<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _______, 19___ to ______, 19___.
Commission File Number: 33-35580-D
INSTANT VIDEO TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer
as Specified in its Charter)
DELAWARE 84-1141967
(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
500 SANSOME STREET, SUITE 503
SAN FRANCISCO, CALIFORNIA 94111
Address of Principal Executive Offices, Including Zip Code
(415) 391-4455
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X YES NO
----- -----
There were 6,396,445 shares of the Issuer's $.00001 par value common stock
outstanding as of June 30, 1998.
<PAGE> 2
SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain information in this Report includes forward-looking statements within
the meaning of applicable securities laws that involve substantial risks and
uncertainties including, but not limited to, market acceptance of the Company's
products and new technologies, the sufficiency of financial resources available
to the Company, economic, competitive, governmental and technological factors
affecting the Company's operations, markets, services, and prices, and other
factors described in this Report and in prior filings with the Securities and
Exchange Commission. The Company's actual results could differ materially from
those suggested or implied by any forward-looking statements as a result of such
risks.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Results of Operations
During the six months ended June 30, 1998, the Company had $15,000 in
revenue as compared to $437,733 during the six months ended June 30, 1997.
Revenue was the result of Intertainer's use of Burstware(R) in field trials of
Intertainer's service.
Costs and expenses during the six months ended June 30, 1998, totaled
$1,309,176 as compared to $1,165,409 during the six months ended June 30, 1997.
The increase was due to higher spending for labor. Headcount at the end of June
1998 was 19 full-time equivalents versus 10 at June 30, 1997.
The Company had a net loss of ($1,866,023) during the six months ended
June 30, 1998, as compared to a net loss of ($756,543) during the six months
ended June 30, 1997. The loss resulted from expenditures for operations and
product development. During the first six months of 1998, the Company also
recognized an expense for deferred employee compensation of $311,586 resulting
from the issuance of common stock options. The Company recognized $417,296 of
interest expense for the period ending June 30, 1998, versus $29,281 for the
period ending June 30, 1997. The increase in interest expense was due to
amortization of discounts on notes payable of $395,000 resulting from the
issuance of convertible debt and debt with warrants at conversion prices that
were discounted from the market price of the common stock at date of issuance.
Liquidity and Capital Resources
As of June 30, 1998, the Company had a working capital deficit of
($1,665,020) as compared to a working capital deficit of ($1,069,614) at
December 31, 1997, which was due to increases in short term debt financing and
accounts payable to provide working capital to fund operations.
Net cash used in operating activities totaled $795,603 during the six
months ended June 30, 1998, as compared to net cash used in operating activities
of $859,497 during the six months ended June 30, 1997.
Cash flow provided by financing activities during the six month period
ending June 30, 1998 totaled $923,927, as compared to $710,000 during the six
month period ending June 30, 1997.
<PAGE> 3
Net cash used in investing activities during the six month period
ending June 30, 1998 totaled $40,938, as compared to $32,559 during the six
month period ending June 30, 1997.
Repayment of Debt during the six months ended June 30, 1998 equaled
$561,073 as compared to $90,000 during the six months ended June 30, 1997.
The Company presently intends to purchase capital equipment of
approximately $75,000 in the third quarter of 1998.
"Year 2000" Issues
The Company is aware of the issues associated with the programming
code in existing computer systems as the year 2000 approaches. The "Year 2000"
problem is pervasive and complex, as many computer systems, manufacturing
equipment and industrial control systems will be affected in some way by the
rollover of the two-digit year value to 00. Systems that do not properly
recognize such data could generate erroneous information or cause a system to
fail. The Year 2000 issue creates risk for the Company from unforeseen problems
in its own systems and from third parties with whom the Company deals on
financial transactions worldwide. Failures of the Company's and/or third
parties' computer systems, manufacturing equipment and industrial control
systems could have a material impact on the Company's ability to conduct its
business.
The Company is currently analyzing the Company's internal systems as
well as all external systems (such as vendor, customer, banking systems, etc.)
upon which the Company is dependent to identify any potential Year 2000 issues.
Based on the results of this analysis, which is expected to be completed in the
fourth quarter of fiscal 1998, the Company will develop a strategy to address
the issues and take appropriate corrective action. The Company has not yet
determined the timetable or the cost related to achieving Year 2000 compliance.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As previously reported in the Company's Form 10-QSB for the
quarter ended March 31, 1998, the Company filed for arbitration on April 14,
1998, in order to obtain a judgment to recover certain of the Company's cash and
assets, that were allegedly misappropriated by Gary R. Familian, the Company's
former Chairman and CEO; and Therese Stacy, the Company's former Executive Vice
President of Business Development. In June, the Superior Court of the City and
County of San Francisco issued a Right to Attach order securing certain physical
assets pending the outcome of these proceedings. The Company estimates that the
legal fees to date, and the anticipated costs involved with this arbitration are
not material.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
FINANCING
During the second quarter of 1998, the Company established a Bridge Line of
Credit in the amount of $675,000 with certain current investors of the Company.
These investors include Draysec Finance Limited, Mercer Management, Inc., and
Robert London. The terms of the Bridge Line of Credit include the provision for
draw downs in a maximum amount of $75,000 to be provided by each investor per
month over a three-month period. For each draw down of $75,000 each investor
shall receive 15,000 warrants to purchase Common Stock of the Company.
Additionally, the Line of Credit bears simple interest at the rate of Prime plus
two percent (2%), and the maturity date is March 31, 1999.
<PAGE> 4
PRODUCT DEVELOPMENT
During the second quarter of 1998, the company released its Burstware(R) Beta
Version 1.02. The Beta product has been distributed to several companies for
testing including major telecommunications providers, multi-media content
aggregators, and Internet content providers.
<PAGE> 5
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit Description Location Sequential
No. Page No
<S> <C> <C> <C>
10.36 Management contracts for Attached
R. Lang, D. Morgenstein, &
D. Genin
10.37 Loan agreements for Draysec Finance Ltd., Attached
Robert London, & Mercer Management, Inc.
27 Financial Data Schedule Attached
</TABLE>
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended June 30, 1998.
SIGNATURES
In accordance with the Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
INSTANT VIDEO TECHNOLOGIES, INC.
Date: August 12, 1998 By: /s/ Richard Lang
-------------------------------------
Richard Lang, Chairman,
Chief Executive Officer
By: /s/ Eric J. Hall, CFA
-------------------------------------
Eric J. Hall, Chief Financial Officer
and Chief Accounting Officer
<PAGE> 6
INSTANT VIDEO TECHNOLOGIES, INC.
Unaudited Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $107,937 20,551
Prepaid expenses 21,110 31,460
-------- --------
Total current assets 129,047 52,011
-------- --------
Property and equipment, net 105,083 85,611
Other assets 16,812 17,569
-------- --------
$250,942 155,191
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 7
INSTANT VIDEO TECHNOLOGIES, INC.
Unaudited Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Current liabilities:
Bank line of credit and credit facility $ -- 500,000
Notes payable 1,437,051 451,773
Accounts payable 228,163 34,026
Accrued expenses 102,246 92,782
Accrued interest 26,607 43,044
------------ ------------
Total current liabilities 1,794,067 1,121,625
------------ ------------
Notes payable -- 16,833
------------ ------------
Stockholders' (deficiency) equity:
Preferred stock, $.00001 par value, 20,000,000 shares authorized:
Series D, 936,000 shares issued, none outstanding -- --
Series E, 500,000 shares issued, none outstanding -- --
Series F, 5,000,000 shares authorized, 2,125,000 shares issued and 22 22
outstanding in 1997 and 1998
Common stock, $.00001 par value, 100,000,000 shares authorized; 6,396,495
and 5,703,553 shares issued and outstanding in 1998 and 1997 65 59
Additional paid in capital 9,170,177 7,795,972
Notes payable discount (68,042) --
Accumulated deficit (10,645,347) (8,779,320)
------------ ------------
Stockholders' (deficiency) equity (1,543,125) (983,267)
------------ ------------
$ 250,942 155,191
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 8
INSTANT VIDEO TECHNOLOGIES, INC.
Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
3 MONTHS ENDED JUNE 30, 6 MONTHS ENDED JUNE 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 15,000 $ 141,750 $ 15,000 $ 437,733
Cost of revenues -- -- -- --
------------ ------------ ------------ ------------
15,000 141,750 -- 437,733
Costs and expenses:
Research and development 161,648 49,559 249,958 49,559
Project Costs -- 239,935 239,935
Sales and marketing 128,085 107,677 173,140 223,015
General and administrative 537,773 335,345 886,078 652,900
------------ ------------ ------------ ------------
Total costs and expenses 827,506 732,516 1,309,176 1,165,409
------------ ------------ ------------ ------------
Loss from operations (812,506) (590,766) (1,294,176) (727,676)
------------ ------------ ------------ ------------
Other income (expense):
Interest, net (417,181) (22,917) (571,047) (28,867)
------------ ------------ ------------ ------------
Loss before income taxes (1,229,687) (613,683) (1,865,223) (756,543)
------------ ------------ ------------ ------------
Income taxes -- -- (800) --
------------ ------------ ------------ ------------
Net loss $ (1,229,687) $ (613,683) $ (1,866,023) $ (756,543)
============ ============ ============ ============
Accumulated deficit, beginning (9,415,656) (6,859,807) (8,779,320) (6,716,947)
Accumulated deficit, ending $(10,645,343) $ (7,473,490) $(10,645,343) $ (7,473,490)
============ ============ ============ ============
Net loss per common share - Basic $ (0.21) $ (0.13) $ (0.32) $ (0.16)
============ ============ ============ ============
Net loss per common share - Diluted $ (0.21) $ (0.13) $ (0.32) $ (0.16)
============ ============ ============ ============
Weighted average shares outstanding 5,813,142 4,803,553 5,813,142 4,803,553
Weighted average shares outstanding assuming dilution 5,813,142 4,803,553 5,813,142 4,803,553
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 9
INSTANT VIDEO TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
For the period ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,866,023) (756,543)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 21,457 28,344
Interest expense issued with debt 137,500 --
Amortization of notes payable discount 415,484 --
Stock option compensation 297,708 --
(Increase) in accounts receivable -- (60,000)
(Increase) in loans to officers -- (37,500)
Decrease (increase) in prepaid expenses 10,350 (7,073)
Decrease in other assets 757 1,389
Increase in costs in excess of billings -- (5,370)
Increase (decrease) in accounts payable 194,137 (20,543)
Increase (decrease) in accrued expenses 9,464 (8,790)
Increase (decrease) in accrued interest (16,437) 6,589
----------- -----------
Net cash used in operating activities (795,603) (859,497)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment, net (40,938) (32,559)
----------- -----------
Net cash used in investing activities (40,938) (32,559)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of stock 310,000 --
Exercise of warrants - Series F -- 400,000
Proceeds from debt 1,175,000 400,000
Repayment of debt (561,073) (90,000)
----------- -----------
Net cash provided by financing activities 923,927 710,000
----------- -----------
Increase (decrease) in cash and cash equivalents 87,386 (182,056)
Cash and cash equivalents, beginning of year 20,551 208,613
----------- -----------
Cash and cash equivalents, end of quarter $ 107,937 26,557
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
(Continued)
<PAGE> 10
INSTANT VIDEO TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows, Continued
For the period ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 800 --
======= =======
Cash paid for interest $31,894 7,342
======= =======
Supplemental schedule of non-cash investing and financing activities: During
1997, the Company financed a prepaid insurance premium of $29,794
During 1997, 500,000 shares of preferred stock were converted into 500,000
shares of common stock
During 1998, $180,000 of convertible debt and $9,942 of accrued interest was
converted into 189,942 shares of common stock
During 1998, the Company granted stock options to various consultants and
employees, which resulted in $311,586 of compensation expense
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 11
INSTANT VIDEO TECHNOLOGIES, INC.
Notes to Unaudited Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Instant Video Technologies, Inc. (the Company) licenses burst
transmission software for use within commercial, multimedia and
interactive environments. The burst technology allows for time
compression and burst transmission of video/audio programming that
results in time-savings, network efficiency and superior quality
products.
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Instant
Video Technologies, Inc. and its wholly-owned subsidiary, Explore
Technology, Inc. All significant intercompany transactions and accounts
have been eliminated in consolidation.
INTERIM FINANCIAL INFORMATION
The accompanying financial statements have been prepared in accordance
with Generally Accepted Accounting Principles for interim financial
information and the instructions for Form 10-QSB and Article 10 of
Regulation S-X. In the Company's opinion, the financial statements
include all adjustments, consisting of normal recurring adjustments,
which the Company considers necessary to fairly state the Company's
financial position and the results of operations and cash flows. The
balance sheet at December 31, 1997, has been derived from the audited
financial statements at that date but does not include all of the
necessary informational disclosures and footnotes as required by
Generally Accepted Accounting Principles. The accompanying financial
statements should be read in conjunction with the financial statements
and notes thereto included with the Company's annual reports on Form
10-KSB and other documents filed with the Securities and Exchange
Commission. The results of the Company's operations for any interim
period are not necessarily indicative of the results of the Company's
operations for any other interim period or for a full fiscal year.
NET LOSS PER SHARE
The Financial Accounting Standards Board ("FASB") recently issued
Statement of Financial Accounting Standard ("SFAS") No. 128, Earnings per
Share, which requires the presentation of basic net income per share,
and, for companies with complex capital structures, diluted net income
per share. Basic and diluted net loss per share is computed using the
weighted average number of common shares outstanding. The Company has net
losses for all periods presented and there is no difference between
previously reported primary loss per share amounts and the amounts
currently reported as basic and diluted loss per share.
<PAGE> 12
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
10.36 Management contracts for R. Lang, D. Morgenstein, & D. Genin
10.37 Loan agreements for Draysec Finance Ltd., Robert London, &
Mercer Management, Inc.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the______ day of___________ , 1998 (the
"Effective Date") between Instant Video Technologies, Inc. (the "Company"), a
corporation, and Richard Lang (the "Employee").
WHEREAS, the Company wishes to employ the Employee as its Chairman and C.E.O.;
and
WHEREAS, the Employee wishes to be employed by the Company in such
position.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT. DUTIES AND ACCEPTANCE
1.1 EMPLOYMENT BY THE COMPANY. The Company hereby employs the Employee
for the term (as defined herein), to render, subject to the following paragraph,
exclusive and full-time services to the Company as Chairman & C.E.O. of the
Company, subject to the direction of the Company's Board of Directors (the Board
of Directors.), and in connection therewith, to perform such duties as he shall
be directed to perform by the Company's Board of Directors.
1.2 ACCEPTANCE OF EMPLOYMENT BY EMPLOYEE. The Employee hereby accepts
such employment and agrees to render the services described above. The Employee
further agrees to accept election and to serve during all or any part of the
term as an officer or director of the Company and of any subsidiary or affiliate
of the Company (or of any other corporation at the Company's reasonable request)
without any compensation therefor, other than that specified in this Agreement
if elected to any such position by the shareholders or by the Board of Directors
of the Company or of any subsidiary or affiliate (or other corporation), as the
case may be.
1.3 VACATION. The Employee shall be entitled to twenty days of annual
vacation in accordance with the vacation policy of the Company, as in effect
from time to time.
1.4 TRAVEL. The Employee shall be subject to reasonable travel
requirements as may be necessary or desirable to perform fully his obligations
hereunder.
2. TERM OF EMPLOYMENT. The term of the Employee's employment under this
Agreement (the "Initial Term") shall commence on the Effective Date and shall
continue for twenty-four (24) months from the Effective Date unless sooner
terminated pursuant to Article 4 of this Agreement. The term of the Employee's
employment shall automatically be extended for one additional year at the end of
the Initial Term ("Extended Term") unless, not later than 90 days preceding such
date, the Employee or
<PAGE> 2
the Company shall give written notice to the other that the Employee or the
Company does not wish to extend the term of employment for such additional
one-year period.
3. Compensation.
3.1 Salary. As full compensation for all services to be rendered
pursuant to this Agreement, the Company agrees to pay the Employee (or, in the
event the Employee performs services hereunder on behalf of a subsidiary of the
Company, the Company shall cause such subsidiary to pay the Employee, without
duplication and only to the extent not paid by the Company or any other
subsidiary), during the term, a salary at the fixed rate of One hundred eighty
thousand dollars ($180,000.00) per annum or such greater amount as shall be
approved by the Board of Directors in its sole discretion (the "Base Salary"),
payable in accordance with the payroll policies of the Company as from time to
time in effect, less such deductions as shall be required to be withheld by
applicable law and regulations. Additionally, Employee shall be entitled to
receive 990,000 stock options previously granted pursuant to the attached stock
option agreement. Vesting, as further described in the attached option
agreement, is subject to the company receiving a minimum of $7,000,000.00 in
equity financing. Additionally, an increase in salary to two hundred and forty
thousand dollars ($240,000.00) shall be effective upon the first pay period
immediately following the receipt of the equity financing. In the event the
Company elects not to extend the term of employment (Extended Term) following
the Initial Term, all remaining options granted in conjunction with this
agreement shall vest on the Employee's last day of employment.
3.2 Bonuses. During the term, the Employee shall be entitled to receive
a bonus (the Bonus.) as a participant in the Company's incentive compensation
arrangement as approved by the Board of Directors on an annual basis.
3.3 Expenses. Subject to such policies as may from time to time be
established by the Board of Directors, applicable to its employees generally,
the Company shall pay or reimburse the Employee for all reasonable expenses
actually incurred or paid by him during the term in the performance of his
services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as the Company may require;
Provided, however, that the maximum amount available for such expenses during
any period may be fixed in advance by the Board of Directors of the Company.
3.4 Participation in Benefit Plans. During the term, the Employee shall
participate in each group life, hospitalization or disability insurance plan,
health program, and any other similar benefit plan and any stock option plan of
the Company which is available to other employees of the Company and for which
he qualifies. Employee understands such benefit plans may be modified from time
to time under guidelines established by the Board of Directors.
<PAGE> 3
3.5 Company Automobile. During the term, Employee shall be entitled to
a car allowance or use of a Company automobile consistent with the guidelines
for employees as set forth in the Company's Policies and Procedures. Employee
agrees to maintain such records and documentation, including calculations of
compensation attributable to the personal use of a Company automobile, as may be
required from time to time by the Company's Policies and Procedures or the
Internal Revenue Service.
3.6 Stock Options. During the term, Employee shall be entitled to
participate in such stock option plans as may be established from time to time
by the Board of Directors of the Company. All stock option awards must be
approved by the Board of Directors' Compensation Committee.
3.7 Limitations Imposed by Law. The provisions of this Agreement
relating to the compensation to be paid to the Employee shall be subject to any
limitations provided by law or regulation that may from time to time limit the
compensation payable to the Employee.
4. Termination.
4.1 Termination Upon Death. If the Employee shall die during the term,
this Agreement shall terminate except that the Employee's beneficiaries shall be
entitled to receive the Employee's Base Salary for a period of six (6) months
following the last day of the month in which his death occurs.
