Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 16, 1999 (this "Agreement"), by
and between 7TH LEVEL, INC., a Delaware corporation (the "Company"), and XXXX X.
XXXXX ("Executive").
RECITALS
WHEREAS, the Company is simultaneously entering into an Agreement and Plan
of Merger, by and among the Company, 0xx Xxxxx Xxxxxx Xxxxxxxxxxx, Xxxxxx
Technologies, Inc. ("Street") and the stockholders of Street named therein (the
"Merger Agreement") pursuant to which the Company and Street shall merge (the
"Merger");
WHEREAS, Executive is the current Chief Financial Officer of Street; and
WHEREAS, the Company desires to employ Executive as Chief Financial
Officer of the Company on the terms and conditions hereinafter set forth and
Executive desires to accept such employment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT.
1.1 Subject to the terms and conditions of this Agreement, the Company
agrees to employ Executive during the Term (as defined in Section 2) as Chief
Financial Officer of the Company. Executive shall report to the Chief Executive
Officer of the Company. As Chief Financial Officer of the Company, Executive
shall perform such duties and responsibilities as are customarily performed by
the chief financial officer of a company the size and nature of the Company, and
such other managerial duties and responsibilities with the Company which are
appropriate for his position at the Company as, from time to time, may be
assigned to him by the Chief Executive Officer of the Company.
1.2 Subject to the terms and conditions of this Agreement, Executive
hereby accepts employment as Chief Financial Officer of the Company and agrees
to devote his full working time and efforts to the performance of services,
duties and responsibilities in connection therewith (other than during periods
of illness, disability or vacation). Nothing in this Agreement shall preclude
Executive, so long as, in the reasonable determination of the Board of Directors
of the Company (the "Board"), such activities do not materially interfere with
his duties and responsibilities hereunder, from engaging in charitable and
community affairs, from managing any passive investment made by him in real
estate or other property (provided that no such investment may exceed 2% of the
equity securities of any entity, without the prior approval of the Board), or
from serving, subject to the prior approval of the Board, as a member of boards
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of directors or as a trustee of any other company, association or entity.
2. TERM OF EMPLOYMENT. The term of this Agreement (the "Term") shall be
for a period commencing on the date hereof and continuing through the second
anniversary of the date hereof; subject to earlier termination in accordance
with the terms and conditions contained in Section 7 hereof.
3. PLACE OF EMPLOYMENT. During the Term, Executive shall perform his
services at the principal place of business of the Company which will be located
in 000 Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxx Xxxx 00000. Executive shall be
furnished with office facilities and services suitable to his position and
suitable for the performance of his duties. Executive acknowledges and agrees
that in connection with his employment, however, he may be required to travel on
behalf of the Company. 6.
4. COMPENSATION.
4.1 SALARY. During the Term, the Company shall pay Executive a base
salary ("Base Salary") at the rate of One Hundred Fifty Thousand Dollars
($150,000) per annum (pro rated for the balance of fiscal 1999 ending December
31, 1999, and for any partial year during the Term). The Base Salary shall be
payable in accordance with the ordinary payroll practices of the Company for its
executive officers but in no event less frequently than semi-monthly. The Base
Salary shall be reviewed annually by the Board on or before the last day of each
fiscal year, and may be increased in the sole discretion of the Board taking
into account corporate and individual performance, any increase in Executive's
responsibilities on account of acquisitions by, or the general growth of, the
Company and general business conditions.
4.2 STOCK OPTIONS.
(a) As an inducement to Executive to enter into this
Agreement, the Company has on the date hereof (the "Grant Date") granted to
Executive options (the "Options") to purchase 150,000 shares of common stock,
par value $.01 per share, of the Company ("Common Stock") exercisable at a price
equal to $3.25 per share of Common Stock. Pursuant to the terms of the grant,
vesting of such Options shall occur as follows, provided the Executive is still
then employed by the Company (except as set forth in Sections 8.1 and 8.2
hereof):
50,000 Options shall vest on the first anniversary of the Grant Date;
50,000 Options shall vest on the second anniversary of the Grant Date;
50,000 Options shall vest on the third anniversary of the Grant Date.
(b) If Executive's employment is terminated by the Company without
Cause (as hereinafter defined) or if Executive terminates his employment with
the Company for Good Reason (as hereinafter defined), all Options shall fully
and immediately vest.
