EMPLOYMENT AGREEMENT
EXHIBIT 10.3
This EMPLOYMENT AGREEMENT (the
“Agreement”)
is effective as of February 12, 2010 (the “Effective
Date”), between Document
Security Systems, Inc., a New York corporation with an office at 00 Xxxx
Xxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxx Xxxx 00000 (“Company”)
and Xxxxxx X.
Xxxxxx, residing at 000 Xxxxxxx Xxx, Xxxxxx, Xxx Xxxx 00000 (“Executive”).
R
E C I T A L S:
WHEREAS, Company is in the
business of developing, licensing, manufacturing and selling anti-counterfeiting
technology and products; and
WHEREAS, Company desires to
engage the Executive, and the Executive wishes to serve the Company on the terms
and conditions set forth below.
P
R O V I S I O N S:
NOW, THEREFORE, in
consideration of the mutual promises and covenants set forth herein, the parties
agree as follows:
1. Employment;
Duties. Company hereby agrees to employ Executive as President
and Chief Executive Officer (“CEO”) of
Premier Packaging Corporation. Executive hereby accepts such
employment. Executive will perform those duties and have such
authority and powers as are customarily associated with the position of
CEO, and
such other duties and responsibilities as the CEO and/or the Board of Directors
of Company may reasonably request. The Executive shall report to the
CEO of the Company or his designee.
2. Term. The
term of this Agreement shall commence on the Effective Date and shall continue
for a period of (5) five years from the Effective Date unless otherwise
terminated or extended as provided herein (the “Term”). Following
the initial five (5) year Term of this Agreement, this Agreement shall be
renewed automatically for a succeeding period of five (5) years (the “Renewal
Period”) on the same terms and conditions as set forth herein unless
either party shall, at least ninety (90) days prior to the expiration of the
initial Term, provide written notice to the other party of its intention not to
renew this Agreement. The period during which Executive is employed
by the Company, including the initial Term and any Renewal Period, is
hereinafter referred to as the “Employment
Period.” If the Company elects not renew the Term for an
additional five (5) years, then the Company will pay to the Executive, One
Hundred Thousand Dollars ($100,000) per year for a period of five (5) years
after the initial Term together with the additional payments and benefits
described in Section 4(b), unless not renewed for Cause (as defined
below).
3. Termination
of Agreement.
(a) Termination
Date. The employment of Executive and the Employment Period
shall terminate as provided in Section 2 above or upon the date (the “Termination
Date”) that is the earliest to occur of any of the following
events:
(i) the
death of Executive;
(ii) the
termination of Executive’s employment by the Company due to Executive’s
Disability (as defined below) pursuant to Section 3(b) hereof;
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(iii) the
termination of Executive’s employment by the Company for Cause (as defined
below) pursuant to Section 3(c) hereof, or for any reason not constituting
Cause; or
(iv) by mutual agreement of the Company and
Executive.
In the event of the termination of
Executive’s employment hereunder, the rights and obligations of the parties
shall be determined pursuant to this Agreement.
(b) Disability. If
Executive incurs a Disability, the Company may terminate Executive's employment
following such Disability period, upon thirty (30) days prior written notice to
Executive. Such termination shall not be effective if Executive
returns to the full time performance of his material duties within such thirty
(30) day period.
(c) Termination
for Cause. Executive's employment and the Employment Period
may be terminated by the Company for Cause (as defined below) upon thirty (30)
days’ prior written notice to Executive indicating the specific Cause event
relied upon and setting forth in reasonable detail the facts and circumstances
which provide a basis for the termination for Cause. Any purported
termination for Cause which is held by a court not to have been based on the
grounds set forth in this Agreement or not to have followed the procedures set
forth in this Agreement shall be deemed a termination by the Company without
Cause.
(d) Definitions.
(i) For
purposes of this Agreement, “Cause”
shall mean (A) the breach by Executive of any material term or condition of this
Agreement for a period of thirty (30) days after written notice to Executive
specifying the breach, (B) Executive’s willful misconduct or gross negligence in
the performance of his duties hereunder, (C) Executive's theft, embezzlement or
fraud involving, relating to or against Company, (D) Executive’s commission of,
or conviction for, a felony or crime involving moral turpitude that has an
adverse effect on the Company, (E) Executive’s breach of any material fiduciary
duty owed by Executive to the Company as an officer thereof or (F) conviction of
the Executive of any felony involving fraud or embezzlement.
