EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is made effective this 1st day of
January, 2002, by and between LEVEL 8 SYSTEMS, INC., a Delaware corporation (the
"Company"), and Xxxxxxx Xxxx, 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:
1. Employment. The Company hereby employs Employee and Employee hereby
----------
accepts such employment upon the terms and conditions set forth in
this Agreement.
2. Duties of Employee. Employee's title will be Chief Executive Officer
------------------
and Chief Technology Officer. Employee will be based in New Jersey.
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 Company, and such duties will be consistent with
those duties regularly and customarily assigned by the Company to the
position of Chief Executive Officer and Chief Technology Officer. In
addition, Employee shall serve as Chairman of the Board of Directors so
long as he is elected to such post by the Board of Directors according
to the By-Laws of the Company. Employee also 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.
3. 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.
4. Termination.
-----------
(a) Termination by Company for Cause. The Company may terminate
--------------------------------
this Agreement and all of its obligations hereunder
immediately, including the obligation to pay Employee
severance, vacation pay or any further benefits or
remuneration, if any of the following events occur:
(i) 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 6, 7 or 8 of this Agreement);
(ii) Employee commits any other act materially detrimental
to the business or reputation of the Company;
(iii) Employee engages in dishonest or illegal activities
or commits or is convicted of any crime involving
fraud, deceit or moral turpitude; or
(iv) 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
adequately to perform services under this Agreement
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.
(b) 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 one (1)
year of Employee's then base salary payable within thirty (30)
days of the date of termination. In addition, all Employee's
then outstanding but unvested stock options shall vest one
hundred percent (100%). Other than the severance payment and
vesting of outstanding options 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. Furthermore, should
Employee's employment with the Company be terminated without
cause, Employee shall be entitled to an award of 200,000
shares of the Company's Common Stock. Employee shall not be
entitled
2
to any further remuneration of any kind whatsoever for his
termination without cause.
(c) Termination by Employee for Cause. In the event there occurs
---------------------------------
a substantial change in the Employee's job duties, there is a
decrease in or a failure to provide the compensation or vested
benefits under this Agreement or there is a Change in Control
(as defined below) of the Company, Employee shall have the
right to resign his employment and will be entitled to receive
a severance payment equal to an award of 200,000 shares of the
Company's common stock. For avoidance of doubt, this award
shall be in lieu of the 200,000 common stock shares awarded
Employee under Section 4(b) above. In addition, all Employee's
then outstanding but unvested stock options shall vest one
hundred percent (100%). Employee shall have thirty (30) days
from the date written notice is given to Employee about either
(a) a change in his duties or (b) the announcement and closing
of a transaction resulting in a Change in Control of the
Company 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:
(i) 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;
(ii) 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
(iii) the adoption by the stockholders of the Company of a
plan relating to the liquidation or dissolution of
the Company.
5. Compensation and Benefits.
-------------------------
3
(a) 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 Three Hundred
Thousand Dollars ($300,000.00) 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.
(b) Incentive Compensation. Employee shall be eligible to receive
----------------------
incentive compensation in the form of a cash bonus equal to
One Hundred Fifty Thousand Dollars ($150,000.00) upon the
Company reaching sales goals for the calendar year as set
forth in the operating plan for the Company which was approved
by the Board of Directors. Said bonus will be pro-rated and
payable quarterly.
(c) Stock Options. On the 1st day of January, 2002, the
-------------
Company will issue to Employee, incentive stock options to
purchase three hundred thousand (300,000) shares of Level 8
Systems, Inc. common stock pursuant to the terms and
conditions of the Level 8 Systems, Inc. Stock Option Plan
("Stock Option Plan"), as amended. Such options will vest at
the rate of thirty-three and one-third percent (33.33%) per
year for a three-year period beginning on the first day after
the common stock of the Company reaches three dollars and
50/100 ($3.50) as quoted on the Nasdaq market, or such other
public securities market as the company may be a member of at
the time. Employee shall be considered for additional grants
of options to purchase shares of Level 8 Systems, Inc. common
stock in a manner which is consistent with other senior
officers of the Company. However, nothing in this Agreement
shall give rise to a contractual right to Employee to receive
grants of additional stock options. Further, the Company has
no obligation to Employee to create parity with any other
Company executives with respect to any options granted to such
other executives.
6. 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.
7. 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.
8. 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.
4
9. 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.
10. 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 Proprietary Information,
Employee agrees that, except with respect to those duties assigned to
him by the Company, Employee shall 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.
11. Non-Solicitation Covenants. Employee agrees that during Employee's
---------------------------
employment by the Company and for a period of one (1) year following
the termination of Employee's
5
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 one (1) 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 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.
12. 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.
13. 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.
6
14. 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, 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.
15. Remedies. Employee agrees and acknowledges that the violation of any of
--------
the covenants or agreements contained in Sections 6, 7, and 10 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.
16. 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
7
never been contained herein. It is the intent of the parties that this
Agreement be enforced to the maximum extent permitted by law.
17. 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.
18. 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 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.
19. Surviving Terms. Sections 4, 6, 7, 10, 11 and 14 of this Agreement
---------------
shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
COMPANY: EMPLOYEE:
XXXXX 0 SYSTEMS, INC.
By:
--------------------------------- --------------------------------------
Name: Xxxxxxx Xxxx
--------------------------------
Title:
-------------------------------
8
EXHIBIT A
INVENTIONS
----------
Employee represents that there are no Inventions.
------------------------
Employee Initials
9
EXHIBIT B
EXISTING RESTRICTIVE COVENANTS
------------------------------
10
