EMPLOYMENT AGREEMENT, dated as of September 1, 1994, between
ACCLAIM ENTERTAINMENT, INC. (the "Corporation"), a Delaware
corporation, and XXXXXXX X. XXXXXXXXX (the "Executive"), an
individual residing at 00 Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000.
W I T N E S S E T H :
WHEREAS, the Executive has been employed by the Corporation
and desires to continue in its employ, and the Corporation xx-
xxxxx to continue the employment of the Executive, upon the terms
and conditions hereinafter provided.
NOW, THEREFORE, the parties hereto hereby agree as follows:
FIRST: Employment. The Corporation hereby employs the Ex-
ecutive as its Chief Executive Officer for the period commencing
on September 1, 1994 and terminating on August 31, 1999, subject
to earlier termination as provided in Articles THIRD and FOURTH
hereof or upon the death of the Executive (the "Employment
Period"). The Executive accepts such employment, agrees to be in
charge of and responsible for all of the duties normally asso-
ciated with said position, agrees faithfully and to the best of
his abilities to perform such other services consistent with his
position as a senior executive officer as may from time to time
be assigned to him by the Board of Directors of the Corporation
and agrees to devote substantially all of his business time,
skill and attention to such services. Notwithstanding anything
to the contrary in this Agreement, the Executive shall not be
prevented from investing and managing his assets in such form or
manner as will not unreasonably interfere with the services to be
rendered by him hereunder, or from acting as a director, trustee,
officer of, or on a committee of, or a consultant to, any other
firm, trust or corporation where such positions do not
unreasonably interfere with the services to be rendered by him
hereunder. During the Employment Period, the Executive shall be
entitled to executive office space, administrative and
secretarial assistance reasonably acceptable to him and other
support services appropriate to his duties hereunder. The
Corporation shall not cause its principal executive office to be
located more than 70 miles from the Executive's principal
residence on the date hereof. The Corporation agrees to use its
best efforts, at each meeting of its stockholders during the
Employment Period at which directors are to be elected, to cause
the Executive to be elected to such Board of Directors.
SECOND: Compensation. A. The Corporation shall pay to
the Executive, and the Executive shall accept from the
Corporation, for the Executive's services during the Employment
Period, (i) a salary at the rate of $775,000 per annum (the "Base
Salary"), payable in accordance with the Corporation's customary
executive payroll policy as in effect from time to time, but not
less frequently than monthly, and (ii) a bonus (the "Bonus") with
respect to each fiscal year during the Employment Period, payable
not later than 120 days after the end of such fiscal year
(whether or not such payment date is during the Employment
Period), in an amount equal to (A) 3.0% of the net pre-tax
profits up to $50,000,000 (but without giving effect to the
expense related to the payment of such bonus to the Employee)
reflected in the Corporation's audited financial statements for
such fiscal year plus (B) 3.5% of the net pre-tax profits over
$50,000,000 (but without giving effect to the expense related to
the payment of such bonus to the Employee) reflected in the
Corporation's audited financial statements for such fiscal year.
B. The Corporation shall lease for the Executive's sole
use during the Employment Period a current-model luxury type
automobile selected by the Executive. The Corporation shall
reimburse the Executive for all operating expenses incurred by
him in connection with the use by him of such automobile pursuant
to his responsibilities hereunder.
C. The Executive shall be entitled to participate, on the
same basis, subject to the same qualifications, as other senior
executive officers of the Corporation, in any pension, profit
sharing, stock purchase, stock option, savings, bonus, health
insurance, hospitalization, and other fringe benefit plans and
policies in effect with respect to senior executive officers of
the Corporation. In addition, the Corporation shall provide the
Executive with term life insurance in the amount of $2,000,000,
payable to the Executive's designees, and the Corporation shall
provide the Executive with a disability insurance policy under
which the Executive shall receive 75% of the Base Salary in
effect at the time of the termination of the Employment Period by
reason of the Executive's disability for as long as such period
of disability continues.
D. The Corporation shall reimburse the Executive for all
reasonable out-of-pocket expenses incurred by him in connection
with the performance of his duties hereunder upon presentation of
appropriate documentation therefor.
