EMPLOYMENT AGREEMENT
AGREEMENT made as of the 27th day of June, 2006, by and between
Interactive Systems Worldwide Inc., a Delaware corporation (the "Corporation"),
and Xxxxxxx Xxxxxxxx ("Employee").
W I T N E S S E T H:
WHEREAS, the Corporation is in the business of developing, producing,
marketing, licensing and servicing computerized sports wagering and related
software and systems;
WHEREAS, the Corporation desires to continue to employ Employee as its
Chief Executive Officer, President and Employee desires to serve the Corporation
in such capacity; and
WHEREAS, the Corporation desires to provide certain benefits to the
Employee upon termination of this Agreement, as herein provided.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions herein contained,
the Corporation hereby employs Employee as its Chief Executive Officer and
President and Employee hereby agrees to serve the Corporation in such capacity.
2. DUTIES.
2.1. Employee agrees, during the "Term" (as hereinafter defined), to
devote his full business attention and best efforts to the business of the
Corporation and to perform such duties of an executive and administrative nature
as the Board or Board of Directors of the Corporation, acting reasonably, shall
assign or direct (i) consistent with his status and position as Chief Executive
Officer and President including, without limitation, such duties as would
typically be performed by persons holding similar positions in other companies,
and (ii) such other duties of a managerial nature relating to operations,
finance, personnel or support.
2.2. Employee shall conduct himself at all times in a manner
consistent with his position with the Corporation.
3. TERM.
3.1. The term of Employee's employment (the "Term") pursuant to this
Agreement shall commence on the date hereof, and shall commence on July 1, 2006
and terminate on June 30, 2007; provided that this Agreement shall be subject to
earlier termination only (i) in the event of Employee's death; (ii) at the
option of the Corporation, in the event of Employee's "disability" (as
hereinafter defined) for 90 consecutive working days or an aggregate of 120
working days during any consecutive six month period during the Term; (iii) for
cause; or (vi) as provided in Sections 3.3, 5.2 or 7.
3.2. For the purpose of this Agreement, "disability" shall mean any
injury or any physical or mental condition or illness which shall render
Employee unable to perform his duties in accordance with this Agreement.
3.3. Notwithstanding anything to the contrary herein provided, the
Employee shall have the right to retire from his employment with the Corporation
by giving the Corporation not less than 60 days prior written notice. Upon the
effective date of Employee's retirement, Employee shall be entitled to the
benefits referred to in Article 6.
4. COMPENSATION AND BENEFITS. As compensation for all services to be
rendered by Employee to the Corporation and its subsidiaries in all capacities,
the Corporation shall pay to Employee during the Term, a minimum of the
following, payable in accordance with the standard payroll practice of the
Corporation:
4.1. The Employee shall receive a base salary of not less than
$240,000 per annum (the "Base Salary").
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4.2. In addition to the Base Salary, during the Term the Employee
shall be entitled to receive incentive compensation as follows: Provided that
Employee's employment with the Corporation has not terminated pursuant to
Section 3.1(i), (ii) or (iii), or Sections 5.2 or 7, for each $1 million of
revenue realized by the Corporation and its subsidiaries on a consolidated
basis, as determined in accordance with generally accepted accounting principles
applied on a consistent basis ("Revenue"), the Employee shall be entitled to a
bonus of $30,000 up to a maximum bonus of $120,000 if the Corporation realized
Revenue of $4,000,000 during the Term.
Commencing with the Corporation's quarter ending September 30, 2006 and
with each of the next three quarters through June 30, 2007, the Corporation will
determine whether the Corporation's Revenue as of the end of such quarter meets
or exceeds the Revenue set forth above. If any such Revenue thresholds are met,
the Employee shall be paid the applicable Bonus promptly after the determination
that such Revenue threshold has been met.
4.3. In addition, Employee shall be entitled to receive (a) such
salary increases, bonuses or other incentive compensation as may be approved by
the Board of Directors; (b) four weeks vacation during each year of the Term;
(c) such health insurance as the Corporation may from time to time provide to
its other executive employees; (d) such life insurance as the Corporation may
provide to its other executive employees; (e) such other fringe benefits as the
Corporation may provide to its employees; and (f) at the Corporation's expense,
the use of a leased automobile plus payment of all expenses of operating such
automobile, including but not limited to insurance and maintenance costs.
