EXHIBIT 10.18
EMPLOYMENT
AGREEMENT
AGREEMENT made as of the 15th day of December 2004 between
INTELLI-CHECK, INC. ("Company"), a Delaware Corporation having an office at 246
Crossways Park West, Woodbury, N.Y. 11797 and FRANK MANDELBAUM ("Employee"),
residing at 400 East 84th Street, New York, NY 10028.
WHEREAS, Employee is currently employed as Chairman-CEO pursuant to an
Employment Agreement dated February 1, 2002 and which expires on December 31,
2004.
WHEREAS, Company and Employee wish to enter into a new Employment
Agreement pursuant to which Employee will continue as Chairman-CEO of the
Company.
NOW, THEREFORE, in consideration of the respective agreements
hereinafter set forth, the parties agree as follows:
Article I
Employment
1.01 Term. Company hereby employs Employee, and Employee hereby accepts
employment with Company (including also employment by, and in
connection with the business activities of any of Company's affiliates,
subsidiaries and related corporations), in the position and with the
duties hereinafter set forth, for a one year period ending December 31,
2005 subject, however, to earlier termination in accordance with the
provisions of this Agreement.
Article II
Duties
2.01 General. Employee shall be the Chief Executive Officer of the Company
and shall perform such executive duties as may from time to time be
assigned to him by Company's Board of Directors. If so elected or
appointed, Employee shall also serve without additional compensation as
a director and/or officer of the Company or any of its subsidiaries.
2.02 Performance. During the term of his employment, Employee shall devote
substantially all his business time, best efforts and attention to the
business, operations and affairs of Company and the performance of his
duties hereunder provided, however, that during the term of his
employment, Employee may work for a non-competitive Company so long as
he devotes substantially all of his business time, best efforts and
attention to the business operations and affairs of the Company and the
performance of his duties hereunder.
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2.03 Employee's Representations. Employee represents and warrants to and
agrees with Company that:
(a) Neither the execution nor performance by Employee of this Agreement is
prohibited by or constitutes or will constitute, directly or
indirectly, a breach or violation of, or will be adversely affected by,
any written or other agreement to which Employee is or has been a party
or by which he is bound.
(b) Neither Employee nor any business or entity in which he has any
interest or from which he receives any payments has, directly or
indirectly, any interest of any kind in or is entitled to receive, and
neither Employee nor any such business or entity shall accept, from any
person, firm, corporation or other entity doing business with Company
any payments of any kind on account of any services performed by
Employee during the term of his employment.
Article III
Compensation and Related Matters
3.01(a) Fixed Salary. As compensation for Employee's services Company shall pay
Employee a salary of $250,000 per annum (the "Fixed Salary").
3.01(b) Fixed Salary Adjustment. The fixed salary may not be decreased
hereunder during the term of this agreement, but may be increased upon
review by and within the sole discretion of the Company's Board of
Directors.
3.01(c) Bonus. Employee shall be entitled to receive bonus compensation in an
amount of $75,000 based upon the Company completing a 12 consecutive
month period during which the Company experiences positive cash flow.
This bonus will survive beyond the contract period so long as the
beginning of the 12 month period is during the term of this agreement
and employee is still employed with the Company.
3.02 Expenses. Company shall pay or reimburse Employee for all reasonable
travel, hotel, entertainment and other business expenses incurred in
the performance of Employee's duties upon submission of appropriate
vouchers and other supporting data therefore.
3.03 Stock Options. The Company issued and granted Employee 75,000 stock
options on December 3, 2004 at a price of $4.37(fair market value at
the close on December 3, 2004). Vesting will be as follows: 25,000 to
be vested on January 1, 2005; 25,000 to be vested on January 1, 2006;
and the remaining 25,000 shares will vest on January 1, 2007 as long as
employee is either employed by the Company or remains as a director.
