EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 31, 1997 between Inventory Management Systems,
Inc., a Delaware corporation (the "Employer" or the "Company"), and Xxxxx Xxxxx
(the "Employee").
W I T N E S S E T H :
WHEREAS, the Employer desires to employ the Employee as its President and
to be assured of his services as such on the terms and conditions hereinafter
set forth; and
WHEREAS, the Employee is willing to accept such employment on such terms
and conditions; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the Employer
and the Employee hereby agree as follows:
1. Term. Employer hereby agrees to employ Employee, and Employee hereby
agrees to serve Employer for a three-year period commencing as of the date of
this Agreement (the "Effective Date") (such period being herein referred to as
the "Initial Term," and any year commencing on the Effective Date or any
anniversary of the Effective Date being hereinafter referred to as an
"Employment Year") unless earlier terminated pursuant to Section 6 hereof. After
the Initial Term and subject to the earlier termination pursuant to Section 6
hereof, this Agreement shall be renewable automatically for successive one year
periods (each such period being referred to as a "Renewal Term"), unless more
than thirty days prior to the expiration of the Initial Term or any Renewal
Term, either the Employee or the Company give written notice that employment
will not be renewed.
2. Employee Duties.
(a) During the term of this Agreement, the Employee shall have the duties
and responsibilities of President of the Employer, reporting directly to the
Chairman of the Employer and the Board of Directors of the Employer (the
"Board"). It is understood that such duties and responsibilities shall be
reasonably related to the Employee's position.
(b) The Employee shall devote substantially all of his business time,
attention, knowledge and skills faithfully, diligently and to the best of his
ability in furtherance of the business and activities of the Company. The
principal place of performance by the Employee of his duties hereunder shall be
the Company's principal executive offices located at 0000 Xxxx Xxxxxxx, 0xx
xxxxx, Xxxxxxxxxx, XX 00000, although the Employee may be required to travel
outside of the area where the Company's principal executive offices are located
in connection with the business of the Company.
3. Compensation.
(a) During the term of this Agreement, the Employer shall pay the Employee
a salary (the "Salary") at a rate of $120,000 per annum in respect of each
Employment Year, payable in equal installments bi-weekly, or at such other times
as may mutually be agreed upon between the Employer and the Employee. Such
Salary may be increased from time to time at the discretion of the Board.
(b) In addition to the foregoing, the Employee shall be paid an amount of
incentive compensation based on Net Income (as defined hereinbelow) in respect
of each year during the term of this Agreement (pro rated for any partial year
during the term of this Agreement) of (i) 6% of Net Income up to $500,000 and
(ii) 9% of Net Income in excess of $500,000. The term "Net Income" means, for
any applicable fiscal year, earnings of the Company before interest and taxes
(EBIT), as calculated in accordance with generally accepted accounting
principles applied on a basis consistent with those utilized in the preparation
of the Company's financial statements for such year. The amount of Net Income
for each year shall be determined no later than 90 days following the end of
such year. Such incentive compensation shall be paid in cash to Employee within
five business days following the date of such determination, and shall be
accompanied by a copy of the determination of such amount, certified by the
Chief Financial Officer or Controller of Take-Two Interactive Software, Inc.
(the "Parent") as having been determined in accordance with the provisions of
this Section 3(b).
4. Benefits.
(a) During the term of this Agreement, the Employee shall have the right to
receive or participate in all benefits and plans which the Company and Parent
may from time to time institute during such period for its employees and for
which the Employee is eligible. Nothing paid to the Employee under any plan or
arrangement presently in effect or made available in the future shall be deemed
to be in lieu of the salary payable to the Employee pursuant to this Agreement.
(b) During the term of this Agreement, the Employee shall be entitled to
receive an automobile allowance of $750.00 per month payable in accordance with
Section 3(a) above. In addition, the Employer shall be responsible (i) for
providing Employee with automobile insurance as well as (ii) reimbursing
Employee, upon the presentation of appropriate vouchers or tax bills, for
personal property taxes incurred by the Employee, in connection with such
automobile.
(c) During the term of this Agreement, the Employee will be entitled to the
number of paid holidays, personal days off, vacation days and sick leave days in
each
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calendar year as are determined pursuant to the Company's Vacation Policies as
in effect from time to time. Such vacation may be taken in the Employee's
discretion with the prior approval of the Employer, and at such time or times as
are not inconsistent with the reasonable business needs of the Company.
