UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 2012
KIT DIGITAL, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware | 001-34437 | 11-3447894 | ||||
(State or other jurisdiction | (Commission File Number) | (IRS Employer | ||||
of incorporation) | Identification No.) |
26 West 17th Street - 2nd Floor | 10011 | |||
New York, New York | (Zip Code) | |||
(Address of principal executive offices) |
Registrant's telephone number, including area code: +1 (646) 553-4845
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))
CURRENT REPORT ON FORM 8-K
KIT digital, Inc.
May 21, 2012
Item 1.01 | Entry into a Material Definitive Agreement. |
Barak Bar-Cohen Employment Agreement:
On April 1, 2012, Mr. Barak Bar-Cohen, the Company’s then Chief Administrative Officer, assumed the role of interim Chief Executive Officer. Mr. Bar-Cohen’s employment agreement, entered into on July 1, 2011 (the “Bar-Cohen Employment Agreement”), provided for Mr. Bar-Cohen to serve as the Company’s Chief Administrative Officer for an initial term of two years, beginning on July 1, 2011, automatically renewing for subsequent two year periods unless either party provides written notice at least 120 days prior to the expiration of the two year period or the Bar-Cohen Employment Agreement otherwise terminates in accordance with its terms. Under the Bar-Cohen Employment Agreement, Mr. Bar-Cohen was eligible to receive an annual base salary of $240,000 and an annual performance-based cash bonus of 70% of base salary. In addition, he received a grant of 34,000 stock options and 80,000 performance contingent restricted stock units.
The Bar-Cohen Employment Agreement provides for his participation in the Company’s fringe benefit programs, including the Company’s health, dental, vision life, accident, short and long term disability insurance programs. The Bar-Cohen Employment Agreement also called for the Company to make payments to Mr. Bar-Cohen to facilitate his relocation to the Company’s headquarters in Prague, Czech Republic, by reimbursing moving and travel expenses for Mr. Bar-Cohen and his family and the reimbursement of costs associated with the renting of his U.S. residence, subject to certain limits set forth in the Bar-Cohen Employment Agreement.
If Mr. Bar-Cohen’s employment under the Bar-Cohen Employment Agreement is terminated “without cause” by the Company or “for cause” by Mr. Bar-Cohen, he will be eligible to receive severance equal to six months base salary and any performance-based cash bonus then outstanding. If his employment terminates as a result of his disability, he will be eligible to receive a continuation of base salary for the lesser of three months or until the date on which his disability insurance benefits commence, and any performance-based cash bonus then outstanding. If his employment terminates as a result of his death, he will be eligible to receive a continuation of his base salary through the third month from which his death occurs, reimbursement of expenses and payment for accrued but unused vacation time and any performance-based cash bonus then outstanding.
A termination “for cause” by the Company means the occurrence of any of the following: (a) Mr. Bar-Cohen's material breach of the Bar-Cohen Employment Agreement, material non-performance of any assigned duties, material breach of the non-competition provisions and Mr. Bar-Cohen's failure to cure such material breach within 30 days following receipt of notice of the same from the Company; (b) the appropriation (or attempted appropriation) of a material business opportunity of the Company, including attempting to secure or securing any profit, for himself or others, in connection with any transaction entered into on behalf of the Company; (c) the misappropriation (or attempted misappropriation) of any of the Company's funds or property; or (d) the conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest with respect to, a felony, the equivalent thereof, or any other crime based upon moral turpitude with respect to which imprisonment is a possible punishment.
A termination “for cause” by Mr. Bar-Cohen means the occurrence of any of the following: (a) the assignment to Mr. Bar-Cohen of duties materially inconsistent with Mr. Bar-Cohen's position, or any significant diminution in Mr. Bar-Cohen's duties, responsibilities or compensation, other than in connection with the termination of the Mr. Bar-Cohen's employment for cause, disability or as a result of Mr. Bar-Cohen's death or by Mr. Bar-Cohen other than for cause; (b) the change in the location of Mr. Bar-Cohen's office from primarily New York City and secondarily Prague without Mr. Bar-Cohen's consent; (c) any material breach of the Bar-Cohen Employment Agreement by the Company which is continuing; (d) a “Change in Control”, provided that a “Change in Control” shall only constitute cause if Mr. Bar-Cohen terminates his employment within six (6) months following the “Change in Control”; provided, however, Mr. Bar-Cohen shall not be deemed to have cause pursuant to clauses (a) or (c) above unless Mr. Bar-Cohen gives the Company written notice of the specified conduct or event which has occurred and the Company fails to cure such conduct or event within thirty (30) days of receipt of such notice.
A "Change in Control" shall be deemed to have occurred when, after July 1, 2011, any new person or entity becomes the beneficial owner, directly or indirectly, of 50% or more of the voting power of the Company’s then outstanding securities.
Pursuant to the Bar-Cohen Employment Agreement, Mr. Bar-Cohen agreed to be bound by a confidentiality agreement that applies during and after termination of his employment with the Company, acknowledged that all “Employee Inventions” belong exclusively to the Company, and agreed to be bound by a non-competition and non-interference agreement that applies during and one year after termination of his employment with the Company.
An "Employee Invention" means any idea, invention, technique, modification, process, or improvement (whether patentable or not), any industrial design (whether registrable or not), any mask work, however fixed or encoded, that is suitable to be fixed, embedded or programmed in a product (whether recordable or not), and any work of authorship (whether or not copyright protection may be obtained for it) created, conceived, or developed by Mr. Bar-Cohen, either solely or in conjunction with others, during his employment period, or a period that includes a portion of his employment period, that relates in any way to, or is useful in any manner in, the business then being conducted or proposed publicly to be conducted by the Company, and any such item created by Mr. Bar-Cohen, either solely or in conjunction with others, following termination of Mr. Bar-Cohen 's employment with the Company, that is based upon or uses confidential information.
Barak Bar-Cohen - Amendment to the Employment Agreement:
On May 15, 2012, the Company and Mr. Bar-Cohen entered into an amendment (the “Bar-Cohen Amendment”) to the Bar-Cohen Employment Agreement reflecting his appointment as interim Chief Executive Officer on April 1, 2012. Thus, the Bar-Cohen Amendment is intended to apply during the period in which Mr. Bar-Cohen will be acting interim Chief Executive Officer, effective as of April 1, 2012.
Under the Bar-Cohen Amendment, Mr. Bar-Cohen’s annual base salary is increased to $500,000 and he is eligible to receive a bonus of $250,000 within three business days after the closing of a financing arrangement in which the Company raises at least $25,000,000 in capital through the issuance of equity or debt obligations. The Company raised such amount in an offering which closed on May 17, 2012. In addition, the annual performance-based cash bonus opportunity was increased to 100% of Mr. Bar-Cohen’s base salary.
The Bar-Cohen Amendment provides that Mr. Bar-Cohen is eligible to receive on May 17, 2012, which the second business day following the filing of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2012, a grant of (i) non-qualified stock options to purchase up to 142,586 shares of common stock of the Company, and (ii) 107,142 restricted shares of common stock of the Company. The equity grants made to Mr. Bar-Cohen under the Bar-Cohen Amendment vest in 12 equal quarterly installments over three years and shall accelerate if Mr. Bar-Cohen’s employment is terminated “without cause” by the Company or “for cause” by Mr. Bar-Cohen, other than on account of a Change in Control. The applicable withholding and employment taxes imposed on the equity grants made to Mr. Bar-Cohen under the Bar-Cohen Amendment may, under certain conditions specified in the Bar-Cohen Amendment, be satisfied by the Company’s withholding of shares of common stock of the Company otherwise deliverable to Mr. Bar-Cohen pursuant to the equity grants made to Mr. Bar-Cohen under the Bar-Cohen Amendment, having a fair market value (based upon the closing price of a share of common stock of the Company as reported on a consolidated basis for stock listed on Nasdaq or such other principal stock exchange or market on which those shares are then traded) on the date on which the taxable event resulting in such taxes being required to be withheld occurs, equal to the minimum statutory amount required to be so withheld.
Under the Bar-Cohen Amendment, his severance is increased to 12 months base salary and he is eligible to continue participating in the Company’s medical and dental plan for one year following his termination, in the event Mr. Bar-Cohen’s employment is terminated “without cause” by the Company or “for cause” by Mr. Bar-Cohen.
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Under the Bar-Cohen Amendment, if Mr. Bar-Cohen’s employment under the Bar-Cohen Employment Agreement is terminated “without cause” by the Company or “for cause” by Mr. Bar-Cohen, other than on account of a Change in Control, the unvested portion of the equity grants made pursuant to the Bar-Cohen Amendment shall vest, and all unvested options, restricted stock and restricted stock units granted to Mr. Bar-Cohen prior to his entering into the Bar-Cohen Amendment that are purely time-vested, shall vest. The Company’s removal of Mr. Bar-Cohen as Interim CEO, other than “for cause” by the Company, on account of his disability, or on account of his appointment as the permanent CEO, shall constitute a termination “for cause” by Mr. Bar-Cohen.
The Bar-Cohen Amendment also provides for reimbursements for association memberships, legal fees incurred in negotiating the Bar-Cohen Amendment and moving expenses if Mr. Bar-Cohen relocates back to the United States while CEO of the Company.
In consideration for the undertakings by the Company pursuant to the Bar-Cohen Amendment, Mr. Bar-Cohen agreed to release the Company and its affiliates for any claims he may have with respect to any failures by the Company prior to May 15, 2011 to comply with any requirement under the Bar-Cohen Employment Agreement or any equity or other award agreement between the Company and Mr. Bar-Cohen.
Barak Bar-Cohen Indemnification Agreement:
On May 4, 2012, Barak Bar-Cohen, the Company's Chief Executive Officer, was elected to the Company's Board of Directors. On May 17, 2012, Mr. Bar-Cohen entered into an Indemnification Agreement (the “Bar-Cohen Indemnification Agreement”) with the Company effective as of April 1, 2012. Pursuant to the terms of the Bar-Cohen Indemnification Agreement, the Company agreed to indemnify Mr. Bar-Cohen as provided in the Bar-Cohen Indemnification Agreement and to the fullest extent now or hereafter permitted by applicable law in the event that Mr. Bar-Cohen was or is made or is threatened to be made a party to or a participant or witness in any proceeding, by reason of his role as an officer or director of the Company or by reason of anything done or not done by Mr. Bar-Cohen in any such capacity, against all costs, expenses (including attorneys’ fees and disbursements), judgments, fines (including excise taxes and penalties), liabilities, amounts paid in settlement by or on behalf of Mr. Bar-Cohen and expenses actually and reasonably incurred by or on behalf of Mr. Bar-Cohen in connection with such proceeding or any claim, issue or matter therein, if Mr. Bar-Cohen acted in good faith and in a manner Mr. Bar-Cohen reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe Mr. Bar-Cohen’s conduct was unlawful.
