Employment Agreement - Atari Inc. and James Caparro
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into this November 26, 2004
(the "Effective Date"), by and between ATARI, INC. (the "Company") and James
Caparro, the undersigned individual ("Executive").
IN CONSIDERATION of the mutual covenants and agreements hereinafter set
forth, the Company and Executive agree as follows:
1. Employment: The Company hereby employs Executive to render his services
as President and Chief Executive Officer of the Company. Executive shall report
directly to the Chairman of the Board of Directors, so long as the current
Chairman remains as such and thereafter directly to the Board of Directors (the
"Board"). The Executive agrees to perform such services, on the terms and
conditions hereinafter set forth. During the Term, as hereinafter defined,
Executive shall have the duties, responsibilities and authority commensurate
with his position and such other duties commensurate with his position as
assigned to him by such Chairman or the Board.
2. Term: The Term of this Agreement shall commence on the Effective Date
and continue until March 31, 2009 (the "Initial Period"). Unless Executive's
employment has otherwise been terminated in accordance with this Agreement,
following the Initial Period, the Term of this Agreement shall be extended
automatically for up to two (2) additional one (1) year periods (each a "Renewal
Term"), unless either party gives written notice in the manner specified herein
at least six (6) months prior to the expiration of the then-current Initial
Period or any Renewal Term of such party's decision not to renew this Agreement,
in which event the Term shall end at the conclusion of such then-current year of
the Initial Period or Renewal Term. Upon any such expiration of the Term, within
five (5) business days following termination of Executive's employment at such
time or thereafter, Executive shall receive Accrued Amounts, any amounts or
benefits due under any benefit or payroll plan or program and, subject to
Paragraph 4(b) hereof, the Pro Rata Bonus (as defined in Paragraph 10(a) below)
and have at least one (1) year thereafter to exercise any stock options or, if
less, the remainder of the Term of the grant, provided that if such expiration
is the result of the Executive giving notice of nonrenewal, such expiration
shall be treated as a resignation other than for Good Reason by the Executive.
Any employment of Executive after expiration of the Term shall be at will
employment terminable by either party at any time with or without Cause or with
or without Good Reason, except as may otherwise be specifically provided in a
written agreement.
3. Other Business Activity and Conflicts of Interest: During the Term,
subject to the provisions of this Agreement, Executive shall abide by the
Company's written policies with respect to conflicts of interest. Executive
shall devote his full business time and efforts to his duties hereunder. Without
limiting the generality of the foregoing, Executive shall not engage in any
activity which conflicts or interferes with the performance of Executive's
duties hereunder, except that Executive shall be entitled to attend to personal
and family affairs and investments, be involved in not for profit, charitable
and professional activities and with the prior consent of the Board, serve on
public for profit boards, provided that the foregoing does not, in the
aggregate, materially interfere with Executive's responsibilities hereunder, and
except as
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otherwise approved in advance in writing by the Board. The Board hereby approves
Executive's service on the boards of directors set forth in Exhibit A hereto.
4. Compensation:
(a) Base Salary: For all of Executive's services to the Company and
its subsidiaries, the Company shall pay to Executive a base salary at the rate
of Seven Hundred Thousand dollars ($700,000) per annum, payable in equal
installments in accordance with the Company's customary payroll practice for its
employees in effect at the time, but no less frequently than monthly.
Executive's base salary may be reviewed annually for increase. Any such
increases shall be in the sole discretion of the Company's Compensation
Committee and subject to the approval of the Board. Executive understands and
agrees that neither the Compensation Committee (the "Committee") nor the Board
is obligated to increase Executive's salary and any decision not to increase
Executive's salary will not be deemed a breach of this Agreement.
(b) Annual Incentive Payments:
(i) Executive shall be eligible for an annual incentive
payment (the "Incentive Bonus") with a target of 100% (with a maximum of 150%
based on significant above target achievement) of Executive's then-current
annual base salary based on the overall financial performance of the Company,
applying criteria and objectives similar to those it considers when determining
incentive compensation for other similar senior executives of the Company for
the same period of the Term. In addition, the Executive shall be eligible for an
additional annual bonus (the "Strategic Bonus") with a target of 100% of the
Executive's annual base compensation to be based on a plan (the "Strategic Bonus
Plan") that shall be reasonably established by the Committee in consultation
with the Executive as soon as practicable after the Effective Date. The parties
acknowledge and agree that the Strategic Bonus Plan shall specifically include
strategic objectives to be achieved by the Company, as well as, to the extent
reasonably measurable, financial hurdles and/or milestones to be achieved by the
Company in connection with such strategic objectives.
(ii) With respect to the fiscal year ending March 31, 2005,
Executive will be eligible for a pro rata Incentive Bonus based on the portion
of the fiscal year during which Executive is employed by the Company and the
actual results for the fiscal year and a pro rata Strategic Bonus in the
discretion of the Committee.
(iii) In addition to the foregoing, the Board or Committee
shall have sole and unreviewable discretion to award Executive additional
incentive compensation at any time during the Term.
(c) Long-Term Incentive:
(i) On the Effective Date, the Company shall grant Executive
1,750,000 Company stock options at fair market value on such date. The stock
options will be subject to
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the following vesting schedule: (A) 25% of the options will vest on June 30,
2005; and (B) the remaining options will vest in accordance with the vesting
schedule contained in the Company's 2000 Stock Option Plan (the "Plan") (i.e.,
6.25% per calendar quarter, commencing with the first such vesting on December
31, 2005).
(ii) In addition to the above stock option grant, at any time
during the Term, the Committee shall have sole and unreviewable discretion to
grant Executive additional stock options.
