Employment Agreement - First Virtual Holdings Inc. and Nathaniel S. Borenstein
[FIRST VIRTUAL LOGO]
August 8, 1996
Dr. Nathaniel S. Borenstein
1724 Shadford St.
Ann Arbor, MI 48104
Dear Nathaniel:
First Virtual Holdings, Incorporated, a Wyoming corporation, (the
Company) is pleased to offer you employment with the Company as Chief
Scientist. This letter will confirm the agreement between us for your
employment on the following terms and conditions.
1. Term of Employment.
The term of this agreement shall commence on the date hereof and continue for a
period of two (2) years ("initial term"), and, thereafter, at the sole option of
the Company, may be renewed for up to an additional one (1) year period of time
("first renewal term"), unless terminated earlier as herein provided. If the
Company elects to renew this agreement beyond the initial two year term, it
shall notify you in writing no later than sixty (60) days prior to the end of
the initial term.
2. Exclusive Employment; Location.
A. The Company hereby employs you, and you accept such employment, to
provide services to the Company, as directed by the Company. You shall perform
your services at the Company's offices in Ann Arbor, MI or as directed by the
CEO and Chairman of the Board. You agree to work full time for the Company.
You agree that during the term of this agreement you will not render
engineering or consulting services to anyone other than the Company without the
prior written consent of the Company, and that you will devote your full
business time, attention, and best efforts to the Company.
B. Notwithstanding anything contained herein to the contrary, you shall
be permitted to continue to work on your existing electronic publishing
projects ("Electric Eclectic" magazine and related matters) and make use of the
Company's hardware and software for this purpose; provided, however, that such
project does not increase in size or scope beyond what you have disclosed to
the Company so as to interfere with your obligations as stated in paragraph 2.A
above. The Company agrees that it shall have no ownership interest in such
projects.
Further, you agree that you will not execute any non disclosure agreements on
any project associated with paragraph 2.B or with any other company or
individual without first getting the written consent of the Company to said non
disclosure.
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Dr. Nathaniel S. Borenstein
August 8, 1996
Page 2
3. Termination for Cause
A. Notwithstanding the provisions of section I above, the Company shall
have the right at any time to terminate your employment, for Cause, upon
written notice to you. For purposes of this agreement, "Cause shall be defined
as: (i) your material breach of this agreement, provided that such breach has
not been cured within thirty (30) days after your receipt of written notice
from the Company describing in reasonable detail the circumstances of such
material breach; (ii) your dishonesty in performing your duties hereunder;
(iii) your use of drugs or alcohol to an extent which interferes with the
performance of your duties hereunder which occurs more than once in any six
month period; (iv) your repeated failure to devote proper time and attention to
the business of the Company; (v) your material or repeated failure to carry out
the directions, instructions, policies, rules, regulations or decisions of the
Board of Directors or Officers of the Company; (vi) your conviction for a
felony or other crime involving moral turpitude or pursuant to which you are
imprisoned, or (vii) your voluntary resignation from the Company prior to the
end of the initial term or renewal term, as applicable. For purposes of this
agreement, the words "repeated failure" shall mean two or more such failures
having occurred in any six month period, provided that the second failure has
occurred more than two (2) days after the Company has delivered to you written
notice of the first, describing it in reasonable detail.
B. Notwithstanding any provision herein to the contrary, in the event of a
termination of your employment for any reason, you shall be entitled to all
salary earned as of the date of termination, but the Company shall not be
liable to you for any compensation or severance pay for any period commencing
after the date of termination.
C. Notwithstanding any other term or provision of this agreement, your
employment shall automatically terminate in the event of your death or
disability. As used herein "disability" shall be understood as the term is
used in any Company provided group disability insurance or your inability to
perform the services required by this Agreement as determined by a physician
reasonably acceptable to the Company, which inability continues for more than
sixty (60) consecutive days, or for more than ninety (90) days in any twelve
month period. If there is a conflict between these two interpretations, the
one most favoring your continued employment will be used.
4. COMPENSATION.
A. Salary. In consideration thereof, the Company agrees to pay you a
salary at the rate of Two Hundred Thousand Dollars ($200,000) per annum payable
two times each month, with an effective date for such salary of July 1, 1996.
B. Renewal and Review of Salary. In the event this Agreement is renewed,
the Company will, yearly hereafter, review your performance and may, in its
sole discretion, elect to increase your salary at such times.
