Exhibit 99(D)(16)
EXECUTION VERSION
EMPLOYMENT AND RETENTION AGREEMENT
This Agreement is made as of February 5, 2001 by and between Flipside,
Inc., a Delaware corporation (the "COMPANY" or "FLIPSIDE"), and Kenneth D. Cron
(the "EXECUTIVE").
WHEREAS, the Company, Flipside Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Company ("MERGER SUB") and
Uproar Inc., a Delaware corporation ("UPROAR"), have entered into an Agreement
and Plan of Merger dated as of February 5, 2001 (the "MERGER AGREEMENT") which
provides for the merger of Merger Sub with and into Uproar with Uproar as the
surviving corporation (the "MERGER");
WHEREAS, it is a condition to the Company's willingness to enter into
the Merger Agreement that certain key employees, including the Executive, become
employed by the Company following the Merger;
WHEREAS, the Executive is willing to become employed by the Company
following the Merger under the terms and conditions contained herein; and
WHEREAS, the Executive and the Company desire to enter into this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged
and intending legally to be bound, the Company and the Executive hereby agree as
follows:
SECTION I
EMPLOYMENT
The Company agrees to employ the Executive and the Executive agrees to
be employed by the Company for the Period of Employment as provided in Section
III. A below and upon the terms and conditions provided in this Agreement.
SECTION II
POSITION AND RESPONSIBILITIES
During the Period of Employment, the Executive agrees to serve as Chief
Executive Officer of the Company reporting directly to the Chief Executive
Officer of Vivendi Universal Games, and to be responsible for the typical
responsibilities expected of an executive holding such position.
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EXECUTION VERSION
SECTION III
TERM AND DUTIES
A. PERIOD OF EMPLOYMENT
The period of the Executive's employment under this Agreement
(the "PERIOD OF EMPLOYMENT") will commence as of the consummation of the Merger
(the "EFFECTIVE DATE") and shall continue for a period of three years
thereafter, subject to termination as provided in this Agreement. Executive's
Period of Employment may be extended beyond the date specified above by the
written mutual agreement of the parties. Executive's Period of Employment shall
cease upon termination of this Agreement, under the terms provided herein,
including Section VIII below.
B. DUTIES
During the Period of Employment and except for illness,
incapacity or any reasonable vacation periods in any calendar year, the
Executive shall devote all of his business time, attention and skill exclusively
to the business and affairs of the Company and its subsidiaries. The Executive
will not engage in any other business activity and will perform faithfully the
duties which may be assigned to him from time to time by the Chief Executive
Officer of Vivendi Universal Games consistent with Section II of this Agreement.
Nothing in this Agreement shall preclude the Executive from devoting time during
reasonable periods required for:
i. Serving, with the prior approval of the Chief Executive
Officer of Vivendi Universal Games, as a director or member of a committee or
organization involving no actual or potential conflict of interest with the
Company;
ii. Delivering lectures and fulfilling speaking engagements;
iii. Engaging in charitable and community activities; and
iv. Investing his personal assets in such form or manner
that will not violate this Agreement or require services on the part of the
Executive in the operation or affairs of the companies in which those
investments are made.
The activities described in clauses i-iv above, and the
further activities described on SCHEDULE B attached hereto, will be allowed as
long as they do not materially affect or interfere with the performance of the
Executive's duties and obligations to the Company.
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EXECUTION VERSION
SECTION IV
COMPENSATION AND BENEFITS
A. COMPENSATION
For all services rendered by the Executive pursuant to this
Agreement during the Period of Employment, including services as an executive,
officer, director or committee member of the Company or any subsidiary of the
Company, the Executive shall be compensated as follows:
i. BASE SALARY
The Company shall pay the Executive base salary ("BASE
SALARY"). Base Salary shall be payable according to the customary payroll
practices of the Company but in no event less frequently than once each month.
The Executive's Base Salary for the twelve months following the Effective Date
(the "FIRST YEAR"), shall be payable at a twelve-month rate of $400,000. The
Executive's twelve-month Base Salary for the remainder of the Period of
Employment shall be increased to $600,000 upon the achievement of those
performance-based milestones set forth on SCHEDULE A hereto.
ii. ANNUAL INCENTIVE AWARDS
The Executive will be eligible for annual incentive
compensation awards, to be awarded based upon the achievement of those
performance-based milestones set forth on SCHEDULE A hereto.
iii. SIGNING BONUS AND RETENTION PAYMENT
On the date prior to the Effective Date, the Company shall pay
to Executive $1,766,000 (the "SIGNING BONUS"). Except as otherwise provided
herein, upon the first anniversary of the Effective Date (the "RETENTION PAYMENT
DATE"), the Company shall pay to Executive $1,234,000 (the "RETENTION PAYMENT",
and collectively with the Signing Bonus, the "INDUCEMENT PAYMENTS").
