Employment Agreement
This Employment Agreement ("Agreement") is made as of January 3, 1995,
("Effective Date") between SP Enterprises, Inc. (also doing business as
"Interactive Magic", and hereafter in this Agreement the "Corporation"), a
Maryland corporation, Xxxx X. Xxxxxxx, Xx. ("Employee"), and Xxxxxx X. Xxxxxxx
("Pickens").
WHEREAS, Employee has been employed by the Corporation as of December 31,
1994, and since that date has served as a director and as Chairman of the Board
of Directors of the Corporation;
WHEREAS, Employee, Xxxxxxx and the Corporation are entering into a Stock
Purchase Agreement ("Purchase Agreement") of even date herewith whereby the
Corporation will issue shares of its Class A Common Stock (Voting) ("Class A
Stock") to Employee, such that Employee will become the majority stockholder of
the Corporation and Xxxxxxx will become a minority shareholder of the
Corporation;
WHEREAS, as an inducement to Employee to enter into the Purchase Agreement,
Xxxxxxx desires to cause the Corporation to employ Employee, and Employee
desires to be employed by the corporation, upon the terms and conditions herein
set forth; and
WHEREAS, this Agreement is the employment agreement described in the
Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, and the mutual
promises and covenants herein contained, the Corporation and Employee agree as
follows:
1. Term of Agreement. This Agreement shall commence as of the Effective
Date for an initial term of three (3) years, provided that on each annual
anniversary of the Effective Date commencing on January 3, 1997, the term shall
be extended automatically by an additional one (1) year, unless either the
Corporation or the Employee, prior to such anniversary date, shall give written
notice of intent not to extend the term for an additional year. The initial
term, as extended automatically pursuant to the foregoing sentence, is hereafter
the "Term of Agreement".
2. Period of Employment. The Corporation shall employ the Employee, and the
Employee shall serve in the employ of the Corporation, during the Term of
Agreement (the "Period of Employment"), in the position and with the duties and
responsibilities set forth in Section 3, subject to the other terms and
conditions of this Agreement.
3. Position.
(a) During the Period of Employment the Employee shall serve as Chief
Executive Officer of the Corporation with the duties and responsibilities as
provided in the Corporation's By-laws for
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the Chief Executive Officer, and such other duties as are customary for a chief
executive officer.
(b) For so long as Xxxxxxx is a stockholder of the Corporation, Xxxxxxx
shall vote all of his shares of voting stock in favor of Employee serving as a
director of the Corporation, and for so long as Xxxxxxx is a director of the
Corporation, in favor of Employee serving as Chairman of the Board.
4. Compensation. During the Period of Employment, the Corporation shall pay
to the Employee as compensation a base salary and incentive compensation, as
follows:
(a) Base Salary. A base salary at the initial annual rate of
$150,000.00, provided that: (i) the amount due for the calendar year 1995
may be deferred, at the Corporation's sole discretion, and paid to Employee
in increments of $50,000 during each of calendar years 1996, 1997, and
1998; (ii) in the event this Agreement is terminated prior to December 31,
1998, Employee shall receive all deferred but unpaid amounts in a lump sum
no later than the date of termination; and (iii) notwithstanding anything
to the contrary in subsection (ii), Employee shall have the option,
exercisable by Employee upon written notice to the corporation no later
than the earlier to occur of (A) three (3) days after termination of
employment for any reason or (B) January 3, 1999, to take all or any
portion of the unpaid or deferred compensation in the form of shares of the
Corporation's Class A Stock, at a purchase price of $0.50 per share.
(b) Incentive Compensation. Annual incentive compensation in an amount
to be determined from year to year by the Corporation's Board of Directors.
5. Benefits. During the Period of Employment, the Corporation shall pay the
Employee the following benefits:
(a) Medical and Dental benefits. Employee shall be entitled to
reimbursement of reasonable health insurance premiums for family coverage
and shall be eligible to participate in the Corporation medical and dental
plans in accordance with the company's policies as may be in effect from
time to time.