5. Travel Expenses. All travel and other expenses incident to the rendering
of services reasonably incurred on behalf of the Company by the Employee during
the term of this Agreement shall be paid by the Employer. If any such expenses
are paid in the first instance by the Employee, the Employer shall reimburse him
therefor on presentation of appropriate receipts for any such expenses.
6. Termination. Notwithstanding the provisions of Section 1 hereof, the
Employee's employment with the Employer may be earlier terminated as follows:
(a) By action taken by the Board, the Employee may be discharged for
cause (as hereinafter defined), effective as of such time as the Board
shall determine. Upon discharge of the Employee pursuant to this Section
6(a), the Employer shall have no further obligation or duties to the
Employee, except for payment of Salary and such incentive compensation, if
any, having accrued to the Employee pursuant to Section 3(b) hereof through
the effective date of termination, and as provided in Sections 5 and 8, and
the Employee shall have no further obligations or duties to the Employer,
except as provided in Section 7.
(b) In the event of (i) the death of the Employee or (ii) by action of
the Board and the inability of the Employee, by reason of physical or
mental disability, to continue substantially to perform his duties
hereunder for a period of 180 consecutive days, during which 180 day period
Salary and any other benefits hereunder shall not be suspended or
diminished. Upon any termination of the Employee's employment under this
Section 6(b), the Employer shall have no further obligations or duties to
the Employee, except as provided in Sections 5 and 8.
(c) In the event that Employee's employment with the Employer is
terminated by action taken by the Board without cause, including
termination upon a Change in Control (as hereinafter defined), then the
Employer shall have no further obligation or duties to Employee, except for
payment of the amounts described below and as provided in Sections 5 and 8,
and Employee shall have no further obligations or duties to the Employer,
except as provided in Section 7. In the event of such termination, the
Employer shall continue to pay Salary to the Employee for one year
following the effective date of termination.
(d) For purposes of this Agreement, the Company shall have "cause" to
terminate the Employee's employment under this Agreement upon (i) the
failure by the Employee to substan-
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tially perform his duties under this Agreement, (ii) the engaging by the
Employee in criminal misconduct (including embezzlement and criminal fraud)
which is materially injurious to the Company, monetarily or otherwise,
(iii) the conviction of the Employee of a felony, (iv) gross negligence on
the part of the Employee or (v) other misconduct of the Employee in the
performance of his duties hereunder. The Company shall give written notice
to the Employee, which notice shall specify the grounds for the proposed
termination and the Employee shall be given thirty (30) days to cure if the
grounds arise under clauses (i) or (v) above.
(e) For purposes of this Agreement, a "Change in Control" shall be
deemed to occur, unless previously consented to in writing by the Employee,
upon the Parent owning less than a majority of the issued and outstanding
capital stock of the Company.
7. Confidentiality; Noncompetition. In addition to and supplementing the
covenants contained in Sections 5.1, 5.2, 5.3, 5.4, 5.5 and 5.6 of the Agreement
and Plan of Merger (the "Merger Agreement"), dated ___________, 1997, among the
Parent, Take-Two Acquisition Corp., Inventory Management Systems, Inc. and
Employee, the Employer and Employee agree as follows:
(a) The Employer and the Employee acknowledge that the services to be
performed by the Employee under this Agreement are unique and extraordinary
and, as a result of such employment, the Employee will be in possession of
confidential information relating to the business practices of the Company
and the Parent. The term "confidential information" shall mean any and all
information (verbal and written) relating to the Company, the Parent or any
of their respective affiliates, or any of their respective activities,
other than such information which can be shown by the Employee to be in the
public domain (such information not being deemed to be in the public domain
merely because it is embraced by more general information which is in the
public domain) other than as the result of breach of the provisions of this
Section 7(a), including, but not limited to, information relating to:
existing and proposed projects, source codes, object codes, forecasts,
assumptions, trade secrets, personnel lists, financial information,
research projects, services, pricing, customers, customer lists and
prospects, product sourcing, marketing and selling and servicing. The
Employee agrees that he will not, at any time during or after the
termination of his employment, directly or indirectly, use, communicate,
disclose or disseminate to any person, firm or corporation any confidential
information regarding the clients, customers or business practices of the
Company or Parent and that Employee agrees that all confidential
information shall be the sole property of the Company.
