EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 1, 2000 (the "Effective Date") between
Xxxxxx Xxxxxx Communications Inc., a New York corporation (the "Company"), and
Xxxxx Xxxxxx (the "Executive").
WHEREAS, the Company is a global communications holding company with ownership
interests in subsidiaries and affiliates that are engaged in the advertising
agency business, the multimedia production business, the business of planning
and buying of media time and space and related businesses (the Company and the
subsidiaries, affiliates and joint ventures in which it from time to time has
equity interests are hereinafter referred to collectively as the "Xxxxxx Xxxxxx
Group");
WHEREAS, the Company and the Executive desire to enter into this Agreement to
provide for the employment of the Executive by the Company as its Chairman and
Chief Executive Officer, upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Employment. The Company hereby employs the Executive and the Executive
hereby agrees to be employed by the Company upon the terms and subject
to the conditions contained in this Agreement. The initial term of
employment of the Executive by the Company pursuant to this Agreement
(the "Initial Term") shall commence on the Effective Date and, unless
earlier terminated, shall end on the second annual anniversary of the
Effective Date; provided that the term of this Agreement shall
automatically be extended for two additional years as of the day
immediately following the end of the Initial Term and as of the day
immediately following the end of each subsequent two-year extended
term hereof unless the Company shall have terminated the automatic
extension provisions of this sentence by giving written notice to the
Executive at least 30 days prior to the then applicable termination
date. (The Initial Term and any extension of the term of this
Agreement pursuant to this Section 1 are collectively referred to
herein as the "Employment Period.").
2. Position and Duties. The Company shall employ the Executive during the
Employment Period with the title of Chairman and Chief Executive
Officer. The Executive shall also serve as a member of the Company's
Board of Directors (the "Board") (subject to continued election by the
Company's stockholders). The Executive shall report directly to the
Board. Subject to the powers, authority and responsibilities vested in
the Board and in duly constituted committees of the Board, the
Executive shall have the authority, duties and responsibilities
commensurate with his position and title as the principal executive
officer of the Company and such other duties and responsibilities (not
inconsistent with his
position) as are reasonably assigned to him from time to time by the
Board or any committee thereof. During the Employment Period, the
Executive shall perform faithfully and loyally and to the best of the
Executive's abilities his duties hereunder, shall devote his full
business time, attention and efforts to the affairs of the Xxxxxx
Xxxxxx Group and shall use his reasonable best efforts to promote the
interests of the Company. Notwithstanding the foregoing, the Executive
may engage in charitable, civic or community activities, provided that
they do not interfere with the performance of the Executive's duties
hereunder, and, with the prior approval of the Board, may serve as a
director of any business corporation; provided that such service does
not violate the terms of any of the covenants contained in Section 8
hereof.
3. Compensation.
Annual Base Salary. During the Employment Period, the Company
shall pay to the Executive an annual base salary at the rate
of $360,000 per annum in accordance with the Company's regular
payroll practices. During the term of this Agreement, the Base
Compensation shall be increased by an amount equal to four
percent (4%) of existing Base Compensation at the end of each
year of employment.
Incentive Compensation. During the Employment Period, the
Executive shall be entitled to participate in the Company's
Executive Compensation Program (and any other incentive
compensation program that may apply generally to senior
executives of the Company from time to time), as such Program
applies to similarly situated senior executives and as such
Program may be amended from time to time.
Other Benefits. During the Employment Period, the Executive
shall be entitled to participate in the Company's employee
benefit plans and programs and fringe benefits that are
generally available to senior executives of the Company from
time to time. All benefits referred to in this Section 3c are
hereinafter referred to as the "Employee Benefits."
Expense Reimbursement. During the Employment Period, the
Company shall reimburse the Executive for all proper expenses
incurred by him in the performance of his duties hereunder in
accordance with the Company's policies and procedures for
senior executives.
Consulting Period and Benefits.
(a) Commencement. At the end of the scheduled term of the Employment
Period (as extended, if applicable), if the Executive retires from the Company
or the Company decides not to extend the Employment Period, then the Executive
shall become a consultant to the Company for the two-year period beginning on
the day following the
last day of the Employment Period (the "Consulting Period"). In addition, if the
Executive resigns from the Company prior to the end of the Employment Period
(other than upon a "Qualifying Termination," as defined in Section 5(a) below),
then the Consulting Period and corresponding benefits shall apply, subject to
the vesting requirements set forth in subsection (d) below.