Gavin Campion Separation and Severance Agreement
Mr. Gavin Campion, the Company’s President, entered into a Separation and Severance Agreement (the “Campion Separation and Severance Agreement”) on May 14, 2012, pursuant to which Mr. Campion resigned as President effective as of April 19, 2012. The Company will pay Mr. Campion an amount equal to the previous twelve (12) months base salary (a total of US$295,000), to paid in nine equal monthly installments, from Aug 15, 2012 to April 15, 2013. Such monthly payments shall be fully accelerated in the event the company completes a financing. The Company completed such financing in an equity offering which closed on May 17, 2012.
Christopher Williams Separation Agreement
Mr. Christopher Williams, the Company’s Chief Technology Officer, entered into a Separation Agreement (the “Williams Separation Agreement”) on March 31, 2012, pursuant to which Mr. Williams; employment with the Company will be terminated effective July 15, 2012. Mr. Williams’ final day as Chief Technology Officer was March 31, 2012 and he will be paid his salary for 14 weeks in lieu of notice (through July 15, 2012).
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Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Subsection (b):
Reference is made to the Campion Separation and Severance Agreement and the Williams Separation Agreement described in Item 1.01.
Effective May 15, 2012, Robin Smyth resigned as the Chief Financial Officer of the Company. Subject to finalization of a definitive agreement, Mr. Smyth will assume the position of Senior Vice President of Corporate Development responsible for among other things, the divestiture of certain Company operations. Mr. Smyth’s base compensation will be unchanged, he will receive a bonus equal to fifty percent of his base compensation and a severance payment equal to six months base salary upon termination of his employment.
Subsection (c):
Reference is made to the Bar-Cohen Employment Agreement and the Bar-Cohen Amendment described in Item 1.01 above.
Subsection (d):
Reference is made to the Bar-Cohen Indemnification Agreement described in Item 1.01 above.
The Bar-Cohen Employment Agreement, the Bar-Cohen Amendment, the Bar-Cohen Indemnification Agreement, the Campion Separation and Severance Agreement and the Williams Separation Agreement are filed as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6, respectively, to this Current Report on Form 8-K and such documents are incorporated herein by reference. The foregoing is only a brief description of the material terms of the Bar-Cohen Employment Agreement, the Bar-Cohen Amendment, the Bar-Cohen Indemnification Agreement, the Campion Separation and Severance Agreement, the Smyth Transition Agreement and the Williams Separation Agreement, does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to such exhibits.
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Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. The exhibit listed in the following Exhibit Index is filed as part of this current report. |
Exhibit No. | Description | |
10.1 | Employment Agreement, dated July 1, 2011, between KIT digital, Inc. and Barak Bar-Cohen. | |
10.2 | Amendment to Employment Agreement, dated May 15, 2012, between KIT digital, Inc. and Barak Bar-Cohen. | |
10.3 | Indemnification Agreement, dated May 15, 2012, between KIT digital, Inc. and Barak Bar-Cohen. | |
10.4 | Separation and Severance Agreement, dated May 14, 2012, between KIT digital, Inc. and Gavin Campion. | |
10.5 | Termination Agreement, dated March 31, 2012, between KIT digital, Inc. and Christopher Williams. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
KIT DIGITAL, INC. | ||
Date: May 21, 2012 | By: | /s/ Barak Bar-Cohen |
Barak Bar-Cohen | ||
Chief Executive Officer |
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made this 1st day of July, 2011 (the “Effective Date”) by and between KIT DIGITAL, INC., a multi-national corporation with its headquarters located in Prague, Czech Republic (the “Employer” or the “Company”) and Barak Bar-Cohen, an individual resident of Princeton, New Jersey, (the “Employee”), collectively (the “Parties).
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1:
“Agreement”-- this Employment Agreement, including the Schedules and Exhibits, if any, attached hereto, as amended from time to time.
“Basic Compensation”-- Salary and Benefits.
“Benefits”-- as defined in Section 3.1(c).
“Board of Directors”-- the board of directors of Employer.
“Bonus” — as defined in Section 3.1(b).
“Chief Executive Officer” or “CEO” -- Kaleil Isaza Tuzman
“Change in Control” -- shall be deemed to have occurred when, after the Effective Date, any new person or entity becomes the beneficial owner, directly or indirectly, of 50% or more of the voting power of the Employer’s then outstanding securities.
“Confidential Information”-- any and all:
(a) trade secrets concerning the business and affairs of Employer (including any and all Confidential Information of Employee’s former employer), product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, current and planned manufacturing or distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, structures, and architectures (and related formulae, compositions, processes, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, methods and information); and
(b) proprietary information concerning the business and affairs of Employer (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training and techniques and materials), however documented; and
(c) notes, analysis, compilations, studies, summaries, and other material prepared by or for Employer containing or based, in whole or in part, on any information included in the foregoing.
“Disability”-- as defined in Section 4.2.
“Effective Date”-- the date stated in the first paragraph of the Agreement.
“Employer” - defined as the KIT DIGITAL, Inc.
“Employee Invention”-- any idea, invention, technique, modification, process, or improvement (whether patentable or not), any industrial design (whether registrable or not), any mask work, however fixed or encoded, that is suitable to be fixed, embedded or programmed in a product (whether recordable or not), and any work of authorship (whether or not copyright protection may be obtained for it) created, conceived, or developed by Employee, either solely or in conjunction with others, during the Employment Period, or a period that includes a portion of the Employment Period, that relates in any way to, or is useful in any manner in, the business then being conducted or proposed publicly to be conducted by Employer, and any such item created by Employee, either solely or in conjunction with others, following termination of Employee’s employment with Employer, that is based upon or uses Confidential Information. The term “Employee Invention” includes but is not limited to the inventions, techniques, and specially commissioned works described in Schedule 6.2(b).
“Employment Period”-- the term of Employee’s employment under this Agreement.
“Fiscal Year”-- Employer’s fiscal year, as it exists on the Effective Date or as changed from time to time.
“For cause”-- as defined in Sections 4.3 and 4.4.
“General Profitability” -- defined as Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) minus Capital Expenditures, as defined in section 3.1.b.i.
“Non-Competition Agreement”-- as defined in Section 6.2
“Person”-- any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or governmental body.
“President” -- Gavin Campion
“Proprietary Items”-- as defined in Section 5.2(a) (iv)
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“Salary”-- as defined in Section 3.1(a)
“Severance”-- as defined in Section 4.5(c)
2. EMPLOYMENT TERMS AND DUTIES
2.1 EMPLOYMENT
Employer hereby employs Employee, and Employee hereby accepts employment by Employer, upon the terms and conditions set forth in this Agreement.
2.2 TERM
Subject to the provisions of Section 4, the term of Employee’s employment under this Agreement will be two (2) years (the “Employment Period”), beginning on the Effective Date and ending on the second (2nd) anniversary of the Effective Date. Subject to the provisions of Sections 3 and 4 below, this Agreement shall be automatically renewed for a period of two years unless either party provides written notice at least one hundred twenty (120) days prior to the expiration of the current period of its intention not to renew the Agreement, and the Agreement shall automatically renew for subsequent 2 year periods unless terminated in accordance with Sections 3 and 4 below or by one of the parties providing written notice at least one hundred twenty (120) days prior to the expiration of the current period of its intention not to renew the Agreement.
2.3 DUTIES
Throughout the Employment Period, Employee will serve as Chief Administrative Officer of the Employer and shall have the ordinary and customary duties attendant with that title. Employee shall have such power and authority in the assigned position as delegated from time to time by the President. Employee will devote his time, attention, skill, and energy to the business of Employer, will use his good faith efforts to promote the success of Employer’s business, and will cooperate fully with the CEO and President in the advancement of the best interests of Employer.
2.4 LOCATION
During the first twelve (12) months of this Agreement, the Employee shall render his services in the Company’s Prague Headquarters in the Czech Republic. After this twelve (12) month period, Employer and Employee shall, upon mutual consent, determine the location from which the Employee shall continue to render his services in the Company.
3. EMPLOYMENT COMPENSATION
3.1 COMPENSATION PACKAGE
Employee’s compensation and any and all other rights of Employee under this Agreement are included in the following compensation package (the “Compensation Package”). This Compensation Package shall contain certain financial terms and conditions addressed below (salary, health care, Company benefits and life and disability insurance, etc.).
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(a) Salary. Employee will be paid an annual base salary of $240,000.00 U.S. subject to adjustments as provided below (the “Salary”), payable according to the Employer’s customary payroll practices. The Salary is contemplated by the Parties to increase after 12 months or earlier and will be reviewed by the Compensation Committee not less frequently than annually, and may be adjusted from time to time by the Compensation Committee commensurate with Employee’s performance and duties.
(b) Performance-Based Cash Bonus. Employer and the Employee agree that the Employee shall be entitled to performance based cash bonuses of seventy percent (70%) of Employee’s base salary, as defined in section 3.1.a above. For the annual period ending December 31, 2011, Employee shall be entitled to this performance-based cash bonus upon the achievement of the following Key Performance Indicators (KPIs):
(i) Corporate KPIs
a. | Achievement of at least 21% General Profitability defined as Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) minus Capital Expenditures. |
b. | Achievement of a 50% improvement in the Customer Satisfaction Index, as defined and measured by the Employer. |
(ii) Departmental KPIs
a. | The successful implementation of the Finance NetSuite module by September 30, 2011 |
b. | Consolidation of the US, Australia, Singapore, UK, Czech Republic, and Italy payroll systems onto the centralized ADP payroll system by December 31, 2011 and all other country payroll systems across the Company by March 31, 2012. |
c. | Implementation of the eTrade system for the top 40 managers in the Company by September 30, 2011 and for all employees by November 30, 2011. |
d. | The successful implementation of a company-wide Performance Management System including Employee reviews, KPI definition, and automated HR reporting in NetSuite by November 30, 2011. |
e. | The successful implementation of a company-wide Employee Satisfaction Survey (ESS) by November 30, 2011 with a KPI for improving the ESS to be determined upon the completion and review of the initial results. |
f. | Building of Corporate Dashboards based on NetSuite information for adherence to and complete compliance with the PR/PO, Travel and Entertainment, and Mobile Usage policies by November 30, 2011. |
g. | The successful management of legal fees through the implementation of a Legal Support Request form in NetSuite and spending in line with the revised 2011 budget by October 31, 2011. |
h. | The successful implementation of a company-wide cost reduction program achieving 25% in people-related cost savings defined as salaries plus related employer taxes as measured by comparing these costs in Q4 2010 as compared to Q4 2011. |
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For subsequent calendar years, Employee and Employer will define mutually agree to KPIs which shall drive the performance based cash bonuses of seventy percent (70%) of Employee’s base salary, as defined in section 3.1.a above.
