EXHIBIT 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(XXXXX X. XXXXXX)
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement")
dated February 24, 2003 by and between American Media, Inc. (the "Company") and
Xxxxx X. Xxxxxx (the "Executive").
WHEREAS, the Company and the Executive are currently parties
to an employment agreement dated as of February 16, 1999 (the "Prior Agreement")
entered into in connection with the Agreement and Plan of Merger pursuant to
which EMP Acquisition Corp. merged with and into the Company, with the Company
constituting the surviving corporation;
WHEREAS, in connection with the transactions contemplated by
the Agreement and the Plan of Merger dated on or about February 24, 2003 (the
"Merger Agreement"), the Company and the Executive wish to amend and restate the
Prior Agreement effective upon, and conditioned upon the occurrence of, the
Closing as defined in the Merger Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein and for other good and valuable consideration, the parties
agree as follows:
1. Effectiveness/Term of Employment.
a. Effectiveness. This Agreement constitutes a
binding obligation of the parties as of the date hereof; provided that
notwithstanding any other provision of this Agreement, the operative provisions
of this Agreement shall become effective only upon the occurrence of the Closing
(as defined in the Merger Agreement) (such date being hereinafter referred to as
the "Effective Date"), at which time, this Agreement shall supercede the Prior
Agreement which shall thereupon be deemed to be terminated without further force
or effect. In the event the Merger Agreement is terminated for any reason
without the Closing having occurred, this Agreement shall be terminated without
further obligation or liability of either party, in which event the Prior
Agreement will remain in full force and effect in accordance with its terms.
b. Employment Term. Subject to the provisions of
Section 8 of this Agreement, Executive shall be employed by the Company for a
period commencing on the Effective Date and ending on the fifth anniversary of
the Effective Date (the "Employment Term") on the terms and subject to the
conditions set forth in this Agreement. Notwithstanding the preceding sentence,
commencing with the first day after the fifth anniversary of the Effective Date
and on each one year anniversary of such date thereafter (each an "Extension
Date"), the Employment Term shall be automatically extended for an additional
one-year period, unless the Company or Executive provides the other party hereto
60 days' prior written notice before the next Extension Date that the Employment
Term shall not be so extended. For the avoidance of doubt, the term "Employment
Term" shall include any extension that becomes applicable pursuant to the
preceding sentence.
2
2. Position.
a. During the Employment Term, Executive shall
serve as the Company's Chairman, Chief Executive Officer and President. In such
position, Executive shall report to the Board of Directors of the Company (the
"Board") and the Board of Directors of EMP Group L.L.C. (the "EMP Board") and
shall have duties, responsibilities and authority commensurate with his position
as Chairman, Chief Executive Officer and President of the Company, subject to
reasonable and customary oversight and review by the Board; provided that it is
understood that while the day-to-day ordinary course operations of the Company
will be managed by Executive without the requirement for approval of the EMP
Board or the Board (x) the EMP Board (in consultation with Executive) shall
establish the Company's overall strategic direction, and adopt the Company's
business plan and annual budget and (y) approval of the EMP Board or the
Executive Committee thereof (the "Executive Committee") shall be required prior
to Executive's taking the actions described on Schedule I.
Executive shall be permitted, in Executive's sole discretion
and without seeking approval of the Board or the EMP Board or Executive
Committee, to award the officers specified in Schedule I (B)(iii) hereof (the
"Senior Management Group") special bonuses not exceeding $200,000 in the
aggregate in any calendar year for all such members of the Senior Management
Group; provided, however, that no more than $25,000 may be awarded to any single
member of the Senior Management Group in any calendar year (the "Special
Bonuses"); provided, further, that the aggregate amount of any such Special
Bonuses shall reduce the Management Bonus Pool (as defined in Section 5(a)) with
respect to such calendar year.
b. Executive also shall be a member of the
Board and the EMP Board at all times during which Executive is serving as the
Company's Chief Executive Officer and President. While Executive remains an
employee of the Company, Executive agrees to serve as a member of the Board and
the EMP Board at no additional compensation.
