EXHIBIT 10 (b)
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), effective as of September 1,
1998 between Digital LAVA, Inc., a Delaware corporation (with its successors and
assigns, referred to as the "Corporation"), and Xxxxxx X.X. Xxxxxxxx (referred
to as "Employee").
Preliminary Statement
The Corporation desires to employ Employee, and Employee wishes to be
employed by the Corporation, upon the terms and subject to the conditions set
forth in this Agreement. The Corporation and Employee also wish to enter into
the other agreements set forth in this Agreement, all of which are related to
Employee's employment under this Agreement.
Agreement
Employee and the Corporation therefore agree as follows:
1. Employment for Term. The Corporation hereby employs Employee and
Employee hereby accepts employment with the Corporation for the period beginning
on the date (the "Commencement Date") of the consummation of the Corporation's
initial public offering (the "IPO") and ending on the two-year anniversary of
such date (the "Initial Term"), or upon the earlier termination of the Term
pursuant to Section 6. This Agreement shall be automatically renewed for
additional one-year periods (the "Renewal Terms;" together with the Initial
Term, the "Term") unless either party notifies the other in writing of its
intention not to so renew this Agreement no less than 180 days prior to the
expiration of the Initial Term or a Renewal Term. The termination of Employee's
employment under this Agreement shall end the Term but shall not terminate
Employee's or the Corporation's other agreements in this Agreement, except as
otherwise provided herein.
2. Position and Duties. During the Term, Employee shall serve as President
and Chief Executive Officer of the Corporation. During the Term, Employee shall
also hold such additional positions and titles as the Board of Directors of the
Corporation (the "Board") may determine from time to time. During the Term,
Employee shall devote his full business time and efforts to his duties as an
employee of the Corporation.
3. Compensation.
(a) Base Salary. The Corporation shall pay Employee a base salary,
beginning on the first day of the Term and ending on the last day of the Term,
of not less than $230,000 per annum, payable at least monthly on the
Corporation's regular pay cycle for professional employees.
(b) Additional Payment. Upon the Commencement Date, Employee shall receive
a payment of $60,000 in consideration for his efforts in connection with the
successful completion of the IPO.
(c) Stock Options. Pursuant to the Corporation's stock option plan, the
Corporation shall grant to Employee on the Commencement Date options under the
Corporation's 1996 Stock Option Plan to purchase 40,000 shares of the
Corporation's Common Stock (on a post-reverse split basis) at an exercise price
equal to the initial public offering price of the Common Stock of the
Corporation. The options shall be fully vested as of the Commencement Date and
shall expire on the tenth anniversary of the Commencement Date, regardless of
whether there has been any prior termination of Employee's status as an employee
with or consultant to the Corporation. The Corporation will prepare a stock
option agreement reflecting the terms of the option as provided herein.
(d) Other and Additional Compensation. The preceding sections establish the
minimum compensation during the Term and shall not preclude the Board from
awarding Employee a higher salary or any bonuses or stock options in the
discretion of the Board during the Term at any time.
4. Employee Benefits. During the Term, Employee shall be entitled to the
employee benefits, including vacation, 401(k) plan, health plan and other
insurance and additional benefits made available by the Corporation to any other
employee of the Corporation.
5. Expenses. The Corporation shall reimburse Employee for actual
out-of-pocket expenses incurred by him in the performance of his services for
the Corporation upon the receipt of appropriate documentation of such expenses.
6. Termination.
(a) General. The Term shall end immediately upon Employee's death. The Term
may also end for Cause or Disability, as defined in Section 7.
(b) Notice of Termination. Promptly after it ends the Term, the Corporation
shall give Employee notice of the termination, including a statement of whether
the termination was for Cause or Disability (as defined in Section 7(a) and 7(b)
below). The Corporation's failure to give notice under this Section 6(b) shall
not, however, affect the validity of the Corporation's termination of the Term.
