Exhibit 10(a)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 12th day of August, 1997 between
Xxxx X. Xxxxxxxxx ("Executive") and Detection Systems, Inc., a
New York corporation ("Company").
WITNESSETH:
In consideration of the mutual covenants contained herein,
the parties agree as follows:
1. Offer of Employment and Term. The Company agrees to
employ Executive in the capacity of Chairman, President and CEO
for the Term of Employment commencing as of the date of this
Agreement (the "Commencement Date"). The Company agrees to
provide Executive with such office and such operational and
administrative support as is consistent with his position.
Executive's employment under this Agreement will be in the
vicinity of Rochester, New York. "Term of Employment" as used
herein shall mean the period commencing on the Commencement Date
and continuing thereafter for a period of five years, unless the
Company and Executive agree in writing to extend the Term of
Employment, in which case the Term of Employment shall have the
meaning as determined at that time; provided, however, that
Executive's employment may be earlier terminated as hereinafter
set forth, in which event the Term of Employment shall mean the
period from the Commencement Date through the date of such
earlier termination.
Notwithstanding any of the other provisions of this
Agreement, however, this Agreement will automatically terminate
upon Executive's death and thereupon all payments and non-vested
benefits payable hereunder shall cease, except for any death
benefits provided under the Company's employee plans. The
Company may terminate this Agreement due to Executive's permanent
disability, as determined by the Board of Directors in good faith
based on the certification of an independent M.D., and thereupon
all payments and non-vested benefits hereunder shall cease.
2. Executive's Acceptance. Executive agrees to accept
the executive employment described in this Agreement. Executive
further agrees that he will devote his full time and best efforts
during reasonable business hours to performance of the duties and
responsibilities of his office during the Term of Employment.
Executive also agrees not to disclose trade secrets of the
Company, or to engage in any other activity which is detrimental
to the interests of the Company, during the Term of Employment.
3. Compensation and Benefits. The compensation and
benefits which the Company shall provide Executive for his
services during the Term of Employment shall include but not be
limited to:
(a) Base salary equal to or greater than $218,460 per
year. In addition, Executive will receive $107,254 per annum
advance against year-end cash bonuses, retroactive to June 1,
1997, paid on a pro rata monthly basis.
(b) Participation in all Company executive incentive
compensation plans. Such incentive compensation plans shall
include: an annual cash bonus of not less than 5% of the amount
by which the Company's pre-tax profits exceed $500,000, subject
to the provision below concerning achievement of the EPS
(Earnings Per Share) Goal.
If a participant in a bonus program is employed by the
Company for only part of a year or his or her employment is
terminated before year end, the participant's bonus for that year
will be pro rated based on the portion of the year the
participant was employed by the Company. Each cash bonus
provided for above shall not be earned unless the Company
achieves the EPS Goal, as defined below:
(1) for any given fiscal year the "EPS Goal"
shall be a goal for after-tax earnings per share for the
year established by the Board of Directors within the first
120 days of that year;
(2) all calculations under this Section 3(b) shall
be made in accordance with generally accepted accounting
principles applied consistently with the Company's
practices;
(3) Bonuses will be paid in the following order:
The General Employee Bonus will be paid in total first on a
pro rata basis and the Executive Cash Bonuses will be paid
second on a pro rata basis.
(c) Grants of options under any Company employee stock
option plan, where permitted by the Plan, in such amounts as are
determined by the Board of Directors or the Committee of the
Board administering such plan;
(d) Participation in all Company pension, deferred
compensation, insurance, health and welfare or other benefit
plans in which the Company's senior executives are entitled to
participate; and
(e) Continuation of all plans in which the Executive
participates, including existing fringe benefits and executive
perquisites to which Executive is entitled as of the date of this
Agreement, except that such plans, benefits and perquisites as
are generally available to the Company's senior executives may be
changed consistent with business conditions in a manner which
does not discriminate against Executive.
4. Termination Without Cause. The Company may terminate
Executive's employment without Cause as hereinafter defined and
for any reason. If Executive is terminated without Cause,
Company will continue to compensate and provide benefits to
Executive as if he had continued in the Company's employment
under this Agreement for the then remaining balance of the Term
of Employment or for a period of three (3) years from the date of
termination, whichever is longer. Executive will comply with
Section 8 of this Agreement while receiving such compensation.
If Executive's employment is terminated by the Company
without Cause and for any reason after termination of the term of
employment but prior to the Company and the Executive reaching a
written agreement with respect to the Executive's full retirement
benefits, Company will continue to compensate and provide
benefits to Executive as if he had continued in the Company's
employment under this Agreement for a period of two (2) years
from the date of termination. Executive will comply with Section
8 of this Agreement while receiving such compensation.