(c) Stock Option Grants. The Parties acknowledge that the Employer is a publicly traded company with its common stock being listed on NASDAQ. As additional compensation to the Employee, the Employer shall grant employee stock options (the “Grant”) under the Employer’s 2008 Incentive Stock Plan (or any subsequent employee benefit plan adopted by the Employer’s Board of Directors and ratified by the Employer’s stockholders), attached hereto as Schedule A (the “Plan”) in the amount of thirty four thousand (34,000) stock options. Each of the stock options included in the Grant gives the Employee the right to acquire one underlying common share at a price of US$10.88 per share, the closing price of our common stock on the NASDAQ on Friday, May 9, 2011.
(d) Performance Contingent Restricted Stock Units (“PCRSU”) Grant. As additional compensation to the Employee, the Employer shall grant employee performance contingent restricted stock units (the “Grant”) under the Employer’s 2008 Incentive Stock Plan (or any subsequent employee benefit plan adopted by the Employer’s Board of Directors and ratified by the Employer’s stockholders), attached hereto (the “Plan”) in the amount of eighty-thousand (80,000) performance contingent restricted stock units. The terms and conditions of these PCRSU are outlined in the PCRSU documentation in Schedule B.
The Employer represents and warrants to the Employee that the Stock Options and PCRSUs, when issued and delivered to the Employee, have been duly authorized and validly issued and are fully paid and nonassessable. The Employer Shares will be issued under the Employer’s 2008 Incentive Stock Plan (or any subsequent employee benefit plan adopted by the Employer’s Board of Directors and ratified by the Employer’s stockholders) and covered by an effective registration statement on Form S-8 on file with the SEC. The Employer acknowledges that the Employee, even though acquiring the Employer Shares for investment, wishes to be legally permitted to sell the Employer Shares when he deems appropriate after receipt of such shares and being able to sell such Employer Shares in accordance with the terms of the Employer’s insider trading policy, including through the establishment of a Rule 10b5-1 stock trading plan. In that regard, the Employee is encouraged to enter into a Rule 10b5-1 stock trading plan with an investment bank or other financial institution prior to any sale of securities of the Employer. These types of plans, when executed according to applicable provisions, enable the Employee to sell Employer securities on pre-specified conditions (e.g., when the price of a share of Employer common stock reaches a certain amount) and, therefore, allow the Employee to sell outside quarterly “trading windows,” whether or not the Employee then possesses material non-public information. The Employer agrees to cooperate with the Employee in connection with establishing such a plan for the Employer Shares. A summary of Employee’s option and restricted stock grants to date are included in Schedule C.
(e) Benefits. During the Employment Period, the Employee shall be entitled to the following benefits, programs and arrangements of the Employer in effect during the Employment Period which are generally available to the executive employees of the Employer, subject to and on a basis consistent with terms, conditions and overall administration of such plans, programs and arrangements.
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(i) Insurance. Employee shall be entitled to participate in all fringe benefit programs, including health insurance, vision insurance, dental insurance, life insurance, accident insurance and short and long term disability insurance, as well as any other similar insurance programs offered by Employer to individuals employed in executive positions. It is acknowledged by the Parties that the family health and medical insurance to be provided by and paid for in full by the Employer to the Employee must include coverage for international travel as the Employee is expected to be traveling extensively in furtherance of his duties.
(ii) Moving Expenses. Employer agrees to reimburse Employee for all costs associated with moving the belongings and possessions of Employee and his family (including but not limited to shipping, taxes, insurance, storage costs, and one-way airfare for Employee and his family) from Prague, Czech Republic back to Princeton, New Jersey, or another destination as determined, upon mutual consent, by Employee and Employer. It is anticipated that these costs shall not exceed $25,000 plus the cost of one-way airfare for employee and his family.
(iii) Rental Fee Expenses. Employer agrees to reimburse Employee for all costs associated with renting Employee’s residence at 256 Snowden Lane, Princeton, New Jersey 08540 (including but not limited to real estate agent fee, taxes, and listing fees) It is anticipated that these costs shall not exceed $10,000.
(iv) Family Travel Expenses. Employer agrees to reimburse Employee for the cost of airfare for Employee and his family (including but not limited to airfare and associated travel taxes) to be used over during the next 12-months for round-trip travel back to the United States to visit friends and family. It is anticipated that these costs shall not exceed $10,000 and shall not include the cost of hotel accommodations or car rental.
(v) Leave. The Employee shall be entitled to twenty five (25) days of vacation leave and ten (10) days of sick leave each year, during which time his compensation shall continue to be paid in full. Employee may carry forward up to ten (10) days of vacation leave from year to year.
(vi) Business Expenses. The Employer shall reimburse the Employee, or provide him with a Company credit card, for the reasonable amount of hotel, travel, entertainment and other expenses necessarily incurred by the Employee in the discharge of his duties for the Employer. Employee will adhere to the KIT Travel and Entertainment Policy when traveling.
(vii) Indemnification; Insurance Against Liability. Employer will indemnify, save harmless, and defend Employee, and all of Employee’s heirs and assigns, (collectively “indemnified parties”) from and against any and all claims, damages, losses, liabilities, suits, actions, demands, proceedings (whether legal or administrative) and expenses (including but not limited to reasonable attorneys’ fees and costs) (collectively, “Losses”) arising out of, resulting from, or relating to the services Employee provides Employer under this Agreement, including, without limitation, any claims from or by third parties to the extent permitted by applicable law of the state of incorporation of Employer (Delaware at the date hereof); provided that if it is determined by a non- appealable judicial ruling that Employee committed any criminal or unlawful acts, Employer will be entitled to recover from Employee all costs, fees and expenses relating to Losses directly resulting from Employee’s criminal or unlawful acts. Such claims shall include, but shall not be limited to, claims based upon trademark, service mark, trade name, copyright and patent infringement, trademark dilution, tortious interference with contract or prospective business relations, unfair competition, defamation or injury to reputation, or other injuries or damage to business. The Employer shall secure an officer’s and director’s liability insurance policy for the Employee designed to insulate and protect the Employee from personal liability for claims arising against him through the proper execution of his duties for the Employer.
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4. TERMINATION
4.1 EVENTS OF TERMINATION
The Employment Period, Employee’s Compensation and any and all other rights of Employee under this Agreement or otherwise as an employee of Employer will terminate (except as otherwise provided in this Section 4):
(a) upon the death of Employee; or
(b) upon the disability of Employee (as defined in Section 4.2) immediately upon the determination of a disability in the manner provided for in Section 4.2; or
(c) for cause by the Employer (as defined in Section 4.3), immediately upon notice from Employer to Employee, or at such later time as such notice may specify; or
(d) for cause by the Employee (as defined in Section 4.4) immediately upon notice from Employee to Employer, or at such later time as such notice may specify; or
(e) at Employee’s election upon not less than thirty (30) days prior written notice of termination (as defined in Section 4.5); or
(f) by Employer without cause, subject to the payment of any Severance hereunder.
4.2 DEFINITION OF DISABILITY
For purposes of Section 4.1, Employee will be deemed to have a “disability” if, for physical or mental reasons, Employee is unable to perform the essential functions of Employee’s duties under this Agreement for 90 consecutive days, or 180 days during any twelve month period, as determined in accordance with this Section 4.2. The disability of Employee will be determined by a medical doctor selected by written agreement of Employer and Employee upon the request of either party by notice to the other. If Employer and Employee cannot agree on the selection of a medical doctor, each of them will select a medical doctor and the two medical doctors will select a third medical doctor who will determine whether Employee has a disability. The determination of the medical doctor selected under this Section 4.2 will be binding on both parties. The Employee must submit to a reasonable number of examinations by the medical doctor making the determination of disability under this Section 4.2, and Employee hereby authorizes the disclosure and release to Employer (but to no other person) of such determination and all supporting medical records, all of which Employer shall keep strictly confidential. If Employee is not legally competent, Employee’s legal guardian or duly authorized attorney-in-fact will act in Employee’s stead, under this Section 4.2, for the purposes of submitting Employee to the examinations, and providing the authorization of disclosure, required under this Section 4.2.
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4.3 DEFINITION OF “FOR CAUSE” BY EMPLOYER
For purposes of Section 4.1, the phrase “for cause” means: (a) Employee’s material breach of this Agreement, material non-performance of any assigned duties, material breach of the Non-Competition provisions hereof and Employee’s failure to cure such material breach within thirty (30) days following receipt of notice of the same from Employer; (b) the appropriation (or attempted appropriation) of a material business opportunity of Employer, including attempting to secure or securing any profit, for himself or others, in connection with any transaction entered into on behalf of Employer; (c) the misappropriation (or attempted misappropriation) of any of Employer’s funds or property; or (d) the conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest with respect to, a felony, the equivalent thereof, or any other crime based upon moral turpitude with respect to which imprisonment is a possible punishment.
4.4 DEFINITION OF “FOR CAUSE” BY EMPLOYEE
As used herein, the phrase “for cause” for use by the Employee shall mean the occurrence of any of the following: (a) the assignment to the Employee of duties materially inconsistent with Employee’s position as described in Section 2.3 hereof, or any signification diminution in the Employee’s duties, responsibilities or compensation, other than in connection with the termination of the Employee’s employment for cause, disability or as a result of Employee’s death or by Employee other than for cause; (b) the change in the location of the Employee’s office from primarily New York City and secondarily Prague without the Employee’s consent; (c) any material breach of this Agreement by the Company which is continuing; (d) a Change in Control, provided that a Change in Control shall only constitute cause if the Employee terminates his employment within six (6) months following the Change in Control; provided, however, the Employee shall not be deemed to have cause pursuant to clauses (a) or (c) above unless the Employee gives the Employer written notice of the specified conduct or event which has occurred and the Employer fails to cure such conduct or event within thirty (30) days of receipt of such notice.
4.5 TERMINATION PAY
Effective upon the termination of this Agreement, Employer will be obligated to pay Employee (or, in the event of his death, his designated beneficiary as defined below) only such compensation as is provided in this Section 4.5. For purposes of this Section 4.5, Employee’s designated beneficiary will be such individual beneficiary or trust, as Employee may designate by notice to Employer from time to time.
