EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made the 1st day of October, 1996,
B E T W E E N:
MAGIC LANTERN COMMUNICATIONS
LTD., a corporation amalgamated pursuant to
the laws of Canada,
(hereinafter referred to as the "Employer"),
OF THE FIRST PART;
- and -
DOUGLAS CONNOLLY, of the City of
Oakville, in the Province of Ontario,
(hereinafter referred to as the "Executive"),
OF THE SECOND PART.
WHEREAS:
1. The Employer carries on businesses consisting of the marketing and
distribution of video programming and other media resource material, the
operation of a fulfillment service bureau, the operation of a video dubbing and
production facility, and the operation of a digital conversion service bureau
(collectively the "Business");
2. Pursuant to a share purchase agreement between Connolly-Daw Holdings Inc.
("Connolly-Daw"), 1199846 Ontario Ltd. ("1199846"), the Executive, Wendy
Connolly and NTN Interactive Network Inc. ("NTN") dated October 1, 1996 (the
"Share Purchase Agreement"), Connolly-Daw and 1199846 sold all of the issued and
outstanding common shares in the capital of the Employer to NTN and 1199846 sold
20.1% of the issued and outstanding shares in the capital of 745695 Ontario Ltd.
to NTN;
3. Pursuant to the provisions of the Share Purchase Agreement, the Executive and
Wendy Connolly entered into a non-competition agreement with the Employer dated
October 1, 1996 (the "Non-Competition Agreement");
4. Pursuant to the provisions of the Share Purchase Agreement, Connolly-Daw
entered into a management agreement with the Employer dated October 1, 1996 (the
"Management Agreement");
5. Pursuant to the provisions of the Share Purchase Agreement, the Employer and
the Executive are required to enter into this Agreement, wherein the Employer
and the Executive have agreed to enter into an employment relationship for their
mutual benefit;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
completion of the transactions contemplated by the Share Purchase Agreement, the
respective covenants and agreements of the parties contained herein, the sum of
One Dollar ($1.00) now paid by each party hereto to the other party hereto and
other good and valuable consideration (the receipt and sufficiency of which is
hereby acknowledged by each of the parties hereto), the parties hereto hereby
acknowledge and agree that the terms and conditions of the aforesaid employment
relationship shall be as follows:
1. DUTIES
The Employer hereby appoints the Executive to undertake the duties and
exercise the powers as the President and Chief Operating Officer of the Employer
as may be requested by the board of directors of the Employer, and the Executive
hereby accepts such appointment upon and subject to the terms and conditions set
forth in this Agreement.
2. TERM
Subject to the provisions of Articles 8 and 9 herein, the appointment
of the Executive hereunder shall be for a two year period commencing on
September 1, 1997 and continuing until August 31, 1999 (hereinafter referred to
as the "Term").
3. COMPENSATION
(1) The fixed remuneration of the Executive for his services hereunder
(hereinafter referred to as the "Fixed Remuneration") for the first
year of the Term shall be at the rate of $125,000.00 plus the amount
obtained by multiplying $125,000.00 by a fraction, the numerator of
which shall be the Consumer Price Index published by Statistics Canada
(or other similarly recognized Government
Index) for the month of July, 1997, and the denominator of which shall
be the Consumer Price Index for the month of September, 1996. The Fixed
Remuneration for the second year of the Term shall be at the rate of
$125,000.00 plus the amount obtained by multiplying $125,000.00 by a
fraction, the numerator of which shall be the Consumer Price Index
published by Statistics Canada (or other similarly recognized
Government Index) for the month of July, 1998, and the denominator of
which shall be the Consumer Price Index for the month of September,
1996. The Fixed Remuneration shall be payable in equal instalments, no
less frequently than semi-monthly.
