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EXHIBIT 10.16
8/26/93
TFM/RHL/HSz/sz/M
15.000-0393
EMPLOYMENT CONTRACT
BETWEEN
SCM ▇▇▇▇▇▇▇▇▇ MICROSYSTEMS ENTWICKLUNGS - UND VERTRIEBS GMBH
▇▇▇▇▇▇▇▇▇▇▇▇▇. ▇▇▇,
▇▇▇▇▇ Planegg,
represented by [the shareholder committee,
which is represented by] [handwritten:] FRIEDRICH BORNIKOEL
pursuant to shareholder resolution dated 8/28/93
(hereinafter referred to as the "Corporation")
and
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇-▇▇▇▇▇▇▇-▇▇▇ ▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
(hereinafter referred to as the "General Manager")
NOTE:
Language indicated as being shown by strike out in the typeset document, or
manually struck-through, is enclosed in brackets " [ " and " ] " in the
electronic format.
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Section 1
ACTIVITY
1. The Corporation has appointed the General Manager to the position of
General Manager by shareholder resolution dated 3/29/90. This
appointment shall not preclude the appointment of additional General
Managers.
2. The General Manager shall conduct the transaction of the Corporation
conscientiously with the care of an ordinary prudent businessman and
shall perform the obligations assigned to him by statue, by-laws or
contract in a responsible manner.
3. The primary activity of the General Manager shall consist of the
responsibility for managing and supervising the Corporation, including
arranging, coordinating and implementing all measures.
4. In the event of appointment of additional General Managers, the
functions of the General Managers shall be defined by the shareholder
committee.
In engaging in his activities, the General Manager shall coordinate
with the remaining General Managers.
5. Upon resolution of the shareholder committee, the General Manager shall
also undertake other comparable activities.
6. The General Manager shall be exempt from the restrictions set forth in
Section 181 BGB [German Civil Code].
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7. The scope of responsibility of the General Manager pursuant to this
contract may be restricted or modified only with his written consent.
Without such agreement, the restriction or modifications shall be
deemed to constitute termination of the employment contract by the
Corporation.
Section 2
SHAREHOLDER RESOLUTIONS
1. The General Manager shall be bound by resolutions and instructions of
the shareholder committee and/or the general meeting of shareholders.
2. The shareholder committee may define general guidelines with regard to
the conduct of transactions.
3. The shareholder committee and/or general meeting of shareholders may
issue a binding set of by-laws which set forth the delineation of the
activities of the General Managers.
4. The General Managers shall require the consent of the shareholder
committee for the following management activities:
- annual budget
- purchase, sale or creation of encumberments on real property
or rights equivalent to real property
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- call for deposits towards the share premium
- disposition of industrial property rights and conclusion of
patent contracts, license contracts (with the exception of
simple product licenses for users), know-how contracts and
cooperation contracts
- conclusion of exclusive distribution contracts and entering
into delivery obligations which substantially restrict the
Corporation's freedom to act
- establishment, purchase and sales of business operations,
divisions or branch offices
- formation of Corporations or enterprises, purchase and sale of
equity interests in other enterprises
- conclusion of business lease and business management contracts
- sale of corporate assets as a whole or a substantial portion
thereof
- drawing and granting of credits in excess of DM 100,000.00 (in
the individual instance or in total)
- investments which (in the individual instance or in total) are
in excess of DM 200,000.00 (including leasing contracts)
- initiation of development projects with a volume in excess of
DM 200,000.00 (in the individual instance or in total)
- submission of guarantees and suretyships; excluded therefrom
shall be the usual guarantee for products of the Corporation
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- hiring of employees if their compensation exceeds 1.5 times
the respective premium measurement threshold in the pension
insurance scheme
- internal organizational changes of substantial importance
- all other extraordinary management measures
- management measures which the shareholder committee has made
subject to its consent.
Section 3
TERM
1. This employment contract shall begin when it is signed and is concluded
for an indefinite term. However, the provisions in Sections 6 through
10 shall not take effect until 1/1/94. Until that point in time, the
provisions in this regard set forth in Section 3 of the General
Manager's prior General Manager employment contract dated 5/14/90 shall
continue to apply.
2. It shall end no later than upon the expiration of the month in which
the General Manager reaches the age of 65.
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Section 4
TERMINATION/DISMISSAL
1. Regular termination
Each party may terminate this contract upon notice of six (6) months
effective at the end of any calendar half-year, but no earlier than
December 31, 1994.
