EMPLOYMENT AGREEMENT
(CHIEF EXECUTIVE OFFICER)
Agreement made as of this 1st day of November, 1998, by and among Xxxxxxxx
X. Xxxxxxxx, of London, England ("Employee") and xxxxxxxxxxxxxx.xxx llc
(referred to herein, together with any successors, as the "Company"), a joint
venture between and among Xxxxxx & Noble, Inc. ("Xxxxxx & Xxxxx") and
Bertelsmann AG ("Bertelsmann").
PREAMBLE
The Board of Managers of the Company recognizes Employee's potential
contribution to the growth and success of the Company and desires to assure the
Company of Employee's employment in an executive capacity as Chief Executive and
to compensate him therefor. Employee wants to be employed by the Company and to
commit himself to serve the Company on the terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties, the parties agree as follows:
1. Definitions
"Affiliate" shall mean with reference to a specified Person, any Person
that directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with the specified Person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used in respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Benefits" shall mean all the fringe benefits approved by the Board from
time to time and established by the Company for the benefit of employees
generally and/or for key employees of the Company as a class, including, but not
limited to, regular holidays, vacations, absences resulting from illness or
accident, health insurance, disability and medical plans (including dental and
prescription drug), group life insurance, and pension, profit-sharing and stock
bonus plans or their equivalent.
"Board" shall mean the Board of Managers of the Company, together with an
executive committee thereof (if any), as the same shall be constituted from time
to time.
"Cause" for termination shall mean (i) Employee's final conviction of a
felony impacting on the performance of his duties or involving a crime of moral
turpitude, or (ii) acts of Employee which constitute willful fraud on the part
of Employee in connection with his duties under this Agreement, including but
not limited to misappropriation or embezzlement in the
performance of duties as an employee of the Company, or willfully engaging in
conduct materially injurious to the Company and in violation of the covenants
contained in this Agreement.
"Chairman" shall mean the individual designated by the Board from time to
time as its chairman.
"Change of Control" shall mean the occurrence of one or more of the
following three events:
(1) After the effective date of this Agreement, any Person other than
an Affiliate of Xxxxxx & Noble or Bertelsmann becomes a beneficial owner
(as such term is defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) directly or indirectly of securities representing 50%
or more of the total number of votes that may be cast for the election of
managers of the Company; or
(2) Within two years after a merger, consolidation, liquidation or
sale of assets involving the Company, or a contested election of a Company
manager, or any combination of the foregoing, the individuals who were
managers of the Company immediately prior thereto shall cease to constitute
a majority of the Board; or
(3) Within two years after a tender offer or exchange offer for voting
securities of the Company, the individuals who were managers of the Company
immediately prior thereto shall cease to constitute a majority of the
Board.
"Chief Executive Officer" shall mean the individual having responsibility
to the Chairman for direction and management of the executive and operational
affairs of the Company and who reports and is accountable only to the Chairman.
"Company" shall mean xxxxxxxxxxxxxx.xxx llc, a Delaware limited liability
company, together with such subsidiaries of the Company as may from time to time
exist.
"Disability" shall mean a written determination by a physician mutually
agreeable to the Company and Employee (or, in the event of Employee's total
physical or mental disability, Employee's legal representative) that Employee is
physically or mentally unable to perform his duties of Chief Executive Officer
under this Agreement and that such disability can reasonably be expected to
continue for a period of six (6) consecutive months or for shorter periods
aggregating one hundred and eighty (180) days in any twelve-(12)-month period.
If in the written determination of such physician the physical or mental
disability is reasonably permanent, such Disability shall be a "Permanent
Disability."
"Employee" shall mean Xxxxxxxx Xxxxxxxx and, if the context requires, his
heirs, personal representatives, and permitted successors and assigns.
-2-
"Person" shall mean any natural person, incorporated entity, limited or
general partnership, business trust, association, agency (governmental or
private), division, political sovereign, or subdivision or instrumentality,
including those groups identified as Apersons@ in " 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934.