Notwithstanding anything to the contrary contained in this Agreement, if the
Executive's employment is terminated prior to the Retention Payment Date due to
death or disability or by the Company other than for Cause (as defined below) or
is terminated by the Executive for Good Reason (as defined below), the Company
shall nevertheless pay the Executive the Retention Payment on the Retention
Payment Date. Any termination of the Executive's employment prior to the
Retention Payment Date other than as described in the preceding sentence will
result in a forfeiture of the Retention Payment.
iv. PARTICIPATION IN THE VIVENDI UNIVERSAL STOCK OPTION PLAN
Subject to the execution by the Executive of a Stock Option
Agreement, Executive will be granted options ("OPTIONS") pursuant to the Vivendi
Universal Stock Option Plan (the "VIVENDI UNIVERSAL PLAN") and in accordance
with the terms of a standard stock option agreement pursuant to the Vivendi
Universal Plan in amounts to be determined as follows:
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EXECUTION VERSION
a. As soon as practicable after the Effective Date, the
Executive shall be granted an option to purchase 50,000 shares of the ADS shares
of Vivendi Universal, Inc., par value $0.01 per share (the "ADS SHARES") at a
fair market value price pursuant to the terms of the Vivendi Universal Plan. The
Options shall vest as follows: (1) 33 1/3% of the Options shall vest on the
first anniversary of the date of grant; (2) 33 1/3% of the Options shall vest on
the second anniversary of the date of grant and (3) 33 1/3% of the Options shall
vest on the third anniversary of the date of grant. The date of grant shall be
the first business day after the Effective Date.
b. If the Executive earns a Target Bonus (as defined in
SCHEDULE A hereto) of $300,000, the Company will recommend to the Vivendi
Univeral board of directors that the Executive be granted, on April 1, 2002, an
additional option to purchase 50,000 ADS Shares of Vivendi Universal, Inc., at a
fair market value price pursuant to the terms of the Vivendi Universal Plan. The
Options shall vest as follows: (1) 33 1/3% of the Options shall vest on the
first anniversary of the date of grant; (2) 33 1/3% of the Options shall vest on
the second anniversary of the date of grant and (3) 33 1/3% of the Options shall
vest on the third anniversary of the date of grant.
B. ADDITIONAL BENEFITS
i. In addition, the Executive will be entitled to participate
in all compensation or employee benefit plans or programs and receive all
benefits and perquisites for which salaried employees of the Company generally
are eligible, under any plan or program now or established later by the Company,
on the same basis as similarly situated senior executives of the Company. These
plans and programs include any group hospitalization, health, dental care, life
or other insurance, savings, thrift and profit sharing plans, termination or
severance pay programs (but only to the extent that such programs provide
payments or benefits more favorable than those provided for in this Agreement),
paid time off and sick leave plans, travel or accident insurance, disability
insurance, and contingent compensation plans, including capital accumulation
programs and stock option plans, which the Company may establish. Nothing in
this Agreement will preclude the Company from amending or terminating any of the
plans or programs referenced in this subparagraph applicable to salaried
employees or senior executives as long as such amendment or termination is
applicable to comparably situated salaried employees or senior executives, as
the case may be.
ii. Notwithstanding anything to the contrary contained in the
company's applicable paid time off policy in effect from time to time during the
Period of Employment, during the Period of Employment the Executive will be
entitled to accrue vacation time at the rate of 20 working days per year of
service with a maximum accrual of 20 working days (after which Executive will
cease to accrue vacation time until a sufficient number of days of such accrued
vacation time has been utilized in accordance with the terms of the Company's
paid time off policy such that Executive's accrued vacation time does not exceed
the maximum accrual of 20 working days).
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EXECUTION VERSION
SECTION V
BUSINESS EXPENSES
The Company will reimburse the Executive for all necessary travel and
other expenses incurred by the Executive in connection with the performance of
his duties and obligations under this Agreement in accordance with the Company's
travel and expense policy in effect from time to time. Notwithstanding the
foregoing, the Company shall not be required to provide the Executive with key
man life insurance or pay for the maintenance of an office on Long Island for
the Executive. The Executive shall comply with such limitations and reporting
requirements with respect to expenses as may be reasonably established from time
to time.
SECTION VI
DISABILITY
A. i. If the Executive becomes Disabled during the Period of
Employment, the Period of Employment may be terminated at the option of the
Executive upon notice of resignation to the Company or at the option of the
Company, subject to applicable legal requirements, upon notice of termination to
the Executive. "DISABLED" shall mean Executive's inability to substantially
perform his duties under this Agreement as a result of illness or injury for a
period of not less than ninety (90) consecutive days together with a
determination by an independent medical authority that executive is unable to
perform such duties and in all reasonable medical likelihood such inability will
continue for a period in excess of one hundred and eighty (180) consecutive
days. Unless otherwise agreed by the Executive and the Company, the independent
medical authority shall be selected by the Executive and the Company each
selecting a board-certified licensed physician and the two physicians selected
designating an independent medical authority, whose determination that the
Executive is Disabled shall be binding upon the Company and the Executive. In
such event, until the Executive reaches the age of sixty-five (65) (or such
earlier date on which he is no longer Disabled), the Company shall continue to
pay the Executive sixty percent (60%) of his Base Salary as in effect at the
time of the termination minus the amount of any disability payments the
Executive may receive under any long-term disability insurance maintained by the
Company or any governmental entity; PROVIDED, HOWEVER, if such disability is due
to chemical dependence, alcoholism or mental illness, the Company shall continue
to make the payments described in this sentence for a period not to exceed
twenty-four (24) months. From the date hereof and continuing for twelve (12)
months thereafter, no payments under this Section VI shall become due if the
disability claimed by the Executive is a pre-existing medical condition for
which the Executive incurred expenses, received medical treatment, care or
services (including, without limitation, diagnostic measures), was prescribed
drugs or medicines or consulted a physician. Any amounts payable pursuant to
this Section VI shall be payable as provided in Section IV.A.i hereof. Earned
but unpaid Base Salary and earned but unpaid incentive compensation awards will
be paid in a lump sum at the time of such termination.
ii. The Company will also continue the benefits and perquisites
described in Section IV.B of this Agreement for a period of twelve (12) months
subsequent to any such termination without cost to the Executive.
