Exhibit 10.7
EMPLOYMENT AGREEMENT
AGREEMENT made as of the _____ day of ______________, 1997 by and
between AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation (the "Company"),
and PETER J. QUADAGNO of West Chester, Pennsylvania (the "Employee").
W I T N E S S E T H :
WHEREAS, Employee is employed by the Company as its Director of
Marketing and Sales, and as a condition of closing on an initial public offering
of the Company's common stock through Whale Securities L.P., Employee and the
Company have required that this Employment Agreement be entered into.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein, the parties hereto agree as follows:
(1) Duties and Extent of Services
(a) The Company shall employ the Employee, and the Employee
shall be employed by the Company, as its Director of Marketing and Sales. The
Employee shall perform such duties as are assigned or delegated to him by the
President, the Chief Executive Officer, or the Board of Directors of the Company
(the "Board"). Without limiting the generality of the foregoing, the Employee
shall be responsible for market planning, business development, and control over
direct and indirect sales distribution channels for the Company, subject to the
supervision of the President, the Chief Executive Officer, or the Board.
(b) 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.
(2) Term. Subject to the termination rights set forth in paragraph 4
hereof, the term (the "Term") of this Agreement shall begin on the date on which
an initial public offering of the Company's Common Stock is closed (the "IPO
Date") and shall continue until the date which is three (3) years after the IPO
Date.
(3) Compensation; Benefits. In consideration of the Employee's
rendering of services pursuant to this Agreement, Employee shall be entitled to
the following compensation and benefits:
(1)
(a) Employee shall be paid a base annual salary of (A) One
Hundred Ten Thousand and 00/100 Dollars ($110,000.00) during the first year of
the Term, (B) One Hundred Twenty-Five Thousand and 00/100 Dollars ($125,000.00)
during the second year of the Term, and (C) an amount to be determined by the
Executive Committee of the Board during the third year of the Term, but in any
event, such amount shall not be less than One Hundred Twenty-Five Thousand and
00/100 Dollars ($125,000.00), payable in equal bi-weekly installments in
arrears.
(b) In addition, the Company shall pay the Employee an annual
bonus (the "Bonus") for each year of the Term if the Company has achieved the
following performance objectives as set forth below:
(i) During the first year of the Term, if gross sales
of Smart Cards (net of returns) ("Gross Sales") equal or exceed $5.0 million,
the Bonus shall be $10,000.00. For every additional $1.0 million in Gross Sales
during the first year of the Term, the Bonus shall increase by $5,000.00 up to a
maximum aggregate Bonus during the first year of the Term of $40,000.00.
(ii) During the second year of the Term, if Gross
Sales equal or exceed $31 million, the Bonus shall be $75,000.00.
(iii) The Bonus and the performance objectives to be
achieved during the third year of the Term shall be established by the Executive
Committee of the Board.
The Bonus shall be payable by the Company within sixty (60) days after
completion of the one (1) year period for which it is determined.
(c) As additional consideration for the Employee's rendering
of services pursuant to this Agreement, the Company shall grant to the Employee
an Incentive Stock Option to purchase 20,000 shares of common stock of the
Company (the "Option") at such exercise prices as may be determined by the
Compensation Committee and subject to the terms and conditions of the Company's
1996 Stock Option Plan, a copy of which Employee acknowledges having received.
Notwithstanding anything contained herein or therein to the contrary, the
Employee's right to purchase the shares covered by the Option shall be subject
to the following:
(i) The Option shall only become exercisable as
follows:
(A) 6,667 of the option shares become
exercisable after the one year anniversary of employment;
(B) 6,667 of the option shares become
exercisable after the second anniversary; and
(C) the final 6,666 of the option shares
becomes exercisable after the third anniversary of employment.
(ii) If the Employee is terminated for Cause (as
hereinafter defined) or voluntarily terminates his employment hereunder, the
Employee shall have no further rights to exercise the Option, in whole or in
part.
(2)
(iii) During the first year of the Term, if the
Employee is terminated by the Company for no reason pursuant to paragraph 4(a)
hereof or in the event of death or disability at any time, the aggregate number
of shares covered by the Option shall be reduced to 6,667.
(iv) After the first full year of the Term, if the
Employee is terminated by the Company for no reason pursuant to paragraph 4(a)
hereof or in the event of death or disability at any time, the aggregate number
of shares covered by the Option shall be adjusted by multiplying 20,000 by a
fraction, the numerator of which equals the number of days that the Employee was
employed by the Company and the denominator of which equals 1,095.