c. During the Employment Term, Executive will
devote his full business time and best efforts to the performance of his duties
hereunder and will not engage in any other business, profession or occupation
for compensation or otherwise which would materially conflict with the rendition
of such services either directly or indirectly, without the prior written
consent of the EMP Board; provided that nothing herein shall preclude Executive
from continuing to serve on the board of directors or trustees of any business
corporation or any charitable organization on which he currently serves and
which is identified on Exhibit A hereto or, subject to the prior approval of the
EMP Board (which approval shall not be unreasonably withheld), from accepting
appointment to any additional directorships or trusteeships (other than
additional charitable or civic directorships which shall not require EMP Board
approval), provided in each case, and in the aggregate, that such activities do
not materially interfere with the performance of Executive's duties hereunder or
conflict with Section 9.
3
3. Base Salary. During the Employment Term, the Company
shall pay Executive a base salary (the "Base Salary") at the annual rate of
$1,500,000, payable in regular installments in accordance with the Company's
usual payment practices. Executive shall be entitled to such increases in his
Base Salary, if any, as may be determined from time to time in the sole
discretion of the EMP Board.
4. Bonus Opportunity.
a. One-Time Transaction Bonus. No later than 30
days following the Effective Date, the Company shall pay the Executive a
one-time transaction bonus in the amount of $1,600,000 (the "Transaction
Bonus").
b. Discretionary Bonus. In addition to any
other bonus described in this Section 4, the Executive Committee also may elect
to pay the Executive such additional amounts in respect of his performance in a
fiscal year as it shall determine appropriate (the "Discretionary Bonus");
provided, however, that in no event shall the amount of a Discretionary Bonus
exceed $250,000 for any calendar year.
5. Bonuses for Other Executives.
a. Bonus Pool For Other Executives. The Company shall
establish an annual bonus pool for Company employees (excluding Executive) of
3.0% of EBITDA each fiscal year during the Employment Term (the "Management
Bonus Pool"), subject in each case, to reduction by the amount of any Special
Bonuses awarded with respect to the applicable year pursuant to Section 2(a).
Executive will be entitled to allocate the Management Bonus Pool to Company
employees in such amounts as determined by the Executive and approved by the EMP
Board. In addition, payment of any bonuses shall be contingent upon satisfaction
of reasonable performance goals established by the EMP Board in consultation
with Executive.
b. One-Time Transaction Bonus for Other Executives.
No later than 30 days following the Effective Date, the Company shall pay, in
the aggregate, $710,000 in the form of one-time transaction bonuses to other
selected members of the senior management team (the allocation of such bonuses
to be mutually agreed by the Executive and the Executive Committee of the EMP
Board).
6. Employee Benefits. During the Employment Term,
Executive shall be provided, in accordance with the terms of the Company's
employee benefit plans as in effect from time to time, customary health
insurance and short term and long term disability insurance, retirement benefits
and fringe benefits (collectively "Employee Benefits") on the same basis as
those benefits are generally made available to other senior executives of the
Company, including a customary long-term disability plan for senior executives.
Executive shall be provided with six weeks of paid vacation per year.
4
7. Business Expenses.
a. Expenses. During the Employment Term, reasonable
business expenses incurred by Executive in the performance of his duties
hereunder (including, without limitation, those expenses set forth on Schedule
II hereto) shall be reimbursed by the Company in accordance with Company
policies to be established by Executive, subject to approval by the EMP Board.
b. Specific Agreements Regarding Expenses. Without
limiting the generality of Section 7(a), Executive shall be entitled to (i)
reimbursement for business travel expenses (including first class travel), (ii)
reimbursement for the cost of cellular and home business telecommunication
lines, (iii) use of a leased luxury car, including a driver, (iv) reasonable tax
and investment management services up to an annual maximum of $30,000 for such
services and (v) a tax gross-up payment with respect to items in clauses (i)
through (iv) above (and the items set forth on Schedule II) to the extent
necessary to offset any income taxes incurred by Executive with respect to such
items.
8. Termination. Notwithstanding any other provision of
this Agreement, Executive's entitlement to compensation and benefits following
the termination of Executive's employment with the Company for any reason shall
be limited to that set forth in this Section 8 as follows:
a. By the Company For Cause or By Executive
Resignation Without Good Reason.