(b) The Employee hereby agrees that he shall not, during the period of
his employment and for a period of one (1) year following such employment,
directly or indirectly, within
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any county (or adjacent county) in the Commonwealth of Virginia or in any
State within the United States or territory outside the United States in
which the Company is engaged in business during the period of the
Employee's employment or on the date of termination of the Employee's
employment, engage, have an interest in or render any services to any
business (whether as owner, manager, operator, licensor, licensee, lender,
partner, stockholder, joint venturer, employee, consultant or otherwise)
competitive with the Parent's or the Company's business activities;
provided, however, that notwithstanding anything to the contrary contained
herein, the Employee shall not be subject to the one (1) year prohibition
set forth above in the event that he is terminated by the Company without
cause.
(c) The Employee hereby agrees that he shall not, during the period of
his employment and for a period of one (1) year following such employment,
directly or indirectly, take any action which constitutes an interference
with or a disruption of any of the Parent's or Company's business
activities including, without limitation, the solicitations of the Parent's
or Company's customers, or persons listed on the personnel lists of the
Parent or Company. At no time during the term of this Agreement, or
thereafter shall the Employee directly or indirectly, disparage the
commercial, business or financial reputation of the Parent or Company;
provided, however, that notwithstanding anything to the contrary contained
herein, the Employee shall not be subject to the one (1) year prohibition
set forth above in the event that he is terminated by the Company without
cause.
(d) For purposes of clarification, but not of limitation, the Employee
hereby acknowledges and agrees that the provisions of subparagraphs 7(b)
and (c) above shall serve as a prohibition against him, during the period
referred to therein, directly or indirectly, hiring, offering to hire,
enticing, soliciting or in any other manner persuading or attempting to
persuade any officer, employee, agent, lessor, lessee, licensor, licensee
or customer who has been previously contacted by either a representative of
the Parent or Company, including the Employee, to discontinue or alter his
or its relationship with the Parent or Company.
(e) Upon the termination of the Employee's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the business of the
Company or Parent which are in the possession of the Employee including all
copies thereof, shall be promptly returned to the Company.
(f) (i) The Employee agrees that all processes, intellectual property
rights, technologies and inventions ("Inventions"), including new
contributions, improvements, ideas and discoveries, whether patentable or
not, relating to the
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business of the Parent or Company, or conceived, developed, invented or
made by him during his employment by Employer shall belong to the Company.
The Employee shall further: (a) promptly disclose such Inventions to the
Company; (b) assign to the Company, without additional compensation, all
patent, copyright, trademark and other rights to such Inventions for the
United States and foreign countries; (c) sign all papers necessary to carry
out the foregoing; and (d) give testimony in support of his inventorship;
(ii) If any Invention is described in a patent or copyright
application or is disclosed to third parties, directly or indirectly, by
the Employee within two years after the termination of his employment by
the Company, it is to be presumed that the Invention was conceived or made
during the period of the Employee's employment by the Company; and
(iii) The Employee agrees that he will not assert any rights to any
Invention as having been made or acquired by him prior to the date of this
Agreement, except for Inventions, if any, disclosed to the Company in
writing prior to the date hereof.
(g) The Company shall be the sole owner of all products and proceeds
of the Employee's services hereunder, including, but not limited to, all
materials, ideas, concepts, formats, suggestions, developments,
arrangements, packages, programs and other intellectual properties that the
Employee may acquire, obtain, develop or create in connection with and
during the term of the Employee's employment hereunder, free and clear of
any claims by the Employee (or anyone claiming under the Employee) of any
kind or character whatsoever (other than the Employee's right to receive
payments hereunder). The Employee shall, at the request of the Company,
execute such assignments, certificates or other instruments as the Company
may from time to time deem necessary or desirable to evidence, establish,
maintain, perfect, protect, enforce or defend its right, or title and
interest in or to any such properties.
(h) The parties hereto hereby acknowledge and agree that (i) the
Company would be irreparably injured in the event of a breach by the
Employee of any of his obligations under this Section 7, (ii) monetary
damages would not be an adequate remedy for any such breach, and (iii) the
Company shall be entitled to injunctive relief, in addition to any other
remedy which it may have, in the event of any such breach.
(i) The parties hereto hereby acknowledge that, in addition to any
other remedies the Company may have under Section 7(h) hereof, the Company
shall have the right and remedy to require the Employee to account for and
pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (collectively, "Benefits") derived or received
by the Employee as the result of any transactions constituting a
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breach of any of the provisions of Section 7, and the Employee hereby
agrees to account for any pay over such Benefits to the Company.
