EX-10.1
XXXXXX'X ENTERTAINMENT, INC.
February 21, 1997
Xx. Xxxxxx X. Xxxx, Xx.
Xxxxxx'x Entertainment, Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Re: Severance Agreement
Dear Xx. Xxxx:
Xxxxxx'x Entertainment, Inc. (the "Company") considers it essential to
the best interest of its stockholders to xxxxxx the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no such change is
now contemplated.
In order to induce you to remain in the employ of the Company and in
consideration of your agreements set forth in Subsection 2(b) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
letter agreement ("this Agreement") in the event your employment with the
Company terminates subsequent to a "Change in Control of the Company" (as
defined in Section 2 hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on February 21,
1997 and shall continue in effect through December 31, 1997; provided, however,
that commencing on January 1, 1998 and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one
-90-
additional year unless, not later than September 30 of the preceding year, the
Company shall have given notice that it does not wish to extend this Agreement;
provided, further, if a Change in Control of the Company shall have occurred
during the original or extended term of this Agreement, this Agreement shall
automatically continue in effect for a period of twenty-four months beyond the
month in which such Change in Control occurred.
2. Change in Control.
(a) No benefit shall be payable to you hereunder unless there shall
have been a Change in Control of the Company, as set forth below. For purposes
of this Agreement, a "Change in Control of the Company" shall be deemed to have
occurred, subject to subparagraph (iv) hereof, if any of the events in
subparagraphs (i), (ii) or (iii) occur:
(i) Any "person" (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than an employee benefit plan of the Company, or a
trustee or other fiduciary holding securities under an employee benefit
plan of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of 25%
or more of the Company's then outstanding voting securities carrying
the right to vote in elections of persons to the Board, regardless of
comparative voting power of such voting securities, and regardless of
whether or not the Board shall have approved such Change in Control; or
(ii) During any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a person who
shall have entered into an agreement with the Company to effect a
transaction described in clauses (i) or (iii) of this Subsection) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof; or
(iii) The holders of securities of the Company entitled to
vote thereon approve the following:
-91-
(A) A merger or consolidation of the Company with any
other corporation regardless of which entity is the surviving
company, other than a merger or consolidation which would
result in the voting securities of the Company carrying the
right to vote in elections of persons to the Board outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the
Company's then outstanding voting securities carrying the
right to vote in elections of persons to the Board, or such
securities of such surviving entity outstanding immediately
after such merger or consolidation, or
(B) A plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
(iv) Notwithstanding the definition of a "Change in
Control" of the Company as set forth in this Section 2(a), the Human
Resources Committee of the Board (the "Committee") shall have full and
final authority, which shall be exercised in its discretion, to
determine conclusively whether a Change in Control of the Company has
occurred, and the date of the occurrence of such Change in Control and
any incidental matters relating thereto, with respect to a transaction
or series of transactions which have resulted or will result in a
substantial portion of the assets or business of the Company (as
determined immediately prior to the transaction or series of
transactions by the Committee in its sole discretion which
determination shall be final and conclusive) being held by a
corporation at least 80% of whose voting securities are held,
immediately following such transaction or series of transactions, by
holders of the voting securities of the Company (determined immediately
prior to such transaction or series of transactions). The Committee may
exercise such discretionary authority without regard to whether one or
more of the transactions in such series of transactions would otherwise
constitute a Change in Control of the Company under the definition set
forth in this Section 2(a).
(b) For purposes of this Agreement, a "Potential Change in Control of
the Company" shall be deemed to have occurred if the following occur:
(i) The Company enters into an agreement or letter of intent,
the consummation of which would result in the occurrence of a Change
in Control of the Company;
-92-
(ii) Any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control of the Company;
(iii) Any person, other than an employee benefit plan of the
Company, or a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the Company's then outstanding voting
securities carrying the right to vote in elections of persons to the
Board increases his beneficial ownership of such securities by 5% or
more over the percentage so owned by such person on the date hereof; or
(iv) The Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control of the
Company has occurred.
You agree that, subject to the terms and conditions of this Agreement,
in the event of a Potential Change in Control of the Company, you will remain in
the employ of the Company (or the subsidiary thereof by which you are employed
at the date such Potential Change in Control occurs) until the earliest of (x) a
date which is six months from the occurrence of such Potential Change in Control
of the Company, (y) the termination by you of your employment by reasons of
Disability or Retirement (at your normal retirement age), as defined in
Subsection 3(a), or (z) the occurrence of a Change in Control of the Company.
