Employment Agreement - I-Storm Inc. and Calbert Lai
CALBERT LAI
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") dated as of August 5, 1998, between
I-Storm, Inc., a Nevada corporation, and its wholly owned subsidiary, LVL
Communications Corporation, a California corporation, (collectively, the
"Company"), each with its principal place of business in the United States at
480 Cowper Street, Palo Alto, California, 94301 (herein called the "Company")
and CALBERT LAI (herein called the "Employee") residing at 26063 Todd Lane, Los
Altos Hills, California, 94022.
1. EMPLOYMENT. The Company hereby employs Employee as the President of I-Storm,
Inc. and as the President of LVL Communications Corporation reporting to the
Company's Board of Directors. Employee will be responsible for management and
supervision of all Company activities for the term of this Agreement, and the
Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth.
2. TERM. The term of this Agreement shall have commenced as of July 15, 1998
(the "Employment Date") and shall continue in effect for a term of 36 months,
unless earlier terminated in accordance with the provisions of Section 6 of this
Agreement. Thereafter, this Agreement shall be automatically renewed on a
year-to-year basis unless either party shall provide the other with notice in
writing of the termination of this Agreement at least 60 days' prior to the
expiration of this Agreement at the end of its original term or any renewal
thereof. For purposes of this Agreement, the "term of this Agreement" shall
refer to the initial term and all renewal terms hereof. In the event of
termination by the Company prior to the expiration of this Agreement at the end
of its original term or any renewal thereof, the Company shall pay the Employee
severance pay and benefits required by Section 6(e) of this Agreement unless
Page 1 of 11
<PAGE> 2
termination by the Company is for a reason specified in Sections 6(a), 6(b) or
6(c) hereunder
3. COMPENSATION. For all services rendered by the Employee under this Agreement,
the Company shall pay the Employee a salary and fringe benefits as follows:
(a) Cash Compensation: The Company shall pay the Employee a base salary
during the term of this Agreement, payable semi-monthly, at the rate of
$150,000 per year. Employee will be eligible to receive an fiscal annual
performance bonus of up to 50% of base salary based upon achievement of
reasonable and achievable Company goals as determined and approved in
good faith by the Board of Directors to be paid no later than 30 days
from the end of such year. Employee shall be eligible for annual
performance appraisal and merit increase. Company may, but is not
obligated to, increase Employee's salary as Company deems appropriate.
(b) Stock Options: The Company shall grant the Employee stock options to
purchase 600,000 common shares of the Company at $0.50 per share, of
which 300,000 shares shall vest ratably over a period of 36 months from
the Employment Date; and of which 300,000 shares will only vest upon the
Company's sales revenue meeting or exceeding twelve million dollars
($12,000,000) for any twelve month period from the Employment Date and
upon the Company's quarterly revenue exceeding operating expenses for the
same twelve month period, as determined by the Board of Directors at its
sole discretion.
(c) Medical, Insurance, and Other Benefits: The Employee shall at his
option be entitled to participate with other employees of the Company in
all group fringe benefit plans or other group arrangements authorized and
adopted from time to time. Employee shall also receive such other
benefits including
Page 2 of 11
<PAGE> 3
vacation, holidays, and sick leave, as Company generally provides to its
employees holding similar positions as that of Employee.
(d) Expenses: The Company shall either pay directly or reimburse Employee
for reasonable travel, entertainment and other business expenses incurred
by Employee in the performance of his duties hereunder; provided that the
incurring of such expenses shall be subject to such policies as shall be
established by the Board of Directors of the Company from time to time,
and Employee shall submit to the Company such documentation to
substantiate such expenses as the Company shall reasonably request.
Nothing herein shall be deemed to preclude the Company from awarding additional
compensation or benefits to Employee during the term of this Agreement, upon
approval of Company's Board of Directors, whether in the form of raises,
bonuses, additional fringe benefits, or otherwise.
