Exhibit 10.40
ACTV, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 1st day of August, 1995, and
amended February 22, 1999 by and between ACTV, INC., a Delaware corporation,
having an office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(hereinafter referred to as "Employer") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
residing at ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. #▇▇, ▇▇▇ ▇▇▇▇, ▇▇ 10021(hereinafter
referred to as "Employee");
W I T N E S S E T H:
WHEREAS, Employer employs, and desires to continue to employ, Employee
as Chairman of the Board of Directors and Chief Executive Officer of Employer;
and
WHEREAS, Employee is willing to continue to be employed as the Chairman
of the Board of Directors and Chief Executive Officer of Employer in the manner
provided for herein, and to perform the duties of the Chairman of the Board of
Directors and Chief Executive Officer of Employer upon the terms and conditions
herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein set forth it is agreed as follows:
1. Employment of Chairman of the Board of Directors and Chief Executive
Officer. Employer hereby employs Employee as Chairman of the Board of Directors
and Chief Executive Officer of Employer.
2. Term.
a. Subject to Section 10 below and further subject to Section 2(b)
below, the term of this Agreement shall end on December 31, 2003. Each 12 month
period from January 1 through December 31 during the term hereof shall be
referred to as an "Annual Period." During the term hereof, Employee shall devote
substantially all of his business time and efforts to Employer and its
subsidiaries and affiliates.
b. Subject to Section 10 below, unless the Board of Directors of the
Company (the "Board") of Employer shall determine to the contrary and shall so
notify Employee in writing on or before the end of any Annual Period, then at
the end of each Annual Period, starting December 31, 1999, the term of this
Agreement shall be automatically extended for one (1) additional Annual Period
to be added at the end of the then current term of this Agreement.
3. Duties. The Employee shall perform those functions generally
performed by persons of such title and position, shall attend all meetings of
the stockholders and the Board, shall perform any and all related duties and
shall have any and all powers as may be prescribed
by resolution of the Board,
and shall be available to confer and consult with and advise the officers and
directors of Employer at such times that may be required by Employer. Employee
shall report directly and solely to the Board.
4. Compensation.
a. (i) Employee shall be paid a minimum of $295,000 for each Annual
Period, commencing January 1, 1998; provided, however, that Employee's salary
shall be increased annually at the beginning of each Annual Period commencing
January 1, 1999 by an amount equal to the amount of his annual salary for the
immediately preceding Annual Period times the percentage increase in the CPIW
(New York) then in effect as compared to the previous period for which the CPIW
(New York) is available. Employee shall be paid periodically in accordance with
the policies of the Employer during the term of this Agreement, but not less
than monthly.
(ii) Employee is eligible for quarterly bonuses, if any, which
will be determined and paid in accordance with policies set from time to time by
the Compensation Committee of the Board.
(iii) Employee shall be entitled to a leased car of his choice,
the cost of which shall reduce the total cash compensation paid under section 4
(a)(i).
b. (i) In the event of a "Change of Control" whereby
(A) A person (other than a person who is an officer or a Director
of Employer on the effective date hereof), including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, becomes, or obtains the
right to become, the beneficial owner of Employer securities having 30% or more
of the combined voting power of then outstanding securities of the Employer that
may be cast for the election of directors of the Employer;
(B) At any time, a majority of the Board-nominated slate of
candidates for the Board is not elected;
(C) Employer consummates a merger in which it is not the
surviving entity;
(D) Substantially all Employer's assets are sold; or
(E) Employer's stockholders approve the dissolution or
liquidation of Employer; then
(ii) (A) All stock options, warrants and stock appreciation
rights ("Rights") granted by Employer to Employee under any plan or otherwise
prior to the effective date of the Change of Control, shall become vested,
accelerate and become
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immediately exercisable; at an exercise price of 10(cent) per stock appreciation
right if applicable; and in addition the employee, at his option, shall receive
a special compensation payment for the exercise cost of all vested options upon
exercising those options any time within twelve months after the effective date
of the change of control, adjusted for any stock splits and capital
reorganizations having a similar effect, subsequent to the effective date
hereof. In the event Employee owns or is entitled to receive any unregistered
securities of Employer, then Employer shall use its best efforts to effect the
registration of all such securities as soon as practicable, but no later than
120 days after the effective date of the registration statement; provided,
however, that such period may be extended or delayed by Employer for one period
of up to 60 days if, upon the advice of counsel at the time such registration is
required to be filed, or at the time Employer is required to exercise its best
efforts to cause such registration statement to become effective, such delay is
advisable and in the best interests of Employer because of the existence of
non-public material information, or to allow Employer to complete any pending
audit of its financial statements;
(B) Any outstanding principle and interest on loans to Employee
pursuant to Section 4.g.(ii), below, shall be recalculated and reconstituted as
if the rights were exercised under 4(b)(ii).
