EXHIBIT A
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is being executed as of April 29,
1998 between SFX Entertainment, Inc. ("Employer"), a Delaware corporation, and
Xxxxx Xxxx ("Employee") (collectively the "Parties") to be effective as of the
Effective Date (as defined below).
WHEREAS, the Employee is currently Chairman and Chief Executive Officer
of Xxxx Associates Management Enterprises, Inc. ("FAME"); and
WHEREAS, the Employer has entered into a Stock Purchase Agreement of even
date herewith (the "Stock Purchase Agreement") with the shareholders of FAME
pursuant to which FAME will become an indirect wholly-owned subsidiary of the
Employer; and
WHEREAS, the Employer desires to employ the Employee on the terms and
conditions described herein, and the Employee wishes to be so employed, on the
closing date on which the transactions described therein are to be consummated
(the "Effective Date");
NOW, THEREFORE, the Parties do hereby agree as follows:
1. Employment. Employer hereby employs Employee effective as of the
Effective Date, and Employee hereby accepts such employment, subject to the
terms and conditions set forth below.
2. Duties.
2.1. Capacities
2.1.1 Employee shall be employed in the capacity of Chairman
of Fame, Chairman of the SFX Sports Group, Inc., a wholly-owned
subsidiary of the Employer ("Sports Group"), and in such capacity,
shall have the rights and responsibilities attendant to that of the
chief executive officer of a subsidiary of a publicly traded
company. Employee will, subject to consultation with, and approval
of, the Chairman and President of the Employer, have
decision-making power over any decisions, with respect to changing
the Sports Group's and FAME's policies, personnel, culture,
compensation structure, re-
porting systems or configuration and alignment of operating
divisions. Employee's duties in such capacity shall be to control,
direct and supervise the day-to-day operations of the Sports Group
and FAME. All sports-related businesses of Employer (other than
motorized sports or any sports-related business that provides less
than 25% of the revenues of any entity acquired by Employer, if a
condition of the purchase agreement for such entity is for such
business to be operated within the entity acquired) will be
operated under the Sports Group and will report to Employee subject
only to the oversight and direction of the Employer's Board of
Directors (the "Board"). Employee shall also perform other duties
which may be reasonably assigned to him from time to time by the
Chairman and President of Employer, or by Employer's Board of
Directors, and that are consistent with his position.
2.1.2 Employee shall be a member of the Office of the
Chairman of Employer, which shall be the highest management body of
Employer, reporting solely and directly to the Chairman of
Employer. The Office of the Chairman shall include (in addition to
Employee) only the Chief Executive Officer of Employer (the "Chief
Executive Officer") and the chief executive officer of PACE
Entertainment.
2.1.3 It is expressly understood that Employee may (1) devote
a reasonable amount of time to charitable, civic and
industry-related boards or organizations, (2) manage his personal,
financial and legal affairs and (3) with the express prior written
approval of the Board, which approval shall not be unreasonably
withheld, serve as a director of any corporate entity; provided,
that any such activity does not substantially interfere with the
performance by Employee of his duties and responsibilities under
this Agreement, including continuing to be associated with or
serving on any associations, organizations and boards, with which
Employee is associated with or is serving on as of the Effective
Date.
2.2. Additional Positions. During the Term of Employment (as
defined in Section 5.1 hereof), Employee agrees, and Employer shall
appoint Employee, to serve as a director of Employer, Sports Group and
each subsidiary of Sports Group, including FAME; provided, Employer
agrees that Employee shall be indemnified for serving in any and all such
capacities on
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a basis no less favorable than is provided by the Employer's bylaws as
may be amended from time to time or by any written agreement between the
Employee and the Employer regarding indemnification, in a manner
consistent with that provided to Senior Executives (as defined in Section
8.2 hereof) of the Employer, and, if ever not so indemnified, Employee
may, without limiting any other remedies, cease serving in such director
positions. In addition, Employee shall continue as Chairman of Financial
Advisory Management Enterprises, Inc.
2.3. Place of Performance. In connection with his employment by the
Employer, Employee shall be based in the Washington, D.C. metropolitan
area at the current offices of FAME. Employee shall be provided with
office space and support staff equivalent to that provided to him by FAME
immediately before the Effective Date.
3. Compensation.
3.1. Salary, Bonus and Withholding.
3.1.1 Salary and Bonus. During the Term of Employment, as
compensation for services rendered by Employee, Employer shall pay
Employee a base salary ("Salary") in semi-monthly installments at
an annual rate equal to $315,000 and (ii) an annual bonus ("Annual
Bonus") pursuant to the provisions of Section 4 hereof. Employee's
Salary shall be reviewed by the Chairman of Employer in accordance
with Employer's standard policies and practices, and may be
increased, but not decreased, at Employer's discretion. In any
event, Employee's Salary shall be increased effective as of each
anniversary of the Effective Date by 4.0% over the then effective
Salary.
3.1.2 Withholding for Taxes. Compensation (herein defined)
shall be subject to any and all applicable payroll and withholding
deductions required by the law of any jurisdiction, state or
federal, taxing authority with respect to such Compensation.
