Reorganization Date: The date on which the "Corporate Reorganization" (as defined in the Sunland preliminary proxy statement filed with the SEC on May 7, 2003) is consummated.
EXHIBIT 10.1
SUNLAND ENTERTAINMENT CO., INC.
Term Sheet for
Employment Agreement with
Xxxxxx Xxxxxxxx ("Executive")
This term sheet (the "Term Sheet") is made as of the Commencement Date (as
defined below), by and between Sunland Entertainment Co., Inc. and Executive.
The parties have agreed to enter into a more formal agreement with
respect to Executive's employment (the "Definitive Agreement"). Notwithstanding
the foregoing or anything else to the contrary, this Term Sheet constitutes a
binding agreement of the parties hereto, irrespective of whether or not the
Definitive Agreement is ever entered into between the parties.
Position: Prior to the Reorganization Date (as
defined below), Co-President of
Sunland Entertainment Co., Inc.
("Xxxxxxx") and President of Trestle
Acquisition Corp. ("Trestle"); after
the Reorganization Date, President
of Sunland and Xxxxxxx (together
"Company").
As Co-President of Sunland,
Executive will serve with the two
other current Co-Presidents of
Sunland, and will have all of the
authority afforded to a Co-President
as set forth in resolutions
previously adopted by the Board of
Directors of Sunland. As President
of Sunland and Xxxxxxx, Executive
will have all of the authority
customarily afforded to a president.
Executive will have full
responsibility and authority for the
management of all day-to-day
operations of Trestle, including
without limitation, all matters
pertaining to the research and
development, production,
distribution, sale and marketing of
Trestle's products and services and
the employment of Trestle's
employees, subject to the direction
of the Board of Directors of Sunland
and the Chairman thereof. In all
events, Executive will report to the
Board of Directors of Trestle and
Sunland, and the respective Chairmen
thereof.
Reorganization Date: The date on which the "Corporate
Reorganization" (as defined in the
Sunland preliminary proxy statement
filed with the SEC on May 7, 2003)
is consummated.
Board of Directors: Executive will be elected to the
Boards of Directors of Sunland and
Trestle as of the Commencement Date
(as defined below), and Company will
use its best efforts to cause
Executive to continue to be a member
of such Boards of Directors
throughout the Term (as defined
below).
Commencement Date: On or before May 20, 2003, with the
specific date to be agreed upon by
Company and Executive.
Term: The three calendar years beginning
on the Commencement Date.
Location of Employment: The offices being acquired by
Company from Trestle Corp., or such
other location in the Southern
California area as may constitute
the principal executive offices of
Trestle.
Salary: Company will pay Executive an annual
base salary of $200,000. The base
salary will be subject to annual
review beginning at the end of the
first year of the Term, and may be
increased (but not decreased) for
subsequent years.
Bonus: Company will pay Executive, in cash,
an annual incentive bonus (the
"Incentive Bonus") as follows:
Executive will be paid the Incentive
Bonus if Trestle meets or exceeds,
for each of the 12-month periods
ended June 30, 2004, 2005 and 2006
(each a "Bonus Period"), a
combination of two budgeted,
measurable metrics (the "Measurable
Metrics"): (i) Trestle's gross
revenues and (ii) Trestle's EBITDA
after adding back all amounts, if
any, allocated to Trestle in excess
of amounts provided to be so
allocated in the budget for Trestle
as determined by the Sunland and
Trestle Board of Directors for that
Bonus Period prior to the
commencement thereof (Xxxxxxx's
EBITDA as so adjusted "Bonus
EBITDA"). Within 60 days following
the end of each Bonus Period (the
date of such comparison the "Review
Date"), Xxxxxxx's actual Revenues
and actual Bonus EBITDA for that
Bonus Period will be compared to
Board-approved budgeted Revenues and
Bonus EBITDA for Trestle for that
Bonus Period. Each of the actual
Measurable Metrics will be
calculated as a percentage above or
below each of the projected
Measurable Metrics, and such
percentages will be added together,
resulting in a combined measurable
metric (the "Combined Measurable
Metric"). Executive will be
compensated on his performance
relative to the Combined Measurable
Metric as follows:
a) If the Combined Measurable Metric
is positive 60% or greater, then the
Executive will receive an Incentive
Bonus in an amount equal to 100% of
his then existing annual base
salary; or
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b) If the Combined Measurable Metric
is less than positive 60%, but is
positive 30% or greater, then the
Executive will receive an Incentive
Bonus in an amount equal to 50% of
his then existing annual base
salary; or
c) If the Combined Measurable Metric
is less than positive 30%, but is 0%
or greater, then the Executive will
receive an Incentive Bonus in an
amount equal to 10% of his then
existing annual base salary; or
d) If the Combined Measurable Metric
is less than 0%, then the Executive
will not receive any Incentive
Bonus.
