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EXHIBIT 10.17
EXECUTIVE EMPLOYMENT AGREEMENT
OF XXX X. XXXXXXX
AGREEMENT, dated March 24, 1997, by and between WORD
ENTERTAINMENT GROUP, INC., a Delaware corporation having its corporate
headquarters at Xxx Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxx 00000 ("WEG") and XXX X.
XXXXXXX residing at 0000 Xxxxxxx, Xxxxxxxxx, Xxxxxxxxx ("Executive").
W I T N E S S E T H:
WHEREAS, WEG desires to employ Executive as its Co-President;
WHEREAS, Executive desires to serve as the Co-President of
WEG;
NOW, THEREFORE, in consideration of the covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Employment; Term. WEG hereby employs Executive, and
Executive hereby accepts employment with WEG, upon the terms and conditions
contained in this Agreement. The term of Executive's employment hereunder (the
"Employment Period") shall commence on the date hereof (the "Effective Date")
and shall continue for a period of seven (7) years from and after the Effective
Date, unless sooner terminated as hereinafter provided.
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2. Duties.
(a) (i) During the Employment Period, Executive shall serve as
the Co-President of WEG. Executive, together with E. Xxxxxxx Xxxxxxx, the other
Co-President of WEG (the "Co-President"), shall be responsible for the
management, operations, growth and development of WEG and its subsidiaries,
which, as of the date hereof, include Word Entertainment, Inc., operating as
Word Records and Music, and Xxxxxxx/Xxxxxxx Entertainment ("BHE"), and will
include such cable broadcasting services (through Z-TV and/or other program
services), syndicated television programming, film, merchandising, sports,
retail, video, hospitality, resorts, publishing and other new ventures as
determined from time to time by the Company (as hereinafter defined) and the
Board of Directors of WEG. Executive shall report directly to the Chief
Operating Officer of the Company or such other more senior officer of the
Company as is determined by the Company from time to time. During the
Executive's employment hereunder, (A) other than E. Xxxxxxx Xxxxxxx, no other
officer of WEG shall perform the duties of a President, Chief Executive Officer,
Chief Operating Officer or other officer of WEG senior to Executive and E.
Xxxxxxx Xxxxxxx, (B) Executive's duties shall not be reduced without his
consent, unless such reduction occurs in connection with a restructuring of the
business of WEG, such as a disposition or discontinuation of an undesirable
business (as determined by the Company) or other action not intended to reduce
Executive's role in WEG's business (as the Company determines it should be
conducted), (C) all employees of WEG shall report, directly or indirectly, to
either Executive or the other Co-President of WEG, other than: (w) the Chief
Financial Officer of WEG, who shall report to such officers as provided in
Section 2(d), (x) all employees of WEG
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performing accounting, finance, budgeting and administration functions related
thereto, who shall report, directly or indirectly, to the CFO of WEG, (y) all
employees of the Company or any subsidiary other than WEG who perform services
for Company subsidiaries generally (such as employees of the Human Resources
Department and the Legal Department) and (z) employees of Company subsidiaries
other than WEG and its wholly-owned subsidiaries utilized by WEG from time to
time in furtherance of its business.
(ii) Executive, the other Co-President of WEG and the Company
shall jointly develop a strategic plan for WEG (the "Strategic Plan"). The
parties will endeavor to develop the Strategic Plan for presentation to and
approval by the Company within one hundred twenty (120) days after the Effective
Date. In furtherance of the Strategic Plan, the Company intends to provide
significant capital to enable the growth and development of WEG.
(iii) On an annual basis, at such time as is consistent with
the Company's overall planning and budgeting process, as determined by the
Company, Executive and the other Co-President shall update the Strategic Plan in
writing for presentation to, and approval by the Company.
(iv) Executive shall faithfully and as a fiduciary perform
the duties of his office and shall perform such other duties of an executive,
managerial and administrative nature as shall be required of his office and be
consistent with the position of President. Subject to Section 2(b) below,
Executive shall devote substantially all of his business time and effort to the
performance of his duties to WEG hereunder.
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(v) If E. Xxxxxxx Xxxxxxx is not employed as Co-President of
WEG at any time in which he has joint duties with the Executive as described in
this Section 2, subject to WEG and the Company's rights under Section 6,
Executive shall be solely responsible for the performance of such duties.
(vi) As used in this Agreement, "Company" shall mean either
Xxxxxxx Entertainment Company ("Xxxxxxx Entertainment") or Xxxxxxx Broadcasting
Company ("Xxxxxxx"), whichever is the ultimate corporate parent of WEG at the
time the determination is made.
(b) Notwithstanding anything to the contrary contained in Section 2(a)
above:
(i) Executive shall continue to perform, or supervise the
performance of, his existing duties at BHE for no additional compensation;
(ii) Executive shall be permitted to engage in the following
activities, provided that such activities do not, individually or in the
aggregate, materially interfere or conflict with Executive's duties and
responsibilities to WEG:
(w) Executive may serve on the governing boards of,
or otherwise participate in, a reasonable number of trade associations
and/or charitable organizations;
(x) Executive may engage in a reasonable amount of
charitable activities and community affairs;
(y) Executive may manage his personal investments
and affairs; and
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(z) subject to the approval of the Chief Executive
Officer of the Company in his sole discretion, Executive may serve on
the Board of Directors of one or more business corporations.
