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EMPLOYMENT
AGREEMENT
AGREEMENT dated
as of December 11, 2006 (the "Effective Date") between TC Digital
Games LLC with offices at 162 S. Rancho Santa Fe Road, Suite B-30
Encinitas, CA 92024 ("Employer"), and Bryan C. Gannon ("Employee"),
162 S. Rancho Santa Fe Road, Suite B-30 Encinitas, CA 92024 .
W I T N E S S E T H :
WHEREAS,
Employer desires to retain the services of Employee and Employee
desires to be employed by Employer upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE,
in consideration of the covenants herein contained, the parties
hereto agree as follows:
1. Employment and Duties
. Employer hereby employs Employee and Employee hereby agrees to
serve as President and Chief Executive Officer of Employer.
Employee shall have full supervision and control of the business
and affairs of Employer subject in all cases to the overall
authority of the Management Committee of Employer and to the terms
and conditions of the Operating Agreement of Employer. Employee
agrees to perform such services for Employer consistent with
Employee’s position as shall, from time to time, be assigned
to Employee by the Employer. Employee shall also perform such
services customary to such office as are necessary for the
operations of Employer. Employee shall use Employee’s best
efforts to promote the interests of Employer and shall devote
Employee’s full business time, energy and skill exclusively
to the business and affairs of Employer during the Term set forth
below in Paragraph 2.
2. Term of
Employment.
(a) The term of Employee’s
employment hereunder shall commence on December 11, 2006 and shall
conclude on December 31, 2009 (the "Initial Term"), unless
terminated earlier in accordance with Paragraph 8 herein or
extended in accordance with Paragraph 2(b) herein.
(b) The Initial Term of this Agreement
shall be automatically extended for successive one (1) year
periods, beginning on January 1 of each year (beginning 2010)
unless prior written notice has been provided by either party
pursuant to Paragraph 15 herein, within one hundred eighty (180)
days prior to the expiration of the Initial Term or the then
current Term, as the case may be, indicating an intention not to
renew this Agreement (a "Non-Renewal Notice"). The Initial Term and
the period of employment, if any, following the Initial Term is
referred to herein as the "Term."
3. Compensation.
(a) Salary . As compensation for
Employee’s services during the Term, Employer shall pay
Employee a salary at the rate of Three Hundred Fifty Thousand
Dollars ($350,000) per annum for each calendar year during the Term
in regular periodic payments in accordance with Employer’s
policy (as may be increased from time to time, the "Salary"). Such
Salary shall be prorated for any partial year of employment on the
basis of a 365-day fiscal year. 4Kids Entertainment, Inc., an
affiliate of Employer ("4Kids"), acknowledges and agrees that it
shall guarantee the obligations of Employer, which are set forth in
this Paragraph 3(a), as evidenced by its signature hereto.
(b) Bonus .
(i) Employee shall receive a signing
bonus of $125,000 to be paid no later than January 15, 2007.
Employee shall be entitled to receive to such bonuses as shall be
determined by the Management Committee of the Employer in its sole
discretion, subject to Paragraph 3(b)(ii) below.
(ii) If Employer attains 60% of the
projected revenues approved by the Management Committee (as defined
in Employer’s Operating Agreement) in the annual budgeting
process for calendar year 2007 and/or 2008, it being agreed and
understood that the projected revenues approved by the Management
Committee may not be more than twenty percent (20%) higher than the
projected revenues contained in the Annual Budget (as defined in
Employer’s Operating Agreement) delivered by the Officers (as
defined in Employer’s Operating Agreement) of Employer for
approval by the Management Committee (the "Projected Revenues"),
then Employee shall receive a minimum bonus of $100,000 if the
Projected Revenues shall have been met for calendar year 2007 and a
minimum bonus of $200,000 if the Projected Revenues shall have been
met for calendar year 2008. The Projected Revenues for 2007
approved by the Management Committee are attached hereto as
Attachment 1 and made a part hereof. Any bonus payable pursuant to
this subparagraph 3(b) (ii) shall be paid by no later than March
15th of the year immediately succeeding the calendar year to which
such bonus pertains.
(iii) 4Kids acknowledges and agrees that
it shall guarantee the payment obligations of Employer, which are
set forth in this Paragraph 3(b), as evidenced by its signature
hereto.
(c) Withholding . All payments of
compensation shall be made in appropriate installments to conform
with the regular payroll dates for salaried personnel of Employer.