(i) The Employment Term and Executive's employment
hereunder may be terminated by the Company for Cause (as defined below) or by
Executive's resignation without Good Reason (as defined in Section 8(c));
provided that Executive will be required to give the Company at least 30 days
advance written notice of a resignation without Good Reason.
(ii) For purposes of this Agreement, "Cause" shall
mean (i) Executive's conviction of, or plea of guilty or nolo contendere to, any
felony which materially adversely affects the Company, (ii) Executive's wilful
or gross misconduct in the performance of duties owed to the Company that is
intended to materially adversely affect the Company or that Executive knew or
should have known would have such effect or (iii) Executive's wilful refusal or
wilful failure to substantially perform Executive's essential duties to the
Company (other than due to Executive's illness); provided that prior to any
termination pursuant to this clause (iii), (A) the Company must provide
Executive with written notice specifically identifying the reasons the Company
believes this clause (iii) is applicable and (B) Executive must have continued
to wilfully refuse or wilfully fail to perform such essential duties for a 30
day period following receipt of such notice; and provided further that it is
understood this clause (iii) shall not permit the Company to terminate
Executive's employment for Cause because of dissatisfaction with the quality of
services provided by, or disagreement with the actions taken by, Executive in
the good faith performance of Executive's duties to the Company. Any act or
inaction believed in good faith by Executive to be in the best interests of the
Company shall not be considered "wilful" for purposes of this Agreement.
5
(iii) If Executive's employment is terminated by the
Company for Cause, or if Executive resigns without Good Reason, Executive shall
be entitled to receive (x) the Base Salary through the date of termination and
(y) such Employee Benefits, if any, as to which Executive may be entitled under
the employee benefit plans of the Company. Following such termination of
Executive's employment by the Company for Cause or resignation by Executive
without Good Reason, except as set forth in this Section 8(a), Executive shall
have no further rights to any compensation or any other benefits under this
Agreement.
b. Disability or Death.
(i) The Employment Term and Executive's employment
hereunder shall terminate upon his death and if Executive becomes physically or
mentally incapacitated and is therefore unable for a period of 180 consecutive
days or for an aggregate of 270 days in any 720 consecutive days period to
perform his duties (such incapacity is hereinafter referred to as "Disability").
Any question as to the existence of the Disability of Executive as to which
Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive and the
Company. If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination
of Disability made in writing to the Company and Executive by such physician
shall be final and conclusive for all purposes of the Agreement.
(ii) Promptly, upon termination of Executive's
employment hereunder for either Disability or death, Executive or his estate (as
the case may be) shall be entitled to receive (x) the Base Salary through the
date of termination, (y) such Employee Benefits, if any, as to which he may be
entitled under the employee benefit plans and arrangements of the Company, and
(z) any earned but unpaid portion of the Discretionary Bonus for the fiscal year
in which such termination of employment occurs (which amount shall be "earned"
as determined by the Company based on the achievement of the relevant
performance criteria, prorated for the portion of the fiscal year during which
Executive was employed by the Company). Following such termination of
Executive's employment due to death or Disability, except as set forth in this
Section 8(b), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
c. By the Company Without Cause or Resignation
by Executive for Good Reason.
(i) The Employment Term and Executive's employment
hereunder may be terminated by the Company without Cause or by Executive's
resignation for Good Reason.
(ii) For purposes of this Agreement, "Good Reason"
shall mean any of the following actions that is not cured within 30 days of
written notice by Executive to the Company that specifies the grounds for Good
Reason:
6
(A) the assignment of any duties materially
inconsistent with Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by this Agreement or any other action by the Company which results in a
substantial diminution in such position, authority, duties or responsibilities;
(B) any reduction in the Base Salary or the Employee
Benefits guaranteed pursuant to Section 6;
(C) the Company's requiring Executive to be based at
any office or location other than one in South Florida, Fairfield County,
Connecticut or the New York metropolitan area;
(D) any failure by the Company to have any successor
to the Company assume this Agreement by operation of law or otherwise; or
(E) the Company's failure to make available the
minimum amount of the Management Bonus Pool as set forth in Section 5, subject
to meeting the applicable performance goals associated therewith; or
(F) the removal of Executive from the Board or the
EMP Board.
