ACTV, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995,
and amended January 1, 1997, by and between ACTV, INC., a Delaware corporation,
having an office at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(hereinafter referred to as "Employer") and XXXXX XXXXX, an individual residing
at 00 Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 (hereinafter referred to as
"Employee");
W I T N E S S E T H:
WHEREAS, Employer employs, and desires to continue to employ,
Employee as its Executive Vice President and President of ACTV Entertainment,
Inc.; and
WHEREAS, Employee is willing to continue to be employed as the
Executive Vice President of Employer and President of ACTV Entertainment, Inc.
in the manner provided for herein, and to perform the duties of the Executive
Vice President of Employer and President of ACTV Entertainment, Inc. upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein set forth it is agreed as follows:
1. Employment of Executive Vice President of Employer and
President of ACTV Entertainment, Inc. Employer hereby employs Employee as its
Executive Vice President and as President of ACTV Entertainment, Inc.
2. Term. Subject to Section 9 below, the term of this
Agreement shall commence on August 1, 1995 and end on December 31, 2000. Each 12
month period from January 1 through December 31 during the term hereof shall be
referred to as an "Annual Period." During the term hereof, Employee shall devote
substantially all of his business time and efforts to Employer and its
subsidiaries and affiliates.
3. Duties. The Employee shall perform any and all duties and
shall have any and all powers as may be prescribed by the President and Chief
Executive Officer and shall be available to confer and consult with and advise
the officers and directors of Employer at such times that may be required by
Employer. Employee shall report directly and solely to the President and Chief
Executive Officer or his designee.
4. Compensation.
a. (i) Employee shall be paid a minimum of
$200,000 for each Annual Period, commencing January 1, 1997; provided, however,
that Employee's salary shall be increased annually at the beginning of each
Annual Period commencing January 1, 1998 by an amount equal to no less than the
amount of his annual salary for the immediately preceding Annual Period times
the percentage increase in the CPIW (New York) then in effect as compared to the
previous period for which the CPIW (New York) is available. Employee shall be
paid periodically in accordance with the policies of the Employer during the
term of this Agreement, but not less than monthly.
(ii) Employee is eligible for
semi-annual bonuses, if any, which will be determined and paid in accordance
with policies set from time to time by the Board.
b. (i) In the event of a "Change of Control"
whereby
(A) A person (other than a person who
is an officer or a Director of Employer on the effective date hereof), including
a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
becomes, or obtains the right to become, the beneficial owner of Employer
securities having 30% or more of the combined voting power of then outstanding
securities of the Employer that may be cast for the election of directors of the
Employer;
(B) At any time, a majority of the
Board-nominated slate of candidates
for the Board is not elected;
(C) Employer consummates a merger in
which it is not the surviving
entity;
(D) Substantially all Employer's assets
are sold; or
(E) Employer's stockholders approve the
dissolution or liquidation of
Employer; then
(ii) (A) All stock options, warrants
and stock appreciation rights ("Rights") granted by Employer to Employee under
any plan or otherwise prior to the effective date of the Change of Control,
shall become vested, accelerate and become immediately exercisable; at an
exercise price of 10(cent) per share if applicable, adjusted for any stock
splits and capital reorganizations having a similar effect, subsequent to the
effective date hereof. In the event Employee owns or is entitled to receive any
unregistered securities of Employer, then Employer shall use its best efforts to
effect the registration of all such securities as soon as practicable, but no
later than 120 days after the effective date of the registration statement;
provided, however, that such period may be extended or delayed by Employer for
one period of up to 60 days if, upon the advice of counsel at the time such
registration is required to be filed, or at the time Employer is required to
exercise its best efforts to cause such registration statement to become
effective, such delay is advisable and in the best interests of Employer because
of the existence of non-public material information, or to allow Employer to
complete any pending audit of its financial statements;
(B) Any outstanding principle
and interest on loans to Employee pursuant to Section 4.g.(ii), below, shall be
recalculated and reconstituted as if the exercise price of the Rights financed
thereby were, ab initio, 10(cent) per share.
(C) If upon said Change of
Control, (i) a new Chief Executive Officer of Employer is appointed and (ii)
Employee is not retained in his immediately prior position or a substantially
similar position with Employer or the surviving entity, as applicable, then in
addition, Employee shall be eligible to receive a one-time bonus, equal on an
after-tax basis to two times his then current annual base salary. To effectuate
this provision, the bonus shall be "grossed-up" to include the amount necessary
to reimburse Employee for his federal, state and local income tax liability on
the bonus and on the "gross-up" at the respective effective marginal tax rates.
