THIS AGREEMENT
(the “ Agreement ”) is made and entered
into as of May 11, 2005, by and between Spectrum Sciences
& Software Holdings Corp., a Delaware corporation (the “
Company ”), and Michael Megless (the “
Executive ”), and shall become effective upon
the filing with the Securities and Exchange Commission of the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2005 (the “ Effective
Date ”).
In consideration
of the mutual covenants herein contained and of the mutual benefits
herein provided, the Company and the Executive agree as
follows:
1. Term
of Employment. The Company will employ Executive and Executive
accepts employment by the Company on the terms and conditions
herein contained for a period (the “ Employment
Period ”) provided in Section 4.
(a)
(1) The Executive shall be employed as the Chief Financial
Officer (the “ CFO ”) of the Company. The
Executive shall report directly to the Company’s Board of
Directors (the “ Board ”).
(2) The
Executive agrees to undertake the duties and responsibilities
commensurate with the position of CFO, which may encompass
different or additional duties as may, from time to time, be
reasonably assigned by the Board, and the duties and
responsibilities undertaken by the Executive may be reasonably
altered or modified from time to time by the Board, so long as the
Executive’s responsibilities as CFO are not materially
reduced, and his reporting relationship is not materially altered
or modified in an adverse way.
(b) During
the Employment Period, the Executive will devote substantially all
of his time and efforts to the business of the Company and will not
engage in consulting work or any trade or business for his own
account or for or on behalf of any other person, firm or
corporation. Notwithstanding the foregoing, the Executive may
engage in charitable activities for reasonable periods of time each
month so long as such activities do not materially interfere with
the Executive’s responsibilities under this Employment
Agreement.
(c) Concurrent
with the execution and delivery of this Agreement, the Company
agrees to secure the Executive’s election to the Board. The
Company agrees to use its best efforts to maintain the
Executive’s continued Board membership for the entire
Employment Period. Upon termination of the employment relationship
under this Agreement for any reason, the Executive shall be deemed
to have resigned his position as an officer of the Company or any
subsidiaries thereof, and as a member of the Board, the boards of
directors of any subsidiaries thereof and any committees of such
boards, effective on the date of termination.
(a) Base
Salary: As compensation for his services hereunder, during the
Executive’s employment as CFO, the Company agrees to pay the
Executive a base salary at the rate of Two Hundred and Sixty
Thousand Dollars ($260,000) per annum, payable in accordance with
the Company’s normal payroll schedule, or on such other
periodic basis as may be mutually agreed. The Company may withhold
from any amounts payable under this Agreement for such federal,
state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation. In no event shall
Executive’s salary be reduced below his current salary (or,
subsequent to any increases, below his then current salary) during
the Employment Period.
Executive’s salary shall be subject to
annual review by the Board at or before the meeting of the
Company’s board of directors held in connection with the
annual general meeting of shareholders, based on corporate policy
and contributions made by Executive to the Company. Any annual
salary increase will take effect on the respective anniversary date
of this Agreement.
(b) Bonus:
Executive shall receive a one-time cash bonus equal to four percent
(4%) of the Company’s EBITDA for FY2005 in excess of
$3,400,000 (the “ 2005 Bonus ”); for
purposes of calculating the 2005 Bonus, the Company’s EBITDA
for FY2005 shall be based on the Company’s 2005 year-end
audited consolidated financial statements prepared in accordance
with generally accepted accounting principles (GAAP) applied
on a consistent basis (the “ 2005 Audit
”). The 2005 Bonus shall be paid to Executive not later than
ten (10) business days after completion of the 2005 Audit.
Subsequent annual bonuses may be granted by the Board on terms to
be agreed between the Board and Executive.
During the term
of his employment, as determined by the Board, acting in its
discretion, the Executive shall be eligible to participate in any
other executive bonus or benefit program that the Company may
develop and offer to other executives from time to time.
(c) Participation
in Equity Award Program: To the extent the Company establishes or
may, from time to time, establish at any period in the future, an
incentive program that permits, allows, or provides for awards of
stock, restricted stock, or options in the Company, or similar
incentive equity interests, the Executive shall be eligible to
participate in such program as determined by the Board, acting in
its discretion.
(d) Other
Expenses: In addition to the compensation provided for above, the
Company agrees to pay or to reimburse the Executive during his
employment for all reasonable, ordinary, and necessary, properly
vouchered, client-related business or entertainment expenses
incurred in the performance of his services hereunder in accordance
with Company policy in effect from time to time. The Executive
shall submit vouchers and receipts for all expenses for which
reimbursement is sought.