(b) Automobiles. The Corporation shall make available to Employee two
(2) automobiles, owned or leased by the Corporation, for use by Employee
throughout the Period of Employment. The Corporation shall provide all
appropriate insurance coverage, all automobile maintenance and operating
expenses, and all automobile telephone expenses for each automobile.
(c) Modification of Company Benefit Plans. Nothing herein shall be
construed as an obligation to make available benefit plans to its employees
generally, or to provide for specific terms
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and conditions relating to such benefit plans.
(d) Promotion Allowance. The Corporation shall provide Employee with a
monthly allowance of $1000 to be used in the promotion, development and
advancement of the Corporation's business. The Corporation shall reimburse
Employee for all additional reasonable and necessary business expenses
incurred by Employee on behalf of the Corporation provided Employee shall
make available all records and information in support of such request.
(e) Reimbursement For Disallowed Compensation and Expenses. In the
event that any fringe benefit, expense allowance payment, or other expense
incurred by the Corporation for the benefit of the Employee shall in whole
or in part, upon audit or other examination of income tax returns of the
Corporation, be determined not to be allowable deductions from the gross
income of the Corporation and such determination shall be acceded to by the
Corporation, or such determination shall be made final and no timely appeal
shall be taken therefrom, then the Employee shall repay to the Corporation
the amount of such disallowed compensation and expenses. This obligation is
in accordance with the provisions of Revenue Ruling 69-115 and is for the
purpose of entitling such Employee to a business expense deduction for the
taxable year in which the repayment is made to the Corporation and to
protect the Corporation from having to bear the entire burden of a
disallowed expense item.
(h) Vacation. Employee shall be entitled to all regular Corporation
employee holidays and in addition to three (3) weeks of vacation per year
for the first year of the Period of Employment, four (4) weeks in the
second year of the Period of Employment, and thereafter to five (5) weeks
of vacation per year. After the fifth year of employment, Employee shall be
entitled to a one-year sabbatical with full pay and benefits.
6. Termination Before Expiration of Period of Employment. The termination
of the employment of the Employee during the Period of Employment may occur,
under this Agreement, in any one of the following ways:
(a) By the Corporation. The Corporation may terminate the employment
of the Employee at any time.
(b) By the Employee. The Employee may terminate his employment at any
time during the Period of Employment for any reason, including retirement
pursuant to the provisions of the Corporation's retirement plan, if any.
7. Notice of Termination. Any termination of the employment of the
Employee, whether by the Corporation or by the Employee shall be communicated to
the other party by notice in writing (the "Notice of Termination"), shall state
the termination provision in
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this Agreement relied upon, and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination under the
provisions so indicated. The "Date of Termination" shall mean the date on which
the employment terminates.
8. Consequences of Termination. The termination of the employment of the
Employee during the Period of Employment will cause the following results:
8.1. If the termination is for any reason other than by Employee
voluntarily (including resignation or pursuant to notice of nonrenewal by
Employee under Section 1):
(a) The Corporation will pay the Employee within five (5) days
after the Date of Termination: (i) any unpaid base compensation for
services performed prior to the Date of Termination; (ii) the amount
of any accrued annual vacation pay to which he may be entitled under
the Corporation's vacation plan and other accrued but unpaid benefits;
and (iii) an amount as liquidated damages, and in a lump sum, equal to
twice the total of (A) Employee's annual base salary then in effect
(regardless of whether such salary has been paid or deferred); (B)
Employee's incentive compensation under Section 4(b), if any, due from
prior years but unpaid as of the Date of Termination; and (C) such
incentive compensation under Section 4(b), if any, as would have been
earned (as defined in section 8.1(b)) by Employee for the period from
January 1 of the year of the Date of Termination through the Date of
Termination, in all cases subject to applicable federal and state
withholding. (The total amount due under subsection (iii) is hereafter
the "Termination Damages.")
