EMPLOYMENT AGREEMENT
AGREEMENT dated as of December 22, 1997 between Alliance Inventory
Management, Inc. a New York corporation (the "Employer" or the "Company"), and
Xxxxx Xxxxxx (the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as Chief Operating
Officer and to be assured of his services as such on the terms and conditions
hereinafter set forth; and
WHEREAS, the Employee is willing to accept such employment on such terms
and conditions; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the Employer
and the Employee hereby agree as follows:
1. Term. Employer hereby agrees to employ Employee, and Employee hereby
agrees to be so employed by Employer for a four (4) year period commencing as of
the date of this Agreement (the "Effective Date") (such period being herein
referred to as the "Term," and any year commencing on the Effective Date or any
anniversary of the Effective Date being hereinafter referred to as an
"Employment Year") unless earlier terminated pursuant to Section 6 hereof.
2. Employee Duties.
(a) During the term of this Agreement, the Employee shall have the duties
and responsibilities of Chief Operating Officer, of the Employer, reporting
directly to the Chairman of the Employer and the Board of Directors of the
Employer (the "Board"). It is understood that such duties and responsibilities
shall be reasonably related to the Employee's position.
(b) The Employee shall devote substantially all of his business time,
attention, knowledge and skills faithfully, diligently and to the best of his
ability in furtherance of the business and activities of the Company. The
principal place of performance by the Employee of his duties hereunder shall be
the Company's principal executive offices located at 00-00X 000xx Xxxxxx,
Xxxxxxx Xxxxx, Xxx Xxxx, although the Employee may, for business reasons, be
required from time to time to travel outside of the area where the Company's
principal executive offices are located in connection with the business of the
Company.
3. Compensation.
(a) Subject to adjustment for cost of living pursuant to subparagraph 3(b)
hereof, the Employer shall pay the Employee a salary (the "Salary") at a rate of
$183,500 per annum in respect of each Employment Year during the Term, payable
in equal installments bi-weekly, or at such other times as may mutually be
agreed upon between the Employer and the Employee.
(b) Effective as of the first day of the second, third and fourth
Employment Years of the Term, there shall be made a cost of living adjustment of
the Salary payable hereunder. Such adjustment shall be based on the percentage
difference between the Price Index (as defined herein) for the first month of
each new Employment Year and the Price Index for the Base Month (as defined
herein). In the event the Price Index for the first month in any Employment Year
calendar year during the Term reflects an increase over the Price Index for the
Base Month, then the Salary shall be multiplied by the percentage difference
between the Price Index for such first month and the Price Index for the Base
Month, and the resulting sum shall be added to the Salary, effective as of such
first month. Such Salary, as adjusted, shall thereafter be payable, in equal
bi-weekly installments, until it is readjusted in the following Employment Year
pursuant to the terms hereof. In the event any cost of living adjustment is not
available as of the first month of the Employment Year, payments of Salary shall
be made on the basis of the preceding Employment Year until the cost of living
adjustment is available at which time the bi-weekly installment payment next due
shall be computed on the basis of the cost of living adjustment increased as
provided hereinabove to retroactively adjust the payments paid during such
Employment Year at the previous Salary, and all subsequent bi-weekly installment
payments of the Salary in such Employment Year shall be at the newly adjusted
Salary. In no event shall any adjustment pursuant to this Section result in a
reduction of salary rate from the prior period.
For the purpose of calculating the cost of living adjustments, the
following definitions shall apply: (i) the term "Base Month" shall mean the
calendar month immediately preceding the calendar month in which the Term
commences; and (ii) the term "Price Index" shall mean the "Revised Consumer
Price Index for Urban Consumers" published by the Bureau of Labor Statistics of
the United States Department of Labor, for the New York, Northeastern, New
Jersey, All Items, (1967 = 100) or a term "Price Index for the Base Month" shall
mean the Price Index for the Base Month.
(c) The Employee shall be entitled to an incentive compensation in respect
of each year during the term of this Agreement (pro rated for any partial year
during the term of this Agreement) equal to 5% of Net Income (as defined
-2-
hereinbelow). The term "Net Income" means, for any applicable fiscal year,
earnings of the Company before taxes, as calculated in accordance with generally
accepted accounting principles applied on a basis consistent with those utilized
in the preparation of the Company's financial statements for such year;
provided, however, that goodwill attributable to the merger of L&J Marketing,
Inc. with and into the Company shall not be greater than $150,000 per annum. The
amount of Net Income for each year shall be determined no later than 90 days
following the end of such year. Such incentive compensation shall be paid in
cash to Employee within ten (10) business days following the date of such
determination, and shall be accompanied by a copy of the determination of such
amount, certified by the Chief Financial Officer or Controller of Take-Two
Interactive Software, Inc. (the "Parent") as having been determined in
accordance with the provisions of this subparagraph 3(c).