In the case of doubt, the corporate law dismissal of the General
Manager shall be interpreted as termination of this contract at the
next possible point in time.
2. Extraordinary termination
The termination of this contract for good cause shall remain
unaffected.
Good cause for the Corporation shall exist in particular if the General
Manager violates substantial provisions of this contract or substantial
restrictions which are imposed upon him inter se with regard to
management.
3. Release
In each case of termination, the Corporation may release the General
Manager independent of the validity of the termination and subject to
his other rights.
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Section 5
REPRESENTATIVE AUTHORITY
1. The General Manager shall represent the Corporation judicially and
extra-judicially along with the other General Managers in accordance
with his appointment and the by-laws.
2. The General Manager shall observe the limitations imposed upon him by
this contract, the by-laws, the statute or a resolution by the
shareholder committee or general meeting of shareholders.
Section 6
COMPENSATION
1. As compensation for his activity, the General Manager shall receive an
annual salary in the amount of DM 180,000.00, payable in 12 monthly
installments, each at the end of the month minus the statutory
deductions.
2. In addition, the General Manager shall receive an annual bonus, the
amount of which shall be calculated from the amount of the result
earned for the fiscal year, as shown in appendix 1.
However, the bonus shall be at least DM 30,000.00.
3. As an advance towards the bonus, the General Manager shall receive
additional salary with his June and November salary installments, each
in the amount of one twelfth (1/12) of the annual salary set forth in
par. 1. Otherwise, the bonus shall be payable 14 days after the general
meeting of shareholders which adopts the annual financial statements.
4. The compensation provided pursuant to this provision shall constitute
settlement for the entirety of the activity of the General Manager,
including activity for subsidiaries, affiliated companies and other
companies, if any, as well as activity on Sundays, holidays and the
like. To the extent that the General Manager receives direct
compensation for holding such positions, such compensation shall be
offset against compensation set forth in this contract first--against
the bonus--unless expressly stipulated to the contrary.
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Section 7
FRINGE BENEFITS
1. For the duration of this contract, a company vehicle of the higher
middle class (approximately DM 2,000.00 per month leasing rate
excluding maintenance and insurance) shall be provided for the General
Manager; the General Manager may use said vehicle for personal purposes
as well. The General Manager shall bear income tax which accrues.
2. Direct insurance/retirement pension
For the duration of this contract, the Corporation shall bear the
premiums for a direct insurance policy in the respective maximum
permissible amount from a tax standpoint. The Corporation shall bear
the lump-sum income tax and church tax which accrues. In addition, the
Corporation may promise the shareholder a reasonable company retirement
pension without thereby creating a legal claim on the part of the
General Manager.
3. Risk insurance
In order to cover the increased risk resulting from the intensive
travel activity, the Corporation shall bear the expense of a risk
accident insurance policy payable in the event of the death of the
General Manager, with an insurance sum in favor of the General Manager
or his family members in the amount of DM 400,000.00 in the event of
death and DM 1 million in the event of disability.
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4. The Corporation shall pay 50% of the premiums of both a private capital
life insurance policy with disability protection to be concluded by the
General Manager and a voluntary health insurance policy. The taxes
allocable to said insurance policies shall be paid by the General
Manager.
The monthly allowance for life insurance shall be 50% of the respective
applicable maximum amount which must be paid into the statutory health
insurance system each month for employees liable to contribute to the
social insurance; however, said allowance shall not exceed DM 900.00.
Section 8
EXPENSES
The Corporation shall be obligated to the General Manager to reimburse necessary
and reasonable outlays. In individual cases, the outlays shall be documented in
accordance with the tax provisions, unless permissible lump-sum amounts are
settled in accordance with the tax provision.
Section 9
VACATION
1. The General Manager shall have a claim to annual vacation of 25 working
days.
2. The timing of the vacation shall be coordinated with the other General
Managers and the general meeting of shareholders and shall be in
observance of the interests of the Corporation.
3. The vacation right shall lapse no later than 3/31 of the following
year. No claim for compensation for unused vacation days shall exist.
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Section 10
CONTINUED PAYMENT OF SALARY IN THE EVENT OF SICKNESS OR DEATH
1. In the event of sickness or other blameless disability, payment of the
monthly compensation (Section 6 par. 1) shall continue for the period
of six (6) months. The continuation of payments shall begin in the
month which follows the occurrence of the work disability. In
addition, the Corporation shall enter into a sick day insurance policy
or assume the existing insurance policy which provided DM 10,000.00 in
coverage per month starting from the expiration of 6 months through 2
years.
