EMPLOYMENT AGREEMENT
AGREEMENT made as of the 25th day of January 2001, by and between
COVER-ALL TECHNOLOGIES INC., a Delaware corporation (the "COMPANY"), having its
principal office at 00-00 Xxxxxxx Xxxxx, Xxxx Xxxx, Xxx Xxxxxx 00000 and XXXX
XXXXXX, currently residing at 00 Xxxxxx Xxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000
(the "EXECUTIVE").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Executive as provided
herein;
WHEREAS, the Executive desires to be employed by the Company as
provided herein; and
WHEREAS, this Employment Agreement hereby supersedes and replaces in
its entirety the Employment Agreement dated December 20, 1999, between the
Company and the Executive (except for the provisions contained in Section 4(c)
and Section 10 thereof which shall continue in full force and effect pursuant to
their terms).
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties agree as follows:
1. EMPLOYMENT. The Company, effective January 25, 2001, hereby
agrees to employ the Executive as Chairman of the Board, President and Chief
Executive Officer of the Company and the Executive hereby accepts such
employment, all upon and subject to the terms and conditions hereinafter set
forth.
2. TERM. The term of employment under this Agreement shall
commence as of January 25, 2001 (the "EFFECTIVE DATE") and shall continue in
full force and effect until December 31, 2003 (including any renewal periods
hereof, the "EMPLOYMENT TERM"), subject to earlier termination as provided in
Section 5 hereof. This Agreement may be renewed by the consent of both parties
for a two-year period upon each party providing written notice of renewal to the
other provided such written notice is given on or before October 1, 2003.
3. DUTIES.
(a) The Executive will render his services to the Company
as Chairman of the Board, President and Chief Executive Officer and shall
perform such duties and services of such office or position. The company agrees
to nominate the Executive for election to the Board of Directors of the Company
(the "BOARD") as a member of the management slate at each annual meeting of
stockholders during his employment hereunder at which the Executive's director
class comes up for election. The Executive agrees to serve on the Board if
elected. In addition, the Executive will hold, without additional compensation
therefor, such other offices and directorships in the Company or any parent or
subsidiary of the Company to which, from time to time, he may be reasonably
appointed or elected.
(b) Except as otherwise provided herein and except for
illness, permitted vacation periods and permitted leaves of absence consistent
with the past practice of the Company or as otherwise approved by the Board, the
Executive agrees that during the term of his employment hereunder, he shall
devote all of his full working time and attention, and give his best effort,
skill and abilities, exclusively to the business and interests of the Company.
4. COMPENSATION; BENEFITS.
(a) SALARY. In consideration of the services to be
rendered by the Executive hereunder, including, without limitation, any services
rendered by him as an officer or director of the Company or any parent,
subsidiary or affiliate of the Company, the Company agrees to pay to the
Executive, and the Executive agrees to accept as compensation, an annual salary
(the "BASE SALARY") of (a) $252,000 for the period from the commencement of this
Agreement to December 31, 2001, (b) $264,000 for the period from January 1, 2002
to December 31, 2002, and (c) $277,830 for the period from January 1, 2003, to
December 31, 2003, payable in equal monthly installments in accordance with the
Company's normal payroll policies. If this Agreement is renewed under Section 2
hereof, the Executive's Base Salary for the period of renewal shall be no less
than the Executive's Base Salary as of the time of such renewal. The Company, by
action of the Board or the Compensation Committee of the Board, may in its sole
discretion increase the Base Salary at any time. The Executive's Base Salary
shall be subject to all applicable withholding and other taxes.
