Employment Agreement - Pivot Rules Inc. and Jonathan Morris
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of June 15, 1998, by and
between Pivot Rules, Inc., a New York corporation (the "Company") and Jonathan
Morris ("Morris").
RECITALS
1. The Company desires to retain the services of Morris as the
Executive Vice President of the Company in accordance with the terms and
conditions of this Agreement.
2. Morris desires to serve the Company as its Executive Vice President
in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Morris agree as
follows:
1. TERM
The Company hereby agrees to employ Morris as the Executive Vice
President of the Company, and Morris hereby agrees to serve in such capacity,
for a term commencing on the date hereof and ending July 31, 2002 upon the
terms and subject to the conditions contained in this Agreement.
2. DUTIES
During the term of this Agreement, Morris shall serve as the Executive
Vice President of the Company, and he shall perform such duties, and have such
powers, authority, functions, duties and responsibilities for the Company as
are assigned to him by the Chief Executive Officer and/or the Board of
Directors of the Company.
The principal location of Morris' employment shall be in the New York
City vicinity (i.e. within a 35 mile radius of Manhattan), although Morris
understands and agrees that he will be required to travel from time to time for
business reasons. Morris shall devote his full professional and business time
and best efforts to the performance of his duties as the Executive Vice
President of the Company during the term of this Agreement. Morris shall not,
directly or indirectly, render services to any other person or entity, without
the consent of the Company's Chief Executive Officer; provided, however, that
nothing contained herein shall prevent Morris from rendering any service to any
charitable organization or family business so long as it does not interfere
with his duties and obligations hereunder.
3. COMPENSATION
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For services rendered by Morris to the Company during the term of this
Agreement, the Company shall pay him a base salary of Eighty-five Thousand
Dollars ($85,000) per year, payable in accordance with the standard payroll
practices of the Company, subject to increases in the sole discretion of the
Company's Board of Directors, taking into account merit, corporate and
individual performance and general business conditions, including changes in
the "cost of living index." Notwithstanding the foregoing, the parties
acknowledge that Morris' base salary as of the date hereof is not commensurate
with his skills and value to the Company, and the parties agree that upon the
Company achieving some level of success such that it can afford to raise
Morris' salary the Company shall raise Morris' base salary to a level which is
commensurate with his skill level and in line with the Company's pay scale in
general.
4. BONUS/OPTIONS
a. During the term of this Agreement, Morris shall be
eligible to receive a bonus set by the Board of Directors in its sole
discretion, based on such factors as the Board deems appropriate; provided that
such bonus shall not exceed seventy-five percent (75%) of Morris' base salary
paid during such fiscal year.
b. The Company hereby agrees to cause the issuance to Morris
of stock options ("Options") to purchase shares of the Company's common stock,
$.01 par value ("Common Stock") in accordance with the following schedule: (i)
Option to purchase Ten Thousand (10,000) shares of Common Stock to be granted
on the date hereof (the "Signing Option"); and (ii) Option to purchase
Forty-five Thousand (45,000) shares of Common Stock to be granted on July 31,
1998 (the "July Option").
c. All Options to be granted pursuant to this Agreement shall
be: (i) issued in accordance with the Company's 1997 Stock Option Plan (the
"Plan"); (ii) Incentive Stock Options (as defined in the Plan) to purchase
shares of Common Stock registered under the Securities Act of 1933, as amended,
to the maximum extent permitted by law; (iii) exercisable at the Fair Market
Value (as defined in the Plan) of the Common Stock on the date of grant; (iv)
evidenced by a written option agreement duly executed by an authorized officer
of the Company, which agreement shall include a standard cashless exercise
provision and an exercise term of ten (10) years or such lesser period as shall
reflect the maximum period permitted by law. The Signing Option shall vest over
a twelve (12) month period at a rate of eight and one third percent (8 1/3%)
per month, commencing on the date hereof. The July Option shall vest over a
forty-eight (48) month period as follows: (i) 12.50% of the Options shall vest
on the six month anniversary of the date of grant and (ii) 2.083% of the
Options shall vest each month thereafter until all such Options shall have
vested, but subject to shareholder approval to the extent there are then
insufficient shares available for grant provided that if shareholder approval
is not obtained, Morris shall be entitled to the cash equivalent of the Option,
which shall be negotiated in good faith. In the event of the termination of
Morris' employment for any reason, he shall thirty (30) days, or more in the
event of termination due to death or disability as provided in the Plan, within
which to exercise any vested Options and any unvested Options shall be
forfeited. During the term of this
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Agreement, Morris shall be eligible to participate in the Company's future
stock option grants as determined appropriate by the Committee in its sole
discretion.