(C) If upon said Change of Control, Employee is not retained as
Chief Executive Officer or substantially similar position of Employer or the
surviving entity, as applicable, under terms and conditions substantially
similar to those herein, then in addition, Employee shall be eligible to receive
a one-time bonus, equal on an after-tax basis to two times his then current
annual base salary. To effectuate this provision, the bonus shall be
"grossed-up" to include the amount necessary to reimburse Employee for his
federal, state and local income tax liability on the bonus and on the "gross-up"
at the respective effective marginal tax rates. In no event shall this bonus
exceed 2.7 times Employee's then current base salary. Said bonus shall be paid
within thirty (30) days of the Change of Control.
c. Employer shall include Employee in its health insurance program
available to Employer's executive officers.
d. Employer shall maintain a life, accidental death and
dismemberment insurance policy on Employee for the benefit of a beneficiary
named by Employee in an amount not less than $2,000,000. Ownership of the policy
shall be assigned to Employee upon termination of Employee's employment under
this Agreement.
e.(i) A bonus plan shall be instituted for Employee which shall take
account of the efforts of Employee in generating value to Employer's
shareholders. Under said plan, Employee shall be entitled to an annual bonus
payable for each 12 month period commencing April 1, 1995 in cash and/or
unregistered securities of Employer, at the option of the Compensation Committee
of the Board, equal to 2% of the increase for said 12 month period in the total
market capitalization of Employer calculated upon the excess of the total of the
average daily closing price (if applicable) price of each class of Employer's
shares for the last 90
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days of the 12 month period, multiplied by the number of shares of each class
outstanding as reported by Employer's Certified Public Accountants, (the "90 Day
Average") over the Base, which shall be the greater of $50,000,000 or the
highest previous 90 Day Average against which a bonus was paid under this bonus
plan, if any. Should the Compensation Committee elect hereunder to pay Employee
in unregistered securities, said securities shall be valued at 60% of the most
recent 90 Day Average. Should Employer's shares no longer be publicly traded,
the current 90 Day Average shall be determined by a 3 person panel, 1 person
appointed each by Employer and Employee and 1 appointed by the former 2.
Employee shall be entitled to receive compensation under this plan for five
fiscal years following expiration or termination of this employment contract,
except that if Employee is terminated for cause as defined in Section 10.a.(i)
hereof or resigns other than for reasons of disability, then said compensation
shall continue for three fiscal years.
(ii) Employee shall also be entitled to participate pari passu in
any other program established by Employer pursuant to which any executive
officers receive a share of the profits of Employer.
f. Employee shall have the right to participate in any other
employee benefit plans established by Employer.
g. Unless a pre-existing plan of Employer expressly forbids it, all
Rights which may become exercisable during the term hereof shall be paid for in
cash only if Employee so elects, otherwise they may be paid for
(i) by the transfer by Employee to Employer of so much of
Employee's Rights which, when valued at the highest trading price of the
underlying securities of Employer during the previous six months, will offset
the price of the Rights then being exercised;
(ii) by means of a non-recourse Note with interest at the lowest
rate, if any, required to be charged by any governmental authority, to accrue
and become due and payable with the principle, in an amount no greater than the
exercise price, given by Employee to Employer and secured solely by the shares
of stock being paid for thereby, which Note shall become due and payable at the
earlier of the expiration hereof or, on a pro rata basis, the sale by Employee
of all or part of the Rights or underlying stock which constitute security for
the Note; or
(iii) by any combination of cash and (ii) or (iii), above.
