EXHIBIT 10.17
February 27, 2001, as of January 1, 2001
Mr. Xxx Xxxxxxxxxx
000 Xxxxx Xxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Re: agreement (the "Agreement") between Xxx Xxxxxxxxxx
("Feltheimer") and Lions Gate Entertainment Corp.
("Company")
Dear Xxx:
This letter shall set forth the terms of the Agreement
between Company and Feltheimer with respect to the employment of
Feltheimer by the Company. The parties hereby agree as follows:
1. Employment. The Company hereby employs Feltheimer to
serve in the capacity of Chief Executive Officer ("CEO") and Vice
Chairman of the Company's board of directors (the "Board") on the
terms and conditions set forth herein. Feltheimer shall have
such powers and authority with respect to the management of the
Company consistent with his position hereunder as shall be
determined by the Board. All employees of the Company, its
divisions and subsidiaries shall report to Feltheimer and he
shall have hiring and firing authority over same; provided,
however, that subject to prior good faith consultation with
Feltheimer, the Board shall have the right to instruct Feltheimer
to terminate any such employee with respect to whom it believes
in good faith either it has "Cause" (as defined in subpart
12(a)(iii) below) or whose job performance is so deficient that
it is materially affecting the Company to its detriment, and may
thereafter terminate such employee if Feltheimer elects not to do
so. Feltheimer shall be responsible to and report solely to the
Board.
2. Term. Feltheimer's employment hereunder shall commence
on January 1, 2001 effective through and including March 31, 2004
(the "Term").
3. Base Salary. During the Term, the Company shall pay
Feltheimer an annual fixed salary of US$750,000 (the "Base
Salary"), payable in equal installments in accordance with the
Company's standard payroll practices retroactive to the
commencement of the Term, i.e., January 1, 2001.
4. Discretionary Annual Bonus. Feltheimer shall receive an
annual bonus (the "Discretionary Bonus") in an amount to be
determined in the sole and absolute discretion of the Board.
The Discretionary Bonus, if any, shall be payable when bonuses,
if any, are generally given to Company's other senior-level
employees but no later than June 30 of each year during the
Term. Further to the above, the Board has determined that
Feltheimer shall be paid a Discretionary Bonus of US$250,000 for
Company's Fiscal Year 2001, payable upon his execution of this
Agreement.
4A. Life and Disability Insurance. During the Term,
Company shall provide Feltheimer with term life and disability
insurance policies providing Feltheimer (or his estate, as
applicable) with $2,000,000 in benefits.
5. Stock Price Bonus. If, during the Term (which includes
for this purpose the Term as defined herein plus three (3) months
thereafter), the volume-weighted average of the median (between the
high and low of each trading day) daily Company stock price
is not less than US$6.00 per share for a period of six
consecutive months the Company shall pay Feltheimer a bonus (in
addition to any Base
Page 169
Salary, Discretionary Bonus, Option (as defined below) or Benefits
(as defined below) payable pursuant to this Agreement) of
US$1,000,000 (the "Stock Price Bonus") within five (5) business
days following the satisfaction of the preceding condition.
Notwithstanding the foregoing, if on or before the time the
Stock Price Bonus becomes payable an applicable bank has declared
Company to be in material default of any of its bank covenants,
and such default is directly attributable to Feltheimer's
negligent disregard of any such covenants (of which he has
received notice) or his negligent supervision of any of his
direct reports, Feltheimer shall not be entitled to the Stock
Price Bonus; provided, however, the foregoing shall be subject
to binding arbitration as set forth in subparagraph 19(a) below
should Feltheimer dispute the Company's position with respect
thereto.
6. Grant of Options.
(a) Grant. Provided that Feltheimer 's employment
hereunder has not been terminated for cause, death or disability,
and subject to shareholder approval thereof, on or before March
31, 2001 (the "Grant Date") Feltheimer shall be granted an option
to purchase 1,000,000 shares of the Company's stock (the
"Option"), which Option shall have an exercise price equal to
US$3.00 per share. The foregoing Option shall be in addition to
any equity interest (whether options, warrants or otherwise)
previously granted to Feltheimer pursuant to any previous
employment agreement or otherwise (the "Pre-existing Equity" ).
(b) Date of Vesting; Date Exercisable. Provided
Feltheimer is then an employee hereunder, the Option shall vest
and become exercisable as to one-third (1/3) of the shares on the
first anniversary of the Grant Date, one-third (1/3) of the
shares on the second anniversary of the Grant Date and one-third
(1/3) of the shares on the third anniversary of the Grant Date;
provided, however, if the vesting of the Option and rights to
exercise are accelerated pursuant to Paragraph 7 or subpart
12(c)(iii) below, then the foregoing requirement that Feltheimer
be an employee shall not apply with respect to any subsequent
anniversary of the Grant Date.