4.2 Termination Upon Disability. If, during the term, the Employee
shall become physically or mentally disabled, whether totally or partially, so
that he is unable substantially to perform his services hereunder for (i) a
period of six (6) consecutive months, or (ii) for shorter periods aggregating
six months during any twelve (12) month period, the Company may, at any time
after the last day of the six (6) consecutive months of disability, or the day
on which the shorter periods of disability shall have equaled an aggregate of
six (6) months, by written notice to the Employee, but before the Employee has
recovered from such disability, terminate the term of the Employee's employment
hereunder. Notwithstanding such disability, the Company shall continue to pay
the Employee sixty percent (60%) of his Base Salary through the date of such
termination, and following the end of the fiscal year in which such termination
occurs, the amount of incentive or other bonuses, if any, that would otherwise
have been payable to Employee under Section 3.2 and which have accrued through
the end of the fiscal year in which such termination occurs as if the Employee
had been employed by the Company for the entire fiscal year.
4.3 Termination Without Cause. If at any time during the term, Employee
shall be terminated by the Company for reasons other than cause (as defined in
Paragraph 4.4), Employee or Employee's estate will be entitled to receive as
severance the continuation
<PAGE> 4
of Base Salary, at its then current rate, through and until the later of (i) one
third of the remaining period to the end of the Initial Term, or (ii) a period
of six (6) months from the effective date of termination, but shall not be
entitled to any incentive bonus for the fiscal year during which the effective
date of termination occurs, or any subsequent year. In addition to continuation
of Base Salary, one third of remaining un-vested stock options granted in
conjunction with this employment agreement shall vest on the effective date of
termination.
If Employee's employment shall be terminated during any
Extended Term, for any reason other than cause, Employee shall be entitled to
receive as severance the continuation of Base Salary for a period of three (3)
months from the effective date of termination, but shall not be entitled to any
incentive bonus for the fiscal year during which the effective date of
termination occurs, or any subsequent year.
Notwithstanding the foregoing, any payments to Employee
hereunder, whether during the Initial Term or any Extended Term, shall be
reduced by any compensation (in any form) received for services from any other
source for or during the period which Employee receives any post-termination
compensation hereunder. These severance payments shall be in full settlement of
any claim Employee may have to compensation in any form.
4.4 Termination by the Company for Cause. The Company may, at any time
during the term, terminate for cause (as hereinafter defined) the Employee's
employment hereunder, in which event the Employee shall be entitled to receive
his Base Salary accrued through the effective date of such termination. The
Employee shall have no right to receive any other compensation or benefit
hereunder after the effective date of such termination; provided, however, that
the foregoing shall not affect the Employee's right to receive any compensation
or benefit under the profit sharing/401(k) plans. As used herein, the term for
"cause" shall be deemed to mean and include with respect to the Employee (i)
conduct of the Employee at any time, which has involved criminal dishonesty,
conviction of the Employee of any felony, or of any lesser crime or offense
involving the property of the Company or any of its subsidiaries or affiliates,
significant conflict of interest, serious impropriety, or breach of corporate
duty, misappropriation of any money or other assets or properties of the Company
or its subsidiaries, (ii) willful violation of specific and lawful directions
from the Board of Directors of the Company (which directions must not be
inconsistent with the provisions of this Agreement), failure or refusal to
perform the services customarily performed by an executive officer (and such
failure or refusal continues after a written direction from the Board of
Directors), or expressly required by the terms of this Agreement, or willful
misconduct or gross negligence by the Employee in connection with the
performance of his duties hereunder, (iii) chronic alcoholism or drug addiction,
and (iv) any other acts or conduct inconsistent with the Company's Policies and
Procedures or the standards of loyalty, integrity or care reasonably required by
the Company of its executives.
<PAGE> 5
5. Protection of Confidential Information: Non-Competition.
5.1 Confidential Information. In view of the fact that the Employee's
work for the Company will bring him into close contact with many confidential
affairs of the Company not readily available to the public, and plans for future
developments, the Employee agrees:
5.1.1 To keep and retain in the strictest confidence all confidential
matters of the Company, including, without limitation, all trade "know how",
secrets, customer lists, pricing policies, operational methods, technical
processes, formulae, inventions and research projects, and other business
affairs of the Company, learned by him heretofore or hereafter, and not to
disclose them to anyone outside of the Company, either during or after his
employment with the Company, except in the course of performing his duties
hereunder or with the Company's express written consent;
5.1.2 To execute and fully comply with a confidentiality and rights
agreement or such other similar agreement which may be required by the Company
from time to time, consistent with its Policies and Procedures; and
5.1.3 To deliver promptly to the Company on termination of his
employment by the Company, or at any time the Company may so request, all
memoranda, notes, records, reports, manuals, drawings, blueprints and other
documents (and all copies thereof) to the Company's business and all property
associated therewith, which he may then possess or have under his control.
5.2 Non-Competition. During the term and for a period of not less than
six (6) months following the termination of such period, or for any period in
which Employee would have been eligible to receive Base Salary, the Employee
shall not in any state of the United States, or any other foreign country in
which the Company shall then be doing business, directly or indirectly, enter
the employ of, or render any services to, any person, firm or corporation
engaged in any business competitive with the business of the Company or of any
of its subsidiaries or affiliates; he shall not engage in such business on his
own account; and he shall not become interested in any such business, directly
or indirectly; as an individual, partner, shareholder, director, officer,
principal, agent, lender, employee, trustee, consultant, or any other
relationship or capacity; provided, however, that nothing contained in this
Paragraph 5.2 shall be deemed to prohibit the Employee from acquiring, solely as
an investment, not more than 1% of the shares of capital stock of any public
corporation.
In addition, Employee agrees that he shall not during such period
solicit, induce or attempt to solicit or induce any employee of the Company to
terminate such employee's employment with the Company in order to become
employed by any other person or entity, without the consent of a majority of the
Company's Board of Directors.
<PAGE> 6
5.3 Remedies of the Company Upon Employee Breach. If the Employee
commits a breach, or threatens to commit a breach, of any of the provisions of
Paragraphs 5.1 or 5.2 hereof, the Company shall have the following rights and
remedies:
5.3.1 The right and remedy to have the provisions of this Agreement
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 Company and that money damages may not provide an
adequate remedy to the Company; and
5.3.2 The right and remedy to require the Employee to account for and
pay over to the Company all compensation, profits, monies, accruals, increments
or other benefits (collectively, "Benefits") derived or received by the Employee
as the result of any transactions constituting a breach of any of the provisions
of the Paragraphs 5.1 or 5.2, and the Employee hereby agrees to account for and
pay over such Benefits to the Company.
Each of the rights and remedies of the company shall be independent of
the other, and shall be severally enforceable, and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under the law or in equity.
5.4 Construction and Enforceability.
5.4.1 If any of the covenants contained in Section 5.1 or 5.2, or any
part thereof, is hereafter construed to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants, which shall be
given full effect, without regard to the invalid portions.
5.4.2 If any of the covenants contained in Section 5.1 or 5.2, or any
part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, said provision shall then be
enforceable.
5.5 Enforceability in Jurisdictions. The parties hereto intend to and
hereby confer jurisdiction to enforce the covenants contained in Sections 5.1
and 5.2 upon federal or state courts or the courts of any foreign jurisdiction
within the geographical scope of such covenants. In the event that the courts of
any one or more of such state, federal or foreign jurisdictions shall hold such
covenants wholly unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other state, federal or foreign jurisdictions within the
geographical scope of such covenants, as to breaches of such covenants in such
other
<PAGE> 7
respective jurisdictions, the above covenants as they relate to each state and
foreign country being for this purpose, severable into diverse and independent
covenants.
5.6 Customer Lists. The Employee recognizes and agrees (i) that all
existing lists of customers of the Company, and all lists of customers of the
Company developed during the course of the Employee's employment by the Company,
are and shall be the sole exclusive property of the Company, and that the
Employee neither has nor shall have any right, title or interest therein; (ii)
that such lists of customers are and must continue to be confidential; (iii)
that such lists are not readily accessible to competitors of the Company; (iv)
that the Company's present and future business is and will continue to be of a
type that customers will normally patronize principally one concern; and (v)
that the Company's present and future business relationship with its customers
is and will continue to be of a type which normally continues unless interfered
with by others.
6. Inventions and Patents.
6.1 The Employee agrees that all processes, computer software,
technologies and inventions ("Inventions"), including new contributions,
improvements, ideas and discoveries, whether patentable or not, conceived,
developed, invented or made by him during the term, shall be the exclusive
property of the Company and shall belong to the Company provided that such
Inventions grew out of the Employee's work with the Company or any of its
subsidiaries or affiliates, are related in any manner to the business
(commercial or experimental) of the Company or any of its subsidiaries or
affiliates or are conceived or made on the Company's time or with the use of the
Company's facilities or materials. The Employee shall further: (i) promptly
disclose such Inventions to the Company; (ii) assign to the Company, without
additional compensation, all patent and other rights to such Inventions in the
United States and foreign countries; (iii) sign all papers necessary to carry
out the foregoing; and (iv) give testimony in support of his inventorship.
6.2 If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Employee within two
years after the termination of his employment by the Company, it is to be
presumed that the Invention was conceived or made during the period of the
Employee's employment by the Company.
6.3 The Employee agrees that he will not assert any rights to any
Invention as having been made or acquired by him prior to the date of this
Agreement, except for Inventions, if any, disclosed to the Company in Exhibit A.