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EXECUTION VERSION
iii. In the event of any such termination, all vested stock options
held by the Executive shall remain fully exercisable until the applicable
expiration dates contained in the applicable stock option agreements pursuant to
which such stock options were granted.
B. During the period the Executive is receiving payments of either
regular compensation or disability insurance described in this Agreement and as
long as he is physically and mentally able to do so without undue burden, the
Executive will furnish information and assistance to the Company as reasonably
requested and from time to time will make himself reasonably available to the
Company to undertake assignments consistent with his prior position with the
Company and his physical and mental health. If the Company fails to make a
payment or provide a benefit required as part of the Agreement, the Executive's
obligation to furnish information and assistance will end without prejudice to
any other rights or remedies the Executive may have.
SECTION VII
DEATH
In the event of the death of the Executive during the Period of
Employment, the Period of Employment shall end and the Company's obligation to
make payments under this Agreement shall cease as of the date of death, except
for earned but unpaid Base Salary, any earned but unpaid amounts due under
Section IV.A.iii and any earned but unpaid incentive compensation awards, which
will be paid to the Executive's surviving spouse, estate or personal
representative, as applicable, in a lump sum within sixty (60) days after the
date of the Executive's death. The Executive's designated beneficiary will be
entitled to receive the proceeds of any life or other insurance or other death
benefit programs provided in this Agreement. The Company will also continue the
benefits and perquisites described in this Agreement for a period of thirty-six
(36) months commencing on the Executive's death. Any vested stock options held
by the Executive will remain exercisable upon his death, for the period
applicable under the terms of the stock option plan under which the options were
granted.
SECTION VIII
EFFECT OF TERMINATION OF EMPLOYMENT
A. The Executive's employment may be terminated by the Company at any
time Without Cause or for Cause (each as defined in Paragraph F below) upon 60
days notice to the Executive. The Executive may terminate his employment with
the Company (i) at any time during the First Year upon 120 days notice with or
without Good Reason and (ii) at any time thereafter upon 90 days notice with or
without Good Reason.
B. If Executive's employment is terminated at any time during the
Period of Employment by the Company Without Cause (as defined in Paragraph F
below) or by Executive for Good Reason (as defined in Paragraph F below), the
Company shall pay the Executive (or his surviving spouse, estate or personal
representative, as applicable): (1) the greater of (x) a lump-sum amount
equal to one year of Executive's Base Salary and (y) the Base Salary which
would have been paid to the Executive for the remaining Period of Employment
(without giving effect to such termination), (2) a pro-rated incentive bonus
based on actual calculations for the year in
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EXECUTION VERSION
which the Executive is terminated (such pro-rated incentive bonus to be paid
as soon as practicable after the financial results for that year become
available), (3) any earned but unpaid amounts due under Section IV.A.iii, and
(4) any earned but unpaid Base Salary and any earned but unpaid incentive
compensation awards, which shall be paid to the Executive in a lump sum after
the date of such termination within the period required by law (but in no
event later than 60 days after the date of termination). All Options not
vested as of the date of termination shall be cancelled on the date of the
termination. The benefits and perquisites described in this Agreement will
terminate as of the date of such termination.
C. If the Executive's employment terminates due to a Termination for
Cause (as defined in Paragraph F below), the Company shall pay the Executive (or
his surviving spouse, estate or personal representative, as applicable): (1) any
earned but unpaid amounts due under Section IV.A.iii and (2) any earned but
unpaid Base Salary and any earned but unpaid incentive compensation awards,
which shall be paid to the Executive in a lump sum after the date of such
termination within the period required by law (but in no event later than 60
days after the date of termination). No other payments will be made or benefits
or perquisites provided by the Company after the date of such termination.
D. Upon termination of the Executive's employment other than for
reasons due to death (as provided for in Section VII), disability (as provided
for in Section VI), or pursuant to Paragraph B or E of this Section, the Period
of Employment and the Company's obligation to make payments under this Agreement
will cease as of the date of the termination, except as expressly provided in
this Agreement; PROVIDED that the Company shall pay the Executive (or his
surviving spouse, estate or personal representative, as applicable): (1) any
earned but unpaid amounts due under Section IV.A.iii and (2) any earned but
unpaid Base Salary and any earned but unpaid incentive compensation awards,
which shall be paid to the Executive in a lump sum after the date of such
termination within the period required by law (but in no event later than 60
days after the date of termination).
