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EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
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AGREEMENT made as of the 1st day of July, 1998, by and between MIDWAY
GAMES INC., a Delaware corporation (the "Corporation"), and BYRON C. COOK
("Executive").
W I T N E S S E T H:
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WHEREAS, Executive has been employed as the Executive Vice President -
Home Video of the Corporation pursuant to an Employment Agreement dated April
29, 1994, between Williams Entertainment Inc. (now known as Midway Home
Entertainment Inc.) and Executive, as amended (the "Existing Employment
Agreement"); and
WHEREAS, the Existing Employment Agreement expired by its terms on May
1, 1998; and
WHEREAS, the Corporation desires to employ Executive and Executive is
willing to undertake such employment on the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT; DUTIES. The Corporation hereby employs Executive to
perform such duties on behalf of the Corporation and its affiliates as the
Chairman of the Board or the Board of Directors of the Corporation may from time
to time determine relating to the development, manufacture and distribution of
home video games and other matters appropriate for a senior executive of the
Corporation. During Executive's employment hereunder he shall not be required to
work away from Corsicana, Texas, except for periods of reasonable and customary
business travel commensurate with Executive's duties and position.
2. ACCEPTANCE AND LOYALTY. Executive hereby accepts such employment and
agrees that throughout the period of his employment hereunder, he will devote
his business time, attention, knowledge and skills, faithfully, diligently and
to the best of his ability, in furtherance of the business of the Corporation
and will perform the duties assigned to him pursuant to Section 1 hereof.
Executive shall perform all duties and responsibilities in a professional manner
consistent with the skill, competence and efficiency expected of an executive
employee performing the duties assigned to Executive and subject to the
direction and control of the Chairman of the Board and the Board of Directors of
the Corporation. Executive will do such traveling as may be reasonably required
of him in the performance of his obligations hereunder. Executive shall at all
times be subject to,
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observe and carry out such rules, regulations, policies, directions and
restrictions as the Corporation shall from time to time establish. During his
employment hereunder, Executive shall not, without the prior written approval of
the Chairman of the Board or Board of Directors of the Corporation; directly or
indirectly, accept employment or compensation from or perform services of any
nature for, any business enterprise other than the Corporation or any of its
subsidiaries or affiliates, except that (i) Executive may continue to perform
services for WMS for such period as shall be mutually agreeable to the
Corporation, WMS and Executive and (ii) Executive may continue to serve as a
member of the Board of Directors of Corsicana National bank. During Executive's
employment hereunder, Executive shall not be entitled to additional compensation
for serving in any office, including as a director, of the Corporation or any of
its subsidiaries or affiliates to which he may be elected.
3. TERM.
3.1 The term of Executive's employment hereunder shall commence on
the date hereof and terminate on June 30, 2001 (the "Term"); provided, however,
that Executive's services hereunder may be terminated by either party effective
upon 30 days' prior written notice (i) from the Corporation if such termination
is for "cause" as defined in subsection 8.3 of this Agreement, or (ii) from
Executive if such termination is for "good reason" as defined in subsection 3.3
hereof. Each year of the Term is hereafter referred to as an "Employment Year."
3.2 Notwithstanding the provisions of Section 3.1 hereof, if
Executive is unable substantially to perform the duties of his position with the
Corporation for any prolonged period by reason of physical or mental illness or
injury, Corporation may terminate this Agreement upon 30 days' written notice,
but only after the period of Executive's illness or injury has lasted
continuously for ninety (90) days within any fiscal year during the Term. Until
any such termination by the Corporation, Corporation shall continue to be
obligated to provide to Executive all of the cash and other compensation
provided for in this Agreement, including his bonus, as if he were continuing to
perform all the duties of his position.
3.3 Executive shall have "good reason" to terminate his employment
hereunder upon the occurrence without his consent or acquiescence of any one or
more of the following events: (i) the placement of Executive in a position of
lesser stature or the assignment to Executive of duties, performance
requirements, or working conditions significantly different from or at variance
with those in effect on the date as of which this Agreement has been entered
into; (ii) the treatment of Executive in a manner which is in derogation of his
status as a senior executive of the Corporation; (iii) substantial
discontinuance, disallowance, or reduction of base salary or personal benefits
available to Executive under, or contemplated by, this Agreement; or (iv)
Executive being required to work away from Corsicana, Texas (other than during
periods of reasonable business travel).