Employee shall enter into a stock option agreement with the Company,
substantially in the form of Exhibit A attached hereto,
3.04 Benefits. Employee shall be entitled to (i) participate in all general
pension, profit-sharing, life, medical, disability and other insurance
and employee benefit plans and programs at any time in effect for
executive employees of Company, provided, however, that nothing herein
shall obligate Company to establish or maintain any employee benefit
plan or program, whether of the type referred to in this clause (i) or
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otherwise, and (ii) four (4) weeks vacation during each twelve month
period of employment at mutually agreeable times. Employee shall be
entitled to the use of a Company vehicle, however, Employee may elect
to provide his own vehicle and if such election is made, Company agrees
to pay Employee One Thousand five hundred Dollars ($1,500) per month to
cover cost of the vehicle, insurance, repairs and other expenses,
pertaining thereto.
Article IV
Termination for Cause; Disability; Death
4.01 For Cause. Company shall have the right to terminate the employment of
Employee hereunder at any time for Cause (as hereinafter defined)
without prior notice (except as otherwise hereinafter provided). For
purposes of this Agreement "Cause" shall mean and include the
occurrence of any of the following acts or events by or relating to the
Employee: (i) any material misrepresentation by Employee in this
Agreement; (ii) any material breach of any obligations of Employee
under this Agreement which remains uncured for more than twenty (20)
days after written notice thereof by Company to Employee or if the
default is such that it cannot be cured within such 20-day period, upon
said breach; (iii) habitual insobriety or substance abuse of Employee
while performing his duties hereunder; (iv) theft of embezzlement from
Company or any other material acts of dishonesty; (v) repeated
insubordination respecting reasonable orders or directions of Company's
Board of Directors; (vi) conviction of a crime (other than traffic
violations and minor misdemeanors) or (vii) if Employee becomes the
subject of any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from, or otherwise limiting,
engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of Federal or
state securities laws or Federal commodities. In the event of
termination for Cause, Employee's fixed salary shall terminate as of
the effective date of termination of employment.
4.02 Without Cause. Company may not terminate the employment of Employee,
except for Cause not withstanding Article IV; Section 4.01 of Company's
by-laws.
4.03 Disability. If Employee, by reason of illness, mental or physical
incapacity or other disability, is unable to perform his regular duties
hereunder (as may be determined by the Board of Directors), Company
shall continue to pay half of Employee's salary for the balance of the
term of this Agreement, provided, however, in the event Employee
recovers from any such illness, mental or physical incapacity or other
disability (as may be determined by an independent physician to which
Employee shall make himself available for examination at the reasonable
request of the Board of Directors), Employee shall immediately resume
his regular duties hereunder. Any payments to Employee under any
disability insurance or plan maintained by Company shall be applied
against and shall reduce the amount of the salary payable by Company
under this Agreement. If at any time during the year the Employee has
suffered a complete and total disability, defined as the inability to
perform his/her duties from any location, then the provisions of
paragraph 3.03 shall be pro-rated so as not to provide for incentive
compensation for the period of complete and total disability.
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4.04 Death. In the event of Employee's death, Company shall continue to pay
half of the Employee's Fixed Salary for the balance of the term of this
Agreement to Employee's surviving spouse, provided, however, that, if
Company is the beneficiary of life insurance on Employee's life, it
shall use the proceeds of such insurance promptly upon the receipt
thereof to prepay (in inverse order to maturity), half of the Fixed
Salary remaining to be paid discounted to present value using an
assumed interest rate of 8% per annum. Company shall have the right
(but not the obligation) to obtain a life insurance policy on
Employee's life. The proceeds of any such life insurance policy shall
be payable to Company. Employee shall cooperate with Company and use
his best efforts in all respects and regard to obtaining a life
insurance policy, including, without limitation, undergoing a physical
examination upon reasonable request.