(c) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a Change in
Control of the Company of any of the following circumstances unless, in the case
of paragraphs (i), (v), (vi), (vii) or (viii), such circumstances are fully
corrected prior to the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3(e) and 3(d), respectively, given in
respect thereof:
(i) The assignment to you of any duties inconsistent with your
status as an executive officer of the Company or a substantial adverse
alteration in the nature or status of your responsibilities from those
in effect immediately prior to the Change in Control of the Company;
(ii) A reduction by the Company in your annual base salary as
in effect on the date hereof or as the same may be increased from time
to time except for across-the-board salary reductions similarly
affecting all executives of the Company and all executives of any
person in control of the Company;
-93-
(iii) The relocation of the Company's principal executive
offices where you are working immediately prior to the Change in
Control of the Company to a location more than 50 miles from the
location of such offices immediately prior to the Change in Control of
the Company or the Company's requiring you to be based anywhere other
than the location of the Company's principal executive offices where
you were working immediately prior to the Change in Control of the
Company except for required travel on the Company's business to an
extent substantially consistent with your present business travel
obligations;
(iv) The failure by the Company, without your consent, to pay
to you any portion of your current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all
executives of the Company and all executives of any person in control
of the Company, or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of the
Company, within thirty days of the date such compensation is due;
(v) The failure by the Company to continue in effect any
compensation plan in which you are participating immediately prior to
the Change in Control of the Company which is material to your total
compensation, including but not limited to, the Company's Bonus Plan,
Executive Deferred Compensation Plan, Restricted Stock Plan, or any
substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the
Company to continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed immediately
prior to the Change in Control of the Company;
(vi) The failure by the Company to continue to provide you
with benefits substantially similar to those enjoyed by you under any
of the Company's pension, savings and retirement plan, life insurance,
medical, health and accident, or disability plans in which you were
participating at the time of the Change in Control of the Company, the
taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive you of any material
fringe benefit enjoyed by you at the time of the Change in Control of
the Company, or the failure by the Company to provide you with the
number of paid vacation days to which you are entitled on the basis of
years of service with the Company in accordance with the Company's
normal vacation policy in effect at the time of the Change in Control
of the Company;
-94-
(vii) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 5 hereof; or
(viii) Any purported termination of your employment by the
Company which is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection 3(d) hereof and the
requirements of Subsection 3(b) above; for purposes of this Agreement,
no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Agreement for
Good Reason shall not be affected by your incapacity due to physical or mental
illness. Your continued employment shall not constitute consent to, or a waiver
of rights with respect to, any circumstance constituting Good Reason hereunder.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(a) hereof constituting a Change in Control of the
Company shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(c) hereof upon the subsequent termination of your employment if
such termination is (y) by the Company other than for Cause, or (z) by you for
Good Reason, or by your Voluntary Termination as provided in Subsection 3(c)(ii)
hereof.
(a) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six consecutive months, and
within thirty days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, your employment may
be terminated for "Disability". Termination by the Company or you of your
employment based on "Retirement" shall mean termination at age 65 (or later)
with ten years of service or retirement in accordance with any retirement
contract between the Company and you.
(b) Cause. Termination by the Company of your employment for "Cause"
shall mean termination upon your engaging in willful and continued misconduct,
or your willful and continued failure to substantially perform your duties with
the Company (other than due to physical or mental illness), if such failure or
misconduct is materially damaging or materially detrimental to the business and
operations of the Company, provided that you shall have received written notice
of such failure or misconduct and shall have continued to engage in such failure
or misconduct after 30 days following receipt of such notice from the Board,
which notice specifically identifies the manner in which the Board believes that
you
-95-
have engaged in such failure or misconduct. For purposes of this Subsection, no
act, or failure to act, on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company. Notwithstanding
the foregoing, you shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of failure to substantially perform your
duties or of misconduct in accordance with the first sentence of this
Subsection, and of continuing such failure to substantially perform your duties
or misconduct as aforesaid after notice from the Board, and specifying the
particulars thereof in detail.
