EMPLOYMENT AGREEMENT
Employment Agreement made as of the 4th day of August, 1998 by and
between American Card Technology, Inc. (the "Company"), a Delaware corporation,
and Xxxxx X. Xxxxx, Xx. of Plantation, Florida (the "Employee").
W I T N E S E T H :
WHEREAS, Employee is employed by the Company as its Chief Financial Officer
and Treasurer, and as a condition of closing on an initial public offering of
the Company's common stock (the "IPO Closing") through Rockcrest
Securities L.L.C. ("Rockcrest"), Rockcrest, Employee and the Company have
required that this Employment Agreement be entered into to be effective on the
IPO Closing;
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth below, the parties hereby agree as follows:
1. EMPLOYMENT
1.1 Position and Duties. The Company shall employ Employee to serve in
and to have the authority and responsibilities for the positions of chief
financial officer and treasurer, and to perform such other duties as relate to
such positions or for such other position and duties as the Board of Directors
of the Company (the "Board") in its discretion may from time to time determine
and assign to him. The Board will have the authority to determine the means and
manner by which Employee is to perform his duties.
1.2 Exclusiveness. The Employee shall devote substantially all of his
business time, attention and energies to the business of the Company and the
performance of his responsibilities and duties and shall carry out such
responsibilities and duties diligently and to the best of his abilities. The
Employee recognizes that the Company is entering into this Agreement because of
the Employee's expertise, skills, and talents and his agreement to devote all of
such expertise, skills, and talents to the tasks assigned him pursuant to this
Agreement. The Employee agrees that he shall not engage in any other business
activities of any kind which would give rise to a conflict of interest for the
Employee with respect to his duties and obligations to the Company.
1.3 Compliance with Policies and Laws. Employee will at all times
comply with all applicable policies, standards and regulations of the Company as
may be established from time to time and will comply with all applicable laws
and regulations.
1.4 Personal Service. Employee's personal performance of his duties is
the essence of this Agreement. Employee's rights and obligations under this
Agreement are not assignable by Employee.
2. COMPENSATION
2.1 Base Salary. For all services to be rendered by Employee in any
capacity hereunder, including services as an officer, director, member of any
committee or any other duties assigned to him by the directors or officers of
the Company, the Company agrees to pay Employee an annual base salary of (i) One
Hundred Sixty Thousand and 00/100 Dollars ($160,000.00) during the first year of
the term hereof, (ii) One Hundred Seventy Thousand and 00/100 Dollars
($170,000.00) during the second and third years
of the term hereof, and (iii) One Hundred Seventy-Five Thousand and 00/100
Dollars ($175,000.00) during the fourth and fifth years of the term hereof,
payable in equal bi-weekly installments in arrears.
2.2 Incentive Bonus. Employee shall be entitled to participate in the
Company's Key Officer Incentive Bonus Plan if and when established by the Board.
This plan shall be established or changed as the circumstances warrant by the
Board and the amount which shall be paid to Employee as well as when such
payment will be made will likewise be established by the Board.
2.3 Other Bonuses or Incentive Compensation. The Company hereby agrees
to grant to Employee an option to purchase up to 92,700 shares of the Company's
common stock, par value $.001, pursuant to the Company's 1996 Stock Option Plan
(the "Plan"), on such terms and conditions as set forth in the Plan. Employee
may also receive such other bonuses, grants of stock, stock options, warrants or
stock appreciation rights as may be determined by the Board, in its sole
discretion.
2.4 Other Benefits. Employee shall be entitled to such fringe benefits,
including, but not limited to, vacation, sick leave, participation in medical,
dental and life insurance plans and pension or profit-sharing plans, as are
customarily provided to the senior executives of the Company as determined by
the Board of Directors of the Company and as provided by the terms of the
applicable benefit plans.
2.5 Reimbursement of Expenses. The Company shall reimburse the
reasonable travel, entertainment and other expenses incurred by Employee in
connection with the performance of his duties in accordance with such policies
as may be adopted from time to time by the Company.
3. TERM OF THE AGREEMENT
Employee's employment under this Agreement will commence upon the IPO
Closing and continue, subject to early termination as provided in Paragraph 4
below, for a term of five years.
4. EARLY TERMINATION; SEVERANCE
4.1 Employee's employment under this Agreement may or will, as
appropriate, be terminated prior to the expiration of the term set forth above
in Paragraph 3 in the following circumstances.
(a) Disability. If Employee is disabled and fails to perform
his duties hereunder on account of illness or other incapacity which prevents
Employee from performing his duties for a continuous period of one hundred
eighty days, the Company thereafter may, upon ten days written notice, terminate
Employee's employment under this Agreement.
(b) Death. In the event of the death of Employee, this
Agreement will terminate immediately.
