Exhibit 10.4
EMPLOYMENT AGREEMENT dated as of June 30, 1998, between NETWORK-1
SECURITY SOLUTIONS, INC., a Delaware corporation with its principal office
located at 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
"Company"), and XXXXXXX XXXXXXX residing at 0000 Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxx
00000 (the "Executive").
The Company desires to enter into this Agreement in order to assure
itself of the service of Executive, and Executive desires to accept employment
with the Company, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
SECTION 1. Employment. The Company hereby employs Executive, and
Executive hereby accepts employment by the Company, upon the terms and
conditions hereinafter set forth.
SECTION 2. Term. The employment of Executive hereunder shall be
for a period commencing on the date hereof (the "Commencement Date") and ending
on the third anniversary of the Commencement Date (the "Term") or such earlier
date upon which the employment of the Executive shall terminate in accordance
with the provisions hereof. The period commencing on the Commencement Date and
ending on the date of termination of the Executive's employment hereunder shall
be called the "Term of Employment" for Executive, and the date on which the
Executive's employment hereunder shall terminate shall be called the
"Termination Date."
SECTION 3. Duties. During the Term of Employment, Executive shall
be employed as Chief Technology Officer of the Company and shall perform such
duties as are consistent therewith as the Chief Executive Officer ("CEO") and
the Board of Directors (the "Board") of the Company shall designate. Executive
shall use his best efforts to perform well and faithfully the foregoing duties
and responsibilities.
SECTION 4. Time to be Devoted to Employment. During the Term of
Employment, Executive shall devote all of his business time, attention and
energies to the business of the Company (except for writing articles for
magazines and publishing books, vacations to which he is entitled pursuant to
Section 6(b) and periods of illness or incapacity). During the Term of
Employment, Executive shall not engage in any business activity which, in the
reasonable judgment of the Board, conflicts with the duties of Executive
hereunder, whether or not such activity is pursued for gain, profit or other
pecuniary advantage.
SECTION 5. Compensation.
(a) The Company shall pay to Executive an annual base salary
(the "Base Salary") during the Term of Employment of $160,000 per annum, payable
in such installments (but not less often than monthly) as is generally the
policy of the Company with respect to its executive officers, which Base Salary
shall be subject to such increases as the Board, in its sole discretion, may
from time to time determine.
SECTION 6. Business Expenses; Benefits.
(a) The Company shall reimburse Executive, in accordance with
the practice from time to time for executive officers of the Company, for all
reasonable and necessary expenses and other disbursements incurred by Executive
for or on behalf of the Company in the performance of Executive's duties
hereunder. Executive shall provide such appropriate documentation of expenses
and disbursements as may from time to time be required by the Company.
(b) During the Term of Employment, Executive shall be entitled
to four (4) weeks vacation per year.
(c) During the Term of Employment, Executive shall be entitled
to participate in the group health, life and disability insurance benefits, and
retirement plan benefits made available from time to time for its employees
generally.
SECTION 7. Involuntary Termination.
(a) If Executive is incapacitated or disabled (such condition
being hereinafter referred to as a "Disability") in a manner that would qualify
Executive for benefits under the disability policy of the Company (the
"Disability Policy"), the Term of Employment and employment of the Executive
under this Agreement shall cease (such termination, as well as a termination
under Section 7(b), being hereinafter referred to as an "Involuntary
Termination") and Executive shall be entitled to receive the benefits payable
under the Disability Policy and in accordance with Section 9 hereof.
(b) If Executive dies during the Term of Employment, the Term of
Employment and Executive's employment hereunder shall cease as of the date of
the Executive's death and Executive shall be entitled to receive the benefits
payable in accordance with Section 9 hereof.
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SECTION 8. Termination by the Company.
(a) Termination For Cause. The Company may terminate the Term of
Employment and the employment of the Executive hereunder at any time for Cause
(as hereinafter defined) (such termination being referred to herein as a
"Termination For Cause") by giving Executive written notice of such termination,
effective immediately upon the giving of such notice to the Executive. As used
in this Agreement, "Cause" means the Executive's (a) commission of an act (i)
constituting a felony or (ii) involving fraud, moral turpitude, theft or
dishonesty which is not a felony and which materially adversely affects the
Company or could reasonably be expected to materially adversely affect the
Company, (b) repeated failure to be reasonably available to perform his duties,
which, if curable, shall not have been cured within 30 business days of written
notice thereof from the Company, (c) repeated failure to follow the lawful
directions of the Board or the CEO, which, if curable, shall not have been cured
within 30 business days of written notice thereof from the Company, (d) material
breach of any agreement with the Company (including any provisions of this or
any agreement between Executive and the Company) which, if curable, shall not
have been cured within 30 business days of written notice thereof from the
Company or (e) voluntary resignation (except as set forth in paragraph 9(d)
hereof).
(b) Termination Other Than for Cause. The Company may terminate
this Agreement and the employment of Executive other than for cause as defined
in Section 8(a) above (such termination shall be defined as a "Termination Other
Than for Cause") by giving Executive written notice of such termination, which
notice shall be effective upon the giving of such notice or such later date set
forth therein.
