EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement"), dated as of December ___, 1999
by Hidenet Secure Architectures Ltd. (the "Company"), and ROBERT FRIEDMAN
("Executive").
RECITALS:
WHEREAS, the Company engages in the business of network date
security (the "Business"); and
WHEREAS, the Company desires to employ Executive in connection
with the operation of the Business.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants and
conditions provided herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Employment, Term, Duties and Authority.
1.1. The Company hereby employs Executive as its Chief Executive
Officer ("CEO"), and Executive hereby accepts employment by the Company on the
terms, covenants and conditions herein contained, from November 1, 1999 until
October 31, 2003 (such period, the "Term").
1.2. As CEO, Executive's duties shall be the general management
of the Business in the United States, including without limitation:
establishment of the United States office, establishing strategic alliances with
appropriate partner companies, hiring additional employees, identifying
investors, raising capital and public relations. The Executive shall take
direction in the performance of his duties hereunder from the Company's Board of
Directors (the "Board").
1.3. During the term of this Agreement, Executive shall devote
his full attention, knowledge and skills, faithfully, diligently and to the best
of his ability, in furtherance of the business of the Company, shall perform the
duties assigned to him, which duties shall be consistent with the duties
described in Section 1.2 hereof, and shall observe and carry out such rules,
regulations, policies, directions and restrictions as the Company shall from
time to time establish.
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1.4. The Company shall use its best efforts to cause Executive to
be elected to the Board and serve as a member thereof, and in any case shall
include Executive in its management slate of directors presented to the
stockholders of the Corporation at any meeting at which directors are elected.
2. Compensation and Benefits.
2.1. Until termination of Executive's employment hereunder, the
Company shall pay to Executive a base salary (the "Salary") at an annual rate of
$150,000, payable in accordance with the terms more fully described below, less
any amounts which the Company may be required to withhold from such payments by
applicable federal, state or local laws or regulations.
2.2. Upon presentation of receipts valid receipts or other
appropriate documentation, the Company shall reimburse Executive for reasonable
expenses incurred by the Executive for the benefit of the Company with its
consent.
2.3. Executive shall not receive any Salary for the period from
November 1, 1999 through and until December 31, 1999 (the "Introductory
Period"); except, that 50% of the Salary for such period be accrued on the books
of the Company in the name of Executive, to be paid to Executive in accordance
with Section 2.4 below.
2.4. From and after January 1, 2000, the Salary shall be paid as
follows: (a) 50% in cash to Executive (less the withholdings identified in
Section 2.1 above), and (b) subject to Section 2.6 hereof, 50% accrued on the
books of the Company in the name of Executive, to be paid, if at all, upon the
raising by the Company of at least $1,000,000 in capital (the "Capital
Threshold"). Any amount payable under clause (b) of this Section shall be
combined with the amount accrued during the Introductory Period as described in
Section 2.3 above, and shall be paid to Executive in equal monthly installments
on the 15th day of each month, over the six month period beginning with the
month immediately following the month in which the Capital Threshold is reached.
2.5. Upon reaching the Capital Threshold (the date thereof, the
"Trigger Date"), Company shall thereafter pay to Executive the Salary in full in
accordance with its usual payment practices, less the withholding amount
identified in Section 2.1.
2.6. If the Trigger Date shall not occur on or before March 1,
2000, the accrual amount described in clause (b) of Section 2.4 shall not be
applicable, and no amounts (except for the accrual owing to the Introductory
Period) shall accrue for Executive until the Capital Threshold is reached.
2.7. Upon reaching the Capital Threshold, the Company shall
obtain and provide to Executive at no cost to Executive:
2.7.1. major medical insurance coverage
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2.7.2. a life insurance policy for the benefit of
Executive's estate, in the face amount of $150,000.