C. Stock Options. The Company granted you on April 11, 1996 options to
purchase one hundred thousand (100,000) shares of Common Stock in the Company
at $6.30 per share of Common Stock. The options shall vest on June 30, 1998
provided you are still an employee of the Company on that date. The parties
agree that as of the date of this Agreement you own no
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Dr. Nathaniel S. Borenstein
August 8, 1996
Page 3
shares of Common Stock of the Company, have been granted 353,425 options to
purchase Common Stock (which includes the grant included in this section), of
which 246,477 have vested as of April 30, 1996.
D. Insurance. You shall be eligible to participate in group life, health
or accident insurance plans that the Company may, or may not, adopt, in its
sole discretion, which covers any other employee of the Company.
E. Expense Reimbursement. The Company shall, subject to receipt of
appropriate documentation and further subject to any policies adopted by the
Company regarding such expenses, reimburse you for those ordinary and necessary
business expenses incurred in connection with the performance of your duties
hereunder, provided that you have obtained the Company's prior approval before
incurring business expenses for which you will desire reimbursement in excess
of $ 1,000 in any thirty (30) day period.
F. Vacation. You shall be eligible for four (4) weeks of paid vacation
per annum, provided no more than two (2) weeks are taken consecutively. Vacation
days not used during any year shall accrue and carry over to the following year,
but such accrued vacation shall not carry over again to the subsequent year if
not used in said year. The scheduling of your vacations shall be determined by
our mutual agreement so as not to materially interfere with the performance of
your responsibilities to the Company. You shall not be entitled to any payment
with respect to accrued vacation days not used, except upon termination of your
employment for any reason other than "Cause" (as defined below), in which event
you shall be paid for up to two (2) weeks of accrued vacation time not used.
5. OBLIGATIONS UPON TERMINATION.
A. After termination of your employment with the Company for any reason
or no reason, you agree that for a period of one (1) year after your
termination, you shall be available to the Company for up to fifteen (15)
hours per week, to perform consulting services for the Company upon its
request. You shall be paid monthly at the rate of $300 per hour for any such
consulting services performed by you. In the event you breach your obligations
hereunder the Company shall be entitled to offset against any amounts owed to
you by the Company the cost of a replacement consultant, provided, however,
that the amount offset shall be not greater than what you would have received
pursuant to this subparagraph 3.A.
B. You hereby acknowledge and agree that the Company shall in all events
be considered to be the owner of all Information relating to the business and
operations of the Company, irrespective of your having produced any such
Information. Upon a termination of your employment for any reason, you or your
estate, as the case may be, shall, at the request of the Company deliver
forthwith to the Company all Information. For purposes of this Agreement,
Information shall be defined to mean the following, which is not intended to
limit the foregoing: memoranda, notes, design notes, schematics, records,
reports, materials and other documents (including all copies thereof), as well
as computer data, disks and files, relating to (i) any and all matters on which
you worked while employed by the Company, or (ii) the business or accounts of
the Company and any other Company property, which are then in the possession or
control of you or your estate. Notwithstanding the foregoing, upon a
termination of your employment you
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Dr. Nathaniel S. Borenstein
August 8, 1996
Page 4
shall be entitled to take with you any printed materials that are in the public
domain, provided that the Company shall have the right to inspect and/or
duplicate all such materials prior to their leaving the Company's premises.
6. ASSIGNMENT OF INVENTIONS AND AGREEMENT TO COMPANY POLICIES
You agree to execute a customary form of Confidential Information and
Invention Assignment Agreement which obligates you to protect the Company's
proprietary and confidential information against disclosure, assign to the
Company, subject to applicable limitation of State law any inventions created
by you in the course of your employment in the form attached as Appendix "A",
and accept the Company's Voice-mail Policy and E-mail Policy attached as
Appendix "B". You shall be eligible to participate in the existing plans for
group life, health and accident insurance plans, and as the Company may adopt
in the future.