(c) If Executive terminates his employment with the Company other
than for Good Reason or if Executive's employment is terminated by the Company
for Cause (i) prior to
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the first anniversary of the Grant Date, then 50,000 Options shall vest on such
date of termination; (ii) after the first anniversary but prior to the second
anniversary of the Grant Date, then 50,000 Options shall vest on such date of
termination (in addition to the 50,000 Options which vested on the first
anniversary of the Grant Date); (iii) after the second anniversary but prior to
the third anniversary of the Grant Date, 50,000 Options shall vest on such date
of termination (in addition to the 50,000 Options which vested on each of the
first and second anniversary of the Grant Date).
5. EMPLOYEE BENEFITS.
5.1 EMPLOYEE BENEFIT PROGRAMS, PLANS AND PRACTICES. The Company shall
provide Executive during the Term, with coverage under all employee benefit
programs, plans and practices which the Company makes available from time to
time to its senior executives, with at least the same opportunity to participate
as the other senior executives of the Company including, without limitation,
retirement, pension, profit sharing, medical, dental, hospitalization, life
insurance, short and long term disability, accidental death and dismemberment
and travel accident coverage.
5.2 VACATION AND FRINGE BENEFITS.
(a) Executive shall be entitled to four (4) weeks paid vacation in
each year (pro rated as necessary for partial calendar years during the Term).
Executive may take his allotted vacation days at such times as are mutually
convenient for the Company and Executive, consistent with the Company's vacation
policy in effect from time to time with respect to its executive officers.
(b) Executive shall be entitled to the perquisites and fringe
benefits normally made available to other senior executives of the Company,
commensurate with his position with the Company.
5.3 EXPENSES. Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement, (in
accordance with the policies and procedures established from time to time by the
Company) including, without limitation, entertainment and travel expenses (and
the cost of living while away from home on business or at the request of, and in
the service of the Company), and similar items related to such duties and
responsibilities. The Company will reimburse Executive in full for all such
out-of-pocket expenses upon presentation by Executive from time to time of a
proper account of such expenditures in accordance with the policies and
procedures established by the Board and applicable to executive officers of the
Company.
5.4 INDEMNIFICATION. Executive shall be entitled, at all times
(including after the termination of this Agreement for any reason), to the
benefit of the maximum indemnification and advancement of expenses available
from time to time under the Company's Restated Certificate of Incorporation
and By-laws, and if not set forth therein, to the maximum extent
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available under the laws of the Company's state of incorporation.
6. [Intentionally Omitted.]
7. TERMINATION OF EMPLOYMENT.
7.1 GOOD REASON. Executive shall be entitled to terminate his employment
for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean
(without Executive's express prior written consent as a shareholder or
otherwise) (i) failure by the Company to pay any compensation when due
hereunder, (ii) any significant reduction by the Company of Executive's
authorities, powers, functions, duties or responsibilities in managing the
Company's business or the assignment of duties to Executive by the Chief
Executive Officer of the Company inconsistent with Executive's position (except
in connection with termination of Executive's employment for Cause (as defined
in section 7.4), as a result of Disability (as defined in Section 7.2), as a
result of Executive's death or by Executive other than for Good Reason) or (iii)
any material breach by the Company of any other material provision of this
Agreement. If Executive desires to terminate his employment with the Company for
Good Reason, he shall first give written notice of the facts and circumstances
providing Good Reason to the Company, and shall allow the Company no less than
twenty (20) days to remedy, cure or rectify the situation giving rise to Good
Reason.
7.2 DISABILITY. If Executive shall fail during the Term, because of
illness, physical or mental disability or other incapacity, for a period of 90
consecutive days or any 120 days in any 365 consecutive days, to render the
services provided for by this Agreement or be adjudged an incompetent
("Disability"); provided that the date on which the Disability will be deemed to
occur shall be such 90th day or the date on which Executive is adjudged an
incompetent, as the case may be, the Company may terminate Executive's
employment on not less than two (2) weeks written notice thereof, setting forth
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under this Section 7.2.
