Exhibit 4
CUSIP NO. 00000X000 Page 13 of 16 Pages
AGREEMENT
This Agreement, dated August 16, 1999, is by and among Interactive Magic, Inc.,
a North Carolina corporation (the "Company"), and X.X. Xxxxxxx, an individual
("Xxxxxxx").
Whereas, Xxxxxxx currently serves as the Chairman and Chief Executive Officer
("CEO") of the Company: and
Whereas, the Company has recently sold its CD-ROM gaming business in order to
focus its efforts on its "Internet only" strategy; and
Whereas, the parties hereto desire to make certain modifications to the
managerial structure of the Company in order to further strengthen the skills
and experience of the Company's management structure within the areas of
e-commerce and Internet advertising;
Now therefore, for the good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Effective as of August 16, 1999, Xxxxxxx hereby resigns as the CEO of the
Company. Xxxxxxx shall continue to serve as non-executive Co-Chairman of the
Board without responsibility for day-to-day operations. The Company hereby
appoints Xxxxxxx as a consultant to the Company for the period commencing on the
date hereof and continuing until 31 December 2000. During such period, Xxxxxxx
shall be paid annual fees of $180,000, and shall be entitled to identical
benefits to those provided under his current Employment contract in section 5,
(including medical, car, car expenses, credit card for car expenses, cell phone,
computer, etc, except as limited by this Agreement). As a consultant, Xxxxxxx
shall perform such duties as shall be reasonably requested by the Company;
provided, that Xxxxxxx shall not be required to perform consulting duties for
more than 5 days per month unless agreed by the parties.
The parties hereto agree that Xxxxxxx'x current Employment Agreement, as
amended, shall be terminated as of the date hereof and, except as provided
above, all rights and obligations of either party thereunder shall be
extinguished. The Company and Xxxxxxx each hereby release and forever discharge
the other party and each of their officers, directors and other affiliated
persons from and against any and all rights, claims, causes of action, damages
and liabilities of any nature or kind whatsoever arising at any time through the
date hereof, except to the extent arising under this Agreement. Without limiting
the generality of the foregoing, Xxxxxxx hereby waives and forever relinquishes
any and all rights he may have under his previous Employment Agreement or to
Termination Damages (as that term is defined in Section 8.1 of such Employment
Agreement).
CUSIP NO. 00000X000 Page 14 of 16 Pages
2. Subject to approval by the Company's Board of Directors as required by law
and the Company Bylaws, the Company shall appoint Xxxxx Xxxxxxxxx, currently
the Director of Corporate Development, as the acting CEO, to serve until the
Company shall complete its executive search for a suitable replacement or until
a successor is duly elected and qualifies. Xxxxxxx agrees to call a Board
Meeting as soon as possible for this purpose. Xx. Xxxxxxx will also serve as
the Chairman of the Search committee to find the new CEO as part of his Board
of Directors duties.
3. The Company will use its best efforts to cause its financial institutions to
release Xxxxxxx from any and all of his personal guarantees of the Company's
indebtedness no later than October 31, 1999. In the event the Company shall
fail to remove all such guarantees, the Company shall establish a plan for the
repayment of such indebtedness (or the release of such guarantees) by November
30, 2000 which plan shall include, at a minimum, the repayment of at least
$50,000 of the indebtedness secured by Xxxxxxx'x guarantees each month
commencing in November 1999 until all such indebtedness shall be repaid or until
the personal guarantees are released. In addition, in the event the Company
shall raise additional capital, the Company shall use its best efforts (subject
to restrictions imposed by the provider of such capital or by Xxxx Xxxx under
the terms of the Company's $4.0 million convertible note to Xxxx Xxxx or by any
other existing agreements of the Company) to utilize up to 25% of such capital
to repay indebtedness secured by Xxxxxxx guarantees until such indebtedness
shall be repaid in full. The parties hereto agree that the current outstanding
amount of indebtedness secured by Xxxxxxx guarantees is $1,000,000. Xxxxxxx has
approximately $1.5 million in restricted securities that guarantee the current
indebtedness. It is the Company's responsibility to get these guarantees reduced
or eliminated. The Company will pay Xx. Xxxxxxx 5% annual interest on the total
amount of the restricted securities beginning on 1 November 1999. As the Company
reduces the amount of restricted securities in Xx. Xxxxxxx'x account, then the
principal on which the interest amount accrues will be reduced pro rata. Unless
the personal guarantees have been released, the Company will not draw down any
additional indebtedness secured by Xxxxxxx guarantees without Xxxxxxx'x consent.
