EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1997 between DATA
SYSTEMS & SOFTWARE INC., a Delaware corporation (the "Company"), and XXXXXX
XXXXXXXXXXX (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been the President and Chief Executive
Officer of the Company since its organization in 1986, and has successfully
developed and expanded the business of the Company;
WHEREAS, the Executive is employed as the President and Chief
Executive Officer of the Company under an agreement between them dated as of
January 1, 1994 (the "1994 Employment Agreement"), which expires on December 31,
1998; and
WHEREAS, the Company desires to assure itself of the Executive's
continued services, and the Executive is willing to continue to provide such
services to the Company on a full time basis for a period of time, and to be
retained thereafter on a part-time basis in an advisory and consultative
capacity, all upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Employment.
(a) The Company shall employ the Executive, and the Executive shall
serve, as Chairman of the Board, President and Chief Executive Officer of the
Company during the period commencing on the date hereof and ending on December
31, 2001, or such earlier date as may be
designated by the Executive upon written notice to the Board of Directors that
he elects to terminate such employment and serve as a Consultant to the Company
in accordance with the provisions of Paragraphs 1(b) or 1(c) hereof (the period
during which the Executive continues to serve as Chairman of the Board,
President and Chief Executive Officer of the Company is hereinafter referred to
as the "Employment Period", and the period during which he serves as a
Consultant to the Company is hereinafter referred to as the "Consulting
Period"). It is also contemplated that throughout the term of this Agreement,
the Executive will continue to be a member of the Board of Directors of the
Company, and serve as Chairman of the Board during the Employment Period and as
Chairman Emeritus during the Consulting Period. During the Employment Period the
Executive shall devote his best efforts and services to his employment on
substantially a full-time basis. The place of employment shall be at the
headquarters of the Company, which shall at all times be in the New York City
metropolitan area.
(b) Upon not less than 120 days' prior written notice to the Company
at any time prior to December 31, 2001, the Executive shall have the right to
terminate his employment as Chairman of the Board, President and Chief Executive
Officer of the Company hereunder and elect to serve as a Consultant to the
Company for a period ending on December 31 of the seventh year after which the
Executive commenced to serve as a Consultant to the Company. The Executive shall
specify in said notice the date (the "Employment Termination Date") upon which
his services as Chairman of the Board, President and Chief Executive Officer of
the Company hereunder shall terminate (which date shall be the last day of a
calendar month not less than 120 days after the date such notice is given). The
Consulting Period shall commence on the first day of the calendar month
immediately succeeding the Employment Termination Date.
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(c) Anything to the contrary herein notwithstanding, if at any time
during the Employment Period the Company breaches any of its obligations
hereunder or there shall occur a "Change in Control of the Company" (as
hereinafter defined), the Executive shall have the option, upon written notice
to the Company (in accordance with the provisions of Paragraph 6(c) hereof) that
such breach or a Change in Control of the Company has occurred and that the
Executive intends to exercise such option, to terminate his employment as
Chairman of the Board, President and Chief Executive Officer hereunder and to
serve as a Consultant to the Company beginning on a date ten (10) days after the
giving of such notice and ending on the later of (i) December 31 of the seventh
year thereafter and (ii) December 31, 2005. For purposes of this Agreement, a
"Change in Control of the Company" shall be deemed to have occurred if (i) there
shall be consummated (A) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted in whole or in part into
cash, securities or other property, other than a merger of the Company in which
the holders of the Company's Common Stock immediately prior to the merger have
substantially the same propor tionate ownership of common stock of the surviving
corporation immediately after the merger, or (B) any sale, lease, exchange or
transfer (in one transaction or a series of related transactions) of all or
substantially all the assets of the Company, or (ii) the stockholders of the
Company shall approve any plan or proposal for the liquidation or dissolution of
the Company, or (iii) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than the Company or a subsidiary thereof or any employee benefit
plan sponsored by the Company or a subsidiary thereof, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company
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representing 20% or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights accruing in special
circumstances) having the right to vote in the election of directors, as a
result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, or (iv) at any time during a period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company shall cease for any reason to constitute
at least a majority thereof, unless the election or the nomination for election
by the Company's stockholders of each new director during such two-year period
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such two-year period or (v) any
other event shall occur that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act.
