EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
May 8, 1998, by and between Digital Video Systems, Inc., a Delaware
corporation (the "Company"), and Sung Xxx Xxx ("Xxx").
WHEREAS, the Company desires to form a wholly-owned subsidiary of
the Company organized under the laws of Korea ("DVS-Korea") to purchase
certain assets of the DVS-ROM Business of Hyundai (the "Transaction");
WHEREAS, the Company desires to employ Xxx to serve as the Managing
Director of DVS-Korea.
NOW, THEREFORE, in consideration of the mutual promises of the
parties hereto, it is mutually agreed by and between the parties hereto
as follows:
1. Employment.
1.1 Employment as Managing Director of DVS-Korea. The
Company agrees to employ Xxx, and Xxx agrees to be employed by the
Company, as the Managing Director of DVS-Korea, a company organized under
the laws of Korea and a wholly-owned subsidiary of the Company("DVS-
Korea") for the period beginning on the closing date of the Transaction
or such earlier date as the Company and Xxx may agree to (the
"Commencement Date") and ending on the third anniversary of the
Commencement Date, unless such employment is terminated earlier pursuant
to Section 3 (the "Employment Period").
1.2 Duties as Employee. Xxx agrees to serve the Company as
Managing Director of DVS-Korea during the Employment Period. Xxx'x
duties shall be those customary for a Managing Director of a company
similar to DVS-Korea and such other duties as are specified by the
Company's Board (the "Board"). In case of a reorganization, merger,
consolidation, liquidation, dissolution, sale of all or substantially all
of the Company's or DVS-Korea's assets or similar event, the Board
reserves the right, in its sole discretion, to change or modify Xxx'x
duties hereunder as it deems appropriate in good faith. During the
Employment Period, Xxx shall devote full time to, and use his best
efforts to advance, the business and welfare of DVS-Korea and of the
Company. Xxx shall not directly or indirectly render any service of a
business, commercial, or professional nature to any other person,
organization or other entity, whether for compensation or otherwise,
directly or indirectly, without the prior written consent of a majority
of the members of the Board. If requested by the Board, Xxx shall resign
from the Board after the Commencement Date.
1.3 Effectiveness of Employment Agreement. If the
Transaction is not consummated, this Agreement shall terminate and shall
be without further force and effect, and none of the parties hereto shall
have any further obligation of any nature or kind whatsoever in
connection with this Agreement.
1.4 Salary and Benefits.
(a) Salary and Bonus. For the first year of the
Employment Period, DVS-Korea shall pay Xxx a salary at the annual rate of
$160,000 per year payable at least as frequently as monthly and subject
to such payroll deductions as may be necessary or customary in respect of
DVS-Korea's salaried employees in general. For the first year of the
Employment Period, DVS-Korea shall pay Xxx a bonus (the "First Year
Bonus") to be based upon performance standards to be agreed to by the
Board and Xxx. Xxx'x salary and bonus for periods after the first year
of the Employment Period shall be mutually agreed to by Xxx and the Board
or, in the absence of any such agreement, shall continue at the same rate
of salary as for the first year of the Employment Period and with a bonus
to be paid at the end of the second and third years of the Employment
Period in an amount equal to the total bonus paid in the first year of
the Employment Period. At the end of the second year of the Employment
Agreement, DVS-Korea shall negotiate with Xxx in good faith to extend the
Employment Period for an additional three years from the end of the
original Employment Period. If DVS and Xxx agree to extend the original
Employment Period (the "Original Employment Period") Xxx'x salary and
bonus shall be mutually agreed to by DVS-Korea and Xxx at that time.
(b) Incentive, Savings and Retirement Plans. Xxx
shall be entitled to participate at the discretion of the Board in all
annual bonus, incentive, stock option, savings and retirement plans,
practices, policies and programs applicable generally to other senior
executives of the Company.
(c) Welfare Benefit Plans. Xxx shall be eligible
for participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company to the
extent applicable generally to other senior executives of the Company.
