EXHIBIT 10.3
EMPLOYMENT AGREEMENT
Employment Agreement made as of the _____ day of _____, 1998 by and between
American Card Technology, Inc. (the "Company"), a Delaware corporation, and
Xxxxxx X. Xxxxx, of Marietta, Georgia (the "Employee").
W I T N E S E T H :
WHEREAS, Employee is employed by the Company as its Vice President of
Technical Operations, 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 position of vice
president of technical operations and to perform such other duties as relate to
such position 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 initial base salary of Two
Hundred Thousand and 00/100 Dollars ($200,000.00) per year payable in equal
bi-weekly installments in arrears. Employee's Base Salary may be adjusted
upward at the sole discretion of the Company during the term of this
Agreement.
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. 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: Xxxxxx X. Xxxxx
0000 Xxxxxxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000
AMERICAN CARD TECHNOLOGY, INC.
By -----------------------
Its President
Duly Authorized
EMPLOYEE
--------------------------
Xxxxxx X. Xxxxx
AMERICAN CARD TECHNOLOGY, INC.
0000 XXXXXXX XXXX XXXX
XXXXXXXX 0000, XXXXX 000
XXXXXXXX, XXXXXXX 00000
-------------------------------------------------------------------------------
April 20, 1998
Xx. Xxxxxx X. Xxxxx
0000 Xxxxxxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000
Dear Rob:
I refer to that certain Employment Agreement dated as of the date hereof by
and between American Card Technology, Inc. (the "Company"), as Employer, and
Xxxxxxx Xxxxxxx, Xx., as Employee (the "Agreement").
Notwithstanding anything to the contrary contained Section 2 of in the
Agreement, until such time (the "Conversion Date") as the Company (i) raises an
amount equal to or greater than Six Million Four Hundred Thousand and 00/100
Dollars ($6,400,000.00), net of underwriting commissions, through an initial
public offering, or (ii) the closing of a subsequent debt financing arranged
through Lilly Beter Capital Group, Ltd., the bi-weekly payments to be made in
arrears with respect to base salary shall be calculated as if the base salary
was One Hundred Thousand and 00/100 Dollars ($100,000.00). Any balance of the
base salary shall accrue and bear interest at a rate of ten percent (10%) per
annum and be payable in full on the Conversion Date.
Please acknowledge your consent to the foregoing by countersigning the
enclosed duplicate copy of this letter below.
Very truly yours,
Xxxxxxx Xxxxxxx, Xx.
President
ACKNOWLEDGED AND AGREED TO
THIS ___ DAY OF _________, 1998
_______________________________
Xxxxxx X. Xxxxx