3.4 Subject to the provisions of Section 12 hereof, if the
Corporation wrongfully terminates Executive's employment, Executive shall be
entitled to continue to receive all cash compensation which would otherwise be
payable to Executive hereunder, which amounts will
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continue to be paid at regular payroll intervals.
4. COMPENSATION AND BENEFITS.
4.1 The Corporation shall pay to Executive as compensation for his
services and agreements hereunder a base salary at the rate of $325,000 per
annum, or such greater amount as the Board of Directors of the Corporation shall
from time to time determine. Base salary shall be payable in equal installments
in accordance with the Corporation's normal payroll policy, subject to payroll
taxes and withholding requirements.
4.2 Executive and Chairman of the Board shall negotiate in good
faith to establish mutually agreeable performance criteria upon which an annual
discretionary bonus for Executive will be based. Executive shall also be
entitled to participate, to the extent he is eligible under the terms and
conditions thereof, in any bonus, pension, retirement, disability,
hospitalization, insurance, medical service, or other employee benefit plan
which is generally available to executive employees of the Corporation and which
may be in effect from time to time during the period of his employment
hereunder, including the Exec-U-Care insurance program. The Corporation shall be
under no obligation to institute or continue the existence of any such employee
benefit plan. In addition, the Corporation shall provide Executive with Four
Hundred Thousand Dollars ($400,000) in additional life insurance coverage,
payable to such beneficiary as Executive shall designate from time to time, in
such form and manner as the Corporation and Executive shall determine as
appropriate in order to minimize the income tax consequences of such coverage to
Executive. If such insurance is not available at an annual premium of $3,000 or
less, then the Corporation shall provide such lesser amount of insurance as is
available at an annual premium of $3,000.
5. BUSINESS EXPENSES. The Corporation shall reimburse Executive for all
authorized expenses reasonably incurred by him in accordance with the
Corporation's "Travel and Entertainment Policy and Procedure," and any
amendments thereof that the Corporation may adopt during the Term hereof;
provided, however, that Executive shall be reimbursed for his actual cost for
first-class airline travel.
6. VACATION. Executive's vacation shall be taken at times mutually
agreeable to Executive and the Chairman of the Board of the Corporation.
7. KEY-MAN LIFE INSURANCE. The Corporation may purchase and maintain
life insurance covering the life of Executive ("Key-man Insurance") in an amount
determined by the Corporation. The Corporation shall be the sole owner and
beneficiary of the Key-man Insurance and may apply to the payment of premiums
thereunder any dividends declared and paid thereon. Executive shall submit
himself to such physical examinations as the Chairman of the Board of the
Corporation may deem necessary or desirable in connection with the purchase and
maintenance of the Key-man Insurance.
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8. NON-COMPETITION AND NON-RAIDING. In consideration of the
Corporation's entering into this Agreement:
8.1 Executive agrees that during the Term hereof and for a period of
one year after termination for "cause" or after Executive terminates his
employment without the written consent of the Corporation, he will not, directly
or indirectly, without the prior written consent of the Corporation, own,
manage, operate, join, control, participate in, perform any services for, invest
in, or otherwise be connected with, in any manner, whether as an officer,
director, employee, consultant, partner, investor or otherwise, any business
entity which is engaged in the design, importation, manufacture and/or sale of
coin-operated video games, home video games or any business entity which is
engaged in any other business in which the Corporation or any affiliate of the
Corporation is engaged. Nothing herein contained shall be deemed to prohibit
Executive from investing his funds in securities of a company if the securities
of such company are listed for trading on a national stock exchange or traded in
the over-the-counter market and Executive's holdings therein represent less than
five percent of the total number of shares or principal amount of other
securities of such company outstanding.
8.2 Executive agrees that during the Term hereof and for a period of
one year thereafter, he will not, directly or indirectly, without the prior
written consent of the Corporation, induce or influence, or seek to induce or
influence, any person who is engaged by the Corporation or any affiliate of the
Corporation as an employee, agent, independent contractor or otherwise, to
terminate his employment or engagement, nor shall Executive directly or
indirectly, through any other person, firm or corporation, employ or engage, or
solicit for employment or engagement, or advise or recommend to any other person
or entity that such person or entity employ or engage or solicit for employment
or engagement, any person or entity employed or engaged by the Corporation or
any affiliate of the Corporation.
8.3 For purposes of this Agreement "cause" means (i) conviction
(pursuant to a final or non-appealable judgment) of a felony or any other crime
involving fraud, larceny or dishonesty; (ii) failure and refusal to follow a
reasonable direction of the Chairman of the Board or the Board of Directors of
the Corporation after notice in writing of such failure or refusal and a cure
period of ten days thereafter; or (iii) commission of any dishonest, willful or
grossly negligent act which has or is reasonably likely to have a material
adverse effect on the Corporation or its customer or trade relationships.