(c) Voluntary Resignation. After a Change in Control of the Company and
for purposes of receiving the benefits provided in Subsection 4(c) hereof, you
shall be entitled to terminate your employment by voluntary resignation given at
any time during the two years following the occurrence of a Change in Control of
the Company hereunder, provided such resignation is (i) by you for Good Reason
or (ii) by you voluntarily without Good Reason if such voluntary termination
occurs by written notice given by you to the Company during the thirty days
immediately following the one year anniversary of the Change in Control (your
"Voluntary Termination"), provided, however, for purposes of this Subsection
3(c)(ii) only, the language "25% or more" in Subsection 2(a)(i) hereof is
changed to "a majority". Such resignation shall not be deemed a breach of any
employment contract between you and the Company.
(d) Notice of Termination. Any purported termination of your employment
by the Company or by you shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(e) Date of Termination, Etc. "Date of Termination" shall mean:
-96-
(i) If your employment is terminated for Disability, thirty
days after Notice of Termination is given (provided that you shall not
have returned to the full-time performance of your duties during such
thirty day period), and
(ii) If your employment is terminated pursuant to Subsection
(b) or (c) above or for any other reason (other than Disability), the
date specified in the Notice of Termination (which, in the case of a
termination pursuant to Subsection (b) above shall not be less than
thirty days, and in the case of a termination pursuant to Subsection
(c) above shall not be less than fifteen nor more than sixty days
(thirty days in case of your Voluntary Termination), respectively, from
the date such Notice of Termination is given);
provided that if within fifteen days after any Notice of Termination is given,
or, if later, prior to the Date of Termination (as determined without regard to
this provision), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Company will continue to pay you your full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, base salary) and continue you as a participant in all compensation, bonus,
benefit and insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.
4. Compensation Upon Termination Following a Change of Control. Following
a Change in Control of the Company, as defined in Subsection 2(a),
upon termination of your employment, you shall be entitled to the following
benefits:
(a) Deleted.
-97-
(b) If your employment shall be terminated by the Company for Cause,
the Company shall pay you your full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation plan of the Company at
the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(c) If your employment by the Company shall be terminated (y) by the
Company other than for Cause or (z) by you for Good Reason, or by your Voluntary
Termination as provided in Subsection 3(c)(ii), then you shall be entitled to
the benefits provided below:
(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation or benefit plan of the Company, at the time such
payments are due;
(ii) In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you a lump sum severance payment (the "Severance
Payment") equal to 2.99 times the average of the Annual Compensation
(as defined below) which was payable to you by the Company or any
corporation affiliated with the Company within the meaning of Section
1504 of the Internal Revenue Code of 1986, as amended (the "Code"), for
the three highest calendar years in terms of Annual Compensation during
the five calendar years preceding the calendar year in which the Change
in Control occurred. If you were not employed by the Company or its
affiliates during the entire five calendar years preceding the calendar
year in which the Change in Control occurred, then such average shall
be an average of the three highest years in terms of Annual
Compensation during the complete calendar years (if any) and partial
calendar year (if any) during which you were so employed provided that
the amount for any such partial calendar year shall be an annualized
amount based on the amount of Annual Compensation paid to you during
the partial calendar year. If you were not employed by the Company or
its affiliates for three complete or partial calendar years, the amount
will be an average of your Annual Compensation during the complete
calendar year(s) (if any) and partial calendar year(s) (if any)
(annualized) you were so employed. If you were not employed by the
Company or its affiliates during such preceding calendar year, then
such average shall be an annualized amount based on the amount of
Annual Compensation paid to you during the calendar year in which the
Change of Control occurred. Annual
-98-
Compensation is your base salary and your annual bonus under the Annual
Management Bonus Plan of the Company that was payable to you by the
Company or any of its affiliates during a calendar year determined
without any reduction for any deferrals of such salary or such bonus
under any deferred compensation plan (qualified or unqualified) and
without any reduction for any salary reductions used for making
contributions to any group insurance plan of the Company or its
affiliates.
(iii) The Company shall also pay to you the amounts
of any compensation or awards payable to you or due to you in respect
of any period preceding the Date of Termination under any incentive
compensation plan of the Company (including, without limitation, the
Company's Restricted Stock Plan and Stock Option Plan (the "Option
Plan") and under any agreements with you in connection therewith, and
shall make any other payments and take any other actions provided for
in such plans and agreements.