(c) Effective Termination by Corporation. If, during the Initial Term or
any Renewal Term, the Corporation (i) appoints an executive officer senior in
position or responsibility to Employee, (ii) designates such executive officer
or any other person as the President or Chief Executive Officer of the
Corporation, or (iii) requires Employee to perform a material portion of his
services at a location more than 25 miles from the Corporation's current
location in Los Angeles, then, at his option, Employee may elect to resign, and
receive the applicable severance benefits set forth in Section 7(c)(ii) or (iii)
below. In the case of Section 6(c)(i) or (ii) above, Employee shall give four
(4) months' prior written notice to the Corporation of such resignation, and in
the case of 6(c)(iii) above, Employee shall only be required to give prior
written notice to the Corporation.
7. Severance Benefits.
(a) "Cause" Defined. "Cause" means (i) willful malfeasance or willful
misconduct by Employee in connection with his employment; (ii) Employee's gross
negligence in performing any of his duties under this Agreement; (iii)
Employee's conviction of, or entry of a plea of guilty to, or entry of a plea of
nolo contendere with respect to, any crime other than a traffic violation or
infraction which is a misdemeanor; (iv) Employee's material breach of any
written policy applicable to all employees adopted by the Corporation which is
not cured to the reasonable satisfaction of the Corporation within fifteen (15)
business days after notice thereof; or (v) material breach by Employee of any of
his agreements in this Agreement which is not cured to the reasonable
satisfaction of the Corporation within fifteen (15) business days after notice
thereof. Any determination by the Corporation of whether "Cause" exists to
terminate Employee shall be made by the Board, which shall give Employee 5 days'
prior written notice of a meeting to be held for such purpose, which Employee
and his counsel shall be offered an opportunity to attend.
(b) Disability Defined. "Disability" shall mean Employee's incapacity due
to physical or mental illness that results in his being unable to substantially
perform his duties hereunder for six consecutive months (or for six months out
of any nine month period). During a period of Disability, Employee shall
continue to receive his base salary hereunder, provided that if the Corporation
provides Employee with disability insurance coverage, payments of Employee's
base salary shall be reduced by the amount of any disability insurance payments
received by Employee due to such coverage. The Corporation shall give Employee
written notice of termination at the end of such 6 month period, which shall
take effect sixty (60) days after the date it is sent to Employee unless
Employee shall have returned to the performance of his duties hereunder during
such sixty (60) day period (whereupon such notice shall become void).
(c) Termination.
(i) If the Corporation ends the Term for Cause or Disability, or if
Employee resigns as an employee of the Corporation for reasons other than a
material breach by the Corporation of its obligations under this Agreement
or as provided in Section 6(c), or if Employee dies, then the Corporation
shall have no obligation to pay Employee any amount, whether for salary,
benefits, bonuses, or other compensation or expense reimbursements of any
kind, accruing after the end of the Term, and such rights shall, except as
otherwise required by law, be forfeited immediately upon the end of the
Term.
(ii) If the Corporation ends the Term without Cause or if Employee
elects to terminate during the Initial Term or a Renewal Term pursuant to
the provisions of Section 6(c)(iii), then the Corporation will be obligated
to pay Employee a severance payment equal to Employee's annual salary,
payable upon the effective date of termination.
The "Severance Period", as used herein, shall in such circumstances equal a
period of twelve months.
(iii) If Employee elects to resign during the Initial Term or a
Renewal Term pursuant to Section 6(c)(i) or (ii), then Employee shall
receive a severance payment equal to eight months' salary (or the number of
months remaining in the Initial Term or Renewal Term then in effect, if
less than eight months), payable upon the effective date of resignation.
The "Severance Period", as used herein, shall in such circumstances equal a
period of eight months (or such shorter period, if the number of months
remaining in the Initial Term or the Renewal Term then in effect is less
than eight months). Notwithstanding the foregoing, if Employee is dismissed
without Cause during the four month period following Employee's notice of
resignation pursuant to Section 6(c)(i) or (ii), his severance payment will
be increased by an amount equal to the salary amount he would have received
during the remainder of the four month period had he not been terminated
without Cause. In such instance, the Severance Period will be increased by
the amount of time beginning on the date of the termination without Cause
and ending at the end of the four month period.