8.4 In the event that Executive is terminated for reasons other than
"cause," then, for such period (not to exceed one year after termination) as the
Corporation continues to pay the Executive's base salary to him, Executive
agrees that he will not, directly or indirectly, without the prior written
consent of the Corporation, take any of the actions prohibited under subsection
8.1 of this Agreement.
8.5 Executive acknowledges that the provisions of this Paragraph 8
are reasonable and necessary for the protection of the Corporation. In the event
that any provision of
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this Paragraph 8, including any sentence, clause or part hereof, shall be deemed
contrary to law or invalid or unenforceable in any respect by a court of
competent jurisdiction, the remaining provisions shall not be affected, but
shall, subject to the discretion of such court, remain in full force and effect
and any invalid and unenforceable provisions shall be deemed, without further
action on the part of the parties hereto, modified, amended and limited to the
extent necessary to render the same valid and enforceable.
9. CONFIDENTIALITY AGREEMENT.
9.1 As used herein, the term "Confidential Information" shall mean
any and all information of the Corporation and of its affiliates (for purposes
of this paragraph, the Corporation's affiliates shall be deemed included within
the meaning of "Corporation"), including, but not limited to, all data,
compilations, programs, devices, strategies, or methods concerning or related to
(i) the Corporation's finances, financial condition, results of operations,
employee relations, amounts of compensation paid to officers and employees and
any other data or information relating to the internal affairs of the
Corporation and its operations; (ii) the terms and conditions (including prices)
of sales and offers of sales of the Corporation's products and services; (iii)
the terms, conditions and current status of the Corporation's agreements and
relationship with any customer or supplier; (iv) the customer and supplier lists
and the identities and business preferences of the Corporation's actual and
prospective customers and suppliers or any employee or agent thereof with whom
the Corporation communicates; (v) the trade secrets, manufacturing and operating
techniques, price data, costs, methods, systems, plans, procedures, formulas,
processes, hardware, software, machines, inventions, designs, drawings, artwork,
blueprints, specifications, tools, skills, ideas, and strategic plans possessed,
developed, accumulated or acquired by the Corporation; (vi) any communications
between the Corporation, its officers, directors, stockholders, or employees,
and any attorney retained by the Corporation for any purpose, or any person
retained or employed by such attorney for the purpose of assisting such attorney
in his or her representation of the Corporation; (vii) any other information and
knowledge with respect to all products developed or in any stage of development
by the Corporation; (viii) the abilities and specialized training or experience
of others who as employees or consultants of the Corporation during the Term
hereof have engaged in the design or development of any such products; and (ix)
any other matter or thing, whether or not recorded on any medium, (a) by which
the Corporation derives actual or potential economic value from such matter or
thing being not generally known to other persons or entities who might obtain
economic value from its disclosure or use, or (b) which gives the Corporation an
opportunity to obtain an advantage over its competitors who do not know or use
the same.
9.2 Executive acknowledges and agrees that the Corporation is
engaged in highly competitive businesses and has expended, or will expend,
significant sums of money and has invested, or will invest, a substantial amount
of time to develop and maintain the secrecy of the Confidential Information. The
Corporation has thus obtained, or will obtain, a valuable economic asset which
has enabled, or will enable, it to develop an extensive reputation and to
establish long-term business relationships with its suppliers and customers. If
such Confidential Information were
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disclosed to another person or entity or used for the benefit of anyone other
than the Corporation, the Corporation would suffer irreparable harm, loss and
damage. Accordingly, Executive acknowledges and agrees that, unless the
Confidential Information becomes publicly known through legitimate origins not
involving an act or omission by Executive:
(1) the Confidential Information is, and at all times hereafter
shall remain, the sole property of the Corporation;
(2) Executive shall use his best efforts and the utmost diligence to
guard and protect the Confidential Information from disclosure to
any competitor, customer or supplier of the Corporation or any other
person, firm, corporation or other entity;
(3) unless the Corporation gives Executive prior express written
permission, during his employment and thereafter, Executive shall
not use for his own benefit, or divulge to any competitor or
customer or any other person, firm, corporation, or other entity,
any of the Confidential Information which Executive may obtain,
learn about, develop or be entrusted with as a result of Executive's
employment by the Corporation; and
(4) except in the ordinary course of the Corporation's business,
Executive shall not seek or accept any Confidential Information from
any former, present or future employee of the Corporation.
