EMPLOYMENT AGREEMENT
Exhibit
10.16
This
Employment Agreement (the “Agreement”) is made and entered into this
1st
day of
January, 2006, by and between LEVEL 8 SYSTEMS, INC., a Delaware corporation
(the
“Company”), and Xxxx X. Xxxxxxxxx, a resident of the State of New Jersey (the
“Employee”).
In
consideration of the mutual covenants, promises and conditions set forth
in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
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1.
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Employment.
The Company hereby employs Employee and Employee hereby accepts
such
employment upon the terms and conditions set forth in this Agreement.
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2.
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Duties
of Employee.
Employee will be based in New Jersey or North Carolina at the discretion
of the Company. Employee’s title will be Chief Executive Officer, Chief
Financial Officer, Chief Operating Officer and Corporate Secretary
and
Employee will report directly to the Board of Directors of the
Company.
Employee agrees to perform and discharge such other duties as may
be
assigned to Employee from time to time by the Company to the reasonable
satisfaction of the Board of Directors , and such duties will be
consistent with those duties regularly and customarily assigned
by the
Company to the position of Chief Executive Officer, Chief Financial
Officer and Secretary. Employee agrees to comply with all of the
Company's
policies, standards and regulations and to follow the instructions
and
directives as promulgated by the Board of Directors of the Company.
Employee will devote Employee's full professional and business-related
time, skills and best efforts to such duties and will not, during
the term
of this Agreement, be engaged (whether or not during normal business
hours) in any other business or professional activity, whether
or not such
activity is pursued for gain, profit or other pecuniary advantage,
without
the prior written consent of the Board of Directors of the Company.
This
Section will not be construed to prevent Employee from (a) investing
personal assets in businesses which do not compete with the Company
in
such form or manner that will not require any services on the part
of
Employee in the operation or the affairs of the companies in which
such
investments are made and in which Employee's participation is solely
that
of an investor; (b) purchasing securities in any corporation whose
securities are listed on a national securities exchange or regularly
traded in the over-the-counter market, provided that Employee at
no time
owns, directly or indirectly, in excess of one percent (1%) of
the
outstanding stock of any class of any such corporation engaged
in a
business competitive with that of the Company; or (c) participating
in
conferences, preparing and publishing papers or books, teaching
or joining
or participating in any professional associations or trade group,
so long
as the Board of Directors of the Company approves such participation,
preparation and publication or teaching prior to Employee’s engaging
therein.
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3.
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Term.
The term of this Agreement will be at-will, and can be terminated
by
either party at any time, with or without cause, subject to the
provisions
of Section 4 of this Agreement.
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4.
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Termination.
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(a)
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Termination
by Company for Cause.
The Company may terminate this Agreement and all of its obligations
hereunder immediately, including the obligation to pay Employee
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severance,
vacation pay or any further accrued benefits or remuneration, if any of the
following events occur:
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(i)
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Employee
materially breaches any of the terms or conditions set forth in
this
Agreement and fails to cure such breach within ten (10) days after
Employee's receipt from the Company of written notice of such breach
(notwithstanding the foregoing, no cure period shall be applicable
to
breaches by Employee of Sections 10 through 14 of this
Agreement);
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(ii)
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Employee
commits any other act materially detrimental to the business or
reputation
of the Company;
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(iii)
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Employee
engages in dishonest or illegal activities or commits or is convicted
of
any crime involving fraud, deceit or moral turpitude;
or
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(iv)
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Employee
dies or becomes mentally or physically incapacitated or disabled
so as to
be unable to perform Employee's duties under this Agreement even
with a
reasonable accommodation. Without limiting the generality of the
foregoing, Employee's inability adequately to perform services
under this
Agreement for a period of sixty (60) consecutive days will be conclusive
evidence of such mental or physical incapacity or disability, unless
such
inability is pursuant to a mental or physical incapacity or disability
covered by the Family Medical Leave Act, in which case such sixty
(60) day
period shall be extended to a one hundred and twenty (120) day
period.
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(b)
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Termination
by Company Without Cause.
The Company may terminate Employee's employment pursuant to this
Agreement
for reasons other than those stated in Section 4(a) upon at least
thirty
(30) days' prior written notice to Employee. In the event Employee's
employment with the Company is terminated by the Company without
cause,
the Company shall be obligated to pay Employee a lump sum severance
payment equal to twelve (12) months of Employee’s then base salary payable
within thirty (30) days after the date of termination. In addition,
Employee will be entitled to payment of all unused vacation days
at his
current daily rate and any accrued but unpaid salary or earned
bonuses.