(iv) In the event of any termination pursuant to the provisions of
Sections 7(c)(ii) or (iii) above, Employee shall also be entitled to
receive health benefits at the Company's expense for the number of months
equal to the applicable Severance Period.
8. Confidentiality, Ownership, and Covenants.
(a) "Corporation Information" and "Inventions" Defined. "Corporation
Information" means all information, knowledge or data of or pertaining to (i)
the Corporation, its employees, and (ii) any other person, firm, corporation or
business organization with which the Corporation may do business during the
Term, that is not in the public domain (and whether relating to methods,
processes, techniques, discoveries, pricing, marketing or any other matters).
"Inventions" collectively refers to any and all inventions, trade secrets,
source and object codes, data, programs, other works of authorship and
developments regarding any of the foregoing.
(b) Confidentiality. (i) Employee hereby recognizes that the value of all
trade secrets and other proprietary data and all other information of the
Corporation not in the public domain disclosed by the Corporation in the course
of his employment with the Corporation may be attributable substantially to the
fact that such confidential information is maintained by the Corporation in
strict confidentiality and secrecy and would be unavailable to others without
the expenditure of substantial time, effort or money. Employee, therefore,
except as provided in the next two sentences, covenants and agrees that all
Corporation Information shall be kept secret and confidential at all times
during the Term and for the three (3) year period after the end of the Term and
shall not be used or divulged by him outside the scope of his employment as
contemplated by this Agreement, except as the Corporation may otherwise
expressly authorize by action of the Board and except if such Corporation
Information is then in the public domain through no action (or non-action) on
the part of Employee. In the event that Employee is requested in a judicial,
administrative or governmental proceeding to disclose any of the Corporation
Information, Employee will promptly so notify the Corporation so that the
Corporation may seek a protective order or
other appropriate remedy and/or waive compliance with this Agreement. If
disclosure of any of the Corporation Information is required, Employee may
furnish the material so required to be furnished, but Employee will furnish only
that portion of the Corporation Information that legally is required.
(ii) Employee also hereby agrees to keep the terms of this Agreement
confidential to the same extent that the Corporation maintains such
confidentiality (except with regard to any disclosure by the Corporation
required under applicable securities laws).
(c) Ownership of Inventions, Patents and Technology. Employee hereby
assigns to the Corporation all of Employee's right (including patent rights,
copyrights, trade secret rights, and all other rights throughout the world),
title and interest in and to Inventions, whether or not patentable or
registrable under copyright or similar statutes, made or conceived or reduced to
practice or learned by Employee, either alone or jointly with others, during the
course of the performance of services for the Corporation. Employee shall also
assign to, or as directed by, the Corporation, all of Employee's right, title
and interest in and to any and all Inventions, the full title to which is
required to be in the United States government by a contract between the
Corporation and the United States government or any of its agencies. The
Corporation shall have all right, title and interest in all research and work
product produced by Employee as an employee of the Corporation.
(d) Non-Competition Period Defined. "Non-Competition Period" means the
period beginning at the end of the Term and ending, in the case of termination
of employment under the circumstances identified in Section 7(c)(i)(other than
in the case of Disability, in which case there shall be no Non-Competition
Period), on the date that is six months after the date of termination of
employment and, in the case of termination of employment under the circumstances
identified in Section 7(c)(ii) or (iii), on the last date of the applicable
Severance Period. If the Term ends solely as a result of either party's timely
election not to renew in accordance with the provisions of Section 1, there
shall be no Non-Competition Period.