3.1.3 Definition of Compensation. The Salary, the Annual
Bonus and the other perquisites set forth in this Agreement
including the Benefits, are herein collectively referred to as
the "Compensation."
3.2. Expenses. Employer shall reimburse Employee, in accordance
with Employer's standard expense reimbursement policy, for reasonable
expenses incurred by Employee,
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upon presentation of documentation reasonably acceptable to Employer in
accordance with the policies applicable to Senior Executives of the Employer.
Expenses incurred by Employee that are consistent with the practices of FAME
prior to the Effective Date, including but not limited to hotel accommodations
and first class air travel, shall be deemed reasonable under this Section 3.2.
In connection with such reimbursement, Employer shall provide Employee with a
credit card or cards to be used for paying such expenses. Such card or cards
shall be the property of Employer and upon termination of the Term of
Employment shall be returned to Employer by Employee. Employee shall be
responsible for and shall reimburse Employer for any and all payments made by
Employer for Employee's personal, non-reimbursable expenses charged on any such
card or cards. To the extent appropriate, Employee shall be permitted to travel
on charter flights or on the Employer's corporate jet.
3.3. Grant of Stock Options and Restricted Stock.
3.3.1 Grants. Employer shall grant Employee, as of the
Effective Date, a stock option (the "Initial Stock Option") to
purchase 100,000 shares of Employer Class A Common Stock (the
"Common Stock") at an exercise price per share equal to the closing
price of the Common Stock on the Effective Date. Employer shall
grant stock options (the "Additional Stock Options") and stock to
Employee during the Term of Employment in a manner and amount
consistent with grants made to Senior Executives of the Employer;
provided, that Additional Stock Options for at least 120,000 shares
of Common Stock shall be granted to Employee (i.e., Additional
Stock Options for at least 30,000 shares of Common Stock shall be
granted in each of the first four calendar years comprising the
Term of Employment). Each Additional Stock Option shall have an
exercise price equal to the closing price of the Common Stock on
the date of the grant. The Initial Stock Option shall have a
ten-year term and shall vest and become in full exercisable on the
first anniversary of the Effective Date. Each Additional Stock
Option shall have a ten-year term and shall vest and become
exercisable on a schedule to be determined by the Board or the
Stock Option Committee, but in no event shall the vesting schedule
exceed the Term of Employment, nor shall the terms and conditions
of such options (including those terms and conditions described
above) be any less favorable than
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the terms and conditions (other than the initial vesting schedule,
but including accelerated vesting) applicable to options granted to
the other Senior Executives of Employer. The Employee shall be
permitted to use shares of Common Stock to exercise the Initial
Stock Option and Additional Stock Options and to pay any
withholding obligation upon such exercise. If the average of the
closing prices of the Common Stock for the last five business days
immediately preceding the first anniversary of the Effective Date
(the "First-Year Price") is less than the exercise price of the
Initial Stock Option, the exercise price of the Initial Stock
Option shall be adjusted, as of such first anniversary of the
Effective Date, to be equal to the First-Year Price. The Initial
Stock Option and Additional Stock Option shall be granted as
incentive stock options under the Internal Revenue Code of 1986, as
amended (the "Code"), to the extent permitted under the Code.
3.3.2 Termination of Employment. Notwithstanding the
foregoing, in the event that Employee ceases to be employed by
Employer for any reason whatsoever (including upon death or
permanent and total disability of Employee) other than as a result
of a voluntary termination (that is not a Constructive Termination
Event) or termination for Cause, (x) all restricted stock which may
be granted pursuant to this Section 3.3 shall vest immediately and
all options granted pursuant to this Section 3.3 shall vest and
become exercisable immediately, and (y) the balance of all
remaining stock options to be granted during the Term of Employment
pursuant to this Section 3.3 shall immediately be granted and shall
vest and become exercisable immediately at an exercise price per
share equal to the lower of (A) the closing price of the Common
Stock on the date of the relevant event or occurrence and (B) the
exercise price of the last option granted to Employee prior to such
event or occurrence, and Employee shall retain the right to
exercise each such options described in clauses (x) and (y) during
the remaining original term of each such option. In the event of a
termination following a Change in Control (as defined in Section
8.4), the exercise price shall be modified as set forth in Section
7.1 below. In the event of Employee's voluntary termination (that
is not a Constructive Termination Event) or termination for Cause,
all unvested options and restricted stock shall be forfeited, all
vested option shall remain exercisable until the first to occur of
the end of the original
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term or one year following the termination of employment, and no
Additional Stock Options not thereto granted will be granted.
3.3.3 Adjustments. The number of shares subject to the
Initial Stock Option and Additional Stock Options to be granted
under this Section 3.3, the kind of shares subject to such options
and the calculation of the First-Year Price shall be equitably
adjusted to reflect any change in the Common Stock including,
without limitation, a recapitalization, spin-off, stock split,
consolidation, reorganization or merger. To the extent applicable,
this Section 3.3 shall automatically be deemed to be modified to
ensure that Employee's rights with respect to acceleration of
option grants, acceleration of option vesting and other rights are
at least as favorable as the rights that from time to time are
generally applicable to other Senior Executives of Employer.