7. NON-COMPETITION
A. You agree that during the term of this agreement and for a period of
two (2) years after the termination of your employment for any reason
whatsoever or for no reason, you shall not:
1. directly or indirectly engage, participate or invest in or assist, as
owner, part owner, stockholder, partner, director, officer, trustee, employee,
agent or consultant, or in any other capacity, any business other than the
Company that provides or enables (i) systems for the authorization and
implementation of payments through Internet in connection with transactions
between buyers and sellers of goods, services or information (hereinafter the
"Virtual PIN"), or (ii) a link between Internet E-mail addresses to telephone
numbers using TPC.INT or similar techniques connecting the Virtual PIN with the
telephone (either of the foregoing, a "Competing Business"); provided however
that the prohibition in Section 7.A. 1 (ii) shall only apply for a period of
three (3) months after the termination of your employment for any reason or for
no reason whatsoever; nor,
2. directly or indirectly contact or solicit any current or former
employee of the Company or any person or entity with whom the Company has had a
business relationship for purposes of entering into a Competing Business or
activity contrary to the best interest of the Company.
3. The restrictions contained in this paragraph shall apply worldwide,
but shall not prohibit you from purchasing or holding passive investments in
limited partnerships or no more than five percent (5%) of the stock or other
securities of any corporation (regardless of its business) which has securities
listed upon any recognized securities exchange or traded on a recognized market
in the United States.
B. You expressly agree and acknowledge that the restrictions in this
paragraph shall be deemed and construed as a series of separate covenants, one
for each state in the United States and each province in Canada, and one for
each country in the world outside the United States and Canada. In the event
that any court of competent jurisdiction shall determine that any one or more
of such covenants are invalid, unenforceable or unreasonable, such
determination shall not affect the validity, enforceability or reasonableness
of any other such covenant, and the remaining covenants shall continue in full
force and effect.
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Dr. Nathaniel S. Borenstein
August 8. 1996
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C. You agree that the Paragraph 9, Arbitration and Equitable Relief as
found in Appendix A will apply to any dispute arising from or related to this
Agreement.
8. REGISTRATION RIGHTS.
A. The Company agrees that, in the event of a public offering of its
common stock after its Initial Public Offering and subject to any Registration
Rights Agreement then in effect, you may include in the registration statement
pro rata any stock of the Company owned by you, subject to such conditions and
restrictions as the underwriter of any such offering may reasonably impose on
you and other individuals wishing to sell shares in such offering.
B. All costs incurred in connection with such registration shall be borne
by the Company, other than (i) costs of separate counsel, if any, retained by
you in connection with such registration, and (ii) commissions, selling
expenses or other similar charges applicable to the stock sold by you pursuant
to such registration. You further agree to execute and deliver any
indemnification, holdback or other agreements required by such underwriter.
9. PRIOR AGREEMENTS: SATISFACTION.
You represent and warrant that no prior contract or agreement to which
you are a party or any prior performance of any such agreement will interfere
in any manner, or conflicts with, the terms of and complete performance of
this agreement. Further, the parties agree that each has performed all its
obligations as found in any prior agreements between the parties and this
Agreement is the sole understanding between them.
10. MISCELLANEOUS.
A. This agreement contains the entire agreement between us and supersedes
all prior oral and written understandings between us with respect to the
subject matter hereof. This agreement cannot be modified except by a written
agreement signed by both the Company and you.
B. No waiver by either party hereto of any breach by the other party of
any term of this agreement shall be effective unless in writing nor shall any
such waiver be construed as a waiver of any other breach (whether prior or
subsequent) of the same or any other term of this agreement.
This agreement and your rights hereunder are personal to you, and neither this
agreement nor any right or interest herein or arising hereunder shall be
subject to voluntary or involuntary assignment or transfer by you; provided,
however, that this agreement shall inure to the benefit of you and your heirs,
legatees, estate or legal representatives. All rights and obligations of the
Company under this agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the Company.
D. You agree that the Company may purchase life insurance on your life
with the Company as the sole beneficiary and you agree to cooperate in the
Company's effort to secure said life insurance. At the Company's sole option,
upon your termination of employment for any reason
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Dr. Nathaniel S. Borenstein
August 8, 1996
Page 6
or no reason, you may be given the opportunity to purchase said life insurance
from the Company at a price to be determined by the Company.
If the foregoing is acceptable to you, please sign on the line provided below
and return one copy to me at your earliest convenience. When so countersigned,
this letter shall serve as a binding agreement between us and shall be
construed in accordance with the laws of the State of California to agreements
made and performed therein.
Sincerely,
First Virtual Heading Incorporated:
/s/ Lee H. Stein
By:______________________________
Lee H. Stein
Chairman and CEO
Accpted:
Date:8/8/96
/s/ Nathaniel S. Borenstein
_________________________________
Nathaniel S. Borenstein