5. Termination for Cause. The Company may terminate
Executive's employment immediately and without prior notice to
Executive for "Cause" as defined below. The existence of Cause
shall be determined by the Company's Board of Directors (other
than Executive) acting in good faith. "Cause" is defined, and
shall be limited to, a good faith determination by the Board of
Directors that any of the following has occurred:
(a) Executive has misappropriated a material amount
of funds or property of the Company;
(b) Executive has obtained a material personal
profit from any unlawful Company transaction with a third party;
(c) Executive has obtained a material personal
profit from the use of the Company's trade secrets other than on
its behalf and/or if the Company has suffered material financial
harm from the disclosure of trade secrets by Executive; or
(d) Willful and prolonged absence from work by
Executive or willful refusal by Executive to perform his duties
and responsibilities under circumstances which, in either case,
constitute a substantial abdication of Executive's duties and
responsibilities of his office.
If Executive's employment is terminated by the Company for
Cause, he shall be paid compensation and provided benefits in
accordance with the provisions of the first paragraph of Section
4 above, provided that his cash compensation shall be reduced by
the amount of any monetary damage suffered by the Company due to
the Cause, prorated over the term of such payments.
6. Resignation. Executive may voluntarily resign from
the Company after giving 90 days' prior written notice of his
intention to resign and the Term of Employment shall terminate on
the effective date of such resignation. If Executive resigns or
otherwise voluntarily leaves the Company's employment prior to a
Change in Control, he shall forfeit all compensation and non-
vested benefits, from and after the effective date of such
resignation, provided in this Agreement.
7. Change in Control.
(a) A "Change in Control" of the Company shall
be deemed to have occurred if:
(1)any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (other
than the Company or any corporation owned, directly
or indirectly, by the shareholders of the Company in
substantially the same proportions as their
ownership of stock of the Company), is or becomes
the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more
of the combined voting power of the Company's then
outstanding securities;
(2)there is elected 35% or more of the
members of the Board of Directors of the Company
without the approval of the nomination of such
members by a majority of the Board serving prior to
such election;
(3)the shareholders of the Company approve
a merger or consolidation of the Company with any
other corporation, other than (i) a merger or
consolidation which would result in the voting
securities of the Company outstanding immediately
prior thereto continuing to represent more than 75%
of the combined voting power of the voting
securities of the Company, or such surviving entity,
outstanding immediately after such merger or
consolidation; or (ii) a merger or consolidation
effected to implement a recapitalization of the
Company (or similar transaction) in which no
"person" (as defined above) acquires more than 50%
of the combined voting power of the Company's then-
outstanding securities; or
(4)the Shareholders of the Company approve
an agreement for the sale or disposition by the
Company of all or substantially all of the Company's
assets.
(b) If any Change in Control of the Company occurs
and Executive's employment is terminated by the Company or the
Executive within four months after the date of the Change in
Control for any reason other than Executive's Death, the Company
shall pay and provide to Executive the following amounts and
benefits:
(1)the sum of Executive's full base salary
through the date of termination of his employment at
the rate in effect at the time of termination or at
the time the Change in Control occurs, whichever is
higher, and an amount equal to the amount of any
bonus which has been earned by him but not yet paid
to him. These two amounts shall be paid to
Executive in a lump sum within five days following
the date of termination, or in the case of a bonus
which is not readily calculable at such time,
within five days after such bonus can be calculated;
and
(2)an amount equal to three times the
highest total cash, stock and stock option cash
value compensation (including base salary and
bonuses) paid Executive in any of the Company's last
three fiscal years completed prior to such
termination. This amount shall be paid to Executive
as provided in the last sentence of subsection (a)
above; and
(3)the benefits provided Executive under
Section 3, such as, but not limited to, life,
accident, disability, health and travel insurance,
and other benefits in effect for Executive at the
time notice of termination is given or at the time
the Change in Control occurs, whichever may be
higher in the case of each benefit, shall be
provided to Executive by the Company to the same
extent as if Executive had continued to be an
employee of the Company for three (3) years from
such termination, and such benefits shall, to the
extent that they may not be provided or paid under
any benefit plan or program, be provided or paid for
by the Company by means other than such plan or
program.
(c) If applicable, the provisions of Section 7(b)
shall control over the provisions of Sections 4 and/or 5. In the
event that Executive's employment is not terminated by the
Company or the Executive for any reason other than the
Executive's death within the four month period specified in
Section 7(b), the provisions of Sections 4 and 5 shall once again
be applicable thereafter.
(d) In the event that the payments and benefits
specified in this Section 7 would be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue
Code of 1986 (the "Code"), as amended (or any similar tax that
may hereinafter be imposed) because of "excess parachute
payments," as defined in Section 280G of the Code, Executive and
Company agree that the amounts payable pursuant to this Section 7
shall be reduced by such amount as shall be necessary to avoid
the imposition of the Excise Tax.
