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EXHIBIT 10.39
EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of June, 1999, by and between MIDWAY
GAMES INC., a Delaware corporation (the "Corporation"), and XXXXXXX X. XXXXXXX
("Executive").
W I T N E S S E T H:
WHEREAS, Executive has been employed as the Executive Vice President -
Coin-Op Video of the Corporation and the Vice President and General Manager of
Xxxxxxxx Electronics Games, Inc. ("WEG"), a wholly owned subsidiary of WMS
Industries Inc. ("WMS"), pursuant to the terms of an Employment Agreement (the
"Prior Employment Agreement") between Executive, on the one hand, and the
Corporation and WEG, on the other hand; and
WHEREAS, the Corporation desires to employ Executive and Executive is
willing to undertake such employment on the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT; DUTIES. The Corporation hereby employs Executive to
perform such duties on behalf of the Corporation and its affiliates as the
President or the Board of Directors of the Corporation may from time to time
determine relating to the development and manufacture of coin-operated amusement
games and other matters appropriate for a senior executive of the Corporation.
During Executive's employment hereunder he shall not be required to move his
place of residence from the Chicago, Illinois metropolitan area. The primary
assignments to be performed by Executive shall be Executive Vice President -
Coin-Op Video and General Manager of the Corporation.
2. ACCEPTANCE AND LOYALTY. Executive hereby accepts such employment and
agrees that throughout the period of his employment hereunder, he will devote
his full time, attention, knowledge and skills, faithfully, diligently and to
the best of his ability, in furtherance of the business of the Corporation and
will perform the duties assigned to him pursuant to Section 1 hereof. Executive
shall perform all duties and responsibilities in a professional manner
consistent with the skill, competence and efficiency expected of an executive
employee performing the duties assigned to Executive and subject to the
direction and control of the President and the Board of Directors of the
Corporation. Executive will do such traveling as may be reasonably required of
him in the performance of his obligations hereunder. Executive shall at all
times be subject to, observe and carry out such rules, regulations, policies,
directions and restrictions as the Corporation shall from time to time
establish. During his employment hereunder, Executive shall not, without
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the written approval of the President or the Board of Directors of the
Corporation first had and obtained in each instance, directly or indirectly,
accept employment or compensation from or perform services of any nature for,
any business enterprise other than the Corporation or any of its subsidiaries or
affiliates except that Executive may continue to perform services to WEG and WMS
for such period as shall be mutually agreeable to the Corporation, WMS and
Executive. During Executive's employment hereunder, Executive shall not be
entitled to additional compensation for serving in any office, including as a
director, of the Corporation or any of its subsidiaries or affiliates to which
he may be elected.
3. TERM.
3.1 The term of Executive's employment hereunder shall commence
on the date hereof and terminate on June 30, 2002 (the "Original Term");
provided, however, that the term of Executive's employment shall be deemed
automatically extended from time to time such that the term of such employment
shall at no time be less than three years (the "Extended Term"); and provided
further, that Executive's services hereunder may be terminated by either party
(i) effective upon expiration of the Original Term or the Extended Term upon
written notice from the terminating party to the other party dated and received
at least three years prior to the respective termination date or (ii) effective
upon 30 days' prior written notice if such termination is for "cause" as defined
in subsection 8.3 of this Agreement. The Original Term and the Extended Term are
hereafter collectively referred to as the "Term" and each year of the Term is
hereafter referred to as an "Employment Year."
3.2 Executive may terminate this Agreement and his services to
the Corporation, if, among other things, without his prior written consent:
Executive is placed in any position of lesser stature than that of Executive
Vice President - Coin-Op Video of the Corporation; is assigned duties
inconsistent with such position or duties which, if performed, would result in a
significant change in the nature or scope of powers, authority, functions or
duties inherent in such position on the date hereof; is assigned performance
requirements and working conditions which are at variance with the performance
requirements and working conditions in effect on the date hereof; or if the
business facility at which Employee is required to perform his duties is
relocated more than fifty (50) miles from the present business location of the
Corporation.
4. COMPENSATION AND BENEFITS.
4.1 The Corporation shall pay to Executive as compensation for
his services and agreements hereunder a base salary at the rate of $325,000 per
annum, or such greater amount as the Board of Directors of the Corporation shall
from time to time determine. Base salary shall be payable in equal installments
in accordance with the Corporation's normal payroll policy, subject to payroll
taxes and withholding requirements.
