EXHIBIT 10.5
EMPLOYMENT AGREEMENT
AGREEMENT made as of April 27, 2000, by and between USA Video Interactive
Corp., a corporation incorporated under the laws of the state of Wyoming, with
its executive offices in Mystic, Connecticut and its corporate offices in
Vancouver, British Columbia (the "Company"), and Xxxxxxx Xxxxx, residing at the
address set forth at the end of this Agreement (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive desire to set forth the terms and
conditions of the Executive's employment by the Company;
NOW, THEREFORE, the parties hereto agree as follows:
1. Term of Employment. The Executive's employment under this Agreement
shall be for a term commencing on April 27, 2000, and terminating two years
therefrom, subject to earlier termination as provided in section 5 hereof (the
"Term of Employment"). Each year of the Term of Employment is referred to
herein as a "Contract Year."
2. Employment.
2.1 During the Term of Employment, the Company shall employ the
Executive as Chief Operating Officer and the Executive shall serve in such
position, perform such services and have such authority, functions, duties,
powers and responsibilities as ordinarily are associated with such title. The
Executive shall report to the President of the Company. The Executive shall
faithfully and diligently serve the Company and shall devote all of his business
time, attention, skill and efforts thereto; provided, that the Executive may
manage his passive
1
investments and be involved in charitable interests so long as they do not
interfere or conflict with the performance of the Executive's duties hereunder.
The Executive shall be based in Mystic, Connecticut.
3. Compensation and Other Remuneration.
3.1 Base Salary. The Company shall pay to the executive during the
Term of Employment base salary with a starting annual rate of $120,000.00
annually. Base salary will be paid in accordance with the customary payroll
practices of the Company and shall be subject to required payroll deductions and
withholdings.
3.2 Bonus. The Executive shall be eligible to receive a bonus in
respect of each Contract Year in such amount, if any, as may be determined by
the Company's board of directors.
3.3 Vacation. The Executive shall be entitled to up to three weeks
of vacation during each Contract Year, scheduled in advance with the Company to
avoid excessive disruption of the Company's operations.
3.4 Stock Options.
3.4.1 Pursuant to one or more stock option agreements (hereafter
referred to as the "Stock Option Agreement") dated the date hereof, the Company
shall grant to Executive stock options, under and pursuant to the Company's 1990
Stock Option Plan, to purchase two hundred fifty thousand (250,000) shares of
the Company's common stock ("Common Stock"), subject to a four month hold as of
the date of approval, with the purchase price to be the greater of either (1)
the market price on the date of announcement less 10% or (2) a ten day average
trading price beginning on the date of announcement less 10%. Twenty-five
percent (25%) of these options will vest immediately upon grant, thirty-seven
percent (37%) at
2
the end of the first Contract Year and the remaining shares shall vest on the
last business day before the end of the second Contract Year; provided Executive
is employed on such dates, except as otherwise provided in the last sentence
hereof, and subject to any approvals required by the CDNX, if any, which
approvals shall be obtained by the Company with dispatch. The Stock Option
Agreement will further provide that if the Executive dies during the Term of
Employment or if the Company terminates this Agreement due to his disability (as
described below) or without "Cause" (as defined below), or the Executive
terminates this Agreement for "Good Reason" (as defined below), all unvested
options shall immediately become exercisable.
3.4.2 All vested options will be exercisable for a period of
five (5) years from the date of grant. Any options which are not exercised
within ninety (90) days of the termination of employment (other than due to
death or disability) or twelve (12) months in the event of termination due to
disability automatically shall be cancelled.
4. Benefits; Reimbursement of Business Expenses.
4.1 Benefits. The Executive shall participate in all benefit plans
of the Company generally available to its employees and/or to any senior
executive of the Company, whether now existing or hereafter established
(collectively, the "Benefit Plans"). The Company expressly agrees that such
benefit will at all times include health insurance such as the Executive
currently enjoys. The extent of Executive's participation in the Benefit Plans
shall be at the same level as the most senior executives of the Company.
Additionally, unless otherwise provided by the Company, the Executive shall be
entitled to reimbursement for payment of insurance premiums for life insurance
and disability insurance in an amount not to exceed $575.00 monthly, payment due
by the Company upon presentation of receipts.