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(a) Termination upon Disability. If this Agreement is terminated by either party as a result of Employee’s disability, as determined under Section 4.2, Employer will pay Employee, promptly upon such termination, his Salary through the remainder of the calendar month during which such termination occurs and for the lesser of (i) three consecutive months thereafter, or (ii) the date that disability insurance benefits commence under the disability insurance coverage furnished by Employer to Employee, if any, and the total amount outstanding of the Bonus
(b) Termination upon Death. If this Agreement is terminated because of Employee’s death, Employer will pay Employee, promptly upon his termination, (i) his Salary through the end of the third calendar month from which his death occurs, (ii) all expenses and other amounts reimbursable or otherwise payable to Employee under this Agreement, including also any then accrued but unused paid vacation leave, up to any maximum accrued vacation limit, and (iii) the total amount outstanding of the Bonus.
(c) Termination by the Employer Without Cause. If the Employer terminates the Employee without cause, the Employer will pay the Employee in accordance with its regular payroll schedule, subject to standard withholdings and deductions, the Employee’s then current Salary for a period of six (6) months (the “Severance”) and the total amounts outstanding from any Performance-based Cash Bonuses, as defined in section 3.1.b.
(d) Termination by the Employee Without Cause. If the Employee severs his employment relationship with the Employer, upon at least thirty (30) days prior written notice, the Employer will pay the Employee in accordance with its regular payroll schedule, subject to standard withholdings and deductions, the Employee’s then current salary up to and until the date the employment relationship is terminated.
(e) Termination by the Employer For Cause. If the Employer terminates the Employee for cause, the Employer will pay the Employee in accordance with its regular payroll schedule, subject to standard withholdings and deductions, the Employee’s then current salary up to and until the date that the Employee is terminated.
(f) Termination by Employee For Cause. If the Employee terminates his employment for cause, the Employer shall pay the Employee the Severance and the total amount outstanding of the Bonus.
(g) Benefits. The Employee’s accrual of, or participation in plans providing for, the Benefits will cease at the effective date of the termination of this Agreement, and Employee will be entitled to accrued Benefits pursuant to such plans only as provided in such plans, to and including all COBRA rights with regard to health insurance plans.
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5. NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
5.1 ACKNOWLEDGMENTS BY THE EMPLOYEE
The Employee acknowledges that (a) during the Employment Period and as a part of his employment, Employee will be afforded access to Confidential Information; (b) public disclosure of such Confidential Information could have an adverse effect on Employer and its business; (c) because Employee possesses substantial technical and business expertise and skill with respect to Employer’s business, Employer desires to obtain exclusive ownership of each Employee Invention, Employee trade secrets, and the Parties agree that Employer will be at a substantial competitive disadvantage if it fails to acquire exclusive ownership of each Employee Invention; (d) Employer has required that Employee make the covenants in this Section 5 as a condition of the Transaction and Employee’s interest therein; and (e) the provisions of this Section 5 are reasonable and necessary to prevent the improper use or disclosure of Confidential Information and to provide Employer with exclusive ownership of all Employee Inventions.
5.2 AGREEMENTS OF THE EMPLOYEE
In consideration of the compensation and benefits to be paid or provided to Employee by Employer under this Agreement, Employee covenants as follows:
(a) Confidentiality
(i) During and following the Employment Period, Employee will hold in confidence all Confidential Information and will not disclose it to any person except with the specific prior written consent of Employer or except as otherwise expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of Employer will be entitled to all of the protections and benefits under applicable law. If any information that Employer deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Confidential Information for purposes of this Agreement. The Employee hereby waives any requirement that Employer submits proof of the economic value of any trade secret or posts a bond or other security.
(iii) None of the foregoing obligations and restrictions applies to any part of the Confidential Information that Employee demonstrates was or became generally available to the public other than as a result of a disclosure by Employee.
(iv) Employee will not remove from Employer’s premises (except to the extent such removal is for purposes of the performance of Employee’s duties at home or while traveling, or except as otherwise specifically authorized by Employer) any document, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the “Proprietary Items”). Employee recognizes that, as between Employer and Employee, all of the Proprietary Items, whether or not developed by Employee, are the exclusive property of Employer. Upon termination of this Agreement by either party, or upon the request of Employer during the Employment Period, Employee will return to Employer all of the Proprietary Items in Employee’s possession or subject to Employee’s control, and Employee shall not retain any copies, abstracts, sketches, or other physical embodiment of any of the Proprietary Items.
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(b) Employee Inventions. Each Employee Invention will belong exclusively to Employer. The Employee acknowledges that all of Employee’s writing, works of authorship, specially commissioned works listed in Schedule 5.2(b), and other Employee Inventions are works made for hire and the property of Employer, including any copyrights, patents, or other intellectual property rights pertaining thereto. If it is determined that any such works are not works made for hire, Employee hereby assigns to Employer all of Employee’s right, title, and interest, including all rights of copyright, patent, and other intellectual property rights, to or in such Employee Inventions. The Employee covenants that he will promptly:
(i) disclose to Employer in writing any Employee Invention;
(ii) assign to Employer or to a party designated by Employer, at Employer’s request and without additional compensation, all of Employee’s rights to Employee Inventions for the United States and all foreign jurisdictions;
(iii) execute and deliver to Employer such applications, assignments, and other documents as Employer may request in order to apply for and obtain patents or other registrations with respect to any Employee Invention in the United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the above obligations; and
(v) give testimony and render any other assistance but without expense to Employee in support of Employer’s rights to any Employee Invention.
5.3 DISPUTES OR CONTROVERSIES
The Employee recognizes that should a dispute or controversy arising from or relating to this Agreement be submitted for adjudication to any court, the preservation of the secrecy of Confidential Information may be jeopardized. All pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy and will be available for inspection by Employer, Employee, and their respective attorneys and experts, who will agree, in advance and in writing, to receive and maintain all such information in secrecy, except as may be limited by them in writing.
6. NON-COMPETITION AND NON-INTERFERENCE
6.1 ACKNOWLEDGMENTS BY THE EMPLOYEE
The Employee acknowledges that: (a) the services to be performed by him under this Agreement are of a special, unique, unusual, extraordinary, and intellectual in character; (b) Employer competes with other businesses in the IP Video sector ; and (c) the provisions of this Section 6 are reasonable and necessary to protect Employer’s business.
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6.2 COVENANTS OF THE EMPLOYEE
In consideration of the acknowledgments by Employee, and in consideration of the compensation and benefits to be paid or provided to Employee by Employer, Employee covenants that he will not, directly or indirectly:
(a) during the Employment Period and for a period of one (1) year after termination of the Agreement engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend Employee’s name or any similar name to, lend Employee’s credit to or render services or advice to, any business whose products or activities directly compete in whole or in material part with the products or activities of Employer ;
(b) whether for Employee’s own account or for the account of any other person, at any time during the Employment Period and for one (1) year following termination of the Agreement, solicit business of the same or similar type being carried on by Employer, from any person known by Employee to have been a customer, client, prime contractor, subcontractor or strategic partner of Employer during the Employment Period, where the Employee had personal contact with such person or entity, or learned of such person or entity, during and by reason of Employee’s employment with Employer;
(c) whether for Employee’s own account or the account of any other person (i) at any time during the Employment Period and for one (1) year following termination of the Agreement, solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise, any person who is or was an employee or contractor of Employer at any time during the Employment Period or in any manner induce or attempt to induce any employee or contractor of Employer to terminate his employment or consultancy with Employer; or (ii) at any time during the Employment Period and for one (1) year following termination of the Agreement, interfere with Employer’s relationship with any person, including any person who at any time during the Employment Period was an employee, contractor (prime or sub-), supplier, or customer of Employer; or
(d) at any time during or after the Employment Period, disparage Employer or any of its shareholders, directors, officers, employees, or agents. Similarly, at no time during or after the Employment Period will the Employer disparage the Employee.
If any covenant in this Section 6.2 is held to be unreasonable, arbitrary, or against public policy, such covenant will be considered to be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against Employee.
The period of time applicable to any covenant in this Section 6.2 will be extended by the duration of any violation by Employee of such covenant.
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7. GENERAL PROVISIONS
7.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
Employee acknowledges that the injury that would be suffered by Employer as a result of a breach of the provisions of this Agreement (including any provision of Sections 5 and 6) would be irreparable and that an award of monetary damages to Employer for such a breach would be an inadequate remedy. Consequently, Employer will have the right, in addition to any other rights it may have, to seek injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and Employer will not be obligated to post bond or other security in seeking such relief. Without limiting Employer’s rights under this Section 7 or any other remedies of Employer, if Employee breaches any of the provisions of Section 5 or 6, Employer will have the right to cease making any payments otherwise due to Employee under this Agreement until such breach has been remedied or cured.
7.2 COVENANTS OF SECTIONS 5 AND 6 ARE ESSENTIAL AND INDEPENDENT COVENANTS
The covenants by Employee in Sections 5 and 6 are essential elements of this Agreement and the Transaction, and without Employee’s agreement to comply with such covenants, Employer would not have entered into the Transaction or this Agreement or employed the Employee. Employer and Employee have independently consulted their respective counsel and have been advised in all respects concerning the reasonableness and propriety of such covenants, with specific regard to the nature of the business conducted by Employer.
The Employee’s covenants in Sections 5 and 6 are independent covenants and the existence of any claim by Employee against Employer under this Agreement or otherwise or against Employer will not excuse Employee’s breach of any covenant in Section 5 or 6.
If Employee’s employment hereunder expires or is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of Employee in Sections 5 and 6.
7.3 REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE
Employee represents and warrants to Employer that the execution and delivery by Employee of this Agreement do not, and the performance by Employee of Employee’s obligations hereunder will not, with or without the giving of notice or the passage of time, or both: (a) violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to Employee; or (b) conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which Employee is a party or by which Employee is or may be bound.
7.4 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by either party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement.
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7.5 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED
This Agreement shall inure to the benefit of, and shall be binding upon (without any further action by Employee required), the parties hereto and their respective successors, assigns, heirs, and legal representatives, including any entity with which Employer may merge or consolidate or to which all or substantially all of its assets may be transferred. The duties and covenants of Employee under this Agreement, being personal, may not be delegated.
7.6 NOTICES
All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers or to such other addresses and facsimile numbers as a party may designate by notice to the other parties.
7.7 ENTIRE AGREEMENT; AMENDMENTS
This Agreement and the documents executed in connection with the Transaction contain the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. This Agreement may not be amended orally, but only by an agreement in writing signed by the parties hereto.
7.8 CHOICE OF LAW; FORUM; LEGAL FEES
This Agreement shall be construed according to the laws of the United States of America and the State of New York, without regard to its conflicts of laws principles. Both Parties hereby expressly consent to the personal jurisdiction of the State and Federal Courts located in the City of New York in any legal action filed by either party arising from or related to this Agreement. In any legal action brought by either party to enforce the terms of this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party the cost of such action, including reasonable attorneys’ fees.
