EXHIBIT 10.13
Employment Agreement, dated as of August 23, 1998,
by and between Xxxx Xxxxxx and OTI America, Inc.
PERSONAL EMPLOYMENT AGREEMENT
This agreement (the "Agreement") is made as of this 23rd day of August, 1998
(the "Effective Date"), between OTI America Inc., a Delaware corporation (the
"Company") and Xxxx Xxxxxx (the "Executive").
RECITALS
A. The Executive is employed by the Company's parent company - On Track
Innovations Ltd. ("OTI"), under an employment agreement dated March 4, 1996,
which shall terminate upon the Effective Date of this Agreement.
B. The Company and the Executive wish to enter into an agreement governing the
terms of the Executive's employment with the Company as its president and
CEO.
C. The Executive recognizes that he is being hired in a position of trust and
confidence with the Company and that the Company needs to protect its
proprietary and confidential information;
In consideration of the mutual agreements and representations contained in this
Agreement, the Executive and the Company agree as follows:
1. Term of the Employment
1.1 Term. The Company will employ the Executive, and the Executive will serve
the Company, under the terms of this Agreement for an initial period of
two years (the "Initial Term"), commencing on the Effective Date. After
the expiration of the Initial Term, the term of this Agreement shall be
extended for an additional two (2) year period (the "Additional Term"),
unless (i) not later than six (6) months prior to the expiration date of
the Initial Term, either party shall have given written notice to the
other that the term shall not be so extended or (ii) the Agreement is
terminated pursuant to Section 7. The Initial Term and the Additional
Term, if and to the extent applicable, constitute the "Employment
Period".
1.2 Continuing Effect. Notwithstanding any termination or expiration of this
Agreement for any reason, Sections 4 through 8 shall remain in full force
and effect and be binding on the Executive and his legal representatives,
successors and assigns.
2. Employment
2.1 Position and Reporting. The executive's position at the time of hire
shall be President and CEO. The Executive shall report to the board of
directors of the Company (the "Board").
2.2 Authority and Duties. The Executive shall faithfully and diligently
exercise such authority, perform such duties and functions and
2
discharge such responsibilities as are reasonably associated with the
Executive's position or assigned to him from time to time by the Company
including, but not limited to (i) the management and maintenance of the
Company's offices, (ii) the selection, recruitment and maintenance of
staff sufficient to enable the Company to achieve its goals (iii) the
development and finalization of a marketing plan for the Company, (iv)
the marketing and sale of OTI's products and technology, and (v) fund
raising from third parties to the Company. The Executive shall comply
with the Company's policies and procedures as they may be in effect from
time to time. During the Employment Period, the Executive shall devote
his full business time, skill and efforts to the business of the Company
and shall not engage, directly or indirectly, in any work or engagement
not within the scope of his employment with the Company pursuant to this
agreement, other than with the Company's prior written consent.
2.3 Reporting Requirements. The Executive shall keep the Board fully informed
of his conduct of the business and affairs of the Company and shall
supply to the Board such information as may be requested in connection
with the business and affairs of the Company.
2.4 Place of Business. The Executive will be based in the Company's offices
in Santa Clara, California, USA.
3. Compensation and Benefits.
3.1 Salary. The Executive's monthly gross salary at the date of hire will be
$8,000 (eight thousand U.S. dollars), payable on the Company's regularly
scheduled payroll dates. The Executive's salary shall be paid net of all
deductions that are legally required or authorized by the Executive.
3.2 Annual Bonus. The Executive shall be entitled to earn an annual bonus
(the "Bonus"), not to exceed $40,000 (Forty Thousand Dollars) commencing
on 1999, based on the satisfaction of certain revenue and activity goals
to be established by the Company in its sole discretion following
consultation with the Executive. The final determination as to the
Executive's satisfaction of the pre-established goals and the amounts of
any Bonus payout in relationship to such performance shall be made by the
Company in its sole discretion. Except as otherwise specifically provided
in this Agreement, the Executive shall have no right or entitlement to
the Bonus or any part thereof unless he remains in the Company's employ
through the last date of the fiscal year to which the Bonus, or any such
part thereof, relates.
3.3 Sales Bonus. Without derogating from the provisions of Section 3.2 above,
the Executive shall be entitled to a sales bonus (the "Sales Bonus")
expressed as the percentage set forth in the third column of the table
below of Company's net revenues exceeding the minimal net
3
revenues amount set forth in the second column of such table actually
received by the Company during the year set forth in the first column of
such table, namely:
Year Minimal Net Revenues Bonus
---- -------------------- -----
1999 US$ 6 million 1%
2000 US$ 12 million 1%
To the extent payable to him, the Sales Bonus shall be paid by the
Company to the Executive on a yearly basis, by no later than the 9th of
the second calendar month in each calendar year ("Year") for the
preceding Year.