3. Equity Participation.
3.1. The Company shall issue and pay to Executive an equity
interest in the Company, not to exceed 15%, based on the capital structure of
the Company as of the date hereof (i.e., prior to the contribution of capital by
investors), as set forth below. It is a condition of issuance and payment of
such equity interests that Employee be employed by the Company at the time of
such issuance:
3.1.1. 3.75% upon the earlier of (a) the Trigger Date and
(b) May 1, 2000;
3.1.2. from and after the Trigger Date, and for a period
of 12 months thereafter, on the last business day of each such month, an amount
equal to 0.3125%;
3.2. Certificates representing the equity interests described
above shall be issued by the Company in the name of Employee and held by the
Company in escrow, to be released, if at all, on the earlier of (i) October 31,
2003 and (ii) an event as described in Section 3.4 below. If at any time the
Company's obligation to issue such interests shall terminate in accordance with
Section 3.3 below, such certificates shall be released from escrow and
cancelled.
3.3. If this Agreement shall terminate prior to October 31, 2003,
Executive shall be entitled to receive only the equity interests which shall
have vested on or prior to the date of such termination and shall thereafter not
be entitled to receive any additional interests; provided, however, that if this
Agreements terminates because Executive (i) has breached his obligations
contained in Sections 5, 8 and 9 hereof, or (ii) Executive has engaged in
outside business activities to the extent that his performance hereunder has
been impaired, in the reasonable discretion of the Company, the Executive shall
not be entitled to receive any equity interest described in this Section 3.
3.4. All equity interests issuable hereunder shall automatically
vest and be payable to Executive upon (a) a sale of the Company or its assets
valued at $25,000,000 or more, (b) an initial public offering of equity
securities of the Company valued by the underwriters thereof at $50,000,000 or
more.
4. Termination. Executive's employment hereunder shall terminate
immediately upon the earlier to occur of (i) Executive's death or permanent
disability, (ii) written notice by the Company at any time after the initial 12
month term of this Agreement of the Company's election to terminate this
Agreement for any reason in its sole discretion, effective 15 days after the
date of the notice or (iii) written notice by the Company of a default by
Executive in any of his obligations hereunder, effective five days after the
date of the notice, and (iv) the dissolution, sale or merger of the Company.
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4.1. In the event of termination of Executive's employment
hereunder pursuant to this Section 4:
4.1.1. Executive shall be entitled to receive (subject to
any rights of setoff or counterclaim by the Company) all compensation specified
in this Agreement which shall have accrued prior to the date of such
termination; provided, that Executive shall be entitled to such payments in
accordance with Section 2 hereof. Thereafter, the obligation of the Company for
the payment of any compensation, and the right of Executive to receive any
further compensation, shall terminate as at the date of such termination.
4.2. If this Agreement terminates upon the death of Executive
then, in such event, the Company shall pay to the heirs, legatees or personal
representatives of Executive all compensation hereunder accrued but not paid to
the date of death of Executive.
5. Company to Own Rights to Proprietary Products and Inventions.
5.1. The Executive acknowledges and agrees that the Proprietary
Products (as defined below) are and shall be the exclusive and valuable property
of the Company and Executive shall neither have, nor claim to have, any right,
title or interest therein or thereto. All opportunities relating to the
Proprietary Products whether or not involving third parties shall belong to and
be carried out for the account of the Company. "Proprietary Products" means
collectively the computer software programs and improvements thereto used by the
Company in the Business, Related Property and Documents (as defined in Section 7
below). "Related Property" includes all tangible and intangible property
relating to the Business (including without limitation, ideas, concepts,
projects, programs, computer software or hardware, data bases, specifications,
documentation, algorithms, source codes, object codes, program listings, product
platforms and architectures, concepts, screens, formats, technology, know-how,
inventions, research and development and patents, copyrights, trademarks, trade
names, service names, service marks, logos and designs and other proprietary
rights and registrations and applications and the rights to apply therefor).
5.2. Any and all Inventions (as defined below) shall be deemed
work specifically ordered or commissioned by the Company and each such work
shall be considered a "work made for hire" within the meaning of 17 U.S.C.
ss.101 of the United States Copyright Act and all rights to such work shall
belong entirely to the Company. Executive shall from time to time upon the
request of the Company promptly execute and deliver to the Company any
instruments necessary to effect the irrevocable assignment of all his right,
title and interest, including copyright and author rights, in such works to the
Company and for the Company to obtain proprietary rights in connection
therewith. "Inventions" shall mean discoveries, concepts, ideas, designs,
methods, formulas, know-how, techniques, or any improvements thereon, whether
patentable or not, made, conceived or developed, in whole or in part, by the
Executive with respect to any Proprietary Products or any work in which an
Executive may be engaged or to which he is exposed while an Executive relating
to the Proprietary Products.
