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EXHIBIT 10.61
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of this 26th day
of April, 1999, by and between THE XXXXXX ENTERTAINMENT COMPANY, a California
corporation (the "Company"), and XXXXXX X. XXXXXX (the "Employee").
Whereas, Company desires to engage the services of Employee, whose
experience, knowledge and abilities are extremely valuable to Company, and
Employee desires to enter the employ of Company,
Now, therefore, Company and Employee agree as follows:
1. Position and Duties; Reporting.
(a) Company hereby employs Employee, and Employee hereby accepts
employment, as Executive Vice President, Chief Financial Officer, and
corporate Secretary of Company during the Term hereof as specified in
Paragraph 6 below, with powers and duties consistent with such
positions. Employee shall perform such additional, different and/or
incidental duties, and accept the election or appointment to such other
offices or positions, as designated by the Chairman and Chief Executive
Officer of Company. Employee shall perform such duties and
responsibilities incidental to his employment as may from time-to-time
be requested by Company, consistent with Employee's position, stature
and experience, and shall faithfully observe Company's policies and
procedures consistent with the provisions hereof. Employee shall render
his services at the Company's executive offices located in the Century
City area of Los Angeles or such other location(s) in the greater Los
Angeles area as may be designated by the Company, spending such time at
the Company's executive offices and traveling on the business of the
Company as the Company shall reasonably deem necessary. The provisions
of this Paragraph 1(a) shall be subject to the terms of Paragraph 6
hereof. Employee shall report to the Chairman/CEO of the Company.
(b) Employee shall devote his full working time to the promotion
of Company's business and welfare, and as such his services in the
entertainment industry shall be exclusive to Company hereunder during
the Term. Notwithstanding any contrary provisions hereof, Employee may
engage in other business activities with Company's prior
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written consent provided the same shall not adversely affect the
performance of Employee's services hereunder and provided further,
during the Term hereunder, Employee shall not, directly or indirectly,
(i) engage in any business for his own account which is competitive with
the businesses of Company or Company's subsidiaries or affiliates
(collectively, "Competitive Business") so long as Company or the
Company's subsidiaries or affiliates (as the case may be) continue to
engage in such business; (ii) enter the employ of, or render any
services to, any person engaged in a Competitive Business; or (iii)
become interested in a Competitive Business in any capacity including,
without limitation, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant. In addition, during
the Term and the one-year period following termination of his employment
hereunder, Employee shall not, directly or indirectly (i) induce any
customer or supplier of Company or Company's subsidiaries or affiliates
to terminate its relationship with Company or Company's subsidiaries or
affiliates (as the case may be), or (ii) solicit or induce any of
Company's employees to terminate their employment with Company, or hire
or cause any of the then current employees of Company to be hired by any
other company (except companies controlled by Company). Notwithstanding
anything to the contrary, without the consent of the Company Employee
may acquire and/or retain, solely as an investment, and take customary
actions to maintain and preserve Employee's ownership of:
(i) securities of any corporation which are registered under
Sections 12(b) or 12(g) of the Securities Exchange Act of 1934,
as amended, and which are publicly traded, as long as Employee
is not part of any control group of such corporation; and
(ii) any securities of a partnership, trust, corporation or
other person, the ownership of income producing real estate or
other passive investments, so long as Employee remains a passive
investor in that entity and does not become part of any control
group thereof (except in a passive capacity) and so long as such
entity is not, directly or indirectly, in competition with the
Company or its subsidiaries or affiliates.
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2. Compensation.
(a) Annual Guaranteed Salary. During the term of his employment
hereunder, Company shall pay to Employee a salary, in equal installments
not less frequently than monthly, at the rate of $150,000 per year for
the first year of the Term, $165,000 per year for the second year of the
Term, and $180,000 per year for the third year of the Term provided,
however, that such salary shall be increased to a level equivalent to
$200,000 per year from and after the time that Company either (i)
achieves in any consecutive period of twelve (12) complete calendar
months, beginning at any time on or after the first day of Employee's
employment hereunder, annual gross revenues in excess of $20,000,000; or
(ii) closes an agreement with respect to that certain insurance backed
motion picture financing proposal currently referred to as "Heartland
Entertainment", and all parties thereto (including without limitation,
Chase Securities, the insurance companies involved, all necessary equity
investors, and a major (or acceptable mini-major such as New Line) U.S.
theatrical distributor have executed binding and effective agreements.
