Employment Agreement - Instant Video Technologies Inc. and David Morgenstein
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the 21st day of July, 1998 (the
"Effective Date") between Instant Video Technologies, Inc. (the "Company"), a
corporation, and David Morgenstein (the "Employee").
WHEREAS, the Company wishes to employ the Employee as its Chief Operating
Officer; and
WHEREAS, the Employee wishes to be employed by the Company in such
position.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Employment. Duties and Acceptance
1.1 Employment by the Company. The Company hereby employs the Employee
for the term (as defined herein), to render, subject to the following paragraph,
exclusive and full-time services to the Company as Chief Operating Officer of
the Company, subject to the direction of the Company's Board of Directors (the
Board of Directors), and in connection therewith, to perform such duties as he
shall be directed to perform by the Company's Board of Directors.
1.2 Acceptance of Employment by Employee. The Employee hereby accepts
such employment and agrees to render the services described above. The Employee
further agrees to accept election and to serve during all or any part of the
term as an officer or director of the Company and of any subsidiary or affiliate
of the Company (or of any other corporation at the Company's reasonable request)
without any compensation therefor, other than that specified in this Agreement
if elected to any such position by the shareholders or by the Board of Directors
of the Company or of any subsidiary or affiliate (or other corporation), as the
case may be.
1.3 Vacation. The Employee shall be entitled to annual vacation in
accordance with the vacation policy of the Company, as in effect from time to
time.
1.4 Travel. The Employee shall be subject to reasonable travel
requirements as may be necessary or desirable to perform fully his obligations
hereunder.
2. Term of Employment. The term of the Employee's employment under this
Agreement (the "Initial Term") shall commence on the Effective Date and shall
continue for twenty-four (24) months from the Effective Date unless sooner
terminated pursuant to Article 4 of this Agreement. The term of the Employee's
employment shall automatically be extended for one additional year at the end of
the Initial Term ("Extended Term") unless, not later than 90 days preceding such
date, the Employee or the Company shall give written notice to the other that
the Employee or the Company does not wish to extend the term of employment for
such additional one-year period.
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3. Compensation.
3.1 Salary. As full compensation for all services to be rendered
pursuant to this Agreement, the Company agrees to pay the Employee (or, in the
event the Employee performs services hereunder on behalf of a subsidiary of the
Company, the Company shall cause such subsidiary to pay the Employee, without
duplication and only to the extent not paid by the Company or any other
subsidiary), during the term, a salary at the fixed rate of ninety thousand
dollars ($90,000.00) per annum or such greater amount as shall be approved by
the Board of Directors in its sole discretion (the "Base Salary"), payable in
accordance with the payroll policies of the Company as from time to time in
effect, less such deductions as shall be required to be withheld by applicable
law and regulations. Additionally, Employee shall be entitled to receive 320,000
stock options previously granted pursuant to the attached stock option
agreement. Vesting, as further described in the attached option agreement, is
subject to the company receiving a minimum of $7,000,000.00 in equity financing.
Additionally, an increase in salary to one hundred and twenty thousand dollars
($120,000.00) shall be effective upon the first pay period immediately following
the receipt of the equity financing. In the event the Company elects not to
extend the term of employment (Extended Term) following the Initial Term, all
remaining options granted in conjunction with this agreement shall vest on the
Employee's last day of employment.
3.2 Bonuses. During the term, the Employee shall be entitled to receive
a bonus (the Bonus) as a participant in the Company's incentive compensation
arrangement as approved by the Board of Directors on an annual basis.
3.3 Expenses. Subject to such policies as may from time to time be
established by the Board of Directors, applicable to its employees generally,
the Company shall pay or reimburse the Employee for all reasonable expenses
actually incurred or paid by him during the term in the performance of his
services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as the Company may require;
Provided, however, that the maximum amount available for such expenses during
any period may be fixed in advance by the Board of Directors of the Company.
3.4 Participation in Benefit Plans. During the term, the Employee shall
participate in each group life, hospitalization or disability insurance plan,
health program, and any other similar benefit plan and any stock option plan of
the Company which is available to other employees of the Company and for which
he qualifies. Employee understands such benefit plans may be modified from time
to time under guidelines established by the Board of Directors.
3.5 Company Automobile. During the term, Employee may be entitled to a
car allowance or use of a Company automobile consistent with the guidelines for
employees as set forth in the Company's Policies and Procedures. Employee agrees
to
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maintain such records and documentation, including calculations of compensation
attributable to the personal use of a Company automobile, as may be required
from time to time by the Company's Policies and Procedures or the Internal
Revenue Service.