7.3 DEATH. Executive's employment hereunder will terminate automatically
if he should die. 5.6
7.4 TERMINATION FOR CAUSE. The Company shall have the right to terminate
the employment of Executive with or without Cause (as hereinafter defined). The
term "Cause," as used herein, shall mean (i) Executive's continuing, repeated
and willful refusal and failure (other than during periods of illness,
disability or vacation) to perform his duties hereunder or under any lawful
directive of the Board (consistent with the terms of this Agreement), (ii)
Executive's willful misconduct or gross neglect in the performance of his duties
hereunder, (iii) the willful material breach of this Agreement by Executive,
(iv) the conviction, plea of guilty or nolo contendre of Executive in respect of
any felony, other than motor vehicle offenses, or for any misdemeanor
constituting theft or embezzlement from the Company; provided that an indictment
of Executive in such matters shall cause the Company to suspend Executive with
pay until such matters are, to the Company's satisfaction, clarified or
finalized , (v) other fraudulent action
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against the Company or (vi) any violation by Executive, or conduct by Executive
that poses a substantial threat of causing the Company to violate, any statute,
law, ordinance or regulation promulgated or enforced by any entity with
jurisdiction over the Company or Executive, concerning employment discrimination
or other employment-related wrongs. For purposes of this Section 7.4, no act, or
failure to act, on Executive's part, will be considered "willful" unless done or
omitted to be done by him not in good faith or without a reasonable belief that
his action or omission was in furtherance of and in the best interests of the
Company's business. Termination by the Company for Cause may be effected by
written notice of the Company to Executive; provided, however, that if the
Company determines to terminate the Executive's employment pursuant to clause
(i) or (iii) hereof, the Company shall give the Executive written notice of the
facts and circumstances providing Cause and shall allow Executive no less than
twenty (20) days in the case of a proposed termination pursuant to clause (i) or
(iii) above to remedy, cure or rectify the situation giving rise to Cause.
7.5 TERMINATION UPON A CHANGE OF CONTROL. In the event of a Change of
Control, Executive shall become immediately and fully vested in all Options held
by Executive. For purposes of this Agreement, a "Change of Control" shall mean
that (i) any "person" (as such term is defined within the meaning of Rule
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act")),
other than any person who as of the date hereof beneficially owns (as defined in
Rule 13(d)(3) of the 0000 Xxx) directly or indirectly 5% or more of the
Company's outstanding Common Stock or as of the date hereof is on, or has
designated a member of, the Board, becomes a beneficial owner directly or
indirectly of securities of the Company representing in excess of fifty percent
(50%) of the Company's then outstanding securities having the right to vote for
the election of directors, (ii) the Company shall have consummated the sale of
all or substantially all of the assets of the Company, or (iii) the following
individuals cease for any reason to constitute a majority of the number of
directors then serving: individuals who, on the date hereof, constitute the
Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of directors
of the Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended by a vote of
at least two-thirds (") of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended.
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8. COMPENSATION UPON TERMINATION.
8.1 CONSTRUCTIVE TERMINATION; TERMINATION BY THE COMPANY WITHOUT CAUSE;
TERMINATION BY EXECUTIVE FOR GOOD REASON. (i) If Executive terminates his
employment pursuant to Section 7.1, or (ii) if Executive's employment is
terminated by the Company without Cause, or (iii) if the Company determines not
to extend the Term of this Agreement for a one year period, Executive shall be
entitled to (A) receive Executive's Base Salary and benefits as set forth in
Section 5 to which Executive is entitled up to and including the effective date
of Executive's termination of employment hereunder, (B) receive Executive's Base
Salary paid consistent with the Company's payroll practices for six (6) months
and (C) become immediately and fully vested in all Options held by Executive.
Executive also shall be entitled to receive, during the period he is being paid
Base Salary under this Agreement, the benefits provided under Section 5.1;
except to the extent that such continued participation is not permitted under
the plan, program or practice or would cause the plan, program or practice to
cease to be qualified under any applicable law or regulation. Notwithstanding
the foregoing, nothing herein shall cause the Company to maintain Executive's
status as an employee of the Company after termination.
8.2 TERMINATION BY EXECUTIVE OTHER THAN FOR GOOD REASON; TERMINATION BY
THE COMPANY FOR CAUSE. If Executive's employment is terminated by the Company
for Cause or by Executive other than pursuant to Section 7.1, Executive shall be
entitled to (i) receive Executive's Base Salary and benefits as set forth in
Section 5 to which Executive is entitled up to and including the effective date
of Executive's termination of employment hereunder and (ii) accelerated vesting
of Options as described in Section 4.3. After such termination of employment,
the obligations of the Company under this Agreement to make any further
payments, or to provide any benefits specified herein, to Executive shall
thereupon cease and terminate.
