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EXHIBIT 4.1
EMPLOYMENT AGREEMENT
AGREEMENT dated as of January 20, 1995, by and between ToHQ, INC., a
New York corporation having an address at 0000 Xxxxx Xxxxxxx Xxxxxxxxx,
Xxxxxxxxx, Xxxxxxxxxx 00000 (the "Company") and XXXX XXXXXXXX, having an
address at 00000 Xxxxxxx Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000 ("Xxxxxxxx").
W I T N E S S E T H :
WHEREAS, Xxxxxxxx has been employed as the President of the Company
pursuant to an Employment Agreement dated as of July 31, 1991, and subsequent
amendments thereto which provides for a salary at the rate of $250,000 per
annum through December 31, 1994 and $495,000 per annum thereafter, in addition
to bonuses (the "Existing Employment Agreement"); and
WHEREAS, the Company and Xxxxxxxx have agreed that it would be in the
parties' mutual best interest for Xxxxxxxx to resign as the Company's
President, effective as of the date of this Agreement; and
WHEREAS, the Company desires to continue to employ Xxxxxxxx and
Xxxxxxxx desires to continue such employment, in the capacity and upon the
terms and conditions set forth more specifically herein;
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto and of the mutual benefits to be gained by the performance thereof, the
parties hereby agree as follows:
1. Employment Term. Xxxxxxxx shall continue to be employed by the
Company until December 31, 1997 (the "Term").
2. Duties. Upon the execution of this Agreement, Xxxxxxxx shall
resign his position as the Company's President and Chief Executive Officer and
shall also resign as director of the Company. From the date hereof until the
expiration of the Term, Xxxxxxxx shall be employed by the Company in connection
with special projects that Xxxxxxxx shall be called upon to evaluate and to
also advise the Company with respect to such special projects and such other
business matters that Xxxxxxxx may be called upon to become involved with.
3. Devotion of Time. The Company acknowledges that after the date
hereof, Xxxxxxxx shall devote a substantial amount of his time and attention to
other business matters. Except as specifically limited by paragraph 7
hereafter, Xxxxxxxx shall be free to devote his time and attention to such
other activities as he deems appropriate and shall render services to the
Company subject to his availability and other commitments and upon three (3)
days prior written notice.
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4. Compensation.
(a) Salary. In consideration of the services provided by Xxxxxxxx to
the Company hereunder, Xxxxxxxx shall receive a salary payable at the rate of
$60,000 per annum. Such salary shall be paid to Xxxxxxxx in twelve (12) equal
monthly installments of $5,000 each on the 15th day of each month, commencing
on January 15, 1994 and ending on December 15, 1997.
(b) Bonus. In addition to the salary payable to Xxxxxxxx pursuant to
subparagraph (a) above, Xxxxxxxx shall also be entitled to receive bonus
compensation, on an annual basis for 1995, 1996 and 1997, in the amount of one
quarter of one percent (.25%) of the Company's first $10,000,000 in revenues,
for each year, and one half of one percent (.50%) of all revenues in excess of
$10,000,000, for each year; provided, however, that the aggregate of all bonus
compensation (excluding salary) payable to Xxxxxxxx for each of 1995, 1996 and
1997 shall not exceed $200,000, $250,000 and $300,000, respectively, inclusive
of any amounts deducted for adjustments to prior years, as provided in
subparagraph (c) hereafter. For purposes of this paragraph, revenues shall
mean the gross revenues from all products sold by the Company less commissions,
and an aggregate of ten percent (10%) for reserves for discounts, returns, and
credits for markdowns and allowances, which shall be reconciled, within 30 days
after the completion of the Company's audited financial statements.
(c) Payment of Bonus. The bonus payable to Xxxxxxxx pursuant to
paragraph (b) above, if any, shall be payable on a quarterly basis within 30
days after the end of each calendar quarter (i.e. March 31st, June 30th,
September 30th and December 31st). In the event that the annual audit by the
Company's accountants reveals an underpayment of any bonus, Xxxxxxxx shall be
paid such additional amount owed within 40 days after the completion of such
audit. In the event that such audit reveals an overpayment of any bonus, such
excess amount shall be deducted by the Company from any future bonus payable to
Xxxxxxxx; provided, however, that in no event shall Xxxxxxxx be required to
return any amounts previously paid to him by the Company.