(b) For purposes of calculating the incentive compensation
component in foregoing clause (a) (iii) (C), Employee shall be deemed
to have earned such incentive compensation if the Corporation's
performance, either pro-rated as of the Date of Termination from the
annual performance criteria as previously determined by the Board of
Directors under Section 4(b) ("Performance Criteria") or as of the end
of the applicable year, substantially satisfies the Performance
Criteria. The amount of incentive compensation to which Employee shall
be entitled under clause (a) (iii) (C) is the portion of the total
incentive compensation for the year in which the Date of Termination
occurs, pro rated from January 1 through the Date of Termination. In
the event the amount of incentive compensation due under clause (a)
(iii) (C) cannot reasonably be determined within five days of the Date
of Termination, the amount due under clause (a) (iii) (C) shall be
paid as soon as can practicably be determined, but in no event later
than incentive compensation paid to the Corporation's other employees
for such year.
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8.2. If the termination is voluntarily by the Employee:
(a) The Corporation will pay the Employee within five (5) days
after the Date of Termination: (i) any unpaid compensation for
services performed prior to the Date of Termination; (ii) the amount
of any accrued annual vacation pay to which he may be entitled under
the Corporation's vacation plan; and (iii) incentive compensation for
the year in which the Date of termination occurs as described in
Section 8.1 (a) (iii) (C).
(b) For purposes of this section, "voluntary termination" by the
Employee shall not include termination by Employee as a result of (i)
a material change in the Employee's duties, responsibilities or
authority, without his express written consent, or any change,
including the sale or other disposition of a substantial part of the
business of the Corporation and its subsidiaries, which would cause
the Employee's position with the Corporation to become of less
dignity, responsibility, importance or scope from the position and
attributes thereof described in Section 2; (ii) failure to obtain the
assumption of the obligation to perform this Agreement by any
successor, or (iii) breach of this Agreement by the Corporation.
9. Other Benefits. Nothing in this Agreement shall prevent the Employee
from receiving any benefits to which he may be entitled under any plan or
program of the Corporation, except any severance pay benefits for which he might
otherwise be eligible under any plan, program or policy of the Corporation.
Amounts paid to the Employee pursuant to Section 8 shall not be considered as
compensation or earnings for purposes of the Corporation's pension plan or other
benefit plans, programs or policies.
10. Income Tax Withholding. The Corporation may withhold from any benefits
payable under this Agreement any federal, state, city or other taxes as may be
required pursuant to any law, regulation or ruling.
11. Noncompetition And Confidentiality.
(a) Employee shall not, without the prior written approval of the Board of
Directors of the Corporation, during the term hereof and a period of two (2)
years after termination of his employment with the Corporation, be interested,
directly or indirectly, as partner, officer, director, stockholder, advisor,
employee or in any other capacity in any other Competitive Business (as defined
herein) within 250 miles of any location at which the Corporation maintains its
principal administrative headquarters; provided, however, that nothing herein
contained shall be deemed to prevent or limit the right of Employee to invest in
the capital stock or securities of any corporation whose stock or securities are
regularly traded on any public exchange. The term "Competitive Business" shall
mean the design, manufacture or sale of games used
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on personal computers.
(b) The term of this provision shall be extended by breach of section 11(a)
such that the term shall run for two years from the date such breach is cured.
(c) The term of this provision shall be reduced automatically upon failure
of the Corporation to timely pay the full amount of all Termination Damages
provided in section 8. The amount of the reduction in the term shall bear the
same proportion to the two-year term as the amount of Termination Damages due
but not paid bears to the total Termination Damages.
12. Confidentiality.
(a) Employee shall not at any time, either directly or indirectly, divulge,
disclose, or communicate to any person, firm or corporation in any manner
whatsoever any information concerning any matters affecting or relating to the
business of the Corporation, including without limitation the names of its
customers or clients, the prices at which it sells, has sold, provides or has
provided, its products and services, or any other information concerning the
Corporation, its manner of operation, its plans, processes, or other data
without regard to whether all of the forgoing matters would be deemed
confidential, material or important, the parties hereto stipulating that, as
between them, the same are important, material, and confidential and gravely
affect the effective and successful conduct of the business of the Corporation,
and the Corporation's good will and that any breach of the terms of this
paragraph shall be a material breach of this Agreement. This confidentiality
provision shall survive the termination of Employee's employment, regardless of
cause. The existence of any claims or cause of action against the Corporation by
Employee, whether predicated on this Agreement or otherwise, shall not
constitute a defense to enforcement of this provision.