(d) During any Consulting Period hereunder, the Executive shall
render such advisory and consultative services concerning the business of the
Company as may be requested from time-to-time by the Board of Directors, and in
performing such services he shall report directly to the Board of Directors.
During any Consulting Period, the Executive shall not be required to render any
services at a distance of more than 50 miles from his then home. The Executive
shall be required to perform consulting services under this Agreement only at
times and places consistent with his other employment or with his private
activities.
2. Compensation.
(a) (1) During the Employment Period the Company shall pay the
Executive a salary at the rate of $420,000 per annum, and commencing on January
1, 1998, said rate shall be increased annually effective January 1 of each year
based upon the percentage year-to-year increase
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in the cost of living index in the New York City metropolitan area as compared
to the immediately preceding year (using as the basis of such computation the
"Consumer Price Index for All Urban Consumers -- New York and Northeastern New
Jersey", hereinafter called the "Index", published by the Bureau of Labor
Statistics of the United States Department of Labor, or if publication of the
Index is discontinued, the parties shall accept comparable statistics on the
cost of living for the New York City metropolitan area as computed and published
by an agency of the United States or by a responsible financial periodical of
recognized authority then to be selected by the parties). During the Employment
Period, the Executive's salary rate shall be reviewed annually by the Board of
Directors of the Company. Upon each such review the Executive's salary rate may
be increased to such rate as shall be considered appropriate and as shall be
fixed by the Board. The salary shall be paid to the Executive in appropriate
installments in accordance with the Company's usual and customary payroll
practices for executive officers. The Executive's election pursuant to
Paragraphs 1(b) or 1(c) hereof to serve as a Consultant to the Company hereunder
shall not adversely affect the Executive's right to receive any compensation
accrued prior to the date of such election.
(2) The Company shall pay the Executive as compensation for
his services as a Consultant hereunder during any Consulting Period a consulting
fee at the annual rate hereinafter set forth:
(i) During that portion of any Consulting Period commencing after
the exercise by the Executive of his option to serve as a Consultant pursuant to
Paragraph 1(c) hereof as a result of a breach of the Company's obligations
hereunder or a Change in Control of the Company and ending on December 31, 2001,
the Executive shall receive a consulting fee at an annual rate equal to the
Executive's annual salary at the rate in effect immediately prior to the
commencement of the
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Consulting Period, which annual rate shall be adjusted annually in January of
each year throughout the remaining term of this Agreement commencing January 1,
1998 for the percentage increase in the Index in accor dance with the provisions
of Paragraph 2(a)(1) hereof (the "Base Rate").
(ii) Except as otherwise provided in Paragraph 2(a)(2)(i) hereof,
the Executive shall receive a consulting fee for his services as a Consultant
hereunder at an annual rate equal to: (A) 50% of the Base Rate (the "50% Rate")
for the portion of the Consulting Period ending December 31 of the fourth full
calendar year of the Consulting Period; and (B) 25% of the Base Rate for the
remainder of the Consulting Period. All such consulting fees shall be paid to
the Executive in appropriate installments in accordance with the Company's usual
and customary payroll practices for executive officers.
(iii) At the commencement of any Consulting Period under this
Agreement, the Company shall take appropriate action to fund the payment of all
consulting fees to become payable to the Executive throughout the entire
Consulting Period, by purchase of an annuity from a reputable insurance company,
deposit of funds or U.S. Treasury Securities having maturities of less than one
year in a special account with a commercial or savings bank acceptable to the
Executive or pursuant to other arrangements acceptable to the Executive in his
sole discretion. Such fund shall not be used by the Company for any purpose
other than the payment of consulting fees to the Executive.