(e) Expenses: Upon submission of itemized expense statements in the
manner reasonably specified by the Company, Executive shall be entitled to
reimbursement for reasonable business-related travel and other reasonable
business expenses duly incurred by Executive in the performance of Executive's
duties under this Agreement in accordance with the policies and procedures
established by the Company from time to time for executives of the same level
and responsibility as Executive. Executive shall have the use of a Company
credit card and be entitled to business-related air travel in business class, or
if not available, first class.
5. Benefits:
(a) During the Term, and subject to the terms and provisions of such
plans, Executive shall be entitled to participate in the benefit plans and
programs, and receive the benefits and perquisites, generally provided to the
Company's executives of the same level and responsibility as Executive to the
extent Executive is otherwise eligible under the terms thereof. Nothing in this
Agreement shall preclude the Company from terminating or amending from time to
time any employee benefit plan or program.
(b) During the Term, in addition to the benefits under Paragraph
5(a) above, the Company shall provide Executive with, or pay the premium on, a
term life insurance policy on Executive's life in an amount of One Million
dollars ($1,000,000). Executive shall be entitled to name the beneficiary of
such policy and such policy shall be portable. In the event Executive is not
insurable by an amount equal to the cost at standard rates, the amount of
insurance shall be that purchasable at standard rates.
(c) Executive shall be provided with financial planning and tax
preparation to an annual maximum of $10,000 (including within such limit a
gross-up for any taxes he may incur on the payment for such services).
6. INTENTIONALLY OMITTED.
7. Place of Employment: Executive's services hereunder shall be rendered
primarily at the Company's office in New York City, New York. The Company may,
however, from time to time require Executive to travel to and render services
elsewhere, as the Company may reasonably deem necessary.
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8. Restrictive Covenants:
(a) Confidential Information; Non-Solicitation:
(i) Existence of Confidential Information. The Company owns
and has developed and compiled, and will develop and compile, certain
proprietary techniques and confidential information which have great value to
its business (referred to in this Agreement, collectively, as "Confidential
Information"). Confidential Information includes not only information disclosed
by the Company to Executive, but also information developed or learned by
Executive during the course or as a result of employment with the Company, which
information shall be the property of the Company. Confidential Information
includes all information that has or could have commercial value or other
utility in the business in which the Company is engaged or contemplates
engaging, and all information of which the unauthorized disclosure could be
detrimental to the interests of the Company, whether or not such information is
specifically labeled as Confidential Information by the Company. By way of
example and without limitation, Confidential Information includes any and all
information developed, obtained, licensed by or to or owned by the Company
concerning trade secrets, techniques, know-how (including designs, plans,
procedures, merchandising, marketing, distribution and warehousing know-how,
processes, and research records), software, computer programs, and any other
intellectual property created, used or sold (through a license or otherwise) by
the Company, Electronic Data Information know-how and processes, innovations,
discoveries, improvements, research, development, test results, reports,
specifications, data, formats, marketing data and plans, business plans,
strategies, forecasts, unpublished financial information, orders, agreements and
other forms of documents, price and cost information, merchandising
opportunities, expansion plans, store plans, budgets, projections, customer,
supplier, licensee, licensor and subcontractor identities, characteristics,
agreements and operating procedures, and salary, staffing and employment
information. Notwithstanding the foregoing, Confidential Information shall not
include information which (A) is or becomes generally available to the public or
is, at the time in question, in the public domain other than as a result of a
disclosure by Executive, (B) was available to Executive on a non-confidential
basis prior to the date of this Agreement, (C) becomes available to Executive
from a source other than the Company, its agents or representatives (or former
agents or representatives), or (D) is required to be disclosed pursuant to law;
provided, that Executive shall provide the Company with prompt notice of such
required disclosure, and Executive shall reasonably cooperate with the Company
(at Company expense) to enable the Company to seek a protective order; provided,
further, that in the case of (C) above, the source of such information was not
bound by a confidentiality agreement with the Company.
(ii) Protection of Confidential Information. Executive
acknowledges and agrees that in the performance of duties hereunder the Company
discloses to and entrusts Executive with Confidential Information which is the
exclusive property of the Company and which Executive may possess or use only in
the performance of duties for the Company. Executive also acknowledges that he
is aware that the unauthorized disclosure of Confidential Information, among
other things, may be prejudicial to the Company's interests, an invasion of
privacy and an improper disclosure of trade secrets. Executive shall not,
without the prior written consent of the Board, directly or indirectly, use,
make available, sell, disclose or
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otherwise communicate to any corporation, partnership, individual or other third
party, other than in the course of Executive's responsibilities and, as he deems
in good faith, for the benefit of the Company, any Confidential Information,
either during the Term or thereafter. In the event Executive desires to publish
the results of Executive's work for or experiences with the Company through
literature, interviews or speeches, Executive will submit requests for such
interviews or such literature or speeches to the Board at least fourteen (14)
days before any anticipated dissemination of such information for a
determination of whether such disclosure is in the best interests of the
Company, including whether such disclosure may impair trade secret status or
constitute an invasion of privacy. Executive agrees not to publish, disclose or
otherwise disseminate such information without the prior written approval of the
Board.
(iii) Proprietary Information. Executive will hold in
strictest confidence and will not disclose, use, or publish, any of the
Company's Proprietary Information (defined below), except as such disclosure,
use or publication may be required in connection with Executive's work for the
Company or unless an officer of the Company expressly authorizes such in
writing. Subject to Paragraph 9 of this Agreement, Executive hereby assigns to
the Company any rights Executive may have or acquire in such Proprietary
Information and recognizes that all Proprietary Information shall be the sole
property of the Company and its assigns, and that the Company and its assigns
shall be the sole owner of all title, patent rights, copyrights, trade secret
rights, moral rights, and all other rights throughout the world (collectively,
"Proprietary Rights") in connection therewith.