4. DUTIES. During the term of this Agreement, the Employee hereby promises to
perform and discharge faithfully the duties which may be assigned to him from
time to time by the Board of Directors in connection with the conduct of its
business so long as such duties are reasonably related to the Employee's duties
as President of the Company. Employee will be responsible for all activities of
the Company as determined by the Board of Directors and as required of officers
of the Company under applicable state and federal law, and will have all
relevant executives and their respective subordinates report to him. Employee is
employed to actively serve on a full-time basis as an executive officer of the
Company.
5. EXTENT OF SERVICES; OTHER INTERESTS. During the term of this Agreement, the
Employee shall devote all of his working time, attention and energies which are
reasonably required for the performance of his duties and the business of the
Company
Page 3 of 11
<PAGE> 4
and shall travel as reasonably required to discharge the duties of his position
with the Company as assigned by its Board of Directors. The Employee shall not
during the term of this Agreement be engaged in any other business activities
that are, or could potentially be, in competition with the business activities
of the Company whether or not such business activities are pursued for gain,
profit or other pecuniary advantage. Subject to the foregoing, the Employee may
engage in investment, business, professional and continuing education activities
so long as such activities do not substantially interfere with the performance
of his duties as the President of the Company.
6. TERMINATION. Payment of severance described in this Section 6 shall be paid
no later than ten (10) days after becoming due.
(a) Death: In the event of Employee's death during the term hereof, this
Agreement shall terminate immediately and, except as expressly set forth
in this paragraph, the Company shall have no further liability hereunder
to Employee or his estate. The Company shall continue to pay to
Employee's estate his salary and continued stock option vesting for a
period of three (3) months from and after the date of death during the
term of this Agreement.
(b) Permanent Disability. In the event that Employee becomes totally
disabled during the term hereof and such total disability continues for a
period in excess of ninety (90) days, whether consecutive or in the
aggregate during any 12 month period, at the end of such period of
disability the Employee shall be considered as permanently disabled and
this Agreement shall terminate immediately and, except as expressly set
forth in this paragraph, the Company shall have no further liability
hereunder to Employee. The Company shall continue to pay to Employee his
salary and continue stock option vesting for the period of disability and
a period of two (2) months from and after the date of total disability
commencing with the expiration of the first 90 day period of such
disability as severance pay hereunder.
Page 4 of 11
<PAGE> 5
Employee shall be considered as totally disabled if, and when because of
injury, illness or physical or mental disability, he is prevented from
effectively performing the duties of his employment. The determination of
total disability shall be made by the Board of Directors of the Company,
but said decision shall not be unreasonable or arbitrary and shall be
supported by the opinion (at the Company's expense) of at least one
licensed physician, unless Employee shall without justification fail to
submit to the necessary physical or mental examinations. It is understood
that Employee's occasional sickness of short duration shall not result in
Employee being considered totally disabled, and Employee shall continue
to be compensated hereunder during such periods of occasional sickness so
long as they shall not exceed the greater of twelve (12) days in a
calendar year or the amount of sick leave available to any other employee
of the Company.
(c) Involuntary Termination for Cause. The Company may terminate this
Agreement for cause. For the purposes of this Agreement, a termination
for "cause" shall mean a termination resulting from a good faith and
reasonable determination by the Company's Board of Directors that
Employee (i) has committed a felony or act of moral turpitude which would
materially injure the Company or its reputation or, (ii) has
intentionally or willfully and repeatedly breached his duties hereunder
in a material respect and, if curable, has failed to cure the same within
thirty (30) days after receiving written notice of such breach from the
Board of the Company. Such notice must be given to Employee following
each claimed breach, whether or not curable. In the event of termination
for cause, the Company shall have no further liability hereunder to
Employee from and after the date of such termination.
(d) Termination Without Cause. Termination of Employee by the Company for
any reason other than in paragraphs 6(a), 6(b), and 6(c) hereof shall be
considered Termination Without Cause.