3.4. Other Benefits. During the Term of Employment, Employer shall
provide the following additional benefits to Employee:
3.4.1 Health Insurance. Medical, dental and hospitalization
insurance for Employee and his family with the same scope and
coverage and on the same terms as is provided by Employer to the
Chief Executive Officer and other Senior Executives of Employer, as
may be amended from time to time; provided, that such insurance
shall have no gap in coverage with Employee's current insurance;
and provided, further, that such insurance will have no exclusions
for pre-existing conditions.
3.4.2 Term Life Insurance. Term life insurance upon the life
of Employee in an amount and on the same terms consistent with
insurance made available to the Chief Executive Officer and other
Senior Executives of Employer, as may be amended from time to time,
including, if applicable, split-dollar insurance policies,
provided, that such insurance shall have no gap in coverage with
Employee's current insurance; and provided, further, that such
insurance will have no exclusions for pre-existing conditions.
3.4.3 Disability Insurance. Disability insurance in an amount
and on the same terms consistent with insurance made available to
the Chief Executive Officer and
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other Senior Executives of Employer, as may be amended from time to
time, provided, that such insurance shall have no gap in coverage
with Employee's current insurance; and provided, further, that such
insurance will have no exclusions for pre-existing conditions.
3.4.4 Other Benefit Programs. Employee shall be entitled to
participate in all other employee benefit programs of Employer
which the Board may, in its sole discretion, regularly make
available to the other Senior Executives of Employer (such as a
stock bonus plan, retirement plans and fringe benefits), on terms
no less favorable than those provided to such other Senior
Executives.
3.4.5 Office in New York. Employer shall provide reasonable
office facilities in New York, New York at its principal executive
offices, with secretarial and support services, for the use of
Employee.
3.4.6 Gross-Up.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment, award, benefit or distribution (or any acceleration of any
payment, award, benefit or distribution) by Employer (or any of its
affiliated entities) to or for the benefit of Employee (a
"Payment") would be subject to the excise tax imposed by Section
4999 of the Code, or any corresponding provisions of state or local
tax laws, or any interest or penalties are incurred by Employee
with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred
to as the "Excise Tax"), then Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") from Employer in an
amount such that after payment by Employee of all 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, Employee retains an amount of the
Gross-Up Payment equal to 40% of the Excise Tax imposed upon the
Payments. The payment of a Gross-Up Payment shall not be
conditioned upon the occurrence of a termination of employment.
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(b) Subject to the provisions of Section 3.4.6(a), all
determinations required to be made under this Section 3.4.6,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by Employer's
independent accounting firm as of immediately prior to the Change
in Control (the "Accounting Firm"), which shall provide detailed
supporting calculations both to Employer and Employee within
fifteen (15) business days of the receipt of notice from Employee
that there has been a Payment, or such earlier time as is requested
by Employer. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change in Control, Employer shall appoint another nationally
recognized accounting firm reasonably acceptable to Employee to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
Employer. Any Gross-Up Payment, as determined pursuant to this
Section 3.4.6, shall be paid by Employer to Employee within five
(5) days following receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon
Employer and Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by Employer should
have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that Employee
thereafter is required to make a payment of any Excise Tax (or any
additional Excise Tax), the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Employer to or for the
benefit of Employee. In the event of any claim by the Internal
Revenue Service for any Excise Tax or additional Excise Tax,
Employer shall have the right to control the defense of such claim
and Employee shall cooperate and assist Employer in connection
therewith as reasonably requested by Employer; provided that all
expenses of such claim (including any additional interest or
penalties) shall be paid by Employer, and Employer shall indemnify
and hold the Employee harmless, on an after-tax basis, for any
Excise Tax or income tax (including any interests and penal-
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ties) imposed as a result of such representation and payment of
costs and expenses. In addition, Employee will cooperate as
reasonably requested by Employer with Employer in making any refund
claim for any Excise Tax already paid, and any refunds of any such
tax (or any Gross-Up Payments or other payments made by Employer in
respect thereof) obtained by the Employee shall be promptly
returned to Employer.
If Employer directs the Employee to pay such claim and xxx
for a refund, Employer shall advance the amount of such payment to
the Employee, on an interest-free basis and shall indemnify and
hold the Employee 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 the taxable year of the Employee with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, Employer's
control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Employee 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.
The reimbursement of expenses provided for in Section 3.2, the stock and
option awards provided for in Section 3.3. the benefits provided for in
this Section 3.4 and any other benefits hereafter granted to Employee by
the Board are hereinafter referred to as the "Benefits."
4. Annual Incentive Bonus. Employee shall be considered for an Annual
Bonus in the discretion of the Board or Compensation Committee of the Employer,
consistent with the consideration given to other Senior Executives of the
Employer.