Notwithstanding the foregoing, if
any individual Measurable Metric is
negative 30% or greater, then the
Executive will not receive any
Incentive Bonus.
The Company's Board of Directors, in
its sole and absolute discretion,
may elect to pay to Executive an
Incentive Bonus greater than that
provided for above under such
circumstances as the Board of
Directors deems appropriate.
The Incentive Bonus, if any, will be
paid to Executive in cash within 30
days following the Review Date.
Option: As soon as practicable following the
Reorganization Date, Executive will
be granted an option (the "Option")
under Sunland's option plan to
acquire a number of shares of
Sunland's Common Stock (the "Option
Shares") representing 5.0% of the
then fully diluted outstanding
shares of Common Stock (not
including shares subject to the
Option and based upon the treasury
method of accounting, i.e., not
including any options and/or
warrants "out of the money" on the
Reorganization Date). The Option
will have a 10-year term and an
exercise price equal to the fair
market value (i.e., the mean between
the closing bid and ask price) of
Sunland's Common Stock on the date
the Option is granted. The Option
will become exercisable (i.e., vest)
as to the Option Shares as follows:
33.33% of the Option Shares will
vest on the first anniversary of the
Commencement Date, and the remaining
Option Shares will vest in equal
monthly installments over the
following two years commencing on
the last day of the month
immediately following the first
anniversary of the Commencement
Date. However, the Option will vest
in full immediately if Executive
terminates his employment for Good
Reason (as defined below) or there
is a Change in
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Control (as defined below), and the
Option will cease to be exercisable
if the Executive's employment is
terminated by Sunland for Cause (as
defined below).
Change in Control: "Change in Control" will mean the
following: (i) except as provided
below, Trestle ceases to be a
majority-owned subsidiary of
Sunland, or all or substantially all
of the assets of Trestle are sold to
any entity other than Sunland or
another majority-owned subsidiary of
Sunland; or (ii) the acquisition,
directly or indirectly (and
including through any merger or
consolidation), after the
Reorganization Date, of beneficial
ownership of securities of Sunland
possessing more than fifty percent
(50%) of the total combined voting
power of all outstanding securities
of Sunland by any person or entity
(or "group" of affiliated persons or
entities within the meaning of
Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended).
Notwithstanding the foregoing, a
"Change in Control" will not include
any transaction between Sunland, on
the one hand, and any subsidiary of
Sunland, including Trestle, on the
other hand, undertaken for the
purpose of effecting a corporate
reorganization whereby the share
ownership of the surviving entity
immediately following such
transaction is held in substantially
the same proportions as the share
ownership of Sunland immediately
prior to such transaction.
Expenses: Executive will be entitled to
reimbursement of all business
expenses (including home office
expenses) reasonably incurred.
Employee Benefits: Executive will be entitled to not
less than four weeks paid vacation
per year, with unused vacation time
accruing up to a maximum of eight
weeks (with all accrued vacation
time, if any, to which Executive is
entitled as of the Commencement Date
as a result of Executive's prior
employment with Xxxxxxx's
predecessor company being excluded
from such maximum). Executive also
will be eligible to participate in
all life, health (including medical,
dental an vision) and long-term
disability insurance programs, all
pension, profit-sharing and
retirement plans and all other
fringe-benefit plans and programs,
if any, available to executive
employees of Company from time to
time.
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Termination: Executive's employment may be
terminated prior to the expiration
of the Term (i) by Company for
Cause, (ii) by Company without
Cause, and (iii) by Executive for
Good Reason. "Cause" will be defined
to include (i) a material act of
dishonesty, a material act of fraud
or other material misconduct; (ii)
continued failure by Executive to
perform Executive's duties under
this Term Sheet or the Definitive
Agreement (other than as a result of
Executive's ill health or
disability, provided, however, if
Executive is unable to perform his
duties and obligations under this
Term Sheet or the Definitive
Agreement as a result of Executive's
ill health or disability for a
period of 90 days in any 12-month
period, Company shall be entitled to
terminate Executive for Cause
pursuant to the terms hereof); or
(iii) a material breach of this Term
Sheet or the Definitive Agreement by
Executive; in each case to the
extent the same is not remedied, if
able to be remedied, within 10
business days following Executive's
receipt of written notice from the
Company's Board of Directors
specifying the circumstances of such
material breach and the proposed
cure thereof, if curable. "Good
Reason" will be defined to include
(i) any material adverse alteration
in the nature or status of
Executive's responsibilities or the
assignment to Executive of any
duties inconsistent with his status
as Co-President or President, as
applicable; and (ii) any material
breach of this Term Sheet or the
Definitive Agreement by Company not
remedied, if able to be remedied,
within 10 business days following
Company's receipt of written notice
from Executive specifying the
circumstances of such material
breach and the proposed cure
thereof, if curable.