(d) The Company shall reimburse the Employee for (i)
reasonable weekly commuting expenses from Philadelphia, Pennsylvania to Atlanta,
Georgia and reasonable weekly lodging expenses in Georgia, both subject to the
Company's approval and (ii) reasonable out-of-pocket expenses incurred in
connection with the business of the Company.
(e) During the term of this Agreement, the Employee shall be
entitled to paid vacation time of four (4) weeks during each calendar year at
such times as are mutually acceptable to the Employee and the Company.
(f) The Employee shall be entitled to such fringe benefits,
including, but not limited to, participation in medical, dental, and life
insurance 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.
(4) Termination; Severance
(a) Either the Company or Employee may terminate Employee's
employment under this Agreement unilaterally at any time for any reason or for
no reason by giving the other party sixty (60) days' advance notice of the
intention to terminate.
(b) In addition to the termination rights in paragraph 4(a),
the Company shall have the right to terminate the Employee's employment under
this Agreement immediately at any time for Cause. For purposes hereof, Cause is
defined to be:
(i) Employee engages in deliberate misconduct or
engages in conduct which brings public obloquy upon the Company;
(ii) Employee repeatedly fails (A) to perform his
obligations hereunder, or (B) to follow reasonable directions of the Board of
Directors of the Company;
(iii) Employee is convicted of, or pleads nolo
contendere to, any crime or offense other than a misdemeanor;
(iv) Employee is repeatedly intoxicated by alcohol or
drugs during the performance of his duties; or
(3)
(v) Employee breaches this Agreement in any material
way, and such breach is not cured or corrected with due diligence by Employee
after written notice of such breach from the Company.
(c) Employee's employment shall also terminate immediately in
the event of the death or disability of the Employee. For purposes hereof,
"disability" of the Employee shall occur on the date on which a reasonable, good
faith determination is made by the Board that, by reason of the physical or
mental condition of the Employee, it is reasonably probable that the Employee
will be unable to perform his duties under this Agreement for a period of at
least one hundred eighty (180) days following the date of the Board's
determination;
(d) In the event of termination of Employee's employment or in
the event of death or disability 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:
(i) If the Employee's employment is terminated by the
Company without Cause pursuant to paragraph 4(a) during the first year of the
Term, the Employee shall be entitled to a payment equal to the sum of:
(A) one (1) year of the then current base
annual salary, and
(B) any accrued salary which has not been
paid, and
(C) any expense reimbursements due and owing
to him at the time of such termination.
(ii) In the event the Employee's employment is
terminated without Cause pursuant to paragraph 4(a) at any time after the end of
the first year of the Term or due to the Employee's death or disability at any
time during the Term, the Employee or Employee's estate shall be entitled to a
payment equal to the sum of:
(A) six (6) months of the then current base
annual salary (including accrued portions),
(B) any accrued salary which has not been
paid, and
(C) any expense reimbursements due and owing
to him at the time of such termination.
(iii) In the event that the Employee's employment is
terminated by the Company for Cause or is terminated by the Employee voluntarily
prior to the end of the Term, the Employee shall not be entitled to any
severance payment.
(e) Upon termination or expiration of the term of this
Agreement, the Employee shall promptly return to the Company any Company
property in his possession or under his control, including, but not limited to,
documents, equipment, disks, tapes and keys.
(4)
(f) Termination of this Agreement shall have no effect on the
rights and obligations of the parties pursuant to paragraph 5 hereof.
(5) Employee Representations. The Employee hereby represents and
warrants to the Company that the performance of the Employee's obligations
pursuant to this Agreement and the Employee's compliance with the terms of this
Agreement will not conflict with or result in a breach of any terms, conditions,
or provisions of, or constitute a default under, any other agreements,
including, without limitation, any noncompete, non-piracy, consulting, or
employment agreements, and that the Employee is not subject to any restrictive
covenants which would interfere with the performance of the Employee's
obligations hereunder.
(6) Confidential Information; Covenant Not to Compete
(a) The Employee acknowledges that the Company's business is
conducted in world-wide markets and that, in the course of performing his
responsibilities and duties pursuant to this Agreement, he will obtain knowledge
of, information relating to, and will develop at the Company's expense,
Confidential Information (as hereinafter defined) which, if disclosed to
competitors of the Company, would cause substantial injury to the Company. The
Employee therefore acknowledges the Company's legitimate need to prevent
disclosure and use of Confidential Information and that, but for the covenants
of the Employee set forth in this Paragraph 5, the Company would not be willing
to enter into this Agreement.