(j) Each of the rights and remedies enumerated in Section 7(h) and
7(i) shall be independent of the other, and shall be severally enforceable,
and all of such rights and remedies shall be in addition to, and not in
lieu of, any other rights and remedies available to the Company under law
or in equity.
(k) If any provision contained in this Section 7 is hereafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions.
(l) If any provision contained in this Section 7 is found to be
unenforceable by reason of the extent, duration or scope thereof, or
otherwise, then the court making such determination shall have the right to
reduce such extent, duration, scope or other provision and in its reduced
form any such restriction shall thereafter be enforceable as contemplated
hereby.
(m) It is the intent of the parties hereto that the covenants
contained in this Section 7 shall be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in
which enforcement is sought (the Employee hereby acknowledging that said
restrictions are reasonably necessary for the protection of the Company).
Accordingly, it is hereby agreed that if any of the provisions of this
Section 7 shall be adjudicated to be invalid or unenforceable for any
reason whatsoever, said provision shall be (only with respect to the
operation thereof in the particular jurisdiction in which such adjudication
is made) construed by limiting and reducing it so as to be enforceable to
the extent permissible, without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of said
provision in any other jurisdiction.
8. Indemnification. The Employer shall indemnify and hold harmless the
Employee against any and all expenses reasonably incurred by him in connection
with or arising out of (a) the defense of any action, suit or proceeding in
which he is a party, or (b) any claim asserted or threatened against him, in
either case by reason of or relating to his being or having been an officer of
the Company, whether or not he continues to be such an officer at the time of
incurring such expenses, except insofar as such indemnification is prohibited by
law. Such expenses shall include, without limitation, the fees and disbursements
of attorneys, amounts of judgments and amounts of any settlements, provided that
such expenses are agreed to in advance by the Employer. The foregoing
indemnification obligation is
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independent of any similar obligation provided in the Employer's Certificate of
Incorporation or Bylaws.
9. General. This Agreement is further governed by the following provisions:
(a) Notices. All notices relating to this Agreement shall be in
writing and shall be either personally delivered, sent by telecopy (receipt
confirmed) or mailed by certified mail, return receipt requested, to be
delivered at such address as is indicated below, or at such other address
or to the attention of such other person as the recipient has specified by
prior written notice to the sending party. Notice shall be effective when
so personally delivered, one business day after being sent by telecopy or
five days after being mailed.
To the Employer:
Inventory Management Systems, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Chairman
Telecopier:
With copies to:
Take-Two Interactive Software, Inc.
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Chief Executive Officer
Telecopier:
and
Xxxxxx Xxxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Telecopier: 212-885-5001
To the Employee:
Xxxxx Xxxxx
0000 Xxxx Xxxxxxx, 0xx xxxxx
Xxxxxxxxxx, XX 00000
Telecopier:
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With a copy to:
Xxxxx & Xxxx
0000 Xxxxxxx Xxxx
Post Office Box 35655
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telecopier:
(b) Parties in Interest. Employee may not delegate his duties or
assign his rights hereunder. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.
(c) Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all
of the covenants and agreements between the parties with respect to such
employment in any manner whatsoever; provided that the provisions of
Sections 5.1, 5.2, 5.3, 5.4, 5.5 and 5.6 of the Merger Agreement shall also
apply to Employee. Any modification or termination of this Agreement will
be effective only if it is in writing signed by the party to be charged.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York. Employee agrees to
and hereby does submit to jurisdiction before any state or federal court of
record in New York City, New York, or in the state and county in which such
violation may occur, at Employer's election.
(e) Warranty. Employee hereby warrants and represents as follows:
(i) That the execution of this Agreement and the discharge of
Employee's obligations hereunder will not breach or conflict with any
other contract, agreement, or understanding between Employee and any
other party or parties.
(ii) Employee has ideas, information and know-how relating to the
type of business conducted by Employer, and Employee's disclosure of
such ideas, information and know-how to Employer will not conflict
with or violate the rights of any third party or parties.
(f) Severability. In the event that any term or condition in this
Agreement shall for any reason be held by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other term or condition
of this Agreement, but this Agreement shall be construed as if such
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invalid or illegal or unenforceable term or condition had never been
contained herein.
(g) Execution in Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts has
been signed by each of the parties hereto and delivered to each of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
INVENTORY MANAGEMENT SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxx
----------------------------
Name: Xxxx X. Xxxxx
Title: Chairman
/s/ Xxxxx Xxxxx
---------------------------
Xxxxx Xxxxx