9.3 Executive also acknowledges and agrees that all documentary and
tangible Confidential Information including, without limitation, such
Confidential Information as Executive has committed to memory, is supplied or
made available by the Corporation to the Executive solely to assist him in
performing his services under this Agreement. Executive further agrees that
after his employment with the Corporation is terminated for any reason:
(1) Executive shall not remove from the property of the Corporation
and shall immediately return to the Corporation, all documentary or
tangible Confidential Information in his possession, custody, or
control and not make or keep any copies, notes, abstracts,
summaries, tapes or other record of any type of Confidential
Information; and
(2) Executive shall immediately return to the Corporation any and
all other property of the Corporation in his possession, custody or
control, including, without limitation, any and all keys, security
cards, passes, credit cards and marketing literature.
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10. INVENTION DISCLOSURE. Any invention, improvement, design,
development or discovery conceived, developed, created or made by Executive
alone or with others, during the period of his employment hereunder and
applicable to the business of the Corporation or its affiliates, whether or not
patentable or registrable, shall become the sole and exclusive property of the
Corporation. Executive hereby assigns to the Corporation, all of his rights to
any "intellectual material" created or developed by him during the course of his
employment. As used herein, "intellectual material" shall include, but shall not
be limited to, ideas, titles, themes, production ideas, methods of presentation,
artistic renderings, sketches, plots, music, lyrics, dialogue, phrases, slogans,
catch words, characters, names and similar literary, dramatic and musical
material, trade names, trademarks and service marks and all copyrightable
expressions in audio visual works, computer software, electronic circuitry and
all mask works for integrated circuits. Executive shall disclose the
intellectual material promptly and completely to the Corporation and shall,
during the period of his employment hereunder and at any time and from time to
time hereafter (a) execute all documents requested by the Corporation for
vesting in the Corporation or any of its affiliates the entire right, title and
interest in and to the same, (b) execute all documents requested by the
Corporation for filing and prosecuting such applications for patents, trademarks
and/or copyrights as the Corporation, in its sole discretion, may desire to
prosecute, and (c) give the Corporation all assistance it reasonably requires,
including the giving of testimony in any suit, action or proceeding, in order to
obtain, maintain and protect the Corporation's right therein and thereto. If any
such assistance is required following the termination of this Agreement, the
Corporation shall reimburse Executive for his time and the reasonable expenses
incurred by him in rendering such assistance. Anything contained in this
paragraph to the contrary notwithstanding, this paragraph does not apply to an
invention for which no equipment, supplies, facilities, or trade secret
information of the Corporation or its affiliates was used and which was
developed entirely on the Executive's own time, unless (d) the invention
relates: (i) to the business of the Corporation or its affiliates, or (ii) to
the Corporation's or any of its affiliates' actual or demonstrably anticipated
research or development, or (e) the invention results from any work performed by
the Executive for the Corporation or its affiliates.
11. REMEDIES. Executive acknowledges and agrees that the business of
the Corporation is highly competitive and that violation of any of the covenants
provided for in Paragraphs 8, 9 and 10 of this Agreement would cause immediate,
immeasurable and irreparable harm, loss and damage to the Corporation not
adequately compensable by a monetary award. Accordingly, Executive agrees,
without limiting any of the other remedies available to the Corporation, that
any violation of said covenants, or any one of them, may be enjoined or
restrained by any court of competent jurisdiction, and that any temporary
restraining order or emergency, preliminary or final injunctions may be issued
by any court of competent jurisdiction, without notice and without bond. In the
event any proceedings are commenced by the Corporation against Executive for any
actual or threatened violation of any of said covenants, the non-prevailing
party in such litigation shall be liable to the prevailing party for, and shall
pay to the prevailing party all costs and expenses of any kind, including
reasonable attorneys' fees, which the prevailing party may incur in connection
with such proceedings.
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12. CHANGE OF CONTROL.
12.1 If at any time during the term of this Agreement, individuals
who presently constitute the Board of Directors of the Corporation, or who have
been recommended for election to the Board by two-thirds of the Board consisting
of individuals who are either presently on the Board or such recommended
successors cease for any reason to constitute at least a majority of such Board
(such event being hereafter referred to as a "Change of Control") and Executive
gives written notice to the Corporation within 60 days after such Change of
Control of his election to terminate his employment hereunder, the Corporation
shall pay to Executive within 15 days after Executive's delivery of such notice,
as severance pay and liquidated damages, in lieu of any other rights or remedies
which might otherwise be available to him under this Agreement, and without
mitigation of any kind or amount, whether or not Executive shall seek or accept
other employment, a lump sum payment equal in amount to three times the annual
base salary payable to Executive pursuant to subsection 4.1 of this Agreement.