(d) In addition to the foregoing, the Employee shall receive a bonus equal
to 0.125% of the first $20 million in combined sales of the Parent and Company
for each fiscal year during each year of the Term.
4. Benefits.
(a) During the term of this Agreement, the Employee shall have the right to
receive or participate in all benefits and plans which the Company and Parent
may from time to time institute during such period for its employees and for
which the Employee is eligible, including without limitation D&O and disability
Insurance. The Company will also purchase an insurance policy on Employee's life
consistent with that coverage offered by the Company from time to time to its
executive officers. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the salary payable to the Employee pursuant to this Agreement.
(b) During the term of this Agreement, the Employee will be entitled to
five (5) weeks of vacation time and that number of paid holidays, personal days
off and sick leave days in each calendar year as are determined pursuant to the
Company's Policies as in effect from time to time. Such vacation may be taken in
the Employee's discretion with the prior approval of the Employer, and at such
time or times as are not inconsistent with the reasonable business needs of the
Company.
(c) During the term of this Agreement, the Employee shall be entitled to
receive an automobile allowance of $650.00 per month payable in accordance with
Section 3(a) above. In addition, the Employer shall be responsible for providing
Employee with automobile insurance.
-3-
5. Termination. Notwithstanding the provisions of Section 1 hereof, the
Employee's employment with the Employer may be earlier terminated as follows:
(a) By action taken by the Board, the Employee may be discharged for
cause (as hereinafter defined), effective as of such time as the Board
shall determine. Upon discharge of the Employee pursuant to this
subparagraph 5(a), the Employer shall have no further obligation or duties
to the Employee, except for payment of Salary and such incentive
compensation, if any, having accrued to the Employee pursuant to
subparagraph 3(c) hereof through the effective date of termination, and the
Employee shall have no further obligations or duties to the Employer,
except as provided in Section 6.
(b) In the event of (i) the death of the Employee or (ii) by action of
the Board and the inability of the Employee, by reason of physical or
mental disability, to continue substantially to perform his duties
hereunder for a period of 90 days, for which 90 day period Salary and any
other benefits hereunder shall not be suspended or diminished. Upon any
termination of the Employee's employment under this subparagraph 5(b), the
Employer shall have no further obligations or duties to the Employee except
for payment of Salary and such incentive compensation, if any, having
accrued to the Employee pursuant to subparagraph 3(c) hereof through the
date of death or effective date of termination in the case of disability.
Anything contained herein to the contrary notwithstanding, in the event of
termination pursuant hereto for disability, the Employer shall pay in
addition to any accrued Salary and incentive compensation, a severance
payment equal to three (3) months Salary.
(c) In the event that Employee's employment with the Employer is
terminated by action taken by the Board without cause, then the Employer
shall have no further obligation or duties to Employee, except for payment
of Salary and such incentive compensation, if any, having accrued to the
Employee pursuant to subparagraph 3(b) hereof through the effective date of
termination and as provided in Section 7, and Employee shall have no
further obligations or duties to the Employer except as provided in Section
6 and for payment by the Company of a severance amount in the sum of
$183,500 or the Salary due and owing for the balance of the term of the
agreement, whichever is less, which severance payment shall be paid, in
full, to the Employee within two (2) weeks of the date of termination
hereunder.
(d) For purposes of this Agreement, the Company shall have "cause" to
terminate the Employee's employment under this Agreement upon (i) the
failure by the Employee to substantially perform his duties under this
Agreement, (ii) the engaging by the Employee in criminal misconduct
(including embezzlement and criminal fraud) which is materially injurious
to the Company,
-4-
monetarily or otherwise, (iii) the conviction of the Employee of a felony
or (iv) gross negligence to the Company on the part of the Employee. The
Company shall give written notice to the Employee, which notice shall
specify the grounds for the proposed termination and the Employee shall be
given thirty (30) days to cure if the grounds arise under clauses (i)
through (iv) above.