In no event shall this bonus exceed 2.7 times Employee's then current base
salary. Said bonus shall be paid within thirty (30) days of the Change of
Control.
c. Employer shall include Employee in its
health insurance program available to Employer's executive officers.
d. Employer shall maintain a life, accidental
death and dismemberment insurance policy on Employee for the benefit of a
beneficiary named by Employee in an amount not less than $750,000. Ownership
of the policy shall be assigned to Employee upon termination of Employee's
employment under this Agreement.
e. Employee shall also be entitled to
participate pari passu in any other program established by Employer pursuant to
which any executive officers receive a share of the profits of Employer.
f. Employee shall have the right to participate in
any other employee benefit plans established by Employer.
g. Unless a pre-existing plan of Employer expressly
forbids it, all Rights which may become exercisable during the term hereof shall
be paid for in cash only if Employee so elects, otherwise they may be paid for.
(i) by the transfer by Employee to Employer of
so much of Employee's Rights which, when valued at the highest trading price of
the underlying securities of Employer during the previous six months, will
offset the price of the Rights then being exercised;
(ii) by means of a non-recourse Note with
interest at the lowest rate, it any, required to be charged by any governmental
authority, to accrue and become due and payable with the principle, in an amount
no greater than the exercise price, given by Employee to Employer and secured
solely by the shares of stock being paid for thereby, which Note shall become
due and payable at the earlier of the expiration hereof or, on a pro rata basis,
the sale by Employee of all or part of the Rights or underlying stock which
constitute security for the Note; or
(iii) by any combination of cash and (ii) or (iii),
above.
5. Expenses. Employee shall be reimbursed for all of his
actual out-of-pocket expenses incurred in the performance of his duties
hereunder, provided such expenses are acceptable to Employer, which approval
shall not be unreasonably withheld, for business related travel and
entertainment expenses, and that Employee shall submit to Employer reasonably
detailed receipts with respect thereto.
6. Vacation. Employee shall be entitled to receive four (4)
weeks paid vacation time after each year of employment upon dates agreed upon by
Employer. Upon separation of employment, for any reason, vacation time accrued
and not used shall be paid at the salary rate of Employee in effect at the time
of employment separation.
7. Secrecy. At no time shall Employee disclose to anyone any
confidential or secret information (not already constituting information
available to the public) concerning (a) internal affairs or proprietary business
operations of Employer or (b) any trade secrets, new product developments,
patents, programs or programming, especially unique processes or methods.
8. Covenant Not to Compete. Subject to, and limited by,
Section 10(b), Employee will not, at any time, anywhere in the world, during the
term of this Agreement, and for one (1) year thereafter, either directly or
indirectly, engage in, with or for any enterprise, institution, whether or not
for profit, business, or company, competitive with the business (as identified
herein) of Employer as such business may be conducted on the date thereof, as a
creditor, guarantor, or financial backer, stockholder, director, officer,
consultant, advisor, employee, member, inventor, producer, director, or
otherwise of or through any corporation, partnership, association, sole
proprietorship or other entity; provided, that an investment by Employee, his
spouse or his children is permitted if such investment is not more than four
percent (4%) of the total debt or equity capital of any such competitive
enterprise or business and further provided that said competitive enterprise or
business is a publicly held entity whose stock is listed and traded on a
national stock exchange or through the NASDAQ Stock Market. As used in this
Agreement, the business of Employer shall be deemed to include the development
and implementation of individualized television technology or programs.
9. Termination.
a. Termination by Employer
(i) Employer may terminate this Agreement
upon written notice for Cause. For purposes hereof, "Cause" shall mean (A)
engaging by the Employee in conduct that constitutes activity in competition
with Employer; (B) the conviction of Employee for the commission of a felony;
and/or (C) the habitual abuse of alcohol or controlled substances.
Notwithstanding anything to the contrary in this Section 9(a)(i), Employer may
not terminate Employee's employment under this Agreement for Cause unless
Employee shall have first received notice from the Board advising Employee of
the specific acts or omissions alleged to constitute Cause, and such acts or
omissions continue after Employee shall have had a reasonable opportunity (at
least 10 days from the date Employee receives the notice from the Board) to
correct the acts or omissions so complained of.
