Moovies, Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
June 18, 1997
Xx. Xxxx X. Xxxxxx
President and Chief Executive Officer
Moovies, Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Dear Xxxx:
This letter is to set forth the terms and provisions pursuant to which
you are, effective on the date hereof, entitled to receive certain payments and
consideration in the event there is a Change of Control (as defined herein) of
Moovies, Inc., provided that you are employed by Moovies, Inc. on the date that
such Change in Control occurs (even if the term of your employment agreement (if
any) has expired). For purposes of this letter, the "Company" shall refer to
Moovies, Inc., or, as appropriate, to the successor to the business of Moovies,
Inc., if a Change in Control shall occur in which Moovies, Inc. is not the
surviving corporation. The Company has agreed to provide you with these benefits
in consideration of your contributions to the Company and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by you and the Company. These payments and consideration are in
addition to the compensation you are entitled to under your employment agreement
(if any) and in addition to all options now or hereafter granted to you.
1. Definition of "Change of Control". As used herein, the term "Change
of Control" means the occurrence of any of the following:
(a) any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than
the Company, a wholly owned subsidiary of the Company, or any employee benefit
plan of the Company or its subsidiaries, becomes the beneficial owner of the
Company's securities having 51 percent or more of the combined voting power of
the then outstanding securities of the Company that may be cast for the election
for directors of the Company; or
(b) as the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions, less than
a majority of the combined voting power of the then outstanding securities of
the Company or any successor corporation or entity entitled to vote generally in
the election of directors of the Company or such other corporation or entity
after
Xx. Xxxx X. Xxxxxx
President and Chief Executive Officer
June 18, 1997
Page 2
such transaction, are held in the aggregate by holders of the Company's
securities entitled to vote generally in the election of directors of the
Company immediately prior to such transaction; or
(c) the approval of the shareholders of the Company of a
plan of liquidation.
2. Effect of Change of Control. If there is a Change of Control of the
Company, and (i) you resign your employment within six months after such event,
or (ii) you are terminated without cause (as defined in your employment
agreement (if any) with the Company; otherwise, as defined in your Non-Qualified
Stock Option Agreement - 1995 Stock Plan with the Company) by the Company within
six months after such event, you shall be entitled to receive an amount, payable
in a lump sum within 30 days after the effective date of such resignation or
termination, equal to the product of your average total annual compensation
(defined for purposes of this Section as the average annual total of your
compensation includable in taxable income for federal tax purposes, including
without limitation, Base Salary, Annual Bonus, all insurance benefit costs and
car allowance (collectively, "Compensation"), during the two (2) years
immediately preceding the termination of your employment (or if you have been
employed for less than 2 years on the date of such termination, the total of
your Compensation for such full year, if any, and compensation includable in
taxable income for federal tax purposes, including without limitation, Base
Salary, the maximum Annual Bonus to which you would be entitled for such partial
year, all insurance benefit costs and car allowance for such partial year on an
annualized basis) multiplied by 3. Serving as a director of the Company, or the
entity that controls the Company, after a Change of Control will not constitute
employment by the Company. In the event that any payment to be received by you
pursuant to this Section 2 or the value of any acceleration right occurring
pursuant to Section 3 of this Agreement in connection with the Change of Control
of the Company would be subject to an excise tax pursuant to Section 4999 of the
Internal Revenue Code of 1986 (the "Code"), whether in whole or in part, as a
result of being an "excess parachute payment" within the meaning of such term in
Section 280G(b) of the Code, the amount payable under this Section 2 shall be
reduced so that no portion of such payment or the value of such acceleration
rights is subject to excise tax pursuant to Section 4999 of the Code. If the
amount necessary to eliminate such excise tax exceeds the amount otherwise
payable under this Section 2, no payment shall be made under this paragraph and
no further adjustment shall be made. Notwithstanding the preceding sentence, (a)
no portion of such payment or any acceleration right which tax counsel, selected
by the Company's independent auditors and acceptable to you, determines not to
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code will be taken into account and (b) no portion of the total of your
compensation which tax counsel, selected by the Company's independent auditors
and acceptable to you, determines to be
Xx. Xxxx X. Xxxxxx
President and Chief Executive Officer
June 18, 1997
Page 3
reasonable compensation for services rendered within the meaning of Section
280G(b)(4) of the Code will be taken into account.
3. Effect of Change of Control on Options. In the event of a Change of
Control, all options granted to you prior to such Change of Control shall
immediately vest and be exercisable by you, regardless of your employment or
termination of employment with the Company.
If the foregoing is acceptable to you, please sign where provided below
and return a signed original of this letter to me.
Yours truly,
MOOVIES, INC.
X. Xxxxxx Xxxxxxxx
Chief Financial Officer
Accepted and Agreed:
________________________________[Signature]
Xxxx X. Xxxxxx
____________________[Date]