(d) Vacations. Xxx shall be entitled to [three]
weeks paid vacation per year of service during the Employment Period. To
the extent vacation is not taken in any year, it shall be accrued and may
be taken in subsequent years.
(e) Expenses. Xxx shall be entitled to receive
prompt reimbursement for all reasonable employment expenses incurred by
him in accordance with the policies, practices and procedures as in
effect generally with respect to other senior executives of the Company.
(f) Fringe Benefits. Xxx shall be entitled to
fringe benefits in accordance with the plans, practices, programs and
policies as in effect generally with respect to other senior executives
of the Company.
2. Additional Compensation.
2.1 Options.
(a) In further consideration for Xxx'x performance
of his obligations under this Agreement, and pursuant to an option
agreement to contain such terms as are customarily provided for by the
Company's 1996 Stock Option Plan, the Company shall grant to Xxx options
(the "Options") to purchase 125,000 shares of Company's common stock (the
"Shares"), subject to shareholder approval, during the five-year period
from the date of grant, at an exercise price per share equal to the
closing price of the Company's common stock on the Nasdaq National Market
on the date of this Agreement.
(b) The Shares vested and subject to exercise shall
be 2.083% of such Shares at the end of each month after the grant date
during which Xxx continues to be employed as the Managing Director of
DVS-Korea, so that all of the Shares may be purchased on or after the
fourth anniversary of the grant date if Xxx has continued to be employed
as the Managing Director of DVS-Korea through that date. In the event
that Xxx'x employment with the Company terminates for any reason, all
Options shall either be vested or cancelled as set forth in Section 3.4
hereof.
2.2 Incentive Options. The Options shall all be granted as
incentive stock options (up to the maximum permitted by applicable law)
shall be granted as incentive stock options, subject to exercise price
requirements for incentive stock options.
3. Termination. The term of Xxx'x employment under this Agree-
ment may terminate as hereinafter provided, in which case (i) Xxx shall
be entitled to the amounts set forth in Section 3.4 hereof and (ii) Xxx
shall remain subject to the provisions of Sections 4, 5 and 6 hereof to
the extent applicable. The Employment Period shall not extend for any
period beyond the third anniversary of the Commencement Date unless
agreed to in writing by Xxx and the Company.
3.1 Death or Disability. If Xxx dies or becomes disabled
during the Employment Period, Xxx'x employment under this Agreement
shall automatically terminate upon death or after three consecutive
months of disability, as the case may be. "Disability" shall mean any
physical or mental illness that renders Xxx unable to perform his agreed-
upon services under this Agreement for any three consecutive months.
Such disability shall be determined by a licensed physician not
affiliated with the parties to this Agreement. In the event of Xxx'x
death, the amounts due him pursuant to this Agreement through the date of
his death shall be paid to whomever he has previously designated or, in
the event no such designation is made, to his estate, or to the
beneficiaries of his estate.
3.2 Good Cause. Xxx'x employment under this Agreement may
be terminated by the Company for "good cause," as determined in good
faith by the Board. The term "good cause" is defined as any one or more
of the following occurrences:
(a) Xxx'x continuing repeated willful failure or
refusal to perform his duties as required by this Agreement or other
material breach of this Agreement, provided, that termination of Xxx'x
employment pursuant to this subsection (a) shall not constitute valid
termination for cause unless Xxx shall have first received written notice
from the Board stating with specificity the nature of such failure or
refusal and affording Xxx at least 15 days to correct the act or omission
complained of;
(b) Gross negligence, material violation by Xxx of
any duty of loyalty to DVS-Korea or to the Company or any other material
misconduct on the part of Xxx, provided that termination of Xxx'x
employment pursuant to this subsection (b) shall not constitute valid
termination for cause unless Xxx shall have first received written notice
from the Board stating with specificity the nature of such failure or
refusal and affording Xxx at least 15 days to fully correct the act or
omission complained of and to indemnify the Company for any damage caused
to it by such act or omission;
(c) Xxx'x conviction by, or entry of a plea of
guilty or nolo contendere in, a court of competent and final jurisdiction
for any crime involving moral turpitude or punishable by imprisonment in
excess of six months in the jurisdiction involved; or
(d) Xxx'x commission of an act of fraud, whether
prior to or subsequent to the date hereof, upon DVS-Korea or the Company.