"Territory" shall mean any state of the United States and any equivalent
section or area of any country in which the Company has revenue-producing
customers or activities.
2. Position, Responsibilities, and Term of Employment.
2.01 Position. Employee shall serve as Chief Executive Officer and in such
additional management position(s) as the Board shall designate. In this capacity
Employee shall, subject to the bylaws of the Company, and to the direction of
the Board, serve the Company by performing such duties and carrying out such
responsibilities as are normally related to the position of Chief Executive
Officer in accordance with the standards of the industry. The Board shall vote
that during the term of employment pursuant to this Agreement: (i) Employee be
elected to and continued in the office of President of the Company and such of
its subsidiaries as he may select (and such other office, if any, as shall be
denominated that of the Chief Executive Officer of the Company or such
subsidiary in the Company's or such subsidiary's Bylaws or other constituent
instruments); and (ii) neither the Company nor any of its subsidiaries shall
confer on any other officer or employee (other than the Chairman of the Board)
authority, responsibility, powers or prerogatives superior or equal to the
authority, responsibility, prerogatives and powers vested in Employee hereunder.
2.02 Best Efforts Covenant. Employee will, to the best of his ability,
devote his full professional and business time and best efforts to the
performance of his duties for the Company and its subsidiaries and Affiliates.
2.03 Exclusivity Covenant. During the Agreement's term, Employee agrees not
to acquire, assume, or participate in, directly or indirectly, any position,
investment, or interest in the Territory adverse or antagonistic to the Company,
its business or prospects, financial or otherwise, or take any action towards
any of the foregoing. The provisions of this Section shall not prevent Employee
from owning shares of any competitor of the Company so long as such shares (i)
do not constitute more than 5% of the outstanding equity of such competitor, and
(ii) are regularly traded on a recognized exchange or listed for trading by
NASDAQ in the over-the-counter market. Without limiting the generality of the
foregoing, the Company acknowledges Employee's participation as a director of
and shareholder in the firms listed on Schedule A and agrees that such
participation will not violate this Section 2.03.
2.04 Post-Employment Noncompetition Covenant. Except with the prior written
consent of the Board, Employee shall not engage in activities in the Territory
either on Employee's own behalf or that of any other business organization,
which are in direct or indirect competition with the Company for a period of one
(1) year subsequent to Employee's voluntary
-3-
withdrawal from employment with the Company (except for a termination pursuant
to a Change of Control), or the Company's termination of Employee's employment
for Cause. Employee and the Company expressly declare that the territorial and
time limitations contained in this Section and the definition of ATerritory@ are
entirely reasonable at this time and are properly and necessarily required for
the adequate protection of the business and intellectual property of the
Company. If such territorial or time limitations, or any portions thereof, are
deemed to be unreasonable by a court of competent jurisdiction, whether due to
passage of time, change of circumstances or otherwise, Employee and the Company
agree to a reduction of said territorial and/or time limitations to such areas
and/or periods of time as said court shall deem reasonable.
2.05 Confidential Information. Employee recognizes and acknowledges that
the Company's trade secrets and proprietary information and know-how, as they
may exist from time to time (AConfidential Information@), are valuable, special
and unique assets of the Company's business, access to and knowledge of which
are essential to the performance of Employee's duties hereunder. Employee will
not, during or after the term of his employment by the Company, in whole or in
part, disclose such secrets, information or know-how to any Person for any
reason or purpose whatsoever, nor shall Employee make use of any such property
for his own purposes or for the benefit of any Person (except the Company) under
any circumstances during or after the term of his employment, provided that
after the term of his employment these restrictions shall not apply to such
secrets, information and know-how which are then in the public domain (provided
that Employee was not responsible, directly or indirectly, for such secrets,
information or processes entering the public domain without the Company's
consent). Employee shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure of any thereof is
specifically required by law; provided, however, that in the event disclosure is
required by applicable law, the Employee shall provide the Company with prompt
notice of such requirement, prior to making any disclosure, so that the Company
may seek an appropriate protective order. Employee agrees to hold as the
Company's property all memoranda, books, papers, letters, customer lists,
processes, computer software, records, financial information, policy and
procedure manuals, training and recruiting procedures and other data, and all
copies thereof and therefrom, in any way relating to the Company's business and
affairs, whether made by him or otherwise coming into his possession, and on
termination of his employment, or on demand of the Company at any time, to
deliver the same to the Company. Employee agrees that he will not use or
disclose to other employees of the Company, during the term of this Agreement,
confidential information belonging to his former employers, unless legally
authorized to do so.
