ARTIFICIAL LIFE INC
EMPLOYMENT AGREEMENT DATED NOVEMBER 1, 2000
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT DATED NOVEMBER 1, 2000
<TEXT>

<PAGE>
                                                                   Exhibit 10.26


                              EMPLOYMENT AGREEMENT
                              --------------------


     EMPLOYMENT AGREEMENT (the "Agreement"), dated as of November 1, 2000,
between Artificial Life, Inc., a Delaware corporation, with its principal office
at Four Copley Place, Suite 102, Boston, Massachusetts, 02116 (the "Company"),
and Rolf Levenhagen, an individual residing at 65812 Bad Soden, Germany (the
"Employee").

     WHEREAS, the Company desires to employ the Employee and the Employee
desires to be employed upon the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the Company and the Employee hereby agree as follows:

     SECTION 1. Employment.
                -----------

     (a) The Company hereby agrees to employ the Employee, and the Employee
hereby accepts such employment by the Company as the Company's President, Sales
and Marketing. The activities of the Employee shall be allocated 70% to the
German market and 30% to the international market. Employee shall coordinate his
activities in the German market with those of Artificial Life Deutschland AG
through consultation with the President of Artificial Life Deutschland AG.

     (b) The Employee shall report directly to the Chief Executive Officer of
the Company and shall have the responsibilities, duties and authority
commensurate with the position of President, Sales and Marketing of the Company,
and shall engage in such other services and responsibilities as may be
prescribed by the Chief Executive Officer of the Company or his designees from
time to time.

     (d) The principal location at which the Employee will perform his duties
will be at the offices of Artificial Life Deutschland AG.

     SECTION 2. Salary; Bonus; Expenses.
                -----------------------

     (a) The Company will pay a salary to the Employee (the "Base Salary"),
payable in substantially equal installments in accordance with the Company's
payroll practices for its employees as in effect from time to time. The Base
Salary shall initially be at the annual rate of Two Hundred Fifty Thousand
Dollars ($250,000.00) per annum.

     (b) The Employee shall be reimbursed by the Company for reasonable travel,
entertainment, lodging, meal and other business expenses incurred by the
Employee in connection with performing his services hereunder in accordance with
the Company's policies as in effect from time to time. The Employee shall
receive sales commissions equal to 3% of revenues received from sales
transactions initiated and completed with companies in the German market through
the Employee's activities and 0.5% of revenues received from sales transactions
initiated and completed with companies outside of the German market through the
Employee's activities.

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     (c) Commencing on March 1, 2001 the Company shall provide Employee, for
business use, a recent Audi automobile, model S6.

     SECTION 3. Equity Participation. The Employee shall be entitled to
                --------------------
participate in all stock option plans and equity participation plans as the
Company may make available to its employees from time to time. It is agreed that
the Employee shall receive stock options to purchase 50,000 shares of the
Company's common stock within fifteen (15) days after the Commencement Date
pursuant to the Company's Equity Incentive Plan and pursuant to a separate Stock
Option Agreement. Such Agreement shall provide that the options vest one-third
after one year, one-third after two years and one-third after three years of
employment.

     SECTION 4. Benefits; Vacations. In connection with the Employee's
                -------------------
employment hereunder, the Employee will be entitled to the following additional
benefits:

     (a) At the Company's expense such fringe benefits as the Company may
provide from time to time for its employees, including, without limitation,
family health insurance coverage and life insurance coverage (the "Fringe
Benefits"); and

     (b) Vacation time in each calendar year determined in accordance with the
Company's vacation policies for its employees as in effect from time to time,
prorated in any calendar year during which the Employee is employed hereunder
for less than the entire such year in accordance with the number of days in such
calendar year for which he is so employed. The Employee shall also be entitled
to all paid holidays and personal days given by the Company to its employees.

