þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009 | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
CICERO INC. |
(Exact name of registrant as specified in its charter) |
Delaware
|
11-2920559
|
|
(State
of incorporation)
|
(I.R.S.
Employer Identification No.)
|
8000
Regency Parkway, Suite 542, Cary, NC 27518
|
(Address
of principal executive offices, including Zip Code)
|
|
(919)
380-5000
|
(
Registrant’s telephone number,
including area code)
|
Securities
registered pursuant to Section 12(b) of the Act:
|
NONE
|
Securities
registered pursuant to Section 12(g) of the Act:
|
Common Stock, $.001 par
value
|
Large accelerated filer o | Accelerated filer o | Non - accelerated filer o | Smaller reporting company þ |
Item
Number
|
Page
Number
|
|||||
PART
I
|
||||||
1. |
Business
|
1 | ||||
1A. |
Risk
factors
|
7 | ||||
1B. |
Unresolved
Staff Comments
|
11 | ||||
2. |
Properties
|
11 | ||||
3. |
Legal
Proceedings
|
11 | ||||
4. |
[Reserved]
|
11 | ||||
PART
II
|
||||||
5. |
Market
for Cicero Common Stock and Related Shareholder Matters
|
12 | ||||
6. |
Selected
Financial Data
|
12 | ||||
7. |
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
13 | ||||
7A. |
Quantitative
and Qualitative Disclosures About Market Risk
|
21 | ||||
8. |
Financial
Statements and Supplementary Data
|
21 | ||||
9. |
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
21 | ||||
9A(T) |
Controls
and Procedures
|
21 | ||||
9B. |
Other
Information
|
22 | ||||
PART
III
|
||||||
10. |
Directors,
Executive Officers and Corporate Governance
|
23 | ||||
11. |
Executive
Compensation
|
26 | ||||
12. |
Security
Ownership of Certain Beneficial Owners and Management
|
31 | ||||
13. |
Certain
Relationships and Related Transactions, and Director
Independence
|
33 | ||||
14. |
Principal
Accountant Fees and Services
|
34 | ||||
PART
IV
|
||||||
15. |
Index
Exhibits and Financial Statement Schedules
|
36 | ||||
SIGNATURES
|
39 | |||||
INDEX
TO FINANCIAL STATEMENTS
|
F-1 |
·
|
Business Process Outsourcers
-
use our software solution in contact
centers to provide real time integration among existing back-office
systems, eliminate redundant data entry, shorten call times, provide
real-time data access and enhance customer service and service
levels.
|
·
|
A financial institution
- uses our software solution to provide real-time integration among market
data, customer account information, existing back-office systems and other
legacy applications, eliminate redundant data entry, provide real-time
data access and processing, and enhance customer service and service
levels.
|
·
|
An insurance company
-
uses our software solution to integrate their customer information systems
with over thirty software applications including a CRM
application.
|
·
|
A law enforcement
organization
- uses our software solution to streamline and
automate support for arrests and investigations while merging federal,
state and local systems within a unified
process.
|
·
|
Product
functionality and features;
|
·
|
Availability
and quality of support services;
|
·
|
Ease
of product implementation;
|
·
|
Price;
|
·
|
Product
reputation; and
|
·
|
Our
financial stability.
|
·
|
Portal
software offers the ability to aggregate information at a single point,
but not the ability to integrate transactions from a myriad of information
systems on the desktop. Plumtree is a representative company in
the market.
|
·
|
Middleware
software provides integration of applications through messages and data
exchange implemented typically in the middle tier of the application
architecture. This approach requires modification of the
application source code and substantial infrastructure investments and
operational expense. Reuters, TIBCO and IBM MQSeries are
competitors in the middleware
market.
|
·
|
CRM
software offers application tools that allow developers to build product
specific interfaces and custom applications. This approach is
not designed to be product neutral and is often dependent on deep
integration with our technology. Siebel is a representative
product in the CRM software
category.
|
·
|
Recently,
there have been several companies that offer capabilities similar to our
software in that these companies advertise that they integrate
applications without modifying the underlying code for those applications.
OpenSpan is one company who advertises that they can non-invasively
integrate at the point of contact or on the
desktop.
|
·
|
make
a special suitability determination for purchasers of our
shares;
|
·
|
receive
the purchaser's written consent to the transaction prior to the purchase;
and
|
·
|
deliver
to a prospective purchaser of our stock, prior to the first transaction, a
risk disclosure document relating to the penny stock
market.
|
2009
|
2008
|
|||||||||||||||
Quarter
|
High
|
Low
|
High
|
Low
|
||||||||||||
First
|
$ | 0.23 | $ | 0.08 | $ | 0.25 | $ | 0.14 | ||||||||
Second
|
$ | 0.25 | $ | 0.13 | $ | 0.19 | $ | 0.14 | ||||||||
Third
|
$ | 0.19 | $ | 0.12 | $ | 0.27 | $ | 0.17 | ||||||||
Fourth
|
$ | 0.15 | $ | 0.09 | $ | 0.20 | $ | 0.09 |
Plan
Category
|
Number
of Securities to
be
issued upon exercise
of outstanding options |
Weighted-average
exercise
price of
outstanding
options
|
Number
of securities
remaining
available under
equity
compensation plans
(excluding
securities reflected
in
the first column)
|
|||||||||
Equity
compensation plans approved by stockholders
|
2,707,006 | $ | 1.10 | 1,818,774 |
Year
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Revenue:
|
||||||||||||
Software
|
17.3 | % | 42.5 | % | 27.7 | % | ||||||
Maintenance
|
47.3 | % | 25.3 | % | 16.6 | % | ||||||
Services
|
35.4 | % | 32.2 | % | 55.7 | % | ||||||
Total
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Cost
of revenue:
|
||||||||||||
Software
|
0.8 | % | 1.5 | % | 1.0 | % | ||||||
Maintenance
|
8.7 | % | 7.5 | % | 14.6 | % | ||||||
Services
|
47.4 | % | 27.3 | % | 36.2 | % | ||||||
Total
|
56.8 | % | 36.2 | % | 51.8 | % | ||||||
Gross
margin
|
43.2 | % | 63.8 | % | 48.2 | % | ||||||
Operating
expenses:
|
||||||||||||
Sales and
marketing
|
48.2 | % | 27.6 | % | 43.5 | % | ||||||
Research and product
development
|
21.6 | % | 17.8 | % | 31.5 | % | ||||||
General and
administrative
|
52.4 | % | 37.7 | % | 75.0 | % | ||||||
Total
|
122.2 | % | 83.1 | % | 150.0 | % | ||||||
Loss from continuing
operations
|
(79.0 | )% | (19.3 | )% | (101.8 | )% | ||||||
Other (expense),
net
|
(12.2 | )% | (4.5 | )% | (7.5 | )% | ||||||
Net loss from continuing
operations
|
(91.2 | )% | (23.8 | )% | (109.3 | )% |
2009
|
2008
|
2007
|
||||||||||
United
States
|
100 | % | 100 | % | 100 | % |
Name
|
Age
|
Position(s)
|
||
John
L Steffens
|
68
|
Director
and Chairman
|
||
John
Broderick
|
60
|
Director
and Chief Executive Officer/Chief Financial Officer
|
||
Antony
Castagno
|
42
|
Director
and Chief Technology Officer
|
||
Anthony
C. Pizi
|
50
|
Director
|
||
Mark
Landis
|
68
|
Director
|
||
Bruce
W. Hasenyager
|
68
|
Director
|
||
Jay
R. Kingley
|
49
|
Director
|
||
Charles
B. Porciello
|
74
|
Director
|
||
Bruce
D. Miller
|
59
|
Director
|
||
John
W. Atherton
|
67
|
Director
|
||
Don
Peppers
|
59
|
Director
|
·
|
Setting
the total compensation of our Chief Executive Officer and evaluating his
performance based on corporate goals and
objectives;
|
·
|
Reviewing
and approving the Chief Executives Officer’s decisions relevant to the
total compensation of the Company’s other executive
officer;
|
·
|
Making
recommendations to the Board of Directors with respect to equity-based
plans in order to allow us to attract and retain qualified personnel;
and
|
·
|
Reviewing
director compensation levels and practices, and recommending, from time to
time, changes in such compensation levels and practices of the Board of
Directors.