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6. Confidentiality. Executive acknowledges and agrees that the success
of the Company depends on the innovative Proprietary Products and that it is
imperative that all Confidential Information (as defined below) is maintained in
strict confidence. Confidential Information is the exclusive and valuable
property of the Company. Executive shall therefore retain in strict confidence
and not copy or disclose or transfer to any third party any Confidential
Information. "Confidential Information" means information disclosed by the
Company to the Executive, or developed or obtained by an Executive either before
the date or during the term of this Agreement relating to or concerning the
Proprietary Products, the Business and the research, development, sale,
distribution, marketing maintenance, support and licensing of the Proprietary
Products and the development and exploitation of proprietary rights relating
thereto, whether or not any of the foregoing are patentable or copyrightable,
including without limitation: all know-how, technical information, inventions,
ideas, concepts, processes, procedures, operations, investment strategy,
computer programs and software, research and development plans and results, data
bases, specifications, documentation, algorithms, source codes, object codes,
program listings, product platforms and architecture, concepts, screens,
formats, "look and feel" of proprietary software, trade secrets, technology,
product information, product availability, pricing information, customer and
supplier lists, financial information, business and marketing plans, the
practices and methods of the Company, and marketing and other relationships
between the Company, its customers, Executives, agents, consultants and
independent contractors; provided, that Confidential Information shall not
include information which (i) at the time of disclosure is generally known in
the business and industry in which the Company is or may subsequently become
engaged, or (ii) after disclosure is published or otherwise becomes generally
known in such business or industry through no fault of the Executive.
7. Documents. Executive agrees that any and all Documents (as defined
below) made or kept by him of work performed in the performance of Executive's
duties hereunder, shall be and are the sole and exclusive property of the
Company. Executive agrees to execute and deliver to the Company any and all
agreements or instruments of any nature which the Company deems necessary or
appropriate to acquire, enhance, protect, perfect, assign, sell or transfer its
rights under this Section. Executive also agrees that upon request he will place
all Documents in the Company's possession and will not take with him without the
written consent of a duly authorized officer of the Company any Documents or
reproductions thereof relating or pertaining to or connected with his employment
or the business of the Company. "Documents" means any and all computer programs
and software created, developed or enhanced by him, whether embodied in a
computer disc, print-out or other format, and books, textbooks, letters,
pamphlets, drafts, memoranda, notes, records, drawings, files, documents,
manuals, compilations of information, correspondence or other writings of any
kind and all copies, abstracts and summaries of any of the foregoing and all
physical items related to the Business and Related Property. Executive further
agrees to execute and deliver to the Company such instruments as the Company may
request from time to time, necessary or appropriate to confirm or otherwise
effectuate the Company's rights under this Section 6 including separate
instruments of transfer.
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8. Inventions.
8.1. Executive shall upon request by the Company, from time to
time, communicate and fully disclose to the Company any and all Inventions made
or conceived by him during his employment with the Company, and any and all
Inventions which he may conceive or make, during his employment with the
Company, shall be at all times and for all purposes regarded as acquired and
held by him in a fiduciary capacity and solely for the benefit of the Company
and shall be the sole and exclusive property of the Company.
8.2. Executive shall assist the Company in every proper way upon
request to obtain for their benefit patents, copyrights, trade names,
trademarks, service names, service marks for any and all Proprietary Products
and Inventions in the United States and all foreign countries. All such patents,
copyrights, trade names, trademarks, service names, service marks and any
registrations and applications therefor are to be, and remain, the exclusive
property of the Company and Executive agrees that he will, whenever so requested
by the Company or its duly authorized agent, make, execute and deliver to the
Company their successors, assigns, or nominees, without charge to the Company,
any and all applications, assignments and all other instruments which the
Company shall deem necessary or appropriate in order to apply for and obtain
such patents, copyrights, trade names, trademarks, service names, and service
marks or in order to assign and convey to the Company, their successors, assigns
or nominees, the sole and exclusive right, title and interest therein and
thereto. Executive's obligations to execute any such instruments shall continue
after the termination of this Agreement, and such obligations shall be binding
upon his heirs, executors, assigns, administrators or other legal
representatives.