SECTION 9. Effect of Termination.
(a) Upon the termination of the Term of Employment and
Executive's employment hereunder due to Termination for Cause (as defined in
Section 8(a) above), neither Executive nor his beneficiary or estate shall have
any further rights or claims against the Company under this Agreement, except to
receive (i) the unpaid portion, if any, of the Base Salary provided for in
Section 5(a), computed on a pro rata basis to the Termination Date (based on the
actual number of days elapsed over the actual number of days elapsed over the
year in which such termination occurs), (ii) any unpaid accrued benefits of
Executive and (iii) reimbursement for any expenses for which Executive shall not
have been reimbursed as provided in Section 6(a).
(b) Upon the termination of Executive's employment hereunder due
to an Involuntary Termination, neither Executive nor
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his beneficiary or estate shall have any further rights or claims against the
Company under this Agreement except the right to receive the amounts set forth
in Section 9(a).
(c) Upon the termination of Executive's employment upon a
Termination Other Than for Cause (as defined in Section 8(b) above), neither
Executive nor his beneficiary nor his estate shall have any rights or claims
against the Company except to receive (i) the amounts set forth in 9(a), and
(ii) the lesser of (A) six months Base Salary as in effect at the time of the
Termination Other Than for Cause or (B) Executive's Base Salary for the balance
of the term of this Agreement.
(d) For purposes of this Section 9, if Executive is asked to
assume any duties or the material reduction of duties, either of which is
substantially inconsistent with the position of Chief Technology Officer of the
Company, Executive, upon 30 days notice to the Chief Executive Officer and the
Board of Directors setting forth in reasonable detail the respects in which
Executive believes such assignment or duties are substantially inconsistent with
the level of Executive's position, may resign from the Company and such
resignation will be treated as a Termination Other Than For Cause pursuant to
this Section 9.
(e) Upon termination of Executive's employment for Cause in
accordance with Section 8(a) hereof, the Company shall have an option to
repurchase (the "Repurchase Option") 50% of the shares of common stock (after
giving effect to the exercise of all outstanding options and warrants and the
conversion or exchange of outstanding securities into common stock) of the
Company then owned by Executive or any of his Affiliates at a purchase price
equal to $1.00 per share. The Company shall have the right to exercise the
Repurchase Option within 30 days of the effective date of termination of
Executive's employment for Cause in accordance with Section 8 hereof. For
purposes herein Affiliates shall be defined as (i) any entity controlled by or
under common control with Executive or (ii) the spouse, lineal descendant,
estate or a trust for the benefit of Executive.
SECTION 10. Insurance. The Company may, for its own benefit, in its
sole discretion, maintain "key-man" life and disability insurance policies
covering Executive. Executive will cooperate with the Company and provide such
information or other assistance as the Company may reasonably request in
connection with the Company's obtaining and maintaining such policies.
SECTION 11. Disclosure of Information. Executive will not, either
during the Term of Employment or at any time thereafter, divulge, publish,
communicate, furnish or make accessible to anyone any knowledge or information
with respect to the Company's confidential, secret or proprietary products,
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technology, methods, plans, materials and processes, or with respect to any
other confidential, secret or proprietary aspects of the business, activities or
products of the Company including, without limitation, (a) software programs,
source code, object code, product development information, research and
development projects or other technical data pertaining to the Company's
products (whether or not subject to patent, trademark or copyright protection)
or (b) any customer or client lists, telephone leads, prospects lists, sales
figures and forecasts, purchase costs, financial projections, advertising and
marketing plans and business strategies and plans; except as such items set
forth in clauses (a) and (b) above may already be in the public domain through
no fault of Employee (all of the foregoing items set forth in clauses (a) and
(b) being referred to herein collectively as "Confidential Property"). Upon the
termination of the Term of Employment, Executive shall return to the Company all
property (including Confidential Property) of the Company (or any subsidiary or
affiliate thereof) then in the possession of Executive and all books, records,
computer tapes or discs and all other material containing non-public information
concerning the business, clients or affairs of the Company or any subsidiary or
affiliate thereof.
SECTION 12. Right to Inventions. Executive shall promptly
disclose, grant and assign to the Company for its sole use and benefit any and
all marks, designs, logos, inventions, improvements, technical information and
suggestions relating in any way to the business conducted by the Company, which
he may develop or which may be acquired by Executive during the Term of
Employment (whether or not during usual working hours), together with all
trademarks, patent applications, letters, patent, copyrights and reissues
thereof that may at any time be granted for or upon any such xxxx, design, logo,
invention, improvement or technical information (collectively, "Inventions"). In
connection therewith, Executive shall (at the Company's sole cost and expense)
take all actions reasonably necessary or desirable to assign and/or confirm the
assignment of any Invention to the Company.
SECTION 13. Restrictive Covenant.