|
·
|
Base
salary;
|
·
|
Non-equity
incentive plan compensation;
|
·
|
Long-term
incentive compensation; and
|
·
|
Other
benefits
|
Name
and
Principal
Position
|
Fiscal
Year
|
Salary
|
Stock
Awards
|
Option
Awards
|
Non-
Equity
Incentive
Plan
Compensation
(1)
|
All
Other
Compensation
(2)
|
Total
|
||||||||||||||||||||
John
P. Broderick
Chief
Executive Officer Chief /Financial Officer, Corporate
Secretary
|
2009
|
$ | 175,000 | -- | -- | -- | $ | 10,139 | $ | 185,139 | |||||||||||||||||
2008
|
$ | 175,000 | -- | -- | $ | 25,000 | $ | 6,780 | $ | 206,780 |
(1)
|
Non-equity
incentive plan compensation includes a bonus for certain revenue
transactions for named executive earned during fiscal year ended December
31, 2008. The revenue transaction was the acceptance of the
first contract greater then
$300,000.
|
(2)
|
Other
compensation includes the Company’s portion of major medical insurance
premiums and long term disability premiums for named executives during
fiscal year ended December 31, 2009 and 2008,
respectively.
|
Option
Awards
|
Stock
Awards
|
||||||||||||||||
Name
|
Number of Securities
Underlying Unexercised Options # Exercisable
(Vested)
|
Number of Securities
Underlying Unexercised Unearned Options# Unexercisable
(Unvested)
|
Option
Exercise price ($)
|
Option
Expiration date
|
Number
of Shares of Stock That Have Not Vested
|
Market
Value of Shares of Stock That Have Not Vested
|
|||||||||||
John
P. Broderick
|
500 | (1) | -- | $ | 404.00 |
05/17/2011
|
|||||||||||
250 | (2) | -- | $ | 175.00 |
09/25/2011
|
||||||||||||
909 | (3) | -- | $ | 174.00 |
12/03/2011
|
||||||||||||
1,000 | (4) | -- | $ | 39.00 |
07/08/2012
|
||||||||||||
4,950 | (5) | -- | $ | 26.00 |
04/24/2013
|
||||||||||||
5,000 | (6) | -- | $ | 31.00 |
02/18/2014
|
||||||||||||
549,360 | (7) | -- | $ | 0.51 |
08/17/2017
|
||||||||||||
549,630
(8)
|
$ 60,459
|
Base
Salary
|
Restricted
Shares Award
|
Deferred
Compensation
|
Total
Compensation and Benefits
|
|||||||||||||
John
P. Broderick
|
||||||||||||||||
Death
|
$ | -- | $ | 60,459 | $ | 175,000 | $ | 235,459 | ||||||||
Disability
|
-- | 60,459 | 175,000 | 235,459 | ||||||||||||
Involuntary
termination without cause
|
175,000 | 60,459 | 175,000 | 410,459 | ||||||||||||
Change
in Control
|
175,000 | 60,459 | 175,000 | 410,459 | ||||||||||||
Antony
Castagno
|
||||||||||||||||
Involuntary
termination without cause
|
75,000 | -- | -- | 75,000 |
Common
Stock
|
||||||||
Name
of Beneficial Owner
|
No.
of Shares
|
Percent
of Class
|
||||||
John
L. Steffens (1)
|
13,635,756 | (2) | 24.5 | % | ||||
Jonathan
Gallen (3)
|
11,094,139 | (4) | 23.3 | % | ||||
Mark
and Carolyn P. Landis (5)
|
5,109,863 | (6) | 10.5 | % | ||||
SOAdesk
LLC
|
4,666,667 | (7) | 9.0 | % | ||||
Anthony
C. Pizi
|
1,402,634 | (8) | 3.0 | % | ||||
Bruce
Miller
|
2,274,364 | (9) | 4.8 | % | ||||
John
P. Broderick
|
1,114,577 | (10) | 2.3 | % | ||||
John
W. Atherton
|
156,784 | (11) | * | |||||
Bruce
W. Hasenyager
|
41,652 | (12) | * | |||||
Don
Peppers
|
357,327 | (13) | * | |||||
Charles
Porciello
|
88,286 | (14) | * | |||||
Jay
R. Kingley
|
10,000 | (15) | * | |||||
Antony
Castagno
|
-- | * | ||||||
All
current directors and executive officers as a group (11
persons)
|
24,191,243 | (16) | 41.5 | % |
*
|
Represents
less than one percent of the outstanding
shares.
|
1
|
The
address of John L. Steffens is 65 East 55
th
Street, New York, N.Y. 10022.
|
2.
|
Includes 5,160,307
shares of common stock, 14,832 shares of the Series A-1 Convertible
Preferred Stock, 6,400,000 shares of the Series B Convertible Preferred
Stock, and 2,052,617 shares issuable upon the exercise of warrants and
8,000 shares subject to stock options exercisable within sixty (60) days.
The exercise prices of the warrants are as follows: 14,332 at $10.00 per
share, 188,285 at $0.18 per share, 250,000 at $0.20 per share and
1,600,000 at $0.25. The exercise price of the stock options is
$0.51 per share.
|
3.
|
The
address of Mr. Gallen is 299 Park Avenue New York, New York
10171.
|
4.
|
Ahab
Partner, L.P. (“Partners”), Ahab International, Ltd. (“International”),
Queequeg Partners, L.P. (“Queequeg”) and Queequeg, Ltd. (“Limited,” and
collectively with Partners, International, and Queequeg, , the “Funds”)
held in aggregate 8,896,136 shares of common stock, 1,667,000 shares of
the Series B Convertible Preferred Stock and warrants to acquire 431,003
shares of common stock. The exercise prices of the warrants are 14,336 at
$10.00 and 416,667 at $0.25. Jonathan Gallen possesses the sole
power to vote and the sole power to direct the disposition of all
securities of the Company held by the Funds. In addition,
Jonathan Gallen held the power to direct the disposition of 100,000 shares
of common stock held in private investment
account. Accordingly, for the purposes of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, Mr. Gallen may be deemed to
beneficially own 11,094,139 shares of common stock of the
Company.
|
5.
|
The
address of Mark and Carolyn P. Landis is 503 Lake Drive, Princeton, New
Jersey 08540.
|
6.
|
Includes
3,748,155 shares of common stock, 1,326,136 shares of the Series A-1
Convertible Preferred Stock, 30,572 shares of common stock issuable upon
the exercise of warrants and 5,000 shares subject to stock options
exercisable within sixty (60) days. The exercise prices of the warrants
and stock options are at $10.00 and $0.51 per share
respectively. Disclaims beneficial ownership of 35,572 shares
because they are anti-dilutive.
|
7.
|
Includes
4,666,667 shares of the Series B Convertible Preferred
Stock.
|
8.
|
Includes
1,274,951 shares of common stock, 111,016 shares of the Series A-1
Convertible Preferred Stock, 11,667 shares of common stock issuable upon
the exercise of warrants and 5,000 shares subject to stock options
exercisable within sixty (60) days. The exercise prices of
warrants and stock options are $10.00 and $0.51 per share of common stock,
respectively.
|
9.