(e) Vacation:
During each calendar year, the Executive shall be entitled to five
(5) weeks of paid vacation per year. To the extent that he is
unable to take any part of this vacation during a particular
calendar year, it shall be carried over and shall not affect his
vacation during any subsequent year; provided, however, that the
Executive may not carry
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forward more
than one (1) week of unused vacation days from any year of
this Agreement to the next.
(f) Fringe
Benefits: In addition to his compensation provided by the
foregoing, the Executive shall be entitled to the benefits
available generally to Company employees pursuant to Company
programs, including, by way of illustration, personal leave, paid
holidays, sick leave, retirement, disability, dental, vision, group
life, health, accident, disability or hospitalization insurance
plans, pension plans and retirement plans of the Company which may
now or, if not terminated, shall hereafter be in effect, or in any
other or additional such programs which may be established by the
Company, as and to the extent any such programs are or may from
time to time be in effect, as determined by the Company and the
terms hereof, provided, however, that, to the extent the Company
amends, reduces or completely terminates any of the group life,
health, accident, disability or hospitalization insurance plans,
pension plans and retirement plans in effect as of the date this
Agreement initially becomes effective (the “ Initial
Benefits ”) in a manner that adversely affects these
benefits for Executive, the Company agrees that it will replace
these Initial Benefits with and/or take any and all steps otherwise
necessary to ensure that Executive obtains comparable replacement
benefits at the level of, the same cost as, and under terms and
conditions no less favorable than those provided under the Initial
Benefits.
(g) Car
Allowance. Executive shall be eligible for a monthly car allowance
in an amount consistent with past practice, which Executive may use
to cover the costs of a car as he sees fit, including but not
limited to lease or loan payments, insurance premiums, and/or
maintenance or fuel expenses.
4. Employment Period; Termination.
(a) The
Executive’s employment under this Agreement shall commence on
Effective Date and shall continue thereafter unabated until
terminated upon the earlier to occur of the following events:
(i) the close of business on the third (3rd) anniversary of
this Agreement (with the initial three (3) year term of this
Agreement being referred to herein as the “ Initial
Term ”) or (ii) otherwise as provided below,
provided, however, that, on the third anniversary of the date of
this Agreement, and on every subsequent annual anniversary, and
unless either party has given the other party written notice at
least sixty (60) days prior to the such anniversary date, the
term of this Agreement and the Employment Period shall be renewed
for a term ending one (1) year subsequent to such date (each
such one-year term shall be referred to herein as a “
Renewal Term ”), unless sooner terminated as
provided herein. For the purposes of this Agreement, the Initial
Term and each Renewal Term shall collectively be referred to as the
“ Employment Period ”.
(b)
(i) Notwithstanding the provisions of Section 4(a) above, the
Executive may terminate the employment relationship at any time for
any reason by giving the Company written notice at least thirty
(30) days prior to the effective date of termination. Unless
otherwise provided herein, all compensation and benefits paid by
the Company to the Executive shall cease upon his last day of
employment; provided, however, that if the Company terminates
Executive’s employment for any reason other than for Cause
(as defined below) or if the Executive
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terminates his
employment for “Good Reason” pursuant to the terms and
conditions set forth below, the Company will continue to pay the
Executive’s base salary, bonus compensation and any and all
fringe/medical benefits as provided for in Section 3(f)
(collectively, the “ Fringe Benefits ”)
for a period of six (6) months from the effective date of such
termination without Cause or for Good Reason, and Executive’s
interest in any stock options, restricted stock or other equity
interest in the Company for which he is or has become eligible
under the terms of any applicable stock option or restricted stock
plan or agreement or for which he was scheduled to become eligible
at any time during the then applicable Employment Period
(collectively, the “ Options ”) shall
fully vest on the effective date of Executive’s termination
without Cause or for Good Reason and otherwise shall thereafter be
exercisable by Executive subject to the terms and conditions
contained therein. In addition, the Company shall pay Executive,
within ten (10) calendar days from the effective date of such
termination without Cause or for Good Reason any and all accrued
but unpaid salary, bonus and reimbursable expenses and payment for
any unused vacation days, in each case through the effective date
of termination without Cause or for Good Reason. Subject to the
provisions detailed below, upon thirty (30) days’
written notice to the Company of his intent to terminate the
Agreement, Executive shall have the right to terminate his
employment under this Agreement for “Good Reason.” For
purposes of this Agreement, “Good Reason” is defined as
any one of the following: (i) Company’s material breach
of any provision of this Agreement; (ii) any material adverse
change in Executive’s position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities, or any other action by the Company made without
Executive’s permission (other than a change due to
Executive’s Permanent D
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