E. During the Employment Period, the Executive shall be
entitled to vacations of 30 business days per annum, with a
maximum of 20 consecutive business days to be taken at any one
time, during which times the Executive shall be entitled to his
full compensation.
THIRD: Disability. If, during the Employment Period, the
Executive shall be unable substantially to perform the duties
required of him pursuant to the provisions of this Employment
Agreement due to any disability for a period of 180 days in any
12 consecutive months, the Corporation shall have the right to
terminate the Executive's employment pursuant to this Employment
Agreement by giving not less than 30 days' written notice to the
Executive, at the end of which time, if such disability has
continued, the Executive's employment shall be terminated. The
Executive shall retain his status and continue to receive his
full compensation hereunder during the period prior to any
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termination hereunder because of a disability. As used in this
Employment Agreement, the term "disability" shall mean the
inability of the Executive to perform his duties under this
Employment Agreement by reason of a non-intentionally self-
inflicted medical disability, including mental or physical
illness, as certified by a physician mutually agreed upon by the
Executive and the Corporation.
FOURTH: Termination For Cause. The Corporation shall have
the right to terminate the Executive's employment pursuant to
this Employment Agreement for "cause" only in accordance with the
provisions of this Article FOURTH. Such termination shall
require a good faith determination by a majority vote of the
Corporation's Board of Directors that the termination of this
Employment Agreement is necessary for cause. As used in this
Employment Agreement, the term "cause" shall mean only (a) the
conviction of (or a plea of nolo contendere by) the Executive for
a felony under state or federal law, unless the Executive
performed the acts underlying such felony in good faith and in a
manner the Executive reasonably believed to be in or not opposed
to the best interests of the Corporation; or (b) the material
breach by the Executive of the provisions of this Employment
Agreement; provided, however, that the Corporation shall have
given the Executive written notice specifying such breach and
permitted the Executive to cure such breach within the period of
30 days after receipt of such notice if such breach is subject to
cure in the sole determination of the Board of Directors or, to
the extent such breach cannot be cured within 30 days, the
Executive shall have begun to cure such breach and shall
diligently pursue any and all actions necessary to cure such
breach. In the event of a termination for cause pursuant to this
Article FOURTH, the Executive shall be entitled to receive only
the benefits set forth in part C of Article EIGHTH hereof.
FIFTH: Non-Competition and Non-Solicitation. A. The
Executive agrees, to the extent permitted by law, that neither he
nor his spouse nor any of his minor children shall, during the
Executive's employment with the Corporation and during the period
terminating on the earlier to occur of August 31, 2000 or the
first anniversary of the termination of such employment, directly
or indirectly, own, manage, operate, join or control, or
participate in the ownership, management, operation or control
of, or be a director or employee of, or a consultant to, any
business, firm or corporation which is conducting any business
which is substantially similar to or competes in any substantial
respect with the business of the Corporation; provided, however,
that the provisions of this Article FIFTH shall not apply to
passive investments by the Executive in shares of stock
registered under the Securities Exchange Act of 1934 which (i)
shall have an initial cost of less than $200,000 or (ii) shall
constitute less than five percent of the outstanding shares of
such stock.
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B. In addition, the Executive agrees that he shall not,
during the Employment Period and for one year thereafter, (i)
persuade or attempt to persuade any video game software
developer, licensor, supplier or other person providing services
or goods to the Corporation not to do business with the
Corporation or to reduce the amount of business it does with the
Corporation; (ii) persuade or attempt to persuade any customer or
potential customer not to do business with the Corporation or to
reduce the amount of business it does with the Corporation; (iii)
solicit for himself or any person other than the Corporation the
business of any video game software developer, licensor, supplier
or other person providing services or goods to the Corporation,
or customer or potential customer who did business with the
Corporation within one year prior to the termination of the
Employment Period; (iv) persuade or attempt to persuade any
employee of the Corporation, or any individual who was its
employee during the one year prior to termination of the
Employment Period, to leave the Corporation's employ or to become
employed by any person other than the Corporation; nor (v) if he
shall voluntarily terminate his employment, perform any
consulting services for any person, partnership, corporation, or
other entity who has engaged in business with the Corporation
during the one year immediately preceding such termination. The
Executive also agrees that, during the Employment Period and at
all times thereafter, he shall not disclose or use any
confidential, proprietary or secret information, including
without limitation, trade secrets of the Corporation, relating to
the Corporation or any of its customers or video game software
developers, licensors, suppliers or other persons providing goods
or services to the Corporation with which it does business, other
than information already in the public domain.
