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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated July 1, 1998 by and between NTN COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), and Xxxxxx Xxxxx, Xx. (the
"Executive").
1. Term of Employment
Subject to the provisions of Section 10 below, the Company shall employ the
Executive, and the Executive shall serve the Company in the capacity of
President and Chief Executive Officer for a term of two (2) years commencing as
of July 1, 1998 and ending June 30, 2000 (the "Term of Employment").
2. Duties
During the Term of Employment, the Executive will serve the Company
faithfully, diligently, and competently and to the best of his ability, will
devote full regular working time to his employment with management and executive
authority and responsibility for the business, affairs and operations of the
Company and any subsidiaries thereof, subject to the terms of this Agreement and
the direction and control of the Board of Directors.
3. Compensation
During the Term of Employment, the Company shall pay to the Executive as
compensation for the performance of his duties and obligations hereunder a
salary at the rate of $262,500 per annum during the first year and the term of
this Agreement. After the first year, the Executive's salary shall be increased
on the anniversary date each year during the Term of Employment in proportion to
any upward changes in Consumer Price Index of the U.S. Bureau of Labor
Statistics of Urban Wage Earners and Clerical Workers, U.S. City Average
(1967=100) during the calendar year immediately preceding each such anniversary
date (in the event that such index shall be changed or discontinued, the index
published by the United States government which is most nearly the same as such
index shall be used to make the foregoing calculations).
In addition, Executive will be paid a bonus for the 1998 fiscal year based
upon the "Operating Cash Flow" of the Company for 1998. Operating Cash Flow is
defined herein to mean revenue less operating and SG&A expenses, excluding
depreciation, amortization, interest expense and any one time or extraordinary
charges. Operating Cash Flow shall exclude all business activity (including
charges associated with the acquisition or sale) of any entity which is acquired
by, or which acquires, the Company. Such bonus shall be paid within 60 days
after the determination of Operating Cash Flow. A schedule setting forth the
formula for calculating such bonus is attached hereto as Exhibit A. The
Compensation Committee of the Board of Directors and the Executive will mutually
agree on a bonus program for the period of this Agreement occurring after
December 1998.
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4. Expenses and Other Benefits
All travel, entertainment and other reasonable business expenses incident
to the rendering of services by the Executive hereunder will be promptly paid
or reimbursed by the Company subject to submission by the Executive in
accordance with the Company's policies in effect from time to time.
The Executive shall be entitled during the Term of Employment to
participate in employee benefit and welfare plans and programs of the Company
including any employee incentive stock option plans, qualified or unqualified,
to the extent that any other executives or officers of the Company or its
subsidiaries are eligible to participate and subject to the provisions, rules,
regulations, and laws applicable thereto. Notwithstanding the foregoing, the
Company shall provide the Executive, at a minimum, with the following benefits:
(a) Coverage, at no expense to the Executive, of the Executive, his
wife, if any, and those of his children who qualify as his dependents under
Section 152 of the Internal Revenue Code of 1954, under a major medical
insurance program with an annual cumulative deductible amount of no more than
$500;
(b) Coverage of the Executive by life insurance, payable to his
designated beneficiary, in the amount of $1,000,000 and, in the event of
accidental death or dismemberment, in the amount of $2,000,000. Coverage shall
begin the first day of the Term of Employment hereunder and shall continue
throughout the Term of Employment; and
(c) A paid vacation of four (4) weeks, in addition to any authorized
holidays of the Company, during each 12-month period during the Term of
Employment.
5. Death or Disability.
This Agreement shall be terminated by the death of the Executive and also
may be terminated by the Board of Directors of the Company if the Executive
shall be rendered incapable by illness or any physical or mental disability
(individually, a "disability") from substantially complying with the terms,
conditions and provisions to be observed and performed on his part for a period
in excess of six months (whether or not consecutive) during any 12 months
during the Term of Employment. If this Agreement is to be terminated by reason
of illness, or any physical or mental disability of the Executive, the Company
shall give thirty days' written notice to that effect to the Executive in the
manner provided herein and the Executive shall be entitled to 75% of the
Executive's compensation that was to accrue during the balance of the Term of
Employment, including those benefits described in Sections 4(a) and (b) hereof.
6. Disclosure of Information; Inventions and Discoveries
The Executive shall promptly disclose to the Company all processes,
trademarks, inventions, improvements, discoveries and other information
(collectively, "developments") directly related to the business of the Company
conceived, developed or acquired by him alone or with others during the Term
of Employment or during any earlier or later period of employment with the
Company, whether or not during regular working hours or through the use
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of material or facilities of the Company. For the purpose of Sections 6, 7 and
8 hereof, the business of the Company includes without limitation the fields of
electronically simulated sports games or interactive television applications.