5. Board of Directors. Employer agrees that so long as this Agreement
is in effect, Employee will be nominated to the Board as part of management's
slate of Directors.
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6. Expenses. Employee shall be reimbursed for all of his actual
out-of-pocket expenses incurred in the performance of his duties hereunder,
provided such expenses are acceptable to Employer, which approval shall not be
unreasonably withheld, for business related travel and entertainment expenses,
and that Employee shall submit to Employer reasonably detailed receipts with
respect thereto.
7. Vacation. Employee shall be entitled to receive four (4) weeks paid
vacation time after each year of employment upon dates agreed upon by Employer.
Upon separation of employment, for any reason, vacation time accrued and not
used shall be paid at the salary rate of Employee in effect at the time of
employment separation.
8. Secrecy. At no time shall Employee disclose to anyone any
confidential or secret information (not already constituting information
available to the public) concerning (a) internal affairs or proprietary business
operations of Employer or (b) any trade secrets, new product developments,
patents, programs or programming, especially unique processes or methods.
9. Covenant Not to Compete. Subject to, and limited by, Section 11(b),
Employee will not, at any time, anywhere in the world, during the term of this
Agreement, and for one (1) year thereafter, either directly or indirectly,
engage in, with or for any enterprise, institution, whether or not for profit,
business, or company, competitive with the business(as identified herein) of
Employer as such business may be conducted on the date thereof, as a creditor,
guarantor, or financial backer, stockholder, director, officer, consultant,
advisor, employee, member, inventor, producer, director, or otherwise of or
through any corporation, partnership, association, sole proprietorship or other
entity; provided, that an investment by Employee, his spouse or his children is
permitted if such investment is not more than four percent (4%) of the total
debt or equity capital of any such competitive enterprise or business and
further provided that said competitive enterprise or business is a publicly held
entity whose stock is listed and traded on a national stock exchange or through
the NASDAQ Stock Market. As used in this Agreement, the business of Employer
shall be deemed to include the development and implementation of individualized
television technology or programs.
10. Termination.
a. Termination by Employer
(i) Employer may terminate this Agreement upon written notice for
Cause. For purposes hereof, "Cause" shall mean (A) engaging by the Employee in
conduct that constitutes activity in competition with Employer; (B) the
conviction of Employee for the commission of a felony; and/or (C) the habitual
abuse of alcohol or controlled substances. Notwithstanding anything to the
contrary in this Section 10(a)(i), Employer may not terminate Employee's
employment under this Agreement for Cause unless Employee shall have first
received notice from the Board advising Employee of the specific acts or
omissions alleged to constitute Cause, and such acts or omissions continue after
Employee shall have had a
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reasonable opportunity (at least 10 days from the date
Employee receives the notice from the Board) to correct the acts or omissions so
complained of. In no event shall alleged incompetence of Employee in the
performance of Employee's duties be deemed grounds for termination for Cause.
(ii) Employer may terminate Employee's employment under this
Agreement if, as a result of any physical or mental disability, Employee shall
fail or be unable to perform his duties under this Agreement for any consecutive
period of 90 days during any twelve-month period. If Employee's employment is
terminated under this Section 10(a)(ii): (A) for the first six months after
termination, Employee shall be paid 100% of his full compensation under Section
4(a) of this Agreement at the rate in effect on the date of termination, and in
each successive 12 month period thereafter Employee shall be paid an amount
equal to 67% of his compensation under Section 4(a) of this agreement at the
rate in effect on the date of termination; (B) Employer's obligation to pay life
insurance premiums on the policy referred to in Section 4(d) shall continue in
effect until five years after the date of termination; and (C) Employee shall
continue to be entitled, insofar as is permitted under applicable insurance
policies or plans, to such general medical and employee benefit plans (including
profit sharing or pension plans) as Employee had been entitled to on the date of
termination. Any amounts payable by Employer to Employee under this paragraph
shall be reduced by the amount of any disability payments payable by or pursuant
to plans provided by Employer and actually paid to Employee.