SIXTH: Equitable Remedy. The Executive acknowledges and
agrees that, because of the unique and extraordinary nature of
his services, any breach of the provisions of Article FIFTH
hereof will cause irreparable injury and incalculable harm to the
Corporation and that it shall, accordingly, be entitled to
injunctive or other equitable relief.
SEVENTH: Indemnification. The Corporation shall indemnify
the Executive (and his legal representatives or other successors)
to the fullest extent permitted by the laws of the State of
Delaware and its existing certificate of incorporation and by-
laws, and the Executive shall be entitled to the protection of
any insurance policies the Corporation may elect to maintain
generally for the benefit of its directors and officers, against
all costs, charges and expenses whatsoever incurred or sustained
by him (or his legal representatives or other successors) in
connection with any action, suit or proceeding to which he (or
his legal representatives or other successors) may be made a
party by reason of his being or having been a director or officer
or employee of the Corporation and its subsidiaries and
affiliates including, without limitation, any joint venture or
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partnership in which the Corporation or any of its subsidiaries
has an interest.
EIGHTH: Termination Benefits. A. If, on or prior to the
March 31 immediately preceding the termination of the Employment
Period, the Corporation shall not have offered to extend the
Executive's employment with the Corporation for a minimum of
three years upon terms and conditions at least as favorable to
the Executive as those contained in this Employment Agreement,
including, without limitation, the provisions of this Article
EIGHTH, then the Corporation shall pay to the Executive, as a
termination benefit, in a lump sum, on or prior to the date of
the termination of the Employment Period, in cash, an amount
equal to the total cash compensation (Base Salary and Bonus) paid
to or accrued with respect to the Executive by the Corporation
during the 12-month period immediately preceding the termination
of the Employment Period; provided, however, that if the term of
this Employment Agreement is subsequently extended, the Executive
shall not be entitled to receive the payment contemplated hereby.
In no event are the benefits provided by this part A of Article
EIGHTH hereof applicable to the termination of the Executive
pursuant to Article FOURTH hereof.
B. (i) If there shall occur a "Change in Control" (as
hereinafter defined) of the Corporation and the Executive's
"Circumstances of Employment" (as hereinafter defined) shall have
changed, (a) the Executive shall have the right to terminate his
employment pursuant to this Employment Agreement by written
notice to the Corporation and (b) notwithstanding anything to the
contrary contained in the Corporation's 1988 Stock Option Plan,
in the stock option agreements between the Corporation and the
Executive or in the stock option certificates delivered to the
Executive, all options granted to the Executive prior to the
effective date of such Change in Control shall become immediately
vested and exercisable in full.
(ii) In the event of the termination by the Executive of
his employment pursuant to part B (i)(a) of this Article EIGHTH
or if, within one year subsequent to a Change in Control, the
Corporation shall terminate the Executive's employment pursuant
to this Employment Agreement, other than for cause pursuant to
Article FOURTH hereof, then the Corporation shall pay to the
Executive, within 60 days of such termination, in cash, the
"Special Severance Payment" (as hereinafter defined).
(iii) A "Change in Control" shall be deemed to occur upon
(a) the sale by the Corporation of all or substantially all of
its assets to any person (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934), the
consolidation of the Corporation with any person, or the merger
of the Corporation with any person as a result of which merger
the Corporation is not the surviving entity as a publicly held
corporation, or (b) the sale or transfer or issuance of shares of
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common stock, par value $0.02 per share ("Shares"), of the
Corporation by the Corporation and/or any one or more of its
stockholders (other than the Executive or Xxxxx Xxxxxxxxxx), as
the case may be, in one or more transactions, related or
unrelated, to one or more persons as a result of which any person
and its "affiliates" (as hereinafter defined), other than the
Executive or Xxxxx X. Xxxxxxxxxx, shall own more than 15% of the
outstanding Shares, unless such sale or transfer has been
approved in advance by the Board of Directors of the Corporation.