(b) Incentive Compensation. Employee shall be eligible for
consideration to receive an annual bonus based on Company's performance,
which bonus (if any) shall be determined by the Board of Directors in
its sole discretion; however, the bonus shall be no less than the bonus
to be paid to any other senior management executive of Company of
similar stature or position as Employee.
(c) Additional Bonus. Company shall pay Employee the sum of Ten
Thousand Dollars ($10,000) upon execution of this agreement in
consideration of Employee's services related to the recent infusion of
new capital into the Company in connection with which Employee made a
significant commitment of time and services.
3. Warrants and Stocks.
(a) Warrants to Purchase Common Stock. On the effective date
hereof, Employee shall be granted warrants ("Warrants") to purchase
eighty thousand (80,000) shares of common stock no par value per share
("Common Stock"), of Company pursuant to the terms of the Warrant
Agreement dated as of April 5, 1999, among the Company, Xxxxx Xxxxxxx
and the other signatories thereto (the "Warrant Agreement"). The
Warrants granted to Employee shall consist equally of Series A Warrants,
Series B Warrants and Series C
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Warrants of Company. The Warrants shall vest as provided in Schedule I
attached hereto.
(b) Stock Options. Employee shall have the right to participate
in stock option plans available to any other senior executive employee
of Company of equal or lesser stature to Employee. With the exception of
the number of options, such participation shall be on terms no less
favorable than those provided to any other senior executive employee of
comparable or lesser level to Employee in Company. Any such stock
options granted hereunder shall vest if Employee is terminated other
than for Cause. The time Employee has to exercise his options after
termination shall be governed by the Company's stock option plan.
4. Expenses. Company will reimburse or pay Employee for all usual,
reasonable and necessary expenses paid or incurred by Employee in the
performance of his duties hereunder, consistent with Company's expense
reimbursement policies and subject to receipt by Company of appropriate
documentary proof of all expenditures for which reimbursement is sought.
5. Employee Benefits. Employee shall be entitled to participate to
the full extent of the participation by any other senior executive employee of
Company of comparable level or below to Employee in any profit-sharing, pension,
vacation, health insurance, life insurance and disability or other plans,
benefits or policies available to the senior executive employees of comparable
level or below to Employee established by Company (in its sole and absolute
discretion) from time to time and not duplicative of those provided herein.
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6. Term.
(a) The period of Employee's employment by Company hereunder
(the "Term") shall commence on the effective date hereof and shall
terminate upon the first to occur of the following events: (i) three (3)
years from the effective date as set forth in Xxxxxxxxx 00 xxxxxx, (xx)
the death of Employee, (iii) at the option of Company upon twenty (20)
days prior written notice to Employee, in the event of the inability of
Employee to perform his duties hereunder, whether by reason of injury,
illness (physical or mental) or otherwise, for a period of four (4)
consecutive months or six (6) months in the aggregate ("disability"), or
(iv) the discharge of Employee for Cause. Cause shall mean, and be
limited to, (x) acts of deliberate dishonesty constituting either the
commission of a felony or the misappropriation of substantial corporate
assets for personal benefit, (y) willful failure to observe or follow
reasonable and explicit instructions or directives of Company, or (z)
willful malfeasance or willful failure to act involving material
nonfeasance, if in either case such malfeasance or nonfeasance would
have a material adverse effect on Company.
Company agrees to give written notice to Employee specifying the claimed
Cause and, provided such Cause is curable, to permit Employee to correct
the claimed Cause as soon as practical thereafter but no later than
seven (7) business days after receipt of the applicable notice. However,
in no event shall the occurrence of Cause within clause (x) of this
Paragraph 6(a) be subject to cure. Upon the termination of Employee's
employment pursuant to this Paragraph 6(a), Company shall have no
further liability or obligation of any kind or nature whatsoever to
Employee under this Agreement, except that any salary or other benefits
accrued or earned by Employee to the date of termination but not paid
shall be paid by Company to Employee or his estate, and Employee shall
be entitled to such benefits, if any, under Sections 4 and 5 hereof to
which he has become entitled prior to the date of his termination of
employment.
Notwithstanding the foregoing, by a date not earlier than seven (7)
months nor later than six (6) months prior to the expiration of the
Term, Employee will give Company written notice that the Term of his
Agreement will expire on a specified date in such notice. If the
Employee desires to discuss with Company an extension of this Agreement
or a new agreement in substitution for this Agreement, Employee shall so
advise Company, and thereafter Company shall have thirty (30) days to
respond thereto; if Company elects to do so, Company and Employee will
thereafter negotiate in good faith with respect thereto.