(2) In addition to the Fixed Remuneration, the Employer shall pay to the
Executive a bonus (hereinafter referred to as the "Bonus") at the end
of each year of the Term in the event that during the said year the
actual net income before taxes of the Employer together with all of its
subsidiaries (hereinafter collectively referred to as the "Magic
Lantern Group of Companies") as determined by the auditors of the
Employer using generally accepted accounting principles applied on a
basis consistent with those of previous years (hereinafter referred to
as the "Actual Net Income Before Taxes"), exceeds the projected net
income before taxes of the Magic Lantern Group of Companies as
determined by the board of directors of the Employer at the
commencement of the said year (hereinafter referred to as the
"Projected Net Income Before Taxes"). The percentage amount of the
excess of Actual Net Income Before Taxes over Projected Net Income
Before Taxes shall hereinafter be referred to as the "Excess". The
amount of the Bonus for each year of the Term shall be calculated in
accordance with the following formula:
(a) In the event the Excess is greater than zero but less than
10%, the amount of the Bonus shall be equal to 5% of the Fixed
Remuneration payable during the year in question;
(b) In the event the Excess is equal to or greater than 10% but
less than 20%, the amount of the Bonus shall be equal to 8% of
the Fixed Remuneration payable during the year in question;
(c) In the event the Excess is equal to or greater than 20% but
less than 30%, the amount of the Bonus shall be equal to 11%
of the Fixed Remuneration payable during the year in question;
(d) In the event the Excess is equal to or greater than 30% but
less than 40%, the amount of the Bonus shall be equal to 13%
of the Fixed Remuneration payable during the year in question;
and
(e) In the event the Excess is equal to or greater than 40%, the
amount of the Bonus shall be equal to 15% of the Fixed
Remuneration payable during the year in question.
(3) In further addition to the Fixed Remuneration, the Employer shall give
to the Executive, at no cost to the Executive, such stock options
during each year of the Term, if any, as determined by the board of
directors of the Employer. In the event the board of directors of the
Employer determines to provide the Executive with such stock options,
the said stock options shall be in the form of options to purchase
common shares in the capital stock of NTN Canada, Inc., the parent
company of NTN.
4. BENEFITS
(1) Automobile Expenses - The Employer shall pay the Executive the sum of
$1,000.00 per month during the Term as full compensation for any and
all automobile expenses (including but not limited to gas, insurance,
maintenance and repairs) incurred by the Executive in fulfilling his
duties under this Agreement.
(2) Other Expenses - The Executive shall be reimbursed on a monthly basis
for all out-of-pocket expenses, including travel costs, actually and
properly incurred by the Executive in fulfilling his duties under this
Agreement provided that the Executive provides to the Employer an
itemized written account and receipts acceptable to the Employer within
30 days after they have been incurred.
(3) Benefit Plans - The Executive shall be entitled to participate in all
existing and future benefit plans which the Employer provides,
including medical/hospital and extended health care benefits and life
insurance.
(4) Directorship - The Employer will recommend to the board of directors of
NTN Canada, Inc. that the Executive be added as a director to the said
board of directors.
5. SERVICE
(1) The Executive, throughout the Term, shall devote his full time and
attention to the business and affairs of the Employer and the other
Magic Lantern Group of Companies and shall not, without the consent in
writing of the board of directors of the Employer, undertake any other
business or occupation or become an officer, employee or agent of any
other company, firm or individual. The foregoing shall not prevent the
Executive from being an officer or director of any other company or
firm provided such office or directorship does not
interfere with the Executive's duties to the Employer under this
Agreement, nor shall the foregoing prevent the Executive from passively
investing in any other company or firm.
(2) The Executive shall act in accordance with any policy of and carry out
all reasonable instructions of the board of directors of the Employer,
and shall obey and carry out the by-laws of the Employer.
(3) The Executive shall well and faithfully serve the Employer and the
other Magic Lantern Group of Companies and shall use his best efforts
to promote the interests thereof.
6. VACATION
The Executive shall be entitled during each year of the Term to four
weeks' vacation. The vacation shall be taken at such time or times as shall be
mutually acceptable to the Employer and the Executive.
