EMPLOYMENT AGREEMENT
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AGREEMENT made as of the 3rd day of November 1998 ("Effective Date") by and
between Viisage Technology, Inc. (the "Employer") and Robert C. Hughes of
Lincoln, Massachusetts (the "Employee").
Recitals
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In connection with the Employee's resignation as President and Chief
Executive Officer of the Employer and the termination of his employment
agreement dated February 1, 1996, the Employer desires to continue to employ the
Employee until the Employee's planned May 7, 1999 resignation, and the Employee
desires to continue to be employed by the Employer until his planned
resignation, to perform certain duties as set forth below and on the terms set
forth in this Agreement, such terms to include the adjustment of stock option
grants. Therefore, in consideration of the mutual covenants contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employer and the Employee
agree as follows:
1. Services to be Rendered. Commencing on the Effective Date, the Employer
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will employ the Employee, and the Employee will serve the Employer by reporting
to the Chief Executive Officer and performing those duties which make reasonably
appropriate use of his skills and experience as are assigned to him by the Chief
Executive Officer, subject at all times to the by-laws of Viisage and to the
direction and supervision of Viisage's Board of Directors.
2. Scope. The Employee agrees that during the term of his employment he (i)
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shall devote his best efforts and business judgment to the advancement of the
Employer's interests and to the performance of the services described herein and
such other duties as may be reasonably assigned to him by the Board of Directors
of the Employer; and (ii) shall not, without the reasonable consent of the Chief
Executive Officer, engage in any other employment or business, directly or
indirectly, alone or as a member of a partnership or as a director, officer,
employee, consultant or advisor to any business entity; provided, however,
nothing herein shall restrict the Employee from owning not more than five (5%)
percent of the issued and outstanding shares of any publicly-held corporation or
making passive investments in any private business entity which does not compete
with the Employer or any of its affiliates, and which will not interfere with
the performance of his duties hereunder.
3. Term of Employment.
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(a) Termination Date. The Employee's employment under this Agreement shall
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continue until May 7, 1999, provided, however, that the term of employment may
end sooner pursuant to Sections 3(b) or (4) below. The last day of such term is
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hereinafter referred to as the "Termination Date." Except as expressly provided
for in this Agreement, or as required by law, the Employee shall not be entitled
to any further compensation, bonus, severance, employee benefits, or other
consideration under this Agreement after the Termination Date other than amounts
previously accrued and unpaid prior to the Termination Date. If the Employee
dies, his estate or designated
beneficiary shall be paid all base salary and incentive compensation earned
through the date of death.
(b) Resignation by Employee. The Employee may resign from his employment
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hereunder at any time prior to May 7, 1999 upon ninety (90) days prior written
notice to the Employer. In the event of resignation by the Employee under this
Section 3(b), the Chief Executive Officer may elect to waive the period of
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notice, or any portion thereof, and, in such event, the Employer will pay the
Employee's salary and bonus through the notice period (or for any remaining
portion of the period). From and after the effective date of such termination by
the Employee of his employment hereunder, the Employer shall have no further
liability to the Employee for severance, compensation, or other benefits, except
as required by law.
4. Provisions Relating to Disability and Cause.
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(a) Disability Defined. Disability shall mean the Employee's inability to
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perform his usual and customary duties for the Employer as a result of any
illness, injury, accident, or condition of either a physical or psychological
nature which could reasonably be expected to last more than 180 days during any
period of 365 days, in the written opinion of a duly licensed physician selected
by the Employer who has expertise with the particular disability. The opinion of
the physician shall be conclusive as of its date, absent fraud or manifest
error. If the Employer reasonably believes that the Employee is disabled, the
Employee shall permit the physician to examine him and otherwise cooperate with
the physician's efforts in assessing the disability.
(b) Continuation of Compensation and Benefits. If the Employee is
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determined to be disabled in accordance with Section 4(a) above, his base
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salary, as described in Section 5(a) below, shall continue to be paid until he
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becomes eligible for and receives disability income under the Employer's
disability income plan or, in the absence of a disability income plan at the
time of such disability, until the commencement of disability payments in
accordance with the last sentence of this Section 4(b). While receiving
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disability income payments under such plan, the Employee shall not receive any
compensation under Section 5 (except a payment which has already been earned but
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is payable as of a later date), but shall continue to participate in the
Employer's benefit plans until his employment under this Agreement terminates
or, if later, the date specified in such plans for termination of participation
in the event of disability. In the absence of a disability income plan at the
time of such disability, the Employer shall pay the Employee benefits equal to
those the Employee would have received, and at the times he would have received
them, if the Employer's current disability income plan were in effect at such
time.