(b) Duties and Responsibilities. During the Consulting Period, the Executive
shall make himself available, upon reasonable notice, to perform services for
the Company which shall be related to such projects and matters as the Board or
the Chief Executive Officer of the Company may designate from time to time and
which shall be commensurate with the Executive's years of experience and level
of skill. The Executive shall not be required to devote more than the equivalent
of 10 full business days during any calendar quarter to the performance of such
services.
(c) Consulting Benefits. During the Consulting Period, the Executive shall
be paid an annual cash benefit equal to the vested portion of 75% of the average
of the Executive's annual base salary over the last three full calendar years of
his employment with the Company, with the vested portion determined in
accordance with subsection (d) below. These consulting payments shall be made no
less frequently than monthly, and shall be subject to any applicable tax
withholding and tax reporting requirements. The Company shall also reimburse the
Executive in accordance with the Company's policies and procedures for all
proper expenses incurred by him in the performance of his duties and
responsibilities during the Consulting Period.
(d) Vesting. The Executive's annual cash benefit described in subsection c
above shall vest one-fifth per year beginning on the first anniversary of the
date the Executive commenced serving as Chief Executive Officer of the Company,
such that the benefit shall vest one-fifth on each of April 1, 2002, 2003, 2004,
2005, and 2006 (subject to the Executive's continued employment with the Company
through those dates).
(e) Termination of Consulting Period. The Consulting Period shall terminate
prior to the end of the two-year period, and the benefits described in
subsection c above shall immediately cease, upon the occurrence of either of the
following: (i) the material failure by the Executive to perform the reasonably
requested duties and responsibilities described in subsection (b) above (subject
to written notice by the Company and a reasonable opportunity to cure) or (ii) a
material breach by the Executive of this Agreement or other action by the
Executive that constitutes "Cause" under Section 5(b) (subject to written notice
by the Company and a reasonable opportunity to remedy any condition, conduct,
action or inaction of the Executive giving rise to the violation or breach if
such violation or breach is remediable). Notwithstanding the foregoing, if the
Executive dies or becomes permanently disabled (see "Disability" as defined in
Section 5(a) below) during the Consulting Period, then the vested consulting
benefits shall continue to be paid to the Executive or his estate, as
applicable, for the remainder of the five-year Consulting Period. The foregoing
shall not be construed as limiting any other rights or remedies that may be
available to the Company upon the Executive's breach of any provision of this
Agreement.
5. Termination of Employment Period.
(a) Qualifying Termination. For purposes of this Agreement, "Qualifying
Termination" means the occurrence of any of the following events prior to the
expiration of the Employment Period, as extended, if applicable:
(i) termination of the Executive's employment by the Company without Cause
(as defined in subsection (b) below), (ii) termination of the Executive's
employment by the Company on account of the Executive having become unable (as
determined by the Company in good faith) to perform regularly his duties
hereunder by reason of illness or incapacity for a period of more than six
consecutive months (termination for "Disability"), (iii) termination of the
Executive's employment on account of the Executive's death, or (iv) termination
of the Executive's employment by the Executive due to and upon the occurrence,
without the Executive's express written consent, of any of the following events:
(1) the assignment to the Executive of any duties that either (A) are
inconsistent in any material respect with the Executive's position, duties,
responsibilities or status with the Company at the date of this Agreement (or
subsequent hereto if such new position(s), duties, responsibilities or status
are agreed to by the Executive) or (B) result in a material diminution of the
Executive's responsibilities, (2) a material adverse change in the Executive's
reporting responsibilities, titles or offices with the Company, (3) a material
breach of the Company's obligations set forth in this Agreement, (4) a decrease
in the Executive's base salary, or (5) any requirement of the Company that the
location where the Executive is based be materially changed.
For purposes of this Agreement, an isolated, insubstantial and inadvertent
action taken by the Company in good faith and which is remedied by the Company
promptly (the later of 60 days or as soon as reasonably practicable) after
receipt of written notice thereof given by the Executive shall not constitute a
basis for a Qualifying Termination.
