1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT, dated as of March
29, 1999, by and between SOURCE MEDIA,
INC., a Delaware corporation
("Company"), and XXXXXXX X. XXXXXX (the
"Employee").
-------------
Company desires to engage Employee to perform services for Company,
and Employee desires to perform such services, on the terms and conditions set
forth below:
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee as its Chief
Executive Officer, and Employee hereby accepts such employment, upon the terms
and conditions hereinafter set forth.
2. TERM. The term (the "Term") of employment of Employee pursuant to
this Agreement shall commence on the date hereof and shall terminate on the
third anniversary of the date hereof. The Term shall automatically be renewed
for successive one year periods unless either party gives the other written
notice to the contrary at least 90 days prior to the end of the Term or any
such renewal thereof.
3. DUTIES AND SERVICES. Employee shall devote his full time and best
efforts to the business and affairs of the Company, and perform, in a competent
manner, such executive and managerial functions and duties commensurate with
his position as Chief Executive Officer of the Company, as the Board of
Directors of the Company may reasonably prescribe from time to time. The
Employee shall report directly to the Board of Directors. Employee shall also
serve as a member of the Board of Directors without additional compensation.
The Company shall not relocate the Employee's principal place of business
outside of New York City without the written consent of the Employee.
4. COMPENSATION.
A. SALARY. For all services to be rendered by Employee hereunder,
the Company shall pay Employee an annual base salary of $200,000. The Company
shall pay Employee's salary in accordance with the Company's standard payroll
practices as in effect from time to time, with appropriate deductions required
by applicable laws, rules and regulations.
2
B. DISCRETIONARY BONUS. On an annual basis, the Board of Directors
shall consider a bonus payment to Employee based on his performance, and the
Company's results of operations. The timing and amount of any such bonus
payment shall be in the sole and absolute discretion of the Board of Directors.
C. STOCK OPTION PARTICIPATION. Employee shall receive a ten-year
option to purchase 500,000 shares of the common stock, par value $.001 per
share, pursuant to the Stock Option Agreement in the form attached hereto as
Exhibit A.
D. GROSS-UP FOR EXCISE TAXES. In the event that Employee receives
any payment or benefit (including but not limited to payments or benefits
pursuant to Section 4(c) above) (a "Payment") that is subject to the excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended, the
Company shall pay to Employee, as soon as practicable, an additional amount
(the "Gross-Up Payment") such that the net amount retained by Employee after
deduction of any excise tax on the Payment and any federal, state and local
income taxes and any excise tax upon the Gross-Up Payment, shall be equal to
the Payment. The determination of whether an excise tax is due and the amount
of any Gross-Up Payment shall be made by an independent auditor jointly
selected by the Company and Employee.
5. EXPENSES. The Company shall reimburse Employee for all reasonable,
ordinary and necessary expenses incurred on behalf of the Company by Employee.
Employee shall submit to the Company an expense report and receipts or other
verification of expenses to be reimbursed in accordance with the Company's
standard policies.
6. BENEFITS. Employee shall be entitled to such insurance and
retirement plan benefits as are generally available to other senior management
employees of the Company, pursuant to Company policy in effect from time to
time, such as health insurance, disability and life insurance, and the right to
participate in any retirement plans maintained by the Company.
7. VACATION AND PERSONAL DAYS. Employee shall be entitled to twenty
(20) business days of paid vacation during each calendar year (pro-rated for
1999). Employee will also be entitled to ten (10) sick and/or personal days
which may be taken as paid vacation days if not used, and two (2) floating
holidays. Vacation, sick and/or personal days and floating holidays shall
accrue at the beginning of each calendar year (or, upon the commencement of
employment of Employee by the Company, in the case of 1999), and shall be taken
in accordance with the Company's published guidelines.
2
3
8. TERMINATION PROVISIONS.
A. TERMINATION FOR CAUSE. Notwithstanding the provisions of Section
2 above, the Company, on two days prior written notice, may terminate the
employment of Employee for any of the following reasons (for "cause"), without
the payment of any compensation to Employee, except accrued salary and vacation
pay due for the period prior to the date of termination of employment.