Any option grants or restricted stock awards made to employee will
immediately vest. The payment to Employee for all deferred salaries
and
earned bonuses will be paid within 30 days by the Company. Other
than the
severance payments set forth in this Section 4(b), Employee will
be
entitled to receive no further remuneration and will not be entitled
to
participate in any Company benefit programs following his termination
by
the Company, whether such termination is with or without
cause.
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(c)
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Termination
by Employee for Cause.
In the event there occurs a substantial change in the Employee’s job
duties related to his position as CFO, but not CEO or COO, or there
is a
decrease in or a failure to provide the compensation or vested
benefits
under this Agreement initiated by either the Company or as a result
of a
Change in Control (as defined below) of the Company, Employee shall
have
the right to resign his employment and will be entitled to a lump
sum
severance payment equal to twelve (12) months of Employee’s then base
salary payable within thirty (30) days after the date of termination
In
addition, Employee will be entitled to payment of all unused vacation
days
at his current daily rate and a lump sum equal to all deferred
salaries
and earned bonuses. In addition, all Employee’s then outstanding but
unvested stock options shall vest one
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2
hundred
percent (100%). Employee shall have 12 months from the date written notice
is
given to Employee about the announcement and closing of a transaction resulting
in a Change in Control of the Company that would result in a substantial
change
in the Employee’s job duties or decrease his compensation or vested benefits
under this Agreement to resign or this Section 4(c) shall not apply. In the
event Employee resigns from the Company for any other reason, Employee will
not
be entitled to receive or accrue any further Company benefits or other
remuneration under this Agreement and Employee specifically agrees that he
will
not be entitled to receive any severance pay.
For
purposes of this Section 4, a Change in Control shall be deemed to have occurred
if any of the following occur:
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(i)
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the
merger of consolidation of the Company with or into another unaffiliated
entity, or the merger of another unaffiliated entity into the Company
or
another subsidiary thereof with the effect that immediately after
such
transaction the stockholders of the Company immediately prior to
such
transaction hold less than fifty percent (50%) of the total voting
power
of all securities generally entitled to vote in the election of
directors,
managers or trustees of the entity surviving such merger or consolidation.
This provision will not apply to any reorganization and reverse
merger
between the Company and Cicero, Inc. (or any other similar entity
established for a similar purpose)
;
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(ii)
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the
sale or transfer of more than fifty-one percent (51%) of the Company’s
then outstanding voting stock (other than a restructuring event
which
results in the continuation of the Company’s business by an affiliated
entity) to unaffiliated person or group (as such term is used in
Section
13(d)(3) of the Securities Exchange Act of 1934, as amended);
or
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(iii)
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the
adoption by the stockholders of the Company of a plan relating
to the
liquidation or dissolution of the
Company.
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5.
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Compensation
and Benefits.
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(a)
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Annual
Salary.
During the term of this Agreement and for all services rendered
by
Employee under this Agreement, the Company will pay Employee a
base salary
of One Hundred Fifty Thousand Dollars ($150,000.00) per annum in
equal
bi-monthly installments. Such annual salary will be subject to
adjustments
by any increases given in the normal course of
business.
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(b)
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Incentive
Compensation.
Employee shall be eligible to receive incentive compensation in
the form
of cash bonuses, in the amount set forth in Exhibit C. The initial
cash bonus of $50,000 will be earned and payable within ninety
90 days
after the close of the trailing three months wherein the Company
achieved
an operating cash flow under generally accepted accounting principles
(after accounting for all bonuses) of no less than $150,000 as
defined in
Exhibit C. In
addition, Employee is eligible for an additional annual bonus upon
the
Company reaching certain operating cash flow levels (after accounting
for
all bonuses) as set forth in Exhibit C. Said bonus will be payable
after
the annual accounts have been presented to the Compensation Committee.
Exhibit C attached hereto provides the benchmarks associated with
achieving the Incentive
Compensation.
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3
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(c)
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Equity
Awards.