Employee shall use his best efforts to prevent the removal of any
Confidential Information from the premises of the Company, except as required in
his normal course of employment by the Company. Employee shall use his best
efforts to cause all persons or entities to whom any Confidential Information
shall be disclosed by him hereunder to observe the terms and conditions set
forth herein as though each such person or entity was bound hereby.
-4-
2.06 Records, Files. All records, files, drawings, documents, equipment and
the like relating to the business of the Company which are prepared or used by
Employee during the term of his employment under this Agreement shall be and
shall remain the sole property of the Company.
2.07 Equitable Relief. Employee acknowledges that his services to the
Company are of a unique character which give them a special value to the
Company. Employee further recognizes that violations by Employee of any one or
more of the provisions of this Section 2 may give rise to losses or damages for
which the Company cannot be reasonably or adequately compensated in an action at
law and that such violations may result in irreparable and continuing harm to
the Company. Employee agrees that, therefore, in addition to any other remedy
which the Company may have at law and equity, the Company shall be entitled to
injunctive relief to restrain any violation, actual or threatened, by Employee
of the provisions of this Agreement.
3. Compensation.
3.01 Minimal Annual Compensation. The Company shall pay to Employee for the
services to be rendered hereunder a base salary at an annual rate of four
hundred thousand dollars ($400,000) ("Minimum Annual Compensation"), calculated
as of a commencement date ("Commencement Date") of January 4, 1999. There shall
be an annual review for merit by the Board and an increase as deemed appropriate
to reflect the value of services by Employee. At no time during the term of this
Agreement shall Employee's annual base salary fall below Minimum Annual
Compensation except in the event of a general reduction of the sort described in
Section 4.02(ii). In addition, if the Board increases Employee's Minimum Annual
Compensation at any time during the term of this Agreement, such increased
Minimum Annual Compensation shall become a floor below which Employee's
compensation shall not fall at any future time during the term of this Agreement
and shall become Minimum Annual Compensation.
Employee's salary shall be payable in periodic installments, beginning on
the payment date next succeeding January 4, 1999, in accordance with the
Company's usual practice for similarly situated employees of the Company.
3.02 Incentive Compensation. In addition to Minimum Annual Compensation,
Employee shall be entitled to receive payments under the Company's incentive
compensation and/or bonus program(s) (as in effect from time to time), if any,
in such amounts as are determined by the Company to be appropriate for similarly
situated employees of the Company. Any incentive compensation which is not
deductible in the opinion of the Company's counsel, under sec. 162(m) of the
Internal Revenue Code shall be deferred and paid, without interest, in the first
year or years when and to the extent such payment may be deducted under sec.
162(m), but in any event no later than the first day of the tax year of the
Company commencing after the Employee ceases employment with the Company,
Employee's right to such payment being absolute, subject only to the provisions
of Section 2.07.
-5-
3.03 Participating in Benefits. Employee shall be entitled to all Benefits
for as long as such Benefits may remain in effect and/or any substitute or
additional Benefits made available in the future to similarly situated employees
of the Company, subject to and on a basis consistent with the terms, conditions
and overall administration of such Benefits adopted by the Company. Benefits
paid to Employee shall not be deemed to be in lieu of other compensation to
Employee hereunder as described in this Section 3.