6. Confidentiality; Noncompetition.
(a) The Employer and the Employee acknowledge that the services to be
performed by the Employee under this Agreement are unique and extraordinary and,
as a result of such employment, the Employee will be in possession of
confidential information relating to the business practices of the Company,
Inventory Management Systems, Inc. ("IMSI") and the Parent. The term
"confidential information" shall mean any and all information (verbal and
written) relating to the Company, IMSI, the Parent or any of their respective
affiliates, or any of their respective activities, other than such information
which can be shown by the Employee to be in the public domain (such information
not being deemed to be in the public domain merely because it is embraced by
more general information which is in the public domain) other than as the result
of breach of the provisions of this subparagraph 6(a). Subject to the last
sentence of this subparagraph 6(a), the Employee agrees that he will not, at any
time during his employment or for a period of one (1) year following such
employment, directly or indirectly, use, communicate, disclose or disseminate to
any person, firm or corporation any confidential information regarding the
clients, customers or business practices of the Company, IMSI or Parent and that
Employee agrees that all confidential information shall be the sole property of
the Company.
In the event that Employee is requested or becomes legally compelled (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) to disclose any
confidential information or the fact that the confidential information has been
made available to you, Employee will provide the Company with prompt written
notice of such request(s) so that the Company may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions hereof.
(b) The Employee hereby agrees that he shall not, during the period of his
employment and for a period of one (1) year following such employment, directly
or indirectly, within any county (or adjacent county) in the State of New York
or in any State within the United States or territory outside the United States
in which the Company is engaged in business during the period of the Employee's
employment or on the date of termination of the Employee's employment, engage,
have an interest in or render any services to any business (whether as
-5-
owner, manager, operator, licensor, licensee, lender, partner, stockholder,
joint venturer, employee, consultant or otherwise) competitive with the
Parent's, IMSI's or the Company's business activities.
(c) The Employee hereby agrees that he shall not, during the period of his
employment and for a period of one (1) year following such employment, directly
or indirectly, take any action which constitutes an interference with or a
disruption of any of the Parent's, IMSI's or Company's business activities
including, without limitation, the solicitations of the Parent's, IMSI's or
Company's customers, or persons listed on the personnel lists of the Parent,
IMSI or Company. At no time during the term of this Agreement, or thereafter
shall the Employee directly or indirectly, disparage the commercial, business or
financial reputation of the Parent, IMSI or Company.
(d) For purposes of clarification, but not of limitation, the Employee
hereby acknowledges and agrees that the provisions of subparagraphs 6(b) and (c)
above shall serve as a prohibition against him, during the period referred to
therein, directly or indirectly, (i) hiring, offering to hire, enticing,
soliciting or in any other manner persuading or attempting to persuade any
officer, employee, agent, lessor, lessee, licensor or licensee who has been
previously contacted by either a representative of the Parent, IMSI or Company,
including the Employee, to discontinue or alter his or its relationship with the
Parent, IMSI or Company or (ii) enticing, soliciting or in any other manner
persuading or attempting to persuade any customer who has been previously
contacted by either a representative of the Parent, IMSI or Company, including
the Employee, to discontinue or alter his or its relationship with the Parent,
IMSI or Company for any business which competes with the business of the
Company.
(e) Upon the termination of the Employee's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the business of the Company,
IMSI or Parent which are in the possession of the Employee including all copies
thereof, shall be promptly returned to the Company.
(f) The Employee agrees that all processes, intellectual property rights,
technologies and inventions relating to the business of the Parent, IMSI or
Company ("Inventions"), including new contributions, improvements, ideas and
discoveries, whether patentable or not, of the Parent, IMSI or the Company, or
conceived, developed, invented or made by Employee during his employment by
Employer, shall belong to the Company and its affiliates. The Employee shall
further: (a) promptly disclose such Inventions to the Company; (b) assign to
-6-
the Company, without additional compensation, all patent, copyright, trademark
and other rights to such Inventions for the United States and foreign countries;
(c) sign all papers necessary to carry out the foregoing; and (d) give testimony
in support of his inventorship.
(g) The Company shall be the sole owner of all products and proceeds of the
Employee's services hereunder, including, but not limited to, all materials,
ideas, concepts, formats, suggestions, developments, arrangements, packages,
programs and other intellectual properties that the Employee may acquire,
obtain, develop or create in connection with and in the course of the Employee's
employment hereunder, free and clear of any claims by the Employee (or anyone
claiming under the Employee) of any kind or character whatsoever (other than the
Employee's right to receive payments hereunder). The Employee shall, at the
request of the Company, execute such assignments, certificates or other
instruments as the Company may from time to time deem necessary or desirable to
evidence, establish, maintain, perfect, protect, enforce or defend its right, or
title and interest in or to any such properties.