7.9 SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms.
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7.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
7.11 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date above first written above.
EMPLOYER:
Name: Gavin Campion
Title: President
Date: September 28, 2011
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EMPLOYEE:
Name: Barak Bar-Cohen
Date: September 25, 2011
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AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT dated this 15th day of May, 2012, by and between KIT DIGITAL, INC., a Delaware corporation with its headquarters located in Prague, Czech Republic (the “Employer”), and Barak Bar-Cohen, an individual resident of Princeton, New Jersey (the “Employee”).
WHEREAS, the Employee and the Employer entered into an Employment Agreement, dated July 1, 2011 (the “Employment Agreement”); and
WHEREAS, the Employee and the Employer desire to further amend the Employment Agreement, to cover, among other things, the Employee’s appointment as Interim Chief Executive Officer (“Interim CEO”) of the Employer, effective as of April 1, 2012 (the “Effective Date”); and
NOW, THEREFORE, in consideration of the premises and intending to be legally bound hereby, the parties agree that the Employment Agreement, be amended and interpreted as follows (the Employment Agreement, as amended hereby, being hereinafter sometimes referred to as the “Agreement”):
1. Interim Appointment. Effective as of the Effective Date and in lieu of the titles presently provided in the Employment Agreement, the Employee is appointed as Interim CEO of the Employer to serve in such capacity until the earliest of the following to occur: (A) his permanent appointment to the position of Chief Executive Officer of the Employer (“CEO”) by the Board of Directors of the Employer (the “Board”), (B) the appointment by the Board of another individual to serve as CEO in an interim or permanent capacity, and (C) his termination of employment as Interim CEO (the “Interim Period”). In such interim position, the Employee shall report directly to the Board, and shall have such duties and responsibilities and be granted such authority as are customarily imposed on a CEO, except to the extent otherwise set forth in the by-laws of the Employer and applicable controlling law or except as otherwise reasonably imposed upon him by the Board.
2. Salary During Interim Period. During the Interim Period described in Paragraph 1 and in lieu of the amount provided in Section 3.1(a) of the Employment Agreement, the Employee’s salary shall be fixed at an annual rate of $500,000 subject to increase (but not reduction) as otherwise provided in Section 3.1(a) of the Agreement.
3. Financing Bonus. Within 3 business days after the closing of a financing arrangement in which the Employer raises at least $25,000,000 in capital through the issuance of equity or debt obligations, the Employer shall pay to the Employee an interim bonus equal to $250,000 (the “Financing Bonus”). The Financing Bonus shall be in addition to any bonuses paid pursuant to Section 4 of the Amendment. The Financing Bonus shall be paid in lieu of, and in complete satisfaction of, any bonus the Employee may have been eligible to receive under Section 3.1(b) of the Employment Agreement for the calendar year ended December 31, 2011.
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4. Bonus. During the Interim Period, the Employee’s annual bonuses referred to in the first and last sentences of Section 3.1(b) of the Employment Agreement shall be based upon a target bonus opportunity equal to 100% of his salary for each year (beginning effective January 1, 2012) during the Interim Period, payable in the manner and at the time specified by the Board for senior executive officers generally but no later than March 15 of the subsequent calendar year. The actual amount of the bonus payable by the Employer to the Employee shall be based upon the achievement of performance criteria to be established by the Board or the Compensation Committee of the Board, in its sole and absolute discretion. For avoidance of any doubt, the Employee’s target bonus opportunity for the calendar year ending December 31, 2012 shall be 100% of the sum of the actual base salary paid by the Employer to the Employee during the calendar year 2012 for the entire calendar year ending December 31, 2012 (including his actual base salary for the period from January 1, 2012 through March 31, 2012).
5. Incentive Equity.
(a) On the second business day following the filing of the Employer’s Quarterly Report on Form 10-Q for the period ended March 31, 2012 (the “Grant Date”), the Employer shall grant the Employee non-qualified stock options under the Employer’s 2008 Incentive Stock Plan, as amended (the “2008 Plan”) or any successor plan pursuant to which the Employer may grant options (collectively, the “Plan”) to purchase up to a number of shares of common stock of the Employer equal to $375,000, divided by the “fair value” of an option to purchase a single share of common stock of the Employer on the Grant Date determined in the manner used by the Employer for financial accounting purposes (the “Option Grant”). Each of the stock options included in the Option Grant shall give the Employee the right to acquire one underlying share at the closing price of the Employer’s common stock on NASDAQ on the Grant Date. The Option Grant shall vest in twelve (12) equal quarterly installments of eight and one-third percent (8 1/3 %), the first installment to become exercisable on the last day of the three (3) month period immediately following the Grant Date (the “Initial Quarterly Vesting Date”), with an additional eight and one-third percent (8 1/3 %) becoming exercisable on the last day of each of the eleven (11) successive three (3) month periods following the Initial Quarterly Vesting Date (the Initial Quarterly Vesting Date and each subsequent vesting date shall each be referred to as a “Vesting Date”); provided, however, that the Employee remains employed by the Employer on each Vesting Date. Notwithstanding the foregoing, the Option Grant shall become fully vested in the event that the Employee’s employment is terminated pursuant to Sections 4.5(c) or (f) (other than a termination by the Employee “for cause” under Section 4.4(d) of the Employment Agreement) of the Employment Agreement.
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(b) On the Grant Date, the Employer shall grant the Employee under the 2008 Plan the right to receive a number of shares of common stock of the Employer equal to $375,000, divided by the closing price per share of the Employer’s common stock on the Grant Date (the “Restricted Stock Award”). The Restricted Stock Award shall vest and become payable in twelve (12) equal quarterly installments of eight and one-third percent (8 1/3 %), the first installment to become vested and payable on the Initial Quarterly Vesting Date, with an additional eight and one-third percent (8 1/3 %) becoming vested and payable on the last day of each of the eleven (11) successive three (3) month periods following the Initial Quarterly Vesting Date; provided, however, that the Employee remains employed by the Employer on each Vesting Date. Notwithstanding the foregoing, the Restricted Stock Award shall become fully vested and payable in the event that the Employee’s employment is terminated pursuant to Sections 4.5(c) or (f) (other than a termination by the Employee “for cause” under Section 4.4(d) of the Employment Agreement) of the Employment Agreement.
(c) Section 3.1(d) of the Employment Agreement is amended to add the following paragraph to the end thereto: “To the extent the Employer maintains a share incentive plan, including but not limited to the 2008 Plan, for periods during the Interim Period after December 31, 2012, the Employee will be eligible to participate in such plan pursuant to the terms and conditions thereof to be aligned with the role and contributions by the Employee to the Employer as determined by the Board and/or the Compensation Committee of the Board, and any award granted thereunder will be governed by an award agreement to be entered into separately between the Employee and the Employer.”
(d) The Employer agrees to cooperate with the Employee in connection with the establishment by the Employee of a Rule 10b5-1 stock trading plan at such time and under such circumstances as the Employer determines, in consultation with the Employer’s outside counsel, it would permissible for the Employee to establish such a plan under applicable law.
(e) If and to the extent that the Employee is unable, by reason of any blackout period or other securities law restriction, to sell a sufficient number of shares of the Employer’s common stock to pay any federal, state, local or foreign income taxes required to be withheld upon exercise of any options, or upon the vesting or delivery of any shares of the Employer’s common stock, under any equity awards made by the Employer to the Employee, then the Employee shall be permitted to satisfy any such withholding obligation by (i) the delivery of fully vested shares of the Employer’s common stock then owned by the Employee or, (ii) if the Employee does not then own a sufficient number of fully vested shares of Employer common stock to satisfy such withholding obligations, by the Employer withholding shares otherwise deliverable to the Employee pursuant to the equity award, having a fair market value (based upon the closing price of a share of common stock of the Employer as reported on a consolidated basis for stock listed on NASDAQ or such other principal stock exchange or market on which those shares are then traded) on the date on which the taxable event resulting in such taxes being required to be withheld occurs, equal to the minimum statutory amount required to be so withheld. If the Employer determines that payment by the Employee of the withholding taxes pursuant to clause (ii) through the withholding of shares otherwise deliverable to the Employee pursuant to the award would have the same financial accounting consequences (including, without limitation, any affect that it might have on the Employer’s Cash EBITDA) to the Employer as would result if payment was made pursuant to clause (i) through the delivery of vested shares then owned by the Employee, then the Employee may elect to have the required withholding taxes paid in accordance with clause (ii) through the withholding of shares otherwise deliverable pursuant to the award even if the Employee owns a sufficient number of vested shares of Employer common stock to satisfy the withholding obligations.
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6. Termination Pay.
(a) For purposes of Section 4.4 of the Employment Agreement, the changes in the Employee’s duties and position under Section 1 hereof, shall not be deemed to constitute “for cause” .
(b) Section 4.5(c) of the Employment Agreement is amended to define “Severance” as a period of twelve (12) months. Additional references to “Severance” throughout the Employment Agreement are similarly amended.
(c) Section 4.5(g) of the Employment Agreement is amended to add the following sentence to the end thereto: “Notwithstanding the foregoing, in the event of a termination of employment under Sections 4.5(c) or 4.5(f), for a period of twelve (12) months from the date of termination of employment, the Employee shall be permitted to continue participation in, and the Employer shall maintain the same level of contribution for, the Employee’s participation in the Employer’s medical and dental insurance, in effect with respect to the Employee during the one (1) year prior to the termination of the Employee’s employment, or, if the Employer cannot provide such benefits because the Employee is no longer an employee, or the Employer otherwise determines to not provide such benefits under the Employer’s plans, a dollar amount equal to the after-tax cost to the Employee of obtaining such benefits (or substantially similar benefits).”
7. Special Additional Provisions Relating Directly or Indirectly to the Employee’s Interim Appointments.
(a) The Employer’s removal of the Employee as Interim CEO, other than (i) “for cause” under Section 4.5(e) of the Employment Agreement, (ii) by reason of the Executive’s disability, or (iii) the Employer’s appointment of the Employee as permanent CEO, shall constitute “for cause” under Section 4.4 of the Employment Agreement. For the avoidance of doubt, the appointment of any other person other than the Employee, as the permanent CEO of the Employer, shall constitute “for cause” under Section 4.4 of the Employment Agreement.