4. The Company has a marketing contract with Xx. Xxxxxxx on his personal
aircraft. That agreement is to terminated effective immediately upon the
Company's payment to Xx. Xxxxxxx in cash of $10,000 to take care of the
anticipated remaining expenses for the aircraft for 1999. This payment is due no
later than 15 September 1999. The Company does not intend to renew this
contract. The Company will have the use of the advertising on the aircraft
through December 1999, unless the aircraft is sold by Xx. Xxxxxxx.
5. The Company and Xxxxxxx agree that Xxxxxxx shall be granted certain
registration rights with respect to his shares in accordance with and subject to
the terms and conditions of the Registration Rights Agreement to be signed by
such parties attached hereto as Exhibit A.
CUSIP NO. 00000X000 Page 15 of 16 Pages
6. The parties hereto agree to use their best efforts: (1) to cause the Board of
Directors to appoint Xxxxx Xxxx, Chairman of Vertical Financial Holdings, to
the vacancy on the Board resulting from the resignation of Avi Xxxxxx from the
Board; (2) to elect Mr. Agam as Chairman of the Board; (3) provided Vertical
owns at least 10% of the outstanding shares of the Company, to allow Vertical to
appoint two additional nominees for election to the Board at the Company's
Annual Meeting (for a total of 3 from Vertical interests), and (4) provided that
Xx. Xxxxxxx owns at least 10% of the outstanding shares of the Company, to
accept Xx. Xxxxxxx and one more nominee from Xx. Xxxxxxx (together with
Vertical's three nominees) as the full Board slate to be nominated by the
Company for election at the Company's Annual Meeting. Xxxxxxx and Vertical agree
to vote, and to direct their nominees to vote, for each other's nominees for the
next two Board elections.
7. Subject to shareholder approval of the new corporate name at the next
Shareholders Meeting, the Company agrees that, following the name assignment
contemplated hereby, it no longer will use the original company name,
Interactive Magic or Imagic. The Company believes it will be completely out of
the use of the old Interactive Magic name and trademarks by the end of December
1999. The Company agrees to sell to Xx. Xxxxxxx the old Company name, logo, and
url (xxx.xxxxxxxxxxx.xxx) as the Company continues to make the change to its new
name, iEntertainment Network, or iEN. The Company agrees that Xx. Xxxxxxx shall
be assigned the Company name and logo as of 1 February 2000 (or earlier if the
Company is sold to or merged with a different company and operated under the new
Company name, on the closing of such an acquisition or sale). Xx. Xxxxxxx will
pay the Company $1,000 for these rights upon that assignment or the Company may
set off such amount against any amounts it then owes Xxxxxxx.
8. Until December 31, 2000, any press release that refers to Xx. Xxxxxxx will be
presented to Xx. Xxxxxxx for his comments and review prior to release.
9. Xx. Xxxxxxx and his Board nominee will receive the same Board compensation
offered to any of Vertical's nominees including Mr. Agam for the period they
will serve on the Board, (or such shorter period that Xx. Xxxxxxx'x or his
nominee serves on the Company's Board.)
10. The Company will prepare a complete list of its indebtedness to Xx. Xxxxxxx
including all past expense accounts not paid to him and all interest currently
owed to him. It will pay all these outstanding debts by September 15, 1999. The
Company will keep a running tally of any interest on debts that are accruing to
Xx. Xxxxxxx and pay them within 30 days of the end of any quarter. The Company
will prepare a statement of stock ownership and option ownership for Xx.
Xxxxxxx. Xx. Xxxxxxx'x options will still vest during his "consulting"
period until 31 December 2000 and for one year after the end of the "consulting"
period.
11. Although Xx. Xxxxxxx may again enter into the business of making Internet
Games, he will not be deemed "competing" with the Company for purposes of the
noncompetition restrictions in his employment agreement, if he does not entice
any of the Company's employees to leave within 17 months of the date of
this contract. Any other reference or limitation relating to "non-competition"
in the employment agreement is removed and deemed no longer in effect on Xx.
Xxxxxxx.
CUSIP NO. 00000X000 Page 16 of 16 Pages
12. The Company also agrees to license to Xx. Xxxxxxx the ICONS 2 Internet
Gaming system on the best terms that they offer it to anyone else over the next
two years or the first three contracts implemented by the Company, whichever
comes first. Xx. Xxxxxxx can license the system anytime during this period.
The current best offer is to an Israeli phone company. Xx. Xxxxxxx may license
the product on the same terms and conditions offered in that or similar
contracts. He will be informed if any other more beneficial contract is offered
and his costs/fees adjusted accordingly.
Interactive Magic, Inc
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx, Chief Financial Officer
/s/ X.X. Xxxxxxx
Xxxx X. Xxxxxxx
We agree to be bound by the provisions of Paragraph 6 above.
Vertical Financial Holdings
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: Chairman