5. Term of Employment.
5.1. Definition of Term of Employment. The "Term of Employment", as
used in this Agreement, shall mean the period commencing on the Effective
Date and terminating with the first to occur of the following:
5.1.1 the fifth anniversary of the Effective Date;
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5.1.2 termination of the Term of Employment by Employer
without Cause;
5.1.3 termination of the Term of Employment by Employee by
notice to Employer at any time following a Constructive Termination
Event (as such term is defined in Section 8.1 hereof); and
5.1.4 termination of the Term of Employment as permitted by,
and in accordance with, the provisions of Section 6.
5.2. Effect of Termination of Term of Employment. Upon termination
of the Term of Employment, the following provisions shall apply:
5.2.1 Employee shall no longer be employed by Employer;
5.2.2 Employee shall no longer be obligated to provide any
employment, consulting or similar services to Employer;
5.2.3 If the Term of Employment is terminated pursuant to
Sections 5.1.2 or 5.1.3 hereof, then the provisions of Section 7.1
hereof shall become effective and the Employer shall be irrevocably
and unconditionally obligated to fulfill and discharge all of the
obligations imposed upon it pursuant to the provisions thereof;
5.2.4 In the event Employer issues a press release concerning
the termination of Employee's employment with Employer, Employee
will be offered an opportunity that is reasonable under the
circumstances to comment on such release; and
5.2.5 Employee (or his guardian or estate, as applicable)
shall in all events be paid (within thirty (30) days following the
date of termination of the Term of Employment), (A) all accrued but
unpaid Salary through the date of termination, (B) all earned but
unpaid incentive compensation through the date of termination, (C)
all accrued vacation through the date of termination, and (D) all
unreimbursed business expenses through the date of termination. In
addition, Employee shall retain all rights with respect to vested
equity awards (and the applicable provisions of Section 3.3), and
shall be entitled to all other Benefits which are provided in
accordance with and subject to the terms of Employer's generally
applicable employee benefit plans, practices and policies. The
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payments and Benefits described in this Section 5.2.5 shall be
referred to herein as the "Accrued Obligations."
6. Termination of Employment.
6.1. Employer's Right to Terminate the Term of Employment. During
the Term of Employment, Employer may terminate the Term of Employment
with or without Cause (as herein defined) by providing written notice
thereof to Employee.
6.1.1 Effect of a For Cause Termination. If Employer
terminates the Term of Employment for Cause, such termination shall
take effect immediately upon written notice thereof being provided
to Employee subsequent to the completion of the procedure set forth
in Section 6.1.2. In such event, Employer shall provide Employee
with the Accrued Obligations. Upon Employer's full, complete and
timely fulfillment and discharge of the aforesaid obligations, all
obligations of Employer to Employee hereunder shall be totally and
completely satisfied, and Employer shall have no further
obligations of any type to Employee pursuant to this Agreement
(except as may be provided under Sections 3.3, 3.4.6, 17 or 18).
6.1.2 Definition of "Cause". Cause for termination of the
Term of Employment shall exist only if, during the Term of
Employment:
(a) Employee is convicted of a felony involving moral
turpitude which would render Employee unable to perform his duties
set forth in this Agreement; or
(b) Employee engages in conduct that constitutes willful
gross neglect or willful gross misconduct in carrying out his
duties under this Agreement resulting, in either case, in a
material adverse economic effect upon the business of Employer.
For purposes of this Section 6.1, no act, or failure to act, by Employee
shall be considered "willful" unless committed in bad faith, and without
a reasonable belief that the act or omission was in the best interests of
Employer or any of its subsidiaries. Cause shall not exist under this
Section 6.1 unless and until Employer has delivered to Employee a copy of
a resolution duly
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adopted by a majority of the Board at a meeting of the Board called and
held for such purpose (after reasonable, but in no event less than ten
(10) days' notice, to Employee and an opportunity for Employee, together
with his counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Employee was guilty of the conduct set forth
in this Section 6.1 and specifying the particulars thereof in detail.
This Section 6.1 shall not prevent Employee from challenging in an
arbitration proceeding the Board's determination that Cause exists or
that Employee has failed to cure any act (or failure to act) that
purportedly formed the basis for the Board's determination. Employer must
provide notice to Employee that it is intending to terminate his
employment for Cause within sixty (60) days after Employer has knowledge
of the occurrence of the event it believes constitutes Cause.
6.2. Termination of the Term of Employment upon Employee's Death or
Permanent and Total Disability. The Term of Employment shall be deemed
terminated in the event of death or upon the termination of Employee's
employment following the permanent and total disability of Employee during the
Term of Employment.
6.2.1 Effect. In the event of a termination of the Term of
Employment for death or permanent and total disability, Employer shall
provide Employee with the Accrued Obligations. In addition, Employer
shall pay to Employee (or Employee's guardian or estate, as applicable),
within thirty (30) days following termination of the Term of Employment,
a pro rata portion (based on the number of months worked in the fiscal
year in which Employee dies or is terminated following becoming
permanently and totally disabled) of the Annual Bonus (to the extent
Employee would have been entitled to an Annual Bonus in Employer's
discretion) with respect to such current fiscal year. Upon Employer's
full, complete and timely fulfillment and discharge of the aforesaid
obligations, all obligations of Employer to Employee hereunder shall be
totally and completely satisfied, and Employer shall have no further
obligations of any type to Employee pursuant to this Agreement (except as
may be provided under Sections 3.3, 3.4.6, 17 or 18).