3.04 Specific Benefits.
During the term of this Agreement (and thereafter to the extent this
Agreement shall require):
(a) Employee shall be entitled to four (4) weeks of paid vacation time
per year, to be taken at times mutually acceptable to the Company and
Employee.
(b) The Company shall provide accident and health insurance for
Employee and his family with limits, extent of coverage and Employee
contributions similar to those provided by Xxxxxx & Xxxxx.
(c) The Company shall obtain at its expense (subject to Employee's
insurability) a term insurance policy on the life of Employee, subject to
the last sentence of this Section 3.04(c), in the face amount of $1,500,000
or such lesser amount as shall be purchasable pursuant to such last
sentence. Employee shall have the exclusive right to designate the
beneficiaries of such policy and change such beneficiaries from time to
time. Such policy and the proceeds shall be the sole property of Employee
and the Company shall not retain any benefit therein. The Company shall not
be obligated to pay premiums for such insurance in excess of $15,000 per
annum.
(d) Employee shall be entitled to sick leave benefits during the
employment period in accordance with the customary policies of the Company
for its executive officers, but in no event less than one (1) month per
year.
(e) In addition to the vacation provided pursuant to Section 3.04(a)
hereof, Employee shall be entitled to not less than ten (10) paid holidays
(other than weekends) per year, generally on such days on which the New
York Stock Exchange is closed to trading.
(f) Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him (in accordance with the policies and
procedures established by the Company or the Board for the similarly
situated employees of the Company) in performing services hereunder.
(g) Employee shall be entitled to the following benefits to cover
Employee's relocation from London to New York: (i) prompt reimbursement for
all reasonable expenses incurred in the relocation of Employee and his
family; (ii) prompt reimbursement for all reasonable travel and living
costs for Employee and his family to search for suitable housing and to
satisfactorily attend to personal affairs during the transition; (iii)
prompt reimbursement for the cost to move Employee's household goods; (iv)
temporary housing for a reasonable period of time; (v) reasonable
reimbursement to cover incidental relocation costs; and (vi) the Company
will repurchase, at Employee's
-6-
Cost, those premises in the New York metropolitan area which Employee
purchases as his principal residence in connection with his employment
hereunder if and as Employee is terminated by the Company for reason other
than Cause, dies or suffers a Permanent Disability (the "Termination
Event"). The Company's obligation to repurchase, which will be at the
option of Employee or, as appropriate, his personal representative, will
expire upon the termination of this Agreement in accordance with its terms
except in the case of termination by reason of a Termination Event, in
which case Employee or his personal representatives may elect to accept the
Company offer to repurchase by delivering notice to the Company within 60
days of the Termination Event. The Company's obligation shall be
conditioned on (i) timely notice as aforesaid and (ii) the subsequent
execution of a reasonably satisfactory purchase and sale agreement in
customary form, negotiated in good faith and conveying the premises free
and clear and in good condition, normal wear and tear excluded. Employee's
"Cost" shall mean and include the initial purchase price, including
transaction costs and brokerage commissions, plus out-of-pocket costs of
capital improvements, but not including points or fees, if any, paid in
connection with Employee's mortgage or other forms of financing. The
Company will indemnify Employee for any tax consequences suffered by
Employee because of the relocation benefits stated in subparagraphs (i)
through (v).
(h) Employee shall be eligible to participate during the employment
period in Benefits not inconsistent or duplicative of those set forth in
this Section 3.04 as the Company shall establish or maintain for its
employees or executives generally.
4. Termination.
4.01 Termination by Company for Other than Cause. If during the term of
this Agreement the Company terminates the employment of Employee and such
termination is not for Cause, then the Company shall pay to Employee an amount
equal to the monthly portion of Employee's Minimum Annual Compensation
multiplied by twenty-four (24), plus the monthly cost to the Company of the
continuation of Benefits at then current levels multiplied by twelve (12) (the
"Severance Amount"). The Employee shall be under no duty to mitigate damages nor
will the Severance Amount be diminished by earnings or income from other
sources.
