or product or the assets of the Company without the Employee’s prior consent.  You may not delegate the performance of your duties under this Agreement.  You may, the extent permitted by applicable law, and the terms of the Company’s incentive programs, assign any financial benefit due to you to any person or entity upon written notice to the Company.

 

g.

Interpretation.  The descriptive headings used in this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.  Each party has had the opportunity to have legal counsel review this Agreement.  Any principle of construction or rule of law that provides that an agreement shall be construed against the drafter of the agreement in the event of any inconsistency or ambiguity in such agreement shall not apply to this Agreement.  The definitions of the terms in this Agreement shall apply equally to the singular and plural forms of the defined terms.  The phrase “without limitation” shall be implied to follow the words “include,” “includes” and “including”.  Unless the context requires otherwise, references to sections and paragraphs shall be construed to refer to sections and paragraphs of this Agreement.

 

h.

Notices.  All notices or other communications which are required or permitted pursuant to this Agreement shall be in writing and sufficient if delivered personally or by telecopier (with a confirmation copy sent by mail) or sent by registered or certified mail, postage prepaid, to the Company at its address first set forth above, and to You at the address written below.

 

i.

Execution by Counterpart; Electronic Signatures.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.  Any party may execute and deliver this Agreement in a counterpart with electronic or facsimile signatures, and such counterpart shall be deemed an original.