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Nothing herein contained shall be deemed to obligate Employee or Company
to enter into any extension or new agreement.
(b) If, without Cause, Company without Employee's consent
determines to remove Employee from the office of the Executive Vice
President and Chief Financial Officer of Company, Employee shall have
the right to elect to treat such event as a termination of his
employment by Company without Cause with the consequences provided in
this Paragraph 6(b). If Employee's employment is terminated by Company
without Cause, Employee shall be entitled to receive from Company until
the ending date of the period of employment hereunder (determined as
provided in Paragraph 6(a) hereof) the salary, benefits and emoluments
in effect at the date of such termination, including without limitation,
the immediate vesting of any unvested stock options and/or Warrants
theretofore granted. Upon the payment of the amounts provided in this
Paragraph 6(b), Company shall have no further liability or obligation of
any kind or nature whatsoever to Employee under this Agreement. If
Company shall be merged, consolidated with another corporation, and/or
reorganized, and if as a result of such merger, consolidation or
reorganization Employee is not the Executive Vice President and Chief
Financial Officer of a unit of the surviving or resulting corporation
which encompasses most of the business and operations previously within
the jurisdiction of Employee's activities, Employee shall be entitled to
terminate his employment upon written notice given to Company by
Employee within three (3) months of such merger, consolidation or
reorganization, and such termination shall be deemed to be a termination
by Company without Cause hereunder. No such termination by Employee
shall be effective before forty-five (45) days after the giving of such
notice by Employee unless otherwise agreed by Company.
(c) Key Man Clause. Employee may terminate this Agreement at any
time during the first two years of the Term hereunder upon ninety (90)
days written notice if Xxxxx Xxxxxxx ceases to occupy and discharge both
of the offices of Chairman of the Board and Chief Executive Officer of
Company, which notice by Employee may be given no later than ninety (90)
days after such departure of Xxxxx Xxxxxxx. Upon the effective date of
such termination by Employee, Company shall be relieved of the
obligation to pay or provide salary or other compensation and/or
benefits to Employee for any period subsequent to such termination date,
but upon such termination Company (i) shall pay to Employee a lump sum
payment in an amount equal to nine (9) months salary; (ii) provide
Employee any Warrants and/or stock options vested at that time; and
(iii) shall pay up to but not in excess
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of the first nine (9) months of so-called COBRA health benefits payments
incurred by Employee in continuing his health benefits insurance.
7. Mitigation. Employee shall have no obligation to seek employment
if Employee's employment hereunder is terminated without Cause; provided,
however, that Employee agrees that if Employee furnishes his services for other
engagements or employment after such termination hereunder, the total
compensation actually earned by Employee together with any welfare or other
benefits earned by Employee shall reduce any amounts and benefits which Company
would otherwise be required to pay or provide to Employee. Employee agrees that
he shall give written notice to Company (promptly after accepting employment or
furnishing his services after such termination of his employment with Company)
of any amounts earned (or to be earned) by Employee and any benefits provided
(or to be provided) to Employee pursuant to his new employment agreement.
8. Nondisclosure of Confidential Information.
(a) "Confidential Information" shall include, but not be limited
to, all of Company's and its subsidiaries' and affiliates' performance,
sales, financial, pricing, cost, manufacturing, contractual and
marketing information, ideas, knowledge and data, and all processes,
products, formulae, designs, practices, techniques, trade secrets,
research, know-how, merchandising agreements, licensing agreements,
distribution agreements, customer lists, technical requirements of
customers and identity and purchasing terms of suppliers.
(b) Employee acknowledges that Company, and its subsidiaries and
affiliates, have exclusive rights to all of their respective
Confidential Information and agrees to assign all rights he might
otherwise possess in any Confidential Information to the Company. Except
as required in the performance of his duties hereunder, Employee shall
not at any time during or after the term of his employment, directly or
indirectly use, communicate, disclose or disseminate, lecture
upon/publish articles or otherwise put in the public domain, any
Confidential Information or any other information of a secret,
proprietary, confidential or generally undisclosed nature relating to
Company, or its subsidiaries or affiliates, or their products,
operations and activities until such Confidential Information is
disclosed by law or legal process or becomes generally available to the
public by independent discovery, development or publication or generally
known within the industry other than as a result of
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Employee's breach hereof.