The Company shall pay to Employee the Severance Amount, in one lump sum as
soon as practicable, but in no event later than sixty (60) days after the date
of such termination.
4.02 Constructive Discharge. If (i) there is a material reduction or
change of Employee's reporting relationship, job duties, responsibilities or
requirements that is inconsistent with the position or positions listed in
Section 2.01 and the Employee's prior reporting relationship, duties,
responsibilities or requirements; (ii) there is a reduction in Employee's salary
then in effect, other than a reduction comparable to reductions generally
applicable to similarly situated employees of the Company; (iii) there is a
material reduction in Employee's Benefits, other than a reduction comparable to
reductions generally applicable to similarly situated
-7-
employees of the Company; (iv) the Company requires Employee to relocate to a
facility or location more than 50 miles from the Company's current location; or
(v) the Company materially breaches this Agreement, Employee may at his option
terminate his employment and such termination shall be considered to be a
termination of Employee's employment by the Company for reasons other than
Cause.
4.03 Termination by the Company for Cause. The Company shall have the right
to terminate the employment of Employee for Cause, provided that the Employee is
given at least 30 days notice of the Company's position and the opportunity to
cure the alleged deficiency. Effective as of the date that the employment of
Employee terminates by reason of Cause, this Agreement, except for Sections 2.04
through 2.07, shall terminate and no further payments of the Compensation
described in Section 3 (except for such remaining payments of Minimum Annual
Compensation under Section 3.01 relating to periods during which Employee was
employed by the Company, Benefits which are required by applicable law to be
continued, and reimbursement of prior expenses under Section 3.04) shall be
made.
4.04 Change of Control. If any time during the term of this Agreement there
is a Change of Control and Employee's employment is terminated for any reason
other than Cause within the greater of one (1) year following the Change of
Control or the remaining term of this Agreement, the Company shall pay to
Employee an amount equal to the monthly portion of Employee's Minimum Annual
Compensation multiplied by twenty (24). This amount shall be paid to Employee in
one lump sum as soon as practicable, but in no event later than sixty (60) days,
after the date that Employee's employment terminated. To the extent that
Employee is not fully vested (i) in retirement Benefits from any pension, profit
sharing or any other retirement plan or program (whether tax qualified or not)
maintained by the Company, the Company shall pay directly to Employee the
difference between the amounts which would have been paid to Employee had he
been fully vested on the date that his employment terminated and the amounts
actually paid or payable to Employee pursuant to such plans or programs; and
(ii) all Options shall vest as provided in Section 5.03.
4.05 Termination on Account of Employee's Death. In the event of Employee's
death during the term of this Agreement, this Agreement shall terminate and no
further payments of the Compensation described in Section 3 shall be made
(except that remaining payments of Minimum Annual Compensation under Section
3.01 relating to periods during which Employee was employed by the Company,
Benefits or other payments which are required by applicable law or this
Agreement to be continued, and reimbursement of prior expenses under Section
3.04 shall be made promptly, Benefits for this purpose including but not limited
to proceeds of insurance described in Section 3.04(c).
4.06 Termination on Account of Employee's Disability. If Employee ceases to
perform services for the Company because he is suffering from a Disability, the
Company shall continue to pay Employee disability benefits no less favorable
than those paid to senior executives of Xxxxxx & Xxxxx, including but not
limited to the proceeds of disability insurance.
-8-
5. Unit Options.
5.01 Amount of Units. The Company hereby grants to Employee, subject to all
of the terms and conditions of the Plan and this Agreement, options (AOptions@)
to acquire a total of 1,200,000 Units (AUnits@) representing Membership
Interests in the Company for $ l4.00 (fourteen dollars) per Unit.