(d) Stock Option Outside of Stock Option Plan. The stock option
granted to Xxxxxxxx pursuant to the Existing Employment Agreement, which is a
nonstatutory option granted outside of the ToHQ Amended and Restated 1990 Stock
Option Plan (the "Plan") shall continue and shall be exercisable until one year
after the expiration of the Term, upon the following terms and conditions:
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(i) Such option has been adjusted as a result of a 1-for-15 reverse
split (the "Reverse Split") of the Company's shares of Common Stock so that the
number of shares available pursuant to such option have been reduced from
1,340,159 shares to 89,343 shares and the exercise price of such option has been
increased from $0.93 per share to $13.95 per share;
(ii) Notwithstanding the provisions of subparagraph (i) above, the
exercise price of such option is hereby reduced to $3.75 per share. Xxxxxxxx'x
right to exercise the Option has previously vested with respect to 29,781
shares, and will vest on August 25, 1995, with respect to an additional 29,871
shares and on February 25, 1997, with respect to the remaining 29,871 shares.
Xxxxxxxx'x right to exercise the Option granted hereunder shall terminate one
year after the expiration of the Term.
(iii) The Company will at all times reserve for issuance and delivery
upon exercise of the Option all shares of Common Stock from time to time due
upon exercise of the Option. All such shares of Common Stock shall be duly
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable and free of all preemptive rights.
(iv) The shares of Common Stock issuable upon exercise of the Option
are not presently, and upon their issuance will not be, registered under the
Securities Act of 1933, as amended (the "Act"). The Company agrees to file a
registration statement on Form S-8 to provide for the registration of the shares
of Common Stock and to take all other steps necessary in order to provide for
the sale of such shares of Common Stock, including, if necessary, the filing of
a reoffering prospectus.
(v) The Common Stock issued upon exercise of the Option may be sold or
otherwise disposed of only in accordance with the provisions of subparagraph
(iii) above or pursuant any other provisions provided under the Act.
(vi) The Option shall not, by virtue hereof, grant any rights of a
stockholder of the Company, either at law or in equity, and Xxxxxxxx'x rights,
with respect to the Option, are limited to those rights expressed herein.
(vii) The Option shall not be given, granted, sold, exchanged,
transferred, pledged, assigned or otherwise incumbered or disposed of by
Xxxxxxxx, otherwise than by Will or the laws of descent and
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distribution, and, during Xxxxxxxx'x lifetime shall not be exercisable by any
other person, but only by him, and in the event of his disability by his legal
representative.
(viii) (A) In the event that the outstanding Common Stock of the
Company is hereafter changed by reason of reorganization,
merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, stock dividends or the like, an
appropriate adjustment shall be made in the number of shares
exercisable under the Option and the exercise price per share.
If the Company shall be reorganized, consolidated or merged with
another corporation, or if all of substantially all of the
assets of the Company shall be sold or exchanged, Xxxxxxxx
shall, at the time of issuance of stock under such a corporate
event, be entitled to receive upon the exercise of the Option
the same number and kind of shares of stock or the same amount
of property cash or securities as he would have been entitled to
receive upon the happening of such corporate event as if he had
been, immediately prior to such event, the holder of the number
of shares covered by the Option.
(B) Any adjustment in the number of shares shall apply
proportionately to only the unexercised portion of the Option
granted hereunder. If fractions of a share would result from any
such adjustment, the adjustment shall be revised to the next
lower whole number of shares.
(ix) Upon exercise of the Option and the issuance of any of the shares
of Common Stock thereunder, all certificates representing shares shall bear on
the face thereof substantially the following legend, insofar as is consistent
with New York law.