|
Consists
of 1,740,388 shares of common stock, 13,195 shares of common stock
issuable upon the exercise of warrants and 8,000 shares subject to stock
options exercisable within sixty (60) days. The exercise prices
of the warrants and stock options are $10.00 and $0.51 per share of common
stock, respectively. Mr. Miller has sole or shared voting or
dispositive power with respect to the securities held by Delphi Partners,
Ltd., which holds 509,267 shares of common stock and 3,514 shares of
common stock issuable upon the exercise of warrants with an exercise price
at $10.00 per share.
|
10.
|
Includes
3,248 shares of common stock. 561,969 shares subject to stock
options exercisable within sixty (60) days and 549,360 shares of
restricted stock that is awarded upon resignation or termination and
change of control. The exercise prices of stock options range
from $0.51 to $404 per share of common
stock.
|
11.
|
Includes
148,784 shares of common stock, and 100 shares of common stock held in a
self-directed IRA and 8,000 shares subject to stock options exercisable
within sixty (60) days. The exercise price of stock options is
$0.51 per share of common stock.
|
12.
|
Consists
of 32,652 shares of common stock and 9,000 shares subject to stock options
exercisable within sixty (60) days. The exercise prices of
stock options are as follows: 1,000 at $35.00 per share and 8,000 at $0.51
per share of common stock. Disclaims beneficial ownership of
1,000 shares of common stock because they are
anti-dilutive.
|
13.
|
Includes
352,327 shares of common stock and 5,000 shares subject to stock options
exercisable within sixty (60) days. The exercise price of stock options is
$0.51 per share of common stock.
|
14.
|
Consists
of 80,286 shares of common stock and 8,000 shares subject to stock options
exercisable within sixty (60) days. The exercise price of stock options is
$0.51 per share of common stock.
|
15.
|
Consists
of 1,000 shares of common stock and 9,000 shares subject to stock options
exercisable within sixty (60) days. The exercise prices of stock options
are as follows: 1,000 at $34.00 per share and 8,000 at $0.51 per share of
common stock.
|
16.
|
Includes
shares issuable upon exercise of options and warrants exercisable within
sixty (60) days as described in Notes 7-14 to our financial
statements.
|
Exhibit
Number
|
Description
|
3.1
|
Certificate
of Incorporation of Level 8 Systems, Inc., a Delaware corporation, as
amended and restated December 29, 2006 (incorporated by reference to
exhibit 3.1 to Level 8’s Form 8-K filed
January
17, 2007).
|
3.2
|
Certificate
of Designation relating to Series A1 Convertible Redeemable Preferred
Stock (incorporated by reference to exhibit 3.2 to Level 8’s Form 8-K
filed January 17, 2007).
|
3.3
|
Certificate
of Incorporation of Level 8 Systems, Inc., a Delaware corporation, as
amended August 4, 2003 (incorporated by reference to exhibit 3.1 to Level
8’s Form 10-K filed March 31,
2004).
|
3.4
|
Bylaws
of Level 8 Systems, Inc., a Delaware corporation (incorporated by
reference to exhibit 3.2 to Level 8’s Form 10-K filed April 2,
2002).
|
3.5
|
Certificate
of Designation relating to Series B Convertible Redeemable Preferred Stock
(incorporated by reference to exhibit 3.1 to Level 8’s Form 8-K filed
January 20, 2010).
|
3.1
|
Form
of Long term Promissory Note Stock Purchase Warrant (incorporated by
reference to exhibit 4.19 to Cicero Inc.’s Form 10-K filed March 31,
2008).
|
4.2
|
Form
of Long term Promissory Note Stock Purchase Warrant (incorporated by
reference to exhibit 4.17 to Cicero Inc.’s Form 10-K filed March 31,
2009).
|
4.3
|
Form
of Amended Long term Promissory Note Stock Purchase Warrant (filed
herewith).
|
10.1
|
Securities
Purchase Agreement for Consortium IV (incorporated by reference to exhibit
10.1 to Cicero Inc.’s Form 10-K/A filed July 11,
2007).
|
10.2
|
Amended
PCA Shell License Agreement, dated as of January 3, 2002, between Level 8
Systems, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated
(incorporated by reference to exhibit 10.2 to Level 8's Form 8-K, filed
January 11, 2002).
|
10.3A
|
PCA
Shell License Agreement between Level 8 Systems, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (incorporated by reference to
exhibit 10.2 to Level 8’s Report on Form 8-K, filed September 11,
2000).
|
10.3B
|
OEM
License Agreement between Cicero Inc. and Merrill Lynch, Pierce, Fenner
& Smith Incorporated (incorporated by reference to exhibit 10.12A to
Cicero Inc.’s Form 10-K filed March 31,
2008).
|
10.3C
|
Software
Support and Maintenance Schedule between Cicero Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (incorporated by reference to
exhibit 10.12A to Cicero Inc.’s Form 10-K filed March 31,
2008).
|
10.4
|
Employment
Agreement between John P. Broderick and the Company effective January 1,
2009 (filed herewith).*
|
10.5
|
Lease
Agreement for Cary, N.C. offices, dated November 7, 2003, between Level 8
Systems, Inc. and Regency Park Corporation (incorporated by reference to
exhibit 10.17 to Level 8’s Form 10-K, filed March 31,
2004).
|
10.6
|
Level
8 Systems Inc. 1997 Stock Option Plan, as Amended and Restated
(incorporated by reference to exhibit 10.2 to Level 8’s Registration
Statement of Form S-1/A, filed September 22, 2000, File No.
333-44588).*
|
10.7A
|
Fifth
Amendment to Level 8 Systems Inc. 1997 Stock Option Plan (incorporated by
reference to exhibit 10.9A to Level 8’s Form 10-K filed April 2,
2002).*
|
10.8B
|
Seventh
Amendment to Level 8 Systems Inc. 1997 Stock Option Plan (incorporated by
reference to exhibit 10.14 B to Level 8’s Form 10-K, filed March 31,
2004).*
|
10.9
|
Lease
Agreement for Cary, N.C. offices, dated August 16
,
2007, between Cicero Inc. and Regency Park Corporation
(incorporated by reference to exhibit 10.21 to Cicero Inc.’s Form 10-K
filed March 31, 2008).
|
10.10
|
Cicero
Inc. 2007 Employee Stock Option Plan (incorporated by reference to exhibit
10.22 to Cicero Inc.’s Form 10-K filed March 31,
2008).
|
10.11
|
Agreement
and Promissory Note of Cicero Inc,, dated October 30, 2007 among Cicero
Inc. and BluePhoenix Solutions Ltd. (incorporated by reference to exhibit
10.23 to Cicero Inc.’s Form 10-K filed March 31,
2008).
|
10.12
|
Promissory
Note of Cicero Inc., dated October 29, 2007 among Cicero Inc. and John L.
Steffens (incorporated by reference to exhibit 10.24 to Cicero Inc.’s Form
10-K filed March 31, 2008).
|
10.13
|
Securities
Purchase Agreement, dated as of February 26, 2007, by and among Cicero
Inc. and the Purchasers in the February Private Placement (incorporated by
reference to exhibit 10.25 to Cicero Inc.’s Form 10-K filed March 31,
2008).
|
10.14
|
Securities
Purchase Agreement, dated as of August 15, 2007, by and among Cicero Inc.
and the Purchasers in the August Private Placement (incorporated by
reference to exhibit 10.26 to Cicero Inc.’s Form 10-K filed March 31,
2008).
|
10.15
|
Revolving
Loan Agreement dated November 3, 2008 among Cicero Inc. and Barbara Sivan
(incorporated by reference to exhibit 10.15 to Cicero Inc,’s Form 10-K
filed March 31, 2009).
|
10.16
|
Employment
Agreement between John P. Broderick and the Company effective January 1,
2010 (filed herewith).*
|
10.17
|
Form
of Long Term Promissory Note dated March 31, 2009 (incorporated by
reference to exhibit 10.17 to Cicero Inc,’s Form 10-K filed March 31,
2009).
|
10.18
|
Employment
Agreement between Antony Castagno and the Company effective January 1,
2010 (filed herewith).*
|
10.19
|
Asset
Purchase Agreement dated January 15, 2010 between Cicero Inc., Vertical
Thought Inc, and SOADesk LLC (incorporated by reference to exhibit 2.1
to Cicero’s Form 8-K filed January 20,
2010).
|
14.1
|
Code
of Ethics (incorporated by reference to exhibit 14.1 to Level 8’s Form
10-K/A, filed
March
31, 2004).
|
21.1
|
List
of subsidiaries of the Company (filed
herewith).
|
22.1
|
Consent
of Marcum LLP (filed herewith).
|
22.2
|
Consent
of Margolis & Company P.C. (filed
herewith).
|
31.1
|
Certification
of Chief Executive pursuant to Rule 13a-14(a) (filed
herewith).