3.3 Other Termination. (a) DVS may terminate this
Agreement during the term of the Employment Period by providing Xxx with
six months prior written notice. (The foregoing notice requirement shall
not apply to any termination being made pursuant to Section 3.2 hereof.)
(b) Xx. Xxx may terminate this Agreement during the term of
the Employment Period by providing DVS with 12 months prior written
notice; provided, however, that any such notice may not be delivered
until at least 12 months from the Commencement Date.
3.4 Payments Upon Termination.
(a) Completion of Employment Period. If at the end
of the Original Employment Period the parties have not agreed in writing
to extend the term of Xxx'x employment with the Company, Xxx shall
receive his salary and any guaranteed minimum bonus through the date of
such termination. In addition, Xxx shall receive a cash severance payment
equal to 12-months salary at the salary rate received by Xxx in the 12
months preceding such termination. Options vested at such termination
date shall be exercisable in accordance with the terms of the Company's
1996 Stock Option Plan (the "Option Plan"). Options not vested at such
termination date shall be immediately cancelled. In no event shall Xxx
be entitled to receive additional salary, bonus, options or compensation
of any other kind hereunder.
(b) Death or Disability. In the event of Xxx'x
termination as set forth in Section 3.1 hereof, he shall receive his
salary through the date of such termination. Options vested at such
termination date shall be exercisable in accordance with the terms of the
Option Plan. In addition, if such termination occurs: (i) during the
first year of the Original Employment Period, Xxx shall receive a cash
severance payment equal to 24 months salary at the salary rate received
by Xxx in first year of the Original Employment Period; (ii) during the
second year of the Original Employment Period, Xxx shall receive a cash
severance payment equal the sum of (A) 12 months salary at the salary
rate received by Xxx in the second year of the Employment Period plus (B)
all of the salary he would have received if he had continued his
employment through the second year of the Original Employment Period; and
(iii) during the third year of the Original Employment Period, Xxx shall
receive a cash severance payment equal to 12 months salary at the salary
rate received by Xxx during the third year of the Original Employment.
Options not vested at such termination date shall be immediately cancel-
led. In no event shall Xxx be entitled to receive additional salary,
bonus, options or compensation of any other kind hereunder.
(c) Good Cause. In the event of Xxx'x termination
as set forth in Section 3.2 hereof, he shall receive his salary through
the date of such termination. Options vested at such termination date
shall be exercisable in accordance with the terms of the Option Plan.
Options not vested at such termination date shall be immediately cancel-
led. In no event shall Xxx be entitled to receive additional salary,
bonus, options or compensation of any other kind hereunder.
(d) Other Termination. In the event of Xxx'x
termination as set forth in Section 3.3 hereof, he shall receive his
salary through the date of such termination. Options vested at such
termination date shall be exercisable in accordance with the terms of the
Option Plan. In addition, if such termination occurs: (i) during the
first year of the Original Employment Period, Xxx shall receive a cash
severance payment equal to 24 months salary at the salary rate received
by Xxx in first year of the Original Employment Period; (ii) during the
second year of the Original Employment Period, Xxx shall receive a cash
severance payment equal the sum of (A) 12 months salary at the salary
rate received by Xxx in the second year of the Employment Period plus (B)
all of the salary he would have received if he had continued his
employment through the second year of the Original Employment Period; and
(iii) during the third year of the Original Employment Period, Xxx shall
receive a cash severance payment equal to 12 months salary at the salary
rate received by Xxx during the third year of the Original Employment.
Options not vested at such termination date shall be immediately cancel-
led. In no event shall Xxx be entitled to receive any other additional
salary, bonus, options or compensation of any other kind hereunder.