Page 5 of 11
<PAGE> 6
(e) Salary and Benefit Continuation Upon Termination Without Cause. Upon
the Company's termination of Employee's employment for any reason
whatsoever prior to the expiration of the original term or any annual
renewal of the term of this Agreement, except for (i) termination upon
death as set forth in paragraph 6(a) hereof; (ii) termination upon
permanent disability as set forth in paragraph 6(b) hereof; or (iii)
termination for cause pursuant to paragraph 6(c) hereof ("Termination
without Cause"); or (iv) Employee's voluntarily electing not to continue
in the employment of the Company under conditions other than Constructive
Discharge; then the Company within thirty (30) days after such
termination, and in lieu of all other obligations, the Company hereunder,
shall: 1) pay to Employee a lump-sum payment equal to his then base
salary for a period equal to twelve (12) months; 2) provide Employee, at
Company's cost, with employment benefits consisting of life, health,
dental and long-term disability insurance for a period of 12 months after
termination; and 3) enter into a Post-termination Consulting Agreement as
defined below in paragraph 6(f) hereof. Thereafter, any continuation of
benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA)
will be at Employee's cost.
(f) Post-termination Consulting Agreement. Upon Termination Without
Cause, the Employee will hold himself available to provide consulting
services to the Company for a period terminating one year after the
Termination Date (the "Consulting Period"). Employee will provide the
consulting services only upon the request of the Company's Board of
Directors and for no more than ten hours per week at such times and
places as are mutually convenient to Employee and the Company. However,
Employee will perform those services at times and places that do not
reasonably conflict with his responsibilities to his then current
employer. Employee will perform services as an independent contractor
with the customary and usual independence associated therewith, and he
will not be deemed an employee or agent of the Company or have the
authority to bind, or to enter into any contract on behalf of, the
Company, unless expressly authorized in writing to do so. The Company
will pay Employee a consulting fee of $150.00 per hour for each hour
actually worked
Page 6 of 11
<PAGE> 7
at the Company's request. The Company's Board of Directors has determined
that Employee will be providing "substantial services" to the Company
during the Consulting Period such that any option held by Employee on the
Termination Date, if not fully vested at the time, will continue to vest
at the rate of 1/36 of the option grant per month during the Consulting
Period provided that total vesting shall not exceed the original total
shares granted under each stock option. Any option held by Employee at
the Termination Date will remain exercisable for 36 months from the
Termination Date even though the employment of Employee will terminate on
the Termination Date.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee recognizes and
acknowledges that the Company's trade secrets and proprietary processes as they
may exist from time to time are valuable, special and unique assets of the
Company's business, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not during or
after the term of his employment, disclose such secrets or processes to any
person, firm, corporation, association or other entity for any reason or purpose
whatsoever, nor shall the Employee make use of any such secrets or processes for
his own purposes or for the benefit of any person, firm, corporation, or other
entity (except the Company) under any circumstances during or after the term of
his employment; provided that, after the expiration of the term of his
employment these, restrictions shall not apply to such secrets and processes
which are then, or from time to time thereafter, in the public domain (provided
that he was not responsible, directly or indirectly, for permitting such secrets
or processes to enter the public domain without the Company's consent).
8. COVENANT NOT TO COMPETE OR INTERFERE. With the exception of activities
associated with the purchase and subsequent operation of the Company., Employee
agrees that during the term of this Agreement and for a period of one (1) year
after the date of Termination under this Agreement, whichever occurs first; (a)
Employee shall not intentionally interfere with, disrupt or attempt to disrupt
the relationship, contractual or otherwise between the Company and any customer,
supplier, lessor or employee of
Page 7 of 11
<PAGE> 8
the Company or any of its subsidiaries and (b) Employee shall not as a sole
proprietor or otherwise for his own account or as a partner, employee, officer,
director, manager, agent, distributor, consultant, marketing representative,
associate, investor or otherwise (except as to a less than 5% interest in a
public company listed on the Nasdaq, a national, or a regional exchange),
directly or indirectly, own, purchase, organize or take preparatory steps for
the organization of, finance, work for, provide services to, advise, acquire,
lease, operate, manage or invest in or permit his name to be used or employed in
connection with any business which engages directly in competition with the
Company. Employee further agrees that the covenants and other provisions of this
paragraph shall cover his activities in the whole of North America, Europe and
Asia (the "Territory"). The parties hereto agree that the covenants contained in
this paragraph (b) shall be construed as if the covenants are divided into
separate and distinct covenants in respect of each of the products and services
of the Company, each capacity in which the party is prohibited from competing,
and each part of the world in which such competition is prohibited from taking
place. The territorial restrictions contained in this Section 8 are properly
required for the adequate protection of the Company and in the event any
covenant or other provision contained this Section 8 shall be deemed to be
illegal, unenforceable, or unreasonable by a court or other tribunal of
competent jurisdiction. With respect to any part of the Territory or otherwise,
such covenant or provision shall not be affected with respect to any other part
of the Territory or otherwise, and each of the parties hereto agrees and submits
to the reduction of said territorial restriction or other provisions to such an
area or otherwise, as said court shall deem reasonable. The parties further
agree that if any provision of this Agreement is found to be unenforceable, it
shall not affect the enforceability of the remaining provisions and the court
shall enforce all remaining provisions to the extent permitted by law.