(iii) If Executive's employment is terminated by the
Company without Cause (other than by reason of death or Disability) or if
Executive resigns for Good Reason, Executive shall be entitled to receive:
(A) Until the later of (x) twelve (12) months
following such termination and (y) the scheduled expiration of the Employment
Term (determined without regard to Executive's termination of employment but
excluding any further extensions of the Employment Term) (I) continued payment
of the Base Salary; and (II) continued health, life insurance and disability
benefits;
(B) Immediate vesting of all nonvested plan benefits
(or a cash payment in lieu thereof), including immediate vesting/exercisability
of any stock options and other equity-based compensation of the Company;
(C) Outplacement services for twelve (12) months
following such termination;
(D) the Discretionary Bonus for the fiscal year in
which such termination occurs (which amount shall be determined by the Company
based on the achievement of the relevant performance criteria) at such time as
the Company makes such annual bonus payments to other senior executives; and
(E) In the event of a Change of Control (as defined
below), a golden parachute excise tax gross-up payment (the "Parachute
Gross-Up"), if applicable (i.e, the payment of an amount, on an after-tax basis,
necessary to make Executive whole for any excise
7
taxes incurred by Executive pursuant to Section 4999 of the Internal Revenue
Code in connection with such Change of Control), up to a maximum of $4,800,000,
it being agreed that the calculation and payment of the Parachute Gross-Up shall
be subject to the provisions of Exhibit B hereto; and
(F) such Employee Benefits, if any, as to which
Executive may be entitled under the employee benefit plans and arrangements of
the Company.
Upon termination of Executive's employment by the
Company without Cause (other than by reason of Executive's death or Disability)
or by Executive's resignation for Good Reason, except as set forth in this
section 8(c), Executive shall have no further rights to any compensation or any
other benefits under this Agreement.
(iv) "Change of Control" shall mean any transaction
or series of transactions described in Section 280G(b)(2)(A)(i) of the Code or
any successor provision thereto, or the applicable final, temporary or proposed
regulations thereunder.
d. Expiration of Employment Term.
(i) Election Not to Extend the Employment Term by
Executive. In the event Executive elects not to extend the Employment Term
pursuant to Section 1, unless Executive's employment is earlier terminated
pursuant to paragraphs (a), (b) or (c) of this Section 8, Executive's
termination of employment hereunder (whether or not Executive continues as an
employee of the Company thereafter) shall be deemed to occur on the close of
business on the day immediately preceding the next scheduled Extension Date and
Executive shall be entitled to receive (x) the Base Salary through the date of
such termination hereunder and (y) such Employee Benefits, if any, as to which
he may be entitled under the employee benefit plans and arrangements of the
Company. Following such termination of Executive's employment hereunder as a
result of Executive's election not to extend the Employment Term, except as set
forth in this Section 8(d)(i), Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
(ii) Election Not to Extend the Employment Term by
the Company. In the event the Company elects not to extend the Employment Term
pursuant to Section 1, unless Executive's employment is earlier terminated
pursuant to paragraphs (a), (b) or (c) of this Section 8, Executive's
termination of employment hereunder (whether or not Executive continues as an
employee of the Company thereafter) shall be deemed to occur on the close of
business on the day immediately preceding the next scheduled Extension Date and
Executive shall be entitled to receive (w) the Base Salary through the date of
such termination hereunder, (x) such Employee Benefits, if any, as to which he
may be entitled under the employee benefit plans and arrangements of the
Company, (y) subject to Executive's compliance with the provisions of Section
9(b), the Base Salary for a period of 6 months following termination of
Executive's employment pursuant to this Section 8(d)(ii) and (z) a one time
payment equal to 50% of any Discretionary Bonus paid to Executive for the year
preceding Executive's termination pursuant to this Section 8(d)(ii) payable
within thirty (30) days following the date of
8
termination. Following such termination of Executive's employment hereunder as a
result of the Company's election not to extend the Employment Term, except as
set forth in this Section 8(d)(ii), Executive shall have no further rights to
any compensation or any other benefits under this Agreement
(iii) Continued Employment Beyond the Expiration of
the Employment Term. Unless the parties otherwise agree in writing, continuation
of Executive's employment with the Company beyond the expiration of the
Employment Term shall be deemed an employment at will and shall not be deemed to
extend any of the provisions of this Agreement and Executive's employment may
thereafter be terminated at will by either Executive or the Company; provided
that the provisions of Sections 9, 10 and 11 of this Agreement shall survive any
termination of this Agreement or Executive's termination of employment
hereunder.
e. Notice of Termination. Any purported
termination of employment by the Company or by Executive (other than due to
Executive's death) shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 12(h) hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of employment under the provision so indicated.