Following the Year 2000, the Company shall reconsider the terms of the
Sales Bonus for the subsequent Years, taking into consideration the
Executive's past performance and the Company's marketing forecast.
In this Section, the term "Net Revenues" means - the revenues received by
the Company from marketing and sale of OTI's products and technology not
including any sales tax or other taxes imposed on the sale, discounts and
rebates.
3.4 Options. The Executive will be entitled to the following cumulative
options to purchase ordinary shares of NIS 0.01 n.v. each ("Ordinary
Shares") in OTI, under the terms and conditions of OTI's employee option
plan, namely:
3.4.1 The Executive's current option plan shall be accelerated so that
all options allocated to him under such plan shall be of immediate
vesting at the date of signature hereof.
3.4.2 The Executive shall be entitled to receive for each period of
twelve months of his employ hereunder, an option to purchase 10,000
Ordinary Shares for a price of US$ 4.5 per share, which shall vest
in the Executive at the termination of each such twelve month
period.
3.4.3 In the event that the Executive shall succeed to raise funds for
the Company from third parties (and for such purpose, it is
clarified for the avoidance of doubt that VeriFone/HP is a third
party), he shall be entitled to an additional option to purchase
Ordinary Shares, for a price of US$ 4.5 per share, in a total
amount equals to 0.5% of the total amount so raised, but in any
event not more than 50,000 Ordinary Shares.
3.5 Other Benefits. During the Employment Period, the Executive shall receive
such other life insurance, pension, disability insurance, health
insurance for the Executive and all members of his family, holiday, sick
4
pay, and other benefits which the Company may at its discretion extend,
as a matter of policy, to its executive employees, and he shall be
entitled to participate in any deferred compensation and other incentive
plan that may be estalibhsed by the Company on the same basis as other
executives of the Company. Without limiting the generality of the
foregoing, the Executive shall be entitled to four (4) weeks paid
vacation during each year of the Employment Period, which shall be
scheduled by the Executive, subject to the business needs of the Company.
3.6 Business Expenses. During the Employment Period, the Company shall
promptly reimburse the Executive for all documented reasonable business
expenses incurred by the Executive in the performance of his duties under
this Agreement, in accordance with the Company's policies and procedures
in effect from time to time.
3.7 Car and Lodging Expenses. The Company shall reimburse to the Executive
any expenses incurred by him for the rental of an apartment in the
vicinity of the Company's offices, and for the purchase or lease of a car
for his use and its insurance, provided that the Company's expenses under
this Section shall not exceed the amount of US$ 48,000 (forty eight
thousand U.S. dollars) per each Year of the Employment Period. In
addition, the Company shall bear all insurance, maintenance and related
expenses to such apartment, and all maintenance, gasoline and related
expenses to such car.
3.8 Organizational Expenses. The Company shall pay the Executive a one time
payment of US$ 20,000 (twenty thousand U.S. dollars), upon his
commencement of employ for the Company as organizational expenses.
3.9 Wife Travel. The Company shall pay for two annual return flying tickets
for the Executive's wife to Israel in tourist class, and shall further
pay additional return flying tickets to Israel in respect of a visit
required due to extraordinary events.
4. Agreement on Unfair Competition
4.1 Duty of Loyalty and Good Faith. The Executive understands and agrees that
the Executive owes the Company a duty of good faith and loyalty.
4.2 Non-competition. The Executive agrees that during the Employment Period
and for twelve (12) months after termination of the Executive's
employment in which the Company is then doing business or preparing to do
business, (i) solicit, directly or indirectly, for his own benefit of
that of any other party, any client of the Company that had purchased a
product or service from the Company at any time in the twelve (12) months
preceding the date of termination or that the Company is then soliciting,
for the purpose of marketing or distributing any product or
5
service in the field of contactless (including contact-contactless),
smart cards; (ii) engage or otherwise deal, directly or indirectly, by
himself or in connection with any other person, in the development,
testing or marketing of any product of service in the field of
contactless (including contact-contactless) smart cards.
4.3 Non-solicitation of Employees. The Company value its employees and
requires fair protection from the loss of those employees. Both during
the Executive's employment with the Company and for a period of twelve
(12) months following the date of the Executive's termination of
employment, for any reason, the Executive shall not, directly or
indirectly, solicit any employee to leave the Company's employment.
5. Confidentiality
The confidentiality undertaking executed by the Executive towards OTI shall
remain in effect and shall be deemed executed as well towards the Company.