All Inventions, Patents and ideas set forth in Exhibit A shall remain the sole
property of Employee.
7. Intellectual Property. The Company shall be the sole owner of all the
products and proceeds of the Employee's services hereunder, including, but not
limited to, all materials, ideas, concepts, formats, suggestions, computer
software, developments, arrangements, packages, programs and other intellectual
properties that the Employee
<PAGE> 8
may acquire, obtain, develop or create in connection with and during the term of
the Employee's employment hereunder, free and clear of any claims by the
Employee (or anyone claiming under the Employee) of any kind or character
whatsoever (other than the Employee's right to receive payments hereunder). The
Employee shall, at the request of the Company, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, or title and interest in or to any such properties.
8. Indemnification. Where, in the determination of the Board of Directors, the
Employee has acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company, the Company will indemnify
the Employee to the maximum extent permitted by applicable law, against all
costs, charges and expenses incurred or sustained by him in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being an employee of the Company or an officer, director or employee of any
subsidiary or affiliate of the Company or any other corporation for which the
Employee serves as an officer, director or employee, at the Company's request.
9. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association then pertaining, in the
County of San Francisco, State of California, and judgment upon the award
rendered by the Arbitrator may be entered in any court having jurisdiction
thereof. The Arbitrator shall be deemed to possess the power to issue mandatory
orders and restraining orders in connection with such arbitration; provided,
however, that nothing in this Article 9 shall be construed so as to deny the
Company the right and power to seek and obtain injunctive relief in a court of
equity for any breach or threatened breach by the Employee of any of his
covenants contained in Articles 5, 6 and 7 hereof.
10. Attorneys Fees. In the event either party hereto commences any action, suit
or other proceeding in law or in equity, or any arbitration, to enforce the
provisions of this Agreement or for any remedy for breach of this Agreement, the
non-prevailing party in such action shall pay the prevailing party's costs and
expenses, including reasonable attorneys' fees incurred in such action or
arbitration proceeding.
11. 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 by registered or certified mail (notices shall
be deemed to have been given on the date sent), as follows (or to such other
address as either party shall designate by notice in writing to the other in
accordance herewith):
11.1 If to the Company, to it at:
c/o Instant Video Technologies, Inc.
<PAGE> 9
500 Sansome Street, Suite 503
San Francisco, CA 94111
Attention: Laura Wagerman
11.2 If to the Employee, to him at:
12. General.
12.1 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely in California.
12.2 Headings. The article and section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.3 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof as of the Effective Date. No
representation, promise or inducement has been made by either party that is not
embodied in this Agreement, and neither party shall be bound by or liable for
any alleged representation, promise or inducement not so set forth.
12.4 Assignability: Successors. This Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee. The Company may
assign its rights, together with its obligations hereunder to any subsidiary or
affiliate Company or in connection with any sale, transfer or other disposition
of all or substantially all of its business or assets; in any event, the
obligations of the Company hereunder shall be binding on its successors or
assigns, whether by assignment to a subsidiary or affiliate of the Company or by
merger, consolidation or acquisition of all or substantially all of its business
or assets.
<PAGE> 10
12.5 Modifications: Waivers. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended and the terms or covenants hereof may
be waived, only by a 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 provision hereof
shall in no manner affect the 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.
13. Subsidiaries and Affiliates. As used herein, the term "subsidiary" shall
mean any corporation or other business entity controlled by the corporation in
question, and the term "affiliate" shall mean and include any corporation or
other business entity controlling, controlled by or under common control with
the corporation in question.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
By: /s/ John Micek
-------------------------------
Title: Secretary
----------------------------
EMPLOYE
/s/ Ricahard Lang
- ---------------------------------
<PAGE> 11
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the______ day of___________ , 1998 (the
"Effective Date") between Instant Video Technologies, Inc. (the "Company"),
a corporation, and David Morgenstein (the "Employee").
WHEREAS, the Company wishes to employ the Employee as its Chief Operating
Officer; and
WHEREAS, the Employee wishes to be employed by the Company in such
position.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT. DUTIES AND ACCEPTANCE
1.1 EMPLOYMENT BY THE COMPANY. The Company hereby employs the Employee for
the term (as defined herein), to render, subject to the following paragraph,
exclusive and full-time services to the Company as Chief Operating Officer of
the Company, subject to the direction of the Company's Board of Directors (the
Board of Directors.), and in connection therewith, to perform such duties as he
shall be directed to perform by the Company's Board of Directors.
1.2 ACCEPTANCE OF EMPLOYMENT BY EMPLOYEE. The Employee hereby accepts such
employment and agrees to render the services described above. The Employee
further agrees to accept election and to serve during all or any part of the
term as an officer or director of the Company and of any subsidiary or affiliate
of the Company (or of any other corporation at the Company's reasonable request)
without any compensation therefor, other than that specified in this Agreement
if elected to any such position by the shareholders or by the Board of Directors
of the Company or of any subsidiary or affiliate (or other corporation), as the
case may be.
1.3 VACATION. The Employee shall be entitled to annual vacation in
accordance with the vacation policy of the Company, as in effect from time to
time.
1.4 TRAVEL. The Employee shall be subject to reasonable travel requirements
as may be necessary or desirable to perform fully his obligations hereunder.
2. TERM OF EMPLOYMENT. THE term of the Employee's employment under this
Agreement (the "Initial Term") shall commence on the Effective Date and shall
continue for twenty-four (24) months from the Effective Date unless sooner
terminated pursuant to Article 4 of this Agreement. The term of the Employee's
employment shall automatically be extended for one additional year at the end of
the Initial Term ("Extended Term") unless, not later than 90 days preceding such
date, the Employee or the Company shall give written notice to the other that
the Employee or
<PAGE> 12
the Company does not wish to extend the term of employment for such additional
one-year period.
3. Compensation.
3.1 Salary. As full compensation for all services to be rendered pursuant
to this Agreement, the Company agrees to pay the Employee (or, in the event the
Employee performs services hereunder on behalf of a subsidiary of the Company,
the Company shall cause such subsidiary to pay the Employee, without duplication
and only to the extent not paid by the Company or any other subsidiary), during
the term, a salary at the fixed rate of ninety thousand dollars ($90,000.00) per
annum or such greater amount as shall be approved by the Board of Directors in
its sole discretion (the "Base Salary"), payable in accordance with the payroll
policies of the Company as from time to time in effect, less such deductions as
shall be required to be withheld by applicable law and regulations.
Additionally, Employee shall be entitled to receive 320,000 stock options
previously granted pursuant to the attached stock option agreement. Vesting, as
further described in the attached option agreement, is subject to the company
receiving a minimum of $7,000,000.00 in equity financing. Additionally, an
increase in salary to one hundred and twenty thousand dollars ($120,000.00)
shall be effective upon the first pay period immediately following the receipt
of the equity financing. In the event the Company elects not to extend the term
of employment (Extended Term) following the Initial Term, all remaining options
granted in conjunction with this agreement shall vest on the Employee's last day
of employment.
3.2 Bonuses. During the term, the Employee shall be entitled to receive a
bonus (the Bonus.) as a participant in the Company's incentive compensation
arrangement as approved by the Board of Directors on an annual basis.
3.3 Expenses. Subject to such policies as may from time to time be
established by the Board of Directors, applicable to its employees generally,
the Company shall pay or reimburse the Employee for all reasonable expenses
actually incurred or paid by him during the term in the performance of his
services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as the Company may require;
Provided, however, that the maximum amount available for such expenses during
any period may be fixed in advance by the Board of Directors of the Company.
3.4 Participation in Benefit Plans. During the term, the Employee shall
participate in each group life, hospitalization or disability insurance plan,
health program, and any other similar benefit plan and any stock option plan of
the Company which is available to other employees of the Company and for which
he qualifies. Employee understands such benefit plans may be modified from time
to time under guidelines established by the Board of Directors.
<PAGE> 13
3.5 Company Automobile. During the term, Employee may be entitled to a car
allowance or use of a Company automobile consistent with the guidelines for
employees as set forth in the Company's Policies and Procedures. Employee agrees
to maintain such records and documentation, including calculations of
compensation attributable to the personal use of a Company automobile, as may be
required from time to time by the Company's Policies and Procedures or the
Internal Revenue Service.
3.6 Stock Options. During the term, Employee shall be entitled to
participate in such stock option plans as may be established from time to time
by the Board of Directors of the Company. All stock option awards must be
approved by the Board of Directors' Compensation Committee.
3.7 Limitations Imposed by Law. The provisions of this Agreement relating
to the compensation to be paid to the Employee shall be subject to any
limitations provided by law or regulation that may from time to time limit the
compensation payable to the Employee.
4. Termination.
4.1 Termination Upon Death. If the Employee shall die during the term, this
Agreement shall terminate except that the Employee's beneficiaries shall be
entitled to receive the Employee's Base Salary for a period of six (6) months
following the last day of the month in which his death occurs.
4.2 Termination Upon Disability. If, during the term, the Employee shall
become physically or mentally disabled, whether totally or partially, so that he
is unable substantially to perform his services hereunder for (i) a period of
six (6) consecutive months, or (ii) for shorter periods aggregating six months
during any twelve (12) month period, the Company may, at any time after the last
day of the six (6) consecutive months of disability, or the day on which the
shorter periods of disability shall have equaled an aggregate of six (6) months,
by written notice to the Employee, but before the Employee has recovered from
such disability, terminate the term of the Employee's employment hereunder.