For purposes of this Agreement, "Proprietary Information" is
information that was or will be developed, created, or discovered by or on
behalf of the Company, including without limitation, by Executive in the course
of his work for the Company, or which became or will become known by, or was or
is conveyed to the Company, which has commercial value in the Company's business
and is subject to Paragraph 9 of this Agreement.. By way of illustration, but
not limitation, "Proprietary Information" includes (a) inventions (whether
patentable or not), mask works, trade secrets, ideas, processes, formulas,
source and object codes, data, programs, other works of authorship, consumer
preference algorithms, strategic alliances, application or other developments,
know-how, technology, improvement, discoveries, designs and techniques
(collectively referred to herein as "inventions"), and (b) information regarding
plans for research, development, new products, marketing and selling, business
plans, budgets and unpublished financial statements, licenses, prices and costs,
suppliers and customers; and information regarding the skills and compensation
of other employees of or consultants to the Company.
(iv) Enforcement of Proprietary Rights. Executive will assist
the Company in every proper way to obtain and from time to time enforce United
States and foreign Proprietary Rights relating to Company Inventions (as defined
in Paragraph 9(c) of this Agreement) in any and all countries, including without
limitation, executing, verifying and delivering such documents and performing
such other acts (including, at Company expense, appearances as a witness) as the
Company may reasonably request for use in applying for, obtaining, perfecting,
evidencing, sustaining and enforcing such Proprietary Rights and the assignment
thereof. In addition, Executive will execute, verify and deliver assignments of
such Proprietary Rights to the Company or its designee. To that end Executive
will execute, verify,
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and deliver such documents and perform such other acts (including, at Company
expense, appearances as a witness) as the Company may reasonably request for use
in applying for, obtaining, perfecting, evidencing, sustaining, and enforcing
such Proprietary Rights and the assignment thereof. In addition, Executive will
execute, verify, and deliver assignments of such Proprietary Rights to the
Company or its designee. Executive's obligation to assist the Company with
respect to Proprietary Rights relating to Company Inventions in any and all
countries shall continue beyond the termination of this Agreement, provided that
the Company shall compensate Executive at a reasonable rate for the time
actually spent by Executive at the Company's request, if any, on such assistance
after termination of Executive's employment. In the event the Company is unable
for any reason, after reasonable effort, to secure Executive's signature on any
document needed in connection with the actions specified in this paragraph,
Executive hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as Executive's agent and attorney in fact, to act
for and in Executive's behalf to execute, verify, and file any such documents
and to do all other lawfully permitted acts to further the purposes of the
preceding paragraph thereon with the same legal force and effect as if executed
by Executive. Executive hereby waives and quitclaims to the Company any and all
claims, of any nature whatsoever, which Executive now or may hereafter have for
infringement of any Proprietary Rights owned by the Company pursuant to this
Agreement.
(v) Third Party Information. Executive will hold confidential
or proprietary information that the Company has received and in the future may
receive from third parties ("Third Party Information"), subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes, in the strictest confidence and will not
disclose, use, or publish except in connection with Executive's work for the
Company, such Third Party Information unless expressly authorized by an officer
of the Company in writing or in compliance with legal process or governmental
inquiry.
(vi) Deliverer of Records, Etc. In the event Executive's
employment with the Company ceases for any reason, Executive will not remove
from the Company's premises without its prior written consent any records,
files, drawings, documents, equipment, materials and writings belonging to the
Company, including those which relate to or contain Confidential Information, or
any copies thereof (other than Executive's rolodex and similar address books,
provided that they only contain names, addresses, telephone numbers, and similar
contact information, and further provided that the Executive, upon written
request, shall furnish the Company with a copy of such rolodex and similar
address books). Upon request or when employment with the Company ends, Executive
will immediately deliver the same to the Company.
(vii) Non-Solicitation/Non-Hire. Executive acknowledges and
agrees that any attempt to interfere with the Company's existing employment
relationships would result in significant harm to the Company's interests.
Accordingly, Executive agrees that during his employment with the Company
(whether under this Agreement or otherwise) and for a period of twenty-four (24)
months after such employment ends (regardless of reason), Executive will not,
except in the good faith performance of his duties while employed by the
Company, in any way, directly or indirectly, solicit any employee of the Company
to terminate his or her employment
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with the Company, or hire any person who is then an employee of the Company and,
if after termination of employment, was an employee of the Company on the date
of termination, provided that the foregoing shall not apply to general
advertising not specifically targeted at employees of the Company.