(b) Definition of Cause. The Company may terminate the Executive's
employment immediately for "Cause" if, in the reasonable determination of the
Board or the Compensation Committee of the Board, as set forth in an action of
the Board or such Committee setting forth in reasonable detail the reasons for
such termination, (i) the Executive engages in conduct that violates significant
policies of the Company after the Executive is notified by the Company that he
is engaging in conduct that violates such policies and that such conduct will be
deemed to be Cause; (ii) the Executive fails to perform the essential functions
of his job (except for a failure resulting from a bona fide illness or
incapacity) or fails to carry out the Board's reasonable directions with respect
to material duties after the Executive is notified by the Company that he is
failing to perform these essential functions or failing to carry out such
reasonable directions and that such conduct will be deemed to be Cause; (iii)
the Executive engages in embezzlement or misappropriation of corporate funds or
other acts of fraud, dishonesty or self-dealing, or commits a felony or any
significant violation of any material statutory or common law duty of loyalty to
the Company; or (iv) the Executive breaches a material provision of this
Agreement (including, but not limited to, the non-compete, non-solicitation,
confidentiality, or non-disparagement provisions in Sections 8 and 9), after the
Executive is notified by the Company that he has breached a material provision
of this Agreement and that such breach will be deemed to be Cause. Prior to any
termination of the Executive for Cause pursuant to clauses (i), (ii) or (iv) of
this Section 5(b), the Company shall give the Executive reasonable opportunity
to remedy any condition, conduct, action
or inaction of the Executive giving rise to the violation or breach of such
clause if such violation or breach is remediable.
6. Consequences of Termination of Employment Period.
(a) Benefits Upon Termination. If the Employment Period terminates for any
reason, the Executive (or the Executive's executor, administrator or other legal
representative, as the case may be) shall be entitled to receive the following
benefits:
(i) within 30 days after the amount in question is reasonably determinable
(1) base salary payable through the date of termination of employment, (2)
unpaid annual incentive compensation for the calendar year immediately preceding
the date of such termination, and (3) reimbursement of proper expenses incurred
through the date of such termination; and,
(ii) participation (by the Executive or the Executive's qualified
dependents, as the case may be) in all other applicable benefit plans or
programs in accordance with the provisions thereof applicable to terminated
employees (or their qualified dependents, as the case may be).
(b) Additional Benefits Upon Qualifying Termination. If the Employment
Period terminates prior to its scheduled expiration date, as extended if
applicable, for a reason set forth in Section 5(a), the Executive (or the
Executive's executor, administrator or other legal representative, as the case
may be) shall be entitled to receive the following additional benefits:
(i) within 30 days after the amount in question is reasonably determinable,
annual incentive compensation for the calendar year in which such termination
shall have occurred, prorated through the date of such termination based on
actual results of operations for such full calendar year; and
(ii) if the Qualifying Termination is for any reason other than death or
Disability:
(1) each stock option granted to the Executive by the Company on or
after the Effective Date then held by the Executive shall on the date of such
termination be 100% vested;
(2) for a period of two years commencing on the day immediately following
the date of termination of the employment of the Executive (the "Severance
Period"), the Executive shall be entitled to receive (A) base salary, at the
rate payable as of the date of such termination, payable in accordance with the
Company's normal payroll policies and (B) within 30 days after the amount in
question is reasonably determinable, annual incentive compensation at the higher
of (x) the rate payable to the Executive for the calendar year in which such
termination shall have occurred or (y) the average of the rates payable to the
Executive for the three calendar years (or if the Executive shall have
participated in the Company's Executive Compensation Program for fewer than
three calendar years, for such lesser number of calendar years) immediately
preceding the year in which such termination shall have occurred;
(3) during the Severance Period, the Executive shall be entitled to
participate in life insurance, medical and dental benefits on terms no less
favorable than on the termination date, subject to legal restrictions and to
modifications of general application to all similarly situated employees; and
(4) for a period of two years beginning on the day immediately following the
conclusion of the Severance Period, the Executive shall receive the annual
Consulting Period benefit described in Section 4(C) above, with all vesting
requirements deemed to be satisfied;
(iii) if the Qualifying Termination is due to the Executive's Disability, for
the two-year period beginning on the day immediately following the effective
date of the Executive's termination of employment, the Executive shall receive
the then vested portion of the annual Consulting Period benefit described in
Section 4(C) above; and
(iv) each stock option granted to the Executive by the Company on or after
the Effective Date then held by the Executive shall be exercisable to the extent
it is vested at the date of termination by the Executive or the Executive's
executor, administrator or other legal representative, as the case may be, for
up to three years after the date of termination, but in no case beyond a date 10
years following the date of grant of such option.
