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Exhibit 8
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into effective as of August 16,
1995 by Spectrum HoloByte, Inc. a Delaware corporation, referred to as Company,
and Xxxxxxx X. Race, referred to as Executive.
WHEREAS, the Company desires to employ Executive and Executive desires
to be employed by the Company upon the terms and conditions set forth below.
NOW, THEREFORE, Company and Executive agree as follows:
1. EMPLOYMENT AND ELECTION AS A DIRECTOR. The Company employs Executive
within the San Francisco Bay Area as its Chief Executive Officer and Executive
accepts employment by the Company upon the terms and conditions herein set
forth. During the term of his employment, Executive shall devote his full time
and attention to the business and affairs of the Company. The Company agrees to
take all action necessary to nominate and elect Executive as a director of the
Company as soon as possible following his commencement of employment and to
continue his directorship during the term of his employment. Should Executive
not be elected a director and choose to resign as a result, then his resignation
shall be treated as an Involuntary Termination (within the meaning of Paragraph
4(e)) for all purposes of this Agreement.
2. COMPENSATION AND BENEFITS.
(a) Base Salary. The Company shall pay to Executive for all services to
be performed by Executive during the term of this Agreement a minimum base
salary at the rate of $275,000 per annum. The Board of Directors may in its
discretion increase Executive's base salary periodically either in connection
with Executive's annual review or otherwise, but in no event shall Executive's
base salary be reduced below such minimum amount without the written consent of
Executive. Amounts paid to Executive pursuant to this Paragraph 2(a) are
hereinafter referred to as "Base Salary."
(b) Performance Incentive. As additional compensation for performance of
the services rendered by Executive during the term of his employment, the
Company will pay a performance incentive amount based upon the achievement of
sales and performance goals and objectives which shall be agreed upon, in
advance, by the Board of Directors and Executive and which will permit Executive
to earn up to an additional 60% of Base Salary (up to 100% of Base Salary to the
Extent the performance goals or objectives are exceeded). Amounts paid to
Executive pursuant to this Paragraph 2(b) are hereinafter referred to as
"Incentive Compensation." For fiscal year 1996, Incentive Compensation shall be
paid at the rate of two thirds to reflect proration for the number of months
during the fiscal year in which Executive is employed. Incentive Compensation
shall be paid to Executive within
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90 days after the end of the applicable fiscal year or, if later, at the time
or times bonuses are paid to other members of senior management of the Company.
(c) Benefits. During the term of his employment or for such time as
otherwise provided in this Agreement, Executive shall be entitled to
participate in such vacation, expense reimbursement, auto allowance, life
insurance, medical and dental plans, retirement plans and other programs as are
offered from time to time by the Company to its executive employees and are
described in the Company's employee benefit handbooks; provided that, as a
minimum, Executive shall be entitled to:
(i) vacation with pay of three (3) weeks during each year of
his employment hereunder, to be taken at such times and in such periods as
Executive elects and which will not unreasonably interfere with his duties
and obligations to the Company; and
(ii) a car allowances of $700 per month.
(d) Life Insurance. The Company will maintain, at its expense,
during the term of Executive's employment, in addition to the normal group life
insurance provided for employees, life insurance insuring Executive's life in
the amount of $1,000,000, payable to the beneficiary or beneficiaries named by
Executive. The Company shall have no obligation to provide life insurance under
this subparagraph (d) if Executive is not insurable at rates less than three
times the best insurance rate available for an individual of the Executive's
age, sex, employment and place of residence.
(e) Options. The Company shall grant to Executive on the date
Executive commences employment with the Company an option to purchase up to
500,000 shares of the Company's common stock (the "Option"). The Option shall
be an incentive stock option to the greatest extent permissible under the
Federal tax laws. Except as otherwise provided herein, the Option shall become
exercisable for 12% of the shares upon Executive's completion of six months of
service measured from Executive's employment commencement date and for the
balance of the shares in a series of 42 equal monthly installments upon
Executive's completion of each month of service thereafter. The Option shall be
granted pursuant to and conform to the terms and conditions of options granted
pursuant to the Company's 1994 Stock Option Plan. The Option granted pursuant
to this subparagraph (e) shall be exercisable at a per share price equal to
100% of the fair market value of the Company common stock on the close of
business on the date Executive becomes employed by the Company ("Executive
Price").