(ii) For
purposes of this Agreement, “Disability”
shall mean (A) a condition that will render Executive eligible for permanent
disability insurance benefits under the Company’s disability insurance policy
and, if none, then (B) that Executive has been unable for a period or periods
constituting one hundred eighty (180) consecutive calendar days in any twelve
(12) month period as a result of a mental illness, physical incapacity or loss
of legal capacity, to perform Executive’s duties hereunder, under such
circumstances as to render Executive eligible for permanent disability income
payments under the standard terminology of the permanent disability income
insurance policy for employees then in effect for the Company, or if none, then
under the provisions of applicable New York disability laws and
regulations.
4. Consequences
on Termination.
(a) Consequences
of Termination for Death or Disability; Termination for
Cause. If Executive's employment and the Employment Period are
terminated (i) by reason of Executive's death or Disability, (ii) by Executive
or by the Company for Cause, then in any such case, the Employment Period shall
terminate without further obligations to Executive or Executive's legal
representatives under this Agreement except that Executive (or his legal
representatives) shall be entitled to receipt of: (i) a lump sum
payment of any base salary earned but unpaid through the Termination Date, any
accrued but unused vacation pay payable pursuant to the Company's policies
through the Termination Date (“Accrued
Vacation”), and any unreimbursed business expenses payable pursuant to
Section 7 (collectively, the "Accrued
Amounts"); (ii) payment of any earned but unpaid bonus for all fiscal
quarters ending in the fiscal year in which the termination occurs (“Unpaid
Bonus”), (iii) payment of any other amounts or benefits owing to
Executive through the Termination Date under the then applicable employee
benefit plans of the Company which shall be paid in accordance with such plans
and programs (“Accrued
Benefits”); and (iv) continued participation under the then applicable
medical and dental plans of the Company with all such benefits as described in
Section 6(d) below for the period specified therein.
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(b) Consequences
of Termination for any Reason Not Constituting Cause. If
Executive's employment and the Employment Period are terminated (i) by the
Company for any reason not constituting Cause, or (ii) as a result of the
Company giving notice of non-extension of the Employment Period pursuant to
Section 2 hereof, then in any such case, Executive shall be entitled to
receive: (A) equal monthly payments of an amount equal to his then
monthly rate of Base Salary from the Termination Date through the end of the
initial Term; (B) the payments described in Section 2 above for the period
specified therein; (C) continued participation under the then applicable medical
and dental plans of the Company with all such benefits as described in Section
6(d) below for the period specified therein; (D) payment of all Accrued Amounts
through the Termination Date; (E) payment of any Unpaid Bonus amount;
(F) payment of all Accrued Benefits; (G) payment of the bonus
the Executive would have been entitled to receive during the remainder of the
Term based upon the actual results of the Company for such year, payable each
year in accordance with Section 6(a) below; and (H) continued benefits pursuant
to Section 6(e) hereof.
5. Salary. In
consideration for the services rendered by Executive on behalf of Company during
the Term of this Agreement, Company shall pay Executive, commencing on the
Effective Date, an annual salary, payable in accordance with the Company’s
regular payroll practices, of Two Hundred Forty Thousand Dollars
($240,000).
6. Benefits.
(a) During the Employment
Period, Executive shall be entitled to receive an additional annual
bonus each calendar year equal to ten percent (10%) of Net After-tax Income plus
depreciation, amortization, and stock based compensation (“Adjusted Net
Income”) of Premier Packaging Corporation (an operating subsidiary of the
Company), as if it were a standalone entity, (in accordance with generally
accepted accounting principles, or GAAP). The
calculation, administration and payment of the annual bonus will be determined
on an annual basis, and shall be payable to Executive within a thirty (30) day
period after the end of the calendar year in which the Adjusted Net Income is
generated and the bonus calculated. As an example, if Net
After-tax Income (as defined by GAAP) for Premier Packaging Corporation for a
calendar year is $1,000,000 and depreciation and amortization expense is $75,000
and stock based compensation expense is $50,000, then the Adjusted Net Income of
such calendar year will be $1,125,000 and Executive’s annual bonus for such
calendar year will be $112,500.
(b) Executive will be
immediately eligible for the Company’s 401(k) plan.
(c) Executive will be
eligible to participate in the Company’s 2004 Employee Stock Option Plan
commensurate with other members of the Company’s senior management team, at the
discretion of the Company’s Board of Directors or Compensation
Committee.