(iii) This agreement automatically shall terminate upon the death
of Employee, except that Employee's estate shall be entitled to receive any
amount accrued under Section 4(a) and the pro-rata amount payable under Section
4(e) for the period prior to Employee's death and any other amount to which
Employee was entitled of the time of his death.
b. Termination by Employee
(i) Employee shall have the right to terminate his employment
under this Agreement upon 30 days' notice to Employer given within 90 days
following the occurrence of any of the following events (A) through (F) or
within three years following the occurrence of event (G):
(A) Employee is not elected or retained as Chairman of the
Board of Directors, President and Chief Executive Officer of Employer.
(B) Employer acts to materially reduce Employee's duties and
responsibilities hereunder. Employee's duties and responsibilities shall not be
deemed materially reduced for purposes hereof solely by virtue of the fact that
Employer is (or substantially all of its assets are) sold to, or is combined
with, another entity, provided that Employee shall continue to have the same
duties and responsibilities with respect to Employer's interactive business, and
Employee shall report directly to the chief executive officer and/or board of
directors of the entity (or individual) that acquires Employer or its assets.
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(C) Employer acts to change the geographic location of the
performance of Employee's duties from the New York Metropolitan area. For
purposes of this Agreement, the New York Metropolitan area shall be deemed to be
the area within 30 miles of midtown Manhattan.
(D) A Material Reduction (as hereinafter defined) in
Employee's rate of base compensation, or Employee's other benefits. "Material
Reduction" shall mean a ten percent (10%) differential;
(E) A failure by Employer to obtain the assumption of this
Agreement by any successor;
(F) A material breach of this Agreement by Employer, which
is not cured within thirty (30) days of written notice of such breach by
Employer;
(G) A Change of Control.
(ii) Anything herein to the contrary notwithstanding, Employee
may terminate this Agreement upon thirty (30) days written notice.
c. If Employer shall terminate Employee's employment other than due
to his death or disability or for Cause (as defined in Section 10(a)(i) of this
Agreement), or if Employee shall terminate this Agreement under Section
10(b)(i), Employer's obligations under Section 4 shall be absolute and
unconditional and not subject to any offset or counterclaim and Employee shall
continue to be entitled to receive all amounts provided for by Section 4 and all
additional employee benefits under Section 4 regardless of the amount of
compensation he may earn with respect to any other employment he may obtain.
11. Consequences of Breach by Employer; Employment Termination
a. If this Agreement is terminated pursuant to Section 10(b)(i)
hereof, or if Employer shall terminate Employee's employment under this
Agreement in any way that is a breach of this Agreement by Employer, the
following shall apply:
(i) Employee shall receive as a bonus, and in addition to his salary
continuation pursuant to Section 10.c., above, a cash payment equal to the
Employee's total base salary as of the date of termination hereunder for the
remainder of the term plus an additional amount to pay all federal, state and
local income taxes thereon on a grossed-up basis as heretofore provided, payable
within 30 days of the date of such termination; except that if this Agreement is
terminated pursuant to Section 10(b)(i)(G), then Employee shall not be entitled
to receive a bonus under this Section 11.a.(i) but shall instead receive a
lump-sum payout of Employee's total base salary for the remainder of the term
plus an additional amount to pay all
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federal, state and local income taxes thereon on a grossed-up basis as
heretofore provided, payable within 30 days of the date of such termination.
(ii) Employee shall be entitled to payment of any previously
declared bonus and additional compensation as provided in Section 4(a), (b) and
(e) above.
b. In the event of termination of Employee's employment pursuant to
Section 10(b)(i) of this Agreement, the provisions of Section 9 shall not apply
to Employee.