(b) Employee agrees that upon termination for any reason, and unless
specifically authorized otherwise in writing by the Corporation's Board of
Directors, he shall return to the Corporation, without making or retaining any
copies thereof, all documents pertaining to the Corporation's business in any
way obtained while Employee was an employee of the Corporation.
13. Severability. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision or this Agreement, which shall remain in full force and effect.
14. Amendment. This Agreement may not be modified or amended except by an
instrument in writing signed by all parties hereto.
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15. Governing Law. This Agreement shall be subject to, and governed by, the
laws of the state of Maryland, excluding its choice of law provisions.
16. Entire Agreement. This Agreement and the Purchase Agreement constitute
the entire agreement and understanding between the parties hereto in respect of
the matters set forth herein, and all prior negotiations, writings and
understandings, written or oral, relating to the subject matter of this
Agreement are merged herein and are superseded and canceled by this Agreement
and the Purchase Agreement.
17. Binding Agreement and Successors. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that this Agreement and the
rights of the .parties hereunder may not be assigned, and the obligations of the
parties hereunder may not be delegated, in whole or in part, without the prior
written consent of the other party hereto.
18. Notices. Any notice, request, instruction or other document or
communication required or permitted to be given under this Agreement shall be in
writing and shall be deemed to be given as provided in the Purchase Agreement.
19. Section Headings. The Section headings contained in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning or interpretation of this Agreement or any of its terms and conditions.
20. Construction. Each and every term and condition of this Agreement and
any and all agreements and instruments subject to the terms hereof, the parties
hereto understand and agree that the same have or has been mutually negotiated,
prepared and drafted, and that if at any time the parties hereto desire or are
required to interpret or construe any such term or condition or any agreement or
instrument subject hereto, no consideration shall be given to the issue of which
party hereto actually prepared, drafted or requested any term or condition of
this Agreement or any agreement or instrument subject hereto.
[End of Page]
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21. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date first above written.
Witness or Attest: SP Enterprises, Inc.
/s/ Nina Xx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
---------------------------- ------------------------------
Xxxxxx Xxxxxxx
President
Witness:
/s/ Nina Xx X. Xxxxxxxx /s/ Xxxxxx X. Xxxxxxx
---------------------------- ----------------------------------
Xxxxxx X. Xxxxxxx
Witness:
/s/ Nina Xx X. Xxxxxxxx /s/ Xxxx X. Xxxxxxx, Xx.
---------------------------- ----------------------------------
Xxxx X. Xxxxxxx, Xx.
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AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement is entered into, effective the
_____ day of May, 1998, by and between INTERACTIVE MAGIC, INC. (formerly known
as SP Enterprises, Inc. and hereinafter in this Agreement, the "Corporation")
and XXXX X. XXXXXXX, XX. (the "Employee") and XXXXXX X. XXXXXXX.
WHEREAS, the Corporation and the Employee are parties to an Employment
Agreement dated January 3, 1995, a copy of which is attached hereto as Exhibit A
(the "Agreement");
WHEREAS, the Corporation and the Employee desire to amend the
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual promises
set forth below, the legal sufficiency and adequacy of which are hereby
acknowledged, the parties agree to amend the Agreement as follows:
1. Section 3(b) of the Agreement is amended by deleting that Section in
its entirety.
2. Section 4(a), Base Salary, is amended by deleting that Section in
its entirety and inserting in lieu thereof a new Section 4(a) to read as
follows:
(a) Base Salary. A base salary at the initial annual
rate of $180,000, with increases in such amounts as may be
determined from time to time by the Board of Directors but in
no event to be less than five percent (5%) per year; and
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3. Section 5(b), Automobiles, is amended by deleting that Section in
its entirety and inserting in lieu thereof a new Section 5(b) to read as
follows:
(b) Automobile. The Corporation shall make available
to Employee an automobile, owned or leased by the Corporation,
for use by Employee throughout the Employment Period. The
Corporation shall provide all appropriate insurance coverage,
all automobile maintenance and operating expenses, and all
automobile telephone expenses.