(b) BONUS. In addition to the payment of the Base Salary,
as provided for hereunder, the Company shall pay the Executive a bonus based
upon the annual financial performance of the Company (the "PERFORMANCE BONUS")
as follows:
(A) for the year ending December 31, 2001, in an
amount equal to the product of the Performance Factor (as
defined herein) and the Executive's Base Salary as in effect
at that time; PROVIDED, HOWEVER, that if the Performance
Factor is less than .5, then the Executive shall not be
entitled to a Performance Bonus for such year, and PROVIDED,
FURTHER, that the Performance Bonus shall not exceed 150% of
the Executive's Base Salary for such year;
(B) for the year ending December 31, 2002 and for any
additional year, including any year during a renewal of this
Agreement, in an amount and pursuant to the calculation and
terms set forth in paragraph (b)(A) above, with any changes to
SCHEDULE A hereto to be agreed upon by the Executive and the
Company in writing no later than December 31 of the prior
year, as the case may be; and
(C) the Company may, by action of the Board in its
sole discretion, agree in writing with the Executive to
revisions to SCHEDULE A hereto during the Company's fiscal
year for which such bonus is computed.
For the purposes hereof:
"PERFORMANCE FACTOR" shall mean the sum of (a) the Growth Factor (as
defined herein) and (b) the Profit Factor (as defined herein).
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"GROWTH FACTOR" shall mean the product of (a) the fraction, the
numerator of which shall be the actual revenues of the Company for such year,
and the denominator of which shall be the Targeted Revenues (as defined herein),
and (b) the Growth Weight (as defined herein).
"PROFIT FACTOR" shall mean the product of (a) the fraction, the
numerator of which shall be the actual net earnings of the Company for such
year, and the denominator of which shall be the Targeted Profits (as defined
herein), and (b) the Profits Weight (as defined herein).
"TARGETED REVENUES" shall have the value set forth on SCHEDULE A
hereto.
"GROWTH WEIGHT" shall have the value set forth on SCHEDULE A hereto.
"TARGETED PROFITS" shall have the value set forth on SCHEDULE A hereto.
"PROFITS WEIGHT" shall have the value set forth on SCHEDULE A hereto.
For the purposes hereof, each of revenues, net earnings and Performance Bonus
shall be determined by and set forth in a certificate of the Company's Chief
Financial Officer, and shall be based upon the books and records of the Company
and calculated in accordance with generally accepted accounting principles
consistently applied. Such certificate shall be final and binding on the parties
hereto. The Executive's Performance Bonus, if any, shall be paid no later than
ten (10) days after the date of the filing by the Company with the Securities
and Exchange Commission of its audited financial statements in its Form 10-K
Annual Report.
(c) EQUITY INTERESTS. Upon the commencement of his
employment hereunder, the Company shall grant the Executive five-year options to
purchase 500,000 shares of the Company's common stock, $.01 par value per share
(the "COMMON STOCK"), (together with any options issued pursuant to Section
4(c)(ii) below, the "OPTIONS"), granted at a price per share equal to the fair
market value of such share as of the date of grant, which will vest as to
200,000 shares immediately, as to 150,000 shares on February 1, 2002, and as to
150,000 shares on February 1, 2003, all in accordance with and subject to the
terms and conditions set forth in a stock option agreement by and between the
Company and the Executive to be entered into concurrently herewith.
(d) BENEFITS. During the Employment Term, the Executive
shall be entitled to the following benefits:
(i) vacations and sick leaves in accordance with
the Company's policies from time to time in effect for officers and executive
employees of the Company; and
(ii) participation, subject to qualification and
participation requirements, in medical, life or other insurance or
hospitalization plans and any pension, profit sharing or other employee benefit
plans, presently in effect or hereafter instituted by the Company and applicable
to its officers and executive employees.
(e) COMPANY CAR. During the Employment Term, the
Executive shall be entitled to the use of one Company automobile of the
Executive's choice for business purposes, which automobile's retail value shall
not exceed $65,000. In addition, the Company shall
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reimburse the Executive, upon the presentation of appropriate receipts, for all
maintenance and repair costs incurred by the Executive in connection with the
use of such automobile.
(f) REIMBURSEMENT OF EXPENSES. The Executive shall be
reimbursed for reasonable and necessary expenses incurred by the Executive in
performing his employment hereunder, provided such expenses are adequately
documented in accordance with the Companies policies.