Notwithstanding such disability, the Company shall continue to pay the Employee
sixty percent (60%) of his Base Salary through the date of such termination, and
following the end of the fiscal year in which such termination occurs, the
amount of incentive or other bonuses, if any, that would otherwise have been
payable to Employee under Section 3.2 and which have accrued through the end of
the fiscal year in which such termination occurs as if the Employee had been
employed by the Company for the entire fiscal year.
4.3 Termination Without Cause. If at any time during the term, Employee
shall be terminated by the Company for reasons other than cause (as defined in
Paragraph 4.4), Employee or Employee's estate will be entitled to receive as
severance the continuation of Base Salary, at its then current rate, through and
until the later of (i) one third of the
<PAGE> 14
remaining period to the end of the Initial Term, or (ii) a period of six (6)
months from the effective date of termination, but shall not be entitled to any
incentive bonus for the fiscal year during which the effective date of
termination occurs, or any subsequent year. In addition to continuation of Base
Salary, one third of remaining un-vested stock options granted in conjunction
with this employment agreement shall vest on the effective date of termination.
If Employee's employment shall be terminated during any Extended Term, for
any reason other than cause, Employee shall be entitled to receive as severance
the continuation of Base Salary for a period of three (3) months from the
effective date of termination, but shall not be entitled to any incentive bonus
for the fiscal year during which the effective date of termination occurs, or
any subsequent year.
Notwithstanding the foregoing, any payments to Employee hereunder, whether
during the Initial Term or any Extended Term, shall be reduced by any
compensation (in any form) received for services from any other source for or
during the period which Employee receives any post-termination compensation
hereunder. These severance payments shall be in full settlement of any claim
Employee may have to compensation in any form.
4.4 Termination by the Company for Cause. The Company may, at any time
during the term, terminate for cause (as hereinafter defined) the Employee's
employment hereunder, in which event the Employee shall be entitled to receive
his Base Salary accrued through the effective date of such termination. The
Employee shall have no right to receive any other compensation or benefit
hereunder after the effective date of such termination; provided, however, that
the foregoing shall not affect the Employee's right to receive any compensation
or benefit under the profit sharing/401(k) plans. As used herein, the term for
"cause" shall be deemed to mean and include with respect to the Employee (i)
conduct of the Employee at any time, which has involved criminal dishonesty,
conviction of the Employee of any felony, or of any lesser crime or offense
involving the property of the Company or any of its subsidiaries or affiliates,
significant conflict of interest, serious impropriety, or breach of corporate
duty, misappropriation of any money or other assets or properties of the Company
or its subsidiaries, (ii) willful violation of specific and lawful directions
from the Board of Directors of the Company (which directions must not be
inconsistent with the provisions of this Agreement), failure or refusal to
perform the services customarily performed by an executive officer (and such
failure or refusal continues after a written direction from the Board of
Directors), or expressly required by the terms of this Agreement, or willful
misconduct or gross negligence by the Employee in connection with the
performance of his duties hereunder, (iii) chronic alcoholism or drug addiction,
and (iv) any other acts or conduct inconsistent with the Company's Policies and
Procedures or the standards of loyalty, integrity or care reasonably required by
the Company of its executives.
5. Protection of Confidential Information: Non-Competition.
<PAGE> 15
5.1 Confidential Information. In view of the fact that the Employee's work
for the Company will bring him into close contact with many confidential affairs
of the Company not readily available to the public, and plans for future
developments, the Employee agrees:
5.1.1 To keep and retain in the strictest confidence all confidential
matters of the Company, including, without limitation, all trade "know how",
secrets, customer lists, pricing policies, operational methods, technical
processes, formulae, inventions and research projects, and other business
affairs of the Company, learned by him heretofore or hereafter, and not to
disclose them to anyone outside of the Company, either during or after his
employment with the Company, except in the course of performing his duties
hereunder or with the Company's express written consent;
5.1.2 To execute and fully comply with a confidentiality and rights
agreement or such other similar agreement which may be required by the Company
from time to time, consistent with its Policies and Procedures; and
5.1.3 To deliver promptly to the Company on termination of his
employment by the Company, or at any time the Company may so request, all
memoranda, notes, records, reports, manuals, drawings, blueprints and other
documents (and all copies thereof) to the Company's business and all property
associated therewith, which he may then possess or have under his control.
5.2 Non-Competition. During the term and for a period of not less than six
(6) months following the termination of such period, or for any period in which
Employee would have been eligible to receive Base Salary, the Employee shall not
in any state of the United States, or any other foreign country in which the
Company shall then be doing business, directly or indirectly, enter the employ
of, or render any services to, any person, firm or corporation engaged in any
business competitive with the business of the Company or of any of its
subsidiaries or affiliates; he shall not engage in such business on his own
account; and he shall not become interested in any such business, directly or
indirectly; as an individual, partner, shareholder, director, officer,
principal, agent, lender, employee, trustee, consultant, or any other
relationship or capacity; provided, however, that nothing contained in this
Paragraph 5.2 shall be deemed to prohibit the Employee from acquiring, solely as
an investment, not more than 1% of the shares of capital stock of any public
corporation.
In addition, Employee agrees that he shall not during such period solicit,
induce or attempt to solicit or induce any employee of the Company to terminate
such employee's employment with the Company in order to become employed by any
other person or entity, without the consent of a majority of the Company's Board
of Directors.
5.3 Remedies of the Company Upon Employee Breach. If the Employee commits a
breach, or threatens to commit a breach, of any of the provisions of
<PAGE> 16
Paragraphs 5.1 or 5.2 hereof, the Company shall have the following rights and
remedies:
5.3.1 The right and remedy to have the provisions of this Agreement
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 Company and that money damages may not provide an
adequate remedy to the Company; and
5.3.2 The right and remedy to require the Employee to account for and
pay over to the Company all compensation, profits, monies, accruals, increments
or other benefits (collectively, "Benefits") derived or received by the Employee
as the result of any transactions constituting a breach of any of the provisions
of the Paragraphs 5.1 or 5.2, and the Employee hereby agrees to account for and
pay over such Benefits to the Company.
Each of the rights and remedies of the company shall be independent of
the other, and shall be severally enforceable, and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under the law or in equity.
5.4 Construction and Enforceability.
5.4.1 If any of the covenants contained in Section 5.1 or 5.2, or any
part thereof, is hereafter construed to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants, which shall be
given full effect, without regard to the invalid portions.
5.4.2 If any of the covenants contained in Section 5.1 or 5.2, or any
part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, said provision shall then be
enforceable.
5.5 Enforceability in Jurisdictions. The parties hereto intend to and
hereby confer jurisdiction to enforce the covenants contained in Sections 5.1
and 5.2 upon federal or state courts or the courts of any foreign jurisdiction
within the geographical scope of such covenants. In the event that the courts of
any one or more of such state, federal or foreign jurisdictions shall hold such
covenants wholly unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other state, federal or foreign jurisdictions within the
geographical scope of such covenants, as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they relate to each state
and foreign country being for this purpose, severable into diverse and
independent covenants.
<PAGE> 17
5.6 Customer Lists. The Employee recognizes and agrees (i) that all
existing lists of customers of the Company, and all lists of customers of the
Company developed during the course of the Employee's employment by the Company,
are and shall be the sole exclusive property of the Company, and that the
Employee neither has nor shall have any right, title or interest therein; (ii)
that such lists of customers are and must continue to be confidential; (iii)
that such lists are not readily accessible to competitors of the Company; (iv)
that the Company's present and future business is and will continue to be of a
type that customers will normally patronize principally one concern; and (v)
that the Company's present and future business relationship with its customers
is and will continue to be of a type which normally continues unless interfered
with by others.
6. Inventions and Patents.
6.1 The Employee agrees that all processes, computer software, technologies
and inventions ("Inventions"), including new contributions, improvements, ideas
and discoveries, whether patentable or not, conceived, developed, invented or
made by him during the term, shall be the exclusive property of the Company and
shall belong to the Company provided that such Inventions grew out of the
Employee's work with the Company or any of its subsidiaries or affiliates, are
related in any manner to the business (commercial or experimental) of the
Company or any of its subsidiaries or affiliates or are conceived or made on the
Company's time or with the use of the Company's facilities or materials. The
Employee shall further: (i) promptly disclose such Inventions to the Company;
(ii) assign to the Company, without additional compensation, all patent and
other rights to such Inventions in the United States and foreign countries;
(iii) sign all papers necessary to carry out the foregoing; and (iv) give
testimony in support of his inventorship.
6.2 If any Invention is described in a patent application or is disclosed
to third parties, directly or indirectly, by the Employee within two years after
the termination of his employment by the Company, it is to be presumed that the
Invention was conceived or made during the period of the Employee's employment
by the Company.
6.3 The Employee agrees that he will not assert any rights to any Invention
as having been made or acquired by him prior to the date of this Agreement,
except for Inventions, if any, disclosed to the Company in Exhibit A. All
Inventions, Patents and ideas set forth in Exhibit A shall remain the sole
property of Employee.
7. Intellectual Property. The Company shall be the sole owner of all the
products and proceeds of the Employee's services hereunder, including, but not
limited to, all materials, ideas, concepts, formats, suggestions, computer
software, developments, arrangements, packages, programs and other intellectual
properties that the Employee may acquire, obtain, develop or create in
connection with and during the term of the Employee's employment hereunder, free
and clear of any claims by the Employee (or
<PAGE> 18
anyone claiming under the Employee) of any kind or character whatsoever (other
than the Employee's right to receive payments hereunder). The Employee shall, at
the request of the Company, execute such assignments, certificates or other
instruments as the Company may from time to time deem necessary or desirable to
evidence, establish, maintain, perfect, protect, enforce or defend its right, or
title and interest in or to any such properties.
