ACTV, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995,
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 XXXXXXX X. XXXXXXX, an individual residing at 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 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 Chairman of the Board of Directors and Chief Executive Officer of
Employer; and
WHEREAS, Employee is willing to continue to be employed as the
Chairman of the Board of Directors and Chief Executive Officer of Employer in
the manner provided for herein, and to perform the duties of the Chairman of the
Board of Directors and Chief Executive Officer of Employer 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 CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF
EXECUTIVE OFFICER. Employer hereby employs Employee as Chairman of the Board of
Directors and Chief Executive Officer of Employer.
2. TERM.
a. Subject to Section 10 below and further subject to
Section 2(b) below, the term of this Agreement shall end on December 31, 2003.
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.
b. Subject to Section 10 below, unless the Board of
Directors of the Company (the "Board") of Employer shall determine to the
contrary and shall so notify Employee in writing on or before the end of any
Annual Period, then at the end of each Annual Period, starting December 31,
1999, the term of this Agreement shall be automatically extended for one (1)
additional Annual Period to be added at the end of the then current term of this
Agreement.
3. DUTIES. The Employee shall perform those functions
generally performed by persons of such title and position, shall attend all
meetings of the stockholders and the Board, shall perform any and all related
duties and shall have any and all powers as may be prescribed by resolution of
the Board, 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 Board.
4. COMPENSATION.
a. (i) Employee shall be paid a minimum of
$295,000 for each Annual Period, commencing January 1, 1998. 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 quarterly
bonuses, if any, which will be determined and paid in accordance with policies
set from time to time by the Compensation Committee of the Board.
(iii)Employee shall be entitled to a leased
car of his choice, the cost of which shall reduce the total cash compensation
paid under section 4 (a)(i).
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
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(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 stock appreciation right if applicable; and in addition
the employee, at his option, shall receive a special compensation payment for
the exercise cost of all vested options upon exercising those options any time
within twelve months after the effective date of the change of control, 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 rights were exercised under 4(b)(ii).
(C) If upon said Change of Control,
Employee is not retained as Chief Executive Officer or substantially similar
position of Employer or the surviving entity, as applicable, under terms and
conditions substantially similar to those herein, 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
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than $2,000,000. Ownership of the policy shall be assigned to Employee upon
termination of Employee's employment under this Agreement.
e.(i) A bonus plan shall be instituted for Employee
which shall take account of the efforts of Employee in generating value to
Employer's shareholders. Under said plan, Employee shall be entitled to an
annual bonus payable for each 12 month period commencing April 1, 1995 in cash
and/or unregistered securities of Employer, at the option of the Compensation
Committee of the Board, equal to 2% of the increase for said 12 month period in
the total market capitalization of Employer calculated upon the excess of the
total of the average daily closing price (if applicable) of each class of
Employer's shares for the last 90 days of the 12 month period, multiplied by the
number of shares of each class outstanding as reported by Employer's Certified
Public Accountants, (the "90 Day Average") over the Base, which shall be the
greater of $50,000,000 or the highest previous 90 Day Average against which a
bonus was paid under this bonus plan, if any. Should the Compensation Committee
elect hereunder to pay Employee in unregistered securities, said securities
shall be valued at 60% of the most recent 90 Day Average. Should Employer's
shares no longer be publicly traded, the current 90 Day Average shall be
determined by a 3 person panel, 1 person appointed each by Employer and Employee
and 1 appointed by the former 2.
The Employee shall be entitled to receive
compensation under this plan for five fiscal years following expiration or
termination of this employment contract, except that if Employee is terminated
for cause as defined in Section 10.a.(i) hereof or resigns under section 10
(b)(ii) then said compensation shall continue for three fiscal years.
Furthermore, in certain years the Employee's
right to retain the entire amount of the bonus paid to the Employee under this
Section 4(e)(i) may be subject to forfeiture upon the termination of the
Employee's employment with Employer under either Section 10(a)(i) or 10(b)(ii)
hereof during a defined time period mutually agreed upon between the
Compensation Committee and the Employee.
(ii) 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
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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, if 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. BOARD OF DIRECTORS. Employer agrees that so long as this
Agreement is in effect, Employee will be nominated to the Board as part of
management's slate of Directors.
6. 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.
7. 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.
8. 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.
9. COVENANT NOT TO COMPETE. Subject to, and limited by,
Section 11(b), Employee will not, at any time, anywhere in the world, during the
term of this Agreement, and for one (1)
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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.
10. 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 10(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. In no event shall alleged
incompetence of Employee in the performance of Employee's duties be deemed
grounds for termination for Cause.
(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 10(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
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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 (F) or within three years following the occurrence of event (G):
(A) Employee is not elected or
retained as Chairman of the Board of Directors, President and Chief Executive
Officer of Employer.
(B) Employer acts to materially
reduce Employee's duties and responsibilities hereunder. Employee's duties and
responsibilities shall not be deemed materially reduced for purposes hereof
solely by virtue of the fact that Employer is (or substantially all of its
assets are) sold to, or is combined with, another entity, provided that Employee
shall continue to have the same duties and responsibilities with respect to
Employer's interactive business, and Employee shall report directly to the chief
executive officer and/or board of directors of the entity (or individual) that
acquires Employer or its assets.
(C) 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.
(D) 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;
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(E) A failure by Employer to obtain
the assumption of this Agreement by any successor;
(F) A material breach of this
Agreement by Employer, which is not cured within thirty (30) days of written
notice of such breach by Employer;
(G) 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
10(a)(i) of this Agreement), or if Employee shall terminate this Agreement under
Section 10(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.
11. CONSEQUENCES OF BREACH BY EMPLOYER;
EMPLOYMENT TERMINATION
a. If this Agreement is terminated pursuant to
Section 10(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 10.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 10(b)(i)(G),
then Employee shall not be entitled to receive a bonus under this Section
11.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 10(b)(i) of this Agreement, the provisions of
Section 9 shall not apply to Employee.
12. 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 10(a)(i) or (iii), or
in the event of termination by Employee under Section 10(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.
13. 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.
14. 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 8 and 9 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.
15. 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.
16. ENTIRE AGREEMENT; SURVIVAL. This Agreement, which was
modified October 6, 1999, 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, 8, 9,
10(a)(ii), 10(a)(iii), 10(c), 11, 12, 13, 14, 15, 18, 19 and 20 shall survive
the termination of this Agreement.
17. ASSIGNMENT. This Agreement shall not be assigned to other
parties.
18. 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.
19. 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:
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(i) if to the Employer:
ACTV, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx, 00000
Attention: Day Xxxxxxxxx
Telefax: (000) 000-0000
Telephone: (000) 000-0000
Gersten, Savage, Xxxxxxxxx LLP
000 Xxxx 00 Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Telefax: (000) 000-0000
Telephone: (000) 000-0000
(ii) if to the Employee:
Xxxxxxx X. Xxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
20. 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:
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Day X. Xxxxxxxxx
Senior Vice President and
General Counsel
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XXXXXXX X. XXXXXXX
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