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4.2 Executive shall be entitled to participate, to the extent he
is eligible under the terms and conditions thereof, in any bonus, pension,
retirement, disability, hospitalization, insurance, medical service, or other
employee benefit plan which is generally available to executive employees of the
Corporation and which may be in effect from time to time during the period of
his employment hereunder, including the Exec-U-Care insurance program. The
Corporation shall be under no obligation to institute or continue the existence
of any such employee benefit plan. In addition, the Corporation shall provide
Executive with Four Hundred Thousand Dollars ($400,000) in additional life
insurance coverage, payable to such beneficiary as Executive shall designate
from time to time, in such form and manner as the Corporation and Executive
shall determine as appropriate in order to minimize the income tax consequences
of such coverage to Executive.
4.3 Executive shall be entitled to purchase from the Corporation
each year during the Term hereof two (2) used units of a Game of his choice at a
price of One Hundred Dollars ($100.00) each. Such purchase shall be made for
Executive's personal use and not for resale and shall be conditional on
Executive taking whatever precautions are necessary to insure that information
with respect to such Game is kept confidential as required in Paragraph 9 of
this Agreement.
5. BUSINESS EXPENSES. The Corporation shall reimburse Executive for
all authorized expenses reasonably incurred by him in accordance with the
Corporation's "Travel and Entertainment Policy and Procedure," and any
amendments thereof that the Corporation may adopt during the Term hereof.
6. VACATION. Executive shall be entitled to five weeks paid
vacation during each Employment Year. Any such vacations are to be taken at
times mutually agreeable to Executive and the President of the Corporation.
Vacation time shall not be accumulated from year to year, unless Executive is
requested by the President of the Corporation to forego a vacation during any
Employment Year.
7. KEY-MAN LIFE INSURANCE. The Corporation may purchase and
maintain life insurance covering the life of Executive ("Key-man Insurance") in
an amount determined by the Corporation. The Corporation shall be the sole owner
and beneficiary of the Key-man Insurance and may apply to the payment of
premiums thereunder any dividends declared and paid thereon. Executive shall
submit himself to such physical examinations as the President of the Corporation
may deem necessary or desirable in connection with the purchase and maintenance
of the Key-man Insurance.
8. NON-COMPETITION AND NON-RAIDING. In consideration of the
Corporation's entering into this Agreement:
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8.1 Executive agrees that during the Term hereof and for a
period of one year after termination for "cause" or after Executive terminates
his employment without the written consent of the Corporation, other than
pursuant to Executive's rights under Paragraph 3.2, he will not, directly or
indirectly, without the prior written consent of the Corporation, own, manage,
operate, join, control, participate in, perform any services for, invest in, or
otherwise be connected with, in any manner, whether as an officer, director,
employee, consultant, partner, investor or otherwise, any business entity which
is engaged in the design, importation, manufacture and/or sale of coin-operated
video games, home video games or any business entity which is engaged in any
other business in which the Corporation or any affiliate of the Corporation is
engaged. Nothing herein contained shall be deemed to prohibit Executive from
investing his funds in securities of a company if the securities of such company
are listed for trading on a national stock exchange or traded in the
over-the-counter market and Executive's holdings therein represent less than
five percent of the total number of shares or principal amount of other
securities of such company outstanding.
8.2 Executive agrees that during the Term hereof and for a
period of one year thereafter, he will not, directly or indirectly, without the
prior written consent of the Corporation, induce or influence, or seek to induce
or influence, any person who is engaged by the Corporation or any affiliate of
the Corporation as an employee, agent, independent contractor or otherwise, to
terminate his employment or engagement, nor shall Executive directly or
indirectly, through any other person, firm or corporation, employ or engage, or
solicit for employment or engagement, or advise or recommend to any other person
or entity that such person or entity employ or engage or solicit for employment
or engagement, any person or entity employed or engaged by the Corporation or
any affiliate of the Corporation.
8.3 For purposes of this Agreement, "cause" means (i) conviction
(pursuant to a final or non-appealable judgment) of a felony or any other crime
involving fraud, larceny or dishonesty; (ii) failure and refusal to follow a
reasonable direction of the Chief Executive Officer, the President or the Board
of Directors of the Corporation after notice in writing of such failure or
refusal and a cure period of ten days thereafter; or (iii) commission of any
dishonest, wilful or grossly negligent act which has or is reasonably likely to
have a material adverse effect on the Corporation or its customer or trade
relationships.