4. Ownership of Intangibles. Xxx hereby grants and assigns to
the Company all of his right, title and interest in and to any ideas,
designs, techniques, processes, trademarks, inventions and improvements
(collectively, "Inventions") arising during the term of this Agreement,
which Inventions relate to the business of the Company or any of its
affiliates, or to actual or demonstrably anticipated research or
development of the Company or any of its affiliates, or results from work
performed by Xxx for the Company or any of its affiliates, together with
all patents that are pending or have been issued in the United States,
Korea and in all other countries during the term of this Agreement with
respect to such Inventions (the "Proprietary Rights"). All such
Proprietary Rights shall be the sole and exclusive property of the
Company and shall remain such notwithstanding the subsequent termination
of employment under this Agreement. To the extent that any Proprietary
Rights or other ideas, designs, techniques, processes, trademarks,
inventions or improvements used by the Company during the term of this
Agreement rely upon or use patented or unpatented Inventions that Xxx has
made or conceived prior to the date of this Agreement, Xxx hereby grants
an exclusive, perpetual, royalty-free, worldwide license to use such
Invention.
5. Confidential Information. Xxx agrees that during the
Employment Period, he will be dealing with proprietary, nonpublic and
confidential information, including inventions and processes developed by
the Company or any of its affiliates, relating to the present and
prospective business, assets and good will of the Company or any of its
affiliates (all of the foregoing referred to as "confidential informa-
tion"). Without limiting the generality of the foregoing, it is
understood that Xxx will have access to information regarding intellec-
tual property of the Company or any of its affiliates, inventions and
ideas under development by them, and information regarding the actual and
prospective business and customers of the Company or any of its affili-
ates. Xxx agrees that he will not disclose to anyone, directly or
indirectly, any of such confidential matters, or use them other than in
the course of performing his obligations under this Agreement. All docu-
ments prepared by Xxx in connection with the services provided herein,
and all confidential information (however embodied or recorded) that
might be given to him are the exclusive property of the Company and shall
be returned to the Company at its request. After termination of Xxx'x
employment with the Company, he shall not, without the prior written
consent of the Company, or as may otherwise be required by law or legal
process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it in writing.
Xxx acknowledges that such actions could cause irreparable harm to the
Company and that the Company may obtain an injunction or other equitable
relief to enforce this provision. Furthermore, upon termination of this
Agreement, Xxx shall promptly deliver to the Company all books,
memoranda, records and written data in original form of every kind
relating to the business and affairs of the Company that may then be in
his personal possession.
6. Noncompetition.
6.1 No Competing Activities. Xxx agrees that, while he is
employed by the Company, he shall not engage or participate in any state
of the United States or in Korea, directly or indirectly, either as an
owner, partner, director, trustee, officer, employee, consultant, advisor
or in any other individual or representative capacity, in any activity
which is the same as, similar to or competitive in any manner with the
business of the Company or its members or affiliates (herein, a
"Competing Activity") or have any investment in a business which is
engaged in a Competing Activity (other than an ownership interest of less
than 5% of any company whose securities are listed on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market).
Xxx further agrees that in the event of a termination for good cause as
set forth in Section 3.2 hereof or Xxx'x election to terminate employment
pursuant to Section 3.3 hereof, he shall not, for a two-year period
following such termination of employment, engage in a Competing Activity
or have any investment in a business which is engaged in a Competing
Activity (other than an ownership interest of less than 5% of any company
whose securities are listed on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market).
6.2 Reasonable Limitations. Xxx acknowledges that, given
the nature of the Company's business, the covenants contained in this
Section 6 contain reasonable limitations as to time, geographical area
and scope of activity to be restrained, and do not impose a greater
restraint than is necessary to protect the legitimate business interests
of the Company. If, however, this Section 6 is determined by any court
of competent jurisdiction, or in any arbitration, as the case may be, to
be unenforceable by reason of its extending for too long a period of time
or over too large a geographic area or by reason of its being too
extensive in any other respect or for any other reason it will be
interpreted to extend only over the longest period of time for which it
may be enforceable and/or over the largest geographical area as to which
it may be enforceable and/or to the maximum extent in all other aspects
as to which it may be enforceable, all as determined by such court, or in
such arbitration, as the case may be.