E. If the Company terminates Executive's employment Without Cause or
Executive terminates his employment for Good Reason at the time during the
Period of Employment within six months of a Change in Control (as defined in
Paragraph F below), the Company shall pay the Executive (or his surviving
spouse, estate or personal representative, as applicable): (1) the greater of
(x) a lump-sum amount equal to one year of Executive's Base Salary and (y) the
Base Salary which would have been paid to the Executive for the remaining Period
of Employment (without giving effect to such termination), (2) a pro-rated
incentive bonus based on actual calculations for the year in which the Executive
is terminated (such pro-rated incentive bonus to be paid as soon as practicable
after the financial results for that year become available), (3) any earned but
unpaid amounts due under Section IV.A.iii, and (4) any earned but unpaid Base
Salary and any earned but unpaid incentive compensation awards, which shall be
paid to the Executive in a lump sum after the date of such termination within
the period required by law (but in no event later than 60 days after the date
of termination). All Options not vested as of the date of termination shall
be cancelled on the date of the termination. The benefits and perquisites
described in this Agreement will terminate as of the date of such
termination, PROVIDED, HOWEVER, that the Company shall continue to provide
the Executive (and his eligible dependents) with the
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EXECUTION VERSION
medical coverage provided to him immediately prior to such termination for a
period of twelve (12) months after such termination.
F. For this Agreement, the following terms have the following
meanings:
i. "TERMINATION FOR CAUSE" or "TERMINATED FOR CAUSE" means
termination of the Executive's employment by the Company by written notice to
the Executive as provided in Paragraph A of this Section, specifying the event
relied upon for such termination, due to (a) the Executive's material breach of
any of his duties or covenants under this Agreement which, in any such case, is
not cured (if such breach is capable of being cured) within thirty (30) days
after written notice thereof to the Executive, (b) the Executive's failure to
perform his duties in a manner which is commensurate with reasonable standards
for employees in similar circumstances and with similar duties to those of the
Executive which, in any such case, is not cured (if such breach is capable of
being cured) within thirty (30) days after written notice thereof to the
Executive, (c) the Executive's willful misconduct with respect to the Company or
any of its Affiliates which, in any such case, is not cured (if such breach is
capable of being cured) within thirty (30) days after written notice thereof to
the Executive or (d) the Executive's conviction of a felony, perpetration of
common law fraud or a misdemeanor involving moral turpitude.
ii. "WITHOUT CAUSE" or "TERMINATED WITHOUT CAUSE" means
termination of the Executive's employment by the Company other than due to
death, disability, or Termination for Cause.
iii. "GOOD REASON" shall be deemed to exist if, before the end
of the Period of Employment, one or more of the following events shall occur:
(i) without the Executive's express written consent, the
assignment to the Executive of any duties or the reduction of
the Executive's duties, either of which effectively results in
the removal of the Executive from the position and
responsibilities described in Section II above;
(ii) a reduction by the Company in the Base Salary or annual
incentive awards of the Executive as in effect immediately
prior to such reduction;
(iii) a material reduction by the Company in the kind or level of
employee benefits to which the Executive is entitled
immediately prior to such reduction with the result that the
Executive's overall benefits package is significantly reduced;
(iv) the relocation of the Executive to a facility or a location
more than 25 miles from the Executive's present primary
residential location, without the Executive's express written
consent; or
(v) any material breach by the Company of any material provision
of this Agreement which is not cured (if such breach is
capable of being cured) within thirty (30) days after written
notice thereof by Executive to the Company.
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EXECUTION VERSION
iv. CHANGE OF CONTROL. "Change of Control" means the
occurrence of any of the following events:
(i) Any "person (as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended) other than
an Affiliate of the Company becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly,
of securities of the Company representing fifty percent (50%)
or more of the total voting power represented by such
company's then outstanding voting securities;
(ii) A change in the composition of the Board of the Directors of
the Company (the "BOARD") occurring within a twelve-month
period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the
Company as of the date hereof, or (B) are elected, or
nominated for election, to the Board with the affirmative
votes of at least a majority of the Incumbent Directors at the
time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with
an actual or threatened proxy contest relating to the election
of directors to the Company) or (C) are elected, or nominated
for election, by an Affiliate of the Company;
(iii) The consummation of merger or consolidation of the Company
with any other corporation which is not an Affiliate of the
Company, other than a merger or consolidation that would
result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or such surviving entity's
parent) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such
surviving entity or such surviving entity's parent outstanding
immediately after such merger or consolidation;
(iv) The consummation of the sale or disposition by the Company of
all or seventy-five percent (75%) or more of the Company's
assets to a person or entity which is not an Affiliate of the
Company;
v. "Affiliate" shall mean any person or entity controlling,
controlled by or under common control with the subject person or entity (as such
terms are used pursuant to the Securities Act of 1933, as amended).
SECTION IX
OTHER DUTIES OF THE EXECUTIVE
DURING THE RESTRICTED PERIOD
A. The Executive will, with reasonable notice during or after the
Period of Employment, furnish any information belonging or relating to the
Company, and will cooperate
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EXECUTION VERSION
in good faith with the Company and its Affiliates as may reasonably be
requested in connection with any claims or legal actions in which the Company
or any of its Affiliates may become a party. Notwithstanding the foregoing,
the Executive is not required to cooperate with the Company unless the
Company pays in advance the Employee's reasonable costs of cooperation. The
Executive's duties hereunder shall be reasonably subject to, among other
things, the Executive's other commitments, including work commitments.