(c) Cause. A termination by the Employer for cause is permitted under this
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Agreement in the following circumstances:
(i) the Employee has been convicted of embezzlement, a felony,
theft, crime of moral turpitude or shall have been convicted of or entered a
plea of no contest relating to any illegal act that materially and adversely
reflects upon the business, affairs or reputation of the Employer; or
(ii) the Employee has breached any one or more of the material
provisions of this Agreement, which breach, refusal or failure shall not have
resulted from a breach of any provision
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of this Agreement by the Employer; provided that any termination under this
clause (ii) shall occur only after the Employer's written notice of such breach
to the Employee, and the Employee's opportunity to cure such breach within 30
days of such notice, in which event the breach hereunder shall be determined as
of the expiration of such 30 day period.
Termination pursuant to this Section 4(c) shall be without prejudice to any
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other right or remedy to which the Employer may be entitled either at law, in
equity or under this Agreement.
5. Compensation and Expenses.
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(a) Base Salary. During the term of the Employee's employment hereunder,
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the Employer shall pay the Employee a base salary at a rate of $235,500 per
year, payable in accordance with the Employer's regular payroll practices.
(b) Expenses. The Employee shall be reimbursed by the Employer for
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reasonable expenses actually incurred in the course of his employment, subject
to the requirements with respect to substantiation and documentation as may be
specified by the Employer from time to time.
6. Benefit Plans. The Employee shall be entitled to continue to participate in
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any employee benefit plans from time to time in effect for executive officers of
the Employer.
7. Non-Competition. In consideration of the payments to be made to the
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Employee hereunder, notwithstanding termination or expiration of this Agreement
(whether voluntary or involuntary), the Employee covenants and agrees that for a
period of two (2) years from the Termination Date, he will not engage, directly
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or indirectly, in any business competing with a primary business of the Employer
on Termination Date, or which could reasonably be expected to be detrimental to
the business of the Employer, whether as principal, agent, partner, stockholder,
director, consultant, employee or in any other capacity. Nothing herein shall
restrict the Employee from owning not more than five percent (5%) of the issued
and outstanding shares of any publicly-held corporation.
For purposes of this Section 7, the term "Employer" shall include all of
the Employer's affiliates.
8. Non-Solicitation of Customers and Employees. In consideration of the
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payments to be made to the Employee hereunder, notwithstanding termination or
expiration of this Agreement (whether voluntary or involuntary), the Employee
covenants and agrees that during the term of this Agreement, and for a period of
two (2) years after the Termination Date, he will not, as an employee, agent,
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servant, or in any other capacity for himself or for any person, corporation,
partnership, organization, association or other entity, directly or indirectly,
deal with, represent, contact, pursue, call upon, solicit, accept, receive,
employ or engage any business from:
(i) any customers of the Employer, as such customers exist at any time
during the term of the Employee's employment hereunder; and
(ii) any potential customers of the Employer being actively solicited
during the six (6) month period prior to the Termination Date; and
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(iii) any person who was employed by the Employer during the six (6) month
period prior to the Termination Date or becomes an employee of the Employer
during the six (6) month period after the Termination Date.
Promptly following the Termination Date, the Employer shall provide the
Employee with a list of those customers and potential customers with respect to
which this Section 8 shall apply. For purposes of this Section 8, the term
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"Employer" shall include all of the Employer's affiliates.
9. Confidentiality. The Employee shall not at any time, whether during or
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after the termination of his employment hereunder, reveal to any person,
corporation, partnership, organization, association or any entity any of the
trade secrets or confidential information concerning proprietary products and
plans, internal financial information including pricing data, internal business,
marketing and strategic plans, customer lists and contracts, marketing plans,
and manufacturing processes of the Employer or any of its affiliates so far as
they have come or may come to his knowledge, except as may be required in the
ordinary course of performing his duties hereunder or except as may be in the
public domain through no fault of the Employee's, and shall keep secret all
matters entrusted to him and shall not use or attempt to use any such
information in any manner which may injure or cause loss or may be calculated to
injure or cause loss, whether directly or indirectly, to the Employer or any of
its affiliates.
Further, the Employee agrees that during his employment hereunder he shall
not make, use or permit to be used any notes, memoranda, drawings, books,
records, lists or other materials of any nature relating to any matter within
the scope of the business of the Employer or its customers or affiliates or
concerning any of their dealings or affairs otherwise than for the benefit of
the Employer. The Employee further agrees that he shall not, after the
Termination Date, use or permit to be used all such notes, memoranda, drawings,
books, records, lists or other materials, it being agreed that any of the
foregoing shall be and remain the sole and exclusive property of the Employer
and that on the Termination Date he shall deliver all of the foregoing, and all
copies thereof, to the Employer, at its main office.