2. Any third-party payments, such as payments on the basis of liability
claims, sick day insurance, etc., shall be offset against the payments
of the Corporation in such a manner that the aggregate of said
miscellaneous payments and the payments of the Corporation reach the
net compensation which the General Manager would have, had he been able
to work.
3. In the event of the death of the General Manager during the term of his
General Manager activity, payment of the monthly compensation (Section
6 par. 1) to his survivors (widow or orphans) shall continue for a
period of three (3) months. The continued payments shall begin upon
the death of the General Manager.
Section 11
DUTIES, ANCILLARY ACTIVITIES
1. The General Manager shall provide the entirety of his work energy and
the results thereof, as well as all experience and knowledge, solely
and exclusively to the Corporation.
2. All activity focused on gain shall require the prior written consent of
the shareholder committee. The General Manager shall be obligated to
notify the Corporation of outside employment which requires or may
require consent.
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3. The written consent of the shareholder committee shall also be required
for taking on a seat on a supervisory board, advisory board,
administrative board, trade association body, among others.
4. At the end of the employment relationship (or at the time of the
release, in the event of early release), the General Manager shall be
obligated by resolution of the shareholder committee to relinquish all
seats which he assumed or exercised on the basis of or in connection
with his activity with the Corporation.
Section 12
COMPETITION PROHIBITION
1. During the term of this contract, the General Manager shall not be
permitted to work directly or indirectly, professionally or
occasionally, for his own account or the account of a third party,
independently or dependently, in the business sector of the
Corporation; moreover, the General Manager shall not be permitted to
acquire an enterprise which engages in transactions in the business
sector of the Corporation or obtain an equity interest in, or otherwise
support, such an enterprise.
2. The restriction on competition set forth in the preceding paragraph
shall likewise apply to the territory of the Federal Republic of
Germany and the United States of America for a period of 1 (one) year
from the end of this employment contract. As compensation for
compliance with this restriction on competition, the General Managers
shall receive compensation in the amount of his basic salary set forth
in Section 6 section 1, which shall be payable as indicated therein.
Everything which the General Manager earns elsewhere through the
exploitation of his work energy or maliciously fails to earn during
the relevant time period shall be offset against this.
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Upon request, the General Manager shall be obligated to provide the
Corporation with information concerning the amount of his earnings.
Prior to the end of the employment relationship, the Corporation may
waive the competition prohibition by written declaration, with the
effect that the Corporation shall be free from the obligation to pay
the compensation.
3. Specifically included in the business sector of the Corporation for
purposes of this provision shall be the sector of personal computer
memory cards, but not the activity involving Personal Computer Memory
Cards Interface Association (PCMCIA).
Section 13
BUSINESS AND OPERATIONAL SECRETS
The General Manager shall be obligated to maintain unrestricted and complete
secrecy with regard to all business and operational secrets, as well as all
other confidential information or data relating to the Corporation or its
enterprise. The duty of confidentiality on the part of the General Manager under
this Section 13 shall apply after the end of the contractual relationship.
The General Manager is aware of the special provisions concerning the criminal
punishability of violation of business and operational secrets under Section 17
of the Act Against Unfair Competition.
Section 14
RELEASE OF DOCUMENTS
When this employment relationship ends (or at the time of release, in the event
of earlier release,), the General Manager shall be obligated to return to the
Corporation--without being requested to do so--all documents, records and other
materials which are related to his General Manager activity.
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Section 15
INVENTIONS, COPYRIGHTS
1. Rights to inventions or technical improvements which the General
Manager made or worked out during his activity on behalf of the
Corporation, in connection with his activity on behalf of the
Corporation, as a result of his experiences arising from his activity
on behalf of the Corporation or on the basis of studies of the
Corporation shall be held solely by the Corporation. The General
Manager hereby assigns all relevant rights at this time. The
Corporation shall not be obligated to make any additional compensation
in this regard. The Employee Invention Act shall not be applicable in
the absence of employee status on the part of the General Manager.
2. Accordingly, the General Manager hereby assigns to the Corporation
exclusive use, at no charge, of any copyrights arising through him for
works created in connection with his activity, as a result of his
experience arising from his activities on behalf of the Corporation or
on the basis of studies by the Corporation.
