ACTV, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995, and
amended December 24th, 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 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 $295,000 for each
Annual Period, commencing January 1, 1998; provided, however, that Employee's
salary shall be increased annually at the beginning of each Annual Period
commencing January 1, 1999 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 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.
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
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the benefit of a beneficiary named by Employee in an amount not less 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 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;
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(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) 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
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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 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
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policies or plans, to such general medical and employee enefit 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;
(E) A failure by Employer to obtain the assumption
of this Agreement by any successor;
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(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.
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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
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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 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: Xxxxxxx X. Xxxxxxx
Telefax: (000) 000-0000
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
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