(c) All documents, records, notebooks, notes, memoranda,
computer records and other repositories of or containing Confidential
Information or any other information of a secret, proprietary,
confidential or generally undisclosed nature relating to Company, or its
subsidiaries or affiliates, or to its products, operations and
activities made or compiled by Employee at any time or made available to
Employee prior to or during the term of his employment by Company,
including any and all copies thereof shall be the property of Company,
shall be held by Employee in trust solely for the benefit of the
Company, and shall be delivered to Company by Employee on the
termination of Employee's employment or at any other time on the request
of Company.
9. Warranties/Indemnities. Employee hereby represents and warrants
that he: (i) is free to enter into this Agreement and to furnish Company all of
the services and grant all of the rights herein set forth; (ii) is in good
health and free from any disability or other condition which will or could
interfere with the full performance of his obligations hereunder; and (iii) has
not made nor will make any commitments or do any acts in conflict with this
Agreement or in derogation of Company's rights hereunder. Employee shall defend,
indemnify and hold harmless Company and all those claiming under Company from
and against any claims, damages, liabilities, costs and expenses (including
reasonable attorney's fees and costs, whether or not in connection with
litigation) arising out of any breach or default by Employee hereunder. Employee
agrees that Company shall have the sole right to control the legal defense
against any such claims, demands or litigation, including the right to select
counsel of its choice and to compromise or settle any such claims, demands or
litigation.
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10. Ownership of Properties. Company, as employer, shall own, and
Employee hereby transfers and assigns to Company, all rights in and to any
material and/or ideas written, suggested or submitted by Employee during the
Term and all other results and proceeds of his services for Company
("Properties"). Company and its licensees and assigns shall have the right to
adapt, change, revise, delete from, add to and/or rearrange the Properties or
any part thereof written or submitted by Employee and to combine the same with
other works to any extent, and to change or substitute the title thereof, and in
this connection Employee hereby waives any so-called "moral rights" of authors.
Employee agrees to execute and deliver to Company such assignments or other
instruments as Company may require from time to time to evidence its ownership
of the results and proceeds of Employee's services, failing which Company shall
have the irrevocable right to do so as Employee's attorney-in-fact; provided,
however, that nothing in this Paragraph 10 shall be deemed in any manner to
restrict or qualify Employee's ownership or right to exploit Employee's personal
memoirs.
11. Right to Injunction/Remedies. Employee acknowledges that
Company's remedies at law for a breach by him of the provisions of Paragraphs 1,
8 and 10 hereof will be inadequate. Accordingly, in the event of the breach or
threatened breach by Employee of any such provisions, Company shall be entitled
to seek injunctive relief in addition to any other remedy it may have. In the
event of any breach by Company of this Agreement, Employee shall be limited to
his remedy at law for damages, if any, and shall not have the right to terminate
or rescind this Agreement or in any way to enjoin or restrain the production,
distribution, advertising or other exploitation of any motion pictures or other
productions, it being specifically agreed that all rights granted and agreed to
be granted to Company under this Agreement shall be irrevocably vested in
Company and shall not be subject to rescission for any cause.
12. Assignment. Employee may not assign, transfer or convey this
Agreement or any interest therein. This Agreement and all of Company's rights
and obligations hereunder may be assigned or transferred by it, in whole but not
in part, to and shall be binding upon and inure to the benefit of any successor
of Company, but any such assignment shall not relieve Company of any of its
obligations. The term successors shall mean only any corporation or other
business entity which by merger, consolidation, purchase of assets or otherwise
succeeds to or otherwise acquires all or substantially all of the assets of
Company; provided that nothing herein shall limit the provisions Paragraph 6(b)
hereof.
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13. Arbitration.
(a) Without limiting Company's right to seek injunctive relief
as described in Paragraph 11, in the event of a disagreement or dispute
between Company and Employee related to this Agreement, the matter will
be finally settled in Los Angeles, California by arbitration by a single
arbitrator (unless the parties cannot agree on such arbitrator in which
case each party will select an arbitrator and the two arbitrators so
selected shall select the third arbitrator) in a proceeding conducted
under the rules of the American Arbitration Association or any similar
successor body, the arbitrator also apportioning the costs of the
arbitration. The decision of the arbitrator(s) in writing shall be final
and binding upon the parties and will not be subject to appeal. If
either party fails to abide by such decision, the other party may seek
the order of any federal or state court having jurisdiction thereof
which shall enter judgment on the decision of the arbitrator(s), and the
party so failing to abide shall be responsible for the payment of the
expenses of the court proceeding and all resulting enforcement expenses,
including actual attorneys' fees. The parties agree to use their best
efforts to complete any arbitration hereunder expeditiously.