5. EXPENSE REIMBURSEMENT AND PERQUISITES
a. During the term of this Agreement, Morris shall be
entitled to reimbursement of all reasonable and actual out-of-pocket expenses
incurred by him in the performance of his services to the Company consistent
with corporate policies, provided that the expenses are properly accounted for.
b. During each calendar year of the term of this Agreement,
Morris shall be entitled to reasonable vacation with full pay; provided,
however, that Morris shall schedule such vacations at times convenient to the
Company.
c. During the term of this Agreement, the Company shall
provide Morris with $250,000 worth of term life insurance, subject to
availability on commercially reasonable terms, major medical insurance coverage
as determined by the Company in its sole discretion, and Morris shall be
entitled to participate in all dental insurance and disability plans and other
employee benefit plans instituted by the Company from time to time on the same
terms and conditions as other similarly situated employees of the Company, to
the extent permitted by law.
6. NON-COMPETITION; NON-SOLICITATION
a. In consideration of the offer of employment, severance
benefits and Options to be granted to Morris hereunder, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, during the term of this Agreement and for a period equal to two
years (subject to Section 6 b. below) thereafter, Morris shall not, without the
prior written consent of the Company, anywhere in the world, directly or
indirectly, (i) enter into the employ of or render any services to any
Competitive Business; (ii) engage in any Competitive Business for his own
account; (iii) become associated with or interested in any Competitive Business
as an individual, partner, shareholder, creditor, director, officer, principal,
agent, employee, trustee, consultant, advisor or in any other relationship or
capacity; (iv) employ or retain, or have or cause any other person or entity to
employ or retain, any person who was employed or retained by the Company while
Morris was employed by the Company; or (v) solicit, interfere with, or endeavor
to entice away from the Company, for the benefit of a Competitive Business, any
of its customers or other persons with whom the Company has a contractual
relationship. For purposes of this Agreement, a "Competitive Business" shall
mean any person, corporation, partnership, firm or other entity which sells or
has plans to sell apparel, fashion accessories, or home furnishings via the
Internet or otherwise engages in any business which now or at the time has
material operations which are competitive (directly or indirectly) with the
business of the Company. However, nothing in this Agreement shall preclude
Morris from investing his personal assets in the securities of any corporation
or other business entity which is engaged in a Competitive Business if such
securities are traded on a national stock exchange or in the over-the-counter
market and if such investment does not result in his beneficially owning, at
any time, more than three percent (3%) of the publicly-traded equity securities
of such
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Competitive Business.
b. Notwithstanding the foregoing, in the event that Ken Seiff
is not the Chief Executive Officer of the Company at the time of Morris'
termination, Morris shall be restricted by the provisions contained in Section
6 a. for the period of six (6) months immediately following his termination and
thereafter the restrictions contained in Section 6 a. shall lapse and be of no
further force or effect.
c. Morris and the Company agree that the covenants of
non-competition and non-solicitation contained in this paragraph 6 are
reasonable covenants under the circumstances, and further agree that if, in the
opinion of any court of competent jurisdiction, such covenants are not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants as to the
court shall appear not reasonable and to enforce the remainder of these
covenants as so amended. Morris agrees that any breach of the covenants
contained in this paragraph 6 would irreparably injure the Company.
Accordingly, Morris agrees that the Company, in addition to pursuing any other
remedies it may have in law or in equity, may obtain an injunction against
Morris from any court having jurisdiction over the matter, restraining any
further violation of this paragraph 6.
7. TERMINATION
a. This Agreement, the employment of Morris, and Morris's
position as Executive Vice President of the Company shall terminate upon the
first to occur of:
(i) his death;
(ii) his "permanent disability," due to injury or
sickness for a continuous period of four (4) months,
or a total of eight months in a twenty-four month
period (vacation time excluded), during which time
Morris is unable to attend to his ordinary and
regular duties;
(iii) a "Constructive Termination" by the Company, which,
for purposes of this Agreement, shall be deemed to
have occurred upon (A) the removal of Morris from
his position as Executive Vice President of the
Company, or (B) the material breach by the Company
of this Agreement; provided that no such breach
shall be considered a Constructive Termination
unless Morris has provided the Company with at least
thirty (30) days' prior written notice of such
breach and the Company has failed to cure such
breach within such thirty (30) day period;
(iv) the termination of this Agreement at any time
without cause by the Company;
(v) non-renewal of this Agreement by the Company and/or
the Board of Directors;
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(vi) the termination of this Agreement for cause, which,
for purposes of this Agreement, shall mean that (1)
Morris has been convicted of a felony or any serious
crime involving moral turpitude, or engaged in
materially fraudulent or materially dishonest
actions in connection with the performance of his
duties hereunder, (2) Morris has willfully and
materially failed to perform his duties hereunder,
(3) Morris has breached the terms and provisions of
this Agreement in any material respect, or (4)
Morris has failed to comply in any material respect
with the Company's written policies of conduct of
which he had actual notice, including with respect
to trading in securities; or
(vii) the termination of this Agreement by Morris, which
shall occur on not less than 60 days prior written
notice from Morris.