(b) Non-Competition: Executive hereby agrees and covenants that, for
the greater period of either: (i) six (6) months after Executive's employment
with the Company ends (regardless of reason); or (ii) the number of months for
which Executive will receive severance payments under Paragraph 10 of this
Agreement, Executive will not render services to the eight entities set forth on
a list provided by the Company to the Executive simultaneously herewith (the
"Listed Entities"), provided that the foregoing shall not apply to continuation
of matters permitted and done in accordance with Paragraph 3 hereof which were
commenced at a time when an entity was not a Listed Entity. The Listed Entities
named herein may be amended from time to time in the Company's sole discretion
by written notice to Executive, provided that the Listed Entities will, at no
time, include more than eight entities, all such entities shall be competitive
with the business of the Company, and any such amendment shall be effective only
if written notice thereof shall have been given to Executive at least 90 days
prior to the effective date of Executive's termination of employment. Nothing in
this Paragraph 8(b) shall prohibit Executive from being employed, or providing
services, in a non-competitive position with a large conglomerate that owns one
of the foregoing. In the event the length of Executive's non-compete obligation
under this Paragraph 8(b) exceeds twelve (12) months, at any time after the end
of the initial twelve (12) months, Executive may elect to forfeit the right to
future severance pay in exchange for termination of this non-compete provision
upon written notice to the Company. If Executive voluntarily resigns without
Good Reason and begins to render services to one of the Listed Entities within
six (6) months of his termination of employment in violation of the obligations
under this paragraph, the Executive shall repay the Company, in cash, within
five business days after demand is made therefore by the Company, the total
amount of the "Award Gain" (as defined herein) realized by the Executive upon
any exercise of Company stock options that occurred on or after the date that is
six (6) months prior to the date the Executive began to render services to the
Listed Entity in violation of the obligations under this paragraph. The term
"Award Gain" shall mean the product of: (x) the fair market value per share of
stock on the date of such exercise (without regard to any subsequent change in
the market price of shares) minus the exercise price, times (y) the number of
shares as to which the option was exercised at that date.
(c) Non-Disparagement: During the Term and thereafter, Executive and
the Company each agree that he or it will take no unnecessary action which is
intended, or would reasonably be expected, to harm the other's reputation or
which would reasonably be expected to lead to unwanted or unfavorable publicity
to the other. Nothing in this Paragraph 8(c) shall preclude Executive from
making non-defamatory statements regarding the Company and taking other actions
in the course of engaging in legitimate competitive activities.
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9. Rights to Results of Services:
(a) Subject to the remainder of this paragraph, in addition to
Executive's services, the Company shall own, and Executive hereby sells, grants,
assigns, transfers and sets over to the Company, all rights of every kind in and
to all results and proceeds of Executive's services hereunder, including,
without limitation, all documents prepared or compiled by Executive in
connection with such services.
(b) Notwithstanding any other provision of this Agreement to
the contrary, this Agreement does not obligate Executive to assign or offer to
assign to the Company any of Executive's rights in an invention for which no
equipment, supplies, facilities or trade secret information of the Company was
used and which was developed entirely on Executive's own time, unless (1) the
invention resulted from work performed by Executive for the Company, (2) the
invention relates to the business of the Company, or (3) the invention relates
to the Company's actual or demonstrably anticipated research or development
provided however, that any work Executive expends in connection with such
excluded inventions shall be done on Executive's own time, during non-working
hours, and not interfere with Executive's full and faithful performance of
Executive's duties as an employee or consultant of the Company, and in any
event, there shall be no obligation or offer to assign any invention not covered
by the grant in (a) above.
(c) Inventions assigned to or otherwise held by the Company
pursuant to paragraph (b) above are hereinafter referred to as "Company
Inventions."
(d) Executive expressly assigns any rights that Executive may
have to control the content or appearance of any Company Invention, to seek
credit as its author/inventor or to seek compensation for such Company
Invention. To the extent that assignment of these rights is not permitted under
applicable law and to the extent the law permits a waiver of those rights,
Executive hereby waives any of Executive's rights in any Company Invention.
(e) Inventions, if any, patented or unpatented, which
Executive made prior to the commencement of Executive's employment relationship
with the Company and to which Executive claims ownership ("Pre-existing
Inventions") are excluded from the scope of this Agreement; provided, however,
that Executive shall maintain appropriate documentation to establish the
existence and scope of any Pre-existing Inventions.
10. Termination:
(a) Death of Executive: Executive's employment shall terminate
automatically upon Executive's death. If Executive's employment under this
Agreement is terminated by reason of Executive's death, the Company shall pay to
Executive's designated beneficiary or estate, as appropriate: (i) any accrued
amounts, including any salary that Executive has earned but that remains unpaid
as of the date of such termination, any accrued but unused vacation, any
unreimbursed business expenses and any bonus due for any completed fiscal year
("Accrued Amounts"); (ii) a pro rata portion of each of Executive's Incentive
Bonus and Strategic Bonus
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for the year of Executive's death based on actual results and the relative
period of such year through which Executive was employed (the "Pro Rata Bonus");
and (iii) all stock options previously granted to Executive by the Company shall
vest immediately upon Executive's death and be exercisable for a period of one
(1) year thereafter or, if less, the remainder of the term of the grant. Nothing
in this Paragraph 10(a) shall affect any entitlement of Executive's heirs to the
benefits of any life insurance plan or other applicable benefits, including but
not limited to as provided in Paragraph 5 hereof.
(b) Disability of the Executive: The Company may, at its option,
terminate Executive's employment by written notice given to the Executive while
he remains incapacitated if Executive shall fail, by virtue of or by reason of
some physical or mental impairment, to perform Executive's duties hereunder for
a period of six (6) consecutive months or more. In the event of such
termination, the Company will pay Executive the Accrued Amounts and the Pro Rata
Bonus and the Executive shall remain eligible for such short-term and long-term
disability benefits as the Company provides to its senior executives generally
at that time to the extent Executive is eligible for those benefits under the
provisions of those plans as amended from time to time. In that regard,
following such termination of this Agreement, Executive shall be considered an
employee solely for the purpose of applying for and receiving disability
payments (both temporary and long-term) in accordance with the terms and
conditions of such disability plans in effect at the time. During any period
that Executive fails to perform his duties hereunder as a result of incapacity
due to physical or mental injury or illness, Executive shall continue to receive
the compensation and benefits provided by Paragraphs 4 and 5 hereof until
Executive's employment hereunder is terminated; provided, however, that the
amount of compensation and benefits received by Executive during said period
shall be reduced by the aggregate amounts, if any, payable to Executive under
the Company's disability benefit plans and programs or under the Social Security
disability insurance program covering the same period of time. In the event of
termination for disability under this Paragraph 10(b), Executive shall also
receive any amounts or rights due under any benefit plan or program, including
but not limited to as provided in Paragraph 5 hereof. Further, all stock options
previously granted to Executive by the Company shall vest immediately upon
Executive's termination for disability under this Paragraph 10(b) and be
exercisable by Executive for a period of one (1) year thereafter or, if less,
the remainder of the term of the grant.
