Employment Agreement Richard Merrick

EXHIBIT 10.43


EMPLOYMENT AGREEMENT


EMPLOYMENT AGREEMENT dated as of April 20, 1998 (this "Agreement"), by and between 7TH LEVEL, INC., a Delaware corporation (the "Company"), and RICHARD S. MERRICK ("Executive").


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WHEREAS, the Company desires to employ Executive as Chief Executive Officer of the Company on the terms and conditions hereinafter set forth and Executive desires to accept such employment.


NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties agree as follows:


1. Employment.


1.1 Subject to the terms and conditions of this Agreement, the Company agrees to employ Executive during the Term (as herein defined). Executive shall be employed as Chief Executive Officer of the Company and as such shall report to the Chairman of the Board of Directors of the Company and the Board of Directors of the Company. As Chief Executive Officer of the Company, Executive shall perform such duties and responsibilities as are customarily performed by the chief executive officer of a company the size and nature of the Company, and such other managerial duties and responsibilities with the Company which are appropriate for his position at the Company as, from time to time, may be assigned to him by the Chairman of the Board of Directors of the Company or the Board of Directors of the Company.


1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts employment hereunder and agrees to devote his full working time and efforts to the performance of services, duties and responsibilities in connection therewith. Nothing in this Agreement shall preclude Executive, so long as, such activities are not prohibited under Section 9.2 hereof and, in the reasonable determination of the Board of Directors of the Company (the "Board"), such activities do not materially interfere with his duties and responsibilities hereunder, from engaging in charitable and community affairs or from managing any passive investment made by him in real estate or other property (provided that no such investment may exceed 2% of the equity securities of any entity, without the prior approval of the Board).


1.3 So long as the Executive shall serve as Chief Executive Officer of the Company, the Company shall cause Executive to be nominated for election to the Board of Directors of the Company.


2. Term of Employment. The term of this Agreement shall commence as of the date of execution hereof and continue for a period of two (2) years (the "Term"); subject to earlier termination in accordance with the terms and conditions contained in Section 6 hereof. The Term shall be extended automatically for successive one year periods unless terminated by written notice not less than ninety (90) days prior to the end of the Term or any successive one year extension by either of the parties hereto.


3. Place of Employment. During the Term, Executive shall perform his services primarily at the principal place of business of the Company which is presently located in 1110 East Collins Boulevard, Suite 122, Richardson, Texas 75081. Executive acknowledges and agrees that in connection with his employment, he may be required to travel on behalf of the Company.


4. Compensation.


4.1 Salary. The Company shall pay Executive a base salary ("Base Salary") at the rate of One Hundred Sixty Thousand Dollars ($160,000); provided, however, that the Base Salary shall be increased to Two Hundred Twenty Five Thousand Dollars ($225,000) commencing on the first anniversary of the beginning of the Term. The Base Salary shall be payable in accordance with the ordinary payroll practices of the Company for its executive officers but in no event less frequently than semi-monthly. The Base Salary shall be reviewed annually by the Board of Directors and subsequent to the initial Term hereunder may be adjusted by the Board of Directors in its sole discretion, but may not be less than the Base Salary in effect at that time. As used in this Agreement, the term "Base Salary" shall include Executive's base salary as it may be adjusted from time to time.


4.2 Bonus. Executive shall be eligible to participate in any Company wide bonus plan (or other such cash incentive plan) that may be adopted by the Company from time to time. It is acknowledged by the parties that no such plan currently exists at the Company but that Executive shall participate in any bonus plan that is adopted in the future.


4.3 Stock Options. As an inducement to Executive to enter into this Agreement, the Company has on April 20, 1998 (the "Grant Date") granted to Executive options (the "Options") to purchase 700,000 shares of common stock, par value $.01 per share, of the Company ("Common Stock") (or to the extent there is not enough authorized Common Stock available, shares of Preferred Stock approved by the Board of Directors of the Company) exercisable at a price equal to $2.00 per share of Common Stock. Pursuant to the terms of the grant, vesting of such Options shall occur as follows, provided the Executive is still then employed by the Company:


100,000 Options shall vest immediately;
200,000 Options shall vest on the first anniversary of the
Grant Date;
200,000 Options shall vest on the second anniversary of the
Grant Date;
200,000 Options shall vest on the third anniversary of the
Grant Date.


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The Company shall deliver a written and duly executed option agreement consistent with the foregoing terms as promptly as practicable following the execution of this Agreement.


The Company shall, as soon as practicable, register the Common Stock underlying all such Options under the Securities Act of 1933, as amended on a Registration Statement on Form S-8. Vested Options shall be exercisable by Executive as long as he is employed by the Company and for ninety (90) days after termination of employment and shall terminate on the tenth anniversary of the Grant Date; provided, however, that Executive agrees not to exercise any Options until the earlier of (a) six months from the date hereof and (b) the effective filing with the Secretary of State of the State of Delaware of an amendment to the Company's Certificate of Incorporation which authorizes a sufficient number of shares of Common Stock.


In the event the Company completes a secondary stock offering through a nationally recognized investment bank and thereafter the closing price of the Common Stock averages fifteen ($15.00) per share for any sixty (60) day period, Options relating to all 700,000 shares shall immediately vest and, in addition, Executive shall be granted options to purchase an additional 350,000 shares of Common Stock on the last day of such sixty (60) day period. Such additional options shall have an exercise price equal to the fair market value of the Common Stock on the date of grant and shall vest in equal installments over the three (3) years following the grant.


5. Employee Benefits.


5.1 Employee Benefit Programs, Plans and Practices. The Company shall provide Executive, during the Term, with coverage under all employee benefit programs, plans and practices which the Company makes available from time to time to its senior executives, with at least the same opportunity to participate as the other senior executives of the Company.


5.2 Expenses. Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, (in accordance with the policies and procedures established from time to time by the Company for its senior executive officers) including, without limitation, reasonable entertainment and travel expenses. The Company will promptly reimburse Executive in full for all such out-of-pocket expenses upon presentation by Executive from time to time of a proper account of such expenditures in accordance with the policies and procedures established by the Board and applicable to executive officers of the Company.


5.3 Indemnification. Executive shall be entitled, at all times, to the benefit of the maximum indemnification and advancement of expenses available from time to time under the Company's Articles of Incorporation and By-laws, and, if not set forth therein, to the maximum extent available under the laws of the Company's state of incorporation.


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6. Termination of Employment.


6.1 Good Reason. Executive shall be entitled to terminate his employment for "Good Reason." For purposes of this Agreement, "Good Reason" shall mean (without Executive's express prior written consent as a shareholder, director or otherwise) (i) failure by the Company to pay any compensation when due hereunder or (ii) a material reduction by the Company of Executive's duties in managing the Company's business or the assignment of duties to Executive by the Board of Directors of the Company inconsistent with Executive's position (except in connection with termination of Executive's employment for Cause, as a result of Disability, as a result of Executive's death or by Executive other than for Good Reason). If Executive desires to terminate his employment with the Company, he shall first give written notice of the facts and circumstances providing Good Reason to the Company, and shall allow the Company no less than ten (10) days to remedy, cure or rectify the situation giving rise to Good Reason.


6.2 Disability. If Executive shall fail during the Term, because of illness, physical or mental disability or other incapacity, for a period of 90 days in any 365 consecutive days, to render the services provided for by this Agreement or be adjudged an incompetent ("Disability") (provided that the date on which the Disability will be deemed to occur shall be such 90th day or the date on which Executive is adjudged an incompetent, as the case may be), the Company may terminate Executive's employment on not less than two (2) weeks written notice thereof, setting forth the facts and circ ...