All such developments shall be the sole and exclusive property of the Company,
and upon request the Executive shall deliver to the Company all drawings,
sketches, models and other data and records relating to such development. In the
event any such development shall be deemed by the Company to be patentable, the
Executive shall, at the expense of the Company, assist the Company in obtaining
a patent or patents thereon and execute all documents and do all other things
necessary or proper to obtain letters of patent and invest the Company with full
title thereto.
7. Non-Competition
The Company and the Executive agree that the services rendered by the
Executive hereunder are unique and irreplaceable. During his employment by the
Company and for a period of one year thereafter, the Executive shall not become
an executive officer (other than an officer whose function substantially relates
to financial matters) of any business in the fields of electronically simulated
sports games or interactive television, which in the judgment of the Company is,
or as a result of the Executive's engagement or participation would become,
directly competitive with any aspect of the business of the Company.
8. Non-Disclosure
The Executive will not at any time after the date of this Employment
Agreement divulge, furnish or make accessible to anyone (otherwise than in the
regular course of business of the Company) any knowledge or information with
respect to confidential or secret processes, inventions, discoveries,
improvements, formulas, plans, material, devices, ideas or other know-how,
whether patentable or not, with respect to any confidential or secret
engineering, development or research work or with respect to any other
confidential or secret aspect of the business of the Company (including, without
limitation, customer lists, supplier lists and pricing arrangements with
customers or suppliers).
9. Remedies
The Company may pursue any appropriate legal, equitable or other remedy,
including injunctive relief, in respect of any failure by the Executive to
comply with the provisions of Section 6, 7 or 8 hereof, it being acknowledged by
the Executive that the remedy at law for any such failure would be inadequate.
If the Company shall have failed to cure any material breach by the Company of
any material provision of this Agreement within 30 days after notice by the
Executive to the Company specifying such breach with particularity, the
Executive may, in addition to other remedies, give notice to the Company of
acceleration of the entire amount of compensation which was to accrue to the
Executive during the balance of the Term of Employment, and such amount shall be
immediately due and payable to the Executive.
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10. Termination
Executive's employment with the Company may be terminated by the Board of
Directors of the Company (i) upon three (3) days' notice to the Executive in the
event of the Executive's personal dishonesty, willful misconduct or breach of
fiduciary duty or (ii) upon thirty (30) days' notice to the Executive if the
Executive shall be in material breach of any material provision of this
Employment Agreement other than as provided in clause (i) above and shall have
failed to cure such breach during such thirty day period. Any such notice to the
Executive shall specify with particularity the reason for termination or
proposed termination. In the event of termination under this Section 10 or
Section 5 (except as provided therein), the Company's unaccrued obligations
under this Agreement shall cease and the Executive shall forfeit all right to
receive any unaccrued compensation or benefits hereunder but shall have the
right to reimbursement of expenses already incurred. Notwithstanding any
termination of the Agreement pursuant to this Section 10 or by reason of
disability under Section 5, the Executive, in consideration of his employment
hereunder to the date of such termination, shall remain bound by the provisions
of Section 6, 7 and 8 (unless this Agreement is terminated on account of the
breach hereof by the Company) of this Agreement except that if this Agreement is
terminated following a Change in Control Event (as defined below) then Executive
shall remain bound only by the provisions of Sections 6 and 8. Termination
without cause or any attempt by the Board of Directors of the Company to
reassume any of the responsibilities or duties from the Executive or to change
the duties of the Executive without cause shall be deemed a breach of this
Agreement by the Company without cause and shall immediately entitle the
Executive, as liquidated damages therefore, to the entire remaining balance due
him as compensation pursuant to this Agreement.
Executive's employment with the Company may be terminated at any time by
Executive upon sixty (60) days' notice to the Company (which period shall not be
shortened by the Board of Directors). In the event Executive performs his duties
hereunder in good faith during such sixty (60) day period, Executive shall be
entitled to receive twelve (12) months salary but, if Executive's employment is
terminated prior to the end of the Company's fiscal year, Executive shall not be
entitled to receive a pro rata portion of the bonus to which Executive would
otherwise have been entitled had he remained employed by the Company.
Notwithstanding anything to the contrary contained herein, Executive or the
Company shall have the option to terminate this Agreement at any time following
a "Change in control Event." In the event of such termination by Executive
following a Change in Control Event, Executive shall be entitled to receive
[one] year's salary as provided in Section 3 together with a pro rata portion of
the bonus to which Executive would have been entitled. In the event of such
termination by the Company following a Change in Control Event Executive shall
be entitled to receive the greater of (i) one year's salary together with a pro
rata portion of the bonus to which Executive would have been entitled; or (ii)
the entire remaining balance due Executive as compensation pursuant to this
Agreement. A "Change in Control Event" shall mean:
(a) The acquisition by any individual entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (a "Person") of beneficial ownership of 50% or
more of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Voting Securities");
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provided, however, that the following acquisitions shall not constitute a
change in Control Event: (A) any acquisition by the Company or (B) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company.