8.4 In the event that Executive is terminated for reasons other
than "cause," or Executive exercises his rights under Section 3.2 hereof, then,
for such period (not to exceed one year after termination) as the Corporation
continues to pay the Executive's base salary to him or has made a lump-sum
payment to Executive pursuant to Section 12 hereof, Executive agrees that he
will not, directly or indirectly, without the prior written consent of the
Corporation, take any of the actions prohibited under subsection 8.1 of this
Agreement.
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8.5 Executive acknowledges that the provisions of this Paragraph
8 are reasonable and necessary for the protection of the Corporation. In the
event that any provision of this Paragraph 8, including any sentence, clause or
part hereof, shall be deemed contrary to law or invalid or unenforceable in any
respect by a court of competent jurisdiction, the remaining provisions shall not
be affected, but shall, subject to the discretion of such court, remain in full
force and effect and any invalid and unenforceable provisions shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited to the extent necessary to render the same valid and enforceable.
9. CONFIDENTIALITY AGREEMENT.
9.1 As used herein, the term "Confidential Information" shall
mean any and all information of the Corporation and of its affiliates (for
purposes of this paragraph, the Corporation's affiliates shall be deemed
included within the meaning of "Corporation"), including, but not limited to,
all data, compilations, programs, devices, strategies, or methods concerning or
related to (i) the Corporation's finances, financial condition, results of
operations, employee relations, amounts of compensation paid to officers and
employees and any other data or information relating to the internal affairs of
the Corporation and its operations; (ii) the terms and conditions (including
prices) of sales and offers of sales of the Corporation's products and services;
(iii) the terms, conditions and current status of the Corporation's agreements
and relationship with any customer or supplier; (iv) the customer and supplier
lists and the identities and business preferences of the Corporation's actual
and prospective customers and suppliers or any employee or agent thereof with
whom the Corporation communicates; (v) the trade secrets, manufacturing and
operating techniques, price data, costs, methods, systems, plans, procedures,
formulas, processes, hardware, software, machines, inventions, designs,
drawings, artwork, blueprints, specifications, tools, skills, ideas, and
strategic plans possessed, developed, accumulated or acquired by the
Corporation; (vi) any communications between the Corporation, its officers,
directors, stockholders, or employees, and any attorney retained by the
Corporation for any purpose, or any person retained or employed by such attorney
for the purpose of assisting such attorney in his or her representation of the
Corporation; (vii) any other information and knowledge with respect to all
products developed or in any stage of development by the Corporation; (viii) the
abilities and specialized training or experience of others who as employees or
consultants of the Corporation during the Term hereof have engaged in the design
or development of any such products; and (ix) any other matter or thing, whether
or not recorded on any medium, (a) by which the Corporation derives actual or
potential economic value from such matter or thing being not generally known to
other persons or entities who might obtain economic value from its disclosure or
use, or (b) which gives the Corporation an opportunity to obtain an advantage
over its competitors who do not know or use the same.
9.2 Executive acknowledges and agrees that the Corporation is
engaged in highly competitive businesses and has expended, or will expend,
significant sums of money and has invested, or will invest, a substantial amount
of time to develop and maintain the secrecy of
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the Confidential Information. The Corporation has thus obtained, or will obtain,
a valuable economic asset which has enabled, or will enable, it to develop an
extensive reputation and to establish long-term business relationships with its
suppliers and customers. If such Confidential Information were disclosed to
another person or entity or used for the benefit of anyone other than the
Corporation, the Corporation would suffer irreparable harm, loss and damage.
Accordingly, Executive acknowledges and agrees that, unless the Confidential
Information becomes publicly known through legitimate origins not involving an
act or omission by Executive:
(1) the Confidential Information is, and at all times hereafter
shall remain, the sole property of the Corporation;
(2) Executive shall use his best efforts and the utmost
diligence to guard and protect the Confidential Information from
disclosure to any competitor, customer or supplier of the
Corporation or any other person, firm, corporation or other
entity;
(3) unless the Corporation gives Executive prior express written
permission, during his employment and thereafter, Executive
shall not use for his own benefit, or divulge to any competitor
or customer or any other person, firm, corporation, or other
entity, any of the Confidential Information which Executive may
obtain, learn about, develop or be entrusted with as a result of
Executive's employment by the Corporation; and
(4) except in the ordinary course of the Corporation's business,
Executive shall not seek or accept any Confidential Information
from any former, present or future employee of the Corporation.