(i) Employee shall be convicted of a felony;
(ii) Commission of any willful misconduct by the Employee that
is materially injurious to the financial condition or business reputation of
the Company, including by reason of material breach by the Employee of the
provisions of this Agreement, provided that Employee has been provided written
notice of such willful misconduct, which notice shall describe the willful
misconduct in reasonable detail, and such willful misconduct is not cured in
the reasonable and good faith judgment of the Board, within thirty (30) days of
the date of the notice.
B. TERMINATION BY COMPANY OTHER THAN FOR CAUSE, DEATH OR
DISABILITY.
(i) If the employment of Employee is terminated by the Company
other than for cause, death or disability, the Company shall pay to Employee as
severance, in equal monthly installments, the remaining base salary payments
that Employee would have earned if he had continued his employment throughout
the Term, and an amount equal to any accrued and unpaid vacation days on the
date of termination of employment. Such payments shall cease in the event
Employee obtains other employment following termination of employment.
(ii) The Company will continue life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
Company for Employee and his dependents prior to termination of his employment,
except to the extent such coverage may be changed in its application to all
Company employees on a nondiscriminatory basis. Such coverage shall cease when
Employee obtains other employment.
C. TERMINATION ON ACCOUNT OF DISABILITY, OR DEATH.
(i) In the event Employee shall, during the term of this
Agreement, become physically or mentally disabled so that he is unable, or can
reasonably be expected to be unable, to perform his duties hereunder for a
period of seventy five (75) consecutive days, or ninety (90) non-consecutive
days within any twelve (12) month period, the Company shall have the right to
terminate Employee's employment, provided that (a) the Company provides the
Employee with not less than five (5) days prior written notice of the
termination of his employment and (b) the Company makes the payments to
Employee referred to in clause (ii) below. Any determination of disability
shall be made by a physician selected by the Company and reasonably acceptable
to the Employee.
3
4
(ii) In the event the Company terminates the Employee's
employment for disability as set forth in clause (i) above ("Disability
Termination"), Employee shall be entitled to receive, in monthly installments,
the base salary Employee would have received in the following twelve months had
his employment continued for one year past the date of Disability Termination.
All payments made pursuant to this paragraph shall be made in accordance with
the Company's standard payroll practices as in effect from time to time, with
appropriate deductions required by applicable laws, rules and regulations. In
addition, the Company, at its expense, for a period of one year following the
date of Disability Termination, will continue medical and dental insurance
coverage substantially identical to the coverage maintained by the Company for
Employee and his dependents prior to termination of employment, except to the
extent such coverage may be changed in its application to all Company employees
on a non-discriminatory basis.
(iii) In the event of the death of Employee, the Company shall
make the payments referred to in clause (ii) above to the estate of the
Employee or his legal representative.
D. TERMINATION BY THE EMPLOYEE.
(i) Notwithstanding the provisions of Section 2 above, the
Employee will be considered to have resigned his employment for "good reason"
if (x) the Company, without the express written consent of the Employee,
materially breaches this Agreement, provided that the Company has been provided
written notice of such breach, which notice shall describe the breach in
reasonable detail, and such breach is not cured in the reasonable and good
faith judgment of the Employee within thirty (30) days of the date of the
notice, or (y) the Employee resigns his employment with the Corporation within
a 60-day period beginning six months after a "change of control."
(ii) Without limitation, it shall be considered a material
breach of this Agreement by the Company if the Company (i) fails to secure the
Employee's election to the Board of Directors by its next regularly scheduled
Annual Meeting of Stockholders, provided the Employee has delivered to the
Company his written consent to serve as such prior to the mailing of the Proxy
Statement relating to such meeting, or (ii) materially reduces the Employee's
duties or authority (whether or not accompanied by a change of title) or
diminishes his title in any way, or transfers his principal place of business
outside New York City.