Upon the successful completion of either the recapitalization merger
of
Level 8 Systems, into Cicero, Inc., or the successful amendment
of Level
8’s charter to increase the authorized shares necessary to effect
the
recapitalization of the Company and the associated conversion of
debt and
equity, (the Conversion Event) Employee is hereby awarded a Stock
Option
Grant equal
to
1.35% of the fully diluted shares of either Cicero, Inc. or Level
8
Systems, Inc., whichever entity shall be the surviving entity,
at the
prevailing market price on the day of grant. These options shall
vest 1/3
immediately and 1/3 on each of the next two anniversaries of the
date of
grant. Where possible under existing tax laws, these option grants
will be
Incentive Stock Option Grants otherwise these options will be Non
Qualified Options. In addition, Employee will be granted a restricted
stock award equal to 1.35% of the fully diluted shares of either
Cicero,
Inc. or Level 8 Systems common stock, which ever entity shall be
the
surviving entity. The restricted stock award will vest upon the
resignation or termination of employee or upon a change in control
as
defined in Section 4 (c) above. The Company will utilize its best
efforts
to register the restricted stock award within 60 days of
grant.
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6.
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Vacation.
Employee shall be eligible for four (4) weeks of paid vacation
annually,
provided that such vacation is scheduled at such times that do
not
interfere with the Company’s legitimate business needs.
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7.
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Other
Benefits.
Employee will be entitled to such fringe benefits as may be provided
from
time-to-time by the Company to its employees, including, but not
limited
to, group health insurance, life and disability insurance, and
any other
fringe benefits now or hereafter provided by the Company to its
employees,
if and when Employee meets the eligibility requirements for any
such
benefit. The Company reserves the right to change or discontinue
any
employee benefit plans or programs now being offered to its employees;
provided, however, that all benefits provided for employees of
the same
position and status as Employee will be provided to Employee on
an equal
basis.
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8.
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Business
Expenses.
Employee will be reimbursed for all reasonable expenses incurred
in the
discharge of Employee's duties under this Agreement pursuant to
the
Company's standard reimbursement
policies.
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9.
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Withholding.
The Company will deduct and withhold from the payments made to
Employee
under this Agreement, state and federal income taxes, FICA and
other
amounts normally withheld from compensation due
employees.
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10.
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Non-Disclosure
of Proprietary Information.
Employee recognizes and acknowledges that the Trade Secrets (as
defined
below) and Confidential Information (as defined below) of the Company
and
its affiliates and all physical embodiments thereof (as they may
exist
from time-to-time, collectively, the “Proprietary Information”) are
valuable, special and unique assets of the Company's and its affiliates'
businesses. Employee further acknowledges that access to such Proprietary
Information is essential to the performance of Employee's duties
under
this Agreement. Therefore, in order to obtain access to such
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Proprietary
Information, Employee agrees that, except with respect to those duties assigned
to him by the Company, Employee will hold in confidence all Proprietary
Information and will not reproduce, use, distribute, disclose, publish or
otherwise disseminate any Proprietary Information, in whole or in part, and
will
take no action causing, or fail to take any action necessary to prevent causing,
any Proprietary Information to lose its character as Proprietary Information,
nor will Employee make use of any such information for Employee's own purposes
or for the benefit of any person, firm, corporation, association or other
entity
(except the Company) under any circumstances.
For
purposes of this Agreement, the term “Trade Secrets” means information,
including, but not limited to, any technical or nontechnical data, formula,
pattern, compilation, program, device, method, technique, drawing, process,
financial data, financial plan, product plan, list of actual or potential
customers or suppliers, or other information similar to any of the foregoing,
which derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can derive economic value from its disclosure or use. For purposes of
this
Agreement, the term “Trade Secrets” does not include information that Employee
can show by competent proof (i) was known to Employee and reduced to writing
prior to disclosure by the Company (but only if Employee promptly notifies
the
Company of Employee’s prior knowledge); (ii) was generally known to the public
at the time the Company disclosed the information to Employee; (iii) became
generally known to the public after disclosure by the Company through no
act or
omission of Employee; or (iv) was disclosed to Employee by a third party
having
a bona fide right both to possess the information and to disclose the
information to Employee. The term “Confidential Information” means any data or
information of the Company, other than trade secrets, which is valuable to
the
Company and not generally known to competitors of the Company. The provisions
of
this Section 6 will apply to Trade Secrets for so long as such information
remains a trade secret and to Confidential Information during Employee’s
employment with the Company and for a period of two (2) years following any
termination of Employee’s employment with the Company for whatever
reason.