An "affiliate" shall mean any person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, any other person. Nothing
contained in this part B (iii) shall limit or restrict the right
of the Executive, in his capacity as a member of the Board of
Directors, from participating in any discussions or voting on any
matter referred to in this part B at any meeting of the Board of
Directors.
(iv) The Executive's "Circumstances of Employment" shall
have changed if there shall have occurred any of the following
events: (a) a material reduction or change in the Executive's
duties or reporting responsibilities; (b) a breach by the
Corporation of any provision of this Employment Agreement; (c) a
reduction in the fringe benefits made available by the
Corporation to the Executive; (d) a material diminution in the
Executive's status, working conditions or economic benefits; or
(e) any action which substantially impairs the prestige or esteem
of the Executive in relation to any other employee of the
Corporation.
(v) The "Special Severance Payment" shall mean a lump sum
payment equal to the sum of (a) the product of three and the Base
Salary, (b) the product of three and the largest Bonus paid to or
accrued with respect to the Executive by the Corporation for the
three fiscal years immediately preceding the termination of the
Executive's employment and (c) any other compensation owed to the
Executive pursuant to this Agreement at the time of such termina-
tion.
C. If the Executive's employment hereunder is terminated
by the Corporation for cause pursuant to Article FOURTH hereof,
the Corporation shall pay to the Executive, in lieu of any other
payments hereunder, an amount equal to the Base Salary and Bonus
actually accrued with respect to the Executive to the date of
termination.
NINTH: Tax Indemnification. A. In the event that,
as a result of any of the payments or other consideration
provided for or contemplated by this Employment Agreement or
otherwise, a tax (an "Excise Tax") shall be imposed upon the
Executive or threatened to be imposed upon the Executive by
virtue of the application of Section 4999(a) of the Internal
Revenue Code of 1986 (the "Code") as now in effect or as the same
6
may at any time or from time to time be amended or any similar
provisions of State or local tax law, the Corporation shall
indemnify and hold the Executive harmless from and against all
such taxes (including additions to tax, penalties and interest
and additional Excise Taxes, whether applicable to payments
pursuant to the provisions of this Agreement or otherwise)
incurred by, or imposed upon, the Executive and all expenses
arising therefrom. Each indemnity payment to be made by the
Corporation hereunder shall be increased by the amount of all
Federal, State and local tax liabilities (including additions to
tax, payroll taxes, penalties and interest and Excise Tax)
incurred by, or imposed upon, the Executive so that the effect of
receiving all such payments will be such that the Executive shall
be held harmless on an after-tax basis from the amount of all
Excise Taxes imposed upon payments made to the Executive by the
Corporation pursuant to this Agreement and otherwise other than
pursuant to this part A and all taxes, penalties and interest and
Excise Taxes with respect to payments pursuant to this part A
under the laws of all Federal, State and local taxing authorities
and so that the Executive shall not incur any out-of-pocket costs
or expenses of any kind or nature on account of the Excise Tax
and the receipt of the indemnity payments to be made by the
Corporation pursuant hereto.
B. Each indemnity payment to be made to the Executive
pursuant to part A of this Article NINTH shall be payable within
fifteen business days of delivery of a written request (a
"Request") for such payment to the Corporation (which request may
be made prior to the time the Executive is required to file a tax
return showing a liability for an Excise Tax or other tax). A
Request shall set forth the amount of the indemnity payment due
to the Executive and the manner in which such amount was
calculated and the Executive shall thereafter submit such other
evidence of the indemnity to which the Executive is entitled as
the Corporation shall reasonably request. All such information
shall, if the Corporation shall request, be set forth in a
statement signed by a nationally recognized accounting firm or a
partner thereof and the Corporation shall pay all fees and
expenses of such accounting firm incurred in the preparation
thereof.
