EXHIBIT 10.5
SPATIALIZER AUDIO LABORATORIES, INC.
EMPLOYMENT AGREEMENT
This Employment
Agreement (this “Agreement”) sets out the terms and
conditions of your employment by Spatializer Audio Laboratories,
Inc., a Delaware corporation (the
“Company”).
1. Period of
Employment.
A. Your
employment by the Company under the terms of this Agreement is
effective as of November 12, 1999 (the “Commencement
Date”). Your employment will continue under the terms of this
Agreement for a period of three years (3) years (the
“Initial Term”) from the Commencement Date, and shall
be automatically renewed thereafter for additional one year periods
(“Successive Terms”), until terminated in accordance
with the terms of this Agreement or until you are notified that the
Agreement will not be automatically renewed. Such notification is
to be provided to you no less than 6 months before the
commencement of a Successive Term and if you elect to terminate
your employment during the Initial Term or any Successive Term, you
shall provide the Company with notice pursuant to
Section 8(A)(1).
2. Job
Description.
A. You are to
be employed as the Company’s Chief Executive Officer
(“CEO”) and you shall continue to be employed as the
Company’s Chief Financial Officer (“CFO”). As
CEO, you shall be responsible for the general and active
supervision and management over the business of the Company and
over its officers, assistants, agents and employees. In your
capacity as CFO, you shall have the general care and custody of the
funds and securities of the Company, the bank and trust accounts of
the Company and you shall exercise general supervision over
expenditures and disbursements made by Company as well as the
Company’s preparation of financial records and reports in
connection therewith as may be necessary. If requested by the Board
of Directors of the Company (the “Board”), your duties
shall include performing services on behalf of the Company or to
affiliates of the Company and in that regard, you agree to serve as
the President and Treasurer of Desper Products, Inc
(“DPI”). Finally, you agree to serve as a Director of
DPI when so elected by the Company as sole shareholder of DPI. You
shall devote your full professional time and energy, attention,
skills and ability to the performance of your duties during your
employment and shall faithfully and diligently endeavor to promote
the business and best interests of the Company. You shall make
available to the Board and the officers of the Company all
knowledge possessed by you relating to any aspect of your duties
and responsibilities hereunder. You agree that during your
employment with the Company, you will not render or perform
services for any other corporation, entity, person or firm actively
involved with the Industry without the prior written consent of the
Board. For purposes of this Agreement, the term the
“Industry” shall consist of firms engaged in the
development, licensing and marketing of digital audio signal
processing technologies for the consumer electronics, personal
computing, enterprise computing and entertainment industries, or
those activities of a kind with which you were concerned or
involved in the term of this Agreement. You hereby agree to appear
and actively participate on behalf of the Company in the Industry
and in the general promotion of its business.
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B. You
further agree, during the course of your employment under this
Agreement, to conduct yourself and all business on behalf of the
Company in a manner intended to be in full compliance with all laws
applicable to the duties undertaken by you during this
Agreement.
3.
Compensation.
A.
Salary . As compensation for the performance by you of your
obligations hereunder, and provided that you satisfactorily perform
your obligations hereunder, you will receive an annual salary of
two hundred thousand dollars ($200,000) on the normal payroll
schedule followed by the Company. On each anniversary of the
Commencement Date, you will be eligible for a salary increase as
approved by the Compensation Committee.
B.
Performance Shares . In addition to your salary, as set
forth above, as November 12, 1999, those 168,628 performance shares
held by the Company’s former CEO, Stephen D. Gershick
directly, and those 674,516 performance shares held in escrow for
him shall be transferred directly to you, to be released in
accordance with the terms of that Escrow Agreement dated June 22,
1992. as amended (the “Escrow Agreement”). Other than
due to your voluntary termination pursuant to Section 8(A)(1)
or 8(B) or termination for Cause as defined in
Section 8(A)(2), the Company will continue to distribute these
performance shares to you under the schedule in the Escrow
Agreement. If you complete the Initial Term of this Agreement, in
all events, all remaining performance shares will be distributed to
you in accordance with the schedule in the Escrow
Agreement.
C. Stock
Options . Of the previously issued 500,000 options to acquire
Company common stock, par value $.01 (“Common Stock”)
held by you, all 500,000 of such options shall be treated as having
been fully vested at November 12,1999 and shall be immediately
exercisable by you from that date. Additionally, as
November 12, 1999, you shall be granted options to acquire an
additional 750,000 options to acquire Common Stock, of which
250,000 shares shall be exercisable at $.50 and immediately vested;
250,000 shares shall be exercisable at $.55 and will vest on
November 12, 2000; and 250,000 shares shall be exercisable at
$.75 and will vest on November 12, 2001.
D. Annual
Bonus . You shall be entitled to receive, in addition to your
annual compensation set forth above, a bonus equal to 5% of the
Company’s income after taxes each year, provided however,
that in no case shall your bonus exceed $100,000 in any given
year.
E. Other
Benefits :
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(1)
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During the term of this Agreement,
you will be entitled, at Company expense, to such medical,
disability, accident, life or other insurance or welfare plans,
programs or arrangements as may be offered generally to the
employees of the Company.