(c) Executive shall comply with all personnel policies and
procedures of the Company applicable to senior executives of the Company and its
subsidiaries as in effect from time to time.
(d) Relationship with the Chief Financial Officer of WEG.
Executive, the Co-President (if then employed by WEG) and the Company shall,
from time to time, jointly select a candidate for appointment as Chief Financial
Officer of WEG. The Chief Financial Officer shall have dual reporting duties to
the Executive and the Co-President (if then employed by WEG), on the one hand,
and the Chief Financial Officer of the Company (or such other senior officer of
the Company as is determined by the Company from time to time), on the other
hand. The Chief Financial Officer of WEG may be terminated either by (i) the
Chief Financial Officer of the Company (or such other senior officer as
aforesaid) with the consent of the Executive and the Co-President (if then
employed by WEG) or (ii) by the Executive and the Co-President (if then employed
by WEG), with the consent of the Chief Financial Officer of the Company (or such
senior officer as aforesaid); provided that any consent required hereunder shall
not be unreasonably withheld or delayed.
3. Compensation.
(a) Base Salary. During the Employment Period, WEG shall pay
to Executive an aggregate annual salary of $300,000 (as increased as described
in this clause (a), the "Base Salary"). The Base Salary shall be payable in
accordance with the Company's
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payroll practices as in effect from time to time. The Base Salary shall be
increased on or about the anniversary of the date hereof by an amount determined
by the Compensation Committee of the Board of Directors of the Company in its
sole discretion, but not less than an amount equal to the percentage increase in
the Consumer Price Index (as hereinafter defined), during the prior year
(measured from December to December). For purposes hereof, "Consumer Price
Index" means the Consumer Price Index South Urban Consumer, All Items (1982-84 =
100), as reported by the Bureau of Labor Statistics of the U.S. Department of
Labor. In the event the Consumer Price Index shall be superseded or shall be
published by a different agency, the superseding index shall be substituted for
this Consumer Price Index in such a manner as to implement the intentions of the
parties in this Agreement.
(b) Annual Cash Bonus. During the Employment Period, Executive
shall be entitled to an annual cash bonus of up to 60% of his Base Salary in
effect during the fiscal year of the Company for which such bonus is awarded
(the "Cash Bonus"). The percentage of the total Cash Bonus for which the
Executive is eligible during any fiscal year shall be based upon performance
measures determined by the Compensation Committee of the Board of Directors of
the Company in its sole discretion. Such performance measures shall be allocated
among various performance criteria determined by the Board of Directors of the
Company in its sole discretion. Such criteria are currently proposed to be
initially allocated as follows:
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Initial
Percentage of
Total Eligible
Criteria Cash Bonus
-------- ----------
(i) Achievement by the Company of operating cash flow goals
fixed by its Board of Directors 25%
(ii) Achievement by WEG of operating cash flow goals fixed by the Board of
Directors of the Company (such cash flow to be (x) subject to a six percent (6%)
charge for the cost of capital invested in WEG, whether before or after the date
hereof, and whether such capital was funded by the Company or otherwise and (y)
adjusted to offset negative cash flow results from losses
incurred by Z-TV, if any) 60%
(iii) Operation by WEG within its capital budget established by
the Board of Directors of the Company 5%
(iv) Executive's individual contribution to WEG during the year, as determined
by the Board of Directors of the Company
10%
---
100%
The Cash Bonus for the portion of each of (x) the first fiscal year of the
Company during which Executive is employed hereunder and, (y) if Executive's
employment with WEG terminates on the last day of the Employment Period, the
last fiscal year of the Employment Period during which Executive is employed
hereunder, shall be equal to the total Cash Bonus which Executive would have
been entitled to receive had he been employed hereunder for such entire fiscal
year multiplied by a fraction, the numerator of which is the number of days in
such calendar year in which Executive was employed hereunder, and the
denominator of which is 365.
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4. Long Term Incentives.
(a) Grants, Adjustment for Economic Equivalents. Xxxxxxx
Entertainment has entered into an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of February 9, 1997, with Westinghouse Electric Company
("Westinghouse"), and G Acquisition Corp ("Sub") providing for a merger of
Xxxxxxx Entertainment with Sub (the "Merger") and a restructuring of certain
other assets of Xxxxxxx Entertainment (the "Distribution") pursuant to an
Agreement and Plan of Distribution to be entered into between Xxxxxxx
Entertainment and Xxxxxxx. Pursuant to the Distribution, certain continuing
assets and businesses of Xxxxxxx and certain continuing liabilities of Xxxxxxx
Entertainment will be assumed by Xxxxxxx. The number of shares of stock
available to Executive for purchase under the option grants and restricted stock
awards provided in Section 4 is based on the number of shares of Class A Common
Stock, $0.01 par value, of Xxxxxxx Entertainment ("Xxxxxxx Entertainment Common
Stock") which would be issued to Executive if the options provided in Section 4
were granted by Xxxxxxx Entertainment. Following the completion of the Merger
and the Distribution, current holders of options to acquire Xxxxxxx
Entertainment Common Stock granted under Xxxxxxx Entertainment's 1993 Stock
Option and Incentive Plan (the "Plan") will receive, in lieu of such options,
options to purchase shares of Common Stock, $0.01 par value, of Xxxxxxx
("Xxxxxxx Common Stock") with an economic value substantially equivalent to the
shares of Xxxxxxx Entertainment Common Stock available to such current holders
under the Plan. In light of the foregoing, the parties agree that the number of
shares of restricted Xxxxxxx Common Stock and the number of shares of Xxxxxxx
Common Stock which may be purchased upon exercise of the options granted
pursuant to Section 4 shall be adjusted
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on the same basis as the number of shares of Xxxxxxx Entertainment Common Stock
which may be purchased by members of Xxxxxxx senior management who are current
holders of options under the Plan as such options are adjusted following
completion of the Merger and the Distribution. In the event the Merger Agreement
terminates and the Merger does not occur, WEG shall cause Xxxxxxx Entertainment
to issue the options set forth in Section 4(b) to purchase the number of shares
of Xxxxxxx Entertainment Common Stock provided herein without adjustment. In no
event shall any adjustment for the benefit of Executive hereunder include any
right (or the economic equivalent of any right) to receive any securities of
Westinghouse in the Merger.