(b) The prevailing party in any arbitration shall be entitled to
be reimbursed for attorneys fees and costs in connection with the
pursuit of such arbitration, subject to the following limitation: such
reimbursement shall not exceed the total attorneys fees and costs
incurred by whichever of the two parties to such arbitration has the
lesser aggregate attorneys fees and costs. By way of example, if
Employee brings an arbitration against Company and Company prevails in
such arbitration, (thus entitling Company to reimbursement of attorneys
fees and costs), and if Employee's legal fees and costs amount to
$50,000 and Company's legal fees and costs amount to $85,000, Company's
recovery of legal fees and costs against Employee in such instance shall
be limited to $50,000.
14. Indemnification. Employee shall be entitled to the benefit of
indemnification to the fullest extent permitted by applicable law at the time of
assertion of any liability against Employee, and, in any event, to the most
favorable indemnification provisions or agreements available to any other senior
executive of Company. Company represents that it currently has and shall
maintain directors' and officers' liability insurance with coverage of at least
$5,000,000 and Employee will be covered thereunder.
15. Notices. All notices hereunder shall be in writing and shall be
given either by personal delivery, telegram or telecopy (toll prepaid) or by
registered or certified mail (postage
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prepaid) to the appropriate party at the address listed below, and the date of
such personal delivery, mailing, telegraphing or telecopying shall be the date
of the giving of such notice.
If to Company: The Xxxxxx Entertainment Company
1999 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chairman of the Board
with a copy to: The Xxxxxx Entertainment Company
1999 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Legal Department
If to Employee: Xxxxxx X. Xxxxxx
0000 X. 00xx Xxxxxx
Xxxxx xxx Xxx, Xxxxxxxxxx 00000
with a copy to: Xxxxxx X. Xxxxxxxx, Esq.
Kinsella, Boesch, Fujikawa & Xxxxx, LLP
1901 Avenue of the Stars, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
16. Miscellaneous.
(a) In the event there is any conflict between the provisions of
this Agreement and any statute, law or regulation, the latter shall
prevail; provided, however, that in such event the provision(s) of this
Agreement so affected shall be curtailed and limited only to the minimum
extent necessary to permit compliance with the minimum mandatory
requirement(s) thereof, and no other provision(s) of this Agreement
shall be affected thereby, and all such other provisions will continue
in full force and effect.
(b) This Agreement shall be governed by the laws of the State of
California applicable to agreements executed and to be wholly performed
therein and shall not be modified except by a written document executed
by the parties hereto.
(c) This Agreement expresses the entire understanding of the
parties hereto and replaces any and all former agreements, negotiations
or understandings, written or oral, relating to the subject matter
hereof.
(d) The remedies herein provided are cumulative and the exercise
of one shall not preclude the exercise of any other.
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(e) No waiver by either party hereto of any failure by the other
party to keep or perform any covenant or condition of this Agreement
shall be deemed a waiver of any preceding, succeeding or continuing
breach of the same, or any other covenant or condition.
(f) Paragraph headings are for the convenience of the parties
only and shall not be used in construing meaning.
(g) This Agreement shall not be construed to create a joint
venture or partnership between the parties, and shall not be interpreted
in favor of or against either party on grounds that said party drafted
this Agreement.
(h) This Agreement shall be executed in a number of identical
counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the
same Agreement.
17. This Employment Agreement shall become effective (the "Effective
Date") as of April 26, 1999.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EMPLOYEE THE XXXXXX ENTERTAINMENT COMPANY
___________________________________ By: ___________________________________
XXXXXX X. XXXXXX
Title:_______________________________
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SCHEDULE I (XXX XXXXXX)
Employee's right to exercise the Warrants granted pursuant to Paragraph
3 of the Agreement to which this Schedule I is attached shall vest in accordance
with the following schedule:
Length of Employment Employee's Warrants that Vest
-------------------- -----------------------------
On signing this Agreement 40,000
One year after the Effective Date
described in Paragraph 17 20,000
End of the second year of the Term 10,000
End of the year of the Term 10,000
Notwithstanding anything to the contrary herein or in the Warrant
Agreement, in the event of the termination of Employee's employment by Company
without Cause or as a result of Employee's death or disability during the term
of and pursuant to the attached Employment Agreement, all unvested Warrants held
individually by Employee shall immediately vest and shall remain exercisable for
a period equal to the then balance of the term of the Warrants (i.e., the
balance of the six year, seven year or eight year term depending on the relevant
Warrants).
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