9. Covenant Not to Compete. Executive acknowledges and agrees that the
Proprietary Products are the exclusive and valuable property of the Company and
may not be used by the Executive for any purpose of any kind directly or
indirectly except during the term of this Agreement for the sole and exclusive
benefit of the Company in his or her capacity as an Executive of the Company and
that the success of the Company depends on Executive's observance of his
covenants in this Section 9.
9.1. Executive agrees that so long as he is an Executive or
consultant of the Company or any of its affiliates, and in addition, for a
period of three years thereafter, neither he nor his spouse nor any other person
or entity under the control of Executive, directly or indirectly, shall:
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9.1.1. Engage in or perform other than for the Company,
any services relating to the creation, development, use, application, marketing,
sale, distribution, maintenance, enhancement, support, licensing or programming
of any software, data base, technology or computer system used in connection
with or relating to the Business. However, the provisions hereof shall not limit
(i) the right of Executive to invest in a company presently existing or
hereinafter created by others that do not employ proprietary application
software systems and related software/hardware packages or (ii) the right of any
of Executive's children, who are not minors, on their own to perform any such
services provided that any such activities of Executive's children are not based
directly or indirectly on knowledge or information obtained from Executive or
otherwise arising out of or with respect to the Proprietary Products.
9.1.2. Solicit, hire or retain any Executive of the
Company or its affiliates or persuade or entice any Executive of the Company or
its affiliates to leave the employ of the Company or its affiliates.
9.2. Following termination of Executive's employment by the
Company for any reason, Executive shall continue to observe and be bound by his
covenants under Section 9.1 for the period provided therein.
9.2.1. The provisions of this Section 9 shall not limit
any of the other provisions of this Agreement.
9.2.2. For purposes of this Section 9, the term "Company"
shall include any licensees from the Company of the Business or any portion
thereof.
10. Specific Enforcement. Executive is obligated under this Agreement to
render service and comply with covenants of a special, unique, unusual and
extraordinary character, thereby giving this Agreement peculiar value so that
the loss of such service or violation by Executive of this Agreement could not
reasonably or adequately be compensated in damages in an action at law.
Therefore, in addition to any other remedies or sanctions provided by law,
whether criminal or civil, and without limiting the right of the Company or any
of their successors or assigns to pursue all other legal and equitable rights
available to them, the Company shall have the right during Executive's
employment hereunder (or thereafter with respect to obligations continuing after
the termination of this Agreement) to compel specific performance hereof by
Executive or to obtain temporary and permanent injunctive relief against
violations hereof by Executive, and, in furtherance thereof, to apply to any
court of the State of New York or any other jurisdiction or any federal court
located in such State or jurisdiction to enforce the provisions hereof. If the
Company prevails in any proceedings, legal or equitable, to enforce any
obligations under this Agreement, it shall also be entitled to recover all costs
and expenses incurred by the Company in connection therewith, including
reasonable attorneys' fees. Executive waives any requirement for security or the
posting of any bond or other surety and proof of damages in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief
and further agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
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11. Situs of Suits. Each party hereto for himself or itself and his or
its successors and assigns hereby consents to personal jurisdiction over him or
it in the courts of the State of New York and of any federal court located in
such state in connection with any action or proceeding arising out of or related
to this Agreement. Each party hereto agrees that service of process upon him or
it may be made in any manner permitted by the laws of the State of New York, and
in addition, specifically agrees that service of process will be deemed
sufficient for personal jurisdiction over him or it if service is made by
registered or certified mail at the address of such party set forth above. Each
party agrees that no action or proceeding of any kind may be brought, and no
claim asserted (whether by counterclaim, cross-claim or otherwise), with respect
to any matter arising from, related to or in connection with this Agreement
except in the state and/or federal courts of New York.