(b) During the Employment Period and any Consulting Period the
Executive shall also be reimbursed by the Company for reasonable business
expenses actually incurred or paid by him, consistent with the policies of the
Company, in rendering to the Company the services provided for herein. In lieu
of accounting for his expenses, Executive may opt to be reimbursed for his
expenses for meals and lodging while traveling on Company business in accordance
with the per diem
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allowances established by the Internal Revenue Service. All air travel shall be
first class or business class.
(c) During the Employment Period and any Consulting Period, the
Executive shall participate in all of the Company's employee benefit plans,
including without limitation, group life insurance, hospitalization and surgical
and major medical coverages, pension and retirement plans, long-term disability,
sick leave, vacations, holidays and such other related fringe benefits as are or
may be made available from time to time to executive employees of the Company,
and the amounts payable thereunder shall be no less (after adjustment for
changes in the Index as compared to the immediately preceding calendar year)
than those received for and in respect of the Company's previous fiscal year,
and the Executive shall be eligible to participate in the Company's 1994 Stock
Incentive Plan and any other stock option, savings, bonus, appreciation, profit
sharing, thrift, incentive, pension or similar plan designed to compensate
employees of the Company. In addition, during the Employment Period and any
Consulting Period, the Executive will be entitled to such other perquisites as
he has received as President and Chief Executive Officer of the Company prior to
the date hereof.
(d) At all times during the Employment Period and any Consulting
Period the Company shall maintain in full force and effect and continue to make
premium payments under the $500,000 whole life insurance policy on the life of
the Executive, of which Executive's spouse or his estate may be the beneficiary.
In addition, during each year of this Agreement, the Company shall obtain and
maintain in full force and effect a term life insurance policy or policies on
the Executive's life, of which Executive's spouse or his estate may be the
beneficiary, in the amount of $1.1 million.
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(e) The Company shall make available to the Executive during the
Employment Period and any Consulting Period two automobiles for the Executive's
exclusive use at the Company's expense. The Company shall also at its own
expense pay for all operating costs, repairs and insurance for such automobiles.
(f) The Company shall during the Employment Period and any
Consulting Period contribute to the retirement fund heretofore established on
behalf of the Executive each pay period an amount equal to not less than 25% of
the Executive's salary for such period in a manner consisting with existing
practice.
(g) During the Employment Period, the Company shall at its expense
cause to be provided for the Executive's use office facilities at the Company's
principal office at least comparable to his present office facilities and such
secretarial services as the Executive may reasonably require in carrying out his
obligations under this Agreement. During the Consulting Period, the Company
shall at its expense cause to be provided for the Executive's use such office
facilities and secretarial services as the Executive may reasonably require in
carrying out his obligations under this Agreement.
(h) The Executive shall be entitled to five weeks paid vacation.
Such vacation shall be taken at such time or times as shall be mutually agreed
to by the Board of Directors, the Company and the Executive.
3. Disability. If during the Employment Period the Executive should
suffer from a disability, the Company shall continue to pay to the Executive (or
his legal representative) the compensation payable to the Executive under
Paragraphs 2(a)(1) and 2(g) hereunder. The disability of the Executive during
the Consulting Period shall not reduce the compensation payable to him (or his
legal representative) pursuant to Paragraphs 2(a)(2) and 2(g) hereof. Any
payments which the
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Executive shall receive under any salary continuation or disability insurance
plan of the Company shall be deducted from the payments which would otherwise be
made under this Paragraph 3. Executive shall continue to receive the other
benefits to which he would be entitled under Paragraph 2 hereof. Nothing herein
contained shall be deemed to limit or abrogate any insurance benefits or other
benefits available to the Executive.
4. Death.
(a) If the Executive dies during the Employment Period or the
Consulting Period, the Company shall continue to pay to the estate of the
Executive all compensation that would otherwise accrue or be payable to the
Executive for the period ending on the later of December 31, 2001 and 180 days
from the date of death at the rate and in the manner set forth in Paragraph 2(g)
and in Paragraph 2(a)(1) or 2(a)(2) hereof, whichever is applicable.