B. The Executive recognizes and acknowledges that all information
pertaining to this Agreement or to the affairs, business, results of operations,
accounting methods, practices and procedures, members, acquisition candidates,
financial condition, clients, customers or other relationships of the Company or
any of its Affiliates ("INFORMATION") is confidential and is a unique and
valuable asset of the Company or any of its Affiliates. Access to and knowledge
of certain of the Information is essential to the performance of the Executive's
duties under this Agreement. The Executive will not, during the Period of
Employment or at any time thereafter, except to the extent reasonably necessary
in performance of his duties under this Agreement, give to any person, firm,
association, corporation, or governmental agency any Information, except as may
be required by law. The Executive will not make use of the Information for his
own purposes or for the benefit of any person or organization other than the
Company or any of its Affiliates. All records, memoranda, etc. relating to the
business of the Company or its Affiliates, whether made by the Executive or
otherwise coming into his possession, are confidential and will remain the
property of the Company or its Affiliates. Notwithstanding the foregoing,
Information shall not include information which: (a) was generally publicly
known at the time of disclosure to the Executive, or subsequently became
generally publicly known through no act or omission attributable to the
Executive; (b) was rightfully in the possession of the Executive, without an
obligation of confidentiality, prior to disclosure by the Company or an
Affiliate; (c) is hereafter rightfully furnished to the Executive by a third
party without an obligation of confidentiality; or (d) is independently
developed by the Executive without use of any Information.
C. The Executive agrees that no later than five (5) days after his
employment is terminated with the Company he will deliver to the Company and
will not keep in his possession or deliver to anyone else, any and all drawings,
notes, memoranda, specifications, financial statements, customer lists, product
surveys, data, documents or other material containing or disclosing any of the
matters referred to in clause B above.
D. i. For one (1) year after any termination of employment (the
"RESTRICTED PERIOD"), irrespective of the cause, manner or time of any
termination, the Executive will not use his status with the Company or any of
its Affiliates to obtain loans, goods or services from another organization on
terms that would not be available to him in the absence of his relationship to
the Company or any of its Affiliates. Notwithstanding the foregoing, the
Restricted Period shall cease as of the date of any termination of Executive's
employment by the Company Without Cause or by Executive for Good Reason.
ii. During the Restricted Period, the Executive will not make
any statements or perform any acts intended to or which may reasonably be
expected to have the effect of materially advancing the interest of any party
which engages in, or plans to engage in, any
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EXECUTION VERSION
Competitive Business Activity (as defined below) or injuring the interests of
the Company's Business (as defined below). The Executive acknowledges that
engaging in any Competitive Business Activity will inevitably require the use
and/or disclosure of Information. During the Restricted Period, the
Executive, without prior express written approval by the Board, will not
engage in, or directly or indirectly (whether for compensation or otherwise),
own or hold proprietary interest in, manage, operate, or control, or join or
participate in the ownership, management, operation or control of, or furnish
any capital to, any party which engages in or plans to engage in any
Competitive Business Activity, either as a general or limited partner,
proprietor, common or preferred shareholder, officer, director, agent,
employee, consultant, trustee, Affiliate, or otherwise. The Executive
acknowledges that the Company's Business is conducted nationally and
internationally and agrees that the provisions in the foregoing sentence
shall operate throughout the United States and the world.
iii. During the Restricted Period, Executive shall not criticize,
denigrate, or otherwise speak adversely of the Company or any of its
Affiliates in regard to any of their past or present activities with the
intent to cause any injury or damage to the Company or such Affiliate.
E. i. During the Restricted Period, the Executive, without express
prior written approval from the Board, will not persuade or attempt to
persuade any customer, supplier, contractor or any other person or party to
cease doing business with the Company's Business or to reduce the amount of
business it does with the Company's Business.
ii. During the Restricted Period, the Executive will not solicit
or induce any person who is an employee of the Company or any of Vivendi
Universal's online entertainment businesses to terminate any relationship
such person may have with the Company or any of Vivendi Universal's online
entertainment businesses. The Executive hereby represents and warrants that
the Executive has not entered into any agreement, understanding or
arrangement with any employee of the Company or any of Vivendi Universal's
online entertainment businesses pertaining to any business in which the
Executive has participated or plans to participate, or to the employment,
engagement or compensation of any such employee.
iii. For the purposes of this Section IX of this Agreement,
"PROPRIETARY INTEREST" means legal or equitable ownership, whether through stock
holding or otherwise, of an equity interest in a business, firm or entity or
ownership of more than 5% of any class of equity interest in a publicly-held
company and the term "AFFILIATE" shall include without limitation all
subsidiaries of the Company and Havas.
iv. For purposes of this Agreement, (x) the term "COMPANY'S
BUSINESS" shall mean the online entertainment business conducted (as of the
date of Executive's termination of employment) by the Company or any of its
subsidiaries or Affiliates, and (y) "COMPETITIVE BUSINESS ACTIVITY" means any
enterprise, person, firm, corporation or business that is similar in whole or
in part to the Company's Business, or competes in any manner with the
Company's Business.