5. TERMINATION.
(a) DISABILITY. If the Executive, due to physical or mental
injury, illness, disability or incapacity, shall fail to render the services
provided for in this Agreement for a consecutive period of three (3) months, or
an aggregate of three (3) months in any six (6) month period, the Company may,
at its option, terminate the Executive's employment hereunder upon fourteen (14)
days' written notice to the Executive. If the employment of the Executive is
terminated pursuant to this Section 5(a), the Company shall have no further
obligations to the Executive hereunder after the date of termination other than
the payment to the Executive of (x) the Base Salary accrued and unpaid through
the date of such termination, (y) the pro rata portion of the bonus payment set
forth in Section 4(b) hereof, based upon the number of days the Executive worked
during the Company's fiscal year for which such bonus is computed, to the extent
the numerical requirements are actually met for the fiscal year in question,
which shall be payable at the same time such bonus would have been paid under
Section 4(b) hereof, and (z) any unreimbursed business expenses of the Executive
that are otherwise reimbursable hereunder. This provision shall not preclude the
Executive from claiming or obtaining such disability benefits to which he may be
entitled pursuant to any plan maintained by the Company for disability incurred
during the period of his employment by the Company.
(b) DEATH. If the Executive shall die during the term of this
Agreement, this Agreement and the Executive's employment hereunder shall
terminate immediately upon the Executive's death. If the employment of the
Executive is terminated pursuant to this Section 5(b), the Company shall have no
further obligations to the Executive hereunder after the date of termination
other than (i) the payment to the Executive of (x) the Base Salary accrued and
unpaid through the date of such termination and a pro rata portion of the Base
Salary payable in accordance with the Company's payroll policies for a period of
six (6) months following such death, (y) the pro rata portion of the bonus
payment set forth in Section 4(b) hereof, based upon the number of days the
Executive worked during the Company's fiscal year for which such bonus is
computed, to the extent the numerical requirements are actually met for the
fiscal year in question, which shall be payable at the same time such bonus
would have been paid under Section 4(b) hereof, and (z) any unreimbursed
business expenses of the Executive that are otherwise reimbursable hereunder and
(ii) notwithstanding anything contained to the contrary in this Agreement or any
option agreement between the Company and the Executive, all stock options
granted to Executive shall also immediately vest and remain exercisable until
the earlier of the six (6) month anniversary of the date of death and the
expiration of such options on the scheduled expiration dates set forth in the
stock option agreements related thereto.
(c) CAUSE. Notwithstanding anything to the contrary in this
Agreement, the Company, upon written notice to the Executive, may in good faith
terminate this Agreement and
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the employment of the Executive hereunder for Cause, which, for purposes of this
Agreement, shall be defined to mean (i) the continued and repeated failure or
refusal by the Executive to perform specific directives of the Board which is
not cured within a reasonable period of time not to exceed sixty (60) days after
receipt of written notice from the Company, (ii) embezzlement or any offense
involving misuse or misappropriation of money or other property of the Company,
(iii) conviction for a felony, (iv) any act of dishonesty that is materially
injurious to the Company, or (v) material breach by the Executive of any of the
terms of this Agreement other than those contained in this Section 5 which, if
curable, has not been cured within five (5) business days after such written
notice. If the employment of the Executive is terminated pursuant to this
Section 5(c), (i) the Company shall have no further obligations to the Executive
hereunder after the date of termination other than the payment to the Executive
of (x) the Base Salary accrued and unpaid through the date of such termination
and (y) any unreimbursed business expenses of the Executive that are otherwise
reimbursable hereunder, and (ii) the Company shall not be obligated to make any
bonus payments to the Executive pursuant to Section 4(b) hereof for the year in
which such termination occurs or to provide any of the benefits set forth in
Section 4(d) of this Agreement after the date of such termination, except as may
be required by applicable law.