If Company terminates Executive's
employment for Cause, Company will
pay Executive (or his estate or
legal representative) Executive's
accrued and unpaid base salary
through the date of termination plus
any accrued vacation pay and
unreimbursed expenses. If Executive
terminates his employment for Good
Reason, Company will pay Executive
(i) on the termination date, an
amount equal to Executive's accrued
and unpaid salary through the date
of termination, plus any accrued
vacation pay, any unreimbursed
expenses and any Incentive Bonus
then earned but not already paid;
(ii) within two weeks after the
termination date, a lump-sum payment
payable as follows: (a) if there is
less than one year remaining in the
Term, a payment equal to six months
of Executive's base salary as then
in effect, or (b) if there is one
year or greater remaining in the
Term, a payment equal to one year of
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Executive's base salary as then in
effect; and (iii) within 60 days
after the end of the first Bonus
Period ending after the termination
date, a prorated portion (based upon
the number of days during such Bonus
Period Executive was employed by
Company) of the Incentive Bonus that
would otherwise be payable to
Executive with respect to that Bonus
Period. If Company terminates
Executive without Cause, Company
will pay Executive (i) on the
termination date, an amount equal to
Executive's accrued and unpaid
salary through the date of
termination, plus any accrued
vacation pay, any unreimbursed
expenses and any Incentive Bonus
then earned but not already paid;
(ii) within two weeks after the
termination date, a lump-sum payment
payable as follows: (a) if there is
eighteen months or greater remaining
in the Term, a payment equal to
Executive's base salary then in
effect for the remainder of the
Term, (b) if there is greater than
one year but less than eighteen
months remaining in the Term, a
payment equal to one year of
Executive's base salary as then in
effect, or (c) if there is less than
one year remaining in the Term, a
payment equal to six months of
Executive's base salary as then in
effect, or; and (iii) within 60 days
after the end of the first Bonus
Period ending after the termination
date, a prorated portion (based upon
the number of days during such Bonus
Period Executive was employed by
Company) of the Incentive Bonus that
would otherwise be payable to
Executive with respect to that Bonus
Period.
Indemnification: Company will indemnify Executive in
his capacity as an officer or
director of Company and hold him
harmless from any cost, expense
(including attorneys' fees) or
liability arising out of or relating
to any act or decision made by him
on behalf of, or in the course of
performing services for, Company to
the fullest extent permitted by
applicable law, but in all events
consistent with the indemnification
provided to all officers and
directors of Sunland. Such
indemnification will survive the
Term.
Confidentiality: On the Commencement Date, Executive
will execute an Employee
Confidentiality and Inventions
Agreement in the form previously
presented to Executive.
Miscellaneous: Until such time that the Definitive
Agreement is executed, this Term
Sheet will constitute the entire
agreement and understanding of the
parties in respect of its subject
matters
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and will supersede all prior
understandings, agreements, or
representations by or among the
parties, written or oral, to the
extent they relate in any way to the
subject matter hereof. This Term
Sheet may not be amended or modified
except by the Definitive Agreement
or another instrument in writing
signed on behalf of each of the
parties hereto. No waiver of any of
the provisions of this Term Sheet
shall be deemed or shall constitute
a waiver of any other provision
hereof (whether or not similar), nor
shall such waiver constitute a
continuing waiver unless otherwise
expressly provided. This Term Sheet
shall be construed in accordance
with the laws of the State of
California without giving effect to
its conflicts of law principles.
Whenever possible each provision of
this Term Sheet shall be interpreted
in such manner as to be effective
and valid under applicable law, but
if any provision of this Term Sheet
shall be or become prohibited or
invalid under applicable law, such
provision shall be ineffective to
the extent of such prohibition or
invalidity without invalidating the
remainder of such provision or the
remaining provisions of this Term
Sheet. This Term Sheet may be
executed in any number of
counterparts, each of which shall be
deemed to be an original, but all of
which together shall constitute one
and the same instrument.
7
In witness whereof, the parties have executed this Term Sheet as of the
20th day of May, 2003.
Company: Executive:
SUNLAND ENTERTAINMENT CO., INC.
By: /s/ Xxxxxxx Xxxxxxx /s/ Xxxxxx Xxxxxxxx
-------------------------------- ------------------------------
Name: Xxxxxxx Xxxxxxx Xxxxxx Xxxxxxxx
Its: Chairman
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