(b) Eligibility for Annual Option and Restricted Stock Grants.
During the Employment Period, Executive shall be entitled to a grant of (and WEG
shall cause the Company to grant) annual options and restricted stock (e.g.,
performance shares) (together, the "Annual Options") relating to 23,000 shares
of Xxxxxxx Entertainment Common Stock or, subject to adjustment as provided in
Section 4(a), Xxxxxxx Common Stock. The Annual Options shall be granted as and
when grants are made to similarly situated executives of the Company, provided
that, any failure by the Company to grant options to similarly situated
executives shall not relieve WEG of its obligation to cause the Company to issue
the Annual Options required hereunder. The Annual Options shall be granted
pursuant to and shall be governed by the terms of the applicable stock option
and incentive plan of the Company. Each Annual Option shall include options to
purchase 18,500 shares of Xxxxxxx Entertainment Common Stock or, subject to
adjustment pursuant to Section 4(a), Xxxxxxx Common Stock and shall (i) vest in
equal amounts at the second through the fifth anniversaries of the grant, (ii)
be
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exercisable at fair market value at the time of grant, (iii) be subject to
accelerated vesting upon the occurrence of an event described in Section 7(e)
and (f), (iv) have a term of ten years from the date of grant, and (vi)
otherwise be subject to the terms of a stock option agreement between the
Company and the Executive in the form prescribed by the Compensation Committee
of the Board of Directors of the Company for its executives generally. Each
Annual Option shall also include a grant of 4,500 restricted shares (i.e.,
performance shares) of Xxxxxxx Entertainment Common Stock or, subject to
adjustment as provided in Section 4(a), Xxxxxxx Common Stock ("Restricted
Stock"). Under the Plan as currently in effect, the restrictions on the
Restricted Stock shall be removed on the third anniversary of grant, based on
the Company's earnings per share growth target (the "Target") established with
respect to such Restricted Stock by the Compensation Committee of the Board of
Directors of the Company in accordance with the following formula:
(i) Restrictions shall be removed as to one-third
of the Restricted Stock on the third anniversary of grant if 90% but less than
100% of the Target is achieved;
(ii) Restrictions shall be removed as to two-thirds
of the Restricted Stock on the third anniversary of the grant if 100% but less
than 110% of the Target is achieved; and
(iii) Restrictions shall be removed as to all of the
Restricted Stock on the third anniversary of its grant if 110% or more of the
Target is achieved.
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In the event the Company shall at any time or from time to time modify
the restricted stock award program for its executives generally under or
pursuant to the Plan or a successor stock option or incentive plan, such
modifications shall apply to the Annual Option Award of Restricted Stock under
this Agreement.
(c) Mega-Grant. Executive shall be entitled to a grant of an
additional 40,000 restricted shares (e.g., performance shares) of Xxxxxxx
Entertainment Common Stock or, subject to adjustment as provided in Section
4(a), Xxxxxxx Common Stock (the "Mega-Grant"). The Mega-Grant shall be made on
or about the date of termination of the Merger Agreement or the consummation of
the Merger and the Distribution, as the case may be. The Mega-Grant shall become
eligible for elimination of restrictions (i.e., become available for
distribution to Executive) as to one-third of the shares exercisable thereunder
beginning on each of the fifth, sixth and seventh anniversaries of the Effective
Date (each a "Mega-Grant Eligibility Date"). Elimination of restrictions on
eligible Mega-Grant shares shall occur upon WEG achieving, on the Mega-Grant
Eligibility Date to which such target and eligible shares relate, or on any
subsequent Mega-Grant Eligibility Date, the cumulative operating cash flow
target (adjusted for losses of ZTV and charges for the cost of capital invested
in WEG as described in Section 3(b)(ii)) determined by the Compensation
Committee of the Board of Directors of the Company. All restrictions on
Mega-Grant shares shall be removed, without achievement of any of the
performance criteria described herein, upon the occurrence of an event described
in Section 7(f) and shall be subject to the terms of the existing or successor
stock option and incentive plans of the Company (including the form of grant
agreement), applicable at the time of grant.
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5. Expenses; Benefits.
(a) During the Employment Period, WEG will reimburse
Executive, in accordance with the Company's policies and procedures, for all
reasonable expenses paid or incurred by Executive, including reimbursement for
first class travel and accommodations expenses, in connection with the
performance of his duties for WEG hereunder.
