EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”) is made and entered into this 1st day of
January, 2007, by and between CICERO 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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Exhibit
10.16
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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 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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2
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(c)
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Termination by
Employee for Cause. In the event of a Change of Control
(as defined below) of the Company that results in either a substantial
reduction or change of title in the Employee’s job duties related to his
position as CFO or CEO, ,or a decrease in or a failure to provide the
compensation or vested benefits under this Agreement or the Company
initiates a substantial reduction or change of title in the Employee’s job
duties related to his position as CFO, 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 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.
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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 or 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 any subsidiary
(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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3
Exhibit
10.16
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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 and Seventy-Five Thousand Dollars
($175,000.00) per annum in equal bi-monthly installments, retroactive to
January 1, 2007. In order to reach a targeted compensation for
2007 the Employee will receive a Bonus of 8.3% of the value of either the
IBM or IRMC contract effective upon payment and capped at
$25,000.
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(b)
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Incentive
Compensation. Employee is eligible for
an annual bonus upon the Company reaching certain pre tax
income 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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(c)
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Equity
Awards. Upon the successful amendment of the Company’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) and the approval of a new Employee Stock
Option Plan by the Board of Directors, Employee is
hereby awarded a Stock Option Grant equal to 1.35% of the fully
diluted shares of Cicero, Inc. 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 Cicero, Inc. common stock. 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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4
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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
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.
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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.
5
Exhibit
10.16
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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 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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6
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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, 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.
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7
Exhibit
10.16
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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8
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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
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.
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COMPANY:
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EMPLOYEE:
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CICERO,
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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9
Exhibit
10.16
EXHIBIT
A
INVENTIONS
Employee
represents that there are no Inventions.
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| Employee Initials |
10
EXHIBIT
B
EXISTING RESTRICTIVE
COVENANTS
11
Exhibit
10.16
EXHIBIT
C
VARIABLE
COMPENSATION
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 Operating Net Income
before taxes (defined as above) as per the chart below:
Operating
Net Income Net Income Range (before tax)
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From
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To
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Variable
Compensation
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||||||||||
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Less
than $1,000,000
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None
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Tier
1
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$ | $1,000,000 | $ | 1,499,999 | $ | 100,000 | ||||||
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Tier
2
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$ | 1,500,000 | $ | 1,999,999 | $ | 200,000 | ||||||
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Tier
3
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$ |
greater
than 2,000,000
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$ | 300,000 | ||||||||
Performance
significantly in excess of Tier 3 may result in an additional reward at the
discretion of the Compensation Committee
12
