ACTV, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995,
and amended January 1, 1997, by and 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, #00X, Xxx Xxxx, XX 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, President and Chief Executive
Officer of Employer; and
WHEREAS, Employee is willing to continue to be employed as the
Chairman of the Board of Directors, President 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, President 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,
President and Chief Executive Officer.
Employer hereby employs Employee as Chairman of the Board of Directors,
President 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 commence on
August 1, 1995 and end on December 31, 2000. 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, 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
$250,000 for each Annual Period, commencing January 1, 1997; provided, however,
that Employee's salary shall be increased annually at the beginning of each
Annual Period commencing January 1, 1998 by an amount equal to the amount of his
annual salary for the immediately preceding Annual Period times the percentage
increase in the CPIW (New York) then in effect as compared to the previous
period for which the CPIW (New York) is available. 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 semi-annual
bonuses, if any, which will be determined and paid in accordance with policies
set from time to time by the Board.
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 share if applicable, 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 exercise price of the Rights financed
thereby were, ab initio, 10(cent) per share.
(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 than $750,000. Ownership of
the policy shall be assigned to Employee upon termination of Employee's
employment under this Agreement.
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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 bid (if applicable) price 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. 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 other than for
reasons of disability, then said compensation shall continue for three fiscal
years.
(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 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
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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) 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
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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 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.
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(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;
(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.
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(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
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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.
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16. Entire Agreement; Survival. This Agreement 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:
(i) if to the Employer:
ACTV, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx, 00000
Attention: Xxxxxxx X. Xxxxxxx
Telefax: (000) 000-0000
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Telephone: (000) 000-0000
Gersten, Savage, Kaplowitz & Xxxxxx
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
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, 00X
Xxx Xxxx, XX 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:
XXXXXXXXXXX X. XXXXX
Chief Financial officer
XXXXXXX X. XXXXXXX