(f) Withholding Taxes. The Company shall deduct and withhold from
the compensation payable to Executive hereunder any and all applicable Federal,
State and local income and employment withholding taxes and any other amounts
required to be deducted or withheld by the Company under applicable statutes,
regulations, ordinances or
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orders governing or requiring the withholding or deduction of amounts otherwise
payable as compensation or wages to employees.
(g) Indemnification. The Company shall indemnify Executive to the
fullest extent permitted by the Delaware General Corporation Law from claims
against him in his capacity as an officer and employee of the Company and, to
the extent he is serving as such, as a Director of the Company. Such
indemnification shall include, among other terms, the advancement, as incurred,
of costs and legal fees of defending against any such claims.
3. Special Bonus. Should Executive remain employed through March
31, 1999, then Executive shall be entitled to receive a Special Bonus from the
Company equal to $3,000,000. The Company shall be deemed to have satisfied its
obligation to Executive pursuant to this Paragraph 3 to the extent that
Executive has any realizable value from the then exercisable Option Shares he
has the right to acquire pursuant to Paragraph 2(e). Should Executive sell any
of such Option shares, then the Company shall be deemed to have satisfied its
obligation to Executive pursuant to this Paragraph 3 to the extent of the
amount of gain (i.e., amount realized over $16.375) from any such stock sales.
If at any time prior to March 31, 1999 the amount of realizable value
recognizable by Executive pursuant to the preceding two sentences exceeds
$3,000,000 for a consecutive six-month period, the Company shall no longer be
obligated to pay the Special Bonus on March 31, 1999.
4. Termination.
(a) This Agreement shall terminate by reason of Executive's death or
Disability.
(b) Should there occur an Involuntary Termination of Executive's
employment for Good Cause, then the Company shall continue to pay Executive's
Base Salary on a monthly basis after such termination for a six-month period
but shall not be obligated to pay Executive any other amount after the date of
termination.
(c) Should there occur an Involuntary Termination of Executive's
employment, other than a termination for Good Cause, then the Company will pay
Executive the following amounts ("Severance Payments"):
(i) the exercisability of the Option shall be accelerated as
though Executive had remained employed for one additional year,
(ii) continue to pay Executive's Base Salary on a monthly basis
after such termination for a twelve-month period,
(iii) pay Executive a pro-rated Incentive Compensation for the
fiscal year ending on or after Executive's last day of employment in an amount
equal to the greater of the Incentive Compensation earned for the current
fiscal year or the Incentive
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Compensation earned for the previous fiscal year. The Incentive Compensation
payable pursuant to this clause (iii) shall be pro-rated by annualizing (if
applicable) the Incentive Compensation earned for the previous fiscal year, and
then dividing the figures for each of the current and previous fiscal years by
twelve then multiplying by the number of whole months that Executive was
employed in the most recent fiscal year. In any event, such Incentive
Compensation shall be paid at the end of the fiscal year in accordance with the
provisions of Paragraph 2(b),
(iv) continued health coverage pursuant to COBRA, at its own
expense, under the health benefit plan maintained or contributed to by the
Company and covering Executive and Executive's dependents on the date of
termination of his employment, such coverage being for Executive and
Executive's dependents and extending from his last day of employment through
the earlier of (i) the date Executive obtains group health insurance covering
Executive and Executive's dependents and (ii) the date that is twelve months
after Executive's termination of employment, and
(v) a cash payment from the Company in accordance with the attached
Schedule A.