(iii) In the event that the Employee resigns from his employment
for good reason, the Company shall be obligated to provide the Employee with
the severance payments and insurance coverage as required if the Company had
terminated the Employee other than for cause pursuant to Section 8B above.
(iv) In the event that the Employee resigns from his employment
without good reason, the Company shall be obligated to provide the Employee
with the payments as required if the Company had terminated the Employee for
cause pursuant to Section 8A above.
4
5
(v) For purposes of this Agreement, "change of control" means
the happening of any of the following:
(i) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") (other than the Company, a subsidiary of
the Company, a Company employee benefit plan, including
any trustee of such plan acting as trustee, or United
Video Satellite Group, Inc. or any of its affiliates) that
is not an owner of 5% or more of the Company capital stock
on the date hereof becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding securities
entitled to vote generally in the election of directors;
or
(ii) The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in
the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent
(50%) of the total voting power represented by the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve
an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets; or
(iii) A proxy contest for the election of directors of the
Company results in the persons constituting the Board
immediately prior to the initiation of such proxy contest
ceasing to constitute a majority of the Board upon the
conclusion of such proxy contest.
9. REPRESENTATIONS AND WARRANTIES. Employee represents and warrants
that Employee is not subject to or a party to any agreement, contract,
covenant, order or other restriction which in any way prohibits, restricts or
impairs Employee's ability to enter into this Agreement and carry out his
duties and obligations hereunder. Each party hereto represents and warrants to
the other that (i) it has the full legal right and power and all authority and
approvals required to enter into, execute and deliver this Agreement and to
perform fully all of his or its obligations hereunder; and (ii) this Agreement
has been duly executed and delivered by it and constitutes a valid and binding
obligation of such party, enforceable in accordance with its terms.
5
6
10. NON-COMPETITION AND SECRECY.
10.1 NO COMPETING EMPLOYMENT. For so long as Employee is employed
by Company and for a period of the lesser of (i) twelve (12) months after
termination of employment and (ii) the expiration of the Term (such period
being referred to hereinafter as the "Restricted Period"), Employee shall not,
directly or indirectly, own an interest in, manage, operate, join, control,
lend money, or render financial or other assistance to or participate in or be
connected with, as an officer, employee, partner, stockholder, consultant or in
a similar capacity, any sole proprietorship, partnership, firm, corporation or
other business organization or entity that competes with the Company in any
business in which it is engaged during the Term or at the time of the
Employee's termination; provided, however, that nothing in this Section 10.1
shall prohibit Employee from (i) making a non-controlling and passive
investment in a corporation or other entity whose shares are publicly traded;
or (ii) engaging in any activity referred to above in any geographic area in
which the Company is not engaged in business during the Term or at the time of
the Employee's termination. The foregoing restriction shall not apply (i) in
the event that the Employee is terminated without cause or resigns his
employment for good reason or (ii) to the holding of a passive investment
interest in a venture to develop and license the television show "Absolute
Cobbler" in various media and territories throughout the world.
10.2 NO INTERFERENCE. During the Restricted Period, Employee shall
not, whether for his own account or for the account of any other individual,
partnership, firm, corporation or other business organization (other than
Company), intentionally solicit, endeavor to entice away from Company, or
otherwise interfere with the relationship of Company with, any person who is
employed by the Company at the time of the termination of the Employee's
employment.
10.3 SECRECY. Employee recognizes that the services to be performed
by him hereunder are special, unique and extraordinary in that, by reason of
his employment hereunder, he may acquire confidential information and trade
secrets concerning the operation of the Company, the use or disclosure of which
could cause the Company substantial loss and damages which could not be readily
calculated and for which no remedy at law would be adequate. Accordingly,
Employee covenants and agrees with the Company that he will not at any time,
except in performance of Employee's obligations to the Company hereunder or
with the prior written consent of the Company, directly or indirectly, disclose
any secret or confidential information that he may learn or has learned by
reason of his association with the Company. The term "confidential information"
includes, without limitation, information not previously disclosed to the
public or to the trade with respect to the products, facilities, applications
and methods, trade secrets and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, customer lists,
technical information, financial information (including the revenues, costs or
profits associated with any of its products), business plans, prospects or
opportunities but shall exclude any information already in the public domain.