3.6 Stock Options. During the term, Employee shall be entitled to
participate in such stock option plans as may be established from time to time
by the Board of Directors of the Company. All stock option awards must be
approved by the Board of Directors' Compensation Committee.
3.7 Limitations Imposed by Law. The provisions of this Agreement
relating to the compensation to be paid to the Employee shall be subject to any
limitations provided by law or regulation that may from time to time limit the
compensation payable to the Employee.
4. Termination.
4.1 Termination Upon Death. If the Employee shall die during the term,
this Agreement shall terminate except that the Employee's beneficiaries shall be
entitled to receive the Employee's Base Salary for a period of six (6) months
following the last day of the month in which his death occurs.
4.2 Termination Upon Disability. If, during the term, the Employee
shall become physically or mentally disabled, whether totally or partially, so
that he is unable substantially to perform his services hereunder for (i) a
period of six (6) consecutive months, or (ii) for shorter periods aggregating
six months during any twelve (12) month period, the Company may, at any time
after the last day of the six (6) consecutive months of disability, or the day
on which the shorter periods of disability shall have equaled an aggregate of
six (6) months, by written notice to the Employee, but before the Employee has
recovered from such disability, terminate the term of the Employee's employment
hereunder. Notwithstanding such disability, the Company shall continue to pay
the Employee sixty percent (60%) of his Base Salary through the date of such
termination, and following the end of the fiscal year in which such termination
occurs, the amount of incentive or other bonuses, if any, that would otherwise
have been payable to Employee under Section 3.2 and which have accrued through
the end of the fiscal year in which such termination occurs as if the Employee
had been employed by the Company for the entire fiscal year.
4.3 Termination Without Cause. If at any time during the term, Employee
shall be terminated by the Company for reasons other than cause (as defined in
Paragraph 4.4), Employee or Employee's estate will be entitled to receive as
severance the continuation of Base Salary, at its then current rate, through and
until the later of (i) one third of the remaining period to the end of the
Initial Term, or (ii) a period of six (6) months from the effective date of
termination, but shall not be entitled to any incentive bonus for the fiscal
year during which the effective date of termination occurs, or any subsequent
year. In addition to continuation of Base Salary, one third of remaining
un-vested stock
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options granted in conjunction with this employment agreement shall vest on the
effective date of termination.
If Employee's employment shall be terminated during any
Extended Term, for any reason other than cause, Employee shall be entitled to
receive as severance the continuation of Base Salary for a period of three (3)
months from the effective date of termination, but shall not be entitled to any
incentive bonus for the fiscal year during which the effective date of
termination occurs, or any subsequent year.
Notwithstanding the foregoing, any payments to Employee
hereunder, whether during the Initial Term or any Extended Term, shall be
reduced by any compensation (in any form) received for services from any other
source for or during the period which Employee receives any post-termination
compensation hereunder. These severance payments shall be in full settlement of
any claim Employee may have to compensation in any form.
4.4 Termination by the Company for Cause. The Company may, at any time
during the term, terminate for cause (as hereinafter defined) the Employee's
employment hereunder, in which event the Employee shall be entitled to receive
his Base Salary accrued through the effective date of such termination. The
Employee shall have no right to receive any other compensation or benefit
hereunder after the effective date of such termination; provided, however, that
the foregoing shall not affect the Employee's right to receive any compensation
or benefit under the profit sharing/401(k) plans. As used herein, the term for
"cause" shall be deemed to mean and include with respect to the Employee (i)
conduct of the Employee at any time, which has involved criminal dishonesty,
conviction of the Employee of any felony, or of any lesser crime or offense
involving the property of the Company or any of its subsidiaries or affiliates,
significant conflict of interest, serious impropriety, or breach of corporate
duty, misappropriation of any money or other assets or properties of the Company
or its subsidiaries, (ii) willful violation of specific and lawful directions
from the Board of Directors of the Company (which directions must not be
inconsistent with the provisions of this Agreement), failure or refusal to
perform the services customarily performed by an executive officer (and such
failure or refusal continues after a written direction from the Board of
Directors), or expressly required by the terms of this Agreement, or willful
misconduct or gross negligence by the Employee in connection with the
performance of his duties hereunder, (iii) chronic alcoholism or drug addiction,
and (iv) any other acts or conduct inconsistent with the Company's Policies and
Procedures or the standards of loyalty, integrity or care reasonably required by
the Company of its executives.