C. The Executive agrees to notify the Corporation (i)
within fifteen business days of being informed by a
representative of the Internal Revenue Service (the "Service") or
any State or local taxing authority that the Service or such
authority intends to assert that an Excise Tax is or may be
payable, (ii) within fifteen business days of the Executive's
receipt of a revenue agent's report (or similar document)
notifying the Executive that an Excise Tax may be imposed and
(iii) within fifteen business days of the Executive's receipt of
a Notice of Deficiency under Section 6212 of the Code or similar
provision under State or local law which is based in whole or in
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part upon an Excise Tax and/or a payment made to the Executive
pursuant to part A of this Article NINTH.
D. After receiving any of the aforementioned notices, and
subject to the Executive's right to control any and all
administrative and judicial proceedings with respect to, or
arising out of, the examination or the Executive's tax returns,
except as such proceedings relate to an Excise Tax, the
Corporation shall have the right (i) to examine all records,
files and other information and documentation in the Executive's
possession or under the Executive's control, (ii) to be present
and to participate, to the extent desired, in all administrative
and judicial proceedings with respect to an Excise Tax, including
the right to appear and act for the Executive at such proceedings
in resisting any contentions made by the Service or a State or
local taxing authority with respect to an Excise Tax and to file
any and all written responses in connection therewith, (iii) to
forego any and all administrative appeals, proceedings, hearings
and conferences with the Service or a State or local taxing
authority with respect to an Excise Tax on the Executive's
behalf, and (iv) to pay any tax increase on the Executive's
behalf and to control all administrative and judicial proceedings
with respect to a claim for refund from the Service or State or
local taxing authority with respect to such tax increase.
E. The Corporation shall be solely responsible for all
reasonable legal and accounting or other expenses (whether of the
Executive's representative or the representative of the
Corporation) incurred in connection with any such administrative
or judicial proceedings insofar as they relate to an Excise Tax
or other tax increases resulting therefrom and the Executive
agrees to execute and file, or cause to be executed and filed,
such instruments and documents, including, without limitation,
waivers, consents and Powers of Attorneys, as the Corporation
shall reasonably deem necessary or desirable in order to enable
it to exercise the rights granted to it pursuant to part D of
this Article NINTH.
F. The liability of the Corporation shall not be affected
by the Executive's failure to give any notice provided for in
part E of this Article NINTH unless such failure materially
prejudices its ability to defend itself as provided for. The
Executive may not compromise or settle a claim which he is
indemnified against hereunder without the consent of the
Corporation, unless the Executive can establish by a
preponderance of the evidence that the decision of the
Corporation was not made in the good faith belief that a
materially more favorable result could be obtained by continuing
to defend against the claim (or prosecute a claim for refund).
TENTH: Costs of Enforcement. In the event that the
Executive incurs any costs or expenses, including attorneys'
fees, in the enforcement of his rights under this Employment
8
Agreement or under any other plan for the benefit of the
employees of the Corporation, then, unless the Corporation is
wholly successful in defending against the enforcement of such
rights (in which event the Executive shall promptly pay to the
Corporation all of its costs and expenses), the Corporation shall
promptly pay to the Executive all such costs and expenses.
ELEVENTH: Notices. All notices hereunder shall be in
writing and shall be sent by registered or certified mail, return
receipt requested, if intended for the Corporation shall be
addressed to it, attention of its Secretary, 00 Xxxxxx Xxxxxx,
Xxxxxx Xxx, Xxx Xxxx 00000, with a copy to Rosenman & Colin, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx X.
Xxxxxx, Esq., or at such other address of which the Corporation
shall have given notice to Executive in the manner herein
provided; and if intended for the Executive, shall be mailed to
him at the address of the Executive first set forth above or at
such other address of which the Executive shall have given notice
to the Corporation in the manner herein provided.
TWELFTH: Entire Agreement. This Employment Agreement
constitutes the entire understanding among the parties with
respect to the matters referred to herein and no waiver of or
modification to the terms hereof shall be valid unless in writing
signed by the party to be charged and only to the extent therein
set forth. All prior and contemporaneous agreements and
understandings with respect to the subject matter of this
Employment Agreement are hereby terminated and superseded by this
Employment Agreement.