(e) Covenants Regarding the Term and Non-Competition Period. Employee
acknowledges and agrees that his services pursuant to this Agreement are unique
and extraordinary; that the Corporation will be dependent upon Employee for; and
that he will have access to and control of confidential information of the
Corporation. Employee further acknowledges that the business of the Corporation
is national in scope and cannot be confined to any particular geographic area of
the United States. For the foregoing reasons and to induce the Corporation to
enter this Agreement, Employee covenants and agrees that during the Term and the
Non-Competition Period, Employee shall not unless with written consent of the
Corporation:
(i) engage in the business of research and development for commercial
sale in direct or indirect competition with the Corporation of any digital
video analysis computer software program, product or process in which the
Corporation had been engaged during the last 90 days of the Term (the
"Prohibited Activity") in the United States or elsewhere for his own
account;
(ii) directly or indirectly, enter the employ of, or render any
services with respect to a Prohibited Activity only, including but not
limited to consultations, to any individual, corporation, partnership or
other business entity (a "Person") engaged in any Prohibited Activity in
the United States or elsewhere; or
(iii) become interested in any Person engaged in any Prohibited
Activity in the United States, directly or indirectly, as an individual,
partner, shareholder, officer, principal, agent, employee, trustee,
consultant or in any other relationship or capacity; provided, however,
that Employee may serve as a director of any such Person and may own
directly or indirectly, solely as an investment, securities of any Person
which are traded on any national securities exchange if Employee (x) is not
a controlling person of, or a member of a group which controls, such person
or (y) does not, directly or indirectly, own 5% or more of any class of
securities of such person;
(iv) directly or indirectly solicit, entice or induce any person which
at any time during the last 180 days of the Term or during the entire
Non-Competition Period was a customer of the Corporation to become a
customer of any other person for any product or services related to any
Prohibited Activity; or
(v) directly or indirectly hire, employ or retain any person who at
any time during the last 90 days of the Term or during the entire
Non-Competition Period was an employee of the Corporation or directly or
indirectly solicit, entice, induce or encourage any such person to become
employed by any other person.
(f) Remedies. Employee hereby acknowledges that the covenants and
agreements contained in Section 8 (the "Restrictive Covenants") are reasonable
and valid in all respects and that the Corporation is entering into this
Agreement, inter alia, on such acknowledgment. If Employee breaches, or
threatens to commit a breach, of any of the Restrictive Covenants, the
Corporation shall have the following rights and remedies, each of which rights
and remedies shall be independent of the other and severally enforceable, and
all of which rights and remedies shall be in addition to, and not in lieu of,
any other rights and remedies available to the Corporation under law or in
equity: (i) the right and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed that any such breach or threatened breach will cause irreparable injury
to the Corporation and that money damages will not provide an adequate remedy to
the Corporation; (ii) the right and remedy to require Employee to account for
and pay over to the Corporation all compensation, profits, monies, accruals,
increments or other benefits (collectively, "Benefits") derived or received by
Employee as the result of any transactions constituting a breach of any of the
Restrictive Covenants, and Employee shall account for and pay over such Benefits
to the Corporation; (iii) if any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the remainder of
the Restrictive Covenants shall not thereby be affected and shall be given full
effect, without regard to the invalid portions; and (iv) if any court construes
any of the Restrictive Covenants, or any part thereof, to be unenforceable
because of the duration of such provision or the area covered thereby, such
court shall have the power to reduce the
duration or area of such provision and, in its reduced form, such provision
shall then be enforceable and shall be enforced.
(g) Jurisdiction. The parties intend to and hereby confer jurisdiction to
enforce the Restrictive Covenants upon the courts of any jurisdiction within the
geographical scope of such Covenants. If the courts of any one or more such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of the parties that
such determination not bar or in any way affect the Corporation's right to the
relief provided above in the courts of any other jurisdiction, within the
geographical scope of such Covenants, as to breaches of such Covenants in such
other respective jurisdictions such Covenants as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants.
9. Successors and Assigns.
(a) Employee. This Agreement is a personal contract, and the rights and
interests that the Agreement accords to Employee may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him. All rights and benefits
of Employee shall be for the sole personal benefit of Employee, and no other
person shall acquire any right, title or interest under this Agreement by reason
of any sale, assignment, transfer, claim or judgment or bankruptcy proceedings
against Employee. Except as so provided, this Agreement shall inure to the
benefit of and be binding upon Employee and his personal representatives,
distributees and legatees.