(d) TAX INDEMNITY. To the extent any amount payable to Executive as the
Special Bonus or Severance Payments pursuant to this Agreement is classified as
a "Parachute Payment" under Section 280G of the Internal Revenue Code (the
"Code"), resulting in the imposition of excise taxes to Executive under Code
Section 4999 (the "Excise Taxes"), then the Company shall pay to Executive an
additional amount (a "Gross-Up Payment") in an amount equal to one-half of the
Excise Tax, "grossed-up" to the extent necessary to assure that after payment
by Executive of all taxes including any excise tax imposed on any Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to one-half
of the Excise Tax imposed upon the Parachute Payments.
For purposes of the foregoing Gross-Up Payment, the following provisions
shall be in effect:
(i) In the event there is any disagreement between Executive and the
Company as to whether one or more payments to which Executive becomes entitled
constitute Parachute Payments or as to the determination of the Excise Tax,
such dispute shall be resolved as follows:
(A) In the event temporary, proposed or final Treasury
Regulations in effect at the time under Code Section 280G (or applicable
judicial decisions) specifically address the status of any such payment or the
method of valuation therefor, the characterization afforded to such payment by
the Regulations (or such decisions) shall, together with the applicable
valuation methodology, be controlling.
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(B) In the event the Regulations (or applicable judicial
decisions) do not address the status of any payment in dispute, the
matter shall be submitted for resolution to independent counsel
mutually acceptable to Executive and the Company ("Independent
Counsel"). The resolution reached by Independent Counsel shall be
final and controlling; provided, however, that if in the judgment of
Independent Counsel the status of the payment in dispute can be
resolved though the obtainment of a private letter ruling from the
Internal Revenue Service, a formal and proper request for such ruling
shall be prepared and submitted by Independent Counsel, and the
determination made by the Internal Revenue Service in the issued
ruling shall be controlling. All expenses incurred in connection with
the retention of Independent Counsel and (if applicable) the
preparation and submission of the ruling request shall be shared
equally by Executive and the Company.
(ii) The Company shall pay the Gross-Up Payment within ten (10)
days after Executive pays the Excise Tax, whether through the payment or
withholding taxes or otherwise. However, the Company may withhold payment
of any Gross-Up Payment under this subparagraph (d) if it in good faith
disputes the determination of Executive's tax counsel, in which case the
dispute mechanism set forth above shall be implemented. Executive hereby
agrees to reimburse the Company for 50% of any Excise Tax paid to the
extent Executive receives a refund from the Internal Revenue Service of
such Excise Tax.
(e) Definitions.
Disability shall mean illness or other physical or mental disability
or incapacity which, in the Company's judgment and in the judgment of a
qualified physician, has substantially prevented Executive from performing his
duties during any period of ninety (90) consecutive days or for ninety (90)
days during any period of 180 consecutive days. The Company will have the right
to terminate Executive's employment as a result of Executive's Disability by
giving written notice to him not later than thirty (30) days after the
expiration of any such ninety-day period.
Good Cause shall mean (i) Executive's engaging in willful misconduct,
or fraud, (ii) Executive's continued refusal to carry out the reasonable
instructions of the Company's Board of Directors, which (if correctable)
remains uncorrected for seven (7) days following written notice to Executive
from the Board, (iii) Executive's conviction of a felony or his embezzlement of
Company funds, (iv) any intentional misconduct by Executive which has an
adverse and material effect upon the Company's business or reputation, or (v) a
material breach by Executive of any of Executive's fiduciary obligations as an
officer of the Company.
Involuntary Termination means the termination of Executive's
employment with the Company involuntarily upon his discharge or dismissal, or
voluntarily or
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involuntarily following a change in his title from Chief Executive Officer to
another title. In addition, following a Corporate Transaction, if Executive is
not the chief executive officer of the successor corporation, then Executive
may resign his position within ninety (90) days following the Corporate
Transaction and treat his resignation as an Involuntary Termination (within the
meaning of Paragraph 4(c)).
5. PROPRIETARY INFORMATION. Executive will enter into the
Company's standard Proprietary Information and Inventions Agreement. This
agreement exists to assure the investors and other shareholders that the
Company's valuable intellectual property is not removed from the Company's
exclusive control and access.