(c) Voluntary Quit: The Executive may voluntarily resign on 30 days
prior written notice at any time with or without Good Reason. If Executive
resigns voluntarily for any reason (other than for "Good Reason" as defined
herein), the Company will pay Executive his Accrued Amounts and any amounts or
rights due under any benefit plan or program, and shall have no further
obligations under this Agreement, except as provided herein with regard to
indemnification and director and officer liability insurance All of Executive's
unvested stock options will terminate immediately upon Executive's notice of
resignation or Executive's actual resignation, whichever occurs first. Any
vested stock options will be exercisable for a period of thirty (30) days
following Executive's actual resignation date.
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(d) Termination for Cause: The Company shall have the right to
terminate the Executive's services for "Cause" during the Term. For purposes of
this agreement, "Cause" shall be defined as:
(i) Willful and material breach of any of the restrictive
covenants set forth in Paragraph 8 of this Agreement;
(ii) Willful failure or refusal to attempt in good faith to
perform any of Executive's material duties, responsibilities, or obligations
under this Agreement, provided that Executive has received written notice from
the Company setting forth the manner in which Executive has failed or refused to
attempt to perform his duties, responsibilities or obligations, and Executive
has been given an opportunity to cure within ten (10) days;
(iii) Any willful act involving material fraud, theft,
misappropriation of funds, embezzlement or dishonesty with regard to the
Company;
(iv) Conviction of a felony or plea of nolo contender
involving a felony, whether or not involving the Company (excluding cases based
solely on Executive's vicarious liability for the conduct of the Company or
others, and cases involving traffic violations); or
(v) Gross neglect or willful misconduct in carrying out
Executive's duties, responsibilities, or obligations under this Agreement, which
has a materially adverse effect on the Company.
Prior to termination for Cause, Executive shall be entitled to
receive written notice from the Company stating the grounds therefor, and shall
have an opportunity to be heard with counsel at a special Board meeting. No act
shall be deemed willful, if taken in good faith and with a reasonable belief
that it was in the best interests of the Company.
In the event the Company terminates the Executive for Cause he shall
receive his Accrued Amounts (other than any prior year bonus) and as provided
under any benefit or equity plan or program. In such event all unexercised stock
options, whether or not vested, shall immediately cease to be exercisable and
shall be forfeited.
(e) Termination Without Cause or for "Good Reason" by Executive
Prior to a "Change in Control": In the event the Company terminates the
Executive's employment under this Agreement during the Term and prior to a
"Change in Control" (as defined herein), other than as provided in (g) below,
for any reason other than death, disability, or for Cause, or if Executive
voluntarily resigns for "Good Reason" (as defined herein) prior to a Change in
Control:
(i) The Company will pay Executive his then-current annual
base salary for a period of twelve (12) months;
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(ii) The Company will pay Executive an amount equal to the
Incentive Bonus and Strategic Bonus earned for the fiscal year prior to the
fiscal year of termination, but no greater than the target Incentive Bonus and
the target Strategic Bonus for such year (or, if during the fiscal years ending
March 31, 2005 or 2006, based on the target Incentive Bonus and target Strategic
Bonus), paid when the Incentive Bonus and Strategic Bonus would otherwise be
paid;
(iii) The Company will continue to provide Executive with any
medical, health and life insurance that Executive elected during his employment,
and continue to pay the Company's portion of the premiums therefor, for a period
of twelve (12) months following Executive's termination or until Executive is
eligible to receive such benefits coverage from a new employer, whichever comes
first;
(iv) All of Executive's unvested stock options shall
immediately vest upon Executive's termination under this Paragraph 10(e), and
all options shall remain exercisable for a period of six (6) months thereafter
or, if less, the remainder of the term of the grant;
(v) The Executive shall be entitled to any amounts or rights
under any benefit plan or program, including but not limited to as provided in
Paragraph 5 hereof; and
(vi) The Company will pay Executive the Accrued Amounts and
the Pro Rata Bonus.
All payments and benefits under this Paragraph 10(e) are subject to
Executive's ongoing compliance with the non-compete provision in paragraph 8(b)
of this Agreement, and are conditioned on Executive executing a waiver and
release of all known and unknown claims against the Company, in substantially
the form annexed hereto as Exhibit B.