(b) The Corporation. This Agreement shall be binding upon the Corporation
and inure to the benefit of the Corporation and of its successors and assigns,
including (but not limited to) any corporation that may acquire all or
substantially all of the Corporation's assets or business or into or with which
the Corporation may be consolidated or merged. The Corporation's obligations
under this Agreement shall cease, however, if the successor to, the purchaser or
acquirer either of the Corporation or of all or substantially all of its assets,
or the entity with which the Corporation has affiliated, shall assume in writing
the Corporation's obligations under this Agreement (and deliver an executed copy
of such assumption to Employee), in which case such successor or purchaser, but
not the Corporation, shall thereafter be the only party obligated to perform the
obligations that remain to be performed on the part of the Corporation under
this Agreement.
10. Entire Agreement. This Agreement represents the entire agreement
between the parties concerning Employee's employment with the Corporation and
supersedes all prior negotiations, discussions, understandings and agreements,
whether written or oral, between Employee and the Corporation relating to the
subject matter of this Agreement, including but not limited to the Employment
Agreement dated as of April 1, 1966 between the Corporation and Employee.
11. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing
signed by Employee and by a duly authorized officer of the Corporation. No
waiver by any party
to this Agreement of any breach by another 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 condition or provision at the same time, any prior
time or any subsequent time.
12. Notices. Any notice to be given under this Agreement shall be in
writing and delivered personally or sent by overnight courier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
party concerned at the address indicated below, or to such other address of
which such party subsequently may give notice in writing:
If to Employee: Xxxxxx X.X. Xxxxxxxx
0000 Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
If to the Corporation: Digital LAVA, Inc.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Attention: Chairman
with a copy to: Xxxxxxxxxx Xxxxxxxxx Xxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Any notice delivered personally or by overnight courier shall be deemed given on
the date delivered and any notice sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed given on the date mailed.
13. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable shall not be affected, and each provision of this
Agreement shall be validated and shall be enforced to the fullest extent
permitted by law. If for any reason any provision of this Agreement containing
restrictions is held to cover an area or to be for a length of time that is
unreasonable or in any other way is construed to be too broad or to any extent
invalid, such provision shall not be determined to be entirely null, void and of
no effect; instead, it is the intention and desire of both the Corporation and
Employee that, to the extent that the provision is or would be valid or
enforceable under applicable law, any court of competent jurisdiction shall
construe and interpret or reform this Agreement to provide for a restriction
having the maximum enforceable area, time period and such other constraints or
conditions (although not greater than those contained currently contained in
this Agreement) as shall be valid and enforceable under the applicable law.
14. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
15. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience of reference, and no provision of
this Agreement is to be construed by reference to the heading of any section or
paragraph.
16. Withholding Taxes. All salary, benefits, reimbursements and any other
payments to Employee under this Agreement shall be subject to all applicable
payroll and withholding taxes and deductions required by any law, rule or
regulation of and federal, state or local authority.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together constitute one and same instrument.
18. Applicable Law; Arbitration. The validity, interpretation and
enforcement of this Agreement and any amendments or modifications hereto shall
be governed by the laws of the State of California, as applied to a contract
executed within and to be performed in such State. The parties agree that any
disputes shall be definitively resolved by binding arbitration before the
American Arbitration Association in Los Angeles, California and consent to the
jurisdiction to the federal court located in Los Angeles, California or, if
there shall be no jurisdiction, to the state courts located in Los Angeles,
California, to enforce any arbitration award rendered with respect thereto. Each
party shall choose one arbitrator and the two arbitrators shall choose a third
arbitrator. All costs and fees related to such arbitration (and judicial
enforcement proceedings, if any) shall be borne by the unsuccessful party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DIGITAL LAVA, INC.
By: /s/ Xxxxx Xxxxxxx
---------------------------
Xxxxx Xxxxxxx, Chairman
/s/ Xxxxxx X.X. Xxxxxxxx
---------------------------
Xxxxxx X.X. Xxxxxxxx