12. Remedies
Employer recognizes that because of Employee's special talents, stature
and opportunities in the interactive television industry, and because of the
special creative nature of and compensation practices of said industry and the
material impact that individual projects can have on an interactive television
company's results of operations, in the event of termination by Employer
hereunder (except under Section 10(a)(i) or (iii), or in the event of
termination by Employee under Section 10(b)(i) before the end of the agreed
term, Company acknowledges and agrees that the provisions of this Agreement
regarding further payments of base salary, bonuses and the exercisability of
Rights constitute fair and reasonable provisions for the consequences of such
termination, do not constitute a penalty, and such payments and benefits shall
not be limited or reduced by amounts' Employee might earn or be able to earn
from any other employment or ventures during the remainder of the agreed term of
this Agreement.
13. Excise Tax. In the event that any payment or benefit received or to
be received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 280G or any similar or successor provision to 280G and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.
14. Arbitration. Any controversies between Employer and Employee
involving the construction or application of any of the terms, provisions or
conditions of this Agreement, save and except for any breaches arising out of
Sections 8 and 9 hereof, shall on the written request of either party served on
the other be submitted to arbitration. Such arbitration shall comply with and be
governed by the rules of the American Arbitration Association. An arbitration
demand must be made within one (1) year of the date on which the party demanding
arbitration first had notice of the existence of the claim to be arbitrated, or
the right to arbitration along with such claim shall be considered to have been
waived. An arbitrator shall be selected according to the procedures of the
American Arbitration Association. The cost of arbitration shall be born by the
losing party or in such proportions as the arbitrator shall decide. The
arbitrator shall
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have no authority to add to, subtract from or otherwise modify the provisions of
this Agreement, or to award punitive damages to either party.
15. Attorneys' Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which he may be entitled.
16. Entire Agreement; Survival. This Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
herein and supersedes, effective as of the date hereof any prior agreement or
understanding between Employer and Employee with respect to Employee's
employment by Employer. The unenforceability of any provision of this Agreement
shall not effect the enforceability of any other provision. This Agreement may
not be amended except by an agreement in writing signed by the Employee and the
Employer, or any waiver, change, discharge or modification as sought. Waiver of
or failure to exercise any rights provided by this Agreement and in any respect
shall not be deemed a waiver of any further or future rights.
b. The provisions of Sections 4, 8, 9, 10(a)(ii), 10(a)(iii), 10(c),
11, 12, 13, 14, 15, 18, 19 and 20 shall survive the termination of this
Agreement.
17. Assignment. This Agreement shall not be assigned to other parties.
18. Governing Law. This Agreement and all the amendments hereof, and
waivers and consents with respect thereto shall be governed by the internal laws
of the state of New York, without regard to the conflicts of laws principles
thereof.
19. Notices. All notices, responses, demands or other communications
under this Agreement shall be in writing and shall be deemed to have been given
when
a. delivered by hand;
b. sent be telex or telefax, (with receipt confirmed), provided that
a copy is mailed by registered or certified mail, return receipt requested; or
c. received by the addressee as sent be express delivery service
(receipt requested) in each case to the appropriate addresses, telex numbers and
telefax numbers as the party may designate to itself by notice to the other
parties:
(i) if to the Employer:
ACTV, Inc.
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Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Gersten, Savage, ▇▇▇▇▇▇▇▇▇ LLP
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Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to the Employee:
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20. Severability of Agreement. Should any part of this Agreement for
any reason be declared invalid by a court of competent jurisdiction, such
decision shall not affect the validity of any remaining portion, which remaining
provisions shall remain in full force and effect as if this Agreement had been
executed with the invalid portion thereof eliminated, and it is hereby declared
the intention of the parties that they would have executed the remaining
portions of this Agreement without including any such part, parts or portions
which may, for any reason, be hereafter declared invalid.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of
the day and year first above written.
ACTV, INC.
By:
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Chief Financial officer
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