Notwithstanding anything to the contrary herein contained, Employee's
obligation to maintain the secrecy and confidentiality of the confidential
information under this Section 10 shall not apply to any such confidential
information which is disclosed through any means other than as a result of any
act by Employee constituting a breach of this Agreement or which is required to
be disclosed under applicable law.
6
7
10.4 EXCLUSIVE PROPERTY. Employee hereby agrees to keep all such
records in connection with Employee's employment as the Company may from time
to time direct, and all such records shall be the sole and exclusive property
of the Company.
10.5 INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, Employee acknowledges that a breach of any of the
covenants contained in this Section 10 may result in material irreparable
injury to the Company for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of such a breach or threat thereof, the Company shall be entitled
to seek to obtain a temporary restraining order and/or a preliminary injunction
restraining Employee from engaging in activities prohibited by this Section 10
or such other relief as may be required to specifically enforce any of the
covenants in this Section 10.
11. PARAGRAPH HEADINGS. The titles to the Sections of this Agreement
are solely for the convenience of the parties and shall not be used to explain,
modify, simplify, or aid in the interpretations of the provisions of this
Agreement.
12. NOTICES. All notices, demands and requests provided or permitted
to be given pursuant to this Agreement, shall be given in writing, sent by
certified mail, return receipt requested, and addressed as follows or to such
other address so designated in the appropriate manner by the parties. All
notices shall be deemed effective when mailed.
Company: Source Media, Inc.
0000 XXX Xxxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Board of Directors
With a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxxx Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Employee: Xxxxxxx Xxxxxx
00 Xxxx Xxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
7
8
13. ASSIGNMENT AND ASSUMPTION. The rights of each party under this
Agreement are personal to that party and may not be assigned, delegated or
transferred to any other person, firm, corporation, or other entity without the
prior written consent of the other party, except that the Company may transfer
its rights under this Agreement to any Affiliate or other entity which
succeeds, by contract or operation of law, to all or substantially all of the
business of the Company and agrees in writing to assume the Company's
obligations under this Agreement.
14. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York without giving
effect to the conflicts of law principles of the laws of said state. The
Company shall reimburse the Employee for all reasonable fees and disbursements
incurred by the Employee in connection with any dispute over the enforcement of
the Employee's rights under this Agreement, but only if the Employee
substantially prevails in such dispute.
15. ENTIRE AGREEMENT. This Agreement, and the stock option agreement
evidencing the stock option referred to in paragraph 4C, shall constitute the
entire agreement between the parties and any prior written or oral
understanding or representation of any kind, or any oral communications shall
not be binding upon either party except to the extent incorporated in this
Agreement. This Agreement supercedes any and all prior agreements between the
parties.
16. MODIFICATION OF AGREEMENT. This Agreement can be modified only in
writing and shall be binding only if executed with and under the same formality
by the parties hereto or their duly authorized representatives.
17. NO WAIVER. The failure of either party to this Agreement to insist
upon the performance of any of the terms and conditions of this Agreement, or
the waiver of any breach of any of the terms and conditions of this Agreement,
shall not be construed as thereafter waiving any such terms and conditions, but
each same shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.
18. EFFECT OF PARTIAL INVALIDITY. The invalidity or unenforceability
of any provision or covenant of this Agreement shall not be deemed to affect
the validity or enforceability of any other provision or covenant. In the event
that any provision or covenant of this Agreement is held invalid or
unenforceable, the same shall be deemed automatically modified to the minimum
extent necessary to make such provision or covenant enforceable and the parties
agree that the remaining provisions shall be deemed to be and to remain in full
force and effect.
8
9
19. COUNTERPARTS. This Agreement may be executed in counterparts and
all counterparts so executed shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SOURCE MEDIA, INC.
By: /s/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx
Chairman of the Board
/s/ XXXXXXX X. XXXXXX
-----------------------------------------
Xxxxxxx X. Xxxxxx
9
