EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 26, 1999 between Take-Two Interactive Software,
Inc., a Delaware corporation (the "Employer" or the "Company"), and Xxxxx X.
Xxxxxxxxx (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its President and
to be assured of his services as such on the terms and conditions hereinafter
set forth; and
WHEREAS, the Employee is willing to accept such employment on such terms
and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the Employer
and the Employee hereby agree as follows:
1. Term. Employer hereby agrees to employ Employee, and Employee hereby
agrees to serve Employer for a three-year period commencing effective as of
_____, 1999 (the "Effective Date") (such period being herein referred to as the
"Initial Term," and any year commencing on the Effective Date or any anniversary
of the Effective Date being hereinafter referred to as an "Employment Year").
After the Initial Term, this Agreement shall be renewable automatically for
successive one year periods (each such period being referred to as a "Renewal
Term"), unless, more than ninety days prior to the expiration of the Initial
Term or any Renewal Term, either the Employee or the Company give written notice
that employment will not be renewed.
2. Employee Duties.
(a) During the term of this Agreement, the Employee shall have the duties
and responsibilities of President of the Employer, reporting directly to the
Chief Executive Officer of Employer and the Board of Directors of the Employer
(the "Board"). It is understood that such duties and responsibilities shall be
commensurate with the Employee's position.
(b) The Employee shall devote substantially all of his business time,
attention, knowledge and skills faithfully, diligently and to the best of his
ability, in furtherance of the business and activities of the Company. The
principal place of performance by the Employee of his duties hereunder shall be
the Company's principal executive offices located in New York City although the
Employee may be required to travel outside of the
area where the Company's principal executive offices are located in connection
with the business of the Company.
3. Compensation.
(a) During the term of this Agreement, the Employer shall pay the Employee
a salary (the "Salary") at a rate of $250,000 per annum in respect of each
Employment Year, payable in equal installments bi-weekly, in advance, or at such
other times as may mutually be agreed upon between the Employer and the
Employee. The Salary shall be increased by 5% each Employment Year, provided
that the Company's net income per share for the one-year period then ended
exceeds the Company's net income per share for the prior one-year period.
Employee's compensation shall be subject to an annual review by the Board and
may be increased from time to time at the discretion of the Board.
(b) The Employee will be paid a signing bonus equal to $75,000 in cash.
(c) The Employee shall be paid a bonus equal to $20,000 in respect of each
fiscal quarter commencing with the quarter ending July 31, 1999 provided that
net income per share in any such quarter exceeds the Company's net income per
share in the comparable quarter for the prior year.
(d) The Employee shall be entitled to receive five-year options to purchase
250,000 shares of Common Stock at an exercise price per share of $8.50. Options
to purchase 83,333 shares shall vest six months from date of grant, options to
purchase 83,333 shares shall vest twelve months from the date of grant and
options to purchase 83,334 shares shall vest twenty-four months from the date of
grant. The options may be exercised on a cashless basis, whereby the Employee
will be entitled to receive a number of shares of Common Stock having a value
equal to the difference between the exercise price of the options and the fair
market value of the Common Stock into which they are exercisable.
(e) The Employee shall be entitled to an automobile allowance of $800 per
month.
(f) The Employer agrees to obtain and pay for malpractice liability
insurance covering the Employee in an amount to be mutually agreed.
(g) The Employer agrees to obtain at its expense an insurance policy on the
life of Employee in the amount of $1 million, the beneficiary of which shall be
designated by Employee.
(h) In addition to the foregoing, the Employee
-2-
shall be entitled to such other cash bonuses and such other compensation in the
form of stock, stock options or other property or rights as may from time to
time be awarded to him by the Board during or in respect of his employment
hereunder.
4. Benefits.
(a) During the term of this Agreement, the Employee shall have the right to
receive or participate in all benefits and plans which the Company may from time
to time institute during such period for its employees and for which the
Employee is eligible, including health, dental and 401(k), and shall
automatically receive or participate in all benefits and plans that the
Company's Chief Executive Officer receives or participates in. Nothing paid to
the Employee under any plan or arrangement presently in effect or made available
in the future shall be deemed to be in lieu of the salary or any other
obligation payable to the Employee pursuant to this Agreement.