8.3 NO SUBSTITUTION. Nothing contained in Section 8.1 shall be construed
to represent a substitution for compensation already paid to or earned by
Executive. In addition, Executive shall be entitled to receive all amounts in
respect of the period prior to the date of termination otherwise payable herein
(without double counting), including such payments provided for in Sections 4
and 5.
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9. NONDISCLOSURE; NON-COMPETITION AND NON-SOLICITATION.
9.1 NONDISCLOSURE. Executive shall not during the Term and thereafter,
without the prior written consent of the Company, divulge, disclose or make
accessible to any other person, firm, partnership, corporation or other entity
any Confidential Information (as herein defined) pertaining to the business of
the Company, except (i) while employed by the Company, in the business of and
for the benefit of the Company or (ii) when required to do so by a court of
competent jurisdiction, by any governmental agency having supervisory authority
over the business of the Company, or by any administrative body or legislative
body (including a committee thereof) with purported or apparent jurisdiction to
order Executive to divulge, disclose or make accessible such information. For
purposes of this Agreement, "Confidential Information" shall mean non-public
information concerning the Company's financial data, strategic business plans,
product development (or other proprietary product data), customer information,
discoveries, practices, processes, methods, marketing plans and other material
non-public, proprietary and confidential information of the Company, that, in
any case, is not otherwise generally available to the public. In the event
Executive's employment is terminated hereunder, he shall immediately return to
the Company all Confidential Information in his possession other than
information which Executive is entitled to receive in his capacity as a
shareholder of the Company. "Confidential Information" shall not include
information which becomes available to Executive on a non-confidential basis
from a source other than the Company or was available to Executive on a
non-confidential basis prior to its disclosure to Executive by the Company.
9.2 PROHIBITION ON COMPETITION. During the period of his employment with
the Company (other than on behalf of the Company) and for twelve (12) months
after the date of termination of his employment with the Company (the
"Non-Competition Period"), Executive agrees that, without the prior written
consent of the Company: (i) he will not, directly or indirectly, either as
principal, manager, agent, consultant, officer, stockholder, partner, investor,
lender or employee, or in any other capacity (and wether or not for
compensation) carry on, be engaged in or employed by or be a consultant to or
have any financial interest in, any business which is in competition with the
business of the Company (as defined in Section 9.3).
9.3 NON-SOLICITATION OF EMPLOYEES. During the Non-Competition Period,
Executive will not:
(a) solicit or request any employee of or consultant to the
Company or its affiliates to (a) leave the employ or cease
consulting for the Company or its affiliates or (b) join the employ
of or begin consulting for any individual or entity that is in
competition with the business of the Company;
(b) solicit or request or suggest or otherwise abet any
individual or entity that is in competition with the business of the
Company to employ any employee of or consultant to the Company or
its affiliates; or
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(c) employ, assist in employing or otherwise associate with
any employee, officer or agent of or consultant to the Company or
its affiliates in any business or venture which is in competition
with the business of the Company.
9.4 NON-SOLICITATION OF CUSTOMERS. During the Non-Competition Period,
Executive will not, directly or indirectly, through brokers or otherwise,
solicit or attempt to solicit, or sell services or attempt to sell services
which are in competition with the business of the Company to any Customer; for
purposes hereof, "Customer" shall mean (A) all customers of the Company (i)
during the term of this Agreement, (ii) as of the date hereof and (iii) within
the two (2) year period preceding the date hereof and (B) all potential
customers of the Company who are being actively solicited by the Company at the
time of the termination of Executive's employment.
9.5 For purposes of this Section 9, a person or entity which is "in
competition with the business of the Company" shall mean an entity engaged in
the business of animation preparation and production software as presently
conducted or proposed to be conducted and any other business actually engaged in
during the term hereof, directly or indirectly, by the Company or its
subsidiaries including, but not limited to, community enrichment technology
solutions [and web based education and training] Nothing in this Section 9 shall
be construed so as to preclude Executive from (i) investing in any publicly held
company provided Executive's beneficial ownership of any class of such company's
securities does not exceed 2% of the outstanding securities of such class, (ii)
owning memberships, or other similar rights or interests therein, of any United
States or foreign securities, commodities, options or similar exchange, board of
trade, contract market or terminal association (collectively "Exchanges") and
exercising the rights and privileges attendant to such ownership for his own
personal account or for the account of any spouse, child, parent or sibling or
any trust created for the benefit of Executive or any of the foregoing or for
the account of any entity wholly owned by Executive or any of the foregoing
relatives or trusts or (iii) trading or dealing on any Exchanges for Executive's
own personal account or for the account of any relative or any trust created for
the benefit of any relative of Executive.