(h) The parties hereto hereby acknowledge and agree that (i) the Company
would be irreparably injured in the event of a breach by the Employee of any of
his obligations under this Section 6, (ii) monetary damages would not be an
adequate remedy for any such breach, and (iii) the Company shall be entitled to
injunctive relief, in addition to any other remedy which it may have, in the
event of any such breach.
(i) The parties hereto hereby acknowledge that, in addition to any other
remedies the Company may have under subparagraph 6(h) hereof, the Company shall
have the right and remedy to require the Employee to account for and pay over to
the Company all compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by the Employee as the
result of any transactions constituting a breach of any of the provisions of
Section 6, and the Employee hereby agrees to account for any pay over such
Benefits to the Company.
(j) Each of the rights and remedies enumerated in subparagraphs 6(h) and
(i) shall be independent of the other, and shall be severally enforceable, and
all of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity.
(k) If any provision contained in this Section 6 is hereafter construed to
be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions.
-7-
(l) If any provision contained in this Section 6 is found to be
unenforceable by reason of the extent, duration or scope thereof, or otherwise,
then the court making such determination shall have the right to reduce such
extent, duration, scope or other provision and in its reduced form any such
restriction shall thereafter be enforceable as contemplated hereby.
(m) It is the intent of the parties hereto that the covenants contained in
this Section 6 shall be enforced to the fullest extent permissible under the
laws and public policies of each jurisdiction in which enforcement is sought
(the Employee hereby acknowledging that said restrictions are reasonably
necessary for the protection of the Company). Accordingly, it is hereby agreed
that if any of the provisions of this Section 6 shall be adjudicated to be
invalid or unenforceable for any reason whatsoever, said provision shall be
(only with respect to the operation thereof in the particular jurisdiction in
which such adjudication is made) construed by limiting and reducing it so as to
be enforceable to the extent permissible, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of said
provision in any other jurisdiction.
7. Indemnification. The Employer shall indemnify and hold harmless the
Employee against any and all expenses reasonably incurred by him in connection
with or arising out of (a) the defense of any action, suit or proceeding in
which he is a party, or (b) any claim asserted or threatened against him, in
either case by reason of or relating to his being or having been an officer of
the Company, whether or not he continues to be such an officer at the time of
incurring such expenses, except insofar as such indemnification is prohibited by
law. Such expenses shall include, without limitation, the fees and disbursements
of attorneys of Employee's choosing (subject to the prior consent of the
Employer, which consent shall not be unreasonably withheld), amounts of
judgments and amounts of any settlements, provided that such expenses are agreed
to in advance by the Employer or a result of a settlement or judgment of a court
or other governmental agency. The foregoing indemnification obligation is in
addition to any similar obligation provided in the Employer's Certificate of
Incorporation or Bylaws.
8. General. This Agreement is further governed by the following provisions:
(a) Notices. All notices relating to this Agreement shall be in
writing and shall be either personally delivered, mailed by certified mail,
return receipt requested, to be delivered at such address as is indicated
below, or at such other address or to the attention of such other person as
the recipient has specified by prior written notice to the sending party.
Notice shall be effective when received.
-8-
To the Employer: Alliance Inventory Management, Inc.
00-00X 000xx Xxxxxx
Xxxxxxx Xxxxx, Xxx Xxxx
Attention: Chairman
With copies to: Take-Two Interactive Software, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx,
Chief Executive Officer
and
Xxxxxx Xxxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxx, Esq.
To the Employee: Xxxxx Xxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
With a copy to: Law Office of Xxxxx X. Xxxxxx
000-00 Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopier: 000-000-0000
(b) Parties in Interest. Employee may not delegate his duties or
assign his rights hereunder. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
(c) Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all
of the covenants and agreements between the parties with respect to such
employment in any manner whatsoever. Any modification or termination of
this Agreement will be effective only if it is in writing signed by the
party to be charged.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Employee agrees to
and hereby does submit to jurisdiction before any state or federal court of
record in New York City, New York, or in the state and county in which such
violation may occur, at Employer's election.
(e) Warranty. Employee and Employer hereby warrant and represent that
the execution of this Agreement and the discharge of its respective
obligations hereunder will not
-9-
breach or conflict with any other contract, agreement, or understanding
between himself or itself, as the case may be, and any other party or
parties.
(f) Severability. In the event that any term or condition in this
Agreement shall for any reason be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition
of this Agreement, but this Agreement shall be construed as if such invalid
or illegal or unenforceable term or condition had never been contained
herein.
(g) Execution in Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
ALLIANCE INVENTORY MANAGEMENT, INC.
By:
--------------------------------
Name:
Title:
-----------------------------------
Xxxxx Xxxxxx
-10-