9. INVENTIONS. The Employee hereby sells, transfers, and assigns to the Company,
or to any person or entity designated by the Company, at of the entire right,
title and interest of the Employee in and to all inventions, ideas, disclosures,
and improvements, whether patented or unpatented, and copyrightable material
made or conceived by the Employee, solely or jointly during the term hereof
which relate to
Page 8 of 11
<PAGE> 9
methods, apparatus, formulae, designs, products, processes or devices, sold,
leased, used, or under consideration or development by the Company, or which
otherwise relate to or pertain to the business, functions, or operations of the
Company. The Employee agrees to communicate promptly and to disclose to the
Company, in such form as the Employee may be required to do so, all information,
details, and data pertaining to the aforementioned inventions, ideas,
disclosures, and improvements and to execute and deliver to the Company such
formal transfers and assignments and such other papers and documents as may be
required of the Employee to permit the Company or any person or entity
designated by the Company to file and prosecute the patent applications and, as
to copyrightable material, to obtain copyright thereof.
For the purposes of this Agreement, an invention shall be deemed to have been
made during the term of Employee's employment if, during such period, the
invention was conceived or first actually reduced to practice by the Company,
and Employee agrees that any patent application filed within one (1) year after
termination of this employment shall be presumed to relate to an invention which
was made during the term of Employee's employment unless Employee can provide
satisfactory evidence to the contrary.
10. INJUNCTIVE RELIEF. The parties hereto acknowledge that (a) the covenants and
restrictions set forth in Sections 8, 9 and 10 of this Agreement are necessary,
fundamental and required for the protection of the business of the Company, (b)
such covenants and restrictions are material inducements to investors to enter
into agreements to invest in the Company, and (c) a breach of any of such
covenants and restrictions by Employee will result in irreparable harm and
damages to the Company which cannot be adequately compensated by a monetary
award. Accordingly, in the event of breach or threatened breach of such
provisions by Employee, Employee expressly agrees that the Company shall be
entitled to the immediate remedy of a temporary restraining order, preliminary
injunction or such other form of injunctive or equitable relief as may be used
by any court of competent jurisdiction to restrain or enjoin the Employee from
breaching any such covenant or provision or to specifically
Page 9 of 11
<PAGE> 10
enforce the provisions hereof. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies for such breach or threatened
breach.
11. INSURANCE. The Company, at its election and for its benefit, may insure the
Employee against accidental loss or death and the Employee shall submit to such
physical examination and supply such information as may be required in
connection therewith.
12. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered or certified mail to
his last known residence in the case of the Employee or to its last known
principal office in the case of the Company.
13. WAIVER OF BREACH. The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed by a waiver of any subsequent
breach.
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California.
15. ASSIGNMENT. The rights and obligations of the parities under this Agreement
shall inure to the benefit of and shall be binding upon the successors of such
parties.
16. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties and supersedes all existing agreements between them. It may not be
changed orally but only by an agreement in writing signed by the party against
whom enforcement of any waiver, modification, extension or discharge is sought.
Page 10 of 11
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first
written above.
CALBERT LAI
EMPLOYEE: /s/ CALBERT LAI
-----------------------------------------
Calbert Lai
COMPANY I-STORM, INC
By: /s/ FRANK DELAPE
--------------------------------------
Frank DeLape
Chairman of the Board
Page 11 of 11