F. The Executive hereby acknowledges that damages at law may be an
insufficient remedy to the Company if the Executive violates the terms of
this Section IX and that the
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EXECUTION VERSION
Company shall be entitled, upon making the requisite showing, to preliminary
and/or permanent injunctive relief in any court of competent jurisdiction to
restrain the breach of or otherwise to specifically enforce any of the
covenants contained in this Agreement without the necessity of showing any
actual damage or that monetary damages would not provide an adequate remedy.
Such right to an injunction shall be in addition to, and not in limitation
of, any other rights or remedies the Company may have.
G. The Executive agrees that the restrictions contained in this
Section IX are an essential element of the compensation the Executive is
granted hereunder and but for the Executive's agreement to comply with such
restrictions, the Company would not have entered into this Agreement.
SECTION X
OTHER POST-TERMINATION OBLIGATIONS
Executive agrees to refrain from engaging in any Competitive Business
Activity for a period of twelve (12) months following any termination of his
employment (the "POST-TERMINATION PERIOD"), whether voluntary or involuntary.
The Executive acknowledges that engaging in any Competitive Business Activity
will inevitably require the use and/or disclosure of Information. In
consideration for Executive's agreement to refrain from Competitive Business
Activity for the Post-Termination Period, any stock options granted to Executive
by the Company during the Period of Employment that were scheduled, as of the
date of Executive's termination, to vest during the Post-Termination Period (the
"STOCK OPTIONS") shall continue to vest and to otherwise be exercisable during
the Post-Termination Period as if Executive had continued to be actively
employed by the Company during the Post-Termination Period. The Executive
understands and agrees that should he engage in any Competitive Business
Activity during the Post-Termination Period, from and after the date he
commences the activities constituting Competitive Business Activity (the
"COMPETITION DATE") the Stock Options will cease to vest and the period of
exercisability of the Stock Options shall be determined as if the Executive's
employment had terminated as of the Competition Date. If, during the
Post-Termination Period, the Executive notifies the company that he intends to
engage in an activity and requests a determination by the Company as to whether
such activity constitutes a Competitive Business Activity, the Company shall,
within a reasonable period of time, inform the Executive as to whether it
would consider such activity to be a Competitive Business Activity, it being
understood that, for purposes of such determination, the Company shall be
entitled to rely upon the Executive's description of such activity.
SECTION XI
INDEMNIFICATION; LITIGATION
The Company, and any subsidiary for which Executive provides services,
will indemnify the Executive to the fullest extent permitted by the laws of the
state of the Company's (or applicable subsidiary's) incorporation in effect at
that time, or certificate of incorporation and by-laws of the Company, whichever
affords the greater protection to the Executive.
12
EXECUTION VERSION
SECTION XII
WITHHOLDING TAXES
The Company may directly or indirectly withhold from any payments
(including payment of the Inducement Payments) under this Agreement all federal,
state, city or other taxes that shall be required pursuant to any law or
governmental regulation.
SECTION XIII
EFFECT OF PRIOR AGREEMENT
This Agreement contains the entire understanding between the Company
and the Executive with respect to the subject matter hereof and supersedes any
prior employment agreement between the Company and the Executive.
SECTION XIV
CONSOLIDATION, MERGER OR SALE OF ASSETS
Nothing in this Agreement shall preclude the Company from consolidating
or merging into or with, or transferring all or substantially all of its assets
to, another corporation which assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a consolidation, merger or sale
of assets, the term "the Company" will mean the other corporation and this
Agreement shall continue in full force and effect.
SECTION XV
MODIFICATION
This Agreement may not be modified or amended except in writing signed
by the parties. No term or condition of this Agreement will be deemed to have
been waived except in writing by the party charged with waiver. A waiver shall
operate only as to the specific term or condition waived and will not constitute
a waiver for the future or act on anything other than that which is specifically
waived.
SECTION XVI
GOVERNING LAW; CONSTRUCTION
This Agreement has been executed and delivered in the State of New York
and its validity, interpretation, performance and enforcement shall be governed
by the internal laws of the State of New York. The construction and
interpretation of this Agreement shall not be strictly construed against the
drafter.
SECTION XVII
SURVIVAL
Sections VI, VII, VIII, IX, X, XI, XV, XVI, XVII, XVIII and XIX shall
continue in full force in accordance with their respective terms notwithstanding
any termination of the Period of Employment.
13
EXECUTION VERSION
SECTION XVIII
ARBITRATION
A. WHEN ARBITRATION IS REQUIRED.
i. The parties hereto agree to submit to arbitration any
and all claims arising out of Executive's employment or cessation of
employment which could have been brought before an appropriate government
agency or in an appropriate court of law, including but not limited to: (1)
breach of this Agreement or any other employment agreement or contract,
express or implied; (2) breach of any other term or condition of employment,
whether express or implied; (3) breach of any covenant of good faith and fair
dealing; (4) employment discrimination or harassment in violation of Title
VII of the Civil Rights Act of 1964; (5) age discrimination or harassment in
violation of the Age Discrimination in Employment Act; (6) any other claim
arising under the common law of the State of New York or of the United States
related to Executive's employment or termination from employment; and (7)
violation of any other federal, state or local statute, ordinance or
regulation related to Executive's employment with the Company or the
termination of that employment. Notwithstanding the above waiver of the right
to a jury trial, Executive shall not be precluded from exercising any right
provided by statute to file a charge or complaint of discrimination with the
appropriate state or federal administrative agency.