     SECTION 5. Termination.
                -----------

     (a) Termination by the Company. The Employee's employment may be terminated
         --------------------------
at any time (i) by the Company for Cause (as hereinafter defined) by a notice to
the Employee, specifying the Cause therefor, such notice to be effective
immediately unless otherwise stated in such notice, which date of effectiveness
shall be the Termination Date therefor, (ii) by the Company without Cause with
at least thirty (30) days notice at any time, (iii) upon the death of the
Employee, or (iv) for the Disability (as hereinafter defined) of the Employee in
accordance with Paragraph 5(c).

     (b) Definition of Cause. For purposes of this Agreement, the term "Cause"
         -------------------
shall mean (i) the engaging by the Employee in intentional misconduct which is
injurious to the Company monetarily or otherwise, (ii) the material violation by
the Employee of any provision of this Agreement, (iii) the conviction of the
Employee of a felony by a court of competent jurisdiction or (iv) the commission
by the Employee of any act of fraud or embezzlement relating to the property of
the Company and/or the services provided hereunder. In making any determination
that Cause exists under this Paragraph 5(b), the Board of Directors shall act
fairly and in utmost good faith.

     (c) Termination by the Employee. The Employee's employment may be
         ---------------------------
terminated by him at any time by written notice to the Company, which notice
shall be effective sixty (60) days

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after the giving of such notice, or earlier if the Company so elects, which date
shall be the Termination Date therefor.

     (d)  Severance Compensation.
          ----------------------

          (i) In the event the Employee's employment hereunder is terminated by
     a notice given by the Company without Cause, the Employee shall be entitled
     to payment of severance pay by means of the continuation of the payment by
     the Company of the Employee's Base Salary and Fringe Benefits at the rate
     in effect on the applicable Termination Date for a period of two (2) months
     after the applicable Termination Date.

          (ii) If the Employee voluntarily terminates his employment hereunder
     or if the employment of the Employee hereunder is terminated by the death
     of the Employee, the Employee (or his estate) shall continue to be entitled
     to payment compensation through the Termination Date.

          (iii) In the event the Company terminates the Employee's employment
     hereunder for Cause, the Employee shall be entitled to no further
     compensation, bonus or Fringe Benefits under this Agreement after the
     applicable Termination Date.

     SECTION 6. Effect of Change of Control. In the event of a Change of Control
                ---------------------------
(as hereinafter defined (i) this Agreement shall survive the Change of Control,
and (ii) any options held by the Employee to purchase securities of the Company
shall become fully vested and exercisable. As used herein, a "Change of Control"
means that any of the following events has occurred:

     (a) The stockholders or the Board of Directors shall have approved any
consolidation or merger of the Company pursuant to which the holders of the
Company's shares of Common Stock immediately prior to such merger or
consolidation would not be the holders immediately after such merger or
consolidation of at least 51% of the voting power entitled to be cast at
elections for Directors of the Company;

     (b) The stockholders or the Board of Directors shall have approved any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company;
or

     (c) The liquidation or dissolution of the Company or the Company ceasing to
do business.

FOR PURPOSES OF SECTIONS 7 AND 8 HEREIN, THE TERM "COMPANY" SHALL INCLUDE ALL OF
THE COMPANY'S DIRECT OR INDIRECT SUBSIDIARIES, IF ANY.

     SECTION 7. Confidentiality and Proprietary Information.
                -------------------------------------------

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     (a) Acknowledgment of the Employee. The Employee acknowledges that (i) the
         ------------------------------
Company has developed and will develop its Proprietary Information (defined
below) and Intellectual Property (defined below) over a substantial period of
time and at a substantial expense, and its Proprietary Information and
Intellectual Property are integral to the goodwill of the Company, (i) during
the Employment Period, the Employee may develop or become aware of Proprietary
Information and/or Intellectual Property, and (iii) protection of the
Proprietary Information and Intellectual Property is necessary to conduct the
Company's business, and the Company is and shall at all times remain the sole
owner of the Company's Proprietary Information and Intellectual Property.