(c) By the Company for Cause. The Company may terminate
Employee's employment under this Agreement for Cause. For purposes of this
subparagraph, the Company will have "Cause" to terminate this Agreement upon (i)
the willful and continued failure by Employee to substantially perform his
duties hereunder (other than such failure resulting from Employee's incapacity
due to physical or mental illness), after a written demand for substantial
performance is delivered by the Company that specifically identifies the manner
in which the Company believes the Employee has not substantially performed his
duties, or (ii) the willful engaging by Employee in misconduct which is
materially injurious
to the Company, monetarily or otherwise, (iii) the willful violation by Employee
of the provisions of this Agreement, (iv) a material breach of any fiduciary
duty owed by Employee to the Company or its relationships with employees,
suppliers, customers or others with whom the Company does business or (v) the
habitual or repeated misuse of alcohol or controlled substances. For purposes
of this subparagraph, no act, or failure to act, on Employee's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith or without reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding the foregoing, Employee will not be
deemed to have been terminated for Cause without reasonable notice to Employee
setting forth the reasons for the Company's intention to terminate for Cause, an
opportunity for Employee to be heard before the Board, and thereafter, a
determination that in the good faith opinion of the Board, "Cause" exists within
the meaning set forth in clause (i), (ii), (iii), (iv) or (v) of this
subparagraph.
(d) By Company Without Cause. The Company may terminate
Employee's employment under this Agreement unilaterally at any time for any
reason or for no reason by giving Employee ninety (90) days' advance notice of
the intention to terminate. Employee may, at the sole discretion of the
Company, be relieved of his duties during such ninety (90) day period, although
Employee must be paid during such period.
(e) By Employee. Employee may terminate his employment under
this Agreement at any time upon ninety (90) days written notice to the Company.
Employee may, at the sole discretion of the Company, be relieved of his duties
during such ninety-day period, but continue to be paid during such period.
4.2 In the event of termination of Employee's employment prior to the
end of the Term, Employee shall be entitled to a lump sum severance payment
payable on the date of termination as follows:
(a) In the event the Employee's employment is terminated due to
Employee's death or disability, the Employee or Employee's estate shall be
entitled to a payment equal to the sum of (i) six months of the then current
base annual salary (including accrued portions), (ii) any accrued salary which
has not been paid, and (iii) any expense reimbursements due and owing to him at
the time of such termination.
(b) If the Employee's employment is terminated by the Company
without Cause as defined above, or Employee terminates his employment for Good
Reason (as hereafter defined), the Employee shall be entitled to a payment equal
to the sum of (i) the greater of one year of the then current base annual
salary, or the total base annual salary which would be payable for the balance
of the Term, and (ii) a pro-rata portion of what the Incentive Bonus for the
then current year would be if the calculation for the year through such date of
termination annualized out for the year would have resulted in an Incentive
Bonus for the year, and (iii) any accrued salary which has not been paid, and
(iv) any expense reimbursements due and owing to him at the time of such
termination.
(c) In the event that Employee's employment is terminated by the
Company for Cause or is terminated by Employee voluntarily prior to the end of
the Term other than for Good Reason, Employee shall not be entitled to any
severance payment.
4.3 For purposes hereof:
"Good Reason" is defined to mean (i) the Board substantially diminishing
Employee's responsibilities and activities to a degree which is not commensurate
with the position held by Employee; or (ii) the Board taking action in material
breach of this Agreement; or (iii) requiring the Employee to relocate to
anywhere other than the metropolitan Atlanta area; or (iv) the voluntary
resignation of Employee at any time within sixty days after a Change in Control
(as hereinafter defined).
"Change of Control" shall mean any transaction or series of transactions
(including, without limitation, a tender offer, merger or consolidation) the
result of which is that any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), other
than Xxxxxxxx X. Perl, Xxxxxxx Xxxxxxx, Xx., Xxxxxxx Xxxxxxx and Xxxxxx
Xxxxxxxxx, or trusts for the benefit of any of the foregoing or their respective
families, and any "person" or "group" solicited by any of such persons: (i)
becomes the beneficial owner of more than 50 percent of the total aggregate
voting power of all classes of the voting stock of the Company and/or warrants
or options to acquire such voting stock, calculated on a fully diluted basis; or
(ii) acquires all or substantially all of the assets of the Company.
5. COVENANT NOT TO COMPETE; CONFIDENTIALITY
5.1 Noncompetition. (a) Employee acknowledges and understands that the
Business (as defined below) in which the Company is engaged can be and will be
effectively and efficiently conducted anywhere in the world and the Company's
business is international in scope (as opposed to national and regional).