(d) CHANGE OF CONTROL. In the event that at any time during the
Employment Term there is a "Change of Control" (as hereinafter defined), (i) the
Executive shall, in the exercise of his sole discretion and upon the provision
of written notice to the Company within three (3) months after the date of a
Change of Control, be entitled to terminate his employment hereunder as of the
date of provision of such written notice, and (ii) all of the then unvested
Options shall automatically vest and become immediately exercisable,
notwithstanding any provision to the contrary in this Agreement or the stock
option agreement. Except as set forth in Section 6(a), if the employment of the
Executive is terminated pursuant to this Section 5(d), (i) the Company shall
have no further obligations to the Executive hereunder after the date of
termination other than the payment to the Executive of (x) the Base Salary
accrued and unpaid through the date of such termination, (y) the pro rata
portion of the bonus payment set forth in Section 4(b) hereof, based upon the
number of days the Executive worked during the Company's fiscal year for which
such bonus is computed, to the extent the numerical requirements are actually
met for the fiscal year in question, which shall be payable at the same time
such bonus would have been paid under Section 4(b) hereof, and (z) any
unreimbursed business expenses of the Executive that are otherwise reimbursable
hereunder, and (ii) the Company shall not be obligated to provide any of the
benefits set forth in Section 4(d) of this Agreement after the date of such
termination, except as may be required by applicable law.
As used herein, a "CHANGE OF CONTROL" shall be deemed to have occurred if (i)
any person (including any individual, firm, partnership or other entity)
together with all Affiliates and Associates (as defined under Rule 12b-2 of the
General Rules and Regulations promulgated under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT")) of such person, but excluding (A) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any subsidiary of the Company, (B) a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of the Company, (C) the Company or any subsidiary
of the Company or (D) Software Investments Limited or Care Corporation Limited
or any of their affiliates, is or becomes the Beneficial Owner (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or
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indirectly, of securities of the Company representing 50% of more of the
combined voting power of the Company's then outstanding securities, such person
being hereinafter referred to as an Acquiring Person; (ii) individuals who, on
the date hereof, are Continuing Directors (as defined below) shall cease for any
reason to constitute a majority of the Board; (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets. For purposes of this paragraph, the
term "CONTINUING DIRECTOR" shall mean (1) any member of the Board, while such
person is a member of the Board, who is a member of the Board on the date of
this Agreement, or (2) any person who subsequently becomes a member of the
Board, while such person is a member of the Board (excluding an Acquiring Person
or a representative of any Acquiring Person), if such person's nomination for
election or election to the Board is recommended or approved by a majority of
the Continuing Directors.
6. SEVERANCE COMPENSATION.
(a) In the event the Executive's employment hereunder is
terminated by the Executive during the Employment Term in the event of a Change
of Control pursuant to Section 5(d), the Company shall provide to the Executive
as severance compensation an amount equal to twelve (12) months Base Salary as
in effect at that time, payable in equal monthly installments in accordance with
the Company's normal payroll policies.
(b) In the event the Executive's employment hereunder is
terminated by reason of the Company's decision not to renew this Agreement upon
the conclusion of the Employment Term ending on December 31, 2003, the Company
shall provide to the Executive as severance compensation an amount equal to six
(6) months Base Salary as in effect at that time, payable in equal monthly
installments in accordance with the Company's normal payroll policies.
(c) In the event the Executive receives severance
compensation under this Section 6, the Executive shall not be entitled to
receive any other compensation or benefits under this Agreement after the
termination of the Executive's employment hereunder and, as a condition to
receiving such severance compensation, the Executive hereby agrees that he shall
have no other claim against the Company by reason of this Agreement.