(b) During the Employment Period, Executive shall be
reimbursed for monthly dues for membership in one country club of his choosing.
(c) During the Employment Period, Executive shall be entitled
to the use of a corporate motor vehicle in accordance with the Company's policy.
In lieu of such a vehicle, Executive may elect to receive from WEG a vehicle
allowance of $1,000 per month. The parties agree to continue any existing auto
lease of BHE relating to Executive's corporate motor vehicle in use on the
Effective Date in such a manner that WEG's cost of making such vehicle available
to Executive does not exceed $1,000 a month. The vehicle allowance shall be
subject to annual increase by an amount equal to the percentage increase of the
Consumer Price Index during the prior year.
(d) During the Employment Period, Executive shall be entitled
to four (4) weeks vacation annually.
(e) During the Employment Period, Executive shall be entitled
to participate in and enjoy the benefits of any health, life, disability,
retirement, pension, group insurance, or other similar plan or plans which may
be in effect or instituted by the Company for the benefit of senior executive
employees of the Company and its subsidiaries generally, upon such terms as may
be therein provided. Such benefits as in effect on the date hereof are
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summarized in Exhibit A hereto, provided that, notwithstanding Exhibit A,
Executive shall be entitled to a life insurance benefit equal to three times his
Base Salary.
6. Termination. Executive's employment hereunder may be terminated
prior to the expiration of the Employment Period only as follows:
(a) Death or Permanent Disability. At the option of the
Company or the Board of Directors of WEG, by written notice to Executive or his
personal representative in the event of either (i) the death of Executive
("Death"), or (ii) the Permanent Disability (as hereinafter defined) of
Executive. As used herein, the term "Permanent Disability" shall mean a physical
or mental incapacity or disability which renders Executive unable substantially
to render the services required hereunder for a period of one hundred
thirty-five (135) consecutive days or one hundred eighty (180) days during any
twelve (12) month period, as certified by a licensed physician retained by the
Company for the purposes of making such determination. Executive shall be
entitled to have his physician present during any examination of Executive by a
Company physician pursuant hereto.
(b) Cause. At the option of the Company or the Board of
Directors of WEG, by written notice to Executive upon the occurrence of any one
or more of the following events (each, a "Cause"):
(i) any action by Executive constituting fraud,
embezzlement or dishonesty in the course of his employment hereunder;
(ii) any conviction of Executive of a crime
involving moral turpitude;
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(iii) gross neglect by Executive in the performance
his duties hereunder for a period of two (2) days following receipt by
Executive of written notice from the Company of such gross neglect;
(iv) failure or refusal by Executive, for a period
of twenty-four hours after receipt by Executive of written notice from
the Company, to perform his duties hereunder or to comply with any
valid and legal directive of the Board of Directors of WEG or the
officer of the Company to whom Executive reports pursuant to Section
2(a);
(v) a breach by Executive of any of his material
obligations under this Agreement and failure to cure such breach within
ten (10) days of receipt by Executive of written notice thereof from
the Company or WEG; or
(vi) upon notice to Executive delivered not later
than six (6) months following the voluntary termination (the
"Co-President Termination") by E. Xxxxxxx Xxxxxxx of his Employment
Agreement, of even date herewith, with the Companies (the "Xxxxxxx
Employment Agreement").
(c) By Executive. At the option of Executive, by written
notice to the Company and WEG at any time for any of the following reasons:
(i) by notice to the Company and WEG given within a
reasonable time after the occurrence of a material breach by WEG of any
of its material obligations under this Agreement and the failure by WEG
to cure such breach within thirty (30) days of such notice;
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(ii) by notice to the Company and WEG given within a
reasonable time after failure to pay Executive his Base Salary in
accordance with Section 3 and failure to cure such breach within
fifteen (15) days of such notice (this clause (ii), together with
clause (i) hereof, hereinafter sometimes referred to as "Good Reason");
or
(iii) upon the occurrence of a Change of Control (as
defined in Section 7(f)); provided that (x) notice of termination by
Executive pursuant to this Section 6(c)(iii) shall have been given
before the expiration of the one hundred twentieth (120th) day
following such Change of Control and (y) if employed by WEG at the
time, E. Xxxxxxx Xxxxxxx shall simultaneously give the Company notice
of termination pursuant to Section 6(c)(iii) of the Xxxxxxx Employment
Agreement.
(d) Without Cause. In addition to its rights of termination
pursuant to Sections 6(a) and (b), the Company or the Board of Directors of WEG
may terminate this Agreement at any time without cause, subject to WEG's
obligations under Section 7(e) and 7(f); provided that, unless (i) E. Xxxxxxx
Xxxxxxx is not at the time employed by WEG pursuant to the Xxxxxxx Employment
Agreement or (ii) E. Xxxxxxx Xxxxxxx'x employment pursuant to the Xxxxxxx
Employment Agreement is not otherwise simultaneously terminated pursuant to a
provision other than Section 6(d) thereof, Executive's employment may not be
terminated pursuant to this Section 6(d) unless E. Xxxxxxx Xxxxxxx'x employment
is simultaneously terminated pursuant to Section 6(d) of the Xxxxxxx Employment
Agreement. Termination pursuant to this Section 6(d) is sometimes hereinafter
referred to as termination "Without Cause."
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7. Effect of Termination.