ii. Executive and the Company further agree that this duty
to arbitrate extends not only to disputes between Executive and the Company,
but also to disputes between Executive and the Company's officers, directors,
employees and agents which arise out of Executive's employment with the
Company or the termination of that employment.
iii. The parties acknowledge and agree that under certain
circumstances a breach of the covenants set forth in this Agreement may cause
or threaten immediate irreparable harm to either party. Therefore,
notwithstanding the agreement to arbitrate any and all disputes arising out
of this Agreement as set forth in Paragraph A.i above, the parties that, in
emergency circumstances, they each shall have the right to seek provisional
equitable remedies in a court of competent jurisdiction.
B. TIME FOR DEMANDING ARBITRATION. Any demand for arbitration
shall be made in writing and served upon the other party to this Agreement.
Such demand shall be served no later than the applicable statute(s) of
limitation should the matter or dispute have been asserted in a court of law.
C. SELECTION OF ARBITRATORS. In the event of a demand for
arbitration, the parties shall first attempt to agree upon an arbitrator to
hear the dispute. If agreement is not reached within fourteen (14) calendar
days of the demand for arbitration, the party seeking arbitration shall,
within the five day period following such fourteen (14) day period, request
from the American Arbitration Association ("AAA") a list of five (5)
arbitrators experienced in labor and employment disputes or such other
matters as may be the subject of the dispute. Within five days following
receipt of the list of arbitrators from AAA, the party seeking arbitration
shall
14
EXECUTION VERSION
forward a copy of the list to the other party. Within fourteen (14) calendar
days of receipt of the list by the party seeking arbitration, the parties
shall confer and attempt to agree upon one of the arbitrators appearing on
the list. If such agreement cannot be reached, then within the five day
period following such fourteen (14) day period the parties shall select the
arbitrator by alternately striking names from the list until a single name
remains. The party seeking arbitration shall be the first to strike.
D. TIME IS OF THE ESSENCE. The parties expressly recognize the
importance of resolving disputes under this Agreement in an expeditious and
timely manner. Therefore, time is of the essence. Failure of a party seeking
arbitration to abide by the time limits set forth herein in a manner which
prejudices the other party shall constitute a waiver by that party of the
dispute.
E. REMEDIES. The remedies which may be awarded by an
arbitrator shall be consistent with any remedies available under such
theories of liability had the claims been brought in a court of law.
F. FINAL AND BINDING ARBITRATION. The decision of the
arbitrator shall be final and binding on the parties.
G. NO DELETION, ADDITION OR MODIFICATION. The arbitrator shall
have no authority to add to, delete from, or modify in any way the provisions
of this Agreement.
H. COSTS OF ARBITRATION. Subject to a subsequent award by the
arbitrator, the cost of arbitration shall be borne equally by the parties.
Each party shall pay their respective attorney's fees, if any.
I. VENUE. The parties hereto agree that any arbitration or
other legal proceeding relating to this Agreement shall be conducted within
the borough of Manhattan of the City of New York.
SECTION XIX
SEVERABILITY
All provisions of this Agreement are intended to be severable. In
the event any provision or restriction contained herein is held to be invalid
or unenforceable in any respect, in whole or in part, such finding shall in
no way affect the validity or enforceability of any other provision of this
Agreement. The parties hereto further agree that any such invalid or
unenforceable provision shall be deemed modified so that it shall be enforced
to the greatest extent permissible under law, and to the extent that any
court of competent jurisdiction determines any restriction herein to be
unreasonable in any respect, such court may limit this Agreement to render it
reasonable in the light of the circumstances in which it was entered into and
specifically enforce this Agreement as limited.
15
EXECUTION VERSION
SECTION XX
BINDING AGREEMENT; SUCCESSORS
This Agreement shall inure to the benefit of, be enforceable by, and be
binding upon the parties and their respective heirs, executors, administrators,
successors and assigns.
[Signature Page Follows]
16
EXECUTION VERSION
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
FLIPSIDE, INC.
By: /s/ Hubert Joly
--------------------------------------
Name: Hubert Joly
Title: Chairman
EXECUTIVE
/s/ Kenneth D. Cron
- ---------------------------------
Kenneth D. Cron
S-1
EXECUTION VERSION
SCHEDULE A
*PLEASE NOTE THAT, FOR THE PURPOSES OF THIS AGREEMENT, ALL FINANCIAL NUMBERS
LISTED BELOW ARE PRO FORMA.
I. BASE SALARY FOR THE FIRST YEAR AND AWARD OF INCENTIVE BONUS FOR 2001.
A. The Executive's Base Salary for the First Year, shall be
$400,000.