5.02 Vesting. The Options granted in Section 5.01 shall vest in five (5)
annual increments, the first installment vesting on February 1, 1999 and the
remaining four installments on the first through fourth anniversaries of
February 1, 1999, all as set forth in the following vesting schedule:
February 1, 1999 300,000
1st Anniversary 225,000
2nd Anniversary 225,000
3rd Anniversary 225,000
4th Anniversary 225,000
5.03 Notwithstanding anything to the contrary contained in this Agreement,
all Options to acquire Units shall irrevocably vest immediately prior to the
consummation of a Change of Control and, if such event results in a successor
firm, Employee shall receive, in lieu of the Units as so vested, the cash, stock
and other securities or property in the successor firm to which he would have
been entitled if he had exercised all his Units immediately prior to the Change
or, at the Company's election, the Units shall be converted into an equivalent
number of like securities, fully vested as aforesaid, preserving the post-tax
economics of the Units, including the substantive terms thereof, in the manner
and to the extent specified in Section 5.05 in the case of Company conversion to
an association taxable as a corporation. The term of the Options shall be ten
years from the date of grant. The Options shall not be transferable except by
will or by reason of the laws of descent and distribution.
5.04 Incentive Plan. The Units shall be subject to the provisions of the
Company's Incentive Plan (the "Plan") as currently in force or, as the case may
be, as subsequently adopted or ratified nunc pro tunc, provided that, to the
extent the provisions of the Plan are inconsistent with, or materially diminish,
the rights, powers and privileges of Employee under this Agreement, the latter
shall control. The Units to be acquired upon exercise shall be economically
equivalent to the other outstanding membership interests in the Company at the
time of exercise. If there is more than one class of membership interests
outstanding, the Membership Interests to be acquired upon exercise will be of
the class that is at least equal in economic interest (but not necessarily
voting interest) to the most valuable. Without limiting the foregoing, the owner
of the Units to be acquired shall, upon exercise enjoy a capital account that
will reflect Employee's right to share proportionately in the value of the
Company as of the date of exercise.
-9-
5.05 Conversion. If the Company shall convert into an association taxable
as a corporation, regardless of the means of conversion (transfer of some or all
of the assets, transfer of Units followed by a liquidation, election or
otherwise), the economics of Employee's enjoyment of his Options shall be
preserved, meaning, for example, that the Options shall be replaced by an
equivalent number (in economic terms) of options to acquire shares of stock in
the Company's successor on the same terms and conditions as provided for herein,
without dilution or enlargement of Employee's rights and benefits, and the
burden of any tax imposed on Employee by reason of the transaction shall be
reimbursed to him as provided in Section 6. In such event, the parties agree to
negotiate in good faith and execute whatever agreement(s) are reasonable to
carry into effect and preserve the substance of this Agreement. If the
transaction involves a Change of Control, Employee's rights respecting his
Options shall be as stated in this Agreement, provided that, if the terms of the
reorganization involving the Change of Control entail an election to convert
Options to stock options in the acquiring entity, Employee's right to exercise
that election shall be preserved, including the tax indemnification provided in
this Section 5.05 and Section 6.