6. NON-COMPETITION.
(a) The parties hereto recognize that Executive's services are
special and unique and that his level of compensation and the provision herein
for compensation upon Involuntary Termination are partly in consideration of
and conditioned upon Executive's not competing with the Company, and that the
covenant on his part not to compete or solicit as set forth in this Paragraph 6
during and after his employment is essential to protect the business and
goodwill of the Company.
(b) Executive agrees that during the employment term and for the
period ending twelve (12) months following the last day on which he receives
salary continuation payments under Paragraph 4 following termination of his
employment (the "Severance Period"), Executive will not either directly or
indirectly, whether as a director, officer, consultant, employee or adviser or
in any other capacity (i) render any planning, marketing or other services
respecting the creation, design, manufacture, sale or licensing of
entertainment software ("Services") to any business, agency, partnership or
entity ("Restricted Business") other than the Company, or (ii) make or hold any
investment in any Restricted Business in the United States or England other than
the Company, whether such investment be by way of loan, purchase of stock or
otherwise, provided that there shall be excluded from the foregoing the
ownership of not more than 5% of the listed or traded stock of any
publicly-held corporation. For purposes of this Paragraph 6, the term "Company"
shall mean and include the Company, any subsidiary or affiliate of the Company,
any successor to the business of the Company (by merger, consolidation, sale of
assets or stock or otherwise) and any other corporation or entity of which
Executive may serve as a director, officer or employee at the request of the
Company or any successor of the Company.
(c) During the term of this Agreement and for a period of twelve
(12) months following cessation of his employment with the Company, Executive
will not, directly or indirectly, induce or attempt to influence any employee
of the Company to leave its employ and Executive will not, directly or
indirectly, involve himself in decisions to hire any employee who has left the
Company's employ within the three month period preceding Executive's cessation
of employment or the three month period following his cessation of employment.
This provision shall not apply to individuals who were employed by
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Executive's present employer during the three-month period ending on the date
of this Agreement and, in addition, shall not be construed to affect any
responsibility Executive has with respect to the bona fide hiring and firing
of Company personnel.
(d) Executive agrees that the Company would suffer an irreparable injury
if he were to breach the covenants contained in subparagraphs (b) or (c) and
that the Company would by reason of such breach or threatened breach be
entitled to injunctive relief in a court of appropriate jurisdiction and
Executive hereby stipulates to the entering of such injunctive relief
prohibiting him from escaping in such breach.
(c) If any of the restrictions contained in this Paragraph 6 shall be
deemed to be unenforceable by reason of the extent, duration or geographical
scope or other provisions thereof, then the parties hereto contemplate that the
court shall reduce such extent, duration, geographical scope or other provision
hereof and enforce this Paragraph 6 in its reduced form for all purposes in the
manner contemplated hereby.
7. No Waiver. The failure of the Company to terminate this Agreement for
the breach of any condition or covenant herein by Executive shall not affect
the Company's right to terminate for subsequent breaches of the same or other
conditions or covenants. The failure of either party to enforce at any time or
for any period of time any of the provisions of this Agreement shall not be
construed as a waiver of such provisions or of the right to the party
thereafter to enforce each and every such provision.
8. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason by
final judgment of a court of competent jurisdiction, the remaining provisions
or portions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law.
9. Relevant Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California. Any action in law or
equity regarding this Agreement or Executive's rights hereunder may only be
brought in the State of California or in any state in which Executive resides
at the time of the commencement of such action.
10. Employment at Will. Employment with the Company is not for a
specific term and can be terminated by Executive or by the Company at any time
for any reason, with or without cause or prior notice. Any contrary
representations that may have been made or that may be made are superseded by
this offer.
11. Entire Agreement. This Agreement sets forth the entire understanding
of the parties and supersedes all prior agreements, arrangements, and
communications, whether oral or written, between the parties, including all
prior employment agreements.
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No amendment to this Agreement may be made except by a writing signed by the
Company and Executive.
12. Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of, and shall be binding upon, the Company, its successors and
assigns, and Executive, the personal representative of his estate and his heirs
and legatees. Without in any manner limiting the foregoing, should the Company
be acquired by merger or stock or asset sale, the acquiring entity shall be
bound by the terms and provisions of this agreement and shall succeed to all of
the Company's obligations and liabilities hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
SPECTRUM HOLOBYTE, INC.
By: /s/ [SIG]
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Title: Chairman of the Board
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Address: 0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
XXXXXXX X. RACE
By: /s/ XXXXXXX X. RACE
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Address: 0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
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Schedule A
TERMINATION PAYMENT
Executive shall receive a cash payment from the Company in accordance with the
following schedule of events if Involuntarily Terminated without Good Cause.
(a) Should Executive's employment be Involuntarily Terminated without
Good Cause on or before March 31, 1996, then Executive shall receive a
Termination Payment of $1,000,000.
(b) Should Executive's employment be Involuntarily Terminated without
Good Cause after March 31, 1996 but before April 1, 1997, then Executive shall
receive, as the Termination Payment, $2,000,000 if the Company was profitable
for the period beginning on October 1, 1995 and ending on March 31, 1996 (such
period referred to as the "1996 Year") or, if not profitable for such period,
$1,000,000. For purposes of this subparagraph (b), if both a Corporate
Transaction occurs and Executive's employment is Involuntarily Terminated
without Good Cause after March 31, 1996 but before April 1, 1997, then provided
the Company has been profitable from April 1, 1996 through the end of the most
recent fiscal quarter, Executive's Termination Payment shall be calculated as
set forth above but Executive shall receive an additional $250,000 for each
quarter completed since April 1, 1996. Corporate Transaction shall have the
meaning assigned to such term in the Company's 1994 Stock Option Plan.
(c) Should Executive's employment be Involuntarily Terminated without
Good Cause after March 31, 1997 but before April 1, 1998, then Executive shall
receive, as the Termination Payment, $3,000,000 if the Company was profitable
for both the 1996 Year and the fiscal year ending March 31, 1997 ("1997 Year")
or, if not profitable both such periods, then $2,000,000 if the Company was
profitable for either the 1996 Year or the 1997 Year or, if not profitable
either of those periods, then $1,000,000. For purposes of this subparagraph
(c), if both a Corporate Transaction occurs and Executive's employment is
Involuntarily Terminated without Good Cause after March 31, 1997 but before
April 1, 1998, then provided the Company has been profitable from April 1, 1997
through the end of the most recent quarter, Executive's Termination Payment
shall be calculated as set forth above but Executive shall receive an
additional $250,000 for each quarter completed since April 1, 1997.
(d) Should Executive's employment be Involuntarily Terminated without
Good Cause after March 31, 1998 but before April 1, 1999, then Executive shall
receive a Termination Payment of $3,000,000.
(e) The Termination Payment calculated as set forth in this Schedule A
shall be paid in twelve equal monthly installments beginning thirty (30) days
after the date such payments became due. In determining whether the Company has
been profitable for
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a fiscal year (or portion of a fiscal year, if applicable), the Company's
financial results shall be adjusted to exclude the effect of any compensation
expense attributable to the Company's obligation to make the Termination
Payment described in this Schedule A incurred other than as the result of a
direct payment pursuant to the terms of this Agreement and, in addition, the
Company and Executive agree to negotiate in good faith regarding the effect to
give any extraordinary transactions reflected in the financial results for any
such fiscal year. The Company shall be deemed to have satisfied its obligation
to Executive pursuant to this Schedule A to the extent that Executive has any
realizable value from the then exercisable Option Shares he has the right to
acquire pursuant to Paragraph 2(e). Should Executive sell any of the Option
shares which he has the right to acquire pursuant to Paragraph 2(e), then the
Company shall be deemed to have satisfied its obligation to Executive pursuant
to this Schedule A to the extent of the amount of gain (i.e., amount realized
over $16,375) from any such stock sales.
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