     (b) Confidentiality. The Employee shall at all times, both during and after
         ---------------
any termination of the Employment Period, maintain in confidence and not utilize
the Proprietary Information or the Intellectual Property of the Company, and/or
technology or proprietary information of others under confidential evaluation by
the Company, except in performing services for the Company pursuant to the
Employee's employment. Maintaining such Proprietary Information and Intellectual
Property in confidence shall include refraining from disclosing such Proprietary
Information or Intellectual Property to any third party (except when appropriate
for the furtherance of the business of the Company or when duly and specifically
authorized to do so), and refraining from using such Proprietary Information or
Intellectual Property for the account of the Employee or for any other person or
business entity. The Employee will not file patents based on the Company's
technology or confidential information, nor seek to make improvements thereon,
without the Company's written approval. The Employee agrees not to make any
copies of the Proprietary Information or Intellectual Property of the Company
(except when appropriate for the furtherance of the business of the Company or
when duly and specifically authorized to do so) and promptly upon request,
whether during or after the period of employment by the Company, to return to
the Company any and all originals and copies of documentary, machine-readable or
other elements or evidence of any such Proprietary Information, Intellectual
Property and other information of any kind relating to the present or potential
business of the Company that may be in the Employee's possession or under the
Employee's control.

     (c) Rights to Inventions and Intellectual Property. In connection with the
         ----------------------------------------------
Employee's employment by the Company, whether or not the Employee is then
retained by the Company, the Employee may, alone or with others, during working
hours and otherwise and by use of the Company's facilities or otherwise,
produce, develop, create, invent, conceive or reduce to practice Inventions
(defined below) and Intellectual Property related to the business of the
Company. The Employee shall maintain and furnish to the Company complete and
current records of all such Inventions and Intellectual Property and disclose to
the Company in writing any such Inventions and Intellectual Property. The
Employee agrees that all such Inventions and Intellectual Property conceived
and/or reduced to writing, drawings or practice during the Employment Period or
within six (6) months of the termination of the Employment Period are and shall
be the exclusive property of the Company, and that the Company may use or pursue
them without restriction or additional compensation. The Employee (i) hereby
assigns, sets over and transfers to the Company all of the Employee's right,
title and interest in and to such Inventions and Intellectual Property, (ii)
agrees that Employee and the Employee's agents shall, during and after the
period the Employee is retained by the Company, cooperate fully in obtaining
patent, trademark, service mark, copyright or

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other proprietary protection for such Inventions and Intellectual Property, all
in the name of the Company (but at Company expense), and, without limitation,
shall execute all requested applications, assignments and other documents in
furtherance of obtaining such protection or registration and confirming full
ownership by the Company of such Inventions and Intellectual Property, and (iii)
shall, upon leaving the Company, provide to the Company in writing a full,
signed statement of all Inventions and Intellectual Property in which Employee
participated prior to termination of the Employee's employment by the Company.
The Employee hereby designates the Company as the Employee's agent, and grants
to the Company a power of attorney with full substitution, which power of
attorney shall be deemed coupled with an interest, for the purposes of effecting
the foregoing assignments from the Employee to the Company.

     (d) Definitions. For purposes of this Agreement, the following terms shall
         -----------
have the following respective meanings:

     "Intellectual Property" means any Invention, writing, trade name,
      ---------------------
trademark, service mark or any other material registered or otherwise protected
or able to be protected under state, federal, or foreign patent, trademark,
copyright, or similar laws.

     "Inventions" means ideas, discoveries, inventions, developments and
      ----------
improvements, whether or not reduced to practice and whether or not patentable
or otherwise within the definition of Intellectual Property.

     "Proprietary Information" means any scientific, technical, trade or
      -----------------------
business secrets of the Company and any scientific, technical, trade or business
materials that are treated by the Company as confidential or proprietary,
including, but not limited to, Inventions belonging to the Company and
confidential information obtained by or given to the Company about or belonging
to its suppliers, licensors, licensees, partners, affiliates, customers,
potential customers or others. The definition of "Proprietary Information"
herein shall not include any information (i) which is in the public domain,
provided such information is not in the public domain as a consequence of
disclosure by the Employee in violation of this Agreement, (ii) which becomes
available to the Employee on a non-confidential basis from a source that is
entitled to disclose it on a non-confidential basis or (c) which was on or
before that date of employment in any capacity or before the date of this
Agreement in the Employee's possession as evidenced by the Employee's written
records or independently developed by the Employee after termination of the
Employee's employment without utilization of confidential information gained
from the Company.