(f) Termination Without Cause or for "Good Reason" by Executive
Within 24 Months After a "Change in Control": In the event that the Company
terminates Executive's employment under this Agreement during the Term and
within twenty-four (24) months after the occurrence of a Change in Control or as
provided in (g) below for any reason other than for death, disability, or for
Cause, or if Executive voluntarily resigns for Good Reason within twenty-four
(24) months after the occurrence of a Change in Control or as provided in (g)
below:
(i) The Company will pay Executive an amount equal to two (2)
times the sum of (x) his then current annual base salary and (y) the greater of
(aa) his target Incentive Bonus and target Strategic Bonus for the year of
termination or (bb) the Incentive Bonus and Strategic Bonus payment Executive
earned from the Company for the immediately preceding Incentive Bonus and
Strategic Bonus year (or if higher, the Incentive Bonus and Strategic Bonus
payment earned by the Executive with respect to the full fiscal year immediately
preceding the Change in Control) in twenty-four (24) equal monthly installments
commencing with the first day of the month after such termination;
<PAGE>
12
(ii) The Company will continue to provide Executive with any
medical, health and life insurance that Executive elected during his employment,
and continue to pay the Company's portion of the premiums therefor, for a period
of twenty-four (24) months following Executive's termination or until Executive
is eligible to receive such benefits coverage from a new employer, whichever
comes first;
(iii) All of Executive's stock options shall immediately vest
upon Executive's termination under this Paragraph 10(f), and all vested options
shall remain exercisable for a period of one (1) year thereafter or, if less,
the remainder of the term of the grant;
(iv) To the extent not yet paid to Executive, the Company will
pay Executive the Accrued Amounts and the Pro Rata Bonus; and
(v) The Executive shall be entitled to any amounts or rights
under any benefit plans or program, including but not limited to as provided in
Paragraph 5 hereof.
All payments and benefits under this Paragraph 10(f) are subject to
Executive's ongoing compliance with the non-compete provision in Paragraph 8(b)
of this Agreement, and are conditioned on Executive executing a waiver and
release of all known and unknown claims against the Company, substantially in
the form annexed hereto as Exhibit B.
(g) For purposes of the Agreement, if the Executive's employment
with the Company is terminated without Cause or the Executive terminates with
Good Reason prior to the date on which the Change in Control occurs, but the
Executive reasonably demonstrates that the termination (i) was at the request of
a third party who had taken steps reasonably calculated to effect a Change in
Control or (ii) otherwise arose in connection with or in anticipation of a
Change in Control which has been threatened or proposed, such termination shall
be deemed to have occurred after a Change in Control for purposes of this
Agreement provided a Change in Control shall actually have occurred (such period
of time the "Protected Pre Change in Control Period").
(h) Payment of Excise Taxes:
(i) If any payment or payments to Executive under this
Paragraph 10 or under any other plan, program, arrangement, or agreement of the
Company or any other person in connection with the Company is subject to excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
from time to time (the "Code"), or any successor or similar provision of the
Code, the Company shall pay Executive an additional amount (the "Gross Up") such
that the net amount retained by Executive after deduction of any such excise tax
and any income or employment tax, social security tax, excise tax, or interest
or penalties imposed on amounts paid under this Paragraph 10(h) shall be equal
to the full amount of the intended payment.
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13
(ii) For purposes of determining the Gross Up, Executive shall
be deemed to pay federal, state, and local income tax at the highest marginal
rate of applicable taxation in the calendar year in which the payment is made.
The determination of whether excise tax is payable, including whether any
exception may apply, and if so the amount thereof shall be made upon the opinion
of tax counsel (delivered to the Company and Executive) selected by the Company
and reasonably acceptable to Executive, applying the following rules: (A) all
payments shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject to excise tax
unless in the opinion of counsel such payments do not constitute parachute
payments or such excess parachute payments represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of the Code
in excess of the "base amount" within the meaning of Section 280G(b)(3) of the
Code or are otherwise not subject to excise tax; and (B) the value of any
non-cash or deferred payments or benefits shall be determined by an independent
accounting firm selected by the Company and reasonably acceptable to Executive
in accordance with the principles of Section 280G(d)(3) and (4) of the Code. All
fees, costs, and expenses of tax counsel and any accounting firm or other
advisor retained in accordance with this paragraph shall be borne solely by the
Company.
(iii) The Gross Up, if any, shall be paid to Executive in cash
and in a lump sum within thirty (30) days after the date on which the amount
thereof has been determined or is reasonably determinable by tax counsel, and in
any event not later than forty-five (45) days following termination of
Executive's employment; provided, however, that if the amount of the Gross Up
cannot be finally determined at or before such time, the amount paid shall be
the estimated full amount of the Gross Up as reasonably determined by tax
counsel in good faith and in accordance with the principles of the preceding
paragraph. If such an estimated Gross Up is paid, or if the opinion of tax
counsel is not finally accepted by the Internal Revenue Service, then
appropriate adjustments shall be computed (with additional Gross Up, if
necessary) by tax counsel based upon the final amount of excise tax, and any
additional amount due to Executive as a result of such adjustment (including any
interest or penalties owed by Executive by reason of any underpayment) shall be
paid in cash and in a lump sum within thirty (30) days of such computation. Any
amount due the Company as a result of such an adjustment shall be paid by
Executive in cash in a lump sum within thirty (30) days of such computation.
(iv) The gross up shall be recalculated and a further payment
made to Executive if: (x) the Internal Revenue Service disagrees with the
position of the tax counsel, (y) under applicable law, the excess parachute
payments are required to be recalculated, or (z) permissive recalculation of the
excess parachute payment is permitted and the Company elects to do so.
11. Good Reason:
(a) For purposes of this Agreement, except as expressly specified in
the last sentence paragraph (b) below, "Good Reason" shall be defined as any of
the following: (i) a change in Executive's direct reporting relationship from
that provided in Paragraph 1; (ii) a diminution in Executive's job title (other
than temporarily while Executive is incapacitated); (iii)
<PAGE>
14
a material diminution or adverse change (other than temporarily while Executive
is incapacitated) in Executive's position, office or duties (including, but not
limited to, Executive's removal from or non-re-election to the Board); (iv) the
assignment of duties inconsistent with Executive's position; (v) a decrease in
Executive's base salary, target Incentive Bonus opportunity or target Strategic
Bonus opportunity; (vi) a material breach of this Agreement by the Company,
which remains uncured, if curable, after more than ten (10) days after the
giving of written notice by the Executive; or (vii) the failure to secure and
deliver to Executive, a written assumption of the Company's obligations under
this Agreement from any successor.