(b) During the term of this Agreement, the Employee will be entitled to the
number of paid holidays, personal days off, vacation days and sick leave days in
each calendar year as are determined by the Company from time to time, provided
that Employee shall be entitled to at least four weeks of paid vacation. Such
vacation may be taken in the Employee's discretion with the prior approval of
the Employee, and at such time or times as are not inconsistent with the
reasonable business needs of the Company.
5. Travel Expenses. All travel and other expenses incident to the rendering
of services reasonably incurred on behalf of the Company by the Employee during
the term of this Agreement shall be paid by the Employer. If any such expenses
are paid in the first instance by the Employee, the Employer shall reimburse him
therefor on presentation of appropriate receipts for any such expenses.
6. Termination. Notwithstanding the provisions of Section 1 hereof, the
Employee's employment with the Employer may be earlier terminated as follows:
(a) By action taken by the Board, the Employee may be discharged for cause
(as hereinafter defined), effective as of such time as the Board shall
determine. Upon discharge of the Employee pursuant to this Section 6(a), the
Employer shall have no further obligation or duties to the Employee, and the
Employee shall have no further obligations or duties to the Employer, except as
provided in Section 7.
(b) In the event of (i) the death of the Employee or (ii) by action of the
Board and the inability of the Employee, by reason of physical or mental
disability, to continue substantially to perform his duties hereunder for a
period of 180
-3-
consecutive days, during which 180 day period Salary and bonus and any other
benefits hereunder shall not be suspended or diminished. Upon any termination of
the Employee's employment under this Section 6(b), the Employer shall have no
further obligations or duties to the Employee.
(c) In the event that Employee's employment with the Employer is terminated
by action taken by the Board without cause, including termination upon a Change
in Control (as hereinafter defined), then the Employer shall have no further
obligation or duties to Employee, except for payment of the amounts described
below, and Employee shall have no further obligations or duties to the Employer,
except as provided in Section 7; provided that in the event that Employee is
terminated without cause, Section 7 (b) shall apply for a period of six (6)
months (provided that thereafter Employer may elect to compete with the Company
and forgo any compensation) and all options granted to Employee pursuant to
Section 3 (c) shall vest and become immediately exercisable. In the event of
such termination, the Employer shall continue to pay to the Employee his Salary,
bonus (deemed to be earned) and benefits during the longer of (i) the remaining
Initial Term or (ii) 18 months following the date of termination. If such
termination occurs upon a Change in Control (i) all amounts payable to the
Employee pursuant to this Section 6(c) shall be paid in one lump-sum payment
payable immediately upon such termination, (ii) all options granted to Employee
pursuant to Section 3(c) shall vest and (iii) if the Change of Control involves
any offer to the holders of Common Stock generally relating to the acquisition
of their shares, including, without limitation, a merger, consolidation or
tender offer, such options, at the option of Employee, shall be deemed to be
exercised on a cashless basis for the consideration payable in the acquisition
transaction.
(d) For purposes of Paragraph 6(c), a "Change in Control" shall mean (i)
any consolidation or merger of Employer in which Employer is not the surviving
corporation or pursuant to which shares of Employer's Common Stock would be
converted into cash; (ii) any sale, lease, exchange or other transfer of all or
substantially all of the assets of Employer; (iii) the cessation of control (by
virtue of their not constituting a majority of directors) of the Board by the
individuals who at the date of this Agreement were directors; or (iv) the
acquisition of beneficial ownership of 20% or more of the voting power of
Employer's Common Stock by any person or group.
(e) For purposes of this Agreement, the Company shall have "cause" to
terminate the Employee's employment under this Agreement upon (i) the failure by
the Employee to substantially perform his material duties under this Agreement,
(ii) the engaging by the Employee in criminal misconduct (including embezzlement
and criminal fraud) which is materially injurious to the Company, (iii) the
conviction of the Employee of
-4-
a felony which is materially injurious to the Company or (iv) gross negligence
on the part of the Employee which is materially injurious to the Company. The
Company shall give written notice to the Employee, which notice shall specify
the grounds for the proposed termination and the Employee shall be given thirty
(30) days to cure if the grounds arise under clauses (i) or (iv) above.