THIRTEENTH: Severability. If any provision of this Employ-
ment Agreement is invalid, illegal or unenforceable, the balance
of this Employment Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and
circumstances.
FOURTEENTH: Assignability. This Employment Agreement shall
be binding upon and inure to the benefit of the parties hereto,
their respective heirs, administrators, executors, personal
representatives, successors and assigns.
FIFTEENTH: Law. This Employment Agreement shall be
governed by and construed and enforced in accordance with the
laws of the State of New York.
SIXTEENTH: Withholding. The Corporation shall be entitled
to withhold from amounts payable to the Executive hereunder such
amounts as may be required by applicable law.
SEVENTEENTH: Section Headings. The Section headings herein
have been inserted for convenience of reference only and shall in
no way modify or restrict any of the terms or provisions hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
ACCLAIM ENTERTAINMENT, INC.
By /s/
Name: Xxxxx Xxxxxxxxxx
Title: Senior Executive Vice
President
/s/
XXXXXXX X. XXXXXXXXX
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AMENDMENT NO. 1, dated as of December 8, 1994, to that
certain Employment Agreement, dated as of September 1, 1994,
between Acclaim Entertainment, Inc., a Delaware corporation (the
"Corporation"), and XXXXXXX X. XXXXXXXXX (the "Executive"), an
individual residing at 00 Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000
(as so amended, the "Employment Agreement").
W I T N E S S E T H :
WHEREAS, the Executive has been employed by the Corporation
pursuant to the Employment Agreement and desires to continue in
its employ, and the Corporation desires to continue to employ the
Executive and to make certain changes to the terms of the
Employment Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
FIRST: Part A of Article SECOND of the Employment
Agreement is hereby amended to be and to read in its entirety as
follows:
"SECOND: A. The Corporation shall pay to the
Executive, and the Executive shall accept from the
Corporation, for the Executive's services during the
Employment Period, (i) a salary at the rate of $775,000
per annum (the "Base Salary"), payable in accordance
with the Corporation's customary executive payroll
policy as in effect from time to time, but not less
frequently than monthly, and (ii) a bonus (the "Bonus")
with respect to each fiscal year during the Employment
Period, payable not later than 120 days after the end
of such fiscal year (whether or not such payment date
is during the Employment Period), in an amount equal to
3.25% of the net pre-tax profits (but without giving
effect to the expense related to the payment of such
bonus to the Employee) reflected in the Corporation's
audited financial statements for such fiscal year."
SECOND: If the stockholders of the Corporation shall not
approve the terms of this Amendment No. 1 to the Employment
Agreement on or prior to August 31, 1995, this Amendment No. 1
shall be null and void and shall have no further force and
effect.
THIRD: Subject to the terms of Article SECOND hereof, the
parties hereto hereby agree that all references in the Employment
Agreement to the "Employment Agreement" shall include this
Amendment No. 1 to the Employment Agreement.
FOURTH: Except as expressly amended hereby and subject to
the terms of Article SECOND hereof, all other terms and
conditions of the Employment Agreement shall remain in full force
and effect in accordance with the original terms thereof.
FIFTH: Subject to the terms of Article SECOND hereof, all
prior or contemporaneous agreements, contracts, promises,
representations and statements, if any, among the parties hereto,
or their representatives, concerning the subject matter hereof,
are merged into this Amendment No. 1 to the Employment Agreement
and this Amendment No. 1 to the Employment Agreement and the
Employment Agreement, as so amended, shall constitute the entire
agreement among them with respect to the subject matter hereof.
No waiver or modification of the terms hereof shall be valid
unless in writing signed by the party to be charged and only to
the extent therein set forth.
SIXTH: This Amendment No. 1 to the Employment Agreement
may be executed in one or more counterparts, each of which shall
be deemed an original and all of which taken together shall
constitute a single agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 to the Employment Agreement as of the day and
year first above written.
ACCLAIM ENTERTAINMENT, INC.
By /s/
Name: Xxxxx Xxxxxxxxxx
Title: Senior Executive Vice
President
/s/
XXXXXXX X. XXXXXXXXX