(b) The Employee agrees that he shall not, at any time during
or after the term of his employment by the Company, disclose to any person, firm
or corporation, or use for any purpose other than in connection with the
performance of his responsibilities and duties under this Agreement, any
proprietary information or other confidential information relating to the
business of the Company, including, but not limited to, technology, know-how,
trade secrets, techniques, client or customer lists, details of client or
customer contracts or relationships, pricing policies, operational methods, or
marketing plans or strategies (collectively, "Confidential Information"). The
Employee agrees that upon expiration or termination of his employment by the
Company he shall promptly return to the Company all property of the Company,
including, but not limited to, all Confidential Information and all documents,
recordings and other materials describing, evidencing or otherwise relating to
Confidential Information. Employee acknowledges that any and all intellectual
property related to the business of the Company is the property of the Company
and Employee has no rights therein.
(c) The Employee agrees that during the term of his employment
by the Company, and for a period of two (2) years thereafter (the "Restricted
Period"), he will not, directly or indirectly, own, operate, manage, join,
control or participate in the ownership, management, operation or control of, or
be employed by, render aid or advice to, or otherwise be associated with, any
person, firm, corporation or other organization that is engaged in the United
States and/or Canada in the business of developing, manufacturing, marketing,
selling, or distributing any Smart Card Related Systems which are competitive
with any developed or prospective Smart Card Related Systems which are actually
being marketed by the Company at any time during the Restricted Period. For the
purposes of this Section, Smart Card Related Systems shall be defined as any
system or application employing technology, incorporating, using or otherwise
related to Smart Cards (the "NonCompete Covenant").
(5)
(d) Employee agrees that during the term of his employment by
the Company and for a period of two (2) years immediately following the
termination of his employment for any reason, Employee will not directly or
indirectly, for himself or on behalf of, or in conjunction with any other
person, persons, company, partnership, corporation or business entity, hire or
employ any current employees or personnel of the Company or induce or entice any
such person to leave the employ of the Company without the prior written consent
of the Company.
(e) Reference to the Company as used in this paragraph 5 shall
include any subsidiary or affiliate or successor in interest to the Company or
any such subsidiary or affiliate.
(f) If the Employee breaches, or threatens to commit a breach
of, any of the provisions of paragraph 5 hereof (the "Restrictive Covenants"),
the Company shall have the right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction, including but not
limited to the right to entry against the Employee of restraining orders and
injunctions (preliminary, mandatory, temporary and permanent) against
violations, threatened or actual, and whether or not continuing, of any of the
Restrictive Covenants, it being acknowledged and agreed by the Employee that any
breach or threatened breach of any of the Restrictive Covenants would cause
irreparable and continuing injury to the Company and that money damages would
not provide an adequate remedy to the Company. The foregoing right and remedy
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company at law or in equity.
(g) The Employee acknowledges and agrees that the Restrictive
Covenants are reasonable and valid in geographic and temporal scope and in all
other respects. The Company and the Employee further acknowledge and agree that
if any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable for any reason, that it is clearly the
intent of the parties that the remainder of the Restrictive Covenants and parts
thereof shall not thereby be affected and shall be given full effect, without
regard to the invalid portions. No provision herein shall be dependent upon the
validity of any other provision.
(7) Miscellaneous
(a) All notices sent pursuant to this Agreement shall be in
writing, and shall be deemed duly given if delivered personally or sent by
certified mail, return receipt requested, to the parties at their last known
addresses.
(b) This Agreement is governed by and is to be enforced
according to the laws of the State of Georgia and shall not be modified or any
provision waived unless in writing signed by the parties. The waiver by either
party of a breach of any provision of this Agreement by the other party shall
not operate as or be construed as a waiver of any subsequent breach.
(c) Notwithstanding any provision contained in this Agreement
to the contrary, the Employee's obligations set forth in paragraph 5 hereof
shall survive the expiration or termination of this Agreement or the Employee's
employment by the Company for any reason.
(d) This Agreement is the entire agreement of the parties and
expressly supersedes all previous agreements, expressions or discussions between
the parties or any affiliate of the parties.
(6)
(e) This Agreement shall be binding upon the parties and their
heirs, executors, administrators, successors, and assigns. Notwithstanding the
foregoing, this Agreement is entered into by the Company in consideration of the
personal expertise and skills of the Employee and, accordingly, the Employee may
not assign or delegate any obligation, right, or interest contained in this
Agreement. The Employee acknowledges and agrees that the Company's rights
hereunder may be assigned by the Company to any person or entity, and in the
event of such assignment, the Employee agrees that the Employees shall continue
to be bound by the covenants set forth herein and such assignee shall thereafter
be deemed the "Company" hereunder.
(7)
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WITNESSES:
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Peter J. Quadagno
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AMERICAN CARD TECHNOLOGY, INC.
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By
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Raymond Findley, Jr.
- ------------------------------ Its President
(8)