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EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of March, 2000, by and between MIDWAY
GAMES INC., a Delaware corporation (the "Corporation"), and XXXXXXX X. XXXXXX
("Executive").
W I T N E S S E T H:
WHEREAS, Executive has been employed as the Executive Vice President of
the Corporation; 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 Corporation's interactive video game business 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 Xxx Xxxxxxxxx Xxx xxx Xxx Xxxx, Xxxxxxxxxx combined
metropolitan areas.
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 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. 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.
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3. TERM.
3.1 The term of Executive's employment hereunder shall commence on
the date hereof and terminate on January 31, 2002 (the "Term"); provided, that
Executive's services hereunder may be terminated effective upon 30 days' prior
written notice (i) from the Corporation if such termination is for "cause" as
defined in Section 8.3 of this Agreement; or (ii) from Executive if such
termination is for "good reason" as defined in Section 3.3 hereof. Each year of
the Term is hereafter referred to as an "Employment Year."
3.2 Notwithstanding the provisions of Section 3.1 hereof, if
Executive is unable substantially to perform the duties of his position with the
Corporation for any prolonged period by reason of physical or mental illness or
injury, Corporation may terminate this Agreement upon 30 days' written notice,
but only after the period of Executive's illness or injury has lasted
continuously for ninety (90) days within any fiscal year during the Term. Until
any such termination by the Corporation, Corporation shall continue to be
obligated to provide to Executive all of the cash and other compensation
provided for in this Agreement, including his bonus, as if he were continuing to
perform all the duties of his position.
3.3 Executive may terminate this Agreement and his services to the
Corporation for "good reason", if, among other things, without his prior
consent: Executive is placed in any position of lesser stature than that of
Executive Vice President of the Corporation or he 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.
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 $380,000 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.
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. If such insurance is not available at an annual
premium of $3,000 or
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less, then the Corporation shall provide such lesser amount of insurance as is
available at an annual premium of $3,000.
4.3 Executive acknowledges that the Corporation has agreed to advance
to Executive the amount of $500,000, which advance is evidenced by Executive's
Promissory Note to the Corporation dated March 8, 2000 (the "Note"), and which
is secured by that certain Junior Deed of Trust, Security Agreement, Fixture
Filing and Financing Statement made by Executive, as Trustor, to First American
Title Company, as Trustee, for the benefit of the Corporation, as beneficiary.
In accordance with the terms of the Note, Executive agrees that the Corporation
may withhold from any bonus otherwise payable to Executive pursuant to Section
4.2 hereof, in full or partial satisfaction of unpaid principal and accrued
interest under the Note, such amounts at such times as are prescribed under the
Note.
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;
provided that Executive will be reimbursed for first or business class air
travel accommodations when travelling on business for the Corporation.
6. VACATION. Executive shall be entitled to four 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:
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, 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
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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, willful 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," then, for such period (not to exceed one year after termination) as the
Corporation either 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.
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
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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 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:
(i) the Confidential Information is, and at all times
hereafter shall remain, the sole property of the
Corporation;
(ii) 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; (1)
(iii) 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
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(iv) 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:
(i) 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
(ii) 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
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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
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 two 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
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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,
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 or any
affiliate of the Company are hereby terminated and of no further force and
effect.
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:
000 Xxxxxxxx Xxxxx
Xxxxxxxx, 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.
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
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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
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxx
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