(b) In the event there is a termination of Employee’s employment described in Sections 4.5(c) or (f) (other than a termination by the Employee “for cause” under Section 4.4(d) of the Employment Agreement) of the Employment Agreement:
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(i) To the extent permitted by the relevant Employer plans, all outstanding Employer stock options then held by the Employee that are purely time-vested shall vest, and the Employee shall thereafter have the lesser of (i) three months from the date on which a termination of employment described in Sections 4.5(c) or (f) of the Employment Agreement occurs, or (ii) the date on which the stock options otherwise would have expired in accordance with its terms, to exercise the same (or, if less, the maximum period permitted under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any guidance issued by the United States Treasury Department thereunder). To the extent any Employer plan does not permit such accelerated vesting or continued exercisability, the Employee shall be paid, in cash, within 30 days after such event, the excess of the aggregate fair market value of the shares of Employer stock subject to all of the affected stock options described in this Section 7(b) over such options’ aggregate exercise price.
(ii) All restricted stock and restricted stock unit awards that are purely time-vested shall vest, and be released free from restriction (other than any restriction that may be imposed by law). For the avoidance of doubt, to the extent any portion of any restricted stock and restricted stock unit awards are subject to vesting, in whole or in part, based on the satisfaction of performance criteria, those restricted stock and restricted stock unit awards only shall become vested if and to the extent that the performance criteria have been satisfied, or to the extent otherwise provided in the applicable Plan or the award agreement evidencing the grant of such restricted stock or restricted stock unit awards.
8. Other Terminations. In the event the Employee’s employment terminates under the Agreement, his entitlement to compensation, benefits and/or severance payments shall, except as otherwise provided in this Amendment, be determined as provided under the Employment Agreement.
9. Future Contract. In the event the Employee is permanently named to the offices described in Paragraph 1, the parties agree to negotiate in good faith a new, restated employment agreement setting forth their respective rights and obligations with regard to the Employee’s employment in such capacities. However, if the parties are unable to agree on a new, restated employment agreement setting forth their respective rights and obligations with regard to the Employee’s employment in such capacities, the Agreement will continue in full force and effect.
10. Miscellaneous.
(a) The Employee shall be reimbursed for up to $5,000 per calendar year for association memberships.
(b) Upon execution of this Amendment, the Employer and the Employee shall enter into an Indemnification Agreement in the form currently used for the members of the Board, which indemnification agreement shall be amended from time to time so as to be consistent with any amendments made to the Board’s indemnification agreements. The Employer shall request that the existing indemnification agreements be reviewed and revised by the Board as it may deem appropriate.
(c) The last sentence of Section 3.1(e)(vii) of the Employment Agreement is amended to read as follows:
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“In addition, the Employer shall promptly pay in advance of final disposition of any action, suit or proceeding all reasonable expenses incurred by the Employee in connection with any matter as to which it could reasonably be expected to be entitled to indemnification hereunder. The Employee hereby undertakes and agrees to repay to the Employer any advances made pursuant to this Section 3.1(e)(vii) if and to the extent that it shall ultimately be found that the Employee is not entitled to be indemnified by the Employer for such amounts. Neither this Amendment nor the Agreement shall affect any indemnification or other rights and benefits afforded to the Employee by the Employer’s certificate of incorporation or by-laws. The Employer shall use commercially reasonable efforts to continue the Employee’s coverage under the directors’ and officers’ liability coverage maintained by the Employer, as in effect from time to time, to the same extent as other current or former senior executive officers and directors of the Employer.”
(d) The Employee shall be reimbursed for up to $35,000 in legal fees incurred in connection with the preparation and negotiation of this Amendment.
(e) The Employer shall reimburse the Employee for up to $30,000 in expenses incurred by the Employee in moving his belongings and possessions, and his family, from Prague Czech Republic back to the United States in the event that the Employer moves its principal place of business to the United States during the Interim Period or during the period, if any, that the Employee is serving as the Employer’s permanent CEO.
(f) The provisions of Sections 7.6, 7.8, 7.10, and 7.11 of the Employment Agreement are incorporated herein by reference, mutatis mutandis. This Amendment and any other documents executed by the parties on the date of this Amendment constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. This Amendment may not be amended orally, but only by an agreement in writing signed by the parties hereto.
11. Effect of This Agreement on Employment Agreement Generally. Except as otherwise provided herein, the Employment Agreement shall continue in full force and effect. Further, in the case of doubt, the Employment Agreement shall prospectively be reasonably construed in a manner consistent with the intent of this Amendment.
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12. Release. In consideration of the undertakings by the Employer pursuant to this Amendment, the Employee hereby releases the Employer, its subsidiaries, affiliated companies, successors and assigns, and its current or former directors, officers, employees, shareholders or agents in such capacities, from any and all actions, causes of action, suits, controversies, claims, liabilities and demands whatsoever that the Employee may arguably have, or assert, with respect to any failures by the Employer prior to the date of this Amendment to comply with any requirements under the Employment Agreement or any equity or other award agreement between the Employer and the Employee, including without limitation, for or relating to (i) any failure to withhold or pay-over any withholding or income taxes imposed in the Czech Republic for the term of the Employee’s employment with the Employer prior to the date of this Amendment, (ii) any rights to any bonuses payable to the Employee for the calendar year ended December 31, 2011, (iii) the reimbursement by the Employer for relocation expenses to the Czech Republic, or (iv) any delays in the delivery of any shares under any equity award previously granted to the Employee, including without limitation any additional taxes or interest imposed under Section 409A of the Code.
13. Application of Section 409A of Internal Revenue Code. Notwithstanding anything in this Amendment or the Employment Agreement to the contrary, the provisions of this Amendment and the Agreement shall be interpreted and applied in a manner that is consistent with Code Section 409A and any guidance issued by the United States Treasury Department thereunder. This means that, unless the parties shall otherwise agree, (i) to the extent that any amount payable in connection with the termination of the Employee’s employment cannot be paid until six months following such termination to avoid subjecting the Employee to the additional income taxes imposed under Code Section 409A, such payments will be so delayed and paid, with interest at the short-term applicable federal rate, as in effect at the date of termination of employment, in a single lump-sum payment six months thereafter and (ii) with respect to medical benefits and other welfare benefits, the Employee shall bear the full cost of such benefits for six months following such termination date and shall be reimbursed for costs that the Employee would not have otherwise incurred during such period in a single lump-sum payment six months thereafter (unless guidance issued by the United States Treasury Department permits benefit continuation through such six-month period), and the Employer shall continue to provide such benefits to the Employee and his eligible dependents for the period that they would otherwise have been provided, starting on the six-month anniversary of the termination date.
14. Potential Section 280G Reductions.
(a) Notwithstanding anything in this Amendment or the Employment Agreement to the contrary, in the event that it shall be determined that any payment, distribution, or other action by the Employer to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Amendment or the Employment Agreement or otherwise (a “Payment”), would result in an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code, and the value determined in accordance with Section 280G(d)(4) of the Code of the Payments, net of all taxes imposed on the Employee (the “Net After-Tax Amount”) that the Employee would receive would be increased if the Payments were reduced, then the Payments shall be reduced by an amount (the “Reduction Amount”) so that the Net After-Tax Amount after such reduction is greatest. For purposes of determining the Net After-Tax Amount, the Employee shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Payment is to be made, and (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
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(b) Subject to the provisions of this Section 14 of the Amendment, all determinations required to be made under this Section 14 of the Amendment, including the Net After-Tax Amount, the Reduction Amount and the Payments that are to be reduced pursuant to Section 14(a) of the Amendment and the assumptions to be utilized in arriving at such determinations, shall be made by the accounting firm then engaged by the Employer to prepare the Employer’s U.S. federal income tax return (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Employer and the Employee within fifteen (15) business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Employer. The Accounting Firm’s decision as to which Payments are to be reduced shall be made (i) only from Payments that the Accounting Firm determines reasonably may be characterized as “parachute payments” under Section 280G of the Code; (ii) only from Payments that are required to be made in cash, (iii) only with respect to any amounts that are not payable pursuant to a “nonqualified deferred compensation plan” subject to Section 409A of the Code, until those payments have been reduced to zero, and (iv) in reverse chronological order, to the extent that any Payments subject to reduction are made over time (e.g., in installments). In no event, however, shall any Payments be reduced if and to the extent that the Board or the Compensation Committee determines that such reduction would cause a violation of Section 409A of the Code or other applicable law. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. Any determination by the Accounting Firm shall be binding upon the Employer and the Employee.
15. The Employer and the Employee hereby acknowledge and agree that their entering into this Amendment is not associated with a Change in Control (as defined in the 2008 Plan) of the Employer.
[Signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or caused it to be executed, on the date indicated above.
KIT DIGITAL, INC | ||
By | /s/ Daniel W. Hart | |
Daniel W. Hart | ||
Director | ||
EMPLOYEE | ||
/s/ Barak Bar-Cohen | ||
Barak Bar-Cohen |
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KIT DIGITAL, INC.
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered into as of April 1, 2012, by and between KIT digital, Inc., a Delaware corporation (the "Company"), and Barak Bar-Cohen (the "Indemnitee").
RECITALS:
WHEREAS, the Board of Directors of the Company (the "Board of Directors") has reviewed and analyzed the protection from liability available to Directors and Officers of the Company and its subsidiaries under the Company's existing corporate documents, applicable law and liability insurance;
WHEREAS, the Board of Directors has determined that the risks of litigation and possible liability for Directors and Officers arising out of the performance of their duties have substantially increased, and that the protection offered by the Company's existing corporate documents, applicable law, and liability insurance is not sufficient to fully protect Directors and Officers from liability;
WHEREAS, the Board of Directors has determined that highly competent persons will be difficult to attract and retain as Directors and/or Officers unless the are adequately protected against liabilities incurred in performance of their duties in such capacity;
WHEREAS, the Board of Directors has determined that the use of indemnification agreements will allow the Company to offer some protection from liability to its Directors and Officers;
WHEREAS, the Indemnitee is a Director and/or Officer of the Company;
WHEREAS, Articles NINTH, TENTH and TWELFTH of the Company’s Certificate of Incorporation provide for indemnification of Directors and Officers acting on behalf of the Company; and
WHEREAS, Section 145 of the Delaware General Corporation Law (the "Statute") specifically provides that the indemnification provided by the Statute is not exclusive.
NOW THEREFORE, in consideration of the Indemnitee's past and continued services to the Company, the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Indemnification. The Company agree to indemnify the Indemnitee to the fullest extent now or hereafter permitted by applicable law (including, without limitation, the indemnification permitted by the Statute) in the event that the Indemnitee was or is made or is threatened to be made a party to or a witness in any threatened, pending or completed action, suit, proceeding or appeal, whether civil, criminal, administrative or investigative, by reason of the fact that the Indemnitee was or is a Director and/or Officer of the Company or any of its subsidiaries, both as to action in his official capacity and as to action in another capacity while holding such directorship or office, where he acts or acted in that capacity at the Company's request, against all reasonable expenses (including attorneys' fees and disbursements), judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred by the Indemnitee in connection with such action, suit, proceeding or appeal. This Agreement is intended to cover all actions, suits, proceedings and appeals arising out of or connected with the Indemnitee's service as a Director and/or Officer which are currently pending or threatened or which arise in the future, even if the Indemnitee is no longer a Director and/or Officer when such action, suit, proceeding or appeal arises or is threatened.