6.2.2 Definition and Effective Date. Employee shall be
considered "permanently and totally disabled" for purposes of this
Section 6.2 if he is unable to per-
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form with reasonable continuity his material duties hereunder by
reason of any medically determinable physical or mental impairment,
which inability to perform has lasted for a continuous period of
not less than six (6) months. A termination for permanent and total
disability shall take effect upon thirty (30) days written notice
from Employer to Employee, provided Employee does not return to
perform his material duties with reasonable continuity during such
30-day period.
6.3. Employee's Right to Terminate. Employee may terminate the Term
of Employment at any time, for any reason, by providing thirty (30) days'
written notice thereof to Employer, and such termination shall not be
deemed a breach of this Agreement.
6.3.1 Effective Date. If Employee so terminates the Term of
Employment (other than under Section 5.1.3) such termination shall
take effect upon the date designated in the notice provided to
Employer which shall, in no event, be earlier than thirty (30) days
following the delivery of such notice; provided, that Employer
shall have the right in the event of such notice by Employee to
accelerate the Employee's effective date of termination to any such
date that the Employer deems appropriate in its sole discretion.
6.3.2 Effect. If Employee so terminates the Term of
Employment (other than under Section 5.1.3), Employer shall provide
Employee with the Accrued Obligations. Upon Employer's full,
complete and timely fulfillment and discharge of the aforesaid
obligations, all obligations of Employer to Employee hereunder
shall be totally and completely satisfied and Employer shall have
no further obligations of any type to Employee pursuant to this
Agreement (except as may be provided under Sections 3.3., 3.4.6, 17
or 18 hereof).
6.4. Termination of Agreement upon Fulfillment of Post-Termination
of Employment Obligations. If the Term of Employment is terminated
pursuant to Sections 5.1.2 or 5.1.3 hereof, then this Agreement shall
thereafter be deemed to be terminated upon Employer's full, complete and
timely fulfillment and discharge of all obligations imposed upon Employer
pursuant to the provisions of Sections 3.3, 3.4.6, 7.1, 17 or 18 hereof.
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7. Post-Termination of Employment Obligations.
7.1. Employer's Obligations after Termination of Term of
Employment. If the Term of Employment is terminated pursuant to Sections
5.1.2 or 5.1.3 hereof, then the following provisions shall apply:
7.1.1 If the Term of Employment is so terminated, Employer
shall provide Employee with the Accrued Obligations. In addition,
Employer shall be obligated to pay to the Employee, for a period of
time commencing on the date of termination of the Term of
Employment and continuing until the fifth anniversary of the
Effective Date (herein called the "Surviving Obligation Period"),
(i) Employee's Salary for the remaining period pursuant to this
Agreement and (ii) Annual Bonuses (at a rate of at least 50% of
Salary) with respect to each fiscal year which ends during the
Surviving Obligation Period.
7.1.2 Employee shall continue to be entitled to participate
during the Surviving Obligation Period in any and all of the
profit-sharing and retirement income, stock purchase, savings,
executive compensation plans at the same level, in the same amount
and to the same degree the Employee was entitled to participate at
the time of such termination, to the extent permitted by the terms
of such plans, and applicable law. If Employee's participation in
any such plan is barred, Employer shall arrange to provide Employee
during the Surviving Obligation Period with benefits substantially
similar to those which he was entitled to receive under such plans
prior to the time of such termination.
7.1.3 Employer shall maintain in full force and effect for
Employee for the longer of (a) one year after termination of the
Term of Employment and (b) the Surviving Obligation Period all
life, accident, medical and health care plans and disability
benefit programs and programs or arrangements in which Employee was
entitled to participate immediately prior to the time of such
termination provided that Employee's continued participation is
possible under the general terms and provisions of such plans and
programs, and under applicable law. If Employee's participation in
any such plan or program is barred, Employer shall arrange to
provide Employee with benefits substantially
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similar to those which he was entitled to receive under such plans
and programs of Employer prior to the time of such termination;
provided, however, that the cost to Employer to provide such
benefits shall be no greater than the contribution made by Employer
for such benefits for other senior executives of Employer. In such
event, appropriate adjustment shall be made so that the after tax
value thereof to Employee is similar to the after tax value to him
of the benefit plans in which Employee is not eligible to
participate. At the end of such period, Employee shall have the
option to have assigned to him at no cost and with no apportionment
of pre-paid premiums, any assignable insurance policy owned by
Employer and relating specifically to Employee.
7.1.4 Employer shall be obligated to provide to Employee, for
a one-year period commencing on the date of termination of the Term
of Employment, use of a similar office and secretarial support.