5. Protection of Confidential Information: Non-Competition.
5.1 Confidential Information. In view of the fact that the Employee's
work for the Company will bring him into close contact with many confidential
affairs of the Company not readily available to the public, and plans for future
developments, the Employee agrees:
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5.1.1 To keep and retain in the strictest confidence all confidential
matters of the Company, including, without limitation, all trade "know how",
secrets, customer lists, pricing policies, operational methods, technical
processes, formulae, inventions and research projects, and other business
affairs of the Company, learned by him heretofore or hereafter, and not to
disclose them to anyone outside of the Company, either during or after his
employment with the Company, except in the course of performing his duties
hereunder or with the Company's express written consent;
5.1.2 To execute and fully comply with a confidentiality and rights
agreement or such other similar agreement which may be required by the Company
from time to time, consistent with its Policies and Procedures; and
5.1.3 To deliver promptly to the Company on termination of his
employment by the Company, or at any time the Company may so request, all
memoranda, notes, records, reports, manuals, drawings, blueprints and other
documents (and all copies thereof) to the Company's business and all property
associated therewith, which he may then possess or have under his control.
5.2 Non-Competition. During the term and for a period of not less than
six (6) months following the termination of such period, or for any period in
which Employee would have been eligible to receive Base Salary, the Employee
shall not in any state of the United States, or any other foreign country in
which the Company shall then be doing business, directly or indirectly, enter
the employ of, or render any services to, any person, firm or corporation
engaged in any business competitive with the business of the Company or of any
of its subsidiaries or affiliates; he shall not engage in such business on his
own account; and he shall not become interested in any such business, directly
or indirectly; as an individual, partner, shareholder, director, officer,
principal, agent, lender, employee, trustee, consultant, or any other
relationship or capacity; provided, however, that nothing contained in this
Paragraph 5.2 shall be deemed to prohibit the Employee from acquiring, solely as
an investment, not more than 1% of the shares of capital stock of any public
corporation.
In addition, Employee agrees that he shall not during such period
solicit, induce or attempt to solicit or induce any employee of the Company to
terminate such employee's employment with the Company in order to become
employed by any other person or entity, without the consent of a majority of the
Company's Board of Directors.
5.3 Remedies of the Company Upon Employee Breach. If the Employee
commits a breach, or threatens to commit a breach, of any of the provisions of
Paragraphs 5.1 or 5.2 hereof, the Company shall have the following rights and
remedies:
5.3.1 The right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that
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any such breach or threatened breach will cause irreparable injury to the
Company and that money damages may not provide an adequate remedy to the
Company; and
5.3.2 The right and remedy to require the Employee to account for and
pay over to the Company all compensation, profits, monies, accruals, increments
or other benefits (collectively, "Benefits") derived or received by the Employee
as the result of any transactions constituting a breach of any of the provisions
of the Paragraphs 5.1 or 5.2, and the Employee hereby agrees to account for and
pay over such Benefits to the Company.
Each of the rights and remedies of the company shall be independent of
the other, and shall be severally enforceable, and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under the law or in equity.
5.4 Construction and Enforceability.
5.4.1 If any of the covenants contained in Section 5.1 or 5.2, or any
part thereof, is hereafter construed to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants, which shall be
given full effect, without regard to the invalid portions.
5.4.2 If any of the covenants contained in Section 5.1 or 5.2, or any
part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, said provision shall then be
enforceable.
5.5 Enforceability in Jurisdictions. The parties hereto intend to and
hereby confer jurisdiction to enforce the covenants contained in Sections 5.1
and 5.2 upon federal or state courts or the courts of any foreign jurisdiction
within the geographical scope of such covenants. In the event that the courts of
any one or more of such state, federal or foreign jurisdictions shall hold such
covenants wholly unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other state, federal or foreign jurisdictions within the
geographical scope of such covenants, as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they relate to each state
and foreign country being for this purpose, severable into diverse and
independent covenants.
5.6 Customer Lists. The Employee recognizes and agrees (i) that all
existing lists of customers of the Company, and all lists of customers of the
Company developed during the course of the Employee's employment by the Company,
are and shall be the sole exclusive property of the Company, and that the
Employee neither has nor shall have any right, title or interest therein; (ii)
that such lists of customers are and must continue to be confidential; (iii)
that such lists are not readily accessible to competitors
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of the Company; (iv) that the Company's present and future business is and will
continue to be of a type that customers will normally patronize principally one
concern; and (v) that the Company's present and future business relationship
with its customers is and will continue to be of a type which normally continues
unless interfered with by others.
6. Inventions and Patents.
6.1 The Employee agrees that all processes, computer software,
technologies and inventions ("Inventions"), including new contributions,
improvements, ideas and discoveries, whether patentable or not, conceived,
developed, invented or made by him during the term, shall be the exclusive
property of the Company and shall belong to the Company provided that such
Inventions grew out of the Employee's work with the Company or any of its
subsidiaries or affiliates, are related in any manner to the business
(commercial or experimental) of the Company or any of its subsidiaries or
affiliates or are conceived or made on the Company's time or with the use of the
Company's facilities or materials. The Employee shall further: (i) promptly
disclose such Inventions to the Company; (ii) assign to the Company, without
additional compensation, all patent and other rights to such Inventions in the
United States and foreign countries; (iii) sign all papers necessary to carry
out the foregoing; and (iv) give testimony in support of his inventorship.