(b) If the Executive dies during the term of this Agreement, the
Executive's surviving spouse shall be entitled to continued coverage under the
Company's hospitalization and surgical and major medical plans at the Company's
expense.
(c) Promptly following the death of the Executive (and in no event
later than 15 days after the date of his death), the Company shall take
appropriate action to fund the payment of all amounts payable to the estate of
the Executive pursuant to this Paragraph 4, in a manner acceptable to the
executor of the Executive's estate (or other legal representative of such
estate).
5. Other Activities. The Executive expressly agrees, as a condition
to the performance by the Company of its obligations hereunder, particularly its
obligations under Paragraphs 2, 3 and 4 hereof, that at all times during the
Employment Period and the Consulting Period, the Executive shall not directly or
indirectly engage in, as a director, officer, employee, partner
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or stockholder, any business, association, firm or corporation (other than the
Company or any parent, subsidiary or successor of it) that is engaged in whole
or in part in a business that is in substantial and direct competition with the
business of the Company or any of its subsidiaries, except that the Executive
may own not in excess of 10% (or such greater percentage as to which the Board
of Directors of the Company shall consent) of any class of securities of any
such competitive entity that is registered under Section 12 of Exchange Act or
otherwise publicly traded.
6. Termination.
(a) The Company may terminate this Agreement and all the Company's
obligations hereunder, except for obligations accrued but unpaid to the
effective date of termination, only for the Executive's willful failure to
perform his obligations under Paragraph 1 hereof. Such termination shall be
effected by notice thereof, hand delivered by the Company to the Executive and,
except as hereinafter provided, shall be effective as of the tenth day after
receipt by the Executive of such notice.
(b) If, within the 10-day period following the date of receipt of
such notice of termination, the Executive shall use his best efforts to perform
such obligations, the termination shall not be effective.
(c) This Agreement may be terminated by the Executive upon not less
than ten days' prior written notice to the Company because of a material breach
by the Company of its obligations hereunder or immediately upon written notice
to the Company of the occurrence of a Change in Control of the Company. In such
event, although the Employment Period (or the Consulting Period, as the case may
be) will then be terminated, the Executive shall continue to receive all the
compensation provided for in Paragraph 2 hereof and shall be entitled to all the
benefits other-
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wise provided for herein for the Employment Period (or the Consulting period, as
the case may be), notwithstanding such termination. An election by the
Executive, pursuant to Paragraphs 1(b) or 1(c) hereof, to function as a
Consultant may not be rescinded by the Executive, and after such election the
Executive may terminate only for a material breach of this Agreement during the
Consulting Period or a Change in Control of the Company.
(d) In the event of a termination of this Agreement by the Executive
as a result of the material breach of this Agreement by the Company of any of
its obligations hereunder or a Change in Control of the Company, or in the event
of the termination of the Executive's employment by the Company in breach of
this Agreement, the Executive shall not be required to seek other employment in
order to mitigate his damages hereunder, and no amounts received from any such
employment shall reduce any amount that the Company would otherwise be required
to pay to him as a result of such breach.
(e) In the event that the Executive institutes any legal action to
enforce his rights under, or to recover damages for breach of this Agreement,
the Executive, if he is the prevailing party, shall be entitled to recover from
the Company any actual expenses of such action, including attorneys' fees and
disbursements, incurred by him.
7. Confidentiality. The Executive shall not during the term of this
Agreement or thereafter disclose to any person, firm or corporation, except as
otherwise required by law, any information concerning the business, clients or
affairs of the Company that he may have acquired in the course of, or as an
incident to, his employment by the Company, for his own benefit or that of any
such person, firm or corporation, or to the detriment or intended or probable
detriment of the Company.
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8. Indemnification. The Executive shall be entitled throughout the
term of this Agreement and thereafter to indemnification in respect of any
actions or omissions as an employee, officer or director of the Company (or any
successor pursuant to Paragraph 14 hereof) to the fullest extent permitted by
the Delaware General Corporation Law or other applicable law.