(a) Effect Generally. In the event of termination of
Executive's employment hereunder prior to the expiration of the Employment
Period for any reason, neither the Company nor WEG shall have any liability or
obligation to Executive other than as specifically set forth in this Section 7.
(b) Upon Death. Upon the termination of Executive's employment
hereunder as a result of Death (pursuant to Section 6(a)(i)), Executive or his
legal representatives shall be entitled to receive an amount equal to the Base
Salary accrued through the date of termination and a pro rata portion of
Executive's bonus, if any, in respect of the fiscal year of the Company in which
termination occurs, which is based on the Executive's performance during the
period through the date of termination, as reasonably determined by the Board of
Directors of Company at the time bonuses are determined for Company executives
generally. In addition, Executive or his legal representatives shall be entitled
to any accrued and unpaid vacation pay, unreimbursed expenses incurred pursuant
to Section 5(a), (b) or (c) or other benefits which may be owing to Executive
pursuant to any applicable written employee benefit plan or policy of the
Company in effect at the time.
(c) Upon Permanent Disability. Upon the termination of
Executive's employment hereunder as a result of Permanent Disability (pursuant
to Section 6(a)(ii)), Executive or his legal representatives shall be entitled
to receive an amount equal to the Base Salary accrued through the date of
termination and a pro rata portion of Executive's bonus, if any, in respect of
the fiscal year of the Company in which Executive's termination occurs which is
based on the Executive's performance through the date of termination, as
reasonably
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determined by the Board of Directors of Company at the time bonuses are
determined for Company executives generally. Executive's payments hereunder
shall be reduced by any payments received by Executive under any worker's
compensation or similar law. In addition, Executive or his legal representatives
shall be entitled to long-term disability benefits, accrued and unpaid vacation
pay, unreimbursed expenses incurred pursuant to Section 5(a), (b) or (c) and any
other benefits which may be owing to Executive pursuant to any applicable
written employee benefit plan or policy of the Company in effect at the time.
(d) For Cause or by Executive Without Good Reason. Upon the
termination of Executive's employment hereunder (i) by the Company or WEG for
Cause (pursuant to Section 6(b)), or (ii) by Executive for any reason other than
Good Reason (pursuant to Section 6(c)(i) or (ii)), then Executive shall be
entitled to an amount equal to the Base Salary accrued through the date of
termination plus unpaid vacation pay, unreimbursed expenses incurred pursuant to
Section 5(a), (b) or (c) and any other benefits which may be owing to Executive
pursuant to any applicable written employee benefit plan or policy of the
Company in effect at the time; provided, however, that if Executive terminates
his employment hereunder pursuant to Section 6(c)(iii), all unvested Annual
Options shall immediately vest.
(e) Without Cause or For Good Reason. Upon the termination of
Executive's employment hereunder either: (i) by the Company or WEG Without Cause
(pursuant to Section 6(d)), or by Executive for Good Reason (pursuant to Section
6(c)(i) or (ii)), Executive shall be entitled to (x) an amount equal to 100% of
the Annual Base Salary then in effect, less $185,910.50 ("Severance
Compensation"), (y) Base Salary accrued through the date of termination, and (z)
unpaid vacation pay, unreimbursed expenses incurred pursuant
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to Section 5(a), (b) or (c) and any other benefits which may be owing to
Executive pursuant to any applicable written employee benefit plan or policy of
the Company in effect at the time. In addition, upon the occurrence of any such
event, all unvested Annual Options shall immediately vest. The Severance
Compensation shall be payable in a lump sum within ninety (90) days of
termination of Executives employment hereunder.
(f) Upon a Change of Control. In the event that Executive's
termination Without Cause (pursuant to Section 6(d)) occurs within ninety (90)
days following a Change of Control, Executive's Severance Compensation shall be
increased such that total Severance Compensation shall be an amount equal 200%
of Annual Base Salary then in effect, less $185,910.50. In addition, (i)
Executive shall be entitled to (y) Base Salary accrued through the date of
termination, and (z) unpaid vacation pay, unreimbursed expenses incurred
pursuant to Section 5(a), (b) or (c) and any other benefits which may be owing
to Executive pursuant to any applicable written employee benefit plan or policy
of the Company in effect at the time, and (ii) upon such event, all Annual
Options and Mega-Grants shall immediately vest. A "Change of Control" shall be
deemed to have taken place if (i) any person or entity, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, other than
the Company, a wholly-owned subsidiary thereof, or any
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employee benefit plan of the Company or any of its subsidiaries becomes the
beneficial owner of Company securities having 33-1/3% or more of the combined
voting power of the then outstanding securities of the Company that may be cast
for the election of directors of the Company (other than as a result of the
issuance of securities initiated by the Company in the ordinary course of
business); or (ii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions less than a
majority of the combined voting power of the then-outstanding securities of the
Company or any successor corporation or entity entitled to vote generally in the
election of the directors of the Company or such other corporation or entity
after such transactions are held in the aggregate by the holders of the Company
securities entitled to vote generally in the election of directors of the
Company immediately prior to such transaction; or (iii) during any period of two
consecutive years after completion of the Merger or termination of the Merger
Agreement, individuals who at the beginning of any such period constitute the
Board of Directors of the Company cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
Company's shareholders, of each director of the Company first elected during
such period was approved by a vote of at least two-thirds of the directors of
the Company then still in office who were directors of the Company at the
beginning of any such period; provided that, notwithstanding the foregoing
clauses (i)-(iii), neither the Merger nor the Distribution shall constitute a
Change of Control.