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) (filed
herewith).
|
32.1
|
Certification
of John P. Broderick pursuant to 18 USC § 1350, as adopted pursuant to
§906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
CICERO INC. | |||
Date:
April 9,
2010
|
By:
|
/s/ John P. Broderick | |
Name John P. Broderick | |||
Title Chief Executive Officer | |||
Report of Independent Registered Public Accounting Firm for the year ended December 31, 2009 | F-2 | |||
Report of Independent Registered Public Accounting Firm for the years ended December 31, 2008 and 2007 | F-3 | |||
Financial Statements: | ||||
Consolidated Balance Sheets | F-4 | |||
Consolidated Statements of Operations | F-5 | |||
Consolidated Statements of Stockholders' Deficit | F-6 | |||
Consolidated Statements of Comprehensive Loss | F-7 | |||
Consolidated Statements of Cash Flows | F-8 | |||
Notes to Consolidated Financial Statements | F-10 |
December
31, 2009
|
December
31, 2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash and cash
equivalents
|
$ | 12 | $ | 63 | ||||
Assets of discontinued
operations
|
-- | 71 | ||||||
Trade accounts receivable,
net
|
225 | 759 | ||||||
Prepaid expenses and other
current assets
|
345 | 255 | ||||||
Total
current assets
|
582 | 1,148 | ||||||
Property
and equipment, net
|
39 | 46 | ||||||
Total
assets
|
$ | 621 | $ | 1,194 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Short-term
debt
(Note
4)
|
$ | 1,886 | $ | 1,192 | ||||
Accounts
payable
|
2,346 | 2,258 | ||||||
Accrued
expenses:
|
||||||||
Salaries, wages, and related
items
|
1,151 | 1,051 | ||||||
Other
|
1,500 | 2,027 | ||||||
Liabilities of discontinued
operations
|
-- | 429 | ||||||
Deferred
revenue
|
243 | 348 | ||||||
Total
current liabilities
|
7,126 | 7,305 | ||||||
Long-term
debt
(Note
5)
|
1,421 | 971 | ||||||
Total
liabilities
|
8,547 | 8,276 | ||||||
Commitments
and contingencies (Notes 12 and 13)
|
||||||||
Stockholders'
deficit:
|
||||||||
Convertible
preferred stock, $0.001 par value, 10,000,000 shares
authorized
Series
A-1 – 1,543.6 shares issued and outstanding at December 31, 2009 and 2008,
$500 per share liquidation preference (aggregate liquidation value of
$772)
|
-- | -- | ||||||
Common
stock, $0.001 par value, 215,000,000 shares authorized at December 31,
2009 and 2008, respectively; 47,098,185 and 46,642,396 issued and
outstanding at December 31, 2009 and 2008, respectively (Note
7)
|
47 | 47 | ||||||
Additional
paid-in-capital
|
230,464 | 230,018 | ||||||
Accumulated
deficit
|
(238,437 | ) | (237,143 | ) | ||||
Accumulated other comprehensive
loss
|
-- | (4 | ) | |||||
Total stockholders'
deficit
|
(7,926 | ) | (7,082 | ) | ||||
Total liabilities and
stockholders' deficit
|
$ | 621 | $ | 1,194 |
Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Revenue:
|
||||||||||||
Software
|
$ | 431 | $ | 1,467 | $ | 501 | ||||||
Maintenance
|
1,182 | 873 | 300 | |||||||||
Services
|
885 | 1,112 | 1,007 | |||||||||
Total
operating revenue
|
2,498 | 3,452 | 1,808 | |||||||||
Cost
of revenue:
|
||||||||||||
Software
|
19 | 50 | 19 | |||||||||
Maintenance
|
217 | 260 | 264 | |||||||||
Services
|
1,183 | 941 | 654 | |||||||||
Total
cost of revenue
|
1,419 | 1,251 | 937 | |||||||||
Gross
margin
|
1,079 | 2,201 | 871 | |||||||||
Operating
expenses:
|
||||||||||||
Sales
and marketing
|
1,203 | 952 | 786 | |||||||||
Research
and product development
|
540 | 615 | 569 | |||||||||
General
and administrative
|
1,310 | 1,301 | 1,356 | |||||||||
Total
operating expenses
|
3,053 | 2,868 | 2,711 | |||||||||
Loss
from continuing operations before other income (charges)
|
(1,974 | ) | (667 | ) | (1,840 | ) | ||||||
Other
income (charges):
|
||||||||||||
Interest
expense
|
(283 | ) | (223 | ) | (257 | ) | ||||||
Other
|
(21 | ) | 67 | 122 | ||||||||
|
(304 | ) | (156 | ) | (135 | ) | ||||||
Loss from continuing operations | (2,278 | ) | (823 | ) | (1,975 | ) | ||||||
Write
off of abandoned assets of discontinued operations
|
998 | -- | -- | |||||||||
Net
loss
|
$ | (1,280 | ) | $ | (823 | ) | $ | (1,975 | ) | |||
Earnings per share - basic and diluted | ||||||||||||
Loss from continuing operations | (0.05 | ) | (0.02 | ) | (0.05 | ) | ||||||
Income form
diiscontinued operations
|
$ | 0.02 | $ | — | $ | — | ||||||
Net Loss | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.05 | ) | |||
Average
shares outstanding – basic and diluted
|
46,970 | 46,642 | 36,771 |
Common Stock | Preferred Stock | |||||||||||||||||||||||||||||||
Shares | Amount | Shares |
Amount
|
Additional
Paid-in
Capital
|
Accumulated
(Deficit)
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
|
|||||||||||||||||||||||||
Balance
at December 31, 2006
|
35,182 | $ | 35 | 2 | -- | $ | 226,407 | $ | (234,345 | ) | $ | (9 | ) | $ | (7,912 | ) | ||||||||||||||||
Shares
issued for private placement
|
5,892 | 6 | 1,034 | 1,040 | ||||||||||||||||||||||||||||
Shares
issued for litigation settlement
|
25 | 50 | 50 | |||||||||||||||||||||||||||||
Conversion
of preferred shares to common
|
160 | -- | ||||||||||||||||||||||||||||||
Options
issued as compensation
|
650 | 650 | ||||||||||||||||||||||||||||||
Restricted
shares issued as compensation
|
36 | 36 | ||||||||||||||||||||||||||||||
Warrant
issued
|
34 | 34 | ||||||||||||||||||||||||||||||
Shares
issued with refinancing of debt
|
2,546 | 3 | 647 | 650 | ||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
(6 | ) | (6 | ) | ||||||||||||||||||||||||||||
Net
loss
|
(1,975 | ) | (1,975 | ) | ||||||||||||||||||||||||||||
Balance
at December 31, 2007
|
43,805 | 44 | 2 | -- | 228,858 | (236,320 | ) | (15 | ) | (7,433 | ) | |||||||||||||||||||||
Shares
issued for loan refinancing
|
1,425 | 1 | 362 | 363 | ||||||||||||||||||||||||||||
Conversion
of preferred shares to common
|
60 | -- | ||||||||||||||||||||||||||||||
Shares
issued for account payable refinancing
|
623 | 1 | 159 | 160 | ||||||||||||||||||||||||||||
Shares
issued for loan conversion
|
392 | 1 | 100 | 101 | ||||||||||||||||||||||||||||
Shares
issued for loan conversion and under registration rights
agreement
|
256 | 65 | 65 | |||||||||||||||||||||||||||||
Shares
issued for account payable conversion