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual who becomes a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board; but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "transaction"), unless, following such transaction
in each case, more than 50% of, respectively, the then outstanding shares of
common stock of the Company resulting from such transaction and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively of the outstanding
Common stock and Outstanding Voting Securities immediately prior to such
transaction; or
(d) Approval by the shareholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other disposition
of all or substantially all of the assets of the Company unless such assets are
sold to a corporation and following such sale or other disposition, the
condition described in paragraph (c) above is satisfied.
11. Resignation
In the event that the Executive's services hereunder are terminated under
Section 5 or 10 of this Agreement (except by death), the Executive agrees that
he will deliver his written resignation as an officer of the Company and/or
director of the Company to the Board of Directors, such resignation to become
effective immediately.
12. Data
Upon expiration of the Term of Employment or termination pursuant to
Section 5 or 10 hereof, the Executive or his personal representative shall
promptly deliver to the Company all books, memoranda, plans, records and
written data of every kind relating to the business and affairs of the Company
which are then in his possession on account of his employment hereunder, but
excluding all such materials in the Executive's possession on account of his
past or current status as a director or shareholder of the Company.
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13. Arbitration
Any dispute or controversy arising under this Agreement or relating to its
interpretation or the breach hereof, including the arbitrability of any such
dispute or controversy, shall be determined and settled by arbitration in San
Diego, California pursuant to the Rules then obtaining of the American
Arbitration Association. Any award rendered herein shall be final and binding on
each and all of the parties, and judgment may be entered thereon in any court of
competent jurisdiction.
14. Insurance
The Company shall have the right at its own cost and expense to apply for
and to secure in its own name, or otherwise, life, health or accident insurance
or any or all of them covering the Executive, and the Executive agrees to submit
to any usual and customary medical examination and otherwise to cooperate with
the Company in connection with the procurement of any such insurance, and any
claims thereunder.
15. Waiver of Breach
Any waiver of any breach of this Employment Agreement shall not be
construed to be a continuing waiver or consent to any subsequent breach on the
part either of the Executive or of the Company.
16. Assignment
Neither party hereto may assign his or its rights or delegate his or its
duties under this Employment Agreement without the prior written consent of the
other party; provided, however, that this Agreement shall inure to the benefit
of and be binding upon the successors and assignees of the Company, all as
though such successors and assignees of the Company and their respective
successors and assignees were of the Company, upon (a) a sale of all or
substantially all of the Company's assets, or upon merger or consolidation of
the Company with or into any other corporation, and (b) upon delivery on the
effective day of such sale, merger or consolidation to the Executive of a
binding instrument of assumption by such successors and assigns of the rights
and liabilities of the Company under this Agreement.
17. Notices
Any notice required or desired to be given hereunder shall be in writing
and shall be deemed sufficiently given when delivered or 3 days after mailing in
United States certified or registered mail, postage prepaid, to the party for
whom intended at the following address:
The Company:
NTN COMMUNICATIONS, INC.
0000 Xx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
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The Executive:
Xxxxxx Xxxxx, Xx.
0000 Xxxx Xxx
Xxxxxxxx, XX 00000
or to such other address as either party may from time to time designate by
like notice to the other.
18. General
The terms and provisions of this Agreement shall constitute the entire
agreement by the Company and the Executive with respect to the subject matter
hereof, and shall supersede any and all prior agreements or understandings
between the Executives and the Company, whether written or oral. This Agreement
may be amended or modified only by a written instrument executed by the
Executive and the Company, and any such amendment or modification or any
termination of this Agreement shall become effective only after written
approval thereof has been received by the Executive. This Agreement shall be
governed by and construed in accordance with California law. In the event that
any terms or provisions of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect the
validity or enforceability of the remaining terms and provisions hereof. In the
event of any judicial, arbitral or other proceeding between the parties hereto
with respect to the subject matter hereof, the prevailing party shall be
entitled, in addition to all other relief, to reasonable attorneys' fees and
expenses and court costs.
IN WITNESS WHEREOF, the parties have executed this Agrement as of the day
and year first above written.
NTN COMMUNICATIONS, INC.
By: /s/ F. XXXXX XXXXXXXX
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F. Xxxxx Xxxxxxxx
Vice President
AGREED TO AND ACCEPTED:
By: /s/ XXXXXX XXXXX, XX.
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Xxxxxx Xxxxx, Xx.
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