9.3 Executive also acknowledges and agrees that all documentary
and tangible Confidential Information including, without limitation, such
Confidential Information as Executive has committed to memory, is supplied or
made available by the Corporation to the Executive solely to assist him in
performing his services under this Agreement. Executive further agrees that
after his employment with the Corporation is terminated for any reason:
(1) Executive shall not remove from the property of the
Corporation and shall immediately return to the Corporation, all
documentary or tangible Confidential Information in his
possession, custody, or control and not make or keep any copies,
notes, abstracts, summaries, tapes or other record of any type
of Confidential Information; and
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(2) Executive shall immediately return to the Corporation any
and all other property of the Corporation in his possession,
custody or control, including, without limitation, any and all
keys, security cards, passes, credit cards and marketing
literature.
10. INVENTION DISCLOSURE. Any invention, improvement, design,
development or discovery conceived, developed, created or made by Executive
alone or with others, during the period of his employment hereunder and
applicable to the business of the Corporation or its affiliates, whether or not
patentable or registrable, shall become the sole and exclusive property of the
Corporation. Executive hereby assigns to the Corporation, all of his rights to
any "intellectual material" created or developed by him during the course of his
employment. As used herein, "intellectual material" shall include, but shall not
be limited to, ideas, titles, themes, production ideas, methods of presentation,
artistic renderings, sketches, plots, music, lyrics, dialogue, phrases, slogans,
catch words, characters, names and similar literary, dramatic and musical
material, trade names, trademarks and service marks and all copyrightable
expressions in audio visual works, computer software, electronic circuitry and
all mask works for integrated circuits. Executive shall disclose the
intellectual material promptly and completely to the Corporation and shall,
during the period of his employment hereunder and at any time and from time to
time hereafter (a) execute all documents requested by the Corporation for
vesting in the Corporation or any of its affiliates the entire right, title and
interest in and to the same, (b) execute all documents requested by the
Corporation for filing and prosecuting such applications for patents, trademarks
and/or copyrights as the Corporation, in its sole discretion, may desire to
prosecute, and (c) give the Corporation all assistance it reasonably requires,
including the giving of testimony in any suit, action or proceeding, in order to
obtain, maintain and protect the Corporation's right therein and thereto. If any
such assistance is required following the termination of this Agreement, the
Corporation shall reimburse Executive for his time and the reasonable expenses
incurred by him in rendering such assistance. Anything contained in this
paragraph to the contrary notwithstanding, this paragraph does not apply to an
invention for which no equipment, supplies, facilities, or trade secret
information of the Corporation or its affiliates was used and which was
developed entirely on the Executive's own time, unless (d) the invention
relates: (i) to the business of the Corporation or its affiliates, or (ii) to
the Corporation's or any of its affiliates' actual or demonstrably anticipated
research or development, or (e) the invention results from any work performed by
the Executive for the Corporation or its affiliates.
11. REMEDIES. Executive acknowledges and agrees that the business of
the Corporation is highly competitive and that violation of any of the covenants
provided for in Paragraphs 8, 9 and 10 of this Agreement would cause immediate,
immeasurable and irreparable harm, loss and damage to the Corporation not
adequately compensable by a monetary award. Accordingly, Executive agrees,
without limiting any of the other remedies available to the Corporation, that
any violation of said covenants, or any one of them, may be enjoined or
restrained by any court of competent jurisdiction, and that any temporary
restraining order or emergency, preliminary or final injunctions may be issued
by any court of competent jurisdiction, without notice and without bond. In the
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event any proceedings are commenced by the Corporation against Executive for any
actual or threatened violation of any of said covenants and if the Corporation
prevails in such litigation, then, Executive shall be liable to the Corporation
for, and shall pay to the Corporation, all costs and expenses of any kind,
including reasonable attorneys' fees, which the Corporation may incur in
connection with such proceedings.