6. Indemnification; Right to Sell; Adjustment.
6.01 (a) Indemnification. If a federal, state, or local income tax (or any
tax of a foreign jurisdiction) shall be assessed against Employee by a tax
authority with respect to the grant, vesting or any event related to the Options
other than the tax on exercise of the Option or sale of the underlying Units,
the Company shall upon demand pay Employee a bonus in an aggregate amount equal
to the sum of: (i) an amount which, when multiplied by the difference between
Employee's Tax Rate (as hereinafter defined) for the year in which such amount
shall be paid to Employee and l00%, shall equal the additional income tax owing;
and (ii) an amount which when multiplied by the difference between Employee's
Tax Rate for the year in which such amount shall be paid to Employee and l00%
shall equal the interest and penalties, if any, payable by Employee with respect
to such tax. The term "Tax Rate" shall mean the sum of the following: (x) the
highest federal income tax rate applicable to ordinary income of an individual
taxpayer; and (y) the sum of the highest applicable state and local tax rates
for such ordinary income, reduced to account for the deductibility of state and
local taxes against federal income tax if and to the extent such state and local
taxes are so deductible by the Employee. Employee shall give the Company notice
of any proposed tax, but Employee shall be under no obligation to contest such
proposed tax, provided that Employee shall contest such proposed tax if
requested to do so by the Company and at the sole cost and expense of the
Company. It is the intention of this Section 6.01(a) to reimburse Employee for
any additional income taxes, interest and penalties thereon arising from any tax
on the Options prior to exercise thereof, with a gross-up based upon tax rates
in effect for the year of such reimbursement and taking into account all the
benefits (deductions and/or credits) available to Employee in connection with
the payment of such taxes, interest and penalties. The provisions of this
Section 6.01(a) shall survive the termination of this Agreement for any reason
whatsoever. To the extent the incomes taxes paid by Employee and reimbursed by
the Company under this Section 6.01(a) reduce the income taxes that would be
payable by Employee, his estate, or successors and assigns upon the exercise of
the
-10-
Options and/or sale of Units acquired pursuant to the exercise of the Options if
the income taxes incurred by Employee (and paid by the Company to Employee
hereunder as a bonus) had not been incurred, the Company shall be reimbursed by
Employee, or his estate, successors or assigns, as the case may be, an amount
equal to the reduction in income taxes described above.
(b) Employee shall be indemnified by the Company, qua an officer and
director of the Company and its Affiliates, against claims, etc. to the fullest
extent permitted by law, including partial indemnification, indemnification post
termination of this Agreement, indemnification of Employee's estate and like
matters.
6.02 Right of Employee to Sell Options and/or Units to the Company upon
Death, Disability, or Termination Without Cause.
(a) Put Option. If Employee shall die, suffer a Permanent Disability,
or be terminated without Cause, Employee shall have the right and option
(the "Put Option") subject to Section 6.02(c), to sell any or all of the
vested Options, or Units purchased by reason of the exercise of all or a
portion of the Options, to the Company at a price per Option equal to Fair
Value. For this purpose, the Fair Value of a Unit of the Company as of any
date shall be determined by the Board of Directors in a reasonable manner,
after considering all pertinent factors and all appropriate information and
data, including liquidity; without limiting the generality of the
foregoing, the Board of Directors shall consider and take into account
published guidelines, including those sponsored by the National Venture
Capital Association or any committee thereof. The Board of Directors may
employ outside experts and independent consultants at the expense of the
Company to assist in the valuation process. The Fair Value of an Option
shall be computed as aforesaid, except that the exercise price shall be
deducted, meaning the Fair Value is the Fair Value of the spread and, thus,
the Fair Value of an Option to purchase, say, 100,000 Units shall be the
spread per Unit times 100,000.
(b) Exercise of Put Option and Closing. Employee may exercise the Put
Option by delivering to the Company written notice of exercise within the
period set forth in Section 6.02(c) below. Such notice shall specify the
number of Units or Options to be sold. If and to the extent the Put Option
is not so exercised within such period, the Put option shall automatically
expire and terminate effective upon the expiration of such period. At the
time of delivery of notice of the exercise of the Put Option, Employee
shall tender to the Company at is principal offices the certificate(s) or
agreements, if any, representing the Units or Options which the Company is
obligated to purchase, all in form suitable for the transfer of such Units
or Options to the Company. In the event of death or disability, the Put
Option may be exercised by the Employee's beneficiaries, heirs, or legal
representatives.