|
81 | 21 | 21 | |||||||||||||||||||||||||||||
Options
issued as compensation
|
417 | 417 | ||||||||||||||||||||||||||||||
Restricted
shares issued as compensation
|
36 | 36 | ||||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
11 | 11 | ||||||||||||||||||||||||||||||
Net
loss
|
(823 | ) | (823 | ) | ||||||||||||||||||||||||||||
Balance
at December 31, 2008
|
46,642 | 47 | 2 | -- | 230,018 | (237,143 | ) | (4 | ) | (7,082 | ) | |||||||||||||||||||||
Shares
issued for loan conversion
|
336 | 52 | 52 | |||||||||||||||||||||||||||||
Shares
issued under registration rights agreement
|
120 | 16 | 16 | |||||||||||||||||||||||||||||
Options
issued as compensation
|
280 | 280 | ||||||||||||||||||||||||||||||
Restricted
shares issued as compensation
|
36 | 36 | ||||||||||||||||||||||||||||||
Warrants
issued
|
62 | 62 | ||||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
(14 | ) | 4 | (10 | ) | |||||||||||||||||||||||||||
Net
loss
|
(1,280 | ) | (1,280 | ) | ||||||||||||||||||||||||||||
Balance
at December 31, 2009
|
47,098 | $ | 47 | 2 | -- | $ | 230,464 | $ | (238,437 | ) | -- | $ | (7,926 | ) |
Years
Ended December 31,
|
||||||||||||
|
2009
|
2008
|
2007
|
|||||||||
Net
loss
|
$ | (1,280 | ) | $ | (823 | ) | $ | (1,975 | ) | |||
Other
comprehensive income (loss), net of tax:
|
||||||||||||
Foreign
currency translation adjustment
|
4 | 11 | (6 | ) | ||||||||
Comprehensive
loss
|
$ | (1,276 | ) | $ | (812 | ) | $ | (1,981 | ) |
Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net loss
|
$ | (1,280 | ) | $ | (823 | ) | $ | (1,975 | ) | |||
Adjustments to reconcile net loss
to net cash (used in) operating activities:
|
||||||||||||
Depreciation and
amortization
|
21 | 17 | 10 | |||||||||
Stock compensation
expense
|
378 | 453 | 720 | |||||||||
Issuance of stock under
registration rights agreement
|
16 | 15 | -- | |||||||||
Provision (credit) for doubtful
accounts
|
62 | (100 | ) | 50 | ||||||||
Changes in assets and
liabilities:
|
||||||||||||
Trade accounts receivable and
related party receivables
|
472 | 33 | (622 | ) | ||||||||
Assets and liabilities
discontinued operations
|
(358 | ) | (18 | ) | 21 | |||||||
Prepaid expenses and other
assets
|
(90 | ) | (47 | ) | (136 | ) | ||||||
Accounts payable and accrued
expenses
|
(339 | ) | 178 | 478 | ||||||||
Deferred revenue
|
(105 | ) | 240 | 70 | ||||||||
Net cash used in operating
activities
|
(1,223 | ) | (52 | ) | (1,384 | ) | ||||||
Cash
flows from investing activities:
|
||||||||||||
Purchases of property and
equipment
|
(14 | ) | (41 | ) | (17 | ) | ||||||
Net cash used in investing
activities
|
(14 | ) | (41 | ) | (17 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds from issuance of common
shares, net of issuance costs
|
-- | -- | 1,040 | |||||||||
Borrowings under short and
long-term debt
|
1,900 | 1,395 | 984 | |||||||||
Repayments of short and long-term
debt
|
(704 | ) | (1,500 | ) | (677 | ) | ||||||
Net cash provided by (used in)
financing activities
|
1,196 | (105 | ) | 1,347 | ||||||||
Effect
of exchange rate changes on cash
|
(10 | ) | 11 | (6 | ) | |||||||
Net
decrease in cash and cash equivalents
|
(51 | ) | (187 | ) | (60 | ) | ||||||
Cash
and cash equivalents at beginning of year
|
63 | 250 | 310 | |||||||||
Cash
and cash equivalents at end of year
|
$ | 12 | $ | 63 | $ | 250 | ||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||||||
Cash
paid during the year for:
|
||||||||||||
Income taxes
|
$ | 2 | $ | 1 | $ | 5 | ||||||
Interest
|
$ | 288 | $ | 227 | $ | 264 |
December
31,
|
|||
2009
|
2008
|
||
Fair
Value
|
$1,338,010
|
$685,304
|
|
Carrying
Value
|
1,421,000
|
971,000
|
2009
|
2008
|
2007
|
||||||||||
Stock
options
|
2,707,006 | 2,711,879 | 2,529,025 | |||||||||
Warrants
|
1,389,400 | 390,400 | 445,387 | |||||||||
Preferred
stock
|
1,543,618 | 1,543,618 | 1,603,618 | |||||||||
5,640,024 | 4,645,897 | 4,578,030 |
2009
|
2008
|
2007
|
||||||||||
Expected
life (in years)
|
10.0
years
|
10.0
years
|
10.0
years
|
|||||||||
Expected
volatility
|
147%-156 | % | 106%-151 | % | 166 | % | ||||||
Risk
free interest rate
|
0.15%-0.18 | % | 0.15%-4.24 | % | 5.25 | % | ||||||
Expected
dividend yield
|
0 | % | 0 | % | 0 | % |
2009
|
2008
|
|||||||
Current
trade accounts receivable
|
$ | 287 | $ | 759 | ||||
Less:
allowance for doubtful accounts
|
62 | -- | ||||||
$ | 225 | $ | 759 |
2009
|
2008
|
|||||||
Computer
equipment
|
$ | 292 | $ | 283 | ||||
Furniture
and fixtures
|
24 | 19 | ||||||
Office
equipment
|
164 | 164 | ||||||
480 | 466 | |||||||
Less:
accumulated depreciation and amortization
|
(441 | ) | (420 | ) | ||||
$ | 39 | $ | 46 |
2009
|
2008
|
|||||||
Term
loan (a)
|
$ | -- | $ | 100 | ||||
Note
payable related party (b)
|
719 | 94 | ||||||
Notes
payable (c)
|
1,167 | 998 | ||||||
$ | 1,886 | $ | 1,192 |
(a)
|
At
December 31, 2008, the Company was indebted to BluePhoenix Solutions for
the current portion of the related long term debt of $100,000. (See Note
5)
|
|
(b)
|
At
December 31, 2009, the Company was indebted to John L. (Launny) Steffens,
the Chairman of the Board of Directors, for the current portion of the
related long term debt of $300,000. (See Note 5, 11 and 16)
In December 2009, the Company entered into a short term note payable with John L. (Launny) Steffens, the Chairman of the Board of Directors, for various working capital needs. The Note bears interest at 12% per year and is unsecured. At December 31, 2009, the Company was indebted to Mr. Steffens in the amount of $100,000. (See Note 11)
In
October 2009, the Company entered into a short term note payable with John
L. (Launny) Steffens, the Chairman of the Board of Directors, for various
working capital needs. The Note bears interest at 12% per year and is
unsecured. At December 31, 2009, the Company was indebted to Mr. Steffens
in the amount of $75,000. (See Note
11)
|
|
In
September 2009, the Company entered into a short term note payable with
John L. (Launny) Steffens, the Chairman of the Board of Directors, for
various working capital needs. The Note bears interest at 10% per year and
is unsecured. At December 31, 2009, the Company was indebted to Mr.