9. Remedies. The Company hereby waives, and will not assert, any
right to set off the amount of any claims, liabilities, damages or losses the
Company may have against any amounts payable by the Company to the Executive
hereunder, and any amounts payable to or otherwise accrued for the account of
the Executive in respect of any period prior to the effective termination of
this Agreement shall be paid as provided in this Agreement.
10. Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or any breach thereof, shall be settled by arbitration in
accordance with the rules of the American Arbitration Association, and judgment
upon such award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The arbitrator shall not have the power to direct
equitable relief. The arbitration shall be held in New York, New York, or such
other place as may be agreed upon at the time by the parties to the arbitration.
11. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
12. Termination of Prior Employment Agreement. This Agreement
supersedes and replaces in its entirety the 1994 Employment Agreement, which is
hereby terminated and without further force or effect, except as to amounts
accrued and payable to the Executive thereunder as of the date hereof.
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13. Entire Agreement. This Agreement constitutes the whole agreement
of the parties hereto in reference to any employment or consultation of the
executive by the Company and in reference to any of the matters or things herein
provided for or hereinbefore discussed or mentioned in reference to such
employment, all prior agreements, promises, representations and understandings
relative thereto being herein merged.
14. Assignability.
(a) In the event that the Company shall merge or consolidate with
any other corporation or all or substantially all the Company's business or
assets shall be transferred in any manner to any other person, such successor
shall thereupon succeed to, and be subject to, all rights, interests, duties and
obligations of, and shall thereafter be deemed for all purposes hereto to be,
the Company hereunder. This Agreement shall be binding upon and inure to the
benefit of any such successor and the legal representatives of the Executive.
(b) This Agreement is personal in nature and neither of the parties
hereto shall assign or transfer this Agreement or any rights or obligations
hereunder, except by operation of law or pursuant to the terms of this Paragraph
14.
(c) Except as otherwise provided in this Paragraph 14 nothing
expressed or implied herein is intended or shall be construed to confer upon or
give to any person, other than the parties hereto any right, remedy or claim
under or by reason of this Agreement or of any term, covenant or condition
hereof.
15. Amendments; Waivers. This Agreement may be amended, modified,
superseded, canceled, renewed or extended and the terms or covenants hereof may
be waived only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party
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waiving compliance. The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by either party of the breach of any
term or covenant contained in this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be, or construed as, a further
or continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
16. Notices. All notices and other communications given pursuant to
this Agreement shall be in writing and shall be deemed given (i) on the day of
delivery, if delivered by hand, (ii) on the fourth business day after mailing,
if mailed, by registered or certified mail (return receipt requested), postage
prepaid, or (iii) on the second business day after deposit, if deposited with
Federal Express or other recognized over-night courier service, to any party
addressed as follows (or to such other address as shall be specified by a party
by like notice):
If to the Company:
Data Systems & Software Inc.
000 Xxxxx 00
Xxxxxx, Xxx Xxxxxx 00000
If to the Executive:
Xxxxxx Xxxxxxxxxxx
0 Xxxxxxx Xxxxx
Xxxxxx, Xxx Xxxx 00000
17. Severability. If for any reason any provision of this Agreement
shall be determined to be illegal and unenforceable by any court of law, the
validity and effect of all other provisions hereof shall not be affected
thereby.
18. Headings. Section headings are for convenience only and shall
not be considered a part of the terms and provisions of this Agreement.
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19. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original and which together shall constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
as of the day and year first above written.
/s/ Xxxxxx Xxxxxxxxxxx
-----------------------------
Xxxxxx Xxxxxxxxxxx
DATA SYSTEMS & SOFTWARE INC.
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx, Vice President and
Chief Financial Officer
By: /s/ Xxxxxx X. Xxxx
-----------------------------------
Xxxxxx X. Xxxx, On Behalf
of the Board of Directors
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