Employer shall be entitled to deduct from each salary payment, all
deductions as may be required by law, including, without
limitation, deductions for federal, state and local income taxes
and FICA.
(d) Fringe Benefits . During the
Term, Employee shall be entitled to participate in all insurance,
and other benefits (collectively "Fringe Benefits") as are now, or
hereafter may be, established by Employer for the benefit of all
employees of Employer, subject, however, to the provisions of the
various benefit plans and programs in effect from time to time.
(e) Vacation . Employee shall be
entitled to accrued vacation at the rate of three (3) weeks per
calendar year during the Term, which vacation shall only be taken
at such times that will not materially interfere with the
performance of Employee’s duties and responsibilities
hereunder. Any vacation days not used by Employee may not be
accrued for future years. All vacation days must be utilized in
accordance with the policy of Employer.
(f) Expenses . Employer shall
reimburse Employee in conformity with the expense reimbursement
practices of Employer for the reasonable, ordinary and necessary
business expenses incurred by Employee in the performance of
Employee’s duties hereunder. Employee shall submit all
receipts, invoices and other such documents evidencing such
expenses as may be required by the policy of Employer.
4. Place of
Employment.
During the Term,
Employee shall be required to perform Employee’s duties at
the principal office of Employer in the San Diego metropolitan
area. Employee shall undertake all reasonable travel required by
Employer in connection with the performance of Employee’s
duties hereunder.
5. Non-Competition and Protection of Confidential
Information.
(a) Employee agrees that
Employee’s services hereunder are of a special, unique,
extraordinary and intellectual character and his position with
Employer places him in a position of confidence and trust with the
clients and employees of Employer. Employee acknowledges that
inasmuch as the business of Employer is carried on in several
states of the United States and that it is the intention of
Employer to continue to expand the geographic area in which
Employer engages in its business and marketing efforts and
accordingly, it is reasonable that the restrictive covenants set
forth below are not limited by specific geographic area but by the
location of Employer’s clients and potential clients.
Employee further acknowledges that the rendering of services to the
clients of Employer necessarily requires the disclosure of
confidential information and trade secrets of Employer (such as,
without limitation, production methods, marketing and licensing
plans and strategies for Employer and marketing budgets). Employee
and Employer agree that in the course of employment hereunder,
Employee has and will continue to develop a personal
acquaintanceship and relationship with Employer’s clients,
and knowledge of those clients’ affairs and requirements.
Employee acknowledges that Employer’s relationships with its
established clientele may therefore be placed in Employee’s
hands in confidence and trust. Employee consequently agrees that it
is reasonable and necessary for the protection of the goodwill and
business of Employer that Employee make the covenants contained
herein.
Accordingly,
Employee agrees that while he is in Employer’s employ and for
a period of one (1) year thereafter, Employee shall not directly or
indirectly:
(i) attempt in any manner to solicit
from any client (except on behalf of Employer) business of the type
performed by Employer or to persuade any client of Employer to
cease to do business or to reduce the amount of business which any
such client has customarily done or contemplates doing with
Employer;
(ii) employ or attempt to employ or
assist anyone else to employ any person who is then or at any time
during the preceding year was in Employer’s employ; or
(iii) render any services of the type
rendered by Employer to its clients to or for any client of
Employer unless such services are rendered as an employee or
consultant of Employer.
Notwithstanding
anything herein to the contrary, the term "client" shall mean (i)
any person (whether individual or business entity) who is the
owner, in whole or in part, of any rights to any property
represented by Employer or whose television series is being
produced or adapted by Employer; and (ii) any person (whether
individual or business entity) who was a client or licensee of
Employer at any time during the one (1) year period immediately
preceding the date of termination of employment.
(b) Employee also agrees that either
during the Term or at any other time thereafter, Employee shall not
divulge to anyone (other than Employer or any persons designated by
Employer) any knowledge or information of any type whatsoever of a
confidential nature relating to the business of Employer or its
clients including, without limitation, all types of trade secrets,
business strategies or marketing, licensing, advertising and/or
promotional plans. Employee further agrees not to disclose, publish
or make use of any such knowledge or information of a confidential
nature other than in the performance of Employee’s duties
hereunder without the prior written consent of Employer. For
purposes of this paragraph, the term "information" shall not
include information which becomes public knowledge other than
through a breach of this covenant by Employee or any confidential
information that Employee is required to disclose in any judicial
or administrative proceeding pursuant to any subpoena or court
order.
(c) In th
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