7. CONFIDENTIAL INFORMATION
(1) The Executive acknowledges that as the President and Chief Operating Officer
and in any other position as the Executive may hold, the Executive will acquire
information about certain matters and things in regard to the Employer and/or
the other Magic Lantern Group of Companies which are confidential to the
Employer, and which information is the exclusive property of the Employer,
including, without limitation:
(a) names and addresses, buying habits and preferences of present
customers, as well as prospective customers, and related
information;
(b) pricing and sales policies, techniques and concepts;
(c) names and addresses of suppliers; and
(d) trade secrets;
(hereinafter collectively referred to as the "Confidential Information"). The
term Confidential Information shall not include any information which becomes
generally available to the public other than as a result of a disclosure by the
Executive.
(2) The Executive acknowledges that the Confidential Information could be used
to the detriment of the Employer. Accordingly, the Executive covenants and
agrees not to disclose any Confidential Information to any third party either
during the term of the
Executive's employment under this Agreement except as may be necessary in the
proper discharge of his employment hereunder, or after the termination of his
employment hereunder, however caused, except with the prior written consent of
the board of directors of the Employer. This obligation shall survive the expiry
or termination of this Agreement. The Executive also agrees that the
unauthorized disclosure of any Confidential Information during the Term will
constitute a material breach of this Agreement, which breach will not be
susceptible to adequate relief by way of monetary damages only, and the
Employer, in addition to any other remedies enjoyed by it under the terms hereof
or at law, shall be entitled to obtain injunctive relief against the Executive
in any court of competent jurisdiction. The aforesaid confidentiality obligation
shall not be applicable in respect of Confidential Information disclosed by the
Executive under compulsion of law.
(3) The Executive covenants and agrees that he will not use any information he
may acquire with respect to the business and affairs of the Employer and/or any
of the other Magic Lantern Group of Companies for his own purposes or for any
purposes other than those of the Employer or any of the other Magic Lantern
Group of Companies.
(4) Upon the expiry or termination of this Agreement, the Executive will return
to the Employer any property or documentation which is the property of the
Employer, including, without limitation, any Confidential Information.
8. DISABILITY
If the Executive shall at any time by reason of illness or mental or
physical disability be incapacitated from performing his duties and at the
request of the Employer, furnish to the Employer satisfactory evidence of the
incapacity and the cause of it, he shall receive his full remuneration for the
first six months or any shorter period during which the incapacity shall
continue. If the Executive shall continue to be incapacitated for a longer
period than six consecutive months or if he shall be incapacitated at different
times for more than six months during the Term, then in either case his
employment and appointment shall, at the option of the Employer, immediately
terminate without any notice or compensation in lieu thereof.
9. TERMINATION
The Executive understands and agrees that the Employer may terminate
this Agreement without any notice or compensation in lieu thereof, for cause.
For the purposes of this Agreement, "cause" shall be limited to the following:
(a) the wilful and continued malfeasance or gross negligence of
the Executive in the performance of his duties and the failure
by the
Executive to remedy such conduct within 30 days of receipt of
written notice from the Employer specifying particulars of the
said conduct;
(b) the Executive's actual fraud, intentional misappropriation of
a corporate opportunity or of the Employer's funds, or
embezzlement of the Employer's funds;
(c) the wilful disregard by the Executive of a directive of the
board of directors of the Employer and the failure by the
Executive to remedy such conduct within 30 days of receipt of
written notice from the Employer specifying particulars of the
said conduct;
(d) the conviction of the Executive of a criminal offence
punishable by indictment;
(e) any material breach of the provisions of the Share Purchase
Agreement, the Management Agreement or the Non-Competition
Agreement;
(f) the disability of the Executive as set forth in Article 8
hereof; and
(g) the death of the Executive.
For the purposes hereof, no act or failure to act, on the Executive's part,
shall be considered "wilful" or "intentional" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that such
action or omission was in, or not opposed to, the best interests of the
Employer.