(d) Executive shall be
entitled to participate in all employee benefit plans and programs sponsored by
Company, including, without limitation, any group disability, life, major
medical and accidental death and dismemberment insurance plans and/or benefits
and profit sharing, retirement or pension plans in a manner not less than any
other Company employees through the Term of this Agreement. The
Company agrees that the Company shall pay for 100% of Executive’s health
insurance coverage for Executive and his family for ten (10) years or
his Employment Period, whichever is greater. If Executive is not
employed during any of the ten (10) years of coverage, then the value of such
coverage will be reported to Executive as 1099 income during such period of
non-employment. This provision shall not apply if Executive is terminated for
Cause.
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(e) During
the Employment Period, term life insurance coverage equal to one (1) year of
Executive’s annual salary shall be maintained by the Company, with Executive’s
spouse or other named beneficiary(ies) named as beneficiaries under any such
policy.
(f) Six
(6) weeks of paid vacation per year.
(g) Executive
will be covered under the Company’s Directors & Officers Liability
Insurance.
(h) All
forms of compensation referred to in this Agreement are subject to reduction to
reflect applicable federal, state and local withholding and payroll
taxes.
7. Expenses. Executive
will be entitled to be paid or reimbursed for all reasonable, documented
expenses incurred by Executive in connection with Executive’s responsibilities
to Company, including, without limitation, administrative, travel, lodging,
food, and entertainment, in accordance with the Company’s policies for senior
executive employees in effect from time to time.
8. Confidential
Information. Executive shall not, during the Term and thereafter,
disclose in any manner to any person or entity, except as required or necessary
in the course of his employment by Company or as otherwise authorized by
Company, any Confidential Information (as defined herein). “Confidential
Information” shall mean any information existing as of the date of this
Agreement, or thereafter developed, in which Company has a proprietary interest,
including, but not limited to, information relating to its patents, technology,
research and development, technical data, trade secrets, know-how, products,
services, finances, operations, sales and marketing, customers and customer
information, licenses, orders for the purchase or sale of products, personnel
matters and/or other information relating to Company, whether communicated
orally, electronically or in writing, or obtained by Executive as a result of
his employment, or through observation or examination of the Company’s
business.
9. Non-Competition
Covenant; Non Solicitation Covenant
(a) During
the Employment Period and for a period of the longer of (i) one year thereafter,
(ii) five years from the Effective Date, or (iii) the period of time that
Executive is receiving any severance payments under Sections 4(b) above, Executive agrees
that he will not directly or indirectly engage in any business or businesses
that are engaged in businesses that are in direct competition with the Company
or any of its subsidiaries or affiliates at such time. For purposes
hereof, businesses that are in direct competition to Company shall include,
without limitation, those that sell design and manufacturer packaging materials
or commercial printing or sell optical deterrent technologies.
(b) Notwithstanding
anything herein to the contrary, Executive shall not be prevented or limited
from (i) investing in the stock or other securities of any corporation whose
stock or securities are publicly owned and regularly traded on any public
exchange, (ii) serving as a director, officer or member of professional, trade,
charitable and civic organizations, or (iii) passively investing (not to exceed
being a beneficial owner of more than three percent (3%) of the outstanding
Common Stock) his assets in such a form and manner as will not conflict with the
terms of this Agreement and will not require services (whether as consultant, an
officer, employee or director) on the part of Executive in the operation of the
business of the entities in which such investments are made.
(c) In
furtherance of the foregoing, Executive shall not, during the aforesaid period
of non-competition, directly or indirectly, in connection with any business
involved in the manufacture, development and/or distribution of
anti-counterfeiting technology and document security businesses, or any business
similar to the business in which the Company or any of its subsidiaries or
affiliates is then engaged, or in the process of developing during Executive’s
tenure with the Company, solicit any customer or employee of the Company who was
a customer or employee of the Company during the tenure of his
employment.
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(d) If
any court shall hold that the duration of non-competition, the geographic scope
or any other restriction contained in this Section 9 is unenforceable, it is our
intention that same shall not thereby be terminated but shall be deemed amended
to delete there from such provision or portion adjudicated to be invalid or
unenforceable or, in the alternative, such judicially substituted term may be
substituted therefor.
(e) The
parties acknowledge and agree that any violation of the confidentiality or
non-competitive provisions of this Agreement would subject the Company to
irreparable injury for which monetary damages will not be an adequate
remedy. Therefore, in addition to any remedies otherwise available,
the Company will be entitled to injunctive relief and specific performance to
enforce the terms of this Agreement, all without the necessity of posting a
bond.