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR ANY
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OPINION OF COUNSEL REASONABLY SATISFACTORY TO TOHQ, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(x) Xxxxxxxx may exercise the Option, at any time, for all
or any portion of the underlying shares of Common Stock by giving the
Company written notice of the number of shares he desires to exercise
and delivering payment to the Company in the amount of the total
exercise price for such shares, within 30 days after any such exercise.
In the event that not all of the shares are exercised, the unexercised
portion of the Option shall continue to be exercisable by him, until
such right expires pursuant to the terms provided hereunder.
(e) Existing Stock Option Under the Plan. The option granted to
Xxxxxxxx on February 25, 1994, pursuant to the Plan, for an additional 3,989
shares of Common Stock (59,841 shares of Common Stock prior to the Reverse
Split), at an exercise price of $13.95 per share ($.93 per share prior to the
Reverse Split), shall also be continued under the terms and conditions of the
Plan and the Stock Option Agreement executed by Xxxxxxxx and the Company,
provided that, in the event that Company reprices the existing options granted
to its employees under the Plan, at any time, it shall all reprice Xxxxxxxx'x
option for 3,989 shares of Common Stock on the same basis.
(f) New Stock Option Under the Plan. The Company also hereby
agrees to grant to Xxxxxxxx, on February 15, 1995, an option to purchase up to
an additional 19,000 shares of Common Stock at an exercise price equal to the
closing price of the Company's Common Stock on NASDAQ on February 14, 1995.
The terms and conditions of such option shall be those set forth in the Stock
Option Agreement, in the form of Exhibit 1 annexed hereto.
5. Benefits; Reimbursement of Expenses.
(a) Benefits. Xxxxxxxx shall continue to be entitled to
participate in, and to receive benefits under, any employee benefit plans of
the Company (including, without limitation, pension, profit sharing, group life
insurance and group medical insurance plans), provided that he meets the
requirements for participation in such plans.
(b) Automobile Allowance. The Company shall continue to make or
reimburse Xxxxxxxx, for payments relating to the use of his automobile,
consistent with its current practices, during the first 18 months of this
Agreement and Xxxxxxxx shall assume all of such payments during the remaining
18 months of this Agreement.
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(c) Expenses. The Company shall pay directly or reimburse
Xxxxxxxx for all reasonable and necessary expenses and disbursements
incurred by him for and on behalf of the Company in the performance of
his duties under this Agreement. For such purposes, Xxxxxxxx shall
submit to the Company itemized reports of such expenses in accordance
with the Company's policies and shall be reimbursed in accordance with
past practices.
6. Books and Records; Audit. Xxxxxxxx, or his
representative, shall have the right, until two years after the expiration of
the Term, upon five days prior written request to audit, examine and make
extracts from the Company's books and records, during regular business hours to
verify the amounts paid to him by the Company pursuant to paragraph 4 hereof.
Xxxxxxxx, or his representative, shall be limited to two such examinations
during any 12 month period. Xxxxxxxx shall pay all expenses in connection with
such examinations and audits; provided, however, that in the event the audit
reveals an underpayment of three and one-half percent (3.5%) or greater between
the actual amounts due Xxxxxxxx and the amounts reported and/or paid to
Xxxxxxxx, the Company shall pay the cost of such audit.
7. Restrictive Covenant.
(a) Non-Compete. Xxxxxxxx agrees that, during the Term and
for a period of one year thereafter, he will not directly or indirectly,
be employed or otherwise involved with any business, other than the
Company, which sells video game titles for the Nintendo GameBoy or Sega
Game Gear platforms which originate from or are otherwise sold by
Electronic Arts for any of its other platforms. This restriction is
expressly conditioned upon the Company's performance of the terms and
conditions contained in this Agreement.
(b) Blue Penciling. If, at the time of enforcement of any
provision of subparagraph (a) above, a court holds that the restrictions
stated therein are unreasonable under circumstances then existing, the
parties hereto agree that the maximum period, scope, or geographical
area reasonable under such circumstances will be substituted for the
stated period, scope or area.