9. Non-Competition; Non-Solicitation. Executive
acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its affiliates and accordingly agrees as follows:
a. During the Employment Term and for a period
of twelve (12) months following Executive's termination of employment with the
Company for any reason other than pursuant to Section 8(d)(ii), Executive will
not directly or indirectly (i) engage in any publishing venture that directly
competes with the DSI business of the Company or one or more of the properties
or magazines of the Company, (ii) enter into the employ of, or render any
services to, any person engaged in any publishing venture that directly competes
with the DSI business of the Company or one or more of the properties or
magazines of the Company, (iii) acquire a financial or equity interest, or
otherwise become actively involved with, any person engaged in any publishing
venture that directly competes with the DSI business of the Company or one or
more of the properties or magazines of the Company directly, or indirectly, as
an individual, partner, shareholder, officer, director, principal, agent,
trustee or consultant, (iv) interfere with business relationships between the
Company and customers or suppliers of the Company or solicit, induce or entice
any customers or suppliers of the Company to do business with any entity that
competes with the DSI business of the Company or one or more of the properties
or magazines of the Company; or (v) solicit, induce or entice any employee of
the Company to leave his or her employment or hire any such employee who has
left the employment of the Company within twelve (12) months after the date of
his or her termination of employment.
b. In the event Executive is terminated
pursuant to Section 8(d)(ii), Executive will not directly or indirectly for a
period of six (6) months following such termination
9
(i) engage in any publishing venture that directly competes with the DSI
business of the Company or one or more of the properties or magazines of the
Company, (ii) enter into the employ of, or render any services to, any person
engaged in any publishing venture that directly competes with the DSI business
of the Company or one or more of the properties or magazines of the Company,
(iii) acquire a financial or equity interest, or otherwise become actively
involved with, any person engaged in any publishing venture that directly
competes with the DSI business of the Company or one or more of the properties
or magazines of the Company directly, or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or consultant, (iv)
interfere with business relationships between the Company and customers or
suppliers of the Company or solicit, induce or entice any customers or suppliers
of the Company to do business with any entity that competes with the DSI
business of the Company or one or more of the properties or magazines of the
Company, or (v) solicit, induce or entice any employee of the Company to leave
his or her employment or hire any such employee who has left the employment of
the Company within twelve (12) months after the date of his or her termination
of employment.
c. Notwithstanding anything to the contrary in
this Agreement, the Executive may, directly or indirectly own, solely as an
investment, securities of any person engaged in the business of the Company or
its affiliates which are publicly traded on a national or regional stock
exchange or on the over-the-counter market if the Executive (i) is not a
controlling person of, or a member of a group which controls, such person and
(ii) does not, directly or indirectly, own 5% or more of any class of securities
of such person.
d. It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained in this
Section 9 to be reasonable, if a final judicial determination is made by a court
of competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive,
the provisions of this Agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
10. Confidentiality. Except as required by law, Executive
will not at any time (whether during or after his employment with the Company)
disclose or use for his own benefit or purposes or the benefit or purposes of
any other person, firm, partnership, joint venture, association, corporation or
other business organization, entity or enterprise other than the Company and any
of its subsidiaries or affiliates, any trade secrets, information, data, or
other confidential information relating to customers, development programs,
costs, marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or affiliate
of the Company, provided that the foregoing shall not apply to information which
is not unique to the Company or which is generally known to the industry or the
public other than as a result of Executive's breach of this covenant. Executive
agrees that upon
10
termination of his employment with the Company for any reason, he will return to
the Company immediately all memoranda, books, papers, plans, information,
letters and other data, and all copies thereof or therefrom, in any way relating
to the business of the Company and its affiliates, except that he may retain
personal notes, notebooks and diaries that do not contain confidential
information of the type described in the preceding sentence. Executive further
agrees that he will not retain or use for his account at any time any trade
names, trademark or other proprietary business designation used or owned in
connection with the business of the Company or its affiliates.