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8. Purchase Option.
(a) In the event that Executive's employment terminates for
any Qualifying Reason (as hereinafter defined), then, upon joint written notice
given by Executive (jointly, if applicable as provided herein, with E. Xxxxxxx
Xxxxxxx) not later than thirty (30) days after such termination (the "Purchase
Notice"), Executive (and, if applicable as provided herein, E. Xxxxxxx Xxxxxxx,)
shall have the right to purchase the artist management business of WEG (subject
to assumption of its liabilities) (the "Management Business") for one hundred
dollars ($100).
(b) It shall be a "Qualifying Reason" for Executive and E.
Xxxxxxx Xxxxxxx to have the right to purchase the Management Business if both
Executive and E. Xxxxxxx Xxxxxxx cease employment with WEG for any reason
specified under Section 6(c) or 6(d) hereunder and under the Xxxxxxx Employment
Agreement. It shall be a Qualifying Reason for purposes of this subsection (b)
even if the reason for termination of Executive hereunder differs from the
reason for termination of E. Xxxxxxx Xxxxxxx under the Xxxxxxx Employment
Agreement.
(c) It shall be a "Qualifying Reason" for Executive to have
the right to purchase the Management Business without E. Xxxxxxx Xxxxxxx if:
(i) Executive's employment is terminated for Cause
as a result of a Co-President Termination (pursuant to Section
6(b)(vi)); or
(ii) Following the termination of E. Xxxxxxx
Xxxxxxx'x employment for any reason:
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(x) Executive shall have terminated employment with
WEG for Good Reason (pursuant to Section 6(c)(i) or (ii));
(y) Executive shall have terminated employment with
WEG upon a Change of Control pursuant to Section 6(c)(iii); or
(z) The Company or WEG shall have terminated
Executive's employment with WEG Without Cause (pursuant to Section
6(d)).
(d) Within sixty (60) days following receipt of the Purchase
Notice, the Company shall deliver to the Executive and E. Xxxxxxx Xxxxxxx (i) a
balance sheet, dated as of a recent date, of the Management Business, prepared
in accordance with generally accepted accounting principles, and (ii) a proposed
assignment and assumption agreement executed by WEG and providing for the sale
of the Management Business for the above purchase price and containing such
other terms as are reasonably required by WEG to effect the sale of the
Management Business without liability, cost or expense to WEG (the
"Assumption").
(e) Closing of the purchase of the Management Business shall
occur on a date selected by Executive and E. Xxxxxxx Xxxxxxx not more than
thirty (30) days following receipt of the documents provided in Section 8(d). At
the Closing, Executive, (and, if applicable, E. Xxxxxxx Xxxxxxx) shall execute
and deliver the Assumption to WEG.
(f) This Section shall not be amended if, at the time, E.
Xxxxxxx Xxxxxxx is employed by WEG, without (i) E. Xxxxxxx Xxxxxxx'x written
consent and (ii) simultaneous identical amendment to Section 8 of the Xxxxxxx
Employment Agreement.
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9. Confidential Information.
(a) Executive agrees that he will not commit any act, or in
any way assist others to commit any act, which could reasonably be expected to
injure WEG, the Company or any of their businesses. Without limiting the
generality of the foregoing, Executive recognizes and acknowledges that all
information about WEG and the Company or relating to any of their respective
products, services or any phase of their operations, business or financial
affairs which is not a matter of public record, including without limitation,
trade secrets, customers, suppliers, inventions, computer programs, price and
rate information, plans and strategies ("Confidential Information"), is not
generally known to WEG's or the Company's competitors and is valuable, special
and unique to the business of WEG and the Company. Accordingly, Executive will
not, directly or indirectly, use any such Confidential Information for his own
benefit, divulge, disclose or make accessible any such Confidential Information
or any part thereof to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever (other than in the course of
carrying out his duties hereunder) or render any services to any person, firm,
corporation, association or other entity to whom any such Confidential
Information, in whole or in part, has been disclosed or is threatened to be
disclosed by or at the instance of Executive. Confidential Information shall not
include any information which is or becomes generally available to the public
other than as a result of disclosure in violation of this Agreement.
(b) All memoranda, notes, lists, records and other documents
(and all copies thereof) constituting Confidential Information made or compiled
by Executive or made available to Executive shall be WEG's or the Company's
property, as the case may be, shall be
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kept confidential in accordance with the provisions of this Section 9 and shall
be delivered to WEG or the Company, as appropriate, at any time on request and
in any event upon the termination of Executive's employment with WEG for any
reason.
(c) Since WEG and the Company will be irreparably damaged if
the provisions of this Section 9 are not specifically enforced, each of WEG and
the Company shall be entitled to an injunction or any other appropriate decree
of specific performance (without the necessity of posting any bond or other
security in connection therewith) restraining any violation or non-fulfillment
of Executive's covenants under this Section 9. Such remedies shall not be
exclusive and shall be in addition to any other remedy, at law or in equity,
which WEG or the Company may have for any breach or threatened breach of this
Section 9 by Executive.