(iv) In lieu of shares of common stock of the Company
("Company Shares") issuable upon exercise of outstanding options, if
any ("Options") granted to you under the Option Plan (which Options
shall be cancelled upon the making of the payment referred to below),
you shall receive an amount in cash equal to the product of (y) the
excess of, the higher of the closing price of Company Shares as
reported on the New York Stock Exchange on or nearest the Date of
Termination (or, if not listed on such exchange, on a nationally
recognized exchange or quotation system on which trading volume in
Company Shares is highest) or the highest per share price for Company
Shares actually paid in connection with any change in control of the
Company, over the per share exercise price of each Option held by you
(whether or not then fully exercisable), times (z) the number of
Company Shares covered by each such option.
(v) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination (including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of Section
4999 of the Code to any payment or benefit provided hereunder).
-99-
(vi) In the event that you become entitled to the
payments (the "Severance Payments") provided under paragraphs (ii),
(iii), and (iv), above (and Subsections (d) and (e), below), and if any
of the Severance Payments will be subject to the tax (the "Excise Tax")
imposed by Section 4999 of the Code, the Company shall pay to you at
the time specified in paragraph (vii), below, an additional amount (the
"Gross-Up Payment") such that the net amount retained by you, after
deduction of any Excise Tax on the Severance Payments and any federal
(and state and local) income tax and Excise Tax upon the payment
provided for by this paragraph, shall be equal to the amount of the
Severance Payments. For purposes of determining whether any of the
Severance Payments will be subject to the Excise Tax and the amount of
such Excise Tax the following will apply:
(A) Any other payments or benefits received or to be
received by you in connection with a Change in Control of the
Company or your termination of employment (whether pursuant to
the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in
a Change in Control of the Company or any person affiliated
with the Company or such person) shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2)
of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) shall be treated as subject to
the Excise Tax, unless in the opinion of tax counsel selected
by the Company's independent auditors and acceptable to you
such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning
of Section 280G(b)(4) of the Code in excess of the base amount
within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax;
(B) The amount of the Severance Payments which shall
be treated as subject to the Excise Tax shall be equal to the
lesser of (y) the total amount of the Severance Payments or
(z) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) (after applying clause (A), above); and
(C) The value of any non-cash benefits or any
deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with proposed,
temporary or final regulations under Sections 280G(d)(3) and
(4) of the Code or, in the absence of such regulations, in
accordance with the
-100-
principles of Section 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment,
you shall be deemed to pay Federal income taxes at the highest
marginal rate of federal income taxation in the calendar year
in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in
the state and locality of your residence on the Date of
Termination, net of the maximum reduction in Federal income
taxes which could be obtained from deduction of such state and
local taxes. In the event that the amount of Excise Tax
attributable to Severance Payments is subsequently determined
to be less than the amount taken into account hereunder at the
time of termination of your employment, you shall repay to the
Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of
the Gross-Up Payment attributable to the Excise Tax and
Federal (and state and local) income tax imposed on the
Gross-Up Payment being repaid by you if such repayment results
in a reduction in Excise Tax and/or a Federal (and state and
local) income tax deduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax attributable to
Severance Payments is determined to exceed the amount taken
into account hereunder at the time of the termination of your
employment (including by reason of any payment the existence
or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional
gross-up payment in respect of such excess (plus any interest
payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(vii) The payments provided for in paragraphs (ii),
(iii), (iv) and (vi) above, shall be made not later than the fifth day
following the Date of Termination, provided, however, that if the
amounts of such payments cannot be finally determined on or before such
day, the Company shall pay to you on such day an estimate, as
determined in good faith by the Company, of the minimum amount of such
payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount
-101-
subsequently determined to have been due, such excess shall constitute
a loan by the Company to you payable on the fifth day after demand by
the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(d) If your employment shall be terminated (y) by the Company other
than for Cause, or (z) by you voluntarily for Good Reason or by your Voluntary
Termination, then for a twenty-four month period after such termination, the
Company shall arrange to provide you with life, disability, accident and health
insurance benefits substantially similar to those which you are receiving
immediately prior to the Notice of Termination. Benefits otherwise receivable by
you pursuant to this Subsection 4(d) shall be reduced to the extent comparable
benefits are actually received by you during the twenty-four month period
following your termination, and any such benefits actually received by you shall
be reported to the Company.