11. Specific Performance. Executive acknowledges and
agrees that the Company's remedies at law for a breach or threatened breach of
any of the provisions of Section 9 or Section 10 would be inadequate and, in
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach (other than any immaterial breach or immaterial threatened
breach of Section 10), in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to cease making any payments or providing
any benefit otherwise required by this Agreement and obtain equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
12. Miscellaneous.
a. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to conflicts of laws principles thereof.
b. Entire Agreement/Amendments. This Agreement
contains the entire understanding of the parties with respect to the employment
of Executive by the Company and, upon the occurrence of the Effective Date,
shall supercede the Prior Agreement, which shall thereupon be terminated without
further force or effect. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This
Agreement may not be altered, modified, or amended except by written instrument
signed by the parties hereto.
c. No Waiver. The failure of a party to insist
upon strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
d. Severability. In the event that any one or
more of the provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
11
e. Assignment. This Agreement shall not be
assignable by Executive. This Agreement may be assigned by the Company to a
company which is a successor in interest to substantially all of the business
operations of the Company. Any assignment by the Company shall become effective
when the Company notifies the Executive of such assignment or at such later date
as may be specified in such notice. Upon such assignment, the rights and
obligations of the Company hereunder shall become the rights and obligations of
such successor company, provided that any assignee expressly assumes the
obligations, rights and privileges of this Agreement.
f. No Mitigation. Except as otherwise expressly
provided in this Agreement, Executive shall not be required to mitigate the
amount of any payment provided for pursuant to this Agreement by seeking other
employment or otherwise.
g. Successors; Binding Agreement. This
Agreement shall inure to the benefit of and be binding upon personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devises and legatees.
h. Notice. For the purpose of this Agreement,
notices and all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the execution page of this
Agreement, provided that all notices to the Company shall be directed to the
attention of its General Counsel, with a copy to Evercore Partners, Inc., 00 X.
00 (xx) Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; Attention: Xxxxxx Xxxxxxx, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
i. Withholding Taxes. The Company may withhold
from any amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law or
regulation.
j. Legal Fees. The Company shall reimburse
Executive for the reasonable fees of legal counsel in connection with the
negotiation and preparation of this Agreement. In addition, the Company will
reimburse Executive for all reasonable costs, including reasonable attorneys'
fees, incurred by Executive in any action to enforce Executive's rights under
this Agreement if Executive substantially prevails in such action.
k. Counterparts. This Agreement may be signed
in counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
American Media, Inc.
/s/ Xxxxxxx Xxxxxx /s/ Xxxxx X. Xxxxxx
--------------------- -------------------------------
By: Xxxxxxx Xxxxxx Xxxxx X. Xxxxxx
Title: Senior Vice President,
General Counsel and
Secretary
Address: 0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxx.
Xxxx Xxxxx, XX 00000
SCHEDULE I
(APPROVALS)
Please note that any definitions used in this Schedule I shall have the meaning
given to them in the form of Fifth Amended and Restated Limited Liability
Company Agreement and Investors Rights Agreement of EMP Group L.L.C. (the "LLC
Agreement"), which is attached as Exhibit A to the Merger Agreement.