8. Noncompetition. If prior to a Change in Control
Executive's employment terminates due to his resignation or other
voluntary departure or due to termination by the Company for
Cause or without Cause, for eighteen (18) months subsequent to
such termination, Executive shall not, without the prior written
consent of the Board of Directors of the Company, engage, as an
employee, partner, consultant, venturer, entrepreneur or
otherwise, in the development or sale of any product or service
which is competitive with any product or service of the Company.
If subsequent to a Change in Control Executive's employment
terminates as above provided, Executive shall similarly refrain
from competing with the Company for a period of twelve (12)
months subsequent to such termination. In the event the Company
terminates Executive's employment due to permanent disability as
provided in Section 1, whether prior to or after a Change in
Control, Executive shall not be restricted from competing with
the Company immediately upon such termination.
9. Retirement. The Company hereby agrees that, after
Executive's retirement from full time employment with the
Company, as agreed between the Company and Executive, the Company
will pay Executive retirement benefits for his lifetime and for
his spouse's lifetime, if his spouse survives him, as follows:
(a) a retirement wage benefit initially equal to 12%
of Executive's base salary as set forth in Section 3(a) above,
increased each year thereafter by any increase, less 0.5%, in the
CPI as defined below (except that the wage benefit shall be 75%
of that amount after Executive's death);
(b) continuation of Executive's full health program
or similar benefit for Executive and his spouse; and
(c) continuation of all other benefits provided at
time of retirement, such continuation limited in individual
benefit cost to 60% of the maximum annual cost of such benefit in
any year prior to retirement.
For these purposes:
(1) unless otherwise agreed or directed by law
or a court, "spouse" shall mean the person to whom Executive is
married at the time any benefit is to be paid, or, after
Executive's death, the person to whom Executive was married at
the time of his death;
(2) "CPI" shall mean the Consumer Price Index
as determined by the United States Department of Labor, Bureau of
Labor Statistics, or any successor governmental agency or,
lacking any such successor, any other authoritative source
designated in good faith by the Board of directors; and the wage
benefit shall be increased as of January 1 each year by
increasing the wage benefit paid during the previous year by any
positive percentage calculated by (A) dividing CPI most recently
computed and available at the end of that previous year by the
CPI most recently computed and available at the end of the year
previous to that (the quotient to be expressed as a percentage)
and (B) subtracting 100.5%.
The parties agree: (y) that payment of these
retirement benefits may be terminated if a court of law
determines that Executive has violated the provisions of Section
8 above, and (z) that the Company will purchase and maintain life
insurance sufficient to fund the estimated benefits for the
spouse (any excess policy proceeds to be available, if agreed, to
purchase shares of the Company's Common Stock held in Executive's
estate) and the policy or policies of such insurance shall be
held in a trust designed for this purpose.
10. Change in Employment Status. If approved by the
Executive and the Board of Directors during the Term of
Employment, executive may become a part time employee with terms
and conditions of employment substantially equal in all respects
to those of Xxxxx X. Xxxxxxx as set forth in his Part Time
Employment Agreement dated August 5, 1997 effective April 2,
1998, except for the basic compensation which shall be $112,500.
11. Expenses. If the Company is found by a court of
competent jurisdiction to have breached this Agreement, the
Company shall pay the costs and expenses incurred by Executive in
any litigation seeking damages in respect of such breach or to
enforce the performance of this Agreement by Company.
12. Notices. Any notice required or permitted to be
given hereunder shall be in writing and may be given by prepaid
and certified return receipt requested first class mail
addressed:
(a) if to the Company, to each member of the Board
of Directors at the address to which the Company then addresses
correspondence to such persons;
(b) if to Executive, at his home mailing address on
file with the Company; and
(c) to such other address as the party to which such
notice is to be given shall have notified (in accordance with the
provisions of this Section 10) as its substitute address for the
purpose of this Agreement.
Any notice given as aforesaid shall be deemed conclusively
to have been received on the fifth business day after such
mailing.
13. Amendment. It is agreed that no change or
modification of this Agreement shall be made except in a writing
signed by both parties.
14. Severability. In the event that any one or more of
the provisions of this Agreement shall be or become invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions shall not be
affected thereby.
15. Law Governing. The validity, interpretation and
effect of this Agreement shall be governed by the laws of the
State of New York.
16. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the employment of
Executive by the Company. There are no restrictions, agreements,
promises, warranties, covenants or undertakings other than those
expressly set forth herein. This Agreement supersedes all prior
agreements, arrangements and understandings between the parties,
whether oral or written, with respect to the employment of
Executive.
IN WITNESS WHEREOF, Executive for himself, and the
undersigned director of the Company on behalf of the Company by
authority of its Board of Directors, have executed this Agreement
as of the day and year first above written.
8/15/97 /s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx, Executive
DETECTION SYSTEMS, INC.
8/15/97 By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx, Chairman of the
Compensation Committee of the
Board of Directors