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11.
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Non-Solicitation
Covenants.
Employee agrees that during Employee's employment by the Company
and for a
period of two (2) year following the termination of Employee's
employment
for whatever reason, Employee will not, directly or indirectly,
on
Employee's own behalf or in the service of or on behalf of any
other
individual or entity, divert, solicit or attempt to divert or solicit
any
individual or entity (i) who is a client of the Company at any
time during
the six (6)-month period prior to Employee's termination of employment
with the Company (“Client”), or was actively sought by the Company as a
prospective client, and (ii) with whom Employee had material contact
while
employed by the Company to provide similar services or products
as such
provided by Employee for the Company to such Clients or prospects.
Employee further agrees and represents that during Employee's employment
by the Company and for a period of two (2) year following any termination
of Employee's employment for whatever reason, Employee will not,
directly
or indirectly, on Employee's own behalf or in the service of, or
on behalf
of any other individual or entity, divert, solicit or hire away,
or
attempt to divert, solicit or
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5
hire
away, to or for any individual or entity which is engaged in providing similar
services or products to that provided by the Company, any person employed
by the
Company for whom Employee had supervisory responsibility or with whom Employee
had material contact while employed by the Company, whether or not such employee
is a full-time employee or temporary employee of the Company, whether or
not
such employee is employed pursuant to written agreement and whether or not
such
employee is employed for a determined period or at-will. For purposes of
this
Agreement, “material contact” exists between Employee and a Client or potential
Client when (1) Employee established and/or nurtured the Client or potential
Client; (2) the Client or potential Client and Employee interacted to further
a
business relationship or contract with the Company; (3) Employee had access
to
confidential information and/or marketing strategies or programs regarding
the
Client or potential Client; and/or (4) Employee learned of the Client or
potential Client through the efforts of the Company providing Employee with
confidential Client information, including but not limited to the Client’s
identify, for purposes of furthering a business relationship.
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12.
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Existing
Restrictive Covenants.
Except as provided in Exhibit B, Employee has not entered into
any
agreement with any employer or former employer: (a) to keep in
confidence
any confidential information, or (b) to not compete with any former
employer. Employee represents and warrants that Employee's employment
with
the Company does not and will not breach any agreement which Employee
has
with any former employer to keep in confidence confidential information
or
not to compete with any such former employer. Employee will not
disclose
to the Company or use on its behalf any confidential information
of any
other party required to be kept confidential by
Employee.
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13.
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Return
of Proprietary Information.
Employee acknowledges that as a result of Employee's employment
with the
Company, Employee may come into the possession and control of Proprietary
Information, such as proprietary documents, drawings, specifications,
manuals, notes, computer programs, or other proprietary material.
Employee
acknowledges, warrants and agrees that Employee will return to
the Company
all such items and any copies or excerpts thereof, and any other
properties, files or documents obtained as a result of Employee's
employment with the Company, immediately upon the termination of
Employee's employment with the
Company.
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14.
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Proprietary
Rights.
During the course of Employee's employment with the Company, Employee
may
make, develop or conceive of useful processes, machines, compositions
of
matter, computer software, algorithms, works of authorship expressing
such
algorithm, or any other discovery, idea, concept, document or improvement
which relates to or is useful to the Company's Business (the
“Inventions”), whether or not subject to copyright or patent protection,
and which may or may not be considered Proprietary Information.
Employee
acknowledges that all such Inventions will be “works made for hire” under
United States copyright law and will remain the sole and exclusive
property of the Company. Employee also hereby assigns and agrees
to assign
to the Company, in perpetuity, all right, title and interest Employee
may
have in and to such Inventions, including without limitation, all
copyrights, and the right to apply for any form of patent,
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utility
model, industrial design or similar proprietary right recognized by any state,
country or jurisdiction. Employee further agrees, at the Company's request
and
expense, to do all things and sign all documents or instruments necessary,
in
the opinion of the Company, to eliminate any ambiguity as to the ownership
of,
and rights of the Company to, such Inventions, including filing copyright
and
patent registrations and defending and enforcing in litigation or otherwise
all
such rights.