If a termination described in this Section 7.1 occurs upon or following a
Change in Control, Employee shall be entitled to the payments and
benefits set forth in this Section 7.1, except that the payments under
Section 7.1.1 shall be paid in a lump sum within thirty (30) days
following Employee's termination of employment, and the exercise price of
the stock options accelerated under Section 3.3 shall be the lower of (a)
the closing price of the Common Stock on the date of termination and (b)
the lowest exercise price of any options granted to Employee prior to the
Change in Control.
7.2. No Mitigation. Under no circumstances shall the Employee be
required, whether by seeking other employment or otherwise, to mitigate
the amount of any payment or benefit under this Agreement, and there
shall be no offset against amounts due the Employee under this Agreement
or the Purchase Agreement on account of any subsequent employment he may
obtain or for any amount allegedly due Employer by Employee.
8. Certain Definitions. As used herein, the following terms shall have
the meanings indicated below:
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8.1. Constructive Termination Event. A "Constructive Termination
Event" shall be deemed to be the occurrence of any one or more of the
following events during the Term of Employment:
8.1.1 the assignment by Employer to the Employee of duties
that are inconsistent with the Employee's office with Employer at
the time of such assignment, or the removal by Employer from the
Employee of those duties described in Section 2.1 above, including
without limitation failure to nominate or re-nominate Employee for
election to the Board of Directors of Employer and failure of
Xxxxxx Xxxxxxxxx (and his affiliates) to vote his (and their)
shares in favor of such nomination; or
8.1.2 any removal of the Employee from, or any failure to
elect or re-elect the Employee to, the Designated Office (as
defined in Section 8.3 hereof), except in connection with the
Employee's promotion, with his prior written consent, to a higher
office (if any) with Employer; or
8.1.3 a reduction by Employer in the amount of the Employee's
Salary as then in effect, or the failure of Employer to pay such
Salary to the Employee at the time and in the manner specified in
Section 3 of this Agreement; or
8.1.4 the discontinuation or material reduction by Employer
of the Employee's participation in any stock option, bonus or other
employee benefit plan or arrangement (including, without
limitation, any profit-sharing, life insurance, medical, dental,
hospitalization, incentive compensation or retirement plan or
arrangement) in which the Employee is a participant or the failure
to grant the Initial Stock Option or the Additional Stock Options;
or
8.1.5 the failure of Employer to obtain the assumption by any
successor to Employer of the obligations imposed upon Employer
under this Agreement, as required by Section 16 of this Agreement;
or
8.1.6 the failure by Employer to reimburse the Employee for
the reasonable business expenses incurred by the Employee in the
performance of his duties to Em-
Page 16
ployer, including, without limitation, reasonable expenditures for
business entertainment and for travel in connection with Employer's
business; or
8.1.7 the failure of Employer to observe, fulfill or perform
any obligation, requirement or restriction imposed upon it pursuant
to this Agreement which is not referenced in the foregoing
subsections of this Section 8.1, and such failure continues
uncorrected for thirty (30) days after notice thereof to Employer;
or
8.1.8 the sale of all or substantially all the assets or
stock of FAME or the Sports Group; or
8.1.9 a Change in Control; or
8.1.10 the failure by Employer to put any sports-related
business of Employer (other than motorized sports or any
sports-related business that provides less than 25% of the revenues
of any entity acquired by Employer, if a condition of the purchase
agreement for such entity is for such business to be operated under
the entity acquired) into the Sports Group, in which case the
sports-related business may be held by Employer outside of the
Sports Group.
Employee's right to terminate the Term of Employment for a Constructive
Termination Event shall not be affected by his mental or physical
incapacity, and his continued employment prior to terminating employment
for a Constructive Termination Event shall not constitute consent to or a
waiver of rights with respect to, any act or failure to act constituting
a Constructive Termination Event.
8.2. Senior Executives. The "Senior Executives" shall mean all
members of Employer's Office of the Chairman (howsoever called), and all
senior executive officers of Employer.
8.3. Designated Office. The "Designated Office" shall mean Chairman
of FAME, Chairman of the Sports Group, and member of the Office of the
Chairman of Employer.
8.4. Change in Control. A "Change in Control" shall mean the
occurrence of any one of the following events:
Page 17
(i) any "person," as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934 (other than Employee
or entities controlled by Employee), becomes a beneficial owner of
50% or more of the voting power of Employer or of the Common Stock
beneficially owned by Xxxxxx F.X. Sillerman as of the date hereof;
(ii) all or substantially all of the assets or business of
Employer are disposed of pursuant to a merger, consolidation, sale
or other transaction (unless the shareholders of Employer,
immediately prior to such merger, consolidation or other
transaction beneficially own, directly or indirectly, in
substantially the same proportion as they owned the voting power of
Employer, all of the voting power or other ownership interests of
the entity or entities, if any, that succeed to the business of
Employer);
(iii) Employer combines with another company and, immediately
after such combination, (A) the shareholders of Employer
immediately prior to the combination do not hold, directly or
indirectly, more than 50% of the voting power of the combined
company or (B) the members of the Board immediately prior to the
Board's approval of the merger transaction do not constitute a
majority of the combined company's board of directors;
(iv) the majority of the Board consists of individuals other
than incumbent directors (which term shall mean members of Board as
of the Effective Date), except that any person who becomes a
director subsequent to such date whose election or nomination was
supported by two-thirds of the directors who then comprise the
incumbent directors shall be considered an incumbent director;
(v) (A) a direct or indirect (including by sale or transfer
of any intermediate holding company) sale or transfer of the voting
securities of Sports Group (including by way of merger,
consolidation or similar transaction) following which one or more
persons other than Employer beneficially owns 50% or more of the
voting power of Sports Group or (B) a sale or transfer of all or
substantially all the assets of Sports Group and its subsidiaries
as a whole; or
Page 18
(vi) the liquidation or dissolution of Employer or of
SportsGroup.