6.3 Acknowledgement. Xxx understands that the restrictions
in Section 6.1 hereof may limit his ability to earn a livelihood in a
business similar to the business of the Company, but he nevertheless
believes that he has received and will receive sufficient consideration
hereunder and otherwise as an employee of the Company to justify such
restrictions which, in any event, given his education, abilities and
skills, Xxx does not believe would prevent him from earning a living.
7. WAIVER OF JURY. WITH RESPECT TO ANY DISPUTE ARISING UNDER OR
IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, EACH PARTY
HEREBY IRREVOCABLY WAIVES ALL RIGHTS IT MAY HAVE TO DEMAND A JURY TRIAL.
THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE AND EACH
PARTY ACKNOWLEDGES THAT NONE OF THE OTHER PARTIES NOR ANY PERSON ACTING
ON BEHALF OF THE OTHER PARTIES HAS MADE ANY REPRESENTATION OF FACT TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY
ITS EFFECT. THE PARTIES EACH FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN
REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE PARTIES EACH
FURTHER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE MEANING AND
RAMIFICATIONS OF THIS WAIVER PROVISION.
8. Miscellaneous.
8.1 Modification and Waiver of Breach. No waiver or
modification of this Agreement shall be binding unless it is in writing
signed by the parties hereto. No waiver of a breach hereof shall be
deemed to constitute a waiver of a future breach, whether of a similar or
dissimilar nature. DVS agrees that it shall, if required, modify this
Agreement to ensure compliance with Korean law, and if Xxx requests, to
provide for employment of Xxx by another DVS affiliate, including,
without limitation, DVS's Hong Kong subsidiary.
8.2 Assignment. This Agreement shall inure to the benefit
of and shall be binding upon the Company, its successors and assigns. The
obligations and duties of Xxx hereunder are personal and not assignable,
whether voluntarily or involuntarily or by operation of law or otherwise.
8.3 Notices. All notices and other communications required
or permitted under this Agreement shall be in writing, served personally
on, or mailed by certified or registered United States mail to, the party
to be charged with receipt thereof. Notices and other communications
served by mail shall be deemed given hereunder 72 hours after deposit of
such notice or communication in the United States Post Office as
certified or registered mail with postage prepaid and duly addressed to
whom such notice or communication is to be given, in the case of (a) the
Company, 000 Xxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, Attention:
Secretary, or (b) Xxx, to the address set forth below his name on the
signature page hereof. Any such party may change said party's address
for purposes of this Section 9.3 by giving to the party intended to be
bound thereby, in the manner provided herein, a written notice of such
change.
8.4 Counterparts. This instrument may be executed in one
or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same Agreement.
8.5 Governing Law. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of
California.
8.6 Legal Fees. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with this
Agreement, the successful or prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs it incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled.
8.7 Savings Clause. If any provision of this Agreement or
the application thereof is held invalid, the invalidity shall not affect
other provisions or applications of the Agreement which can be given
effect without the invalid provisions or applications and to this end the
provisions of this Agreement are declared to be severable.
8.8 Complete Agreement. This instrument constitutes and
contains the entire agreement and understanding concerning Xxx'x
employment and the other subject matters addressed herein between the
parties, and supersedes and replaces all prior negotiations and all
agreements proposed or otherwise, whether written or oral, concerning the
subject matters hereof. This is an integrated document.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the day and year first above written.
XXX: THE COMPANY:
DIGITAL VIDEO SYSTEMS, INC.
/S/ Sun Xxx Xxx By: /S/ Xxxxxx Xxxxxxxxx
-------------------------- --------------------------
Sung Xxx Xxx Xxxxxx Xxxxxxxxx
Address:
Hyundai Apt #310-1101
KwangJang-Dong, KwangJin-Ku
Seoul, Korea