B. A maximum of $300,000 shall be awarded to the Executive as a
target bonus (a "TARGET BONUS") and a maximum of an additional $300,000 as a
super target bonus (a "SUPER TARGET BONUS") based upon the Company achieving
certain performance milestones as follows:
- ------------------------------------------------------------------------------------------------------
GOALS(1) SYMBOL GOAL AMOUNT
- ------------------------------------------------------------------------------------------------------
TARGET GOALS
- ------------------------------------------------------------------------------------------------------
US pro-forma net revenue(2) for Calendar Year 2001 Rt 72,000,000(3)
- ------------------------------------------------------------------------------------------------------
US pro-forma EBITDA(4) for Calendar Year 2001 Pt -6,000,000
- ------------------------------------------------------------------------------------------------------
REDUCED TARGET GOALS
- ------------------------------------------------------------------------------------------------------
US pro-forma net revenue for Calendar Year 2001 rt 64,000,000
- ------------------------------------------------------------------------------------------------------
US pro-forma EBITDA for Calendar Year 2001 pt -12,000,000
- ------------------------------------------------------------------------------------------------------
SUPER TARGET GOALS
- ------------------------------------------------------------------------------------------------------
US pro-forma net revenue for Calendar Year 2001 SRt 88,000,000
- ------------------------------------------------------------------------------------------------------
US pro-forma EBITDA for Calendar Year 2001 SPt 8,800,000
- ------------------------------------------------------------------------------------------------------
ACTUAL RESULTS
- ------------------------------------------------------------------------------------------------------
US pro-forma net revenue for Calendar Year 2001 Ra
- ------------------------------------------------------------------------------------------------------
US pro-forma EBITDA for Calendar Year 2001 Pa
- ------------------------------------------------------------------------------------------------------
1. These Goals will remain valid so long as Flipside meets its targets for the
first four months of 2001; otherwise, these Goals will be revised to reflect
only Uproar's performance for the whole of 2001 plus the performance of Flipside
beginning on May 1, 2001.
2. Net revenue includes barter revenue to a first fiscal year maximum of
$6,000,000.
3. For determination of eligibility for second year compensation increase, the
definition of net revenue Target Goal will be equal to or greater than
$69,000,000.
4. All EBITDA Calculations are to be made in accordance with the restructuring
model attached hereto and are exclusive of the effect of any further
acquisitions made by the Company.
- --------------------------
1. The maximum Target Bonus shall be awarded if the Company
shall have achieved Target Goals (as indicated in the above table). If the
Company shall not have achieved the Target Goals, a portion of the Target Bonus
shall be awarded according to the following weighted formula:
-- --
| / \ / \ |
||(Ra-rt) 1| |(Pa-pt) 2||
||------- x -| + |------- x -|| x $300,000 = Target Bonus
||(Rt-rt) 3| |(Pt-pt) 3||
| \ / \ / |
-- --
A-1
EXECUTION VERSION
Notwithstanding the foregoing, if the above calculation yields
a result which is less than $100,000, the Executive shall receive a First Year
Target Bonus of $100,000.
2. If the Super Target Goals are achieved, the maximum Super
Target Bonus shall be awarded. If the Company shall not have achieved the Super
Target Goals, but shall have achieved the Target Goals, the Executive shall
receive the maximum Target Bonus and a portion of the Super Target Bonus,
calculated together as follows:
/ \
|-- -- |
|| // \ \ // \ \ | |
||||(Ra-Rt) | 1| ||(Pa-Pt) | 2|| |
||||--------| x -| + ||--------| x -|| x $300,000| + $300,000 = Total Bonus
||||(SRt-Rt)| 3| ||(SPt-Pt)| 3|| |
|| \\ / / \\ / / | |
|-- -- |
\ /
C. Notwithstanding the foregoing, if the Company shall not have
achieved (i) EBITDA (calculated on a pro forma basis in accordance with the
restructuring model attached hereto, and exclusive of the effect of any future
acquisitions by the Company) greater than 0 for the quarter ending December 31,
2001 and (ii) a milestone for revenues from European operations, to be mutually
agreed-upon by the Executive, Emmanuel Schalit and Hubert Joly, the Executive
shall only receive a bonus of $100,000 for the First Year.
II. BASE SALARY AND AWARD OF INCENTIVE BONUS FOR THE REMAINDER OF THE
PERIOD OF EMPLOYMENT.
A. If the Company has not achieved the Target Goals:
1. The Executive's Base Salary for the remainder of the
Period of Employment shall be $400,000.
2. The Executive shall be eligible to receive a yearly
Target Bonus award up to $300,000 and a yearly Super Target Bonus up to
$300,000 for the remainder of the Period of Employment. Payment of such
awards will be made in accordance with Company policy pursuant to Executive's
achievement of certain performance-based milestones, which milestones will be
established prior to or on March 31 of the year for which such bonus awards
are to be determined.
B. If the Company has achieved the First Year Target Goals:
1. The Executive's annual Base Salary for the remainder of the
Period of Employment shall be $600,000.
2. The Executive shall be eligible to receive a yearly
Target Bonus award up to $100,000 and a yearly Super Target Bonus award up to
$300,000 for the remainder of the Period of Employment. Payment of such
awards will be made in accordance with Company policy pursuant to Executive's
achievement of certain performance-based milestones, which milestones will be
established prior to or on March 31 of the year for which such bonus awards
are to be determined.
A-2
EXECUTION VERSION
SCHEDULE B
B-1