10. Inventions. If at any time or times during his employment under this
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Agreement or prior employment agreements, the Employee shall (either alone or
with others) make, conceive, discover, reduce to practice or become possessed of
any invention, modification, discovery, design, development, improvement,
process, formula, data, technique, know-how, secret or intellectual property
right whatsoever or any interest therein (whether or not patentable or
registrable under copyright or similar statutes or subject to analogous
protection) (herein called "Inventions") that relates to the business of the
Employer or any customer of the Employer or any of the products or services
being developed, manufactured or sold by the Company or which may conveniently
be used in relation therewith, or results from tasks assigned to the Employee by
the Employer or results from the use of premises owned, leased or contracted for
by the Employer or its assigns, the Employee shall promptly disclose to the
Employer (or any persons designated by it) each such Invention and hereby
assigns any rights the Employee may have or acquire in the Inventions and
benefits and/or rights resulting therefrom to the Employer and its assigns
without compensation and shall communicate, without cost or delay, and without
publishing the same all available information relating thereto (with all
necessary plans and models) to the Employer.
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11. Stock Options. The Employer hereby grants the Employee options to purchase
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50,000 shares of the Employer's common stock at $0.9375 closing price per share
as of the day before the Effective Date and substantially in accordance with the
standard terms and conditions attached to options granted under the Employer's
1996 Management Stock Option Plan, as amended. Provided that the Employee
remains an employee of the Employer through May 6, 1999, the aforementioned
grant of 50,000 options, in the form attached at Exhibit A, will vest thereafter
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on the Employee's resignation from the Employer. The Employee acknowledges and
agrees that as of the Effective Date, in addition to the 50,000 options
described above, he holds 183,270 vested options and 445,730 non-vested options
granted under the Employer's 1996 Management Stock Option Plan. Such 445,730
unvested options are hereby cancelled and of no further force or effect.
Contemporaneous with the execution and delivery of this Agreement, and to enable
the Employee to exercise the vested options through February 1, 2006
notwithstanding the termination of the Employee's employment, the 183,270 vested
options are being amended in the form attached as Exhibit B, which amended grant
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supersedes the Employee's grant of options issued June 17, 1996.
12. Mutual Releases. In consideration of the Employee's resignation as
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President and Chief Executive Officer, termination of his prior employment
agreement, and his continued employment and compensation by the Employer under
this Agreement, the parties agree that in conjunction with the execution of this
Agreement that they will execute a mutual release in the form attached at
Exhibit C.
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13. Injunctive Relief. Any breach of this Agreement by the Employee could cause
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irreparable damage to the Employer and that in the event of such breach the
Employer shall have, in addition to any and all remedies of law, the right to
seek an injunction, specific performance or other equitable relief to prevent
the violation of the Employee's obligations hereunder.
14. Assignment; Binding Nature of Agreement. This Agreement is personal in its
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nature and neither of the parties hereto shall, without the prior written
consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder other than by operation of law, except that the Employer
may, without consent, assign or transfer this Agreement to any successor
corporation in the event of merger, consolidation or transfer or sale of all or
substantially all of the stock or assets of the Employer, and in such event the
provisions hereof shall be binding upon and inure to the benefit of such
successor corporation. This Agreement shall be binding upon and inure to the
benefit of the Employee and his successors, assigns, personal representations,
heirs and legatees.
15. Notices. Any notice required to be given pursuant to the provisions of this
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Agreement shall be in writing and hand-delivered or sent by facsimile to the
Employer at its principal place of business and to the Employee at his resident
address as then shown in the records of the Employer.
16. Limitation of Scope of Agreement. If any provision of this Agreement is
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unenforceable or illegal, the remainder of the Agreement shall remain in full
force and effect. If any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity, or subject, such provision shall be construed by
limiting and reducing it so as to be enforceable to the extent compatible with
the applicable law.
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17. Law Governing. This Agreement shall be interpreted and its validity and
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effect determined under and in accordance with the laws of The Commonwealth of
Massachusetts.
18. Entire Agreement, etc. This Agreement (and all exhibits and schedules)
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embodies the entire agreement and understanding between the Employer and the
Employee as of the effective date of this Agreement and supersedes all prior
agreements and understandings relating to the matter of employment of the
Employee by the Employer. Accordingly, the Employee's employment agreement with
the Employer dated February 1, 1996 is of no further force and effect as of the
effective date of this Agreement. This Agreement may be modified or amended only
by a writing signed by the Employee and by an officer of the Employer on behalf
of the Employer. The failure of either party to exercise any right or the waiver
by either party of any breach, will not prevent a subsequent exercise of such
right or be deemed a waiver of any subsequent breach of the same of any other
term of the Agreement.
Agreed, under seal, and effective as of the Effective Date.
VIISAGE TECHNOLOGY, INC.
/s/ Robert C. Hughes By: /s/ Thomas Colatosti
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Robert C. Hughes Thomas Colatosti, President and
Chief Executive Officer
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