3
4.2 Reimbursement of Business Expenses. Business expenses incurred
by the Executive in accordance with the Company's policies will be reimbursed
upon the presentation of receipts. Business-related air travel shall be such
class as is determined by Executive in his reasonable discretion.
4.3 Moving Expenses. The Company will pay or reimburse the Executive
for the expenses of commuting between Florida and Connecticut weekly for a
period of three months, and to reimburse the Executive for moving expenses, in
an amount not to exceed Ten Thousand Dollars ($10,000.00).
4.4 Insurance. During any period that the Executive is rendering any
services hereunder, the Company agrees to cause Executive to be named as an
insured under a director and officer liability insurance policy which the
Company shall obtain within 30 days from the date hereof.
5. Termination.
5.1 Termination for Cause.
5.1.1 The Company may terminate this Agreement and all of the
Company's obligations hereunder, other than its obligations set forth below in
this section 5.1, for "Cause". "Cause" shall mean that the Executive (i) is
convicted of a felony, or any misdemeanor involving fraud or theft, (ii) engages
in dishonest behavior which materially adversely affects the Company, (iii)
commits a willful and intentional act having the effect of materially injuring
the reputation or business of the Company, including, without limitation,
habitual use of illegal drugs or alcohol, or (iv) materially breaches this
Agreement and, after having been given written notice thereof by the Company,
fails to correct such breach within ten (10) days after receipt of such notice.
4
5.1.2 In the event of termination by the Company for Cause, the
Company shall have no further obligations to the Executive other than to pay (i)
base salary accrued through the effective date of termination; and (ii) all
other benefits and amounts which may be then due the Executive under the general
provisions then in effect of any Benefit Plan ((i) and (ii) collectively, the
"Termination Entitlements").
5.2 Termination Due to Death. This Agreement shall terminate upon
the Executive's death, and in such event the Company shall have no further
obligations hereunder, other than to pay to the Executive's estate the
Termination Entitlements.
5.3 Termination Due to Disability. If, during the Term of
Employment, the Executive shall become physically or mentally disabled, whether
totally or partially, so that he is unable to perform the material functions of
this position for periods aggregating one hundred thirty-five (135) days in any
twelve (12) month period, the Company shall be entitled to terminate this
Agreement upon written notice to the Executive given at any time thereafter
during which the Executive is still so disabled. Upon such termination, the Term
of Employment shall end, and the Company shall have no further oblations
hereunder other than to pay the Executive the Termination Entitlements.
5.4 Termination for Good Reason. "Good Reason" shall mean any of the
following: (i) a material breach by the Company of this Agreement, (ii) a
material diminution of Executive's authority, duties or responsibilities with
the Company, or (iii) the assignment to Executive of duties materially
inconsistent with Executive's position with the Company, unless otherwise
approved by the Executive. If there exists an event or condition that
constitutes Good Reason, and such event or condition is not cured within ten
(10) days following Executive's giving the Company notice thereof, Executive at
any time thereafter shall have the right to
5
terminate this Agreement by giving the Company written notice of such
termination, and upon his doing so, the provisions of sections 3.4.1, 3.4.2, and
5.5 and all other relevant provisions hereof shall apply.
5.5 Termination Without Cause or for Good Reason. If the Company
terminates this Agreement without Cause (as defined in section 5.1 hereof), or
if the Executive terminates this Agreement for Good Reason (as defined in
section 5.4 hereof), in addition to the Termination entitlements, the Executive
shall be entitled to receive all base salary due for the balance of the Term of
Employment in a lump sum within thirty (30) days of the date of termination.
5.6 Stock Option Vesting. The impact of the termination of this
Agreement on the stock options referred to in section 3 hereto, shall be as
described in section 3 and in the Stock Option Agreements under which such
options shall be issued.
6. Protection of Confidential Information. The Executive acknowledges
that employment by the Company will bring the Executive into close contact with
the confidential affairs of the Company and its affiliates. In recognition of
the foregoing, the Executive covenants and agrees that the Executive will keep
secret all confidential matters of the Company and its affiliates, including,
without limitation, the terms and provisions of this Agreement, and will not use
for his own benefit or intentionally disclose such matters to anyone outside of
the Company, either during or after the Term of Employment, except with the
Company's consent, provided that (i) the Executive shall have no such obligation
to the extent such matters are or become publicly known other than as a result
of the Executive's breach of his obligations hereunder, (ii) the Executive may
disclose such matters to the extent required by applicable laws
6
or governmental regulations or judicial or regulatory process, and (iii) the
Executive may disclose the terms of this Agreement to his attorney(s),
accountant(s) and/or financial advisor(s).