7. Confidentiality; Noncompetition.
(a) The Employer and the Employee acknowledge that the services to be
performed by the Employee under this Agreement are unique and extraordinary and,
as a result of such employment, the Employee will be in possession of
confidential information relating to the business practices of the Company. The
term "confidential information" shall mean any and all information (verbal and
written) relating to the Company or any of its affiliates, or any of their
respective activities, other than such information which can be shown to be in
the public domain (such information not being deemed to be in the public domain
merely because it is embraced by more general information which is in the public
domain) other than as the result of breach of the provisions of this Section
7(a), including, but not limited to, information relating to: trade secrets,
personnel lists, financial information, research projects, services used,
pricing, customers, customer lists and prospects, product sourcing, marketing
and selling and servicing. The Employee agrees that he will not, during or for a
period of one year after the termination of employment, directly or indirectly,
use, communicate, disclose or disseminate to any person, firm or corporation any
confidential information regarding the clients, customers or business practices
of the Company acquired by the Employee during his employment by Employer,
without the prior written consent of Employer; provided, however, that the
Employee understands that Employee will be prohibited from misappropriating any
trade secret at any time during or after the termination of employment.
(b) Subject to Section 6 (c), Employee hereby agrees that he shall not,
during the period of his employment and for a period of one (1) year following
such employment, directly or indirectly, within any county (or adjacent county)
in any State within the United States or territory outside the United States in
which the Company is engaged in business during the period of the Employee's
employment or on the date of termination of the Employee's employment, engage,
have an interest in or render any services to any business (whether as owner,
manager, operator, licensor, licensee, lender, partner, stockholder, joint
venturer, employee, consultant or otherwise) competitive with the Company's
business activities.
(c) The Employee hereby agrees that he shall not,
-5-
during the period of his employment and for a period of one (1) year following
such employment, directly or indirectly, solicit the Company's customers, or
persons listed on the personnel lists of the Company. At no time during the term
of this Agreement, or thereafter shall the Employee directly or indirectly,
disparage the commercial, business or financial reputation of the Company.
(d) For purposes of clarification, but not of limitation, the Employee
hereby acknowledges and agrees that the provisions of subparagraphs 7(b) and (c)
above shall serve as a prohibition against him, during the period referred to
therein, directly or indirectly, hiring, offering to hire, enticing, soliciting
or in any other manner persuading or attempting to persuade any officer,
employee, agent, lessor, lessee, licensor, licensee or customer existing during
the time of the Employee's employment by the Company, or at the termination of
his employment, to discontinue or alter his, her or its relationship with the
Company.
(e) Upon the termination of the Employee's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the business of the Company
which are in the possession of the Employee including all copies thereof, shall
be promptly returned to the Company.
(f) (i) The Employee agrees that all processes, technologies and inventions
("Inventions"), including new contributions, improvements, ideas and
discoveries, whether patentable or not, conceived, developed, invented or made
by him during his employment by Employer and relating to the Company's business
shall belong to the Company, provided that such Inventions grew out of the
Employee's work with the Company are related in any manner to the business
(commercial or experimental) of the Company or are conceived or made on the
Company's time or with the use of the Company's facilities or materials. The
Employee shall further: (a) promptly disclose such Inventions to the Company;
(b) assign to the Company, without additional compensation, all patent and other
rights to such Inventions for the United States and foreign countries; (c) sign
all papers necessary to carry out the foregoing; and (d) give testimony in
support of his inventorship;
(ii) If any Invention is described in a patent application or is disclosed
to third parties, directly or indirectly, by the Employee within six months
after the termination of his employment by the Company, it is to be presumed
that the Invention was conceived or made during the period of the Employee's
employment by the Company; and
(iii) The Employee agrees that he will not assert any rights to any
Invention as having been made or
-6-
acquired by him prior to the date of this Agreement, except for Inventions, if
any, disclosed to the Company in writing prior to the date hereof.
(g) The Company shall be the sole owner of all products and proceeds of the
Employee's services hereunder, including, but not limited to, all materials,
ideas, concepts, formats, suggestions, developments, arrangements, packages,
programs and other intellectual properties that the Employee may acquire,
obtain, develop or create in connection with and during the term of the
Employee's employment hereunder, free and clear of any claims by the Employee
(or anyone claiming under the Employee) of any kind or character whatsoever
(other than the Employee's right to receive payments hereunder). The Employee
shall, at the request of the Company, execute such assignments, certificates or
other instruments as the Company may from time to time deem necessary or
desirable to evidence, establish, maintain, perfect, protect, enforce or defend
its right, or title and interest in or to any such properties.
(h) The parties hereto hereby acknowledge and agree that (i) the Company
would be irreparably injured in the event of a breach by the Employee of any of
his obligations under this Section 7, (ii) monetary damages would not be an
adequate remedy for any such breach, and (iii) the Company shall be entitled to
injunctive relief, in addition to any other remedy which it may have, in the
event of any such breach.