Steffens in the amount of $150,000. (See Note 11)
In September 2009, the Company entered into a short term note payable with John L. (Launny) Steffens, the Chairman of the Board of Directors, for various working capital needs. The Note bears interest at 10% per year and is unsecured. At December 31, 2009, the Company was indebted to Mr. Steffens in the amount of $150,000. (See Note 11) In June 2008, the Company entered into a short term note payable with John L. (Launny) Steffens, the Chairman of the Board of Directors, for various working capital needs. The Note bears interest at 10% per year and is unsecured. At December 31, 2009, the Company was indebted to Mr. Steffens in the amount of $45,000. (See Note 11) In November 2007, the Company entered into a short term note payable with John L. (Launny) Steffens, the Chairman of the Board of Directors, for various working capital needs. The Note bears interest at 6% per year and is unsecured. At December 31, 2009, the Company was indebted to Mr. Steffens in the amount of $40,000. (See Note 11) All these notes were converted into 4,733 shares of Series B Convertible Preferred Shares at $150 per share in January 2010 as part of the Company’s issuance of Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock bears an annual interest of 8% and provides warrants to purchase common stock of the Company at a strike price of $0.25 per share. The Series B stock may convert into common stock at a conversion rate of $0.15 per share. The total principal converted was $710,000. Fr om time to time the Company entered into promissory notes with one of the Company’s directors and the former Chief Information Officer, Anthony Pizi. The notes bear interest at 12% per annum. As of December 31, 2009 and 2008, the Company was indebted to Anthony Pizi in the amount of $9,000. |
(c)
|
The
Company has issued a series of short term promissory notes with private
lenders, which provide for short term borrowings, both secured by accounts
receivable and unsecured. In addition, the Company has settled
certain litigation and agreed to issue a series of promissory notes to
support its obligations in the aggregate principal amount of $88,000. The
notes bear interest between 10% and 36% per
annum.
|
2009
|
2008
|
|||||||
Term
loan (a)
|
$ | 671 | $ | 671 | ||||
Note
payable, related party (b)
|
-- | 300 | ||||||
Other
long-term debt (c)
|
750 | -- | ||||||
$ | 1,421 | $ | 971 |
(a)
|
In
October 2007, the Company, in conjunction with Blue Phoenix Solutions,
retired the note payable to Bank Hapoalim and entered into a new
unsecured note with Blue Phoenix Solutions in the principal amount of
$1,021,000 with interest at LIBOR plus 1% (approximately 2.2% at December
31, 2009) maturing in December 2011. Interest is payable quarterly. During
2008, the Company paid $200,000 against the principal and BluePhoenix
converted $50,000 of principal into 195,848 shares of Cicero common stock.
In January 2009, the Company paid $100,000 against the
principal. At December 31, 2009, the Company was indebted to
BluePhoenix Solutions in the amount of
$671,000.
|
(b)
|
In
October 2007, the Company entered into a long-term unsecured note
with John L. (Launny) Steffens, the Chairman of the Board of Directors, as
part of the restructuring of the note payable to Bank
Hapoalim. The note bears interest of 3% and matured in October
2009. In March 2009, the Company and Mr. Steffens agreed to
extend the maturity on the above Note until October 2010. In
April 2009, the Company awarded Mr. Steffens, in consideration for the
extended maturity, 250,000 warrants to purchase the Company’s common stock
at a price of $0.20 per share. These warrants expire in five years. The
Company utilized the Black-Scholes formula to calculate the value of these
warrants which amounted to $12,000 and were included in general and
administrative expenses. At December 31, 2009, the Company had
classified the $300,000 balance to short term
debt.
|
(c)
|
In
March 2009, the Company entered into several secured Promissory Notes with
certain investors in the aggregate amount of $750,000. The Notes bear
interest at 15% and mature on January 31, 2012. The Notes are secured by
the amount due the Company in February 2010 under its contract with
Merrill Lynch. In addition, each investor was issued a warrant to purchase
common stock of the Company. Under the terms of the warrant, which expires
in five years, each Note holder is entitled to purchase 1,000 shares of
Cicero common stock for every $1,000 of principal due under the Note. The
exercise price on the warrant is $0.20 per share. The shares of common
stock underlying the warrants have registration rights and a cashless
exercise provision in the event no registration statement is effective for
resales, if required. The Company has allocated the proceeds
received from the Note and Warrant Offering to determine the fair value of
the warrants issued and is amortizing such amount under the terms of the
notes as additional interest expense in the amount of
$50,349. At December 31, 2009, the Company was indebted to
these investors in the amount of
$750,000.
|
Year
|
||||
2011
|
$ | 671 | ||
2012
|
$ | 750 |
2009
|
2008
|
2007
|
||||||||||
Expected income tax benefit at
statutory rate (34%)
|
$ | (418 | ) | $ | (280 | ) | $ | (672 | ) | |||
State taxes, net of federal tax
benefit.
|
(73 | ) | (49 | ) | (118 | ) | ||||||
Effect of change in valuation
allowance
|
488 | 326 | 788 | |||||||||
Non-deductible
expenses
|
3 | 3 | 2 | |||||||||
Total
|
$ | -- | $ | -- | $ | -- |
2009
|
2008
|
|||||||
Current
assets:
|
||||||||
Accrued expenses, non-tax
deductible
|
$ | 246 | $ | 371 | ||||
Deferred revenue
|
97 | 139 | ||||||
Noncurrent
assets:
|
||||||||
Stock
compensation expense
|
428 | 296 | ||||||
Loss
carryforwards
|
94,501 | 93,217 | ||||||
Depreciation and
amortization
|
3,595 | 4,356 | ||||||
98,867 | 98,379 | |||||||
Less:
valuation allowance
|
(98,867 | ) | (98,379 | ) | ||||
$ | -- | $ | -- |
Number
of Options
|
Option
Price
Per
Share
|
Weighted
Average
Exercise
Price
|
||||||||||
Balance
at December 31, 2006
|
45,315 | 12.00-3,931.00 | $ | 120.61 | ||||||||
Granted
|
2,756,173 | 0.51 | $ | 0.51 | ||||||||
Forfeited
|
(270,413 | ) | 0.51-612.50 | $ | 12.21 | |||||||
Expired
|
(2,050 | ) | 1,473.00 | $ | 1,473.00 | |||||||
Balance
at December 31, 2007
|
2,529,025 | 0.51-3,931.00 | $ | 1.35 | ||||||||
Granted
|
475,000 | 0.10-0.25 | $ | 0.19 | ||||||||
Forfeited
|
(292,146 | ) | 0.17-1,881.25 | $ | 0.74 | |||||||
Balance
at December 31, 2008
|
2,711,879 | 0.10-3,931.25 | $ | 1.22 | ||||||||
Granted
|
475,000 | 0.11-0.15 | $ | 0.12 | ||||||||
Forfeited
|
(478,333 | ) | 0.11-1,881.25 | $ | 0.78 | |||||||
Balance
at December 31, 2009
|
2,707,006 | 0.10-3,931.25 | $ | 1.10 | ||||||||
Number
of Options
|
Option
Price
Per
Share
|
Weighted
Average
Exercise
Price
|
||||||||||
Balance
at December 31, 2008
|
1,023,692 | 0.10-0.51 | $ | 0.42 | ||||||||
Granted
|
475,000 | 0.11-0.15 | $ | 0.12 | ||||||||
Vested
|
1,043,689 | 0.11-0.51 | $ | 0.40 | ||||||||
Forfeited
|
(116,669 | ) | 0.11-0.15 | $ | 0.12 | |||||||
Balance
at December 31, 2009
|
338,334 | 0.10-0.25 | $ | 0.15 | ||||||||
EXERCISE
PRICE
|
NUMBER
OUTSTANDING
|
REMAINING
CONTRACTUAL
LIFE
FOR OPTIONS
OUTSTANDING
|
NUMBER
EXERCISABLE
|
WEIGHTED
AVERAGE
EXERCISE
PRICE
|
||||||||||||||
$ | 0.10-0.50 | 723,333 | 8.8 | 384,999 | $ | 0.18 | ||||||||||||
0.51-0.51 | 1,959,093 | 7.6 | 1,959,093 | 0.51 | ||||||||||||||
0.52-393.12 | 23,150 | 3.4 | 23,150 | 42.40 | ||||||||||||||
393.13-786.25 | 1,340 | 1.2 | 1,340 | 531.84 | ||||||||||||||
786.26-3,931.25 | 90 | 0.6 | 90 | 1,895.83 | ||||||||||||||
2,707,006 | 7.9 | 2,368,672 | $ | 1.24 |
Expected Life in
Years
|
Expected
Volatility
|
Risk Free Interest
Rate
|
Expected
Dividend
|
Fair Value of
Common Stock |
Number
of
Outstanding Warrants |
||||||||||||||||
Early
Adopter Warrants
|
4 | 104 | % | 4 | % |
None
|
$ | 1.50 | 201,115 | ||||||||||||
Long
Term Promissory Note Warrants
|
10 | 168 | % | 5.25 | % |
None
|
$ | 0.18 | 188,285 | ||||||||||||
Long
Term Promissory Note Warrants
|
5 | 149 | % | 2.85 | % |
None
|
$ | 0.20 | 250,000 | ||||||||||||
Secured
Promissory Note Warrants
|
5 | 149 | % | 2.85 | % |
None
|
$ | 0.20 | 750,000 |
Lease
Commitments
|
||||
2010
|
$ | 110 | ||
2011
|
1 | |||
$ | 111 |
|
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
||||||||||||
(In thousands, except
per share data
)
|
||||||||||||||||
2009:
|
||||||||||||||||
Net
revenues
|