7. DISCLOSURE AND ASSIGNMENT OF DISCOVERIES.
(a) The Executive shall (without any additional
compensation) promptly disclose in writing to the Board all ideas, processes,
devices and business concepts (hereinafter referred to collectively as
"DISCOVERIES"), that are patentable or copyrightable, which he, while employed
by the Company, conceives, develops, acquires or reduces to practice, whether
alone or with others and whether during or after usual working hours, and which
are related to the
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Company's business or interests, or arise out of or in connection with the
duties performed by him hereunder; and the Executive hereby transfers and
assigns to the Company all right, title and interest in and to such Discoveries.
Upon the request of the Company, the Executive shall (without any additional
compensation), from time to time during or after the expiration or termination
of his employment, execute such further instruments and do all such other acts
and things as may be deemed necessary or desirable by the Company to protect
and/or enforce it rights in respect of such Discoveries.
(b) For purposes of this Section 7 and the following
Section 8, the term "Company" shall mean and include any and all subsidiaries,
parents and affiliated corporations or entities of the Company in existence from
time to time.
8. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION AND
NON-COMPETITION.
(a) The Executive represents that he has been informed
that it is the policy of the Company to maintain as secret and confidential all
information relating to (i) the computer software, products, processes and/or
business concepts used by the Company and (ii) the customers and employees of
the Company ("CONFIDENTIAL INFORMATION"), and the Executive further acknowledges
that such Confidential Information is of great value to the Company and is the
property of the Company. The parties recognize that the services to be performed
by the Executive are special and unique, and that by reason of this employment
by the Company, he will acquire Confidential Information as aforesaid. The
parties confirm that to protect the Company's goodwill, it is reasonably
necessary that the Executive agree, and accordingly the Executive does hereby
agree, that he will not directly or indirectly (except where authorized by the
Board for the benefit of the Company or as required by law, or a court of
competent jurisdiction or subpoena):
A. at any time during his employment hereunder
or after he ceases to be employed by the Company, divulge to any persons, firms
or corporations other than the Company (hereinafter referred to collectively as
"THIRD Parties"), or use, or cause to authorize any Third Parties to use, any
such Confidential Information; or
B. at any time during his employment hereunder
and for a period of six (6) months after he ceases to be employed by the Company
(the "RESTRICTED PERIOD"), solicit or cause or authorize, directly or
indirectly, to be solicited for employment, for or on behalf of himself or Third
Parties, any persons who were at any time within one (1) year prior to the
cessation of his employment hereunder, employees of the Company; or
C. at any time during his employment hereunder
and during the Restricted Period, employ or cause or authorize, directly or
indirectly, to be employed, for or on behalf of himself or Third Parties, any
such employees of the Company; or
D. at any time during his employment hereunder,
the Executive will not accept employment with or participate, directly or
indirectly, as owner, stockholder, director, officer, manager, consultant or
agent or otherwise use his special, unique or extraordinary skills or knowledge
with respect to the business of the Company or of any affiliate of the Company
in or with any business, firm, corporation, partnership, association, venture or
other entity or person
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which is engaged in the business of designing, developing or providing software
services to the property and casualty insurance industry, except that this
paragraph D shall not be construed to prohibit the Executive form owning up to
5% of the securities of a corporation which are publicly traded on a national
securities exchange or in the over-the-counter market or from being employed by
an insurance or other company which may design and market software provided the
designing and marketing of software is not a principal part of the business of
such other company or concern; or
E. at any time during his employment hereunder,
solicit or cause or authorize, directly or indirectly, to be solicited, for or
on behalf of himself or Third Parties, any business with respect to designing,
developing or providing software services to the property and casualty insurance
industry from Third Parties who were, at any time within one (1) year prior to
the cessation of his employment hereunder, customers of the Company for such
business; or
F. at any time during his employment hereunder,
accept or cause or authorize, directly or indirectly, to be accepted, for or on
behalf of himself or Third Parties, any such business from any customers of the
Company.
(b) The Executive agrees that he will not, at any time,
remove from the Company's premises any confidential Company drawings, notebooks,
data and other documents and materials relating to the business and procedures
heretofore or hereafter acquired, developed and/or used by the Company without
prior written consent of the Board, except as reasonably necessary to the
discharge of his duties hereunder.