12. CHANGE OF CONTROL.
12.1 If at any time during the term of this Agreement,
individuals who presently constitute the Board of Directors of the Corporation,
or who have been recommended for election to the Board by two-thirds of the
Board consisting of individuals who are either presently on the Board or such
recommended successors cease for any reason to constitute at least a majority of
such Board (such event being hereafter referred to as a "Change of Control") and
Executive gives written notice to the Corporation within 60 days after such
Change of Control of his election to terminate his employment hereunder, the
Corporation shall pay to Executive within 15 days after Executive's delivery of
such notice, as severance pay and liquidated damages, in lieu of any other
rights or remedies which might otherwise be available to him under this
Agreement, and without mitigation of any kind or amount, whether or not
Executive shall seek or accept other employment, a lump sum payment equal in
amount to three times the annual base salary payable to Executive pursuant to
subsection 4.1 of this Agreement. In addition, all unexpired options to purchase
securities of the Corporation granted to Executive before the Change of Control
shall, if unvested, vest fully on the date of the Change of Control,
notwithstanding any vesting provisions of such options. The payments provided
for in this Section 12 shall be paid in full, without discount to present value.
12.2 If it shall be determined that any amount payable under
Section 12.1 by the Corporation to or for the benefit of Executive (a "Base
Payment") would be subject to the excise tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then
Executive shall be entitled to receive an additional payment (the "Gross-Up
Payment") in an amount such that the net amount retained by Executive, after the
calculation and deduction of any Excise Tax on the Base Payment shall be equal
to the Base Payment, less any federal, state and local income taxes. The
Gross-Up Payment shall be reduced by income or Excise Tax withholding payments
made by the Corporation to any federal, state, or local taxing authority with
respect to the Gross-Up Payment that was not deducted from compensation payable
to the Executive. All determinations required to be made under this Section
12.2, including whether and when a Gross-Up Payment is required, the amount of
such Gross-Up Payment, and the assumptions to be utilized in arriving at such
determination, except as specified above, shall be made by the Corporation's
auditors (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Corporation and Executive within fifteen business days
after the receipt of notice from Executive that there should be a Gross-Up
Payment. The determination of tax liability made by the Accounting Firm shall be
subject to review by Executive's tax advisor, and, if Executive's tax advisor
does not agree with the determination reached by the Accounting Firm,
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then the Accounting Firm and Executive's tax advisor shall jointly designate a
nationally recognized public accounting firm, which shall make the
determination. All fees and expenses of the accountants retained by the
Corporation or jointly designated and retained shall be borne by the
Corporation. Any determination by a jointly designated public accounting firm
shall be binding upon the Corporation and Executive.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to Executive's employment with the
Company and no amendment or modification hereof shall be valid or binding unless
made in writing and signed by the party against whom enforcement thereof is
sought. All prior agreements relating to Executive's employment with the
Company, WEG or WMS (including without limitation, the Prior Employment
Agreement) or any affiliate of the Company, WEG or WMS are hereby terminated and
of no further force and effect. Executive hereby releases and discharges the
Corporation, WEG and WMS from any claim for payment arising under the Prior
Employment Agreement.
14. NOTICES. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or sent by
telephone facsimile or sent by certified mail, return receipt requested, or sent
by responsible overnight delivery service, postage and fees prepaid, to the
parties hereto at their respective addresses set forth below. Either of the
parties hereto may at any time and from time to time change the address to which
notice shall be sent hereunder by notice to the other party given under this
Section 14. The date of the giving of any notice sent by mail shall be three
business days following the date of the posting of the mail, if delivered in
person, the date delivered in person, if sent by overnight delivery service, the
next business day following delivery to an overnight delivery service or if sent
by telephone facsimile, the date sent by telephone facsimile.
If to the Corporation:
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xx. Xxxx X. Xxxxxxxx, President
If to Executive:
0 Xxxxxx Xxxx
Xxxxxxxx Xxxxx, XX 00000
15. No Assignment. Neither this Agreement nor the right to receive
any payments hereunder may be assigned by Executive. This Agreement shall be
binding upon Executive, his heirs, executors and administrators and upon the
Corporation, its successors and assigns.
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16. No Waiver. No course of dealing nor any delay on the part of the
Corporation in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
17. Governing Law. This Agreement shall be governed, interpreted and
construed in accordance with the substantive laws of the State of Illinois
applicable to agreements entered into and to be performed entirely therein.
18. Severability. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any arbitrator or court of competent jurisdiction, such provision
shall be ineffective but shall not in any way invalidate or affect any other
clause, paragraph, section or part of this Agreement. The parties intend that
all clauses, paragraphs, sections or parts of this Agreement shall be
enforceable to the fullest extent permitted by law.
19. Affiliate. As used in this Agreement, "affiliate" means any
person or entity controlled by or under common control with the Corporation.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which counterparts, when taken together, shall constitute
but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the day and year first above written.
MIDWAY GAMES INC.
By: /s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx, President
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
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