7. Federal and State Withholding. The Company shall deduct from the amounts
payable to the Executive pursuant to this Agreement the amount of all required
federal and state withholding taxes in accordance with the Executive's Form W-4
on file with the Company and all applicable social security and Medicare taxes.
8. Noncompetition; Nonsolicitation; Confidentiality.
(a) Covenant Not to Compete. Except with the prior written consent of the
Board, during the Employment Period (including the remaining scheduled term of
the Employment Period following the Executive's resignation or termination for
"Cause"), any Severance Period and any Consulting Period (including the period
during which consulting benefits are paid in accordance with Section 6(b)(ii) or
(iii) above):
(i) the Executive shall not engage in any activities, whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of the
stock of a corporation the securities of which are traded on a national
securities exchange or in the over-the-counter market), director, officer,
employee or otherwise, in competition with (1) the businesses conducted at the
date hereof by the Xxxxxx Xxxxxx Group or (2) any business in which the Xxxxxx
Xxxxxx Group is substantially engaged at any time during the Employment Period;
(ii) the Executive shall not solicit, directly or indirectly, any customer,
client or other business relationship of the businesses conducted by the Xxxxxx
Xxxxxx Group as of the date hereof or of any business in which the Xxxxxx Xxxxxx
Group is substantially engaged at any time during the Employment Period; and
(iii) the Executive shall not induce or attempt to persuade any employee of
the Xxxxxx Xxxxxx Group to terminate the employee's employment relationship with
the Xxxxxx Xxxxxx Group.
(b) Confidential Information and Trade Secrets. The Executive shall not, at
any time during the Employment Period or thereafter, make use of any bidding
information (or computer programs thereof) of the Xxxxxx Xxxxxx Group, nor
divulge any trade secrets or other confidential information of the Xxxxxx Xxxxxx
Group, except to the extent that such information becomes a matter of public
record, is published in a newspaper, magazine or other periodical available to
the general public or as the Company may so authorize in
writing; and when the Executive shall cease to be employed by the Company, the
Executive shall surrender to the Company all records and other documents
obtained by him or entrusted to him during the course of his employment
hereunder (together with all copies thereof) which pertain specifically to any
of the businesses covered by the covenants in Section 8(a)(i) or which were paid
for by the Xxxxxx Xxxxxx Group; provided, however, that the Executive may retain
copies of such documents as necessary for the Executive's personal records for
federal income tax purposes.
(c) Scope of Covenants; Remedies. The following provisions shall apply
to the covenants of the Executive contained in this Section:
(i) the covenants set forth in Sections 8(a)(i) and 8(a)(ii) shall apply
within all territories in which the Xxxxxx Xxxxxx Group is actively engaged in
the conduct of business during the Employment Period, including, without
limitation, the territories in which customers are then being solicited;
(ii) each party intends and agrees that if in any action before any court or
agency legally empowered to enforce the covenants contained in Sections 8(a) and
8(b) any term, restriction, covenant or promise contained therein is found to be
unreasonable and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency; and
(iii) the covenants contained in Sections 8(a) and 8(b) shall survive the
conclusion of the Executive's employment by the Company.
9. Nondisparagement; Cooperation. (a) The Executive shall not, at any time
during his employment with the Company or thereafter, make any public or private
statement to the news media, to any Xxxxxx Xxxxxx Group competitor or client, or
to any other individual or entity, if such statement would disparage any of the
Xxxxxx Xxxxxx Group, any of their respective businesses or any director or
officer of any of them or such businesses or would have a deleterious effect
upon the interests of any of such businesses or the stockholders or other owners
of any of them; provided, however, that the Executive shall not be in breach of
this restriction if such statements consist solely of (i) private statements
made to any officers, directors or employees of any of the Xxxxxx Xxxxxx Group
by the Executive in the course of carrying out his duties pursuant to this
Agreement or, to the extent applicable, his duties as a director or officer, or
(ii) private statements made to persons other than clients or competitors of any
of the Xxxxxx Xxxxxx Group (or their representatives) or members of the press or
the financial community that do not have a material adverse effect upon any of
the Xxxxxx Xxxxxx Group; and provided further that nothing contained in this
Section 9(a) or in any other provision of this Agreement shall preclude the
Executive from making any statement in good faith that is required by law,
regulation or order of any court or regulatory commission, department or agency.