10. Indemnification.
Company shall, to the maximum extent permitted by law, indemnify Executive
against all expenses, including, without limitation, reasonable attorneys’ fees,
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of Executive’s
employment by Company. Company shall, to the maximum extent permitted
by law, advance to Executive any expenses incurred in defending any such
proceeding. Company agrees to obtain Directors and Officers Liability
insurance, and to include Executive in the coverage of this policy.
11. Work-for
Hire. Except as otherwise may be agreed by the Company in
writing, in consideration of the employment of Executive by the Company, and
free of any additional obligations of the Company to make additional payment to
Executive, Executive agrees to irrevocably assign to the Company any and all
inventions, software, manuscripts, documentation, improvements or other
intellectual property whether or not protectable by any state or federal laws
relating to the protection of intellectual property, relating to the present or
future business of the Company that are developed by Executive prior to the
termination of his employment with the Company, either alone or jointly with
others, and whether or not developed during normal business hours or arising
within the scope of his/her duties of employment. Executive agrees
that all such inventions, software, manuscripts, documentation, improvement,
trade secrets or other intellectual property shall be and remain the sole and
exclusive property of the Company and shall be deemed the product of work for
hire. Executive hereby agrees to execute such assignments and other
documents as the Company may consider appropriate to vest all right, title and
interest therein to the Company and hereby appoints the Company Executive’s
attorney-in-fact with full powers to execute such document itself in the event
Executive fails or is unable to provide the Company with such signed
documents. This provision does not apply to an invention for which no
equipment, supplies, facility, or intellectual property or trade secret
information of the Company was used and which was developed entirely on
Executive's own time, unless (a) the invention relates (i) to the business of
the Company, or (ii) to the Company's actual or demonstrably anticipated
research or development, or (b) the invention results from any work performed by
Executive for the Company.
12. Miscellaneous.
(a) This
Agreement:
(i)
shall
constitute the entire agreement between the parties hereto concerning the
subject matter herein and supersedes all prior agreements, written or oral,
concerning the subject matter herein, and there are no oral understandings,
statements or stipulations bearing upon the effect of this Agreement which have
not been incorporated herein.
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(ii) may
be modified or amended only by a written instrument signed by each of the
parties hereto.
(iii) shall
bind and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns.
(iv) may
not be assigned by either party without a written agreement signed by all
parties hereto. Any assignment not signed by all parties is null and
void.
(b) If
any provision of this Agreement shall be held invalid or unenforceable by
competent authority, such provision shall be construed so as to be limited or
reduced to be enforceable to the maximum extent compatible with the law as it
shall then appear. The total invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
(c) This
Agreement shall be construed in accordance with and governed by the laws of the
State of New York without reference to conflict of laws
principles. Any litigation involving this Agreement shall be
adjudicated in a court with jurisdiction located in Monroe County, New York and
the parties irrevocably consent to the personal jurisdiction and venue of such
court.
(d) All
notices and other communications under this Agreement must be in writing and
must be given by personal delivery, via overnight delivery or first class mail,
certified or registered with return receipt requested, and will be deemed to
have been duly given upon receipt if personally delivered or delivered via
overnight delivery, five (5) days after mailing, if mailed, to the respective
persons named below:
If to
Company:
Document
Security Systems, Inc.
00 Xxxx
Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
Xxx Xxxx 00000
If to
Executive:
Xxxxxx
X. Xxxxxx
000
Xxxxxxx Xxx
Xxxxxx,
Xxx Xxxx 00000
Any party
may change such party’s address for notices by notice duly given pursuant to
this Section.
(e) In
the event of litigation to enforce the terms and conditions of this Agreement,
the losing party agrees to pay the substantially prevailing party's costs and
expenses incurred including, without limitation, reasonable attorneys’
fees.
(f) This
Agreement may be executed simultaneously in one or more counterparts, each one
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(g) Failure
of either party at any time to require performance of any provision of this
Agreement shall not limit the party's right to enforce the provision, nor shall
any waiver of any breach of any provision be a waiver of any succeeding breach
of any provision or a waiver of the provision itself for any other
provision.
(h) If
any provision of this Agreement, or the application of such provision to any
person or circumstance, shall be held invalid, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those as to which it is held invalid, shall not be affected
thereby.
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IN WITNESS WHEREOF, the
parties have executed this Agreement on the day and year first above
written.
COMPANY:
Document
Security Systems, Inc.
By:
/s/ Xxxxxxx Xxxxx
Name:
Xxxxxxx Xxxxx
Title: Chief
Executive Officer
EXECUTIVE:
/s/
Xxxxxx Xxxxxx
Xxxxxx
X. Xxxxxx
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