9. Noncompete Covenant.
9.1. During Period of Employment. During the Term of Employment,
Employee will not, without the prior written approval of the Board,
become employed in any capacity by, or become an officer, director or
general partner of, any partnership, corporation or other entity that
directly competes with any business of Employer, or any subsidiary of
Employer whether now or hereafter conducted.
9.2. After Termination of Employment. For the period of one (1)
year following the termination of the Term of Employment by Employer for
Cause or by Employee on his own initiative (other than due to a
Constructive Termination Event), Employee will not become employed in any
capacity by, or become an officer, director, shareholder or general
partner of, any partnership, corporation or other entity that competes
with any material business of FAME conducted as of the Effective Date;
provided, that, this Section 9.2 shall not prevent Employee from owning
no more than 5% of any class of securities of any publicly-traded entity.
The material businesses of FAME conducted as of the Effective Date shall
be limited to the representation, as a sports agent in contract and
marketing negotiations, of male basketball and football athletes in
professional sports, and shall exclude, without limitation, such
representation of (a) athletes in sports other than basketball and
football and (b) female professional athletes, as well as the management,
marketing and/or operation of professional sports teams, sports leagues,
sports organizational committees or other sports businesses (or related
consulting or other services), and the organization or the sponsorship of
sports leagues.
9.3. No Solicitation of Other Employees. Employee additionally
agrees that, throughout the Term of Employment and for a period of one
(1) year after the termination of the Term of Employment by Employer for
Cause or by Employee on his own initiative (other than due to a
Constructive Termination Event), Employee shall not directly or
indirectly, solicit, or attempt to solicit, any employee of Employer's
Affiliated Group to leave Employer's Affiliated Group for any reason
whatsoever.
Page 19
9.4. Definition of Affiliated Group. As used above, the term
"Employer's Affiliated Group" shall mean Employer and all corporations,
partnerships or other organizations which, directly or indirectly, are
controlled by Employer.
9.5. Extraordinary Remedies. In the event of a breach of Employee's
covenants in this Section 9, it is understood and agreed that Employer
shall be entitled to injunctive relief as well as other applicable
remedies at law or in equity available to Employer against Employee or
others.
9.6. Survival. The provisions of this Section 9 shall survive the
termination of the Term of Employment and the termination of this
Agreement to the extent applicable; it being understood that in the event
of a termination of the Term of Employment pursuant to Sections 5.1.1,
5.1.2 or 5.1.3 hereof, the provisions of this Section 9 shall be of no
force or effect.
10. Disclosure of Confidential Information. Except to the extent (a)
authorized by the express prior consent of the Board, (b) required by law or
any legal process or (c) desirable in performing his duties under this
Agreement, Employee will not, directly or indirectly, at any time during the
Term of Employment, or at any time subsequent to the termination of the Term of
Employment, disseminate, disclose, or divulge to any person, firm, corporation,
association or other business entity, Confidential Information (herein defined)
of Employer. As used herein, the term "Confidential Information" means any and
all information about or relating to the trade secrets of Employer or any of
its subsidiaries disclosed to Employee or known by Employee as a consequence of
or through his employment by Employer, if such information is not generally
known in any industry in which Employer or any of its subsidiaries is or may
become engaged during the Term of Employment. In the event of a breach or
threatened breach by Employee of this Section 10, Employer shall be entitled to
injunctive relief as well as other applicable remedies at law or in equity
available to Employer against Employee or others.
11. Notice. Any notice, request, reply, instruction, or other
communication provided or permitted in this Agreement must be given in writing
and may be served by depositing same in the United States mail in certified or
registered form, postage prepaid, addressed to the Party or Parties to be
notified with return receipt requested, or by delivering the notice in person
to such Party or Parties. Unless actual receipt is required by any provision of
this Agreement, notice de-
Page 20
posited in the United States mail in the manner herein prescribed shall be
effective on dispatch. For purposes of notice, the address of Employee, his
spouse, any purported donee or transferee or any administrator, executor or
legal representative of Employee or his estate, as the case may be, shall be as
follows:
The address of Employee shall be:
c/x Xxxx Associates Management Enterprises, Inc.