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     SECTION 8. Non-Competition and Non-Solicitation.
                ------------------------------------

     (a) Non-Competition Covenant. The Employee covenants and agrees that during
         ------------------------
the Restricted Covenant Period (as defined below), the Employee shall not,
whether for the Employee's own account or for any other person or organization
other than the Company, (i) manage, operate, control, assist (directly or
indirectly), or participate in the management, operation or control of, or (ii)
serve as a Director, officer, partner, employee or consultant of, or own more
than five percent of the outstanding voting securities of any enterprise which,
within the Restricted Area (as that term is defined below), is engaged in any
business competitive with the business engaged in by the Company prior to the
time that the Employee's employment is terminated or set forth in a written
strategic plan adopted by the Board of Directors or the Board's Employee
Committee in good faith of which the Employee has knowledge prior to such
termination.

     (b) Non-Solicitation of Employees. The Employee further agrees that during
         -----------------------------
the Restricted Covenant Period the Employee will not knowingly, directly or
indirectly, (a) solicit the employment of any employee of the Company who was
such at any time during the last twelve (12) months of the Employee's employment
with the Company, or (b) induce any employee of the Company to leave the employ
of the Company, unless in each case the Employee obtains the prior written
consent of the Company.

     (c) Definitions. For the purposes of this Section 8, the term "Restricted
         -----------
Covenant Period" shall mean the period commencing on the date hereof and
terminating one (1) year after the Termination Date. For the further purposes of
this Section 5, the term "Restricted Area" shall mean Germany and any other
Territories in which Employee has earned commissions for sales.

     SECTION 9. Remedies. Without intending to limit the remedies which may be
                --------
available to the Company, the Employee acknowledges that any breach by the
Employee of any of the provisions of this Agreement may result in material
irreparable injury to the Company for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injury precisely, and
that, in the event of such a breach or a threat thereof, the Company shall be
entitled, in addition to monetary damages and to any other remedies available to
the Company, to equitable relief, including injunctive relief, and to payment by
the Employee of all costs incurred by the Company in enforcement against the
Employee of the provisions of this Agreement, including reasonable attorneys'
fees. The Employee further acknowledges and agrees that, in addition to the
remedies that the Company may seek and obtain pursuant to this Section 9, the
period during which the covenants contained in this Agreement apply shall be
extended by any periods during which the Employee is in violation of any of such
covenants.

     SECTION 10. Additional Representations of the Employee. The Employee
                 ------------------------------------------
represents and warrants to the Company that the Employee is not bound by the
provisions of any agreement with a current or former employer which would
prohibit or limit the Employee's ability to render services to the Company as
herein provided. The Employee also represents to the Company that he will not
disclose to the Company, or use for the benefit of the Company, any trade
secrets or confidential information now or hereafter in the possession of the
Employee which is the property of any other party, provided, however, that the
Employee will make every diligent effort to use all

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information which is at his disposal and which is not subject to enforceable
confidentiality agreements to aid the Company in achieving its goals.

     SECTION 11. Disclosures Regarding Employment. The Employee acknowledges
                 --------------------------------
that the Company may, during the course of his employment hereunder or
thereafter, receive inquiries concerning the Employee's character, fitness or
performance as an employee. The Employee authorizes the Company to release to
any person or organization making such inquiry such information concerning the
Employee's character, fitness or performance as an employee and agrees to
indemnify and to hold the Company harmless from any liability whatsoever arising
from the Company's disclosure of such information.