(b) The Company shall not, at any time during the Executive's employment
with the Company or thereafter, authorize any person to make, nor shall the
Company condone the making of, any statement, publicly or privately, which would
disparage the Executive; provided, however, that the Company shall not be in
breach of this restriction if such statements consist solely of (i) private
statements made to any officers, directors or
employees of the Xxxxxx Xxxxxx Group or (ii) private statements made to persons
other than clients or competitors of any of the Xxxxxx Xxxxxx Group (or their
representatives) or members of the press or the financial community that do not
have a material adverse effect upon the Executive; and provided further that
nothing contained in this Section 9(b) or in any other provision of this
Agreement shall preclude any officer, director, employee, agent or other
representative of any of the Xxxxxx Xxxxxx Group from making any statement in
good faith which is required by any law, regulation or order of any court or
regulatory commission, department or agency.
10. Enforcement. The parties hereto agree that the Company would be damaged
irreparably in the event that any provision of Section 8 or 9 of this Agreement
were not performed in accordance with its terms or were otherwise breached and
that money damages would be an inadequate remedy for any such nonperformance or
breach. Accordingly, the Company and its successors or permitted assigns shall
be entitled, in addition to other rights and remedies existing in their favor,
to an injunction or injunctions to prevent any breach or threatened breach of
any of such provisions and to enforce such provisions specifically (without
posting a bond or other security). Each of the parties agrees that he or it will
submit himself or itself to the personal jurisdiction of the courts of the State
of Missouri in any action by the other party to enforce an arbitration award
against him or it or to obtain interim injunctive or other relief pending an
arbitration decision.
11. Survival. Sections 8, 9 and 10 of this Agreement shall survive and
continue in full force and effect in accordance with their respective terms,
notwithstanding any termination or expiration of the Employment Period.
12. Arbitration; Certain Costs. Any dispute or controversy between the
Company and the Executive, whether arising out of or relating to this Agreement,
the breach of this Agreement, or otherwise, shall be settled by arbitration in
St.Louis, Missouri administered by the American Arbitration Association in
accordance with its Commercial Rules then in effect and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall have the authority to award any remedy or relief
that a court of competent jurisdiction could order or grant, including, without
limitation, the issuance of an injunction. However, either party may, without
inconsistency with this arbitration provision, apply to any court having
jurisdiction over such dispute or controversy and seek interim provisional,
injunctive or other equitable relief until the arbitration award is rendered or
the controversy is otherwise resolved. Except as necessary in court proceedings
to enforce this arbitration provision or an award rendered hereunder, or to
obtain interim relief, neither a party nor an arbitrator may disclose the
existence, content or results of any arbitration hereunder without the prior
written consent of the Company and the Executive. The Company and the Executive
acknowledge that this Agreement evidences a transaction involving interstate
commerce. Notwithstanding any choice of law provision included in this
Agreement, the United States Federal Arbitration Act shall govern the
interpretation and enforcement of this arbitration provision.
13. Notice. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered or five days after deposit in the United States mail,
certified and return receipt requested, postage prepaid, addressed (a) if to the
Executive, to the most recent address then shown on the employment records of
the Company, and if to the Company, to Xxxxxx Xxxxxx Communications Inc., 0000
Xxxxxxxx Xxxxxx, Xx. Xxxxx, Xxxxxxxx 00000, Attention: Chief Financial Officer,
or (b) to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
14. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is determined to be invalid, illegal or
unenforceable in any respect under applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Agreement or the
validity, legality or enforceability of such provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersedes and preempts any other prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related in any manner to the subject matter hereof.
16. Successors and Assigns. This Agreement shall be enforceable by the
Executive and the Executive's heirs, executors, administrators and legal
representatives, and by the Company and its successors and permitted assigns.
Any successor or permitted assign of the Company shall assume by instrument
delivered to the Executive the liabilities of the Company hereunder. This
Agreement shall not be assigned by the Company other than to a successor
pursuant to a merger, consolidation or transfer of all or substantially all of
the capital stock or assets of the Company.
17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Missouri without
regard to principles of conflict of laws.
18. Amendment and Waiver. The provisions of this Agreement may be amended or
waived only by the written agreement of the Company and the Executive, and no
course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
19. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original and both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
XXXXXX XXXXXX COMMUNICATIONS INC.
By: /s/ S. Xxx Xxxxx
S. Xxx Xxxxx,
Chairman of the Compensation
Committee of the Board of
Directors
EXECUTIVE:
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