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:Xxxxxxxx Xxxxxxx
The address of Employer shall be:
SFX Entertainment, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:Xxxxxx X. Xxxxx
with a copy to:
Winston & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:Xxxxxxxx Xxxxxxxxx
Employer shall have the right from time to time and at any time to change its
address and shall have the right to specify as its address any other address by
giving at least ten (10) days written notice to Employee. Employee shall have
the right from time to time and at any time to change his address and shall
have the right to specify as his address any other address by giving at least
ten (10) days written notice to Employer.
Page 21
12. Vacation. Employee shall be entitled to a minimum of four (4) weeks
of paid vacation during each calendar year, but in no event less than the
vacation provided to other Senior Executives of Employer.
13. Controlling Law. The execution, validity, interpretation and
performance of this Agreement shall be determined and governed by the laws of
the State of Maryland.
14. Entire Agreement. This Agreement contains the entire agreement of the
Parties with respect to the employment of Employee, and any prior employment
agreement between FAME and Employee shall be terminated effective as of the
Effective Date.
15. Severability. If any provision of the Agreement is rendered or
declared illegal or unenforceable by reason of any existing or subsequently
enacted legislation or by decree of a court of last resort, the Parties shall
promptly meet and negotiate substitute provisions for those rendered or
declared illegal or unenforceable, but all remaining provisions of this
Agreement shall remain in full force and effect.
16. Effect of Agreement, Assignment, Required Assumption. This Agreement
shall be binding upon Employee and his heirs, executors, administrators, legal
representatives, successors and assigns and the Employer and its successors and
assigns. Employee may not assign any rights or obligations hereunder without
the prior written consent of Employer and, except with respect to a successor
entity (as described below), Employer may not assign any rights or obligations
hereunder without the prior written consent of Employee. Employer shall require
any person who is the successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or a substantial portion of the
business or assets of Employer to expressly assume the obligations of Employer
hereunder. The term "Employer" as used in this Agreement shall expressly
include any such successors.
17. Indemnification. Employer shall indemnify Employee and his legal
representatives to the fullest extent permitted by the laws of the State of
Delaware, and Employee shall be entitled to the protection of such insurance
policies which Employer maintains for the benefit of its directors and
officers, against all costs, charges or expenses whatsoever incurred or
sustained by him or his legal representatives in connection with any action,
suit or proceeding to which he or
Page 22
his legal representatives may be made a party by reason of his being or having
been a director of officer of Employer, or because of actions taken purportedly
on behalf of Employer after the Effective Date. Employer shall, upon request by
Employee, promptly advance or pay any amount for costs, charge or expenses
(including, without limitation, legal fees and expenses incurred by counsel
retained by Employee) in respect of his right to indemnification hereunder,
subject to a later determination as to Employee's ultimate right to receive
such payment. Employee's indemnification and the insurance policies maintained
for his benefit shall be at least to the same extent, of the same type and in
the same amount as that maintained by Employer for the Chief Executive Officer
of Employer, as may be amended from time to time.
18. Legal Fees and Expenses. Employee shall be entitled to receive from
Employer the amount of his legal fees (and expenses) reasonably incurred in
connection with claims or disputes under this Agreement, if Employee is the
prevailing party on any issue in any such dispute. The reimbursement shall be
made as soon as practicable following the resolution of such claim or dispute
to the extent Employer receives reasonable written evidence of such fees and
expenses.
19. Amendments; Waivers. This Agreement cannot be changed, modified or
amended, and no provision or requirement hereof may be waived, without an
affirmative vote of the Board, and the consent in writing of Employee and
Employer. The failure of a party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such party at a
later time to enforce the same. No waiver by a party of the breach of any term
or covenant contained in this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
20. Beneficiaries. Whenever this Agreement provides for any payment to
Employee's estate, such payment may be made instead to such beneficiary or
beneficiaries as Employee may have designated in a writing filed with Employer.
Employee shall have the right to revoke any such designation and to redesignate
a beneficiary or beneficiaries by written notice to Employer (and any
applicable insurance company) to such effect.
Page 23
21. Resolution of Disputes. Any dispute or controversy between the
parties relating to or arising out of this Agreement or any amendment or
modification hereof shall be determined by arbitration in New York, New York by
and pursuant to the rules then prevailing of the American Arbitration
Association, other than claims for injunctive relief under Sections 9 or 10.
All claims for legal remedies under this Agreement shall be limited to the
actual damages of Employer or Employee, respectively, but shall not limit any
payments or damages provided to Employee under the terms of this Agreement. The
arbitration award shall be final and binding upon the parties and judgment may
be entered thereon by any court of competent jurisdiction. The service of any
notice, process, motion or other document in connection with any arbitration
under this Agreement or the enforcement of any arbitration award hereunder may
be effectuated either by personal service upon a party or by certified mail
duly addressed to him or to his executors, administrators, personal
representatives, next of kin, successors or assigns, at the last known address
or addresses of such party or parties.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original. It shall not be
necessary when making proof of this Agreement to account for more than one
counterpart.
23. Termination of Agreement. This Agreement shall be void and of no
further effect upon the termination of the Stock Purchase Agreement.
Page 24
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
SFX ENTERTAINMENT, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
By: /s/ Xxxxx Xxxx
------------------------------
Xxxxx Xxxx
Page 25