     SECTION 12. Notices. All notices and other communications hereunder shall
                 -------
be in writing, and shall be either (i) delivered by hand, (ii) sent by overnight
courier, or (iii) sent by registered or certified mail, return receipt
requested, postage prepaid (a) if to the Employee, at his residence address
first set forth above, and (b) if to the Company, at its principal office as
first set forth above, or to such other persons or addresses as the parties
hereto may specify by a written notice in accordance with this Section 12 from
time to time. All notices and other communications hereunder shall be deemed to
have been given either (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party as set forth above, (ii) if
sent by overnight courier, on the next business day following the day such
notice is delivered to the courier service, or (iii) if sent by registered or
certified mail, on the fifth (5th) business day following the day such mailing
is made, except in any case for a notice of a change of address, which will not
be effective until receipt.

     Section 13. Waivers and Consents. The terms and provisions of this
                 --------------------
Agreement may be waived, or consent for the departure therefrom granted, only by
a written document executed by the party entitled to the benefits of such terms
or provisions. No waiver or consent shall be deemed to be or shall constitute a
waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.

     SECTION 14. Headings. The headings contained in this Agreement are for
                 --------
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement.

     SECTION 15. Agreement Complete; Amendments. This Agreement, together with
                 ------------------------------
the Confidentiality Agreement, represents the entire agreement of the parties
with respect to the subject matter hereof and thereof and supersedes all prior
agreements, written or oral, with respect thereto. This Agreement may not be
amended, supplemented, canceled or discharged except by a written instrument
executed by both of the parties hereto, provided, however, that the immediately
foregoing provision shall not prohibit the termination of rights and obligations
under this Agreement which termination is made in accordance with the terms of
this Agreement.

     SECTION 16. Severability. If any provision of this Agreement shall be
                 ------------
deemed invalid or unenforceable as written, this Agreement shall be construed,
to the greatest extent possible, or

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modified, to the extent allowable by law, in a manner which shall render it
valid and enforceable and any limitation on the scope or duration of any such
provision necessary to make it valid and enforceable shall be deemed to be a
part thereof. No invalidity or unenforceability of any provision contained
herein shall affect any other portion of this Agreement.

     SECTION 17. Benefit and Binding Nature; Assignment. This Agreement shall be
                 --------------------------------------
binding upon and inure to the benefit of the successors and permitted assigns of
the respective parties hereto. The Employee may not assign or transfer any or
all of his rights or obligations under this Agreement. The Company may assign
its rights and obligations hereunder to any person or entity who succeeds to all
or substantially all of the Company's business by means of a Change of Control
or otherwise or to any affiliate of the Company, defined as a person which,
directly or indirectly, controls or is controlled by or is under common control
with the Company.

     SECTION 18. Governing Law. This Agreement will be governed and construed in
                 -------------
accordance with the law of the Commonwealth of Massachusetts without giving
effect to the conflicts of law principles thereof.

     SECTION 19. Jurisdiction. The parties agree that in the event of any
                 ------------
dispute or claim arising out of or in connection with this Agreement, they will
submit to the exclusive jurisdiction and venue of any court of competent
jurisdiction in the Commonwealth of Massachusetts, and will comply with all
requirements necessary to give such court jurisdiction over the parties and the
controversy.

     SECTION 20. Survival. The provisions of Sections 6 through 22 shall survive
                 --------
the termination of the Employee's employment as continuing and separate
agreements between the parties.

     SECTION 21. Interpretation. The Company and the Employee each acknowledge
                 --------------
and agree that this Agreement has been reviewed and negotiated by such party and
its or his counsel, who have contributed to its revision, and the normal rule of
construction, to the effect that any ambiguities are resolved against the
drafting party, shall not be employed in the interpretation of it.

     SECTION 22. Counterparts. This Agreement may be executed in two or more
                 ------------
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one agreement.

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                                              ARTIFICIAL LIFE, INC.


                                              By: /s/ Eberhard Schoneburg
                                                  -----------------------
                                                  Eberhard Schoneburg
                                                  Chief Executive Officer

                                              EMPLOYEE


                                              /s/ Rolf Levenhagen
                                              -------------------
                                              Rolf Levenhagen

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