8. Mutual Releases. Xxxxxxxx and the Company shall
execute and deliver to each other general releases in the forms annexed hereto
as Exhibits A and B, respectively, which releases, however, shall not discharge
either from any of their obligations under this Agreement or any of the
exhibits to this Agreement. In addition, such releases shall not affect any of
Xxxxxxxx'x rights with respect to any of the stock options described in this
Agreement, whether pursuant to or outside of the Plan.
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9. Termination.
(a) Termination of Employment. Xxxxxxxx'x employment hereunder shall
be automatically terminated upon his death or his resignation from the
Company, and in addition may be terminated, at the sole discretion of the
Company, upon 30 days' prior written notice by the Company, for cause as
set forth in paragraph (b) below.
(b) Cause. For purposes hereof, "cause" shall include: (i) Xxxxxxxx'x
willful malfeasance or gross negligence or (ii) the material breach of any
covenant made by Xxxxxxxx hereunder, and his failure to cure such conduct
or event constituting "cause" within 30 days after written notice thereof.
(c) Termination by Xxxxxxxx. Xxxxxxxx may terminate this Agreement
without further obligation or liability to the Company upon 30 days written
notice to the Company, if the Company breaches any material term, covenant
or obligation contained in this Agreement or files a petition in
bankruptcy, liquidates or dissolves. In the event Xxxxxxxx terminates this
Agreement for any of the reasons herein set forth: (i) the Company shall be
obligated to pay Xxxxxxxx the compensation, bonus, stock options and
expenses due Xxxxxxxx pursuant to Paragraphs 4 and 5 of this Agreement
through the date of termination and (ii) Xxxxxxxx shall be released from
the restrictive covenant set forth in Paragraph 7 hereof.
10. Indemnification. The Company hereby agrees to indemnify Xxxxxxxx
to the fullest extent permitted by law against any and all claims, expenses,
judgments and/or penalties, including attorneys' fees, arising from or relating
to any claims, actions, suits or proceedings instituted against the Company
and/or Xxxxxxxx by reason of his actions on behalf of the Company.
11. Dispute Resolution. The parties agree to submit all disputes
arising under this Agreement before the Judicial Arbitration and Mediation
Services located in Santa Monica, California ("JAMS"). Pursuant to the
applicable provisions of the California Code of Civil Procedure, including
without limitation, Section 1283.05 thereof, the parties agree that they shall
be entitled to all rights to discovery as if the matter were litigated in the
California Superior Court. To the extent permitted by law, the parties agree
that the judge shall have full power and authority to resolve all discovery
disputes and issue any and all ancillary relief (injunctions, writs, etc.)
regarding such disputes.
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12. Attorneys' Fees. In the event that any action or proceeding is
commenced by one party to this Agreement against the other for the purpose of
determining or enforcing the rights of either party hereunder, the prevailing
party shall be entitled to recover against the other party the reasonable
attorneys' fees and costs the prevailing party incurred in connection with such
action or proceeding.
13. Xxxxxxxx'x Legal Fees. The Company agrees to pay up to $2,500 of
Xxxxxxxx'x legal fees associated with this Agreement and the modification of
his employment with the Company.
14. Assigns. This Agreement shall be binding upon, shall inure to the
benefit of, and shall be enforceable by the prospective heirs, beneficiaries,
representatives, successors, and assigns of the parties hereto.
15. Entire Agreement; Amendment. This Agreement, the Exhibits hereto,
all Stock Option Agreements covering Xxxxxxxx'x stock options and the Plan,
together reflect the entire agreement between the parties, with respect to the
subject matters contained herein, and supersede all prior agreements and
understandings between the parties with respect to such subject matter. The
Existing Employment Agreement and any other agreements, oral or written,
relating to Xxxxxxxx'x employment with the Company are hereby cancelled. This
Agreement may be amended only by a written instrument duly executed by the
parties hereto or their respective successors or assigns.
16. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California.