(A) Actions Requiring Approval of the LLC Board:
(i) declaration of voluntary bankruptcy, insolvency,
reorganization or any assignment for the benefit of
creditors;
(ii) any merger, consolidation, exchange offer,
recapitalization, liquidation or dissolution;
(iii) the sale, transfer, grant of permission to use or disposal
of or encumbrance of any assets outside ordinary course of
business consistent with past practice;
(iv) any transaction with an Affiliate of the LLC, the Company
or any of the Company's subsidiaries other than (y) annual
monitoring fees of the Evercore Member and the THL Member
and (z) transactions entered into in the ordinary course of
business, which are not material;
(v) subject to the provisions of Section 10.7 of the LLC
Agreement, amendments of (x) the LLC Agreement, (y) the
certificate of incorporation of the Company and any of the
Company's subsidiaries, and/or (z) bylaws of the Company
and any of the Company's subsidiaries;
(vi) acquiring or agreeing to acquire by merger, consolidation
or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation,
partnership, joint venture, association or other business
organization or division thereof; for the avoidance of
doubt, (a) ordinary course transactions involving joint
developments of published materials and (b) any other
investments entered into the ordinary course of business so
long as such investment is not material to the Company and
its subsidiaries taken as a whole shall not require prior
LLC Board approval pursuant to this clause (vi);
(vii) the creation, incurrence, guarantee or assumption of any
debt by the LLC, the Company or any of the Company's
subsidiaries, except for borrowings under revolving credit
facilities to fund working capital requirements;
(viii) investments in any form in any entities other than existing
wholly-owned subsidiaries of the LLC or newly-created
subsidiaries of the LLC, which are approved by the LLC
Board; provided, that, (a) ordinary course transactions
involving joint developments of published materials and (b)
any other investments entered into the ordinary course of
business so long as such investment is not material to the
Company and its subsidiaries taken as a whole shall not
require
14
prior LLC Board approval pursuant to this clause (viii);
(ix) adoption of the annual operating budget and capital budget
for the LLC, the Company or any of the Company's
subsidiaries;
(x) any change in the number of authorized members of the LLC
Board, the Board of the Company, any board of directors of
any of the Company's subsidiaries or any creation of new
committees of the LLC Board, the Board of the Company or
any board of directors of any of the Company's
subsidiaries; and
(xi) subject to this Agreement, any other actions determined by
the LLC Board in its sole and absolute discretion.
(B) Actions Requiring Approval by the LLC Executive Committee or the
LLC Board:
(i) authorize for issuance, issue, grant, sell, deliver,
dispose of, pledge or otherwise encumber any of Class A
Units, Class B Units, such other Units as may be authorized
by the LLC Board, any securities of the Company, any
securities of any of the Company's subsidiaries or
securities convertible into or rights, warrants, options to
acquire any such Units or securities;
(ii) material deviations from the annual operating budget or
capital budget of the LLC, the Company or any of the
Company's subsidiaries;
(iii) the hiring or termination of any of the following officers
of the Company and its subsidiaries, including: (A) the
Executive Vice President/Editorial Director--Tabloids; (B)
the Senior Vice President/Group Editorial Director of
Shape, Fit Pregnancy and Natural Health; (C) the Executive
Vice President/Chief Financial Officer; (D) the Executive
Vice President/Chief Marketing Officer; (E) the
President/Chief Executive Officer of Distribution Services,
Inc.; (F) the Senior Vice President of Manufacturing; and
(G) the Senior Vice President and General Counsel;
(iv) increase or otherwise modify the amount of base and bonus
compensation paid to each of the officers listed in the
immediately preceding clause (iii), except for certain
annual aggregate bonuses not to exceed $200,000 total for
all such officers, which aggregate annual bonuses not to
exceed $200,000 may be determined solely by DJP;
(v) the settlement of any litigation for a material amount or
any settlement involving any significant restrictions on
the LLC, the Company or any of the subsidiaries of the
Company;
(vi) any changes to the Company's or any of the Company's
subsidiaries' periodical cover prices or material changes
to discounts or other pricing terms with
15
wholesalers or distributors;
(vii) entering into or amending in any material respect any
material contracts or commitments by the LLC, the Company
or the Company's subsidiaries, in each case other than any
such contract entered into or amended, as applicable, in
the ordinary course of business consistent with past
practice;
(viii) expansion of the business of Distribution Services, Inc. to
convert Distribution Services, Inc. to a national
distributor; and
(ix) subject to this Agreement, any other actions requiring LLC
Board approval, which may be delegated to the LLC Executive
Committee, which delegation shall be determined by the LLC
Board in its sole and absolute discretion.