12. Change in Control:
(a) For purposes of this Agreement, a "Change in Control" shall mean
any of the following occurrences:
(i) Any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934 ("Exchange Act")), other than
Infogrames Entertainment, SA ("IESA"), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's then outstanding securities (other than as a result of a merger
or consolidation covered by clause 12(iii) below in connection with a merger
involving the Company which would result in voting securities of the Company
outstanding immediately prior thereto continuing to represent more than 65% of
the combined voting power of the voting securities of the Company or the
surviving entity (or its parent) outstanding immediately after such merger or
consolidation);
(ii) During any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of the Company, and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in clause (i),
(iii) or (iv) of this definition) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;
(iii) The consummation of a merger or consolidation of the
Company with any other entity, other than (x) a merger or consolidation which
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) more than 65% of
the combined voting power of the voting securities of the Company or such
surviving entity (or its parent) outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"
(as hereinabove defined, but not including IESA) acquires more than 35% of the
combined voting power of the Company's then outstanding securities; or
<PAGE>
15
(iv) The stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
13. Applicable Law; Arbitrations, Etc.:
(a) THIS AGREEMENT WAS NEGOTIATED AND ENTERED INTO WITHIN THE STATE
OF NEW YORK. ALL MATTERS PERTAINING TO THIS AGREEMENT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE WHOLLY
PERFORMED THEREIN (WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS PRINCIPLES
UNDER NEW YORK LAW).
(b) Subject to the provisions of Paragraph 13(c) of this Agreement,
any and all controversies or claims arising out of or relating to this
Agreement, its performance, construction, interpretation or breach, or otherwise
relating to or arising from Executive's employment or the termination thereof
(including claims for employment discrimination), shall be resolved by final and
binding arbitration, to the greatest extent allowed by law, which arbitration
will be conducted in New York County in accordance with the rules of the
American Arbitration Association then in effect, and any award that may be
rendered by the arbitrator or arbitrators may be enforced in any court of
competent jurisdiction. The arbitrator shall have no authority to change or
modify any provision of this Agreement. With respect to any dispute arising
prior to a Change in Control and not during the Protected Pre Change in Control
Period, the prevailing party in any such arbitration, as determined by the
arbitrator, shall be entitled to reimbursement by the other party for its
reasonable attorneys' fees incurred in connection with the dispute; provided,
however, no award of attorneys' fees shall be made against Executive unless it
is found by the arbitrator that his overall position was frivolous or taken in
bad faith. With respect to any dispute arising after a Change in Control or
during the Protected Pre Change in Control Period, Executive shall be entitled
to reimbursement for reasonable attorneys' fees in all instances unless it is
determined by the arbitrator that Executive's overall position is frivolous or
that Executive brought it in bad faith and the Company shall not be entitled to
reimbursement even if it prevails except if Executive's overall position is
found by the arbitrator to have been frivolous or taken in bad faith.
(c) Notwithstanding the provisions of Paragraph 13(b) of this
Agreement, either party may bring a court action in equity for an injunction or
other equitable relief or for interim relief pending a decision by the
arbitrator with regard to Paragraph 8 hereof. Any court action under this
Paragraph may be brought in state or federal court within New York County, and
the parties each agree to waive any objection they may have to the in personam
jurisdiction or venue of any such court.
(d) Nothing in this Agreement shall be construed to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this agreement and any material present or future
statute, law, governmental regulation or ordinance as a result of which the
parties have no legal right to contract or perform, the latter shall prevail,
<PAGE>
16
but in such event the provision(s) of this Agreement affected shall be curtailed
and limited only to the extent necessary to bring it or them within the legal
requirements.
14. Assignment and Transfer:
(a) The Company: This Agreement shall inure to the benefit of and be
enforceable by, and may be assigned by the Company to, and only to, any
purchaser of all or substantially all of the Company's business or assets, any
successor to the Company or any assignee thereof (whether direct or indirect, by
purchase, merger, consolidation or otherwise). The Company will require any such
purchaser, successor or assignee to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such purchase, succession or assignment had taken
place in a writing delivered to the Executive.
(b) Executive: Executive's rights and obligations under this
Agreement shall not be transferable by Executive by assignment or otherwise, and
any purported assignment, transfer or delegation thereof shall be void;
provided, however, that if Executive shall die, all amounts then payable to
Executive hereunder shall be paid in accordance with the terms of this Agreement
to Executive's devisee, legatee or other designee or, if there be no such
designee, to Executive's estate.
15. Miscellaneous:
(a) Other Obligations: Executive represents and warrants that
neither his employment with the Company nor his performance of his obligations
hereunder will conflict with or violate or otherwise are inconsistent with any
other obligations, legal or otherwise, which Executive may have.
(b) Cooperation: Following termination of employment with the
Company, Executive shall cooperate with the Company, as reasonably requested by
the Company and at the Company's expense for Executive's out-of-pocket expenses,
to effect a transition of Executive's responsibilities and to ensure that the
Company is aware of all material matters being handled by Executive.
(c) Entire Agreement: This Agreement contains the entire agreement
and understanding between the parties hereto in respect of the subject matter
hereof and supersedes, cancels and annuls any prior or contemporaneous written
or oral agreements, understandings, commitments and practices between them
respecting the subject matter hereof, including all prior employment agreements,
if any, between the Company and Executive, which agreement(s) hereby are
terminated and shall be of no further force or effect.