7. Ownership of Work Product. Except for previously held work product of
the Executive and specifically the work product currently subject to a
Confidentiality Agreement between the parties relating to blended media
(television, telephone, fax, internet, and wireless devices) e-commence business
models, methods, procedures, and system design for business to consumer or
business to business sales, over which Executive maintains exclusive ownership,
the Executive acknowledges that in the course of employment hereunder, he may
conceive of, discover, or create inventions or new contributions relating to the
subject matter of his employment (all of the foregoing being collectively
referred to herein as "Work Product"). The Executive acknowledges that, unless
the Company otherwise agrees in writing, all of such Work Product shall be owned
by and belong exclusively to the Company. The Executive shall further, unless
the Company otherwise agrees in writing, (i) promptly disclose any such Work
Product to the Company; (ii) assign to the Company, upon request, the entire
rights to such Work Product to the extent not otherwise owned at law by the
Company; and (iii) do all things and sign all papers reasonably necessary to
carry out the foregoing.
8. Representations. Both Executive and Company represent and warrant that
each is not a party to any agreement or understandings which would prevent the
fulfillment by such party of the terms of this Agreement or which would be
violated by entering into this Agreement and performing such party's obligations
hereunder.
9. 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 personally or three days after being
mailed first-class, postage prepaid, by registered
7
or certified mail, to the address of the recipient given herein (or such other
address of which notice is given or, in the case of notice to the Executive, to
the most recent address set forth on the records of the Company).
10. Indemnification. The Company shall indemnify Executive against any
and all judgments, fines, amounts paid in settlement and reasonable expenses,
including attorney's fees, incurred in connection with any action or proceeding,
whether civil, criminal, judicial, legislative, administrative or investigative,
or in connection with an appeal therein, by reason of the fact that Executive is
or was a director, officer, employee, representative or agent of the Company;
provided, however, that no such indemnification shall be made to Executive if an
adverse judgment or other final adjudication establishes that the acts of
Executive were committed in bad faith or were the result of active and
deliberate dishonesty or gross negligence and, in either case, were material to
the cause of action so adjudicated. Without limiting the foregoing, Executive
shall also be entitled to indemnification by the Company against any liability
or damage, including attorney's fees and liabilities under federal and state
securities laws, arising form any act or omission by Executive provided such act
or omission was reasonably believed to be within the scope of Executive's
authority or was taken upon advise of the accountants or legal counsel for the
Company. The indemnification of Executive provided by this section 10 shall
continue after Executive has ceased to be a director, officer, employee,
representative or agent of the Company and all inure to the benefit of
Executive's heirs, executors, administrators and legal representatives.
11. General.
11.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the state of Connecticut.
8
11.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.3 Entire Agreement; No Other Representations. The parties
expressly acknowledge, represent and agree that this Agreement is fully
integrated and contains and constitutes the complete and entire agreement and
understanding of the parties with respect to the subject matters hereof and
supersedes any and all agreements, understandings and discussions, whether
written or oral, between the parties with respect to the subject matters hereof,
other than the Proprietary Rights and Information Agreement being entered into
simultaneously herewith. The parties further acknowledge, represent, and agree
that neither has made any representations, promises or statements to induce the
other party to enter into this Agreement, and each party specifically disclaims
reliance, and represents that there has been no reliance, on any such
representations, promises or statements.
11.4 Assignability. This Agreement and the parties' rights and
obligations hereunder may not be assigned by either party.
11.5 Amendments; Waivers. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and covenants hereof
may be waived, only by 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
provisions hereof shall in no manner affect such party's 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.
9
11.6 Construction. No presumption will be made or inference drawn
because the attorneys for one of the parties drafted this Agreement or because
of its drafting history.
12. This Agreement is subject to regulatory acceptance, if any, including
by the Canadian Venture Exchange.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
USA VIDEO INTERACTIVE CORP.
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Its: President
--------------------------------
/s/ Xxxxxxx Xxxxx
-----------------------------------------
Xxxxxxx Xxxxx
Address: 0000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
10