Employee
will not be obligated to assign to the Company any Invention made by Employee
while in the Company's employ which does not relate to any business or activity
in which the Company is or may reasonably be expected to become engaged,
except
that Employee is so obligated if the same relates to or is based on Proprietary
Information to which Employee will have had access during and by virtue of
Employee's employment or which arises out of work assigned to Employee by
the
Company. Employee will not be obligated to assign any Invention which may
be
wholly conceived by Employee after Employee leaves the employ of the Company,
except that Employee is so obligated if such Invention involves the utilization
of Proprietary Information obtained while in the employ of the Company. Employee
is not obligated to assign any Invention that relates to or would be useful
in
any business or activities in which the Company is engaged if such Invention
was
conceived and reduced to practice by Employee prior to Employee's employment
with the Company. Employee agrees that any such Invention is set forth on
Exhibit “A” to this Agreement.
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15.
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Remedies.
Employee agrees and acknowledges that the violation of any of the
covenants or agreements contained in Sections 10 through 14 of
this
Agreement would cause irreparable injury to the Company, that the
remedy
at law for any such violation or threatened violation thereof would
be
inadequate, and that the Company will be entitled, in addition
to any
other remedy, to temporary and permanent injunctive or other equitable
relief without the necessity of proving actual damages or posting
a
bond.
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16.
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Severability.
In case one or more of the provisions contained in this Agreement
is for
any reason held to be invalid, illegal or unenforceable in any
respect,
the parties agree that it is their intent that the same will not
affect
any other provision in this Agreement, and this Agreement will
be
construed as if such invalid or illegal or unenforceable provision
had
never been contained herein. It is the intent of the parties that
this
Agreement be enforced to the maximum extent permitted by
law.
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17.
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Entire
Agreement.
This Agreement embodies the entire agreement of the parties relating
to
the subject matter of this Agreement and supersedes all prior agreements,
oral or written, regarding the subject matter hereof. No amendment
or
modification of this Agreement will be valid or binding upon the
parties
unless made in writing and signed by the
parties.
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18.
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Governing
Law.
This Agreement is entered into and will be interpreted and enforced
pursuant to the laws of the State of New Jersey. The parties hereto
hereby
agree that the appropriate forum and venue for any disputes between
any of
the parties hereto arising
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out
of
this Agreement shall be any federal court in the state where the Employee
has
his principal place of residence and each of the parties hereto hereby submits
to the personal jurisdiction of any such court. The foregoing shall not limit
the rights of any party to obtain execution of judgment in any other
jurisdiction. The parties further agree, to the extent permitted by law,
that a
final and unappealable judgment against either of them in any action or
proceeding contemplated above shall be conclusive and may be enforced in
any
other jurisdiction within or outside the United States by suit on the judgment,
a certified exemplified copy of which shall be conclusive evidence of the
fact
and amount of such judgment.
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19.
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Surviving
Terms.
Sections 4, 10, 11, 14, 15 and 18 of this Agreement shall survive
termination of this Agreement.
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first above written.
| COMPANY: |
EMPLOYEE:
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| LEVEL 8 SYSTEMS, INC. | |||
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By:
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Name:
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Xxxx
X. Xxxxxxxxx
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Title:
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8
EXHIBIT
A
INVENTIONS
Employee
represents that there are no Inventions.
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Employee
Initials
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9
EXHIBIT
B
EXISTING
RESTRICTIVE COVENANTS
10
EXHIBIT
C
VARIABLE
COMPENSATION
Initial
Cash Bonus:
Employee
is entitled to an initial cash bonus of $50,000 payable within ninety 90
days
after the close of the trailing three months wherein the Company achieved
an
operating cash flow under generally accepted accounting principles (after
accounting for all bonuses) of no less than $150,000. Cash flow from operations
is defined as net income plus depreciation and amortization plus or minus
the
changes in working capital.
Annual
Cash Bonus:
Employee
is entitled to an annual cash bonus payable after the Company has reported
its
results for the year. This annual cash bonus is tied to cash flow from
operations (defined as above) as per the chart below:
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Operating
Cash Flow
Range
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From
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To
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Variable
Compensation
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Tier
1
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$
500,000
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$
1,000,000
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$
100,000
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Tier
2
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$
1,000,001
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$
2,000,000
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$
200,000
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Tier
3
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$
greater than 2,000,001
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$
300,000
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Performance
significantly in excess of Tier 3 may result in an additional reward
at
the discretion of the Compensation
Committee
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11