b. In the event that this Agreement is terminated, other than
as a result of a Constructive Termination or by the Company without cause, the
Company shall pay Morris his base salary, unreimbursed business expenses, and
Options vested, subject to Section 4 c., only through the date of termination
and shall make no other payments or provide any other benefits under this
Agreement. In the event that this Agreement is terminated without cause by the
Company pursuant to paragraph 7(a)(iv) or through a Constructive Termination
pursuant to paragraph 7(a)(iii), the Company shall pay Morris, in lieu of all
salary, bonus and unvested options, severance payments (the "Severance
Payments") as follows:
(i) the then-current base salary for a period of ninety
(90) days, if Morris is terminated during the first
year of the term of this Agreement;
(ii) the then-current base salary for a period of
one-hundred twenty (120) days, if Morris is
terminated during the second year of the term of
this Agreement; or
(iii) the then-current base salary for a period of
one-hundred fifty (150) days, if Morris is
terminated during the third year of the term of this
Agreement or any time during the term of this
Agreement thereafter.
Notwithstanding the foregoing provisions relating to Severance Payments, in the
event of the termination of Morris' employment for any reason, he shall thirty
(30) days, or more in the event of termination due to death or disability as
provided in the Plan, within which to exercise any vested Options and any
unvested Options shall be forfeited. The Severance Payments shall be payable in
periodic installments in accordance with the Company's standard payroll
practices.
8. CONFIDENTIALITY; INVENTIONS
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a. Morris recognizes that the services to be performed by him
are special, unique and extraordinary in that, by reason of his employment
under this Agreement, he may acquire or has acquired confidential information
and trade secrets concerning the operation of the Company, its predecessors,
and/or its affiliates, the use or disclosure of which could cause the Company,
or its affiliates substantial loss and damages which could not be readily
calculated and for which no remedy at law would be adequate. Accordingly,
Morris covenants and agrees with the Company that he will not, directly or
indirectly, at any time during the term of this Agreement or thereafter, except
in the performance of his obligations to the Company or with the prior written
consent of the Board of Directors or as otherwise required by court order,
subpoena or other government process, directly or indirectly, disclose any
secret or confidential information that he may learn or has learned by reason
of his association with the Company. If Morris shall be required to make such
disclosure pursuant to court order, subpoena or other government process, he
shall notify the Company of the same, by personal delivery or electronic means,
confirmed by mail, within twenty-four (24) hours of learning of such court
order, subpoena or other government process and, at the Company's expense,
shall (i) take all reasonably necessary and lawful steps required by the
Company to defend against the enforcement of such subpoena, court order or
government process, and (ii) permit the Company to intervene and participate
with counsel of its choice in any proceeding relating to the enforcement
thereof. The term "confidential information" includes, without limitation,
information not in the public domain and not previously disclosed to the public
or to the trade by the Company's management with respect to the Company's or
its affiliates' facilities and methods, studies, surveys, analyses, sketches,
drawings, notes, records, software, computer-stored or disk-stored information,
processes, techniques, research data, marketing and sales information,
personnel data, trade secrets and other intellectual property, designs, design
concepts, manuals, confidential reports, supplier names and pricing, customer
names and prices paid, financial information or business plans.
b. Morris confirms that all confidential information is and
shall remain the exclusive property of the Company. All memoranda, notes,
reports, software, sketches, photographs, drawings, plans, business records,
papers or other documents or computer-stored or disk-stored information kept or
made by Morris relating to the business of the Company shall be and will remain
the sole and exclusive property of the Company and shall be promptly delivered
and returned to the Company immediately upon the termination of his employment
with the Company.
c. Morris shall make full and prompt disclosure to the
Company of all inventions, improvements, ideas, concepts, discoveries, methods,
developments, software and works of authorship, whether or not copyrightable,
trademarkable or licensable, which are created, made, conceived or reduced to
practice by Morris for the Company during his services with the Company,
whether or not during normal working hours or on the premises of the Company
(all of which are collectively referred to in this Agreement as
"Developments"). All Developments shall be the sole property of the Company,
and Morris hereby assigns to the Company, without further compensation, all of
his rights, title and interests in and to the Developments and any and all
related patents, patent applications, copyrights, copyright applications,
trademarks and tradenames in the United States and elsewhere.