Within ten (10) days of its receipt of the notice and such Units or
Options, the Company shall deliver to Employee a check in the amount of the
Fair Value of the Units being sold
-11-
or the Fair Value of the Options calculated as provided above. The purchase
price may be payable, at the option of the Company, in cancellation of all
or a portion of any outstanding indebtedness of Employee to the Company or
in cash (by bank or cashier's check) or both.
(c) Term of Put Option. The Put Option shall be exercisable (i) in the
case of death or Permanent Disability, from and after the expiration of 180
days after the execution and delivery, of this Agreement, (ii) in the case
of termination by the Company without Cause, from and after the first
anniversary of such execution and delivery and the Put Option shall
terminate upon the closing of a sale of common stock of the Company or its
Affiliates registered pursuant to the Securities Act of 1933, as amended,
assuming the Options and/or Units shall have been converted into options to
acquire shares of common stock of the Company or such Affiliates.
6.03 Adjustments for Unit Splits, Unit Dividends, etc. The Unit numbers set
forth herein assume that 33,333,334 Units are outstanding immediately following
the investment by Bertelsmann in the Company. If from time to time, there is any
Unit dividend, Unit distribution or other reclassification of the Units of the
Company, any and all new, substituted or additional securities to which Employee
is entitled by reason of his ownership of the Units or Options shall be
immediately subject to adjustment in the same manner and to the same extent as
the Units, and the Option exercise price shall be appropriately adjusted as
well.
7. Miscellaneous.
7.01 Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of each of the parties hereto
and shall also bind and inure to the benefit of any successor or successors of
the Company in a reorganization, merger or consolidation and any assignee of all
or substantially all of the Company's business and properties and any personal
representative of Employee or his estate, but, except as to any such successor
of the Company or representative of Employee, neither this Agreement nor any
rights or benefits hereunder may be assigned by the Company or Employee.
7.02 Legal Fees. The Company shall pay the reasonable legal fees and out of
pocket disbursements for one counsel in representing Employee in connection with
the execution and delivery hereof.
7.03 Initial Term and Extensions. Except as otherwise provided, the term of
this Agreement shall continue from time to time until terminated by either party
on 60 days written notice to the other.
7.04 Governing Law. This Agreement shall be construed in accordance with
and governed for all purposes by internal the laws of the State of New York.
-12-
7.05 Interpretation. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but this Agreement
shall be construed, subject to the provisions of the last sentence of Section
2.04 as if such invalid, illegal or unenforceable provision had never been
contained herein.
7.06 Notice. Any notice required or permitted to be given hereunder shall
be effective when received and shall be sufficient if in writing and if
personally delivered or sent by prepaid cable, telex or registered air mail,
return receipt requested, to the party to receive such notice at its address set
forth at the end of this Agreement or at such other address as a party may by
notice specify to the other.
7.07 Amendment and Waiver. This Agreement may not be amended, supplemented
or waived except by a writing signed by the party against which such amendment
or waiver is to be enforced. The waiver by any party of a breach of any
provision of this Agreement shall not operate to, or be construed as a waiver
of, any other breach of that provision nor as a waiver of any breach of another
provision.
7.08 Binding Effect. This Agreement shall be binding on the successors and
assigns of the parties hereto. All obligations of Employee with respect to any
Options or Shares covered by this Agreement shall, as the context requires, bind
Employee's spouse and the divorce or death of such spouse shall not vitiate the
binding nature of such obligation.
7.09 Survival of Rights and Obligations. All rights and obligations of
Employee or the Company arising during the term of this Agreement shall continue
to have full force and effect after the termination of this Agreement unless
otherwise provided herein.
xxxxxxxxxxxxxx.xxx llc
By:______________________________
Xxxxxxx Xxxxxx, Chairman
_________________________________
Xxxxxxxx X. Xxxxxxxx
-13-
SCHEDULE A
Current shareholdings and board positions:
1. Quixell Ltd. - Non. Exec. Chairman, 15% holdings
2. Rocket Networks - Non. Exec. Chairman
3. International Photography Council - Non-Profit Board Member