8. Indemnification. Where, in the determination of the Board of Directors, the
Employee has acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company, the Company will indemnify
the Employee to the maximum extent permitted by applicable law, against all
costs, charges and expenses incurred or sustained by him in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being an employee of the Company or an officer, director or employee of any
subsidiary or affiliate of the Company or any other corporation for which the
Employee serves as an officer, director or employee, at the Company's request.
9. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association then pertaining, in the
County of San Francisco, State of California, and judgment upon the award
rendered by the Arbitrator may be entered in any court having jurisdiction
thereof. The Arbitrator shall be deemed to possess the power to issue mandatory
orders and restraining orders in connection with such arbitration; provided,
however, that nothing in this Article 9 shall be construed so as to deny the
Company the right and power to seek and obtain injunctive relief in a court of
equity for any breach or threatened breach by the Employee of any of his
covenants contained in Articles 5, 6 and 7 hereof.
10. Attorneys Fees. In the event either party hereto commences any action, suit
or other proceeding in law or in equity, or any arbitration, to enforce the
provisions of this Agreement or for any remedy for breach of this Agreement, the
non-prevailing party in such action shall pay the prevailing party's costs and
expenses, including reasonable attorneys' fees incurred in such action or
arbitration proceeding.
11. 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 by registered or certified mail (notices shall
be deemed to have been given on the date sent), as follows (or to such other
address as either party shall designate by notice in writing to the other in
accordance herewith):
11.1 If to the Company, to it at:
c/o Instant Video Technologies, Inc.
500 Sansome Street, Suite 503
San Francisco, CA 94111
Attention: Laura Wagerman
<PAGE> 19
11.2 If to the Employee, to him at:
David Morgenstein
350 Hermann Street
San Francisco, CA 94117
12. General.
12.1 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely in California.
12.2 Headings. The article and section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.3 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof as of the Effective Date. No
representation, promise or inducement has been made by either party that is not
embodied in this Agreement, and neither party shall be bound by or liable for
any alleged representation, promise or inducement not so set forth.
12.4 Assignability: Successors. This Agreement, and the Employee's rights
and obligations hereunder, may not be assigned by the Employee. The Company may
assign its rights, together with its obligations hereunder to any subsidiary or
affiliate Company or in connection with any sale, transfer or other disposition
of all or substantially all of its business or assets; in any event, the
obligations of the Company hereunder shall be binding on its successors or
assigns, whether by assignment to a subsidiary or affiliate of the Company or by
merger, consolidation or acquisition of all or substantially all of its business
or assets.
12.5 Modifications: Waivers. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties hereto,
or in the case of a
<PAGE> 20
waiver, by the party waiving compliance. The failure of either party at any time
or times to require performance of any provision hereof shall in no manner
affect the 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.
13. Subsidiaries and Affiliates. As used herein, the term "subsidiary" shall
mean any corporation or other business entity controlled by the corporation in
question, and the term "affiliate" shall mean and include any corporation or
other business entity controlling, controlled by or under common control with
the corporation in question.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
By: /s/ Richard Lang
---------------------------------
Title: Chairman, CEO
------------------------------
EMPLOYEE
/s/ David Morgenstein
- ------------------------------------
<PAGE> 21
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the______ day of___________ , 1998 (the
"Effective Date") between Instant Video Technologies, Inc. (the "Company"),
a corporation, and David W. Genin (the "Employee").
WHEREAS, the Company wishes to employ the Employee as its Vice President,
Business Development; and
WHEREAS, the Employee wishes to be employed by the Company in such
position.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT. DUTIES AND ACCEPTANCE
1.1 EMPLOYMENT BY THE COMPANY. The Company hereby employs the Employee for
the term (as defined herein), to render, subject to the following paragraph,
full-time services to the Company as Vice President, Business Development of the
Company, subject to the direction of the Company's Board of Directors (the Board
of Directors.), and in connection therewith, to perform such duties as he shall
be directed to perform by the Company's Board of Directors. Employee shall be
permitted to contract with client(s) for no more than four days per months
provided such client(s) do not represent a conflict with IVT's business.
1.2 ACCEPTANCE OF EMPLOYMENT BY EMPLOYEE. The Employee hereby accepts such
employment and agrees to render the services described above. The Employee
further agrees to accept election and to serve during all or any part of the
term as an officer or director of the Company and of any subsidiary or affiliate
of the Company (or of any other corporation at the Company's reasonable request)
without any compensation therefor, other than that specified in this Agreement
if elected to any such position by the shareholders or by the Board of Directors
of the Company or of any subsidiary or affiliate (or other corporation), as the
case may be.
1.3 VACATION. The Employee shall be entitled to annual vacation in
accordance with the vacation policy of the Company, as in effect from time to
time.
1.4 TRAVEL. The Employee shall be subject to reasonable travel requirements
as may be necessary or desirable to perform fully his obligations hereunder.
2. TERM OF EMPLOYMENT. The term of the Employee's employment under this
Agreement (the "Initial Term") shall commence on the Effective Date and shall
continue for twenty-four (24) months from the Effective Date unless sooner
terminated pursuant to Article 4 of this Agreement. The term of the Employee's
employment shall
<PAGE> 22
automatically be extended for one additional year at the end of the Initial Term
("Extended Term") unless, not later than 90 days preceding such date, the
Employee or the Company shall give written notice to the other that the Employee
or the Company does not wish to extend the term of employment for such
additional one-year period.
3. Compensation.
3.1 Salary. As full compensation for all services to be rendered pursuant
to this Agreement, the Company agrees to pay the Employee (or, in the event the
Employee performs services hereunder on behalf of a subsidiary of the Company,
the Company shall cause such subsidiary to pay the Employee, without duplication
and only to the extent not paid by the Company or any other subsidiary), during
the term, a salary at the fixed rate of One hundred and fifty-six thousand
dollars ($156,000.00) per annum or such greater amount as shall be approved by
the Board of Directors in its sole discretion (the "Base Salary"), payable in
accordance with the payroll policies of the Company as from time to time in
effect, less such deductions as shall be required to be withheld by applicable
law and regulations. Additionally, Employee shall be entitled to receive 320,000
stock options previously granted pursuant to the attached stock option
agreement. The vesting as further described in the attached option agreement, is
subject to the company receiving a minimum of $7,000,000 in equity financing. In
the event the Company elects not to extend the term of employment (Extended
Term) following the Initial Term, all remaining options granted in conjunction
with this agreement shall vest on the Employee's last day of employment.
3.2 Bonuses. During the term, the Employee shall be entitled to receive a
bonus (the Bonus.) as a participant in the Company's incentive compensation
arrangement as approved by the Board of Directors on an annual basis.
3.3 Expenses. Subject to such policies as may from time to time be
established by the Board of Directors, applicable to its employees generally,
the Company shall pay or reimburse the Employee for all reasonable expenses
actually incurred or paid by him during the term in the performance of his
services under this Agreement, upon presentation of expense statements or
vouchers or such other supporting information as the Company may require;
Provided, however, that the maximum amount available for such expenses during
any period may be fixed in advance by the Board of Directors of the Company.
3.4 Participation in Benefit Plans. During the term, the Employee shall
participate in each group life, hospitalization or disability insurance plan,
health program, and any other similar benefit plan and any stock option plan of
the Company which is available to other employees of the Company and for which
he qualifies. Employee understands such benefit plans may be modified from time
to time under guidelines established by the Board of Directors.
<PAGE> 23
3.5 Company Automobile. During the term, Employee may be entitled to a car
allowance or use of a Company automobile consistent with the guidelines for
employees as set forth in the Company's Policies and Procedures. Employee agrees
to maintain such records and documentation, including calculations of
compensation attributable to the personal use of a Company automobile, as may be
required from time to time by the Company's Policies and Procedures or the
Internal Revenue Service.
3.6 Stock Options. During the term, Employee shall be entitled to
participate in such stock option plans as may be established from time to time
by the Board of Directors of the Company. All stock option awards must be
approved by the Board of Directors' Compensation Committee.
3.7 Limitations Imposed by Law. The provisions of this Agreement relating
to the compensation to be paid to the Employee shall be subject to any
limitations provided by law or regulation that may from time to time limit the
compensation payable to the Employee.
4. Termination.
4.1 Termination Upon Death. If the Employee shall die during the term, this
Agreement shall terminate except that the Employee's beneficiaries shall be
entitled to receive the Employee's Base Salary for a period of six (6) months
following the last day of the month in which his death occurs.
4.2 Termination Upon Disability. If, during the term, the Employee shall
become physically or mentally disabled, whether totally or partially, so that he
is unable substantially to perform his services hereunder for (i) a period of
six (6) consecutive months, or (ii) for shorter periods aggregating six months
during any twelve (12) month period, the Company may, at any time after the last
day of the six (6) consecutive months of disability, or the day on which the
shorter periods of disability shall have equaled an aggregate of six (6) months,
by written notice to the Employee, but before the Employee has recovered from
such disability, terminate the term of the Employee's employment hereunder.
Notwithstanding such disability, the Company shall continue to pay the Employee
sixty percent (60%) of his Base Salary through the date of such termination, and
following the end of the fiscal year in which such termination occurs, the
amount of incentive or other bonuses, if any, that would otherwise have been
payable to Employee under Section 3.2 and which have accrued through the end of
the fiscal year in which such termination occurs as if the Employee had been
employed by the Company for the entire fiscal year.