(c) The Executive agrees that, upon the expiration of
this employment by the Company for any reason, he shall forthwith deliver up to
the Company any and all order-books, customer lists, logs, drawings, notebooks
and other documents and materials, and all copies thereof, in his possession or
under his control relating to any Confidential Information or any Discoveries or
which is otherwise the property of the Company.
(d) The Executive agrees that any breach or threatened
breach by him of any provision of this Section 8 shall entitle the Company, in
addition to any other legal remedies available to it, to apply to any court of
competent jurisdiction to enjoin such breach or threatened breach. The parties
understand and intend that each restriction agreed to by the Executive
hereinabove shall be construed as separable and divisible from every other
restriction, and that the unenforceability, in whole or in part, of any other
restriction, will not effect the enforceability of the remaining restrictions
and that one or more or all of such restrictions may be enforced in whole or in
part as the circumstances warrant. No waiver of any one breach of the
restrictions contained in this Section 8 shall be deemed a waiver of any future
breach.
(e) The Executive hereby acknowledges that he is fully
cognizant of the restrictions put upon him by this Section 8, and that the
provisions of this Section 8 shall survive the termination of this Agreement and
his employment with the Company.
9. LIFE INSURANCE. The Executive agrees that the Company may
apply for and purchase one or more life insurance policies on the life of the
Executive in such amount or amounts as the Company deems appropriate. The
Company shall be the sole beneficiary of such
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insurance policy or policies and the Executive hereby acknowledges that the
Company has an insurable interest in his life. The Executive agrees to cooperate
with the Company in obtaining any insurance on the life or on the disability of
the Executive which the Company may desire obtain for its own benefit and shall
undergo such physical and other examinations, and shall execute any consents or
applications, which the Company may reasonably request in connection with the
issuance of one or more of such insurance policies. The Company hereby agrees to
cancel such life insurance policy with respect to the Executive immediately upon
the termination of his employment hereunder.
10. NOTICES. All notices, requests, demands or other
communications hereunder shall be deemed to have been given if delivered in
writing personally or by certified mail to each party at the address set forth
below, or at such other address as each party may designate in writing to the
other:
If to the Company:
Cover-All Technologies Inc.
00-00 Xxxxxxx Xxxxx
Xxxx Xxxx, Xxx Xxxxxx 00000
Attention: Chairman
With a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
If to the Executive:
Xxxx Xxxxxx
00 Xxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
11. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof,
supersedes any prior agreement between the parties, and may not be changed or
terminated orally. No change, termination or attempted waiver of any of the
provisions hereof shall be binding unless in writing and signed by the party
against whom the same is sought to be enforced. No provision hereof shall be
construed against a party because that provision or any other provision was
drafted by or at the direction of such party.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the respective heirs, legal representatives,
successors and assigns of the parties hereto.
13. SEVERABILITY. In the event that any one or more of the
provisions of this Agreement shall be declared to be illegal or unenforceable
under any law, rule or regulation of
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any government having jurisdiction over the parties hereto, such illegality or
unenforceability shall not affect the validity and enforceability of the other
provisions of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. GOVERNING LAW. All matters concerning the validity and
interpretation of the performance under this Agreement shall be governed by the
laws of the State of New Jersey, whose courts or the federal courts located in
the District of New Jersey shall have exclusive jurisdiction over the parties to
which they consent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COVER-ALL TECHNOLOGIES INC.
By: /s/ Xxx X. Xxxxxx
------------------------------------
Name: Xxx X. Xxxxxx
Title: CFO
/s/ Xxxx Xxxxxx
------------------------------------
XXXX XXXXXX
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SCHEDULE A
2001 PERFORMANCE BONUS COMPONENTS
---------------------------------
Growth Weight : .33
Profits Weight : .67
Targeted Revenues : $12,000,000
Targeted Profits : $ 1,500,000
