Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT made as of the ___ day of __________, 1997 [date of IPO
Closing] by and between AMERICAN CARD TECHNOLOGY, INC., a Delaware corporation
(the "Company"), and RAYMOND FINDLEY, JR. , of Marietta, Georgia (the
"Employee").
W I T N E S E T H :
WHEREAS, Employee is employed by the Company as its President, 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 President. The Employee shall perform
such duties as are assigned or delegated to him by the Board of Directors of the
Company (the "Board"). Without limiting the generality of the foregoing, the
Employee shall, in conjunction with the Chief Executive Officer, be responsible
for the management of the overall business and operations of the Company,
subject to the supervision of 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.
(c) The Company agrees to nominate Employee to serve as a
director of the Company during the Term (as hereafter defined) and to use its
reasonable efforts to cause Employee to be elected a director and be retained as
a director throughout the Term. Notwithstanding the foregoing, in the event that
Employee should at any time during the Term not be a director, Employee shall be
entitled to notice of all director meetings in the same manner as if he were a
director and shall have the right to attend all director meetings.
(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 two (2) 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:
(a) Employee shall be paid a base annual salary of (A) One
Hundred Twenty-Five Thousand and 00/100 Dollars ($125,000.00) during the first
year of the Term, and (B) One Hundred Fifty Thousand and 00/100 Dollars
($150,000.00) during the second year of the Term, 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 equal to fifty percent (50%) of
the base annual salary for each such year if the Company has achieved the
following performance objectives:
(i) During the first year of the Term, gross
sales of Smart Cards (net of returns) equal or exceed $3.4 million and the
pre-tax net operating loss does not exceed $1.0 million.
(ii) During the second year of the Term, gross
sales of Smart Cards (net of returns) equal or exceed $31 million and the
pre-tax net operating income equals or exceeds $15 million.
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 may grant to the Employee an
option to purchase common stock of the Company in such amounts and at such
exercise prices as may be determined by the Compensation Committee.
(d) The Company shall reimburse the Employee for 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.
(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.
(g) In addition to the foregoing, the Company shall pay to
Employee on the IPO Date, Fifty Thousand and 00/100 Dollars ($50,000.00) in
accrued but unpaid salary of Employee for services rendered prior to the IPO
Date.
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(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
(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 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) 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:
(A) six (6) months of the then current
base annual salary (including accrued portions),
(B) any accrued salary which has not
been paid, and
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(C) any expense reimbursements due and
owing to him at the time of such termination.
(ii) If the Employee's employment is terminated
by the Company without Cause pursuant to paragraph 4(a), or Employee terminates
his employment for Good Reason (as hereafter defined), the Employee shall be
entitled to a payment equal to the sum of:
(A) the greater of (I) one (1) year of
the then current base annual salary, or (II) the total base annual salary which
would be payable for the balance of the Term, and
(B) a pro rata portion of what the Bonus
for the then current term would be if sales and income performance for the year
through such date of termination annualized out for the year would have resulted
in a Bonus for such year, and
(C) any accrued salary which has not
been paid, and
(D) any expense reimbursements due and
owing to him at the time of such termination.
(iii) 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.
(e) For purposes hereof:
(i) "Good Reason" is defined to mean:
(A) the Board substantially diminishing
Employee's responsibilities and activities as set forth herein; or
(B) the Board taking action in material
breach of this Agreement; or
(C) requiring the Employee to relocate
to anywhere other than the metropolitan Atlanta area; or
(D) the voluntary resignation of
Employee at any time within sixty (60) days after a Change in Control (as
hereinafter defined).
(ii) "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
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Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended),
other than the Employee, Lawrence O. Perl, Raymond Roncari, and Harold
Rothstein, 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:
(A) becomes the beneficial owner of more
than 50% 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
(B) acquires all or substantially all of
the assets of the Company.
(f) 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.
(g) Termination of this Agreement shall have no effect on the
rights and obligations of the parties pursuant to paragraph 5 hereof.
(5) 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, 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
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aid or advice to, or otherwise be associated with, any person, firm, corporation
or other organization that is engaged anywhere in the world in the business of
developing, manufacturing, marketing, selling, or distributing Smart Cards or
Smart Card related systems (the "NonCompete Covenant").
(d) 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 be bound to the
Non-Compete Covenant for a period of two (2) years following the date of his
employment termination.
(e) (i) In the event that Employee's employment is terminated
due to expiration of the Term, due to termination by the Company during the Term
other than for Cause, or due to voluntary termination by Employee for Good
Reason, then the Company shall have the option to bind Employee to the
NonCompete Covenant for two years after the termination of his employment by
electing to do so and agreeing to pay to Employee the NonCompete Consideration
(as hereafter defined) in equal monthly installments over the two year period.
To make such election, the Company shall give Employee notice of such election
(which shall include an agreement to pay the NonCompete 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 NonCompete Covenant for the two year period following employment
termination. In the event that the Company shall default in its payment of any
installment of the NonCompete Consideration, Employee shall be relieved from the
NonCompete Covenant, in addition to any other rights and remedies which Employee
may have.
(ii) For purposes hereof, the NonCompete
Consideration is the amount equal to (A) two times the current base annual
salary being paid to Employee on the day prior to the date of termination, less
(B) the amount of any lump sum severance payment to which Employee is entitled
under paragraph 4(d) hereof.
(iii) For purposes hereof, the "Election Date" is:
(A) if employment termination is due to
expiration of the Term, such date is the date which is three (3) months prior to
the date on which the Term expires;
(B) if employment termination is due to
termination by the Company during the Term other than for Cause, or due to
voluntary termination by Employee for Good Reason, such date is the date which
is ten (10) days after the Company or Employee, as the case may be, gives notice
of such termination.
(f) 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.
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(g) 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.
(h) 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.
(i) 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.
(6) 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, except as otherwise specifically set
forth herein.
(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.
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(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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WITNESSES:
______________________________
______________________________
Raymond Findley, Jr.
______________________________
AMERICAN CARD TECHNOLOGY, INC.
______________________________
By ___________________________
Lawrence O. Perl
______________________________ Its Chief Executive Officer
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