6.2 If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Employee within two
years after the termination of his employment by the Company, it is to be
presumed that the Invention was conceived or made during the period of the
Employee's employment by the Company.
6.3 The Employee agrees that he will not assert any rights to any
Invention as having been made or acquired by him prior to the date of this
Agreement, except for Inventions, if any, disclosed to the Company in Exhibit A.
All Inventions, Patents and ideas set forth in Exhibit A shall remain the sole
property of Employee.
7. Intellectual Property. The Company shall be the sole owner of all the
products and proceeds of the Employee's services hereunder, including, but not
limited to, all materials, ideas, concepts, formats, suggestions, computer
software, developments, arrangements, packages, programs and other intellectual
properties that the Employee may acquire, obtain, develop or create in
connection with and during the term of the Employee's employment hereunder, free
and clear of any claims by the Employee (or anyone claiming under the Employee)
of any kind or character whatsoever (other than the Employee's right to receive
payments hereunder). The Employee shall, at the request of the Company, execute
such assignments, certificates or other instruments as the Company may from time
to time deem necessary or desirable to evidence, establish, maintain, perfect,
protect, enforce or defend its right, or title and interest in or to any such
properties.
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8. Indemnification. Where, in the determination of the Board of Directors, the
Employee has acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company, the Company will indemnify
the Employee to the maximum extent permitted by applicable law, against all
costs, charges and expenses incurred or sustained by him in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being an employee of the Company or an officer, director or employee of any
subsidiary or affiliate of the Company or any other corporation for which the
Employee serves as an officer, director or employee, at the Company's request.
9. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association then pertaining, in the
County of San Francisco, State of California, and judgment upon the award
rendered by the Arbitrator may be entered in any court having jurisdiction
thereof. The Arbitrator shall be deemed to possess the power to issue mandatory
orders and restraining orders in connection with such arbitration; provided,
however, that nothing in this Article 9 shall be construed so as to deny the
Company the right and power to seek and obtain injunctive relief in a court of
equity for any breach or threatened breach by the Employee of any of his
covenants contained in Articles 5, 6 and 7 hereof.
10. Attorneys Fees. In the event either party hereto commences any action, suit
or other proceeding in law or in equity, or any arbitration, to enforce the
provisions of this Agreement or for any remedy for breach of this Agreement, the
non-prevailing party in such action shall pay the prevailing party's costs and
expenses, including reasonable attorneys' fees incurred in such action or
arbitration proceeding.
11. Notices. All notices, requests, consents and other communications, required
or permitted to be given hereunder, shall be in writing and shall be deemed to
have been duly given if delivered by registered or certified mail (notices shall
be deemed to have been given on the date sent), as follows (or to such other
address as either party shall designate by notice in writing to the other in
accordance herewith):
11.1 If to the Company, to it at:
c/o Instant Video Technologies, Inc.
500 Sansome Street, Suite 503
San Francisco, CA 94111
Attention: Laura Wagerman
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11.2 If to the Employee, to him at:
David Morgenstein
350 Hermann Street
San Francisco, CA 94117
12. General.
12.1 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely in California.
12.2 Headings. The article and section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.3 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof as of the Effective Date. No
representation, promise or inducement has been made by either party that is not
embodied in this Agreement, and neither party shall be bound by or liable for
any alleged representation, promise or inducement not so set forth.
12.4 Assignability: Successors. This Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee. The Company may
assign its rights, together with its obligations hereunder to any subsidiary or
affiliate Company or in connection with any sale, transfer or other disposition
of all or substantially all of its business or assets; in any event, the
obligations of the Company hereunder shall be binding on its successors or
assigns, whether by assignment to a subsidiary or affiliate of the Company or by
merger, consolidation or acquisition of all or substantially all of its business
or assets.
12.5 Modifications: Waivers. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving compliance. The failure of
either party at any time or times to require performance of any provision hereof
shall in no manner affect the right at a later time to enforce the same. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
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13. Subsidiaries and Affiliates. As used herein, the term "subsidiary" shall
mean any corporation or other business entity controlled by the corporation in
question, and the term "affiliate" shall mean and include any corporation or
other business entity controlling, controlled by or under common control with
the corporation in question.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
By: /s/ Richard Lang
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Title: Chairman & CEO
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EMPLOYEE
/s/ David Morgenstein
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