(e) In the event a Change in Control of the Company occurs after you
and the Company have entered into any retirement agreement including an
agreement providing for early retirement, then the present value, computed using
a discount rate of 8% per annum, of the total amount of all unpaid deferred
payments as payable to you in accordance with the payment schedule that you
elected when the deferral was agreed to and using the plan interest rate
applicable to your situation, or other payments payable or to become payable to
you or your estate or beneficiary under such retirement agreement (other than
payments payable pursuant to a plan qualified under Section 401(a) of the
Internal Revenue Code) including, without limitation, any unpaid deferred
payments under the Company's Executive Deferred Compensation Plan and the
Company's other deferred compensation plans shall be paid to you (or your estate
or beneficiary if applicable) in cash within five business days after the
occurrence of the Change in Control of the Company. If you and the Company or
its affiliates have executed a retirement agreement and if the Change in Control
of the Company occurs before the effective date of your retirement, then you
shall receive the Severance Payment payable under Subsection 4(c)(ii) herein in
addition to the present value of your unpaid deferred retirement payments and
other payments under the retirement agreement as aforesaid. All other benefits
to which you or your estate or any beneficiary are entitled under such
retirement agreement shall continue in effect notwithstanding the Change in
Control of the Company. This Subsection 4(e) shall survive your retirement.
(f) Notwithstanding that a Change in Control shall not have yet
occurred, if you so elect, by written notice to the Company given at any time
after the date hereof and prior to the time such amounts are otherwise payable
to you:
-102-
(i) The Company shall deposit with an escrow agent, pursuant
to an escrow agreement between the Company and such escrow agent, a sum
of money, or other property permitted by such escrow agreement,
sufficient in the opinion of the Company's management to fund payment
of the following amounts to you, as such amounts become payable:
(A) Amounts payable, or to become payable, to you or
to your beneficiaries or your estate under the Company's
Executive Deferred Compensation Plan and under any agreements
related thereto in existence at the time of your election to
make the deposit into escrow.
(B) Amounts payable, or to become payable, to you or
to your beneficiaries or your estate by reason of your
deferral of payments payable to you prior to the date of your
election to make the deposit into escrow under any other
deferred compensation agreements between you and the Company
in existence at the time of your election to make the deposit
into escrow, including but not limited to deferred
compensation agreements relating to the deferral of salary or
bonuses.
(C) Amounts payable, or to become payable, to you or
to your beneficiaries or your estate under any agreement
relating to your retirement from the Company (including
payments described under Subsection 4(e) above) which
agreement is in existence at the time of your election to make
the deposit into escrow, other than amounts payable by a plan
qualified under Section 401(a) of the Code.
(D) Subject to the approval of the Committee, amounts
then due and payable to you, but not yet paid, under any other
benefit plan or incentive compensation plan of the Company
(whether such amounts are stock or cash) other than amounts
payable to you under a plan qualified under Section 401(a) of
the Code.
(ii) Upon the occurrence of a Potential Change of Control, the
Company shall deposit with an escrow agent (which shall be the same
escrow agent, if one exists, acting pursuant to clause (i) of this
Subsection 4(f)), pursuant to an escrow agreement between the Company
and such escrow agent, a sum of money, or other property permitted
-103-
by such escrow agreement, sufficient in the opinion of Company
management to fund the payment to you of the amounts specified in
Subsection 4(c) of this Agreement.
(iii) It is intended that any amounts deposited in escrow
pursuant to the provisions of clause (i) or (ii) of this Subsection
4(f), be subject to the claims of the Company's creditors, as set forth
in the form of such escrow agreement.
(g) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise (except as specifically provided in
this Section 4).
(h) In addition to all other amounts payable to you under this Section
4, you shall be entitled to receive all benefits payable to you under any
benefit plan of the Company in which you participate to the extent such benefits
are not paid under this Agreement.
5. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the same amount and on the
same terms as you would be entitled to hereunder if you terminate your
employment voluntarily for Good Reason following a Change in Control of the
Company, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
-104-
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devises and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law. The
obligations of the Company under Section 4 shall survive the expiration of the
term of this Agreement.
8. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
-105-
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Memphis, Tennessee in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
11. Similar Provisions in Other Agreement. The Severance Payment
under this Agreement supersedes and replaces any other severance payment to
which you may be entitled under any previous agreement between you and the
Company or its affiliates.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our binding agreement on this subject.
Very truly yours,
XXXXXX'X ENTERTAINMENT, INC.
By: /s/X.X. Xxxxxxxx, Xx.
-------------------------
X. X. Xxxxxxxx, Xx.
Senior Vice President
Agreed:
/s/Xxxxxx X. Xxxx, Xx.
----------------------------
Xxxxxx X. Xxxx, Xx.
-106-