6. Executive's Representation and Warranty
The Executive represents and warrants that (i) the Executive's performance of
all the terms of this Agreement and any services to be rendered as an
employee of the Company do not and shall not breach any fiduciary or other
duty or any covenant, agreement or understanding, including, without
limitation, any agreement relating to any proprietary information, knowledge
or data acquired by the Executive in confidence, trust, or otherwise, prior
to the Executive's employment by the Company to which the Executive is a
party or by the terms of which the Executive may be bound; (ii) the Executive
shall not disclose to the Company or its clients, or induce the Company to
use or disclose, any such proprietary information, knowledge or data
belonging to any previous employer or others and the Executive will disclose
to the Company the term and subject of any prior confidentiality or
invention, agreement or agreements the Executive has entered into; and (iii)
the Executive will not enter into any agreement or understanding, either
written or oral, in conflict with the provisions of this Agreement.
7. Termination of Employment
7.1 Termination Other Than For Cause. The Executive may terminate his
employment under this Agreement without cause by giving ninety (90) days
prior written notice to the Company. In its sole discretion, the Company
may give the Executive ninety (90) days pay in lieu of such prior notice.
7.2 Termination for Cause. The Company may terminate the Executive's
employment effective immediately upon written notice, or on any other
date specified in such notice, if he is convicted of a felony or for any
one of the following conducts by the Executive: (i) an act of personal
6
dishonesty; (ii) a breach of fiduciary duty; (iii) the intentional
failure after written notice to perform his assigned duties; (iv) a
breach of any of the provisions of this Agreement that continues uncured
for more than forty five (45) days after written notice thereof by the
Company to the Executive; (v) substantial failure to meet the sales goals
established by the Company from time to time due, in whole or in
substantial part, to the Executive's fault; or (vi) in the event that the
Company reasonably determines that the Executive does not use his best
efforts to advance the Company's business or operations.
7.3 Disability or Death. If, during the Employment Period, the Executive
becomes physically or mentally incapacitated so that, for a period of
(90) days, he is unable to perform for the Company substantially the same
services as he performed prior to incurring such incapacity (the Company,
at its option and expense, being entitled to retain a physician
reasonably acceptable to the Executive to confirm the existence of such
incapacity, and the determination of such physician to the binding upon
the Company and the Executive), the Company may terminate the Executive's
employment under this Agreement upon written notice. This Agreement shall
automatically terminate upon the Executive's death.
8. Consequences of Termination
8.1 Termination For Cause by the Company, Due to the Executive's Disability
or Death or Without Cause by Executive. Upon termination of this
Agreement by the Company pursuant to Sections 7.2 or 7.3, or by the
Executive pursuant to Section 7.1, the Executive shall be entitled to
receive only the compensation and benefits accrued but unpaid as of the
date of termination and shall not be entitled to additional compensation
or benefits, provided however that in the event of termination due to
disability of the Executive, the Company shall verify that the Executive
receives from his disability insurance policy issued in terms of Section
3.5 above funds for the period immediately following such termination.
9. Miscellaneous provisions
9.1 Entire Agreement, Amendments. Unless expressly stated herein, this
Agreement constitutes the entire understanding of the parties and
supersedes and annuls all oral or written representations or agreements,
privileges or understandings between the parties; save as expressly
provided in this Agreement the Executive shall not be entitled to any
payments or other benefits in respect of his employment and the
termination of his employment with the Company. This Agreement may only
be modified by an agreement in writing duly signed by both parties
hereto.
9.2 Severability. If any non material condition, term or covenant of this
Agreement shall at any time be held to be void, invalid or unenforceable,
7
such condition, covenant or term shall be construed as severable and such
holding shall attach only to such condition, covenant or term and shall
not in any way affect or render void, invalid or unenforceable any other
condition, covenant or term of this Agreement, and this Agreement shall
be carried out as if such void, invalid or unenforceable term were not
embodied herein.
9.3 Waiver. A waiver by a party of any of its rights under this Agreement
shall not be effective unless made by a written instrument duly signed by
such party.
9.4 Governing Law. This Agreement shall be governed by the laws of the state
of California, USA.
10. Notices
The parties' addresses for the purpose of this Agreement are:
OTI America Inc.:
Address:
Facsimile:
with a copy to On Track Innovations Ltd.
Address: Z.H.R. I.Z., Rosh Xxxx, 12000, Israel
Facsimile: (972)-6-693 88 87
Xxxx Xxxxxx:
Address:
Facsimile:
and any notice sent by one party to the other as per the above addresses
shall be considered as having reached its destination, if it was delivered
by hand, at the time of its delivery; if it was sent by registered mail, on
the first business day occurring following 96 hours from the time it was so
dispatched; and if it was sent by facsimile or e-mail, on the first business
day occurring following 48 hours from the receipt of the confirmation of
regular transmission of the notice.
In witness whereof the parties have set their signatures hereunto:
/s/ OTI America Inc. /s/ Xxxx Xxxxxx
-------------------- ---------------
OTI American Inc. Xxxx Xxxxxx