2. Advance Payment of Expenses. Expenses incurred by the Indemnitee in connection with any action, suit, proceeding or appeal, as described herein, shall be paid by the Company in advance of the final disposition of such action, suit, proceeding or appeal within thirty (30) days of Company's receipt of any invoice for reasonable and actual expenses incurred by Indemnitee; provided however, Indemnitee has within ten (10) days after the Company's request, executed a written agreement satisfactory to the Company's counsel to repay all such amounts it if is ultimately determined that he is not entitled to be indemnified by the Company under applicable law. Notwithstanding the foregoing, the Company shall not be required to advance expenses for the defense of Indemnitee for any cause of action that relate to activities that the Company in its good faith determines are outside the scope of the duties required of Indemnitee under this Agreement, including without limitation, causes of action such as sexual harassment, personal torts and the like.
3. Changes in the Law; Partial Indemnification.
(a) In the event of any changes after the date of this Agreement in any applicable law, statute or rule (including judicial interpretation thereof) which expand the right of the Company to indemnify its Directors and Officers, the Indemnitee's rights and the Company's obligations under this Agreement shall be expanded to include such changes in applicable law, statute or rule. In the event of any changes in any applicable law, statute or rule (including judicial interpretation thereof) which narrow the right of the Company to indemnify its Directors and Officers, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder.
(b) The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which the Indemnitee may be entitled under the Company's Certificate of Incorporation, its By-laws, any agreement, any vote of shareholders or Directors, applicable law or otherwise, both as to action in the Indemnitee's official capacity and as to action in another capacity while holding such directorship or office, where he acts or acted in that capacity at the Company's request.
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(c) If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonable incurred by the Indemnitee in the preparation, investigation defense, appeal or settlement of any civil or criminal action, suit, proceeding or appeal, but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such expenses, judgments, fines or penalties to which the Indemnitee is entitled.
4. Contribution. If the indemnification provided in Section 1 hereof may not be paid to the Indemnitee under applicable law, then in any threatened, pending or completed action, suit, proceeding or appeal in which the Company is jointly liable with the Indemnitee, the Company shall contribute to the amount of reasonable expenses (including attorneys' fees and disbursements), judgments, fines (including expense taxes and penalties) and amounts paid in settlement actually and reasonably incurred and paid or payable by the Indemnitee in such proportion as is appropriate to reflect (a) the relative benefits received by the Company on the one hand and the Indemnitee on the other hand from the transaction from which such action, suit, proceeding or appeal arise, and (b) the relative fault of the Company on the one hand and of the Indemnitee on the other in connection with the events which resulted in such expenses, judgments, fines or settlement amounts, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnitee on the other shall be determined by reference to, among other things, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such expenses, judgments, fines or settlement amounts. The Company agrees that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.
5. Exclusions.
(a) The Company shall not be liable to make any payment hereunder (whether in the nature of indemnification or contribution) to the extent payment is actually made to the Indemnitee under an insurance policy (an "Insurance Policy") or any other method outside of this Agreement. Before payment is reasonable expended to be made under an Insurance Policy or such other method, if the Indemnitee is required to pay any amount that the Company would otherwise be obligated to pay except for the exclusion in this subparagraph (a), the Company shall promptly advance the amount the Indemnitee is required to pay for which the Company is liable hereunder. In the event that the Company makes any advance to the Indemnitee under this subparagraph (a), the Indemnitee shall promptly execute an assignment, if a form satisfactory to the Company's counsel, under which the funds the Indemnitee later receives under such Insurance Policy or such other method are assigned to the Company in an amount not to exceed the amount which the Company advanced pursuant to this subparagraph (a).
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(b) The Company shall not be liable hereunder for any amounts paid in settlement of a proceedings effected without its prior written consent, which shall not be unreasonably withheld.
6. Term. All obligations of the Company contained herein shall continue during the period the Indemnitee is a Director and/or Officer of the Company and shall continue thereafter (a) until both parties agree in writing to terminate this Agreement, or (b) as long as the Indemnitee remains subject to any possible claim or threatened, pending or completed action, suit, proceeding or appeal, whether civil, criminal, administrative or investigative, arising out of the Indemnitee's service as a Director or Officer or in any other capacity in which he served at the Company's request while a Director or Officer.
7. Enforcement. In the event the Indemnitee is required to bring any action to enforce rights or to collect funds due under this Agreement and is successful in such action, the Company shall reimburse the Indemnitee for all of the Indemnitee's reasonable expenses (including attorneys' fees and disbursements) in bringing and pursuing such action. The burden of proving that indemnification or advances are not reasonable shall be on the Company.
8. Obligations of the Indemnitee.
(a) Promptly after receipt by the Indemnitee of notice of the commencement of any action, suit, proceeding or appeal in which the Indemnitee is made or is threatened to be made a part or a witness, the Indemnitee shall notify the Company in writing of the commencement of such action, suit, proceeding or appeal, but the Indemnitee's failure to notify the Company shall not relieve the Company from any obligation to indemnify or advance expenses to the Indemnitee under this Agreement, except to the extent such delay in providing notice has caused actual damages to the Company through prejudice to the Company's rights or its ability to defend the action, suit, proceeding or appeal.
(b) The Indemnitee shall reimburse the Company for all or an appropriate portion of the expenses advanced to the Indemnitee pursuant to Section 2 above if it is finally judicially adjudicated that the Indemnitee is not entitled to be indemnified, or not entitled to be fully indemnified because of indemnification in the particular circumstances is not permitted under applicable law.
(c) The Indemnitee shall not settle any claim or action in any manner which would impose on the Company any penalty, constraint, or obligation to hold harmless or indemnify the Indemnitee pursuant to this Agreement without the Company's prior written consent, which shall not be unreasonably withheld.
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9. Defense of Claim.
(a) Except as otherwise provided below, in the case of any action, suit, proceeding or appeal commenced against the Indemnitee, the Company shall be entitled to participate therein at its own expense and, to the extent that it may wish, to assume the defense thereof. If the Company wishes to assume the defense of any action, suit, proceeding or appeal hereunder, the Company must give written notice to the Indemnitee of such assumption of defense and of its choice of counsel. Such choice of counsel must be approved in writing by the Indemnitee in his sole discretion, which will not be unreasonably withheld, before the Company's assumption of defense hereunder may proceed. After notice from the Company to Indenmitee of its election to assume the defense of any action, suit, proceeding or appeal and the Indemmitee's approval of the Company's choice of counsel, the Company shall not be obligated to the Indemnitee under this Agreement for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof other than reasonable costs of investigation, travel and lodging expenses arising out of the Indemnitee's participation in such action, suit, proceeding or appeal, except as otherwise provided herein. The Indemnitee shall have the right to employ the Indemnitee's own counsel in such action, suit, proceeding or appeal, but the fees and expenses of such counsel incurred after notice from the Company to the Indemnitee of its assumption of the defense thereof shall be a the Indemnitee's expense (i) unless the employment of such counsel has been requested by the Indemnitee and authorized in writing by the Company, or (ii) unless the Company shall have employed counsel to assume the defense of such action, suit, proceeding or appeal, in which case the reasonable fees and expenses of the Indemnitee's counsel shall be at the expense of the Company, or (iii) unless counsel for the Indemnitee shall have provided a written opinion to Company in accordance with applicable standards of professional conduct that there may be a conflict of interest between the Company and the Indemnitee in the defense of such action, suit, proceeding or appeal; and (iv) except for reasonable costs and expenses for counsel for Indemnitee to monitor proceedings (provided, however, that such counsel for will not appear as counsel of record in any such proceeding).
(b) In the event that counsel for the Indemnitee concludes that there may be a conflict of interest between the Company and the Indemnitee in the defense of an action, suit, proceeding or appeal, (i) the Company shall not have the right to assume and direct the defense of such action, suit, proceeding or appeal on behalf of the Indemnitee, and (ii) the Company shall indemnify the Indemnitee for all reasonable legal fees and other reasonable expenses, but the Company shall not be liable for any settlement or negotiated disposition of such action, suit, proceeding or appeal or any part thereof effected without the written consent of the Company, which shall not be unreasonably withheld.
10. Severability. In any provision of this Company shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.
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11. Notices. Any notices or other communications required or desired hereunder shall be written and shall be given by (a) certified mail, return receipt requested, (b) overnight courier service, or (c) personal delivery. Such notice or communication shall be deemed to be given upon receipt or on the date of courier or personal delivery, as applicable, and shall be given at the following addresses:
the Company: | KIT digital, Inc. | ||
228 East 45th Street, 8th Floor | |||
New York, New York 10017 | |||
Attention: Louis Schwartz | |||
General Counsel | |||
Indemnitee: | At the latest address of Indemnitee on the Payroll Records of the Company. |
or to such other address as either party may specify by written notice to the other party.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.
(b) This Agreement shall be binding upon the Indemnitee, his heirs, personal representatives and permitted assigns, and upon the Company, its successors and assigns. This Agreement shall inure to the benefit of the Indemnitee, his heirs, personal representatives and permitted assigns, and to the benefit of the Company, its successors and assigns. No assignment of this Agreement or of any duty or obligation hereunder shall be made by the Indemnitee without the prior written consent of the Company, which shall not be unreasonably withheld.
(c) This Agreement supersedes any other oral or written agreements between the Company and the Indemnitee which would restrict or lessen any of the rights granted to the Indemnitee hereunder.
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(d) No amendment, modification, termination or claimed waiver of any of the provisions hereof shall be valid unless in writing and signed by the party or an authorized representative of the party against whom such modification is sought to be enforced.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.
KIT DIGITAL, INC. | ||
By: | /s/ Louis Schwartz | |
Name: | Louis Schwartz | |
Title: | General Counsel | |
INDEMNITEE: | ||
/s/ Barak Bar-Cohen | ||
Name: | Barak Bar-Cohen |
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SEPARATION AND SEVERANCE AGREEMENT
This Separation and Severance Agreement ("Agreement") is made and entered into by and between KIT digital, Inc., a Delaware corporation (the "Company"), and Gavin Campion an individual ("Executive") this 14th day of May, 2012 (the “Effective Date”).
RECITALS
A. Executive has been employed by the Company as an officer and served on the Company's Board of Directors up until March 23, 2012.