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d. Morris shall assist the Company in obtaining, maintaining
and enforcing patent, copyright and other forms of legal protection for
intellectual property in any country. Upon the request of the Company, Morris
shall sign all applications, assignments, instruments and papers and perform
all acts necessary or desired by the Company in order to protect its rights and
interests in any Developments.
e. Morris agrees that any breach of this paragraph 8 will
cause irreparable damage to the Company and that, in the event of such breach,
the Company will have, in addition to any and all remedies of law, including
rights which the Company may have to damages, the right to equitable relief
including, as appropriate, all injunctive relief or specific performance or
other equitable relief. Morris understands and agrees that the rights and
obligations set forth in paragraph 8 shall survive the termination or
expiration of this Agreement.
9. REPRESENTATIONS AND WARRANTIES
a. Morris represents and warrants to the Company that he was
advised to consult with an attorney of Morris' own choosing concerning this
Agreement and that Morris has done so.
b. Morris represents and warrants to the Company that the
execution, delivery and performance of this Agreement by Morris complies with
all laws applicable to Morris or to which his properties are subject and does
not violate, breach or conflict with any agreement by which he or his assets
are bound or affected.
10. GOVERNING LAW
This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of New
York, without giving effect to its conflict of law provisions.
11. INDEMNIFICATION
a. The Company agrees that it shall to the fullest extent
permitted by law indemnify and hold Morris harmless and shall pay and reimburse
Morris for any loss, cost, damage, injury or other expense (including without
limitation reasonable attorneys' fees) which Morris incurs by reason of being
or having been an officer or director of the Company or by reason of the fact
that Morris is or was serving at the request of the Company as a director,
officer, employee, fiduciary or other representative of the Company. All
indemnification shall be paid by the Company in advance of the final
disposition of the matter (as incurred by Morris) provided that Morris executes
and deliver to the Company an undertaking to repay any amounts so advanced in
the event that it shall be determined that Morris is not entitled to
indemnification hereunder. This indemnification obligation is in addition to
any other indemnification provision contained in the Company's By-laws or
pursuant to any other document, instrument or agreement and shall survive the
term of Morris' employment hereunder.
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b. In the event that Morris asserts his right of
indemnification under Section 11 a. above, the Company shall have the right to
select Morris' counsel provided that there is no material conflict of interest
between the Company and Morris and provided such counsel is reasonably
acceptable to Morris. Notwithstanding the foregoing, the Company shall have the
right to participate in, or fully control, any proceeding, compromise,
settlement, resolution or other disposition of the claim or proceeding so long
as Morris is provided with a general release from the Company and the claimant
in form and substance reasonably satisfactory to Morris and no restrictions are
imposed on Morris as a result of the settlement.
12. ENTIRE AGREEMENT
This Agreement and the Option Agreements contain all of the
understandings between Morris and the Company pertaining to Morris's employment
with the Company, and they supersede all undertakings and agreements, whether
oral or in writing, previously entered into between them.
13. AMENDMENT OR MODIFICATION; WAIVER
No provision of this Agreement may be amended or modified unless such
amendment or modification is agreed to in writing, signed by Morris and by an
officer of the Company duly authorized to do so. Except as otherwise
specifically provided in this Agreement, no waiver by either party of any
breach by the other party of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time.
14. NOTICES
Any notice to be given hereunder shall be in writing and delivered
personally or sent by certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or
to such other address as such party may subsequently designate by like notice:
If to the Company, to:
Pivot Rules, Inc.
42 West 39th Street, 9th Floor
New York, NY 10018
Attn: E. Kenneth Seiff
With a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
New York, New York 10022
Attn: Richard A. Goldberg, Esq.
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If to Morris, to:
Jonathan Morris
15 West 72 Street, Apt. 32A
New York, New York 10023
15. SEVERABILITY
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions or portions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
16. TITLES
Titles of the Sections of this Agreement are intended solely
for convenience of reference and no provision of this Agreement is to be
construed by reference to the title of any Section.
17. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
PIVOT RULES, INC.
By: /s/ E. Kenneth Seiff
--------------------------
E. Kenneth Seiff
President
/s/ Jonathan Morris
-----------------------------
Jonathan Morris
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