Therefore, as a material consideration of the Company's entering into this
Agreement, Employee agrees that during the Term and for a period of one year
following termination of Employee's employment under this Agreement for any
reason whatsoever, in the entire world, directly or indirectly, Employee shall
not, in any location whatsoever, (i) own (as a proprietor, partner, stockholder,
or otherwise) an interest in or (ii) participate (as an officer, director, or in
any other capacity) in the management, operation or control of, or (iii) perform
services as or act in the capacity of an employee, independent contractor,
consultant or agent of any enterprise, which competes, or intends to compete
with the Company's Business (the "Non-Compete Covenant") except with the prior
written consent of the Board, which consent may be withheld or granted in the
Board's sole and absolute discretion. The Company's "Business" as that term is
used in this Paragraph 5.1 means the development, manufacture, marketing,
selling or distribution of smart cards or smart card related systems.
(b) Notwithstanding the foregoing, in the event that Employee's
employment is terminated due to expiration of the Term without early termination
under Section 4, and Employee's employment is not otherwise renewed, Employee
shall not be bound to the Non-Compete Covenant unless the Company makes the
following election. The Company shall have the option to bind Employee to the
Non-Compete Covenant for one year after the termination of his employment due to
expiration of the Term by electing to do so and agreeing to pay to Employee the
Non-Compete Consideration (as hereafter defined) in equal monthly installments
over the one year period. To make such election, the Company shall give
Employee notice of such election (which shall include an agreement to pay the
Non-Compete Consideration) by no later than the Election Date (as hereafter
defined). Failure to give such notice by the Election Date shall be deemed an
election by the Company to not bind Employee to the Non-Compete Covenant for the
one year period following expiration of the Term. In the event that the Company
shall default in its payment of any installment of the Non-Compete
Consideration, Employee shall be relieved from the Non-Compete Covenant, in
addition to any other rights and remedies which Employee may have. For purposes
hereof: the "Non-Compete Consideration" is the amount equal to the current base
annual
salary being paid to Employee on the day prior to the date of expiration of the
Term, and the "Election Date" is the date which is three (3) months prior to the
date on which the Term expires.
5.2 Covenant Not to Promote Termination of Relationships. As a material
consideration for the Company's entering into this Agreement, Employee covenants
and agrees that for a period of two years commencing on the termination of
Employee's employment with the Company, Employee shall not persuade or entice,
or attempt to persuade or entice any customer or client of the Company to
terminate its business or contractual relationship with the Company, or refrain
from establishing any such relationship with the Company.
5.3 Inducement of Breach. Employee shall promptly notify the Company if
any person, firm, partnership, limited liability company, association,
corporation or other entity attempts to induce Employee to breach any of the
terms or provisions of this Agreement.
5.4 Confidentiality. Employee acknowledges and agrees that all product
or service information, marketing information, lists or identities of the
Company's customers, pricing and cost information, financial information,
technical data, technical know-how, and other information and data related to
the Company's business ("Confidential Information") are valuable assets of the
Company. Except for Confidential Information which is a matter of public record
through no action or fault of the Employee, Employee shall not, during the Term
or after termination of Employee's employment hereunder for any reason
whatsoever, use, divulge, disclose, or communicate any Confidential Information
to any person or entity or use any Confidential Information for the benefit of
Employee or any other person or entity, except with the prior consent of the
Board of Directors of the Company, which consent may be withheld or granted in
the Board's sole and absolute discretion.
5.5 Return of Documents. Employee acknowledges and agrees that all
originals and copies of records, reports, documents, lists, memoranda, notes and
other documentation related to the business of the Company or containing any
Confidential Information shall be the sole and exclusive property of the Company
and shall be returned to the Company by Employee upon the termination of
Employee's employment hereunder for any reason whatsoever, or upon the written
request of the Company at any time.
5.6 No Solicitation. As a material consideration of the Company's
entering into this agreement, Employee covenants and agrees that during the Term
and for a period of two years after the termination of Employee's employment
hereunder for any reason whatsoever, neither Employee, nor any person or entity
controlled by Employee (including without limitation, members of Employee's
family), shall, directly or indirectly: (i) solicit for employment any person
employed by, or serving as a consultant to, the Company or the Company's
affiliates, successors or assigns or (ii) solicit or aid in the solicitation of
persons or business entities with whom the Company has done business or with
whom the Company has attempted to do business.
5.7 Equitable relief; Other Remedies. Employee acknowledges and agrees
that it would be difficult to measure damage to the Company from any breach by
Employee of any matter described in this Section 5 of this Agreement and that
monetary damages would be an inadequate remedy for any such breach.
