EXHIBIT 10.12
EMPLOYMENT AGREEMENT
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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 Xxxx Xxxxxx, a resident of the State of California (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
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accepts such employment upon the terms and conditions set forth in
this Agreement.
2. Duties of Employee. Employee's title will be President and Employee
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will report directly to the Chief Executive Officer of the Company.
Employee will be based in California. 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 President.
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 Chief Executive Officer 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 Chief Executive Officer 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 Chief Executive Officer of
the Company approves such participation, preparation and publication or
teaching prior to Employee's engaging therein.
3. Term. The term of this Agreement will be at-will, and can be
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terminated by either party at any time, with or without cause, subject
to the provisions of Section 4 of this Agreement.
4. Termination.
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(a) Termination by Company for Cause. The Company may terminate
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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
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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; an amount equal to the
prorated bonus earned having received credit for bonus
earnings up to the date of termination and Employee shall be
entitled to an award of 100,000 shares of the Company's Common
Stock. In addition, all Employee's then outstanding but
unvested stock options shall vest one hundred percent (100%).
Employee will have twelve (12) months from the date of
termination to exercise his stock options. Other than the
severance payments 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
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programs following his termination by the Company, whether
such termination is with or without cause.
(c) Termination by Employee for Cause. In the event there
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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 one
(1) year of Employee's then base salary payable within thirty
(30) days of the date of termination; an amount equal to the
prorated bonus earned having received credit for bonus
earnings up to the date of termination , except if there is a
failure to provide compensation or vested benefits in the
event of insolvency by the Company, in which case no severance
payment shall be made, but in any case, Employee shall receive
an award of 100,000 shares of the Company's common stock. For
avoidance of doubt, this award shall be in lieu of the 100,000
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%). Except in
the case of a Change in Control (as defined below), Employee
will have twelve (12) months from the date of termination to
exercise his stock options. 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
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(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.
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(a) Annual Salary. During the term of this Agreement and for all
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services rendered by Employee under this Agreement, the
Company will pay Employee a base salary of Two Hundred
Thousand Dollars ($200,000.00) 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
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incentive compensation in the form of a cash bonus equal to
One Hundred Fifty Thousand Dollars ($150,000.00) upon the
Company reaching anticipated operating income results as set
forth in the operating plan for the Company subject to
approval by the Board of Directors.
(c) Repayment of Outstanding Note. Upon execution of the
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Agreement, Employee shall surrender to Company fifteen
thousand (15,000) shares of the Company's common stock as
partial repayment for the outstanding loan with the Company
evidenced by a Promissory Note and Stock Pledge Agreement. In
addition, Employee shall pay to the Company an amount equal to
Fifty Thousand Dollars ($50,000.00) payable in equal monthly
installments of Five Thousand Dollars ($5,000.00), which
amount shall be taken from employees paychecks through
December 31, 2002. Upon receipt of the common stock and
payment in full of the amount referenced in this paragraph,
Level 8 will cancel the Promissory Note and Stock Pledge
Agreement. If, prior to December 31, 2002 there occurs a
Change in Control of the Company or in the event of
insolvency, Employee shall be forgiven of the remaining
payments from the date of closing of such transaction under
this Section 5(c).
6. Vacation. Employee shall be eligible for four (4) weeks of paid
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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
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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. Business Expenses. Employee will be reimbursed for all reasonable
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expenses incurred in the discharge of Employee's duties under this
Agreement pursuant to the Company's standard reimbursement policies.
9. Withholding. The Company will deduct and withhold from the
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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
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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
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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
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employment by the Company and for a period of one (1) 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 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,
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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
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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
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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.
14. Proprietary Rights. During the course of Employee's employment with
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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.
The provisions of this Section 14 will be construed in accordance will
be construed in accordance with the provisions of Section 2870 of the
California Labor Code. Section 2870(a) of the California Labor Code
provides that: (a) any provision in an employment agreement which
provides that an employee shall assign, or offer to assign, any of his
or her rights in an invention to his or her employer shall not apply to
an invention that the employee developed entirely on his or her own
time without using the employer's equipment, supplies, facilities, or
trade secret information except for those inventions that
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either (1) relate at the time of the conception and reduction to
practice of the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer; or
(2) result from any work performed by the employee for the employer.
15. Remedies. Employee agrees and acknowledges that the violation of any of
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the covenants or agreements contained in Sections 10, 11 and 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.
16. Severability. In case one or more of the provisions contained in this
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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.
17. Entire Agreement. This Agreement embodies the entire agreement of the
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parties relating to the subject matter of this Agreement and supersedes
all prior agreements, oral or written, regarding the subject matter
hereof, except for any earned but unpaid bonuses that remain from
calendar year 2001 for which the parties agree as being due and
payable. Specifically, both parties agree that Employee has earned and
is due a minimum of $60,000 for calendar year 2001. 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
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interpreted and enforced pursuant to the laws of the State of
California. 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, 10, 11, 14, 15 and 18 of this Agreement
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shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
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COMPANY: EMPLOYEE:
XXXXX 0 SYSTEMS, INC.
By:
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Name: Xxxx Xxxxxx
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Title:
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EXHIBIT A
INVENTIONS
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Employee represents that there are no Inventions.
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Employee Initials
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EXHIBIT B
EXISTING RESTRICTIVE COVENANTS
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