SCHEDULE II
(EXPENSES)
The following items shall be reimbursable under the expense
reimbursement policy of the Company:
1. Charter flights or use of private aircraft in the discretion of
Executive in connection with the performance of Executive's duties to the
Company, provided that the Company's net reimbursement obligation to Executive
for expenses incurred in connection with charter or private aircraft shall not
exceed $200,000 per annum.
2. Reasonable gifts presented by Executive to clients and Company
employees.
3. Dues and membership fees for a country club of Executive's choosing in
the New York metropolitan area or Florida.
4. Business-related flights to London or Xxxxx xxx be made on the
Concorde.
5. Up to 17 round trip flights per year for Executive's spouse between New
York and Florida and all other flights for Executive's spouse travel if
Executive reasonably determines that his spouse's presence on the trip promotes
a business interest of the Company.
EXHIBIT A
(OTHER ACTIVITIES)
DEA Foundation
Madison Square Boys and Girls Club
EXHIBIT B
(PARACHUTE GROSS-UP)
In the event the provisions of Section 8(c)(iii)(D) of the
employment agreement to which this Exhibit B is a part shall become applicable,
then the following provisions shall apply:
(a) If it shall be determined that any amount, right or
benefit paid, distributed or treated as paid or distributed by the Company or
any of its affiliates (including Evercore Capital Partners, L.P. and its
affiliates) to or for Executive's benefit (other than any amounts payable
pursuant to this Exhibit B) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code"), or
any interest or penalties are incurred by Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties,
collectively, the "Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount equal to the lesser of
(i) $4,800,000 and (ii) the amount necessary such that after payment by
Executive of all federal, state and local taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) All determinations required to be made under this Exhibit
B, including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Company's independent auditors (the
"Auditor"). The Auditor shall provide detailed supporting calculations to both
the Company and Executive within 15 business days of the receipt of notice from
Executive or the Company that there has been a Payment, or such earlier time as
is requested by the Company. All fees and expenses of the Auditor shall be paid
by the Company. Any Gross-Up Payment, as determined pursuant to this Exhibit B,
shall be paid by the Company to Executive (or to the Internal Revenue Service or
other applicable taxing authority on Executive's behalf) within 5 days of the
receipt of the Auditor's determination. All determinations made by the Auditor
shall be binding upon the Company and Executive; provided that following any
payment of a Gross-Up Payment to Executive (or to the Internal Revenue Service
or other applicable taxing authority on Executive's behalf), the Company may
require Executive to xxx for a refund of all or any portion of the Excise Taxes
paid on Executive's behalf, in which event the provisions of paragraph (c) below
shall apply. As a result of uncertainty regarding the application of Section
4999 of the Code hereunder, it is possible that the Internal Revenue Service may
assert that Excise Taxes are due that were not included in the Auditor's
calculation of the Gross-Up Payments (an Underpayment"). In the event that the
Company exhausts its remedies pursuant to this Exhibit B and Executive
thereafter is required to make a payment of any Excise Tax, the Auditor shall
determine the amount of the Underpayment that has occurred and any additional
Gross-Up Payments that are due as a result thereof shall be promptly paid by the
Company to Executive (or to the Internal Revenue Service or other applicable
taxing authority on Executive's behalf).
(c) Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up
2
Payment. Such notification shall be given as soon as practicable but no later
than 10 business days after Executive receives written notification of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. Executive shall not pay such claim
prior to the expiration of the 30 day period following the date on which it
gives such notice to the Company )(or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company
notifies Executive in writing prior to the expiration of such period that it
desires to contest such claim, Executive shall: (i) give the Company all
information in his control or possession reasonably requested by the Company
relating to such claim; (ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and ceasing all
efforts to contest such claim; (iii) cooperate with the Company in good faith in
order to effectively contest such claim; and (iv) permit the Company to
participate in any proceeding relating to such claim; provided, however, that
the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expense.
Without limiting the foregoing provisions of this Exhibit B, the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct Executive to pay the tax claimed and xxx
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine and direct; provided, however that if the
Company directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for Executive's taxable year with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
3
(d) If, after the Executive's receipt of an amount advanced by
the Company pursuant to this Exhibit B, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the Executive's
receipt of an amount advanced by the Company pursuant to this Exhibit B, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after the Company's receipt of notice of such determination, then
such advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