Accordingly, Employee agrees that if Employee shall directly or indirectly
breach or take steps preliminary to breaching any of the provisions of this
Section 5 of this Agreement, the Company shall be entitled, in addition to all
other remedies it may have at law or in equity, to an injunction or other
appropriate orders or equitable relief to restrain any such breach, without
showing or proving any actual
damage sustained by the Company. Employee further agrees that, for any period
during which the breach of any provision of this Agreement has not been
enjoined, the Company shall be entitled, upon proof of same, to actual and
consequential damages caused by such breach, including, but not limited to loss
of business relationships, loss of goodwill and loss of prospective business
advantage.
5.8 No release. Employee agrees that the termination of this Agreement
shall not release Employee from any of Employee's obligations under this Section
5, all of which shall survive such termination.
6. INDEMNIFICATION
To the fullest extent permitted under the law, the Company will defend,
advance funds, indemnify and hold Employee harmless with respect to any expenses
incurred, claims made against and other liabilities arising in connection with
any actual or threatened action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (including any suit or proceeding by
or in the right of the Company) to which Employee is made a party, is threatened
to be made a party or is an actual or potential witness by reason of the fact
that Employee is an officer, employee, director or agent of the Company, or at
the request of the Company, an officer, employee, director or agent of any other
entity, unless, in connection with such action, suit or proceeding or in
connection with the claims made therein, Employee has engaged in acts of bad
faith, willful misconduct, gross negligence or reckless disregard of his duties
to the Company or the best interests of the Company.
7. GENERAL PROVISIONS
7.1 Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the employment of Employee by the
Company and supersedes all prior and contemporaneous agreements between them
with respect to such subject matter.
7.2 Modification. This Agreement may not be changed, modified,
released, discharged, abandoned, or otherwise amended, in whole or in part,
except by an instrument in writing, signed by an employee and an authorized
officer of the Company.
7.3 Waiver. Failure of any party at any time to require performance of
any provision of this Agreement shall not limit such party's right to enforce
such provision, nor shall any waiver of any breach of this Agreement constitute
a waiver of such provision itself. No attempted or purposed waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the party to be bound.
7.4 Severability. The agreements and covenants contained in this
Agreement are severable, and in the event any of the agreements and covenants
contained in this Agreement should be held to be invalid by an arbitrator or by
any court or tribunal of competent jurisdiction, this agreement shall be
interpreted as if such valid agreements and covenants were not contained herein;
provided however, that if any legal proceeding or arbitrator or a court shall
hold unenforceable the covenants contained in Section 5 above by reason of their
geographic extent or duration or otherwise, any such covenant shall be reduced
in scope to the extent required by law and enforced in its reduced form.
7.5 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the state of Georgia.
7.6 Controversies or Disputes. Any controversy, claim, or dispute
arising under or relating to this agreement, or that arises out of or that is
based upon the employment relationship (including any wage claim, any claim for
wrongful termination, or any claim based upon any statute, regulation, or law
including those concerning employment discrimination, sexual harassment, civil
rights, age or disabilities), including tort claims (except a tort that is a
"compensable injury" under workers' compensation law), or a dispute between the
parties that arose or arises before, during or after employment, other than any
matter as to which a party seeks injunctive relief, shall be resolved by a
single, neutral arbitrator in an arbitration conducted in Georgia, in accordance
with the then-current rules of commercial arbitration of the American
Arbitration Association. Employee and the Company agree that neither party is
entitled to recover punitive damages. The decision or award rendered by the
arbitrator shall be final, nonappealable, and binding upon the parties, and
judgment may be entered upon it in accordance with applicable law in a court of
competent jurisdiction. The arbitrator shall be an attorney with at least ten
years of experience in employment law. Arbitration in accordance with this
paragraph is the sole and exclusive method, means and procedure to resolve any
and all claims or disputes other than those seeking exclusively injunctive
relief. Employee and the Company hereby irrevocably waive any and all rights to
resolve disputes in a manner contrary to the provisions of this paragraph. Any
and all attempts to circumvent the terms of this paragraph shall be null and
void and of no force and effect whatsoever.
8. NOTICES
Any notice given pursuant this Agreement shall be in writing and shall be
deemed given on the earlier of the date the notice is (i) personally delivered
to the party to be notified, (ii) mailed, postage prepaid, certified with return
receipt requested, addressed as follows, or to such other address as a party may
from time to time designate by notice to the other party, or (iii) delivered at
the party's address via courier service.
To the Company: American Card Technology, Inc.
0000 Xxxxxxx Xxxx Xxxx
Xxxxxxxx 0000, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attention: President
To the Employee: Xxxxx X. Xxxxx, Xx.
00000 Xxxxxxxxx 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
AMERICAN CARD TECHNOLOGY, INC.
By
-----------------------------
Xxxxxxx Xxxxxxx, Xx.
Its President
Duly Authorized
EMPLOYEE
----------------------------
Xxxxx X. Xxxxx, Xx.