4.4. In the event that during the Term, the Employee's employment is
terminated without cause, the Corporation shall pay to the Employee (i) an
amount equal to $300,000 less the aggregate Base Salary and Bonus paid pursuant
to Section 4.2 paid to the Employee from July 1, 2006 through the date of
termination, which amount shall be payable in a lump sum on the date of such
termination; (ii) continuation of all benefits described in Sections 4.2 and 9
until the end of the Term; and (iii) the Severance Benefits described in Section
6.
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5. REQUIRED RELOCATION.
5.1. During the Term, the Corporation shall not require the Employee
to relocate outside of the New York City/New Jersey metropolitan area (the
"Area").
5.2. In the event that prior to the end of the Term, or after the
Term of this Agreement if the Employee continues to be employed by the
Corporation on an at will basis, the Corporation requires the Employee to
relocate outside the Area and the Employee elects in his discretion, not to do
so, the Employee may voluntarily terminate his employment with the Corporation
and in such event the Corporation shall pay to the Employee (i) an amount equal
to $300,000 less the aggregate Base Salary and Bonus paid pursuant to Section
4.2 paid to the Employee from July 1, 2006 through the date of termination,
which amount shall be payable in a lump sum on the date of such termination;
(ii) continuation of all benefits described in Sections 4.2 and 9 until the end
of the Term; and (iii) the Severance Benefits described in Section 6.
5.3. Notwithstanding the foregoing, the Employee may be required to
travel away from his home for reasonable periods of time in fulfillment of his
responsibilities for the Corporation.
6. SEVERANCE BENEFITS.
6.1. Upon (a) expiration or termination of the Term of this
Agreement as provided in Section 3.1, other than for cause, (b) retirement of
the Employee as provided in Section 3.3, (c) if a new agreement is not entered
into by Employee and the Corporation on the terms and conditions described in
Section 7.1, (d) as a result of a Change of Control, or (e) pursuant to Section
5.2, the Corporation shall pay to the Employee (or the Employee's personal
representative if the Agreement is terminated as a result of the Employee's
death), the following severance benefits (collectively the "Severance Benefits")
for a period of one year after such termination:
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(a) An amount equal to $300,000, payable in a lump sum on the
date of such expiration, retirement or termination; and
(b) Continuation of the benefits provided in Section 4.3(c),
(d) if applicable, (e) and (f), and Section 9, for a period of one year
after the date of such expiration, retirement or termination.
6.2. In addition, the Corporation shall continue to provide the
Employee with the benefits described in Section 4.3(f) for the remainder of the
term of the lease of the leased automobile that was provided to the Employee on
the date of termination of this Agreement.
7. NON-RENEWAL OF EMPLOYMENT AGREEMENT; DEATH OR DISABILITY.
7.1. In the event that at the end of the Term of this Agreement, a
new employment agreement is not entered into on terms and conditions at least as
beneficial to the Employee as each of the terms and conditions contained herein,
and the Employee's employment with the Corporation is terminated by the
Corporation, other than for cause, or by the Employee, in his discretion, the
Corporation shall pay to the Employee the Severance Benefits described in
Section 6.
7.2. In the event this Agreement is terminated as a result of the
death or disability of the Employee during the Term or, after the end of the
Term while the Employee is still employed by the Corporation on an at-will
basis, the Employee or his personal representative, as the case may be, shall be
paid the Severance Benefits described in Section 6.