4.05 Change of Control. If during the term of this Agreement, there shall
occur a Change of Control, Employee may terminate his employment
hereunder for Good Reason (as in hereinafter defined) at any time
during the term of this Agreement in which case he shall be entitled to
receive a payment equal to 2.99 times Employee's average annual
compensation paid by Company (including bonuses, if any) during the
three years preceding the date of termination (the "Severance
Payment"), provided, however, that such Severance Payment shall be
reduced if and only to the extent necessary to avoid the imposition of
an excise tax on such Severance Payment under Section 4999 of the
Internal Revenue Code of 1986, as amended. The Severance Payment shall
be payable to Employee on the date of termination as follows:
(i) an amount equal to three months Fixed Salary at the rate
prevailing on the date of termination, provided, however,
that such amount shall be reduced if three times such amount
would cause Company to be in default of any of its
convenants to any of its lenders, in which event the amount
payable to Employee shall be reduced so that three times
such amount would not cause such default; and
(ii) the balance remaining after the payment set forth in (i)
above shall be paid by Company by issuing to Employee that
number of its unregistered common shares as shall equal the
balance divided by the exercise price of the stock
For purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred on the first day on which a majority of the Directors
of the Company do not consist of individuals recommended by Employee,
and one outside Director of the Company or if the Company is sold.
For purposes of this Agreement, "Good Reason: shall mean any of the
following (without Employee's express prior written consent):
(a) The assignment to Employee by Company of duties inconsistent with
Employee's then positions, duties, responsibilities, titles or
offices or any reduction in his duties or responsibilities or any
removal of Employee from or any failure to re-elect Employee to
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any of such positions, except in connection with the termination
of Employee's employment for Cause, or disability (as described in
Section 4.03 herein) or as a result of Employee's death or by
termination of employment by Employee other than for Good Reason,
however, nothing herein prevents the current Board from exercising
its right to elect officers.
(b) A relocation of Company's principal executive offices to a
location greater than 50 miles from the current operating address
of the Company or the Company requiring Employee to be based
anywhere other than the location at which Employee on the date
hereof performs Employee's duties, except for required travel on
Company's business to an extent substantially consistent with
Employee's business travel obligations on the date hereof or any
adverse change in the office assignment or secretarial and other
support accorded to Employee on the date hereof;
(c) A failure by Company to continue in effect any benefit or
compensation plan (including any pension, profit-sharing, bonus,
life, medical, disability and other insurance and employee benefit
plans and programs) in which Employee is then participating or
plans providing Employee with substantially similar benefits or
the taking of any action by Company which would adversely affect
Employee's participation in or reduce Employee's benefits under
any of such plans;
(d) The taking of any action by Company which would deprive Employee
of any material fringe benefit enjoyed by Employee on the date
hereof;
(e) The failure by Company to obtain the specific assumption of this
Agreement by any successor or assign of Company or any person
acquiring substantially all of Company's assets;
(f) Any material breach by Company of any provision of the Agreement.
Article V
Confidential Information; Non-Competition
5.01 Confidential Information. Employee shall not, at any time during or
following termination or expiration of the term of this Agreement,
directly or indirectly, disclose, publish or divulge to any person
(except in the regular course of Company's business), or appropriate,
use or cause, permit or induce any person to appropriate or use, any
proprietary, secret or confidential information of Company including,
without limitation, knowledge or information relating to its trade
secrets, business methods, the names or requirements of customers or
the prices, credit or other terms extended to its customers, all of
which Employee agrees are and will be of great value to Company and
shall at all times be kept confidential. Upon termination or expiration
of this Agreement, Employee shall promptly deliver or return to Company
all materials of a proprietary, secret or confidential nature relating
to Company together with any other property of Company which may have
theretofore been delivered to or may be in possession of Employee.
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5.02 Non-Competition. During the term of this Agreement and for a period of
two years after the sooner of the expiration date of this Agreement or
the date when Employee ceases to be employed by Company as a result of
either a voluntary termination of his employment or a termination for
cause, Employee shall not, within the United States, its territories
and/or, possessions and countries in which the Company does business,
without the prior written consent of Company in each instance ,
directly or indirectly, in any manner or capacity, whether for himself
or any other person and whether as proprietor, principal, owner,
shareholder, partner, investor, director, officer, employee,
representative, distributor consultant, independent contractor or
otherwise engage or have any interest in any entity which is engaged in
any business or activity then conducted or engaged in by Company. The
two-year period referred to in the preceding sentence shall be reduced
by two months for each full year that elapses after the commencement
date of this Agreement. Notwithstanding the foregoing, however,
Employee may at any time own in the aggregate as a passive (but not
active) investment not more than 5% of the stock or other equity
interest of any publicly-traded entity which engages in a business
competitive with Company.