In addition, all unexpired options to purchase securities of the Corporation
granted to Executive before the Change of Control shall, if unvested, vest fully
on the date of the Change of Control, notwithstanding any vesting provisions of
such options. All payments provided for in this Section 12 shall be paid in
full, without discount to present value.
12.2 If it shall be determined that any amount payable under
Section 12.1 by the Corporation to or for the benefit of Executive (a "Base
Payment") would be subject to the excise tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then
Executive shall be entitled to receive an additional payment (the "Gross-Up
Payment") in an amount such that the net amount retained by Executive, after the
calculation and deduction of any Excise Tax on the Base Payment shall be equal
to the Base Payment, less any federal, state and local income taxes. The
Gross-Up Payment shall be reduced by income or Excise Tax withholding payments
made by the Corporation to any federal, state, or local taxing authority with
respect to the Gross-Up Payment that was not deducted from compensation payable
to the Executive. All determinations required to be made under this Section
12.2, including whether and when a Gross-Up Payment is required, the amount of
such Gross-Up Payment, and the assumptions to be utilized in arriving at such
determination, except as specified above, shall be made by the Corporation's
auditors (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Corporation and Executive within fifteen business days
after the receipt of notice from Executive that there should be a Gross-Up
Payment. The determination of tax liability made by the Accounting Firm shall be
subject to review by Executive's tax advisor, and, if Executive's tax advisor
does not agree with the determination reached by the Accounting Firm, then the
Accounting Firm and Executive's tax advisor shall jointly designate a nationally
recognized public accounting firm, which shall make the determination. All fees
and expenses of the accountants retained by the Corporation or jointly
designated and retained shall be borne by the Corporation. Any determination by
a jointly designated public accounting firm shall be binding upon the
Corporation and Executive.
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13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties hereto with respect to Executive's employment with the Company
and no amendment or modification hereof shall be valid or binding unless made in
writing and signed by the party against whom enforcement thereof is sought. All
prior agreements relating to Executive's employment with the Company or WMS or
any affiliate of the Company or WMS are hereby terminated and of no further
force and effect.
14. NOTICES. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or sent by
telephone facsimile or sent by certified mail, return receipt requested, or sent
by responsible overnight delivery service, postage and fees prepaid, to the
parties hereto at their respective addresses set forth below. Either of the
parties hereto may at any time and from time to time change the address to which
notice shall be sent hereunder by notice to the other party given under this
Section 14. The date of the giving of any notice sent by mail shall be three
business days following the date of the posting of the mail, if delivered in
person, the date delivered in person, if sent by overnight delivery service, the
next business day following delivery to an overnight delivery service or if sent
by telephone facsimile, the date sent by telephone facsimile.
If to the Corporation:
3401 North California Avenue
Chicago, IL 60618
Facsimile: 312-961-1099
Attn: Mr. Neil D. Nicastro, Chairman of the Board
If to Executive:
2117 West Park Avenue
Corsicana, TX 75110
15. NO ASSIGNMENT. Neither this Agreement nor the right to receive any
payments hereunder may be assigned by Executive. This Agreement shall be binding
upon Executive, his heirs, executors and administrators and upon the
Corporation, its successors and assigns.
16. NO WAIVER. No course of dealing nor any delay on the part of the
Corporation in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.
17. GOVERNING LAW. This Agreement shall be governed, interpreted and
construed in accordance with the substantive laws of the State of Illinois
applicable to agreements entered into and to be performed entirely therein.
18. SEVERABILITY. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any arbitrator or court of competent
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jurisdiction, such provision shall be ineffective but shall not in any way
invalidate or affect any other clause, paragraph, section or part of this
Agreement. The parties intend that all clauses, paragraphs, sections or parts of
this Agreement shall be enforceable to the fullest extent permitted by law.
19. AFFILIATE. As used in this Agreement, "affiliate" means any person
or entity controlled by or under common control with the Corporation.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which counterparts, when taken together, shall constitute
but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
MIDWAY GAMES INC.
By: /s/ NEIL D. NICASTRO
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Neil D. Nicastro, Chairman of the Board
EXECUTIVE
/s/ BYRON C. COOK
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Byron C. Cook
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