8. CHANGE OF CONTROL.
8.1. Notwithstanding any other provision of this Agreement, in the
event of a "Change of Control" (as hereafter defined) during the Term, the
Employee shall be entitled, at his option, which option shall be exercised by
giving not less than 60 days' prior written notice to the Corporation, to
terminate this Agreement. Whether the Employee terminates this Agreement, or
this Agreement is terminated by the Corporation after a Change of Control, for
any reason whatsoever other than termination of this Agreement by the
Corporation for cause, Employee shall be entitled to the following:
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(a) If the termination is during the Term, the Employee shall
be entitled to be paid (i) an amount equal to $300,000 less the
aggregate Base Salary and Bonus paid to the Employee pursuant to
Section 4.2, which amount shall be payable in a lump sum on the date of
such termination, and (ii) continuation of all of the benefits as
provided in Sections 4.3 (c), (d), if applicable, (e) and (f), and
Section 9 until the end of the Term. In addition to the foregoing, the
Employee shall be entitled to the Severance Benefits described in
Section 6.
(b) If the termination occurs after the Term, while the
Employee is still employed by the Corporation on an at-will basis, the
Employee shall be entitled to the Severance Benefits described in
Section 6.
8.2. "Change of Control" shall mean, if any person, or any two or
more persons acting a "group" (as defined in the Securities Exchange Act of
1934, as amended (the "Exchange Act")), and all affiliates of such person or
persons who prior to such time "beneficially" owned (as defined in Rule 13d-3
under the Exchange Act) less than a total of 50% of the number of shares of
Common Stock outstanding plus the number of shares of Common Stock into which
any outstanding shares of Preferred Stock or other convertible securities of the
Corporation are then convertible at the then conversion rate, shall acquire
additional shares of Common Stock, Preferred Stock or other convertible
securities of the Corporation in one or more transactions or series of
transactions, such that following such transaction or transactions, such person
or group and affiliates beneficially own 50% or more of the Common Stock
outstanding and Common Stock into which any Preferred Stock or other convertible
securities is convertible, or 50% or more of the voting power of the
Corporation.
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8.3. "Good Reason", when used with reference to a voluntary
termination by the Employee of his employment with the Corporation, shall mean:
(a) the assignment to the Employee of any duties inconsistent
in a material way with, or the reduction of powers or functions
associated with, his positions, duties, responsibilities and status
with the Corporation, Employee's reporting responsibilities or any
removal of the Employee from, or any failure to reelect the Employee
to, any significant positions or offices the Employee held immediately
prior to the time of the Change in Control, except in connection with
the termination of the Employee's employment by the Corporation for
cause or for death or disability;
(b) a reduction by the Corporation in the Employee's base
salary or benefits that existed immediately prior to the Change in
Control; or
(c) a change in the Employee's principal work location, except
for required travel on the Corporation's business to an extent
substantially consistent with the Employee's business travel
obligations immediately prior to the Change of Control;
provided, however, that no event shall constitute a Good Reason unless the
Employee notifies the Corporation that it has committed an action or inaction
specified in clauses (a) through (c) (a "Covered Action") and the Corporation
does not cure such Covered Action within 30 days after such notice, at which
time such Good Reason shall be deemed to have arisen. Notwithstanding the
immediately preceding sentence, no action by the Corporation shall give rise to
Good Reason if it results from the Employee's termination for cause, or from the
Employee's resignation for other than a Good Reason. If the Employee has Good
Reason to resign, he may in fact resign for Good Reason by notice of termination
given within 60 days after the Good Reason arises.
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9. REIMBURSEMENT OF EXPENSES. The Corporation shall reimburse the
Employee for all reasonable business expenses paid or incurred by him on behalf
of the Corporation, including, but not limited to, travel and entertainment
expenses, that he shall incur during the Term in connection with the performance
of his duties hereunder, provided that he submits, in a timely manner, receipts
or other expense records in such detail as may be required by the Corporation.
10. TERMINATION/STOCK OPTIONS. In the event that Employee's employment
with the Corporation terminates for any reason whatsoever, including death or
disability of the Employee, other than (i) by the Corporation for cause, (ii) or
voluntarily by the Employee (other than as permitted herein), all stock options
theretofore granted to the Employee which have not vested and become exercisable
on the date of such termination shall automatically vest and become exercisable
and remain exercisable in accordance with the terms of the Corporation's 1995,
1996 and 2006 Stock Option Plans and the stock option agreements thereunder.
11. NO CONFLICTING COMMITMENTS. Employee represents and warrants that
he has no commitments or obligations of any kind whatsoever inconsistent with
this Agreement which would impair, infringe upon or limit his ability to enter
into this Agreement or to perform the services required of him hereunder.