(c) Offset; Favored Nations. The Company agrees that
the Option (i) is not subject to Company's right to offset as set
forth in subpart 12(c)(iii) below; and (ii) shall be provided
under the most favorable circumstances allowed for senior
executives under the plan governing such Option. The Pre-
existing Equity shall continue to be subject to the terms and
conditions of the agreement(s) pursuant to which it was
originally granted.
(d) Failure to Obtain Shareholder Approval. If the
Company' s shareholders fail to approve Company's grant of the
Option, then Feltheimer shall be entitled to alternative
compensation of comparable value, the details of which shall be
negotiated in good faith.
7. Change of Control. In the event of a merger,
consolidation, sale or other disposition of a majority of the
equity interests or assets of the Company or any other
transaction or business combination in which the shareholders of
Company immediately before consummation thereof do not
immediately following consummation thereof beneficially own at
least fifty percent (50%) of the voting control of the resulting
entity (each a "Change of Control"), the following shall apply:
(a) Share Price Greater Than or Equal to US$4.00. If
the Company's share price at the time of such Change of Control
is greater than or equal to US$4.00 per share then any then-
unvested portion of the Option shall be subject to full (i.e.,
100%) and immediate vesting and/or exercise;
(b) Share Price Less Than US$4.00. If the Company's
share price at the time of such Change of Control is less than
US$4.00 per share, then only fifty percent (50%) of any then-
Page 170
unvested portion of the Option shall be subject to immediate
vesting and the other fifty percent (50%) shall be subject to the
following:
(i) For a period of ten (10) business days
following the effective date of the Change of Control (i.e., the
date of the formal closing of the transaction), Feltheimer shall
have the right, exercisable in his sole discretion, to terminate
his employment hereunder by giving written notice thereof to the
Company within such ten (10) business day period, such
termination being deemed a termination for "Good Reason" in
accordance with subparagraph 12(b) below, except that such other
fifty percent (50%) of any then-unvested portion of the Option
shall be forfeited; or
(ii) If Feltheimer does not terminate pursuant to
subpart 7(b)(i) above, then provided the weighted average daily
median stock price of the Company's stock (or its equivalent in
new stock, if any, replacing the Company's stock) is US$4.00 per
share (or its equivalent) for the three (3) consecutive month
period immediately following the date of the Change of Control,
then Feltheimer shall continue to vest in the Option (or its
equivalent with respect to new stock, if any, replacing the
Company's stock that is subject to the Option) as otherwise
provided herein; or
(iii) If Feltheimer does not terminate pursuant to
subpart 7(b)(i), 7(b)(ii) does not apply, and if the Change of
Control transaction is a cash sale of substantially all of the
Company's assets, then such fifty percent (50%) of any then-
unvested portion of the Option shall be forfeited.
(c) Waiver of Stock Price Bonus Condition Precedent.
If at the time of such Change of Control the Company's share
price is US$6.00 per share or greater, Company shall pay
Feltheimer the Stock Price Bonus, without regard to the potential
condition precedent or reduction set forth in the Paragraph 5
above, within five (5) business days following such Change of
Control.
8. Benefits. During the Term, Feltheimer shall be
entitled to no less than all benefits provided by the Company to
senior-level employees including, without limitation, paid
vacation of no less than four (4) weeks per year, the right to
participate in the Company's medical insurance and retirement
plans and, subject to the approval of the Board, appropriate
incentive/bonus compensation plans (the "Benefits"). Without
limiting the foregoing, Company agrees that the Benefits will be
no less favorable to Feltheimer in every aspect than the benefits
Feltheimer currently receives from Company. Notwithstanding the
foregoing, nothing contained in this Agreement shall obligate
Company to adopt or implement any Benefits, or prevent or limit
Company from making any blanket amendments, changes, or
modifications of the eligibility requirements or any other
provisions of, or terminating, in its entirety, any Benefit at
any time, and Feltheimer's participation in or entitlement under
any such Benefit shall at all times be subject in all respects
thereto. Feltheimer's entitlement to the Benefits shall be in
addition to the Base Salary, the Discretionary Bonus, the Stock
Price Bonus (if any) and the Option.
9. Office/Personnel. During the Term, Company shall
provide Feltheimer with parking, and an office and secretarial
assistance for his exclusive use, all in accordance with his
reasonable requirements and commensurate with his title, duties
and responsibilities.
10. Business Expenses. The Company shall, consistent with
its normal practice, promptly reimburse Feltheimer for all
travel, entertainment and other reasonable business expenses
incurred by him in promoting the business of the Company.
Feltheimer shall be entitled to reimbursement of travel, business
and entertainment expenses at a level commensurate with his
position as CEO, consistent with Company' s then-normal practices
for an executive at Feltheimer's level.
11. Devotion of Time/Services. Feltheimer shall devote his
exclusive business time and services to the business and
interests of the Company. Notwithstanding the foregoing,
Feltheimer shall
Page 171
retain the