4. Section 5(h), Vacation, is amended by deleting the last sentence of
that Section which reads, "After the fifth year of employment, Employee shall
be entitled to a one-year sabbatical with full pay and benefits."
5. Section 5, Benefits, is amended by adding the following:
(i) Life Insurance. The Corporation shall provide
Employee with a term life insurance benefit equal to no less
than $1,000,000. Employee shall have the sole discretion to
name the beneficiary of this insurance. The Corporation shall
have the right, at its own expense and for its own benefit, to
purchase additional insurance on Employee's life, and Employee
shall cooperate by providing the necessary information,
submitting to
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the required examinations, and otherwise complying with the
designated carrier's requirements.
(j) Disability Insurance. The Corporation
shall provide Employee with disability insurance in accordance
with the Corporation's policies as may be in effect from time
to time.
6. Section 8.1 is amended by deleting the introductory clause which
currently reads "If the termination is for any reason other than by Employee
voluntarily (including resignation or pursuant to notice of non-renewal by
Employee under Section 1)" and inserting in lieu thereof "If the termination is
for any reason other than either by the Corporation for Cause (as defined
herein) or by Employee voluntarily (including resignation or pursuant to notice
of non-renewal by Employee under Section 1)".
7. Section 8.1 is further amended by adding the following:
(c) The term "Cause" shall mean: (i)
substantially uncured breach of this Agreement 30 days
following written notice by the Corporation to Employee of
such alleged breach; (ii) material or flagrant violations of
Employer's policies and procedures; (iii) other conduct that
is substantially and materially detrimental to the best
interests of the Corporation; (iv) conviction of, or pleading
guilty or confessing to, fraud, misappropriation, embezzlement
or any felony; or (v) willful failure, without reasonable
excuse or proper authorization, to devote full business
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time to the affairs of the Corporation. Without limiting the
generality of the first sentence of Section 8.1, notice by the
Corporation that it will not extend the Period of Employment
for an additional one-year term upon any anniversary of the
Effective Date, as provided in Section 1, shall be considered
termination of Employee by the Corporation without Cause.
8. Section 15, Governing Law, is amended by deleting that Section in
its entirety and by inserting in lieu thereof a new Section 16 to read as
follows:
15. Governing Law. This Agreement shall be
subject to, and governed by, the laws of the State of North
Carolina, excluding its choice of law provisions.
9. The Agreement is amended by adding as Section 22 the following:
22. Remedy for Breach. The parties recognize that
the services to be rendered by Employee hereunder are special,
unique, of an extraordinary character, require Employee's
special skills, knowledge and talents and that his employment
with the Corporation of necessity provides Employee with
specialized knowledge, and that the Corporation will be
irreparably harmed in the event Employee were to use his
special skill, knowledge and talents and his knowledge of the
Corporation's trade secrets in competition with a competitor
of the Corporation, or otherwise in
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breach or threatened breach of this Agreement. In such event,
the Corporation, without limitation as to other remedies that
may be available to it, shall be entitled to institute and
prosecute proceedings at law or in equity to enforce the
specific performance hereof by Employee or to enjoin Employee
from breaching the provisions hereof. Employee waives any and
all defenses he may have on the ground of jurisdiction or
competence of the court to grant such an injunction, specific
performance or other equitable relief.
10. Except as set forth herein, the Agreement is not modified or
amended, and the parties hereto reaffirm and agree to all of the terms and
provisions of the Agreement, as amended, in all other respects.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Employment Agreement, effective the _____day of May, 1998.
INTERACTIVE MAGIC, INC.
ATTEST:
By: __________________________________
Name:
Title:
------------------------------------
Secretary
(CORPORATE SEAL)
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EMPLOYEE:
----------------------------------------
Xxxx X. Xxxxxxx, Xx.
-----------------------------------------
Xxxxxx X. Xxxxxxx