$ | 769 | $ | 644 | $ | 546 | $ | 539 | ||||||||
Gross
margin
|
373 | 243 | 208 | 256 | ||||||||||||
Net
income/(loss)
|
(402 | ) | (707 | ) | (599 | ) | 430 | |||||||||
Net
income/(loss) per share – basic and diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | -- | ||||||
2008:
|
||||||||||||||||
Net revenues | $ | 470 | $ | 1,427 | $ | 578 | $ | 977 | ||||||||
Gross margin | 230 | 1,153 | 264 | 554 | ||||||||||||
Net income/(loss) | (485 | ) | 430 | (553 | ) | (215 | ) | |||||||||
Net income/(loss) per share – basic and diluted | $ | (0.01 | ) | $ | 0.01 | $ | (0.01 | ) | $ | (0.01 | ) | |||||
● |
$300,000
paid in cash to the Sellers on the closing
date;
|
● |
an
unsecured convertible note in the aggregate principal amount of $700,000,
payable to SOAdesk, with an annual interest rate of 5%, and
convertible into shares of the Company’s Series B Preferred Stock (the
“Convertible Note”);
|
● |
$525,000,
payable in cash to SOAdesk on March 31,
2010;
|
● |
an
unsecured convertible note in the aggregate principal amount of
$1,000,000, payable to SOAdesk and convertible into shares of the
Company’s Common Stock; and
|
● |
certain
earn-out payments as described in the Asset Purchase
Agreement.
|
250,000 Shares | Warrant No. 2009APN-01 |
NOTICE
:
|
The
signature on this subscription must correspond with the name as written
upon the face of the within Warrant in every particular, without
alteration or enlargement or any change
whatsoever.
|
Name and Address of Assignee |
No. of Shares
of
|
|
Common
Stock
|
||
___________________________________
|
_____________ | |
___________________________________
|
||
___________________________________
|
||
___________________________________
|
Dated: __________________ | Print Name:____________________________ | |
|
||
Signature:_____________________________ | ||
|
||
Witness:______________________________ |
NOTICE
:
|
The
signature on this subscription must correspond with the name as written
upon the face of the within Warrant in every particular, without
alteration or enlargement or any change
whatsoever.
|
1.
|
Employment
. The Company hereby employs Employee and Employee hereby accepts such employment upon the terms and conditions set forth in this Agreement.
|
2.
|
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.
|
3.
|
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.
|
4.
|
Termination
.
|
|
(a)
|
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:
|
|
(i)
|
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);
|
|
(ii)
|
Employee commits any other act materially detrimental to the business or reputation of the Company;
|
|
(iii)
|
Employee engages in dishonest or illegal activities or commits or is convicted of any crime involving fraud, deceit or moral turpitude; or
|
|
(iv)
|
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.
|
|
(b)
|
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.
|
|
(c)
|
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.
|
|
(i)
|
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);
|
|
(ii)
|
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
|
|
(iii)
|
the adoption by the stockholders of the Company of a plan relating to the liquidation or dissolution of the Company.
|
5.
|
Compensation and Benefits
.
|
|
(a)
|
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. Employee will also be entitled to earn a short term incentive compensation as further outlined in Exhibit D.
|
|
(b)
|
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.
|
|
(c)
|
Equity Awards
. Employee is eligible for stock option grants and restricted stock awards as determined by the Compensation Committee.
|
6.
|
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.
|
7.
|
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.
|
8.
|
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.
|
9.
|
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.
|
10.
|
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.
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.
|
11.
|
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.
|
12.
|
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.
|
13.
|
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.
|
14.
|
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.
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.
|
15.
|
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.
|
16.
|
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.
|
17.
|
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.
|
18.
|
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.
|
|
19.
Surviving Terms
. Sections 4, 10, 11, 14, 15 and 18 of this Agreement shall survive termination of this Agreement.
|
COMPANY: | EMPLOYEE: |
CICERO, INC. | |
By: ____________________________ | |
______________________________________ | |
Name:___________________________ | John P. Broderick |
Title:____________________________ | |
Operating Net Income Net Income Range (before tax) |
|
|||||||||||
From
|
To
|
Variable Compensation
|
||||||||||
Less than $1,000,000
|
None
|
|||||||||||
Tier 1
|
$ | $1,000,000 | $ | 1,699,999 | $ | 100,000 | ||||||
Tier 2
|
$ | 1,700,000 | $ | 1,999,999 | $ | 200,000 | ||||||
Tier 3
|
$ greater than 2,000,000
|
$ | 300,000 |
1.
|
Employment
. The
Company hereby employs Employee and Employee hereby accepts such
employment upon the terms and conditions set forth in this
Agreement.
|
2.
|
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.
|
3.
|
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. Subject to the provisions of Section4, this
Agreement will cover the period January 1, 2010 through December 31, 2010
and thereafter successive annual periods unless a party provides the other
with written notice of its intention to terminate this Agreement, which
notice shall be delivered no later than thirty (30) days prior to the
expiration of the initial term or any renewal term, as
applicable.
|
4.
|
Termination
.
|
|
(a)
|
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:
|
|
(i)
|
Employee
improperly performs, or fails to perform, his duties and responsibilities
or materially breaches any of the terms or conditions set forth in this
Agreement, a Policy, or invention assignment, confidentiality,
non-solicitation or non-competition agreement with or for the benefit of
the Company, 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 or of
provisions of such Policies or agreements relating to any
thereof);
|
|
(ii)
|
Employee
commits any other act materially detrimental to the business or reputation
of the Company;
|
|
(iii)
|
Employee
engages in willful misconduct, including fraud or
intentional misrepresentation;
|
|
(iv)
|
Employee
engages in dishonest activities or commits or is convicted of, or pleads
guilty or nolo contendere to, any felony or a misdemeanor involving fraud,
deceit, moral turpitude or unethical business
conduct;
|
|
(v)
|
Employee
engages in habitual alcohol or drug abuse that continues after written
notice from the Company, which abuse has (a) had an adverse effect on
Employee’s productivity or ability to carry out his duties under this
Agreement, (b) jeopardized the safety of any other employee of the Company
or any person having business relations with the Company, (c) damaged the
reputation of the Company, or (d) endangered the Company’s ability to
compete for business; or
|
|
(vi)
|
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.
|
|
(b)
|
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.
|
|
(c)
|
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.
|
|
(i)
|
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);
|
|
(ii)
|
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
|
|
(iii)
|
the
adoption by the stockholders of the Company of a plan relating to the
liquidation or dissolution of the
Company.
|
5.
|
Compensation and
Benefits
.
|
|
(a)
|
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. Employee will also be entitled to earn a short
term incentive compensation as further outlined in Exhibit
D.
|
|
(b)
|
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.
|
|
(c)
|
Equity
Awards
. Employee is eligible for stock option grants and
restricted stock awards as determined by the Compensation
Committee.
|
6.
|
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.
|
7.
|
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.
|
8.
|
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.
|
9.
|
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.
|
10.
|
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.