(ii) Employer may terminate Employee's
employment under this Agreement if, as a result of any physical or mental
disability, Employee shall fail or be unable to perform his duties under this
Agreement for any consecutive period of 90 days during any twelve-month period.
If Employee's employment is terminated under this Section 9(a)(ii): (A) for the
first six months after termination, Employee shall be paid 100% of his full
compensation under Section 4(a) of this Agreement at the rate in
effect on the date of termination, and in each successive 12 month period
thereafter Employee shall be paid an amount equal to 67% of his compensation
under Section 4(a) of this agreement at the rate in effect on the date of
termination; (B) Employer's obligation to pay life insurance premiums on the
policy referred to in Section 4(d) shall continue in effect until five years
after the date of termination; and (C) Employee shall continue to be entitled,
insofar as is permitted under applicable insurance policies or plans, to such
general medical and employee benefit plans (including profit sharing or pension
plans) as Employee had been entitled to on the date of termination. Any amounts
payable by Employer to Employee under this paragraph shall be reduced by the
amount of any disability payments payable by or pursuant to plans provided by
Employer and actually paid to Employee.
(iii) This agreement automatically shall
terminate upon the death of Employee, except that Employee's estate shall be
entitled to receive any amount accrued under Section 4(a) and the pro-rata
amount payable under Section 4(e) for the period prior to Employee's death and
any other amount to which Employee was entitled of the time of his death.
b. Termination by Employee
(i) Employee shall have the right to
terminate his employment under this Agreement upon 30 days' notice to Employer
given within 90 days following the occurrence of any of the following events (A)
through (D) or within three years following the occurrence of event (E):
(A) Employer acts to change the
geographic location of the performance of Employee's duties from the New York
Metropolitan area. For purposes of this Agreement, the New York Metropolitan
area shall be deemed to be the area within 30 miles of midtown Manhattan.
(B) A Material Reduction (as
hereinafter defined) in Employee's rate of base compensation, or Employee's
other benefits. "Material Reduction" shall mean a ten percent (10%)
differential;
(C) A failure by Employer to
obtain the assumption of this Agreement by any successor;
(D) A material breach of this
Agreement by Employer, which is not cured within thirty (30) days of written
notice of such breach by Employer;
(E) A Change of Control.
(ii) Anything herein to the contrary
notwithstanding, Employee may terminate this Agreement upon thirty (30) days
written notice.
c. If Employer shall terminate Employee's
employment other than due to his death or disability or for Cause (as defined in
Section 9(a)(i) of this Agreement), or if Employee shall terminate this
Agreement under Section 9(b)(i), Employer's obligations under Section 4 shall be
absolute and unconditional and not subject to any offset or counterclaim and
Employee shall continue to be entitled to receive all amounts provided for by
Section 4 and all additional employee benefits under Section 4 regardless of the
amount of compensation he may earn with respect to any other employment he may
obtain.
10. Consequences of Breach by Employer;
Employment Termination
a. If this Agreement is terminated pursuant to
Section 9(b)(i) hereof, or if Employer shall terminate Employee's employment
under this Agreement in any way that is a breach of this Agreement by Employer,
the following shall apply:
(i) Employee shall receive as a bonus,
and in addition to his salary continuation pursuant to Section 9.c., above, a
cash payment equal to the Employee's total base salary as of the date of
termination hereunder for the remainder of the term plus an additional amount to
pay all federal, state and local income taxes thereon on a grossed-up basis as
heretofore provided, payable within 30 days of the date of such termination;
except that if this Agreement is terminated pursuant to Section 9.(b)(i)(E),
then Employee shall not be entitled to receive a bonus under this Section
10.a.(i) but shall instead receive a lump-sum payout of Employee's total base
salary for the remainder of the term plus an additional amount to pay all
federal, state and local income taxes thereon on a grossed-up basis as
heretofore provided, payable within 30 days of the date of such termination.
(ii) Employee shall be entitled to
payment of any previously declared bonus and additional compensation as provided
in Section 4(a), (b) and (e) above.
b. In the event of termination of Employee's
employment pursuant to Section 9(b)(i) of this Agreement, the provisions of
Section 8 shall not apply to Employee.