(d) Amendment: This Agreement may be amended or terminated only by a
writing which makes express reference to this Agreement as the subject of such
amendment or termination and which is signed by Executive and, on behalf of the
Company, by its duly authorized officer.
<PAGE>
17
(e) Severability: If any term, provision, covenant or condition of
this Agreement or part thereof, or the application thereof to any person, place
or circumstance, shall be held to be invalid, unenforceable or void, the
remainder of this Agreement and such term, provision, covenant or condition
shall remain in full force and effect, and any such invalid, unenforceable or
void term, provision, covenant or condition 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 and the remainder of this Agreement valid,
enforceable and lawful. In this regard, Executive acknowledges that the
provisions of Paragraphs 8(a) and 8(b) of this Agreement are reasonable and
necessary for the protection of the Company.
(f) Construction: The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect in construing
or interpreting this Agreement. The language in all parts of this Agreement
shall be in all cases construed according to its fair meaning and not strictly
for or against the Company or Executive. The use herein of the word "including,"
when following any general provision, sentence, clause, statement, term or
matter, shall be deemed to mean "including, without limitation". As used herein,
"Company" shall mean the Company and its parents and subsidiaries and any
purchaser of, successor to or assignee (whether direct or indirect, by purchase,
merger, consolidation or otherwise) of all or substantially all of the Company's
business or assets which is obligated to perform this Agreement by operation of
law, agreement, or otherwise, and the parent, if any, thereof. As used herein,
the words "day" or "days" shall mean a calendar day or days.
(g) Non-waiver: Neither any course of dealing nor any failure or
neglect of either party hereto in any instance to exercise any right, power or
privilege hereunder or under law shall constitute a waiver of any other right,
power or privilege or of the same right, power or privilege in any other
instance. All waivers by either party hereto must be contained in a written
instrument signed by the party to be charged and, in the case of the Company, by
its duly authorized officer.
(h) Remedies for Breach: The parties hereto agree that (i) Executive
is obligated under this Agreement to render personal services during the Term of
a special, unique, unusual, extraordinary and intellectual character, thereby
giving this Agreement peculiar value, and (ii) in the event of a breach or
threatened breach by either party of any covenant in Paragraph 8 hereof, the
injury or imminent injury to the value and the goodwill of the Company's
business or to the Executive could not be reasonably or adequately compensated
in damages in an action at law. Accordingly, each party expressly acknowledges
that the other party shall be entitled to specific performance, injunctive
relief or any other equitable remedy against the breaching party, without the
posting of a bond and without limitation as to any other remedy, in the event of
any breach or threatened breach of any provision of Paragraph 8 of this
Agreement. The rights and remedies of the parties hereto are cumulative and
shall not be exclusive, and each such party shall be entitled to pursue all
legal and equitable rights and remedies and to secure performance of the
obligations and duties of the other under this Agreement, and the enforcement of
one or more of such rights and remedies by a party shall in no way preclude such
party from pursuing, at the same time or subsequently, any and all other rights
and remedies available to it.
<PAGE>
18
(i) Notices: Any notice, request, consent or approval required or
permitted to be given under this Agreement shall be sufficient if in writing,
and if and when sent by certified or registered mail, return receipt requested,
with postage prepaid, to Executive's residence (as reflected in the Company's
records or as otherwise designated by Executive on thirty (30) days prior
written notice to the Company), or to the Company's principal executive office,
attention: General Counsel, as the case may be. All such notices, requests,
consents and approvals so sent shall be effective upon being deposited in the
United States mail. However, the time period in which a response thereto must be
given shall commence to run from the date of receipt on the return receipt of
the notice, request, consent or approval by the addressee thereof. Rejection or
other refusal to accept, or the inability to deliver because of changed address
of which no notice was given as provided herein, shall be deemed to be receipt
of the notice, request, consent or approval sent.
(j) Assistance in Proceedings, Etc.: Executive shall, without
additional compensation, but at Company expense, during the Term, upon
reasonable notice and at reasonable times, and after the Term, as reasonably
requested considering Executive's other commitments, furnish such information
and proper assistance to the Company as may reasonably be required by the
Company in connection with any legal or quasi-legal proceeding, including any
external or internal investigation, involving the Company or any of its
affiliates or in which any of them is, or may become, a party, and, in all
cases, which relate to activities in which Executive was involved during the
Term and in which Executive's interests are not adverse to those of the Company.
(k) Insurance and Indemnification:
(i) Executive shall be covered under any director and officer
insurance policy obtained by the Company, if any, and shall be entitled to
benefit from any officer indemnification arrangements adopted by the Company, if
any, to the same extent as other directors or senior executive officers of the
Company (including the right to such coverage or benefit following Executive's
employment to the extent liability continues to exist); provided, however that
Executive acknowledges and agrees that the Company shall not be obligated, in
any way, except as provided in (ii) below, to obtain such insurance coverage or
to adopt any such indemnification arrangements for such officers.
(ii) The Company shall indemnify the Executive to the fullest
extent permitted by law against any claim or suits arising out of any act or
inaction in connection with his positions.
(l) Survival: This Agreement and the respective obligations, rights
and benefits of the Company and the Executive as set forth herein shall survive
the cessation or termination of Executive's employment with the Company and the
termination of the Term in accordance with the terms set forth herein.
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19
(m) Counterparts: This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same agreement. Facsimile signatures of
any party will have the same force and effect as original signatures.
ATARI, INC.
By: /s/ Harry Z. Glantz
--------------------------------------
By: Senior Vice President, Human Resource
ACCEPTED AND AGREED TO:
/s/ James Caparro
--------------------------
James Caparro
<PAGE>
EXHIBIT A
PRE-APPROVED BOARD MEMBERSHIPS