B. Executive and the Company entered into an Employment Agreement on August 31, 2011 (the "Employment Agreement"), attached hereto as Exhibit A.
C. After lengthy discussions among the parties concerning the operations, management structure and future of the Company, the parties desire to terminate their relationship and reorganize the structure of the Company on an amicable basis pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, undertakings and releases, receipt of which is hereby acknowledged as sufficient consideration by both parties, the parties agree as follows:
1. RECITALS. The above recitals are true, correct, and are herein incorporated by reference.
2. RESIGNATION OF EMPLOYMENT. Executive hereby resigns as a key employee and Director and from any and all other offices or positions he may have had with the Company or any of its subsidiaries, to be effective on the Termination Date, as defined herein. Executive acknowledges that he has timely received all wages, benefits or other monies due through the date of this Agreement under the Employment Agreement or otherwise from the Company.
3. TERMINATION. The Employment Agreement is permanently terminated effective on the Termination Date. However, Schedules B&C of the Employment Agreement shall survive termination for a period of one (1) year after the Termination Date.
4. SEVERANCE AND BENEFITS. Subject to the conditions set forth herein, the Company and Executive agree to the following.
a.) | Company shall pay Executive an amount equal to the previous twelve (12) months base salary (US$24,583 pcm to a total of US$295K), to paid in 9 equal monthly installments, commencing Aug 15th, 2012 and through April 15th, 2013, which shall be fully accelerated in the event the company completes a financing. At such time, the balance shall be paid in a lump sum on the closing date of such financing. Financing shall include the securing of a debt facility. |
b.) | All stock options (the “Stock Options”) granted and issued to Campion pursuant to the Company’s incentive stock plans over time (together, the “Stock Option Plans”) together with all restricted stock units (the “RSUs”) and performance contingent restricted stock units (the “PCRSUs”) awarded and issued to Campion pursuant to those certain Restricted Stock Unit Program (the “RSU Program”) and Performance Contingent Restricted Stock Unit Program (the “PCRSU Program”) shall continue to vest pursuant to the terms and conditions of the Stock Option Plans, the RSU Program and the PCRSU Program, as the case may be, irrespective of Campion’s ongoing role in the Company or on the Board. |
c.) | The Company agrees that if Executive is made a party, is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative, or investigative (a "Proceeding"), by reason of the fact that Executive is or was a director, officer, or employee of the Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is Executive' alleged action in an official capacity while serving as a director, officer, member, employee, or agent, Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company's Articles of Incorporation, Bylaws, or resolutions of the Board of the Company, or, if greater, by the laws of the State of New York, against all cost, expense, liability, and loss (including, without limitation, attorney's fees, judgments, fines or other liabilities or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Executive in connection therewith, and such indemnification shall continue as to Executive even if he has ceased to be a director, member, employee, or agent of the Company or other entity and shall inure to the benefit of Executive' heirs, executors, and administrators. |
d.) | The Company agrees to enter into an advisory agreement with Executive that compensates Executive $25,000 per month for the ensuing three-month period which will be paid on or before the 15th May, 15th June and 15th July. |
e.) | If Executive is able to successfully complete the divestiture of the Sputnik Agency within the six (6) month time period following the Termination Date, the Company shall pay Executive an additional 10% bonus against the gross revenue proceeds of such sale. The gross revenue for such sale must exceed $3.5 mil. in order to collect the 10% bonus. If the Sputnik business is sold for less than $3.5 mil, Executive shall receive a 5% bonus for such direct effort. |
f.) | Executive shall be paid $25,000 to cover relocation costs upon execution of this agreement, to be paid on the execution date of this agreement. |
g.) | The Board’s Compensation Committee shall determine whether or not Executive is entitled to receive a bonus for 2011, or the partial period of 2012. |
h.) | Executive shall be reimbursed up to $20K to cover legal expenses associated with the negotiation of this Agreement and other related matters. Actual invoices of work shall be provided to the Company and the Company will pay the legal firm directly. |
5. TERMINATION DATE AND CONDITION TO AGREEMENT. The effective date of the resignation of Executive and termination of the Employment Agreement shall be April 19, 2012 ("Termination Date").
6. RETURN OF PROPERTY. As a condition to the terms of this Agreement, Executive shall return to the Company, in good condition, all property, documentation and materials or property to the Company in Executive's possession, except for his cell phone (Blackberry) and Mac Air laptop.
7. NON-DISPARAGEMENT. The Company and Executive further agree that they shall not make any disparaging, denigrating or untrue statements about the parties or about any other employee of the Company. It is agreed and understood that any breach of this paragraph by Executive or the Company would be material to the other.
8. GENERAL RELEASES AND VOLUNTARY WAIVER OF RIGHTS.
Except for the obligations created by or arising out of this Agreement, effective on the Termination Date, Executive and Executive's descendants, heirs, successors and assigns, and each of them, do hereby release, acquit, satisfy and forever discharge and covenant not to sue the Company, its agents, servants, employees and all persons for whose conduct it is legally responsible, including, but not limited to, its officers, directors, attorneys, insurers, stockholders, parent, subsidiary, affiliated or related entities and their respective successors and assigns, and each of them, past or present, from any and all manner of action, causes of action, rights, liens, agreements, contracts, covenants, obligations, suits, claims, debts, dues, sums of monies, costs, expenses, attorneys' fees, judgments, orders and liabilities, accounts, covenants, controversies, promises, damages, of whatever kind and nature in law or equity or otherwise whether now known or unknown, including specifically but not limited to, any and all claims arising out of such employment relationship which Executive ever had (including claims not yet accrued) against the Company, its agents, servants, employees and persons for whom it is legally responsible, for and upon any reason arising out of the employment relationship Executive had with the Company and the transactions and relationships describe herein. Executive specifically acknowledges that he has been advised that he should consult with an attorney concerning his rights and the signing of this Release
9. NON-ADMISSIONS. The Company and Executive agree that neither this Agreement nor the consideration given shall be construed as an admission of any wrongdoing or liability by the Company or Executive, and that all such liability or wrongdoing is expressly denied.
10. ANTI-COERCION. Each of the Parties hereto has entered into this Agreement without undue influence, fraud, coercion, duress, misrepresentation, or restraint having been imposed upon them by any other party, and further acknowledges that each party had the opportunity to be represented by counsel of their own selection.
11. INTERPRETATION OF RELEASE. That this Agreement shall be construed in any case which doubt may arise in such a manner as will make it lawful and fully enforceable, and in the event that any part hereof shall be deemed unenforceable or illegal, then it is the intention of the Parties hereto that such part be severed and only the remainder be in force. That for the purposes of interpretation and construction of this Agreement, this Agreement shall be deemed to have been drafted by the Company and by Executive.
12. NOTICES. Any notice required or permitted to be given under the terms of this Agreement shall be sufficient if in writing and if sent postage prepaid by registered or certified mail, return receipt requested; by overnight delivery; by courier; or by confirmed telecopy, in the case of Executive to the business or residence as shown on the records of the Company, or in the case of the Company to its principal office or at such other place as it may designate.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Parties and shall not be modified, altered, or discharged, except by a writing signed by each of the Parties hereto.
14. GOVERNING LAW, JURISDICTION AND VENUE. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
15. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same Agreement.
16. WAIVER OF BREACH - EFFECT. No waiver or any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the Party waiving the breach.
17. FULL UNDERSTANDING AND VOLUNTARY ACCEPTANCE. In entering into this Agreement, the Parties represent that they have relied upon the advice of their attorneys or have chosen to enter into this Agreement without the assistance of counsel based upon their understanding of the terms hereof. The terms of this Agreement have been completely read and explained to them by their attorneys and/or they have reviewed the terms hereof in complete detail and that the terms are fully understood and voluntarily accepted by them.
18. HEADINGS. The headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.
KIT DIGITAL, INC. | |
By: | /s/ Lou Schwartz |
Lou Schwartz, Esq. | |
General Counsel | |
GAVIN CAMPION | |
/s/ Gavin Campion |
Date: 31 March 2012
To: | Christopher Williams |
69 Bridge Street | |
Manchester, MA 01944 |
Subject: Termination of Employment
Dear Christopher Williams;
THIS TERMINATION OF EMPLOYMENT is entered into by KIT digital, Inc. (“Employer”) and Christopher Williams (“you”). We both agree that your employment relationship with KIT Digital, Inc. will terminate. You are being provided formal notice that your date of employment termination will be 15 July 2012. Both you and KIT Digital, Inc. agree to set forth the following terms and conditions upon which the employment relationship is to be terminated:
- | Your last day of work will be 31 March 2012 and you will be paid 3.5 months in lieu of notice (through 15 July 2012). During this time period, you agree to provide reasonable transition assistance to KIT Digital, Inc. You will have access to a laptop and office space during the transition. |
- | Your accrued and unused Paid-Time-Off (PTO) will be paid in your final paycheck. As of July 15, your accrued and unused PTO balance will be 160 PTO hours (20 PTO days). |
- | Upon termination of your employment your medical and dental benefits will continue through 31 July 2012. You will be eligible for the continuation of your medical and dental benefits beyond 31 July 2012 through COBRA. You must however enroll for COBRA coverage to extend your medical and dental plan benefits. You will receive notification for COBRA coverage at your home address. To be eligible for COBRA coverage, you must have been enrolled in the company’s benefit plans when you were an active employee. |
KIT digital, Inc.
1100 Circle 75 Parkway, 6th Floor
Atlanta, GA 30339
Website: www.kitd.com
- | Any stock options will vest through 31 December 2012. A copy of the Employee Stock Option Exercise Form is attached for your reference. The completed exercise form should be sent to John Clark in New York at john.clark@kit-digital.com. |
- | Your final, outstanding invoices totaling $38,500 for services provided between September 2010 and December 2010 will be paid within thirty (30) days of the acceptance date of this letter and processed and paid through the accounting department. |
- | The terms and conditions of this agreement are to be private and confidential, and you agree not to disclose any of these terms and conditions to any person except your spouse, your attorney, or your tax advisor, unless disclosure is necessary to carry out the terms of this Agreement, or to supply information to any taxing authority, or is otherwise required by law. |
If you should have any questions regarding this document or package, please feel free to contact me.
Sincerely,
/s/ Lou Schwartz | |
Lou Schwartz | |
General Counsel and Managing Director, Americas | |
KIT digital, Inc. |
Agreed to and Accepted: | |||
/s/ Christopher Williams | 04/23/2012 | ||
Christopher Williams | Date |
KIT digital, Inc.
1100 Circle 75 Parkway, 6th Floor
Atlanta, GA 30339
Website: www.kitd.com