Section 16
NO COLLATERAL AGREEMENTS, MODIFICATIONS, WRITTEN FORM
This contract contains all agreements of the parties. Unless they are separately
mentioned, no collateral agreements exist. Contractual modifications must be in
writing in each instance. The General Manager employment contract dated 5/14/90,
as well as the previous bonus provision and pension assurance, shall become
invalid effective immediately, except as stated in Section 3 par. 1. The General
Manager can no longer assert claims arising therefrom.
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Section 17
SEVERANCE CLAUSE
In the event that individual contracts are or should become invalid, this shall
not affect the validity of the remaining provisions. In place of the invalid
provision, a provision shall be agreed upon which comes as close as possible to
the economic intent of the parties. The same shall apply in the event that the
contract contains loopholes.
Section 18
PLACE OF PERFORMANCE AND PLACE OF VENUE
The place of performance and place of venue for all possible disputes arising
from this contract shall be the domicile of the Corporation.
Martinsried, 8/26/93
s\Friedrich Bornikoel s\▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------- ------------------------------
(SCM ▇▇▇▇▇▇▇▇▇ Microsysteme (▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇)
Entwicklungs- und Vertrieds
GmbH)
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APPENDIX TO THE GENERAL MANAGER CONTRACT OF MR. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall receive a bonus in the amount of
DM 60,000
for 1994 if SCM ▇▇▇▇▇▇▇▇▇ Microsysteme Entwicklungs- und Vertriebs GmbH has
worldwide sales of at least DM 18.0 million in 1994 and achieves a balanced
result from ordinary business activity. In any case, however, he shall receive
DM 30,000.
For the ensuing years, new agreements shall be concluded through the shareholder
committee, for which the consent of the Zweiten Beteiligungsgesellschaft [Second
Holding Company] of TVM Techno Venture Management GmbH & Co. KG is necessary.
Munich, August 26, 1993
FB/GR
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MANAGEMENT COMPENSATION 1997
GENERAL GUIDE LINES:
- ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ shall have the same fixed
income and target bonus in US-Dollars, since SCM Inc.'s internal currency is
US-Dollar.
- The Bonus shall be now and in the future based on:
- budget, business model, profit, stock price
- internal organization, IPO, investors' relations
- strategic goals, strategic partnerships which are relevant not only for
the result in 1997, but also in future years.
THE PROPOSAL IS:
Fix salary incl. BoD fee: US$ 190k
Bonus up to US$ 75k
The bonus shall be based on the following:
I. PROFIT
US$ 0 to US$ 15k linear in proportion to a net income before tax (but before
interest expense)
US$ 10k if the confirmed order backlog (in writing) as of December 31, 1997
which is shipable in Q1 1998 exceeds 70% of the revenues planned in Q1 1998.
II: INTERNAL ORGANIZATION, IPO, INVESTORS' RELATIONS
US$ 15k if the company has a successful IPO or if the company is ready to
go public in Q3 1997 at a price range of US$ 10 -12 per share.
US$ 15k for the strategic investment of Intel, NIF, Itochu and Telenor.
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MANAGEMENT COMPENSATION 1997 - CONTINUED
III. STRATEGIC GOALS
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇:
- US$ 5,000 if the Intel partnership develops fine and US$ 5,000 if this
relationship leads to business of US$ 0.5 million in 1997 or up to US$ 3.0
million in 1998.
- US$ 5,000 for a clear strategy to secure SCM's access to chip technology and
to integrate SCM's technology in chips, i.e. UART (similar to Oak
Technology's strategy)
Time frame: July/August
Board approval: September
- US$ 5,000 for a strategic paper on SCM's strategy in the security business
SCM's options (cooperations, acquisitions)
Time frame: July/August
BoD Approval: September
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
- US$ 3,000 for each strategic new major customer for Smart Card readers in
America, the target is three customers
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇:
- US$ 10,000 if 30% of revenues in the USA in 1997 is not related to the US
government
▇▇▇▇▇ ▇▇▇▇▇:
- US$ 3,000 for each new major customer for Smart Card readers (DVB CAM, DVB
SWAPBOX, InterNet COMMERCE, InterNet access) in Europe and Asia.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇:
- US$ 3,000 for each major contract worth US$ 1.0 million for chips plus
firmware with SCM' technology inside i.e. UART