5.03 Reasonableness. Employee agrees that each of the provisions of this
Section 5 is reasonable and necessary for the protection of Company;
that each such provision is and is intended to be divisible; that if
any such provision (including any sentence, clause or part) shall be
held contrary to law or invalid or unenforceable in any respect in any
jurisdiction, or as to any one or more periods of time, areas of
business activities, or any part thereof, the remaining provisions
shall not be affected but shall remain in full force and effect as to
the other and remaining parts; and that any invalid or unenforceable
provision shall be deemed, without further action on the part of the
parties hereto, modified, amended and limited to the extent necessary
to render the same valid and enforceable in such jurisdiction. Employee
further recognizes and agrees that any violation of any of his
agreements in this Section 5 would cause such damage or injury to
Company as would be irreparable and the exact amount of which would be
impossible to ascertain and that, for such reason, among others,
Company shall be entitled, as a matter of course, to injunctive relief
from any court of competent jurisdiction restraining any further
violation. Such right to injunctive relief shall be cumulative and in
addition to, and not in limitation of, all other rights and remedies
which Company may possess.
5.04 Survival. The provisions of this Section 5 shall survive the expiration
or termination of this Agreement for any reason.
Article VI
Miscellaneous
6.01 Notices. All notices under this Agreement shall be in writing and shall
be deemed to have been duly given if personally delivered against
receipt or if mailed by first class registered or certified mail,
return receipt requested, addressed to Company and to Employee at their
respective addresses set forth on the first page of this Agreement, or
to such other person or address as may be designated by like notice
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hereunder. Any such notice shall be deemed to have been given on the
day delivered, if personally delivered, or on the third day after the
date of mailing if mailed.
6.02 Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and, in the case of
the Company, assigns, but no other person shall acquire or have any
rights under or by virtue of this Agreement, and the obligations of
Employee under this Agreement may not be assigned or delegated.
6.03 Governing Law; Severability. This Agreement shall be governed by and
construed and enforced in accordance with the laws and decisions of the
State of New York applicable to contracts made and to be performed
therein without giving effect to the principles of conflict of laws. In
addition to the provisions of 5.03 above, the invalidity or
unenforceability of any other provision of this Agreement, or the
application thereof to any person or circumstance, in any jurisdiction
shall in no way impair, affect or prejudice the balance of this
Agreement, which shall remain in full force and effect, or the
application thereof to other persons and circumstances.
6.04 Entire Agreement; Modification; Waiver; Interpretation. This Agreement
contains the entire agreement and understanding between the parties
with respect to the subject matter hereof and supersedes all prior
negotiations and oral understandings, if any. Neither this Agreement
nor any of its provisions may be modified, amended, waived, discharged
or terminated, in whole or in part, except in writing signed by the
party to be charged. No waiver of any such provision or any breach of
or default under this Agreement shall be deemed or shall constitute a
waiver of any other provision, breach or default. All pronouns and
words used in this Agreement shall be read in the appropriate number
and gender, the masculine, feminine and neuter shall be interpreted
interchangeably and the singular shall include the plural and vice
versa, as the circumstances may require.
6.05 Indemnification. Employee shall indemnify and hold Company free and
harmless from and against and shall reimburse it for any and all
claims, liabilities, damages, losses, judgments, costs and expenses
(including reasonable counsel fees and other reasonable out-of-pocket
expenses) arising out of or resulting from any breach or default of any
of his representations, warranties and agreements in this Agreement.
Company shall indemnify and hold Employee free and harmless from and
against and shall reimburse him for any and all claims, liabilities,
damages, losses, judgments, costs and expenses (including reasonable
counsel fees and other reasonable out-of-pocket expenses) arising out
of or resulting from any breach or default of any of its
representations, warranties and agreements in this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
INTELLI-CHECK, INC.