11. Remedies
Employer recognizes that because of Employee's
special talents, stature and opportunities in the interactive television
industry, and because of the special creative nature of and compensation
practices of said industry and the material impact that individual projects can
have on an interactive television company's results of operations, in the event
of termination by Employer hereunder (except under Section 9(a)(i) or (iii), or
in the event of termination by Employee under Section 9(b)(i) before the end of
the agreed term, Company acknowledges and agrees that the provisions of this
Agreement regarding further payments of base salary, bonuses and the
exercisability of Rights constitute fair and reasonable provisions for the
consequences of such termination, do not constitute a penalty, and such payments
and benefits shall not be limited or reduced by amounts' Employee might earn or
be able to earn from any other employment or ventures during the remainder of
the agreed term of this Agreement.
12. Excise Tax. In the event that any payment or benefit
received or to be received by Employee in connection with a termination of his
employment with Employer would constitute a "parachute payment" within the
meaning of Code Section 280G or any similar or successor provision to 280G
and/or would be subject to any excise tax imposed by Code Section 4999 or any
similar or successor provision then Employer shall assume all liability for the
payment of any such tax and Employer shall immediately reimburse Employee on a
"grossed-up" basis for any income taxes attributable to Employee by reason of
such Employer payment and reimbursements.
13. Arbitration. Any controversies between Employer and
Employee involving the construction or application of any of the terms,
provisions or conditions of this Agreement, save and except for any breaches
arising out of Sections 7 and 8 hereof, shall on the written request of either
party served on the other be submitted to arbitration. Such arbitration shall
comply with and be governed by the rules of the American Arbitration
Association. An arbitration demand must be made within one (1) year of the date
on which the party demanding arbitration first had notice of the existence of
the claim to be arbitrated, or the right to arbitration along with such claim
shall be considered to have been waived. An arbitrator shall be selected
according to the procedures of the American Arbitration Association. The cost of
arbitration shall be born by the losing party or in such proportions as the
arbitrator shall decide. The arbitrator shall have no authority to add to,
subtract from or otherwise modify the provisions of this Agreement, or to award
punitive damages to either party.
14. Attorneys' Fees and Costs. If any action at law or in
equity is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which he may be
entitled.
15. Entire Agreement; Survival. This Agreement contains the
entire agreement between the parties with respect to the transactions
contemplated herein and supersedes, effective as of the date hereof any prior
agreement or understanding between Employer and Employee with respect to
Employee's employment by Employer. The unenforceability of any provision of this
Agreement shall not effect the enforceability of any other provision. This
Agreement may not be amended except by an agreement in writing signed by the
Employee and the Employer, or any waiver, change, discharge or modification as
sought. Waiver of or failure to exercise any rights provided by this Agreement
and in any respect shall not be deemed a waiver of any further or future rights.
b. The provisions of Sections 4, 7, 8,
9(a)(ii), 9(a)(iii), 9(c), 10, 11, 12, 13, 14, 17, 18 and 19 shall survive the
termination of this Agreement.
16. Assignment. This Agreement shall not be assigned to
other parties.
17. Governing Law. This Agreement and all the amendments
hereof, and waivers and consents with respect thereto shall be governed by the
internal laws of the state of New York, without regard to the conflicts of laws
principles thereof.
18. Notices. All notices, responses, demands or other
communications under this Agreement shall be in writing and shall be deemed to
have been given when
a. delivered by hand;
b. sent be telex or telefax, (with receipt
confirmed), provided that a copy is mailed by registered or certified mail,
return receipt requested; or
c. received by the addressee as sent be express
delivery service (receipt requested) in each case to the appropriate addresses,
telex numbers and telefax numbers as the party may designate to itself by notice
to the other parties:
(i) if to the Employer:
ACTV, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx, 00000
Attention: Xxxxxxx X. Xxxxxxx
Telefax: (000) 000-0000
Telephone: (000) 000-0000
Gersten, Savage, Kaplowitz & Xxxxxx
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Telefax: (000) 000-0000
Telephone: (000) 000-0000
(ii) if to the Employee:
Xxxxx Xxxxx
00 Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
19. Severability of Agreement. Should any part of this
Agreement for any reason be declared invalid by a court of competent
jurisdiction, such decision shall not affect the validity of any remaining
portion, which remaining provisions shall remain in full force and effect as if
this Agreement had been executed with the invalid portion thereof eliminated,
and it is hereby declared the intention of the parties that they would have
executed the remaining portions of this Agreement without including any such
part, parts or portions which may, for any reason, be hereafter declared
invalid.
IN WITNESS WHEREOF, the undersigned have executed this
agreement as of the day and year first above written.
ACTV, INC.
By: __________________________________
XXXXXXX X. XXXXXXX
President
XXXXX XXXXX