17. Severability. If any provision of this Agreement is declared by
any court of competent jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions of this Agreement. Such
remaining provisions shall be fully severable, and this Agreement shall be
construed and enforced as if such invalid provisions had never been a part of
this Agreement.
18. Counterparts. This Agreement may be executed simultaneously in
several counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
19. Survival. Except as set forth in Paragraph 7 and subparagraph
9(c), subparagraphs 4(d), 4(e) and 4(f) and Xxxxxxxxxx, 0, 0, 0, 00, 00, 00,
00, 00, 15, 16 and 17 shall survive the termination of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
T0HQ, INC.
By: /s/ XXXXX X. XXXXXXX
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Xxxxx X. Xxxxxxx
President
/s/ XXXX XXXXXXXX
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XXXX XXXXXXXX
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EXHIBIT A
GENERAL RELEASE
To all to whom these Presents shall come or may Concern, Know That XXXX
XXXXXXXX, having an address at 00000 Xxxxxxx Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx
00000, as RELEASOR, in consideration of the sum of Ten Dollars ($10.00),
received from T0HQ, Inc., as RELEASEE, receipt whereof is hereby acknowledged:
Releases and discharges the RELEASEE and RELEASEE'S successors and
assigns from all actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, executions, claims, and demands whatsoever, in
law, admiralty or equity, which against the RELEASEE, the RELEASOR or
RELEASOR'S heirs, executors, administrators, successors and assigns ever had,
now have or hereafter can, shall or may have, for, upon, or by reason of any
matter, cause or thing whatsoever from the beginning of the world to the date
of this RELEASE, except for those liabilities and obligations arising from the
provisions of an Employment Agreement between the RELEASOR and the RELEASEE,
bearing an even date herewith, or arising from the provisions of any agreement
or other document which is an exhibit to said Employment Agreement or executed
in connection therewith.
This RELEASE may not be changed orally.
IN WITNESS WHEREOF, the RELEASOR has hereunto set RELEASOR'S hand on
the 15th day of March, 1995.
/s/ XXXX XXXXXXXX
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XXXX XXXXXXXX
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STATE OF NEW YORK )
): ss.:
COUNTY OF NEW YORK )
On March 15, 1995 before me personally came Xxxx Xxxxxxxx, to me known,
and known to me to be the individual described in, and who executed the
foregoing RELEASE, and duly acknowledged to me that he executed the same.
/s/ XXXXX X. XXXXXX
--------------------------------
Notary Public
XXXXX X. XXXXXX
Notary Public, State of New York
No. 4874728
Qualified in New York County
Commission Expires Oct. 6, 1996
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EXHIBIT B
GENERAL RELEASE
To all to whom these Presents shall come or may Concern, Know That
T0HQ, INC., INC., a New York Corporation having an address at 0000 Xxxxx
Xxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000, as RELEASOR, in consideration
of the sum of Ten Dollars ($10.00), received from XXXX XXXXXXXX, as RELEASEE,
receipt whereof is hereby acknowledged:
Releases and discharges the RELEASEE, RELEASEE'S heirs, executors,
administrators, successors and assigns from all actions, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, bonds, executions,
claims, and demands whatsoever, in law, admiralty or equity, which against the
RELEASEE, the RELEASOR or RELEASOR'S successors and assigns ever had, now have
or hereafter can, shall or may have, for, upon, or by reason of any matter,
cause or thing whatsoever from the beginning of the world to the date of this
RELEASE except for those liabilities and obligations arising from the
provisions of an Employment Agreement between the RELEASOR and the RELEASEE,
bearing an even date herewith, or arising from the provisions of any agreement
or other document which is an exhibit to said Employment Agreement or executed
in connection therewith.
This RELEASE may not be changed orally.
IN WITNESS WHEREOF, the RELEASOR has caused this RELEASE to be executed
by a duly authorized officer on the 31st day of Xxxxx, 0000.
T0HQ, INC.
By: /s/ XXXXX X. XXXXXXX
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Xxxxx X. Xxxxxxx
President