By
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Frank Mandelbaum
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EXHIBIT A
STOCK OPTION AGREEMENT
Intelli-Check, Inc., a Delaware corporation (the "Company"), as of the
3rd day of December, 2004 hereby grants to Frank Mandelbaum ("Optionee"),
residing at 400 East 84th Street, New York, N.Y. 10028 in consideration of
services and advice rendered by Optionee to the Company, the irrevocable right
and option ("Option") to purchase all or part of an aggregate of 75,000 shares
("Shares") of the Company's common stock, par value $.001 per share ("Common
Stock"), on the terms and conditions hereinafter set forth:
1. Purchase Price. The purchase price for the Shares shall be $4.37 per
share, the fair market value on December 3, 2004 subject to adjustment as
provided in Paragraph 5 below.
2. Term of Option: Exercise.
(a) Subject to earlier termination pursuant hereto, the Option shall
terminate ten (10) years from the date hereof. The Option shall vest
as follows: 25,000 shall vest January 1, 2005; 25,000 shall vest
January 1, 2006; and the remaining 25,000 shall vest January 1, 2007
provided that Mr. Mandelbaum remains as an employee or director of
the Company. Should there be a change of control as defined in 4.05
of the employment agreement, then all remaining options shall vest.
(b) The Option shall be exercised by fifteen (15) days written notice to
the Secretary or Treasurer of the Company at its then principal
office. The notice shall specify the number of Shares as to which the
Option is being exercised and shall be accompanied by payment in full
of the purchase price for such Shares. The option price shall be
payable in United States dollars, and may be paid in cash or by
certified check on a United States bank or by other means acceptable
to the Company. In no event shall the Company be required to issue any
Shares (i) until counsel for the Company determines that the Company
has complied with all applicable securities exchange or the National
Association of Security Dealers Automated Quotation System on which
the Common Stock may then be listed, and (ii) unless Optionee
reimburses the Company for any tax withholding required and supplies
the Company with such information and data as the Company may deem
necessary.
(c) Optionee shall not, by virtue of the granting of the Option, be
entitled to any rights of a shareholder in the Company and shall not
be considered a record holder of any Shares purchased by Optionee
until the date on which Optionee shall actually be recorded as the
holder of such Shares upon the stock records of the Company. The
Company shall not be required to issue any fractional Share upon
exercise of the Option and shall not be required to pay to Optionee
the cash equivalent of any fractional Share interest.
3. Restrictions on Transfer and Termination.
(a) No option shall be transferred by Optionee otherwise than by will or
by the laws of descent and distribution. During the lifetime of
Optionee the Option shall be exercisable only by Optionee or by
Optionee's legal representative.
(b) In the event of the termination of Optionee's employment by the
Company at any time for cause, the Option and all rights there under
shall terminate. Should the employee end his employment prior to the
termination date then the Option and all rights thereunder shall be
exercisable by Optionee at any time within three (3) months
thereafter, but not later than the termination date of the Option.
Notwithstanding the foregoing, in the event Optionee is permanently
and totally disabled (within the meaning of Section 105(d) (4), or any
successor section, of the Internal Revenue Code), Optionee's Option
and all rights thereunder shall be exercisable by Optionee (or
Optionee's legal representative) at any time within six (6) months of
Optionee's termination of employment, but not later than the
termination date of the Option.
(c) If Optionee shall die while in the employ of the Company, the Option
may be exercised by Optionee's designated beneficiary or beneficiaries
(or if none have been effectively designated, by Optionee's executor,
administrator or the person to whom Optionee's rights under the Option
shall pass by Optionee's will or by the laws of descent and
distribution) at any time within six (6) months after the date of
Optionee's death, but not later than the termination date of the
Option.
(d) This Option is granted pursuant to an Employment Agreement between
Company and Optionee dated December 15, 2004, which Employment
Agreement governs Optionee's rights and obligations as an employee
including, without limitation, Company's right to terminate
Optionee's employment under certain circumstances, and nothing in
this Agreement shall confer upon Optionee any additional rights with
respect to the terms and conditions of Optionee's employment.