(a) The Company is in the business of developing, marketing,
licensing and supporting network software security products and also provides
consulting in network security, network design, troubleshooting and engineering
(the "Business"). Executive acknowledges and recognizes that the Business has
been conducted, and sales of its products have been made, throughout the United
States, and Executive further acknowledges and recognizes the highly competitive
nature of the industry in which the Business is involved. Accordingly, in
consideration of the premises contained herein, the consideration to be received
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hereunder, stock options to be granted Executive, Executive shall not, during
the Non-Competition Period (as defined below): (i) directly or indirectly
engage, whether or not such engagement shall be as a partner, stockholder,
affiliate or other participant, in any Competitive Business (as defined below),
or represent in any way any Competitive Business, whether or not such engagement
or representation shall be for profit, (ii) interfere with, disrupt or attempt
to disrupt the relationship, contractual or otherwise, between the Company and
any other person or entity, including, without limitation, any customer,
supplier, employee or consultant of the Company, (iii) induce any employee of
the Company to terminate his employment with the Company or to engage in any
Competitive Business in any manner described in the foregoing clause (i) (as
well as an officer or director of any Competitive Business), or (iv)
affirmatively assist or induce any other person or entity to engage in any
Competitive Business in any manner described in the foregoing clause (i) (as
well as an officer or director of any Competitive Business). Anything contained
in this Section 13 to the contrary notwithstanding, an investment by Executive
in any publicly traded company in which Executive and his affiliates exercise no
operational or strategic control and which constitutes less than 5% of the
capital of such entity shall not constitute a breach of this Section 13.
(b) As used herein, "Non-Competition Period" shall mean the
period commencing on the date hereof and terminating on the Termination Date;
provided, however, that if the Term of Employment shall have been terminated
pursuant to Section 8 (a), then "Non-Competition Period" shall mean the period
commencing on the date hereof and ending on the second anniversary of the
Termination Date. "Competitive Business" shall mean any business in any State
of the United States engaged in the development, marketing and licensing of
network software security products, or in any other line of business in which
the Company was engaged or had a formal plan to enter as of the Termination
Date; provided, however, during the period beginning on the Termination Date and
ending on the second anniversary thereof, Executive shall not be precluded from
engaging in consulting services in the computer industry including, but not
limited to, network design, troubleshooting and engineering.
(c) Executive understands that the foregoing restrictions may
limit his ability to earn a livelihood in a business similar to the business of
the Company, but he nevertheless believes that he has received and will receive
sufficient consideration and other benefits as an employee of the Company and as
otherwise provided hereunder and pursuant to other agreements between the
Company and Executive to justify clearly such restrictions which, in any event
(given his education, skills and ability), Executive does not believe would
prevent him from earning a living.
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SECTION 14. Enforcement; Severability; Etc. It is the desire and
intent of the parties that the provisions of this Agreement shall be enforced to
the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to (a) delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made or (b) otherwise to render it enforceable in
such jurisdiction.
SECTION 15. Remedies. Executive acknowledges and understands that
the provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
that the breach or threatened breach of the provisions of this Agreement would
cause the Company irreparable harm. In the event of a breach or threatened
breach by Executive of the provisions of this Agreement, the Company shall be
entitled to an injunction restraining him from such breach. Nothing contained in
this Agreement shall be construed as prohibiting the Company from or limiting
the Company in pursuing any other remedies available for any breach or
threatened breach of this Agreement.
SECTION 16. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given and delivered if personally delivered or if sent
by a nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to: Network-1 Security Solutions, Inc.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxx Xxxxx, President
and Chief Executive Officer
with copies to: Xxxxx Xxxxxx & Xxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxx Xxxxxxxx, Esq.
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if to Executive, to: Xxxxxxx Xxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx 00000
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.
SECTION 17. Binding Agreement; Benefit. The provisions of this
Agreement will be binding upon, and will inure to the benefit of, the respective
heirs, legal representatives, successors and assigns of the parties.
SECTION 18. Governing Law. This Agreement will be governed by,
construed and enforced in accordance with, the laws of the State of
Massachusetts (without giving effect to principles of conflicts of laws).
SECTION 19. Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement must be in writing and shall not
operate or be construed as a waiver of any other breach.
SECTION 20. Entire Agreement; Amendments. This Agreement contains
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings between the parties
with respect thereto. This Agreement may be amended only by an agreement in
writing signed by the parties.
SECTION 21. Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 22. Assignment. This Agreement is personal in its nature
and the parties shall not, without the consent of the other, assign or transfer
this Agreement or any rights or obligations hereunder; provided, however, that
the Company may assign this Agreement to any of its subsidiaries and affiliates.
SECTION 23. Gender. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders unless the context otherwise
requires.
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SECTION 24. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Employment Agreement as of the date first written above.
NETWORK-1 SECURITY SOLUTIONS, INC.
By: /s/ Avi X. Xxxxx
--------------------------------
Avi X. Xxxxx, President and
Chief Executive Officer
/s/ Xxxxxxx Xxxxxxx
--------------------------------
Xxxxxxx Xxxxxxx