12. Representations and Warranties of Executive.
12.1. Executive hereby represents and warrants to the Company
that the execution and delivery of this Agreement by him, and the performance of
his or her obligations hereunder are not in violation of, and do not and will
not conflict with or constitute a default under, any of the terms and provisions
of any agreement or instrument to which he is bound or any law, regulation,
order, decree or judgment to which he or she is subject; and that this Agreement
has been duly executed and delivered by him and is a valid and binding
obligation in accordance with its terms.
12.2. The Company hereby represents to the Executive that the
execution and delivery of this Agreement by it and the performance of its
obligations hereunder are not in violation of and do not conflict with or
constitute a default under any of the terms and provisions of any agreement or
instrument to which it is bound or any law or regulation, order, decree or
judgment to which it is subject and that this Agreement has been duly executed
and delivered by it and it is a valid and binding obligation in accordance with
its terms.
13. Assignment. The rights and duties of hereunder shall not be
assignable. The Company may assign this Agreement and all rights and obligations
hereunder to any subsidiary or affiliate.
14. Binding Effect. This Agreement shall be binding upon the parties
hereto and their respective successors-in-interest, heirs and personal
representatives and, to the extent permitted herein, the assigns of the Company.
Each of the parties hereto have been represented by counsel of their choice in
connection with the execution and delivery of this Agreement.
15. Severability. If any provision of this Agreement or any part hereof
or the application hereof to any person or circumstance shall be finally
determined by a court of competent jurisdiction or by any arbitration panel to
be invalid or unenforceable to any extent, the remainder of this Agreement, or
the remainder of such provision or the application of such provision to persons
or circumstances other than those as to which it has been held invalid or
unenforceable, shall not be affected thereby and each provision of this
Agreement shall remain in full force and effect to the fullest extent permitted
by law. The parties also agree that if any portion of this Agreement, or any
part hereof or application hereof, to any person or circumstance shall be
finally determined by a court of competent jurisdiction or arbitration panel to
be invalid or unenforceable to any extent, then such objectionable provision
shall be deemed modified to the extent necessary so as to make it valid,
reasonable and enforceable.
16. Notices. All notices, or other communications required or permitted
to be given hereunder, shall be in writing and shall be delivered personally or
mailed, certified mail, return receipt requested, postage prepaid, to the
Company, at the address set forth on the first page of this Agreement, and to
the Executive, to the address provided to the Company by the Executive. Any
notice mailed in accordance with the terms hereof shall be deemed received on
the third day following the date of mailing. Either party may change the address
to which notices to such party may be given hereunder by serving a proper notice
of such change of address to the other party.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior written or oral negotiations, representations, agreements,
commitments, contracts or understandings with respect thereto and no
modification, alteration or amendment to this Agreement may be made unless the
same shall be in writing and signed by both of the parties hereto.
18. Waivers. No failure by either party to exercise any of such party's
rights hereunder or to insist upon strict compliance with respect to any
obligation hereunder, and no custom or practice of the parties at variance with
the terms hereof, shall constitute a waiver by either party to demand exact
compliance with the terms hereof. Waiver by either party of any particular
default by the other party shall not affect or impair such party's rights in
respect to any subsequent default of the same or a different nature, nor shall
any delay or omission of either party to exercise any rights arising from any
default by the other party affect or impair such party's rights as to such
default or any subsequent default.
19. Governing Law. For purposes of construction, interpretation and
enforcement, this Agreement shall be deemed to have been entered into under the
laws of the State of New York and its validity, effect, performance,
interpretation, construction and enforcement shall be governed by and subject to
the laws of the State of New York without reference to its choice of law rules.
20. Interpretation. Section titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
21. Expenses. Each party hereto will pay all of its or his own costs and
expenses incident to the negotiation and preparation of this Agreement.
22. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be considered an original instrument, but
all of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by each of the parties
and delivered to the other party.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
Hidenet Secure Architectures, Ltd.
By: /s/ Ron Fussman
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Name: Ron Fussman
Manager
EXECUTIVE:
/s/ Robert Friedman
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Robert Friedman