4 Securities Act Matters.
(a) Optionee represents that Shares issued upon any exercise of the Option
will be acquired for Optionee's own account for investment only and
not with a view to the distribution thereof within the meaning of the
Federal Securities Act of 1933, as amended (hereinafter, together with
the rules and regulations thereunder, collectively referred to as the
"Act"), and that Optionee does not intend to divide Optionee's
participation with others or transfer or otherwise dispose of all or
any Shares except as below set forth. As herein used the terms
"transfer" and "dispose" mean and include, without limitation, any
sale, offer for sale, assignment, gift, pledge or other disposition or
attempted disposition.
(b) Optionee understands that in the opinion of the Securities and
Exchange Commission ("SEC") Shares must be held by Optionee for an
indefinite period unless subsequently registered under the Act or
unless an exemption from registration thereunder is available; that,
under Rule 144 of the Act, after one or more years from the date of
payment for and issuance of the shares, certain public sales thereof
(which may be limited as to the number of Shares) may be made in
accordance with the subject to the terms, conditions and restrictions
of Rule 144, but only if certain reporting and other requirements
thereunder have been complied with; and that should Rule 144 be
inapplicable, registration or the availability of an exemption under
the Act will be necessary in order to permit public distribution of
any Shares. Optionee also understands that the Company is and will be
under no obligation to register the Shares or to comply with any
exemption under the Act.
(c) Optionee shall not at any time transfer or dispose of any Shares
except pursuant to either (i) a registration statement under the Act
which registration statement has become effective as to the Shares
being sold or (ii) a specific exemption from registration under the
Act, but only after Optionee has first obtained either a "no-action"
letter from the SEC, following full and adequate disclosure of all
facts relating to such proposed transfer, or a favorable opinion from
or acceptable to counsel to the Company that the proposed transfer or
other disposition complies with and is not in violation of the Act or
any applicable state "blue sky" or securities laws.
5. Anti-Dilution Provisions.
(a) Subject to the provisions of Paragraph 5(b) below, if at any time or
from time to time prior to expiration of the Option there shall occur
any change in the outstanding Common Stock of the Company by reason of
any stock dividend, stock split, combination or exchange of shares,
merger, consolidation, recapitalization, reorganization, liquidation
or the like, then and as often as the same shall occur, the kind and
number of Shares subject to the Option, or the purchase price per
share, or both, shall be adjusted by the Board of Directors of the
Company ("Board") in such manner as it may deem appropriate and
equitable, the determination of which Board shall be binding and
conclusive. Failure of the Board to provide for any such adjustment
shall be conclusive evidence that no adjustment is required.
(b) The Board shall have the right to engage a firm of independent
certified public accountants, which may be the Company's regular
auditors, to make any computation provided for in this Section, and a
certificate of that firm showing the required adjustment shall be
conclusive and binding.
6. Notices. All notices and other communications required or permitted under
this Agreement shall be in writing and shall be given either by (i)
personal delivery or regular mail, in each case against receipt, or (ii)
first class registered or certified mail, return receipt requested. Any
such communication shall be deemed to have been given (i) on the date of
receipt in the cases referred to in clause (i) of the preceding sentence
and (ii) on the second day after the date of mailing in the cases referred
to in clause (ii) of the preceding sentence. All such communications to
the Company shall be addressed to it, to the attention of its Secretary or
Treasurer, at its then principal office and to Optionee at the address set
forth above or such other address as may be designated by like notice
hereunder.
7. Miscellaneous. This Agreement cannot be changed except in writing signed
by the party to be charged. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed exclusively in New York. The Option
has been granted pursuant to the Company's 2004 Stock Option Plan. This
Agreement is in all respects subject to the terms and conditions of said
Plan. The Option granted hereunder is intended to be a Non-Qualified Stock
Option. Optionee acknowledges that Optionee is not holding any other stock
options granted by the Company. Optionee shall execute this Agreement and
return it to the Company within thirty (30) days after the mailing or
delivery by the Company of this Agreement. If Optionee shall fail to
execute and return this Agreement to the Company within said thirty (30)
day period, the Option shall automatically terminate. The section headings
in this Agreement are solely for convenience of reference and shall not
affect its meaning or interpretation.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
INTELLI-CHECK, INC.
By:
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Optionee:
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Name