(i) Each of the rights and remedies enumerated in Section 7(h) shall be
independent of the other, and shall be severally enforceable, and all of such
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity.
(j) If any provision contained in this Section 7 is hereafter construed to
be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions.
(k) If any provision contained in this Section 7 is found to be
unenforceable by reason of the extent, duration or scope thereof, or otherwise,
then the court making such determination shall have the right to reduce such
extent, duration, scope or other provision and in its reduced form any such
restriction shall thereafter be enforceable as contemplated hereby.
(l) It is the intent of the parties hereto that the covenants contained in
this Section 7 shall be enforced to the fullest extent permissible under the
laws and public policies of each jurisdiction in which enforcement is sought
(the Employee
-7-
hereby acknowledging that said restrictions are reasonably necessary for the
protection of the Company). Accordingly, it is hereby agreed that if any of the
provisions of this Section 7 shall be adjudicated to be invalid or unenforceable
for any reason whatsoever, said provision shall be (only with respect to the
operation thereof in the particular jurisdiction in which such adjudication is
made) construed by limiting and reducing it so as to be enforceable to the
extent permissible, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of said provision in any
other jurisdiction.
8. General. This Agreement is further governed by the following provisions:
(a) Indemnification. The Employer shall indemnify and hold harmless the
Employee against any and all expenses reasonably incurred by him in connection
with or arising out of (a) the defense of any action, suit or proceeding in
which he is a party, or (b) any claim asserted or threatened against him, in
either case by reason of or relating to his being or having been an employee,
officer or director of the Company, whether or not he continues to be such an
employee, officer or director at the time of incurring such expenses, except
insofar as such indemnification is prohibited by law. Such expenses shall
include, without limitation, the fees and disbursements of attorneys, amounts of
judgments and amounts of any settlements, provided that such expenses are agreed
to in advance by the Employer. The foregoing indemnification obligation is
independent of any similar obligation provided in the Employer's Certificate of
Incorporation or Bylaws, and shall apply with respect to any matters
attributable to periods prior to the Effective Date, and to matters attributable
to his employment hereunder, without regard to when asserted.
(b) Notices. All notices relating to this Agreement shall be in writing and
shall be either personally delivered, sent by telecopy (receipt confirmed) or
mailed by certified mail, return receipt requested, to be delivered at such
address as is indicated below, or at such other address or to the attention of
such other person as the recipient has specified by prior written notice to the
sending party. Notice shall be effective when so personally delivered, one
business day after being sent by telecopy or five days after being mailed.
To the Employer:
Take Two Interactive Software, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx
-8-
To the Employee:
000 Xxxx 00xx Xxxxxx, Xxx. 0X
Xxx Xxxx, XX 00000
(c) Parties in Interest. Employee may not delegate his duties or assign his
rights hereunder. This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns.
(d) Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto (including the
letter agreement dated January 16, 1998) with respect to the employment of the
Employee by the Employer and contains all of the covenants and agreements
between the parties with respect to such employment in any manner whatsoever.
Any modification or termination of this Agreement will be effective only if it
is in writing signed by the party to be charged.
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Employee agrees to and hereby
does submit to jurisdiction before any state or federal court of record in New
York County or in the state and county in which such violation may occur, at
Employer's election.
(f) Warranty. Employee hereby warrants and represents as follows:
(i) That the execution of this Agreement and the discharge of Employee's
obligations hereunder will not breach or conflict with any other contract,
agreement, or understanding between Employee and any other party or parties.
(ii) Employee has ideas, information and know-how relating to the type of
business conducted by Employer, and Employee's disclosure of such ideas,
information and know-how to Employer will not conflict with or violate the
rights of any third party or parties.
(iii) Employee will not disclose any trade secrets relating to the business
conducted by any previous employer and agrees to indemnify and hold Employer
harmless for any liability arising out of Employee's use of any such trade
secrets.
-9-
(g) Severability. In the event that any term or condition in this Agreement
shall for any reason be held by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or condition of this Agreement,
but this Agreement shall be construed as if such invalid or illegal or
unenforceable term or condition had never been contained herein.
(h) Execution in Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
TAKE TWO INTERACTIVE SOFTWARE, INC.
By:
----------------------------
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
----------------------------
Xxxxx X. Xxxxxxxxx