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(2)
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The
Company shall pay or reimburse you for all reasonable and necessary
business expenses incurred by you which relate to the business of
the Company, as approved by the Board, with such payments or
reimbursements
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to
be made monthly on the first scheduled payroll period in the month
following that month in which such expenses were incurred, and upon
presentation of receipts or other evidence of such expenses. These
expenses include, but are not limited to the necessary reasonable
and customary expenses associated with your work at the
Company’s Santa Clara, California office, including an
apartment of reasonable nature in the Santa Clara area, automobile
use in the Santa Clara area, round-trip airfare and airport car
service to and from the Santa Clara area and meals while working in
the Santa Clara area.
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(3)
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A
monthly automobile allowance of nine hundred ($900)
dollars.
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F. The
compensation provided to you pursuant to this Agreement shall be
subject to any required federal, state, local and other
governmental withholdings or other deductions that may be required
from time to time under applicable tax laws.
4. Place of Work.
Your principle place of work shall
be at the Company’s business offices located at 20700 Ventura
Boulevard, Suite 140, in Woodland Hills, California. You also
agree to be available to travel and to work from time to time in
such other places as may be requested by the Company for the
reasonable performance of your duties. You have agreed that you
will be available to work from the Company’s Santa Clara,
California office on average of four (4) days per week but
this commitment shall not apply in the event of any Change of
Control (as defined below) and shall not, in any event, require you
to relocate your principal residence to the Santa Clara, California
area.
5. Authorizations.
You agree to provide to the Company,
as a condition precedent to your employment under this Agreement,
all legally required proof of your authorization to work in the
United States. You further agree to allow the Company to use your
name, biography and likeness in connection with information that
may be disseminated concerning the Company. You hereby warrant and
represent that there are no existing or proposed agreements to
which you are a party that may adversely affect your ability to
your duties under this Agreement.
6. Vacations and
Holidays.
A. You will
be entitled to take as vacation time all official Company holidays
each year, as offered to all Company employees. You will also be
entitled to three weeks of paid vacation each year.
B. Holiday
and vacation days accrued may be carried over from one year to the
next as outlined in the Company’s employment manual or unless
otherwise agreed in advance by the Board. Unused holiday days may
be reimbursed to you as hours worked at your normal basic salary
rate at the sole discretion of the Board.
C. If you
leave the Company before taking vacation days due to you, you will
receive a pro-rata payment of your salary in respect to those
vacation days you have not used during the year, in accordance with
the Company’s policy then in effect for executive
officers.
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7. Sick Pay.
A. The
Company, subject to your compliance with the following procedures,
will pay you your salary in respect of periods of absence through
illness or injury for up to 14 days absence (in the aggregate)
in any period of 12 months, or until the Company’s Short
term Disability Plan begins payments. Unless otherwise required by
law, sick leave is only to be used when, owing to health reasons,
you are unable to work.
B. Your
unused sick leave is not carried forward from one year to the next
and you will not be paid for unused sick leave.
8. Termination.
A. Notice
of Termination .
(1) If
you desire to terminate your employment with the Company, you must
give the Company 30 days prior written notice; provided
however, that if a Change of Control (as defined below) or a change
in you place of work, as set forth in Section 4 above, is
made, you may choose to terminate your employment by providing
10 days prior written notice to the Company. A “Change
of Control” shall mean if and when (i) any person, as
that term is used in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934 (the “Exchange Act”), becomes or
is discovered to be a beneficial owner (as defined in
Rule 13d-3 under the Exchange Act as in effect on the date
hereof) directly or indirectly of securities of the Company
representing 20% or more of the combined voting power of the
Company’s then outstanding securities (unless such person is
known by you to already be a beneficial owner on the date of this
Agreement); and (ii) the individuals who, as of the date
hereof, constitute the Board of Directors of the Company cease for
any reason to constitute at least a majority of the Board of
Directors of the Company, unless such change is approved
unanimously by the Board of Directors in office immediately prior
to such cessation.
(2) Except
in the case of termination for “Cause” (as defined
below), if the Company desires to terminate your employment, for
any reason, the Company must give you 30 days written notice.
Termination not for “Cause” is subject to the
conditions set forth in Section 8(C)(2) below.
(3) Any
salary paid or owing to you from the Company upon termination shall
be subject to any deductions for:
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i.
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Social Security, disability,
unemployment or other taxes customarily paid by an employer and
employee;
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ii.
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for
any deductions in respect of any indebtedness that you may have to
the Company; and
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iii.
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for
any obligations the Company may have to any third party on your
behalf.
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(4) The
Company may, in its sole discretion, choose to pay your salary for
the duration of the notice period set forth in Section 8(A)(3)
in lieu of providing notice above or following such notice of
termination of employment, require you to carry out none or only
some of your duties at or away from the Company offices.
B. For
purposes of this Agreement, the following events shall constitute
“Termination Events”:
(1) Any
termination of which notice is given under Section 8(A)
above;
(2) Termination
of this Agreement by the Company for “Cause.” For
purposes of this Agreement, the term “Cause,” when used
in connection with the termination of this Agreement by the Company
shall mean, and shall be limited to: (a) your commission
of
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