12. PROPRIETARY INFORMATION; NON-COMPETITION.
12.1. Prior to the execution of this Employment Agreement, Employee
signed a Proprietary Information Agreement the terms of which shall continue in
full force and effect.
12.2. During the Term of this Agreement and until one year following
the termination or nonrenewal of this Agreement, the Employee shall not in any
way compete with the business of the Corporation. In furtherance thereof, during
the period described in the preceding sentence, the Employee shall not become a
stockholder, director, employee, consultant, agent or representative of any
person, firm or entity whose business is competitive with the business of the
Corporation; provided that the foregoing shall not preclude the Employee from
owning less than 5% of the stock or other securities of any person, firm or
entity whose business is competitive with the business of the Corporation.
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13. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. During the Term and
for at least two years after (i) the end of the Term or (ii) earlier termination
or expiration of the Agreement or retirement of the Employee, whichever of (i)
or (ii) last occurs, the Company shall, at its sole cost and expense, procure
for the benefit of the Employee, directors' and officers' liability in an amount
of at least $5 million and with terms and conditions substantially similar to
the terms of such insurance in effect on the date hereof.
14. ENTIRE AGREEMENT. This Agreement embodies the entire understanding
and agreement of the parties hereto in relation to the subject matter hereof,
and no promise, condition, representation or warranty, express or implied, not
herein set forth shall bind any party hereto. None of the terms or conditions of
this Agreement may be changed, modified, waived or cancelled orally or otherwise
except in a writing signed by both the parties hereto, specifying such change,
modification, waiver or cancellation. A waiver at any time of compliance with
any of the terms and conditions of this Agreement shall not be considered a
modification, cancellation or waiver of such terms and conditions of any
preceding or succeeding breach thereof unless expressly so stated. The
Employment Agreement dated as of June 22, 2005, as amended, is hereby
terminated.
15. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
successors and assigns.
16. GOVERNING LAW; FEES. This Agreement shall be governed by the
internal laws of the State of New Jersey without regard to principles of
conflicts of law. In the event of any litigation relating to the terms of this
Agreement, the prevailing party shall be awarded all of its fees and expenses in
pursuing or defending such litigation, including all reasonable legal fees and
expenses.
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17. NOTICES. Any notice or other communication required or desired to
be given shall be in writing and shall be sent by registered or certified mail
return receipt requested or by express mail. Each such notice shall be deemed
given at the time it is mailed in any post office maintained by the United
States to the following respective addresses, which either party may change as
to such party upon ten (10) days' notice to the other.
To the Corporation:
Interactive Systems Worldwide Inc.
0 Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxx Xxxxxxxx, XX 00000
Attn: Chief Financial Officer
With a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxxxx Xxxxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxxx (00xx Xxxxx)
Xxx Xxxx, XX 00000
To Employee:
Xx. Xxxxxxx Xxxxxxxx
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
18. EXTRAORDINARY RELIEF. Employee acknowledges and agrees that
irreparable damage will result to the Corporation in the event of a breach of
the Proprietary Information Agreement or Section 12 of this Agreement.
Accordingly, Employee agrees that the Corporation shall be entitled to enforce
its rights under said Proprietary Information Agreement and Section 12 of this
Agreement, in the event of a breach or threatened breach thereof, in the court
of equity, and shall be entitled to a decree of specific performance or
appropriate injunctive relief. Such remedies shall be cumulative and not
exclusive and shall be in addition to any other rights or remedies available to
the Corporation.
19. INVALIDITY. Any provision of this Agreement found to be prohibited
by law shall be ineffective as written without invalidating the remainder of
this Agreement and shall be deemed amended to the fullest extent allowable by
applicable law to effectuate the purposes of said provision.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
INTERACTIVE WORLDWIDE SYSTEMS INC.
By: /s/ Xxxxx XxXxxx
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Xxxxx XxXxxx, Chief Financial Officer
/s/ Xxxxxxx Xxxxxxxx
-----------------------------------------
Xxxxxxx Xxxxxxxx