10. Covenant Against Competition. Executive covenants and agrees that:
(a) During the Non-Compete Period (as hereinafter defined),
Executive shall not, directly or indirectly, in any Geographic Area (as
hereinafter defined): (i) engage for his own account in the Company Business;
(ii) render any services in any capacity to any person or entity (other than the
Company or its Affiliates) engaged in the Company Business; or (iii) become
interested in any person or entity engaged in the Company Business (other than
the Company or its Affiliates) as a partner, shareholder, director, officer,
employee, principal, member, manager, agent, trustee, consultant or in any other
relationship or capacity; provided, however, Executive may own, directly or
indirectly, solely as a passive investment, securities of any such entity which
are traded on any national securities exchange if Executive (A) is not a
controlling person of, or a member of a group which controls, such
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entity, and (B) does not, directly or indirectly, own 1% or more of any class of
securities of such entity.
(b) During the Non-Compete Period, Executive shall not,
without the prior written consent of the Company, directly or indirectly,
solicit or encourage any employee of the Company or any of its Affiliates to
leave the employment of the Company or any of its Affiliates, hire any employee
who has left the employment of the Company or any of its Affiliates based on or
as a result of any direct or indirect, express or implied, inducements offered
by Executive or anyone affiliated with Executive within one year of the
termination of such employee's employment with either of WEG, the Company or any
of their Affiliates; provided, however, that nothing contained herein shall
prevent Executive from soliciting or hiring any individual(s) who was his
personal assistant or personal secretary while an employee of WEG.
(c) During any portion of the Non-Compete Period during which
Executive is not employed by WEG, Executive shall not, in any Geographic Area,
directly or indirectly, knowingly solicit or encourage any customer, client or
account of WEG, the Company or any of their Affiliates to engage the services of
Executive or any person or entity (other than the Company or its Affiliates) in
which Executive is a partner, shareholder, director, officer, employee,
principal, member, manager, agent, trustee, consultant or engaged in any other
relationship or capacity.
(d) Since WEG and the Company will be irreparably damaged if
the provisions of this Section 10 are not specifically enforced, each of WEG and
the Company shall be entitled to an injunction or any other appropriate decree
of specific performance
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(without the necessity of posting any bond or other security in connection
therewith) restraining any violation or non-fulfillment of Executive's covenants
under this Section 10. Such remedies shall not be exclusive and shall be in
addition to any other remedy, at law or in equity, which WEG or the Company may
have for any breach or threatened breach of this Section 10 by Executive.
(e) If any provision of this Section 10 is held to be
unenforceable because of the scope, duration, area of its applicability or
otherwise, it is the intention of the parties that the court making such
determination shall modify such scope, duration or area, or all of them, and
that such provision shall then be applicable in such modified form.
(f) As used herein:
(i) "Affiliate" shall mean any entity directly or
indirectly controlling, controlled by, or under common control with the
Company and any entity in which either of WEG or the Company, directly
or indirectly is a general partner, member, manager or holder of
greater than a 10% common equity, partnership or membership interest.
(ii) "Company Business" shall mean the business of
WEG on the date hereof, and any business which WEG is engaged in or
under development or proposed to be engaged in, as set forth in the
Strategic Plan, as updated and in effect, at the earlier to occur of
the time of the alleged violation of this Section 10 or the termination
of Executive's employment under this Agreement, whichever occurs
earlier.
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(iii) "Geographic Area" shall mean North America and
the United Kingdom.
(iv) "Non-Compete Period" shall mean the period of
Executive's employment hereunder and (other than in the event of
termination for cause pursuant to Section 6(b)(vi)) additional period
of one year following the termination of Executive's employment
hereunder; provided, however, that, in the event Executive purchases
the Management Business pursuant to Section 8, the Noncompete Period as
it relates to the Management Business shall terminate on the date of
such purchase.
(g) Notwithstanding any other provision of this Section 10, if
Executive's employment terminates at the end of the Employment Period then, for
the remainder of the Non-Compete Period, (i) the provisions of Section 10(a)
shall be inapplicable, (ii) Executive may provide management services to Xxx
Xxxxx, Xxxxxxx X. Xxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxxx and Xxxxx Xxxxxxxxxxx so
long as Executive has not directly solicited such clients of WEG, and (iii)
Executive may hire any personnel primarily responsible for the management of the
foregoing artists even though they may be employed by the Company or an
Affiliate at the time, so long as Executive has not directly solicited such
employees.
11. Executive's Representations and Warranties.
(a) Executive represents and warrants that no lawsuits or
claims are pending or, to Executive's knowledge, threatened against Executive.
(b) Executive represents and warrants that he (i) has not
committed any acts inconsistent with the moral or ethical standards expected of
senior executives in the
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Christian music business in the United States, (ii) has never been subject to
bankruptcy, insolvency or similar proceedings, (iii) has never been convicted
of a felony; and (iv) has never been subject to an investigation or proceeding
by or before the Securities and Exchange Commission or any state securities
commission.
12. Notices. Any and all notices or other communications
required or permitted to be given under any of the provisions of this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or mailed by first class registered mail, return receipt requested, or
by commercial courier or delivery service, or by facsimile, addressed to the
parties at the addresses set forth below (or at such other address as any party
may specify by notice to all other parties given as aforesaid):
(a) if to the Company or WEG, to them at:
Xxxxxxx Entertainment Company
Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: X.X. Xxxxxxxxx, Xx., Esq.