9.6 Executive and the Company agree that the covenants of
non-competition and non-solicitation are reasonable covenants under the
circumstances, and further agree that if in the opinion of any court of
competent jurisdiction such covenants are not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of these covenants as to the court shall appear not
reasonable and to enforce the remainder of these covenants as so amended.
Executive agrees that any breach of the covenants contained herein would
irreparably injure the Company. Accordingly, Executive hereby agrees that, in
such event, the Company shall be entitled, without the necessity of proving
damages or posting a bond or security, and notwithstanding any election by the
Company to claim damages, to obtain a temporary and/or permanent injunction to
restrain any such breach or threatened breach or to obtain specific performance
of any such provisions, all without prejudice to any and all other remedies
which the Company may have at law or in equity.
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10. MITIGATION OF DAMAGES. Executive shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other
employment (which may include self-employment) or otherwise, and, after his
termination of employment hereunder, any payments made by the Company hereunder
shall not be reduced by any amount Executive receives from any other such
employment.
11. LOCK-UP AGREEMENT. Executive agrees not to sell, make any short sale of,
pledge, grant any option for the purchase of or otherwise dispose of Common
Stock without the prior written consent of the Company until July 1, 1999. 5. 6.
NOTICES. Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered by hand, electronic transmission (with a copy following by
hand or by overnight courier), by registered or certified mail, postage prepaid,
return receipt requested or by overnight courier addressed to the other party.
All notices shall be addressed as follows, or to such other address or addresses
as may be substituted by notice in writing:
To the Company:
7th Level, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Attention: Chairman of the Board
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Fax No.: (000) 000-0000
To Executive:
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
0
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
Communications delivered by hand or by overnight courier shall be deemed
received on the date of delivery; communications sent by electronic means shall
be deemed received one (1) business day after the sending thereof, and
communications sent by registered or certified mail shall be deemed received
three (3) business days after the sending thereof.
13. SEPARABILITY; LEGAL FEES. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect. Each party shall bear the costs of any legal
fees and other fees and expenses which may be incurred in respect of enforcing
its respective rights under this Agreement.
14. ASSIGNMENT. This contract shall be binding upon and inure to the benefit
of the heirs and representatives of Executive and the assigns and successors of
the Company. Neither this Agreement nor any rights hereunder shall be assignable
or otherwise subject to hypothecation by Executive (except by will or by
operation of the laws of intestate succession) or by the Company, except that
the Company may assign this Agreement to any successor (whether by merger,
acquisition of stock, purchase or otherwise) to all or substantially all of the
assets or business of the Company, if such successor expressly agrees in writing
to assume the obligations of the Company hereunder.
15. AMENDMENT; WAIVER. This Agreement may only be amended by written agreement
signed by the parties hereto. A waiver by the Company or Executive of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the other party.
16. BENEFICIARIES; REFERENCES. Executive shall be entitled to select (and
change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
17. SURVIVORSHIP. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 17 are in addition to the survivorship provisions of
any other section of this Agreement. 10.
18. GOVERNING LAW. This Agreement shall be construed, interpreted and governed
in
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accordance with the laws of the State of New York, without reference to rules
relating to conflicts of law. 12.
19. ENTIRE AGREEMENT. This Agreement and the Merger Agreement contain the
entire understanding between Executive and the Company and supersede in all
respects any prior or other agreement or understanding between the Company and
Executive as to the matters set forth herein and therein. Except for the
obligations specifically set forth herein and therein, the Company does not owe
any obligations to Executive and Executive does not owe any obligations to the
Company with respect to the matters set forth herein and therein.
20. WITHHOLDING. The Company shall withhold from any payments due to Executive
hereunder, all taxes, FICA or other amounts required to be withheld pursuant to
any applicable law. 16.
21. HEADINGS. The section headings contained in this Agreement are for the
convenience of reference only and shall not affect the construction of any
provision of this Agreement.
22. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which will be deemed an original but all of which together this shall
constitute one and the same instrument.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
7TH LEVEL, INC.
By: _____________________________
Xxxxxx Xxxxxxx
Chairman of the Board
EXECUTIVE
---------------------------------
Xxxx X. Xxxxx
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