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.
|
11
|
.
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.
|
12.
|
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.
|
13.
|
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.
|
14.
|
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.
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.
|
15.
|
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.
|
16.
|
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.
|
17.
|
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.
|
18.
|
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.
|
|
19.
Surviving
Terms
. Sections 4, 10, 11, 14, 15 and 18 of this
Agreement shall survive termination of this
Agreement.
|
COMPANY: | EMPLOYEE: |
CICERO, INC. | |
By: ____________________________ | |
______________________________________ | |
Name:___________________________ | John P. Broderick |
Title:____________________________ | |
Operating Net Income Range (before tax) | |||
From
|
To
|
Variable
Compensation
|
|
Less
than Target Operating Net Income
|
None
|
||
Tier
1
|
Achieve
Target Operating Net Income up to 120% of Target
|
|
43%
of 43% of base compensation
|
Tier
2
|
Achieve
>120% of Target Net Operating Income ; < 150%
|
86%
of base compensation
|
|
Tier
3
|
Achieve
> 150% of Target Net
Operating
Income
|
143%
of base compensation
|
1.
|
Employment
. The
Company hereby employs Employee and Employee hereby accepts such
employment upon the terms and conditions set forth in this
Agreement.
|
2.
|
Duties of
Employee
. Employee will be based in Georgia or North
Carolina at the discretion of the Company. Employee’s title
will be Chief Technology Officer and Employee will report directly to the
Chief Executive Officer. 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
Technology Officer. 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 (“Policies”). 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.
|
3.
|
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. Subject to the provisions of
Section 4, this Agreement will cover the period January __, 2010 through
December 31, 2010 and thereafter successive annual periods unless a party
provides the other with written notice of its intention to terminate this
Agreement, which notice shall be delivered no later than thirty (30) days
prior to the expiration of the initial term or any renewal term, as
applicable.
|
4.
|
Termination
.
|
|
(a)
|
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:
|
(i)
|
Employee
improperly performs, or fails to perform, his duties and responsibilities
or materially breaches any of the terms or conditions set forth in this
Agreement, a Policy, or invention assignment, confidentiality,
non-solicitation or non-competition agreement with or for the benefit of
the Company, SOAdesk, LLC (“SOAdesk”) or Vertical Thought, Inc. (“VTI”)
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 or of provisions of such
Policies or agreements relating to any
thereof);
|
(ii)
|
Employee
commits any other act materially detrimental to the business or reputation
of the Company;
|
(iii)
|
Employee
engages in willful misconduct, including fraud or intentional
misrepresentation;
|
(iii)
|
Employee
engages in dishonest activities or commits or is convicted of, or pleads
guilty or nolo contendere to, any felony or a misdemeanor involving fraud,
deceit, moral turpitude or unethical business
conduct;
|
(iv)
|
Employee
engages in habitual alcohol or drug abuse that continues after written
notice from the Company, which abuse has (a) had an adverse effect on
Employee’s productivity or ability to carry out his duties under this
Agreement, (b) jeopardized the safety of any other employee of the Company
or any person having business relations with the Company, (c) damaged the
reputation of the Company, or (d) endangered the Company’s ability to
compete for business; or
|
|
(v)
|
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.
|
|
(b)
|
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, and subject to the execution by
Employee and effectiveness of a customary release in a form reasonably
satisfactory to the Company, the Company shall be obligated to pay
Employee severance payments equal to six (6) months of Employee’s then
base salary in the aggregate. 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. The
foregoing severance and other payments shall be payable (subject to the
effectiveness of such customary release) in equal semi-monthly
installments over the six (6) month period following Employee’s
termination in accordance with the Company’s standard payroll practices.
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.
|
5.
|
Compensation and
Benefits
.
|
|
(a)
|
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 Fifty Thousand Dollars
($150,000.00) per annum in equal semi-monthly
installments.
|
|
(b)
|
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.
|
|
(c)
|
Equity
Awards
. Employee is eligible for stock option grants and
restricted stock awards as determined by the Compensation
Committee.
|
6.
|
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.
|
7.
|
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.
|
8.
|
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.
|
9.
|
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.
|
10.
|
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,
including for purposes of this Section 10 any of the same purchased from
SOAdesk or VTI, 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.
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;
provided, that clauses (i) through (iv) shall not be available for Trade
Secrets of or purchased from SOAdesk or VTI. 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.
|
11.
|
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 or SOAdesk 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 or SOAdesk as a prospective client, and
(ii) with whom Employee had material contact while employed by or
providing services to or for the benefit of the Company, SOAdesk or VTI to
provide similar services or products as such provided by Employee for the
Company, SOAdesk or VTI 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, SOAdesk or VTI, any person
employed by the Company for whom Employee had supervisory responsibility
or with whom Employee had material contact while employed by or providing
services to or for the benefit of the Company, SOAdesk or VTI, 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, SOAdesk or VTI; (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, SOAdesk or VTI 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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12.
|
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.
|
13.
|
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.
|
14.
|
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.
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 has
had access during and by virtue of Employee's employment by the Company or
providing services to or for the benefit of SOAdesk or VTI or which arises
out of work assigned to Employee by the Company, SOAdesk or
VTI. 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, SOAdesk or VTI. 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, except if conceived while
providing service to or for the benefit of SOAdesk or
VTI. Employee agrees that any such Invention is set forth on
Exhibit “A” to this Agreement.
|
15.
|
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.
|
16.
|
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.
|
17.
|
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.
|
18.
|
Governing
Law
. This Agreement is entered into and will be
interpreted and enforced pursuant to the laws of the State of North
Carolina. 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.
|
19.
|
Surviving
Terms
. Sections 4, 10, 11, 13, 14, 15 and 18 of this
Agreement shall survive termination of this
Agreement.
|
COMPANY: | EMPLOYEE: |
CICERO, INC. | |
By: ____________________________ | |
______________________________________ | |
Name:___________________________ | Antony Castagno |
Title:____________________________ | |
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
I
am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principals;
|
|
c)
|
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based upon such evaluation;
and
|
|
d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
I
have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent functions):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
Date:
April 9, 2010
|
By:
|
/s/ John P. Broderick | |
Name: John P. Broderick | |||
Title: Chief Executive Officer | |||
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
I
am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
b)
|
designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principals;
|
|
c)
|
evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based upon such evaluation;
and
|
|
d)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
I
have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent functions):
|
|
a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
|
b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
Date:
April 9, 2010
|
By:
|
/s/ John P. Broderick | |
Name: John P. Broderick | |||
Title: Chief Financial Officer | |||
|
(1)
|
The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the
|
Securities
Exchange Act of 1934; and
|
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company
for the periods presented in the
Report.
|
By:
/s/ John P.
Broderick
|
|
John
P. Broderick
|
|
Chief
Executive and Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|
|
April
9, 2010
|