10. EXTENSION OF TERM
The Employer and the Executive shall, prior to the end of the first
year of the Term, decide whether or not they wish to extend the Term for a
further three years and the terms and conditions of the said extension. In the
event the Term is not extended, for whatever reason, there shall be no
compensation paid to the Executive as a result of the said decision not to
extend the Term.
11. GENERAL PROVISIONS
(1) Notices - Any notice, direction or other document required or permitted to
be given hereunder or for the purposes hereof (hereinafter in this Article 11
called a "notice") to any party shall be in writing and shall be sufficiently
given if delivered personally or if sent by prepaid registered mail to such
party:
(a) in the case of a notice to the Executive, at:
49 Ennisclare Drive East
Oakville, Ontario
L6J 4N3
(b) in the case of a notice to the Employer, at:
Unit 38
775 Pacific Road
Oakville, Ontario
L6L 6M4
or at such other address as may be given by such party to the other party hereto
in writing from time to time.
All such notices shall be deemed to have been received when delivered
or, if mailed, 48 hours after 12:01 a.m. on the day following the day of the
mailing thereof.
(2) Additional Considerations - The parties shall sign such further and other
documents, cause such meetings to be held, resolutions passed and by-laws
enacted, exercise their vote and influence, do and perform and cause to be done
and performed such further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement and every part thereof.
(3) Time of the Essence - Time shall be of the essence of this Agreement and of
every part hereof and no extension or variation of this Agreement shall operate
as a waiver of this provision.
(4) Entire Agreement - This Agreement constitutes the entire agreement between
the parties with respect to all of the matters herein and its execution has not
been induced by, nor do any of the parties rely upon or regard as material, any
representations or writings whatsoever not incorporated herein and made a part
hereof and may not be amended or modified in any respect except by written
instrument signed by the parties hereto. Any and all previous agreements,
written or oral, express or implied, between the parties or on their behalf,
relating to the matters herein, are terminated and cancelled and each of the
parties releases and forever discharges the other of and from all manner of
actions, causes of action, claims, and demands whatsoever, under or in respect
of any and all such previous agreements.
(5) Modification of Agreement - Any modification to this Agreement must be in
writing and signed by the parties hereto or it shall have no effect and shall be
void.
(6) Assignment and Enurement - Neither this Agreement nor any rights or
obligations of the Executive under this Agreement shall be assignable by the
Executive without the prior written consent of the Employer. Subject to such
consent, this Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, successors and assigns.
(7) Currency - Unless otherwise provided for herein, all monetary amounts
referred to herein shall refer to the lawful money of Canada.
(8) Headings for Convenience Only - The division of this Agreement into Articles
and Sections is for convenience of reference only and shall not affect the
interpretation or construction of this Agreement.
(9) Governing Law - This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable therein and each of the parties hereto hereby irrevocably
attorns to the jurisdiction of the courts of such Province.
(10) Waiver - No term or condition of this Agreement shall be deemed waived
unless such waiver is expressed in writing and signed by the parties hereto.
Failure or delay on the part of any party to enforce any right hereunder shall
not operate as a waiver hereof.
(11) Gender - In this Agreement, words importing the singular number shall
include the plural and vice versa, and words importing the use of any gender
shall include the masculine, feminine and neuter genders and the word "person"
shall include an individual, a trust, a partnership, a body corporate, an
association or other incorporated or unincorporated organization or entity.
(12) Severability - If any Article, Section or any portion of any Section of
this Agreement is determined to be unenforceable or invalid for any reason
whatsoever, that unenforceability or invalidity shall not affect the
enforceability or validity of the remaining portions of this Agreement and such
unenforceable or invalid Article, Section or portion thereof shall be severed
from the remainder of this Agreement.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement.
MAGIC LANTERN
COMMUNICATIONS LTD.
Per:_____________________________
Chairman
Peter Rona
SIGNED, SEALED AND DELIVERED )
- in the presence of - )
)
________________________ ) _________________________________
WITNESS ) DOUGLAS CONNOLLY