4.3 Termination Without Cause. If at any time during the term, Employee
shall be terminated by the Company for reasons other than cause (as defined in
Paragraph 4.4), Employee or Employee's estate will be entitled to receive as
severance the continuation of Base Salary, at its then current rate, through and
until the later of (i) one third of the
<PAGE> 24
remaining period to the end of the Initial Term, or (ii) a period of six (6)
months from the effective date of termination, but shall not be entitled to any
incentive bonus for the fiscal year during which the effective date of
termination occurs, or any subsequent year. In addition to continuation of Base
Salary, one third of remaining un-vested stock options granted in conjunction
with this employment agreement shall vest on the effective date of termination.
If Employee's employment shall be terminated during any Extended Term, for
any reason other than cause, Employee shall be entitled to receive as severance
the continuation of Base Salary for a period of three (3) months from the
effective date of termination, but shall not be entitled to any incentive bonus
for the fiscal year during which the effective date of termination occurs, or
any subsequent year.
Notwithstanding the foregoing, any payments to Employee hereunder, whether
during the Initial Term or any Extended Term, shall be reduced by any
compensation (in any form) received for services from any other source for or
during the period which Employee receives any post-termination compensation
hereunder. These severance payments shall be in full settlement of any claim
Employee may have to compensation in any form.
4.4 Termination by the Company for Cause. The Company may, at any time
during the term, terminate for cause (as hereinafter defined) the Employee's
employment hereunder, in which event the Employee shall be entitled to receive
his Base Salary accrued through the effective date of such termination. The
Employee shall have no right to receive any other compensation or benefit
hereunder after the effective date of such termination; provided, however, that
the foregoing shall not affect the Employee's right to receive any compensation
or benefit under the profit sharing/401(k) plans. As used herein, the term for
"cause" shall be deemed to mean and include with respect to the Employee (i)
conduct of the Employee at any time, which has involved criminal dishonesty,
conviction of the Employee of any felony, or of any lesser crime or offense
involving the property of the Company or any of its subsidiaries or affiliates,
significant conflict of interest, serious impropriety, or breach of corporate
duty, misappropriation of any money or other assets or properties of the Company
or its subsidiaries, (ii) willful violation of specific and lawful directions
from the Board of Directors of the Company (which directions must not be
inconsistent with the provisions of this Agreement), failure or refusal to
perform the services customarily performed by an executive officer (and such
failure or refusal continues after a written direction from the Board of
Directors), or expressly required by the terms of this Agreement, or willful
misconduct or gross negligence by the Employee in connection with the
performance of his duties hereunder, (iii) chronic alcoholism or drug addiction,
and (iv) any other acts or conduct inconsistent with the Company's Policies and
Procedures or the standards of loyalty, integrity or care reasonably required by
the Company of its executives.
5. Protection of Confidential Information: Non-Competition.
<PAGE> 25
5.1 Confidential Information. In view of the fact that the Employee's work
for the Company will bring him into close contact with many confidential affairs
of the Company not readily available to the public, and plans for future
developments, the Employee agrees:
5.1.1 To keep and retain in the strictest confidence all confidential
matters of the Company, including, without limitation, all trade "know how",
secrets, pricing policies, operational methods, technical processes, formulae,
inventions and research projects, and other business affairs of the Company,
learned by him heretofore or hereafter, and not to disclose them to anyone
outside of the Company, either during or after his employment with the Company,
except in the course of performing his duties hereunder or with the Company's
express written consent;
5.1.2 To execute and fully comply with a confidentiality and rights
agreement or such other similar agreement which may be required by the Company
from time to time, consistent with its Policies and Procedures; and
5.1.3 To deliver promptly to the Company on termination of his
employment by the Company, or at any time the Company may so request, all
memoranda, notes, records, reports, manuals, drawings, blueprints and other
documents (and all copies thereof) to the Company's business and all property
associated therewith, which he may then possess or have under his control.
5.2 Non-Competition. During the term and for a period of not less than
six (6) months following the termination of such period, or for any period in
which Employee would have been eligible to receive Base Salary, the Employee
shall not in any state of the United States, or any other foreign country in
which the Company shall then be doing business, directly or indirectly, enter
the employ of, or render any services to, any person, firm or corporation
engaged in any business competitive with the business of the Company or of any
of its subsidiaries or affiliates; he shall not engage in such business on his
own account; and he shall not become interested in any such business, directly
or indirectly; as an individual, partner, shareholder, director, officer,
principal, agent, lender, employee, trustee, consultant, or any other
relationship or capacity; provided, however, that nothing contained in this
Paragraph 5.2 shall be deemed to prohibit the Employee from acquiring, solely as
an investment, not more than 1% of the shares of capital stock of any public
corporation.
In addition, Employee agrees that he shall not during such period
solicit, induce or attempt to solicit or induce any employee of the Company to
terminate such employee's employment with the Company in order to become
employed by any other person or entity, without the consent of a majority of the
Company's Board of Directors.
5.3 Remedies of the Company Upon Employee Breach. If the Employee
commits a breach, or threatens to commit a breach, of any of the provisions of
<PAGE> 26
Paragraphs 5.1 or 5.2 hereof, the Company shall have the following rights and
remedies:
5.3.1 The right and remedy to have the provisions of this Agreement
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 Company and that money damages may not provide an
adequate remedy to the Company; and
5.3.2 The right and remedy to require the Employee to account for and
pay over to the Company all compensation, profits, monies, accruals, increments
or other benefits (collectively, "Benefits") derived or received by the Employee
as the result of any transactions constituting a breach of any of the provisions
of the Paragraphs 5.1 or 5.2, and the Employee hereby agrees to account for and
pay over such Benefits to the Company.
Each of the rights and remedies of the company shall be independent of
the other, and shall be severally enforceable, and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under the law or in equity.
5.4 Construction and Enforceability.
5.4.1 If any of the covenants contained in Section 5.1 or 5.2, or any
part thereof, is hereafter construed to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants, which shall be
given full effect, without regard to the invalid portions.
5.4.2 If any of the covenants contained in Section 5.1 or 5.2, or any
part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or area of
such provision and, in its reduced form, said provision shall then be
enforceable.
5.5 Enforceability in Jurisdictions. The parties hereto intend to and
hereby confer jurisdiction to enforce the covenants contained in Sections 5.1
and 5.2 upon federal or state courts or the courts of any foreign jurisdiction
within the geographical scope of such covenants. In the event that the courts of
any one or more of such state, federal or foreign jurisdictions shall hold such
covenants wholly unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect the Company's right to the relief provided above in the
courts of any other state, federal or foreign jurisdictions within the
geographical scope of such covenants, as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they relate to each state
and foreign country being for this purpose, severable into diverse and
independent covenants.
<PAGE> 27
5.6 Customer Lists. The Employee recognizes and agrees (i) that all
existing lists of customers of the Company (with the exception of lists of names
provided by Employee at the commencement of his work for the Company), and all
lists of customers of the Company developed during the course of the Employee's
employment or consulting period by the Company, are and shall be the sole
exclusive property of the Company, and that the Employee neither has nor shall
have any right, title or interest therein; (ii) that such lists of customers are
and must continue to be confidential; (iii) that such lists are not readily
accessible to competitors of the Company; (iv) that the Company's present and
future business is and will continue to be of a type that customers will
normally patronize principally one concern; and (v) that the Company's present
and future business relationship with its customers is and will continue to be
of a type which normally continues unless interfered with by others.
6. Inventions and Patents.
6.1 The Employee agrees that all processes, computer software, technologies
and inventions ("Inventions"), including new contributions, improvements, ideas
and discoveries, whether patentable or not, conceived, developed, invented or
made by him during the term, shall be the exclusive property of the Company and
shall belong to the Company provided that such Inventions grew out of the
Employee's work with the Company or any of its subsidiaries or affiliates, are
related in any manner to the business (commercial or experimental) of the
Company or any of its subsidiaries or affiliates or are conceived or made on the
Company's time or with the use of the Company's facilities or materials. The
Employee shall further: (i) promptly disclose such Inventions to the Company;
(ii) assign to the Company, without additional compensation, all patent and
other rights to such Inventions in the United States and foreign countries;
(iii) sign all papers necessary to carry out the foregoing; and (iv) give
testimony in support of his inventorship.
6.2 If any Invention is described in a patent application or is disclosed
to third parties, directly or indirectly, by the Employee within two years after
the termination of his employment by the Company, it is to be presumed that the
Invention was conceived or made during the period of the Employee's employment
by the Company.
6.3 The Employee agrees that he will not assert any rights to any Invention
as having been made or acquired by him prior to the date of this Agreement,
except for Inventions, if any, disclosed to the Company in Exhibit A. All
Inventions, Patents and ideas set forth in Exhibit A shall remain the sole
property of Employee.
7. Intellectual Property. The Company shall be the sole owner of all the
products and proceeds of the Employee's services hereunder, including, but not
limited to, all materials, ideas, concepts, formats, suggestions, computer
software, developments, arrangements, packages, programs and other intellectual
properties that the Employee may acquire, obtain, develop or create in
connection with and during the term of the
<PAGE> 28
Employee's employment hereunder, free and clear of any claims by the Employee
(or anyone claiming under the Employee) of any kind or character whatsoever
(other than the Employee's right to receive payments hereunder). The Employee
shall, at the request of the Company, execute such assignments, certificates or
other instruments as the Company may from time to time deem necessary or
desirable to evidence, establish, maintain, perfect, protect, enforce or defend
its right, or title and interest in or to any such properties.
8. Indemnification. Where, in the determination of the Board of Directors, the
Employee has acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company, the Company will indemnify
the Employee to the maximum extent permitted by applicable law, against all
costs, charges and expenses incurred or sustained by him in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being an employee of the Company or an officer, director or employee of any
subsidiary or affiliate of the Company or any other corporation for which the
Employee serves as an officer, director or employee, at the Company's request.
9. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association then pertaining, in the
County of San Francisco, State of California, and judgment upon the award
rendered by the Arbitrator may be entered in any court having jurisdiction
thereof. The Arbitrator shall be deemed to possess the power to issue mandatory
orders and restraining orders in connection with such arbitration; provided,
however, that nothing in this Article 9 shall be construed so as to deny the
Company the right and power to seek and obtain injunctive relief in a court of
equity for any breach or threatened breach by the Employee of any of his
covenants contained in Articles 5, 6 and 7 hereof.
10. Attorneys Fees. In the event either party hereto commences any action, suit
or other proceeding in law or in equity, or any arbitration, to enforce the
provisions of this Agreement or for any remedy for breach of this Agreement, the
non-prevailing party in such action shall pay the prevailing party's costs and
expenses, including reasonable attorneys' fees incurred in such action or
arbitration proceeding.
11. 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 by registered or certified mail (notices shall
be deemed to have been given on the date sent), as follows (or to such other
address as either party shall designate by notice in writing to the other in
accordance herewith):
<PAGE> 29
11.1 If to the Company, to it at:
c/o Instant Video Technologies, Inc.
500 Sansome Street, Suite 503
San Francisco, CA 94111
Attention: Laura Wagerman
11.2 If to the Employee, to him at:
2603 Spring Oaks Drive
Santa Rosa, CA 95405
12. General.
12.1 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely in California.
12.2 Headings. The article and section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.3 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof as of the Effective Date. No
representation, promise or inducement has been made by either party that is not
embodied in this Agreement, and neither party shall be bound by or liable for
any alleged representation, promise or inducement not so set forth.
12.4 Assignability: Successors. This Agreement, and the Employee's rights
and obligations hereunder, may not be assigned by the Employee. The Company may
assign its rights, together with its obligations hereunder to any subsidiary or
affiliate Company or in connection with any sale, transfer or other disposition
of all or substantially all of its business or assets; in any event, the
obligations of the Company hereunder shall be binding on its successors or
assigns, whether by assignment to a subsidiary or affiliate of the Company or by
merger, consolidation or acquisition of all or substantially all of its business
or assets.
12.5 Modifications: Waivers. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended and the terms or covenants hereof may
be waived, only by a 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
<PAGE> 30
to require performance of any provision hereof shall in no manner affect the
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.
13. Subsidiaries and Affiliates. As used herein, the term "subsidiary" shall
mean any corporation or other business entity controlled by the corporation in
question, and the term "affiliate" shall mean and include any corporation or
other business entity controlling, controlled by or under common control with
the corporation in question.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
By: /s/ Richard Lang
---------------------------------
Title: Chairman, CEO
------------------------------
EMPLOYEE
/s/ David Genin
- ------------------------------------
<PAGE> 1
EXHIBIT 10.37
June 9, 1998
Mr. Michael Darville
Draysec Finance Limited
Windermere House
404 East Bay Street, P.O. Box SS-5539
Nassau, Bahamas
Dear Mr. Darville:
Thank you for your commitment to provide IVT with additional bridge financing at
this time. The specific terms and conditions of the Bridge Line of Credit
("Credit Agreement") are as follows:
1. You shall make available to IVT up to a total of $225,000. IVT may draw
down from this amount a maximum of $75,000 per month over the term of this
Credit Agreement.
2. The other parties providing bridge financing under the same terms are
Robert London and Mercer Management, Inc. IVT shall draw down equal amounts
from each source at the same time.
3. The term of this Line of Credit shall be from July 1, 1998 through
September 30, 1998. Principal and Interest due at maturity, which is March
31, 1999.
4. IVT shall provide written notification of a draw down five days in advance
of the required funding date.
5. Amounts drawn down from the Line of Credit, shall be recorded in booking
entry form evidenced by receipt of funds and written notification of the
draw down described in Paragraph 4 herein.
6. The Line of Credit shall bear simple interest at a rate of Prime plus 2%,
calculated monthly in arrears.
7. The Line of Credit shall also provide 20% warrant coverage ($75,000 funded
= 15,000 warrants). Each warrant shall have an exercise price of the lower
of $2.75 per share or 85% of the average closing bid price of IVT Common
Stock during the five day period commencing on the date of written
notification from IVT of a draw down. The warrants shall expire on June 30,
2001.
8. Funds will be drawn down on an as-needed basis and may not be required.
Please indicate your agreement to these terms for the Bridge Line of Credit by
signing this letter where indicated. Everyone here at IVT appreciates your
continued support and enthusiasm.
Regards,
/s/ Richard Lang
Richard Lang
Chairman, CEO
UNDERSTOOD, ACKNOWLEDGED, AGREED AND ACCEPTED:
/s/ Michael Darville
-------------------------------------- -------------
Michael Darville, Draysec Finance Ltd. Date
<PAGE> 2
June 9, 1998
Mr. Robert London
809 Presidio Ave.
Santa Barbara, CA 93101
Dear Bob:
Thank you for your commitment to provide IVT with additional bridge financing at
this time. The specific terms and conditions of the Bridge Line of Credit
("Credit Agreement") are as follows:
1. You shall make available to IVT up to a total of $225,000. IVT may draw
down from this amount a maximum of $75,000 per month over the term of this
Credit Agreement.
2. The other parties providing bridge financing under the same terms are
Draysec Finance Ltd. and Mercer Management, Inc. IVT shall draw down equal
amounts from each source at the same time.
3. The term of this Line of Credit shall be from July 1, 1998 through
September 30, 1998. Principal and Interest due at maturity, which is March
31, 1999.
4. IVT shall provide written notification of a draw down five days in advance
of the required funding date.
5. Amounts drawn down from the Line of Credit, shall be recorded in booking
entry form evidenced by receipt of funds and written notification of the
draw down described in Paragraph 4 herein.
6. The Line of Credit shall bear simple interest at a rate of Prime plus 2%,
calculated monthly in arrears.
7. The Line of Credit shall also provide 20% warrant coverage ($75,000 funded
= 15,000 warrants). Each warrant shall have an exercise price of the lower
of $2.75 per share or 85% of the average closing bid price of IVT Common
Stock during the five day period commencing on the date of written
notification from IVT of a draw down. The warrants shall expire on June 30,
2001.
8. Funds will be drawn down on an as-needed basis and may not be required.
Please indicate your agreement to these terms for the Bridge Line of Credit by
signing this letter where indicated. Everyone here at IVT appreciates your
continued support and enthusiasm.
Regards,
/s/ RICHARD LANG
- --------------------
Richard Lang
Chairman, CEO
UNDERSTOOD, ACKNOWLEDGED, AGREED AND ACCEPTED:
/s/ Robert London 6/19/98
--------------------------------- --------------
Robert London Date
<PAGE> 3
June 9, 1998
Mr. Gordon Rock
Mercer Management Inc.
5820 E. Mercer Way
Mercer Island, WA 98040
Dear Gordon:
Thank you for your commitment to provide IVT with additional bridge financing at
this time. The specific terms and conditions of the Bridge Line of Credit
("Credit Agreement") are as follows:
1. You shall make available to IVT up to a total of $225,000. IVT may draw
down from this amount a maximum of $75,000 per month over the term of this
Credit Agreement.
2. The other parties providing bridge financing under the same terms are
Draysec Finance Ltd. and Robert London. IVT shall draw down equal amounts
from each source at the same time.
3. The term of this Line of Credit shall be from July 1, 1998 through
September 30, 1998. Principal and Interest due at maturity, which is March
31, 1999.
4. IVT shall provide written notification of a draw down five days in advance
of the required funding date.
5. Amounts drawn down from the Line of Credit, shall be recorded in booking
entry form evidenced by receipt of funds and written notification of the
draw down described in Paragraph 4 herein.
6. The Line of Credit shall bear simple interest at a rate of Prime plus 2%,
calculated monthly in arrears.
7. The Line of Credit shall also provide 20% warrant coverage ($75,000 funded
= 15,000 warrants). Each warrant shall have an exercise price of the lower
of $2.75 per share or 85% of the average closing bid price of IVT Common
Stock during the five day period commencing on the date of written
notification from IVT of a draw down. The warrants shall expire on June 30,
2001.
8. Funds will be drawn down on an as-needed basis and may not be required.
Please indicate your agreement to these terms for the Bridge Line of Credit by
signing this letter where indicated. Gordon, everyone here at IVT appreciates
your continued support and enthusiasm.
Regards,
/s/ Richard Lang
Richard Lang
Chairman, CEO
UNDERSTOOD, ACKNOWLEDGED, AGREED AND ACCEPTED:
/s/ Gordon Rock 6/20/98
------------------------------------ -------------
Gordon Rock, Mercer Management, Inc. Date
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 107,937
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 129,047
<PP&E> 105,083
<DEPRECIATION> 0
<TOTAL-ASSETS> 250,942
<CURRENT-LIABILITIES> 1,794,067
<BONDS> 0
0
22
<COMMON> 65
<OTHER-SE> (1,543,125)
<TOTAL-LIABILITY-AND-EQUITY> 250,942
<SALES> 15,000
<TOTAL-REVENUES> 15,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,309,176
<LOSS-PROVISION> 571,047
<INTEREST-EXPENSE> (1,865,223)
<INCOME-PRETAX> 800
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,866,023)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