Senior Vice President,
Legal Counsel and Secretary
Telecopier Number: (000) 000 0000
(b) if to Executive, to:
Xxx X. Xxxxxxx
4411 Truxton
Nashville, Tennessee
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With a copy to:
Manatt, Xxxxxx & Xxxxxxxx
0000 00xx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier Number: (000) 000-0000
and/or to such other persons and addresses as any party shall have specified in
writing to the other by notice as aforesaid.
13. Mediation and Arbitration.
(a) If a dispute or controversy arises out of or in any way
relates to this Agreement or the breach hereof ("Dispute"), the Dispute shall be
settled exclusively through the mediation and binding arbitration provisions of
this Section 13. If the Dispute cannot be settled through direct discussions,
the parties agree to endeavor to settle the Dispute through mediation
administered by the American Arbitration Association ("AAA") under the AAA's
National Rules for the Resolution of Employment Disputes ("AAA Rules"). If the
Dispute is not resolved in mediation pursuant to the AAA Rules and the further
provisions of this Section, the Dispute shall be submitted to and settled
through binding arbitration administered by the AAA in accordance with the AAA
Rules, and judgment upon the arbitration award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
(b) Any party hereto may initiate a mediation proceeding or,
following mediation, an arbitration proceeding by serving a written mediation or
arbitration request to the AAA in conformity with the AAA Rules and tendering
the appropriate administrative fee. Copies of the mediation or arbitration
request shall be served on all other
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parties to the Dispute. The mediation or arbitration request shall describe the
nature of the dispute, the amount involved, if any, and in the case of
arbitration, the remedy sought. The AAA shall review the mediation or
arbitration request and appoint a mediator or arbitrator, as applicable,
pursuant to the AAA Rules.
(c) In the event of a mediation request, the mediator selected
will schedule the mediation conference between the parties within thirty (30)
days of the date it receives the mediation request.
(d) A party who has previously submitted a Dispute to
mediation as set forth in this Section 13 may initiate arbitration proceedings
under the AAA Rules before a single arbitrator within nine (9) months of the
date of the event which gave rise to the Dispute or nine (9) months of the date
the party became aware or should have been aware of the event that gave rise to
the Dispute. Failure of a party to timely initiate a proceeding hereunder shall
bar the party from any relief, and any such Dispute shall be deemed to have been
finally and completely resolved.
(e) The parties on whom the arbitration notice is served shall
file an answering statement within twenty-one (21) days of receiving notice of
intent to arbitrate or a specification of claims, which shall include any
counter-claims and any request that the arbitrator (if any) prepare a statement
of reasons for the award.
(f) Each party shall bear its or his own fees and expenses in
connection with any mediation or arbitration. The fees and expenses of the AAA
and the cost of any transcripts incurred in connection with any arbitration
shall be borne by the parties in such manner as the arbitrator shall determine
in proportion to the relative liability or fault of
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the parties in the Dispute, as determined by the arbitrator. Any mediation or
arbitration to resolve a Dispute shall be held in the City of Nashville,
Tennessee.
14. Company Obligations. Promptly following completion of the Merger
and the Distribution, WEG shall cause Gaylord to execute an instrument agreeing
to be bound by the provisions of this Agreement relating to the Annual Options
and the Mega-Grant and the provisions of Section 15. In the event that the
Merger and the Distribution shall not occur and the Merger Agreement shall
terminate, WEG shall cause Xxxxxxx Entertainment to execute an instrument
agreeing to be bound by the provisions of this Agreement relating to the Annual
Options, the Mega-Grant and the provisions of Section 15.
15. Miscellaneous.
(a) This writing constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be modified,
amended or terminated except by a written agreement signed by all of the parties
hereto.
(b) This Agreement shall not be assignable by Executive, but
it shall be binding upon, and shall inure to the benefit of, his heirs,
executors, administrators and legal representatives. This Agreement shall be
binding upon WEG and inure to the benefit of WEG, Gaylord and Xxxxxxx
Entertainment and their respective successors and permitted assigns. This
Agreement may only be assigned by WEG, Gaylord or Xxxxxxx Entertainment to any
entity controlling, controlled by or under common control with the Company in
connection with an assignment of WEG's business to such other entity.
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(c) No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
(d) If any provision of this Agreement shall be held invalid
or unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein, unless the invalidity or unenforce-ability of such provision
substantially impairs the benefits of the remaining portions of this Agreement.
(e) The section headings contained herein are for the purposes
of convenience only and are not intended to define or limit the contents of said
sections.
(f) This Agreement may be executed in two or more
counterparts, all of which taken together shall be deemed one original.
(g) The parties agree that the terms of this Agreement as they
relate to compensation, benefits, termination, and repurchase of the Management
Business, shall, unless otherwise required by law (including, in the Company's
reasonable judgment, as required by federal and state securities laws), be kept
confidential; provided, however, that any party hereto shall be permitted to
disclose this Agreement or the terms hereof with any of its legal, accounting or
financial advisors provided that such party ensures that the recipient will
comply with the provisions of this Section 15(g).
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(h) This Agreement shall be deemed to be a contract under the
laws of the State of Tennessee and for all purposes shall be construed and
enforced in accordance with the internal laws of said state.
(i) This Agreement shall not confer any rights or remedies
upon any person or entity other than the parties hereto and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
WORD ENTERTAINMENT GROUP, INC.
By:
-----------------------------
Xxxxx X. London
Chairman
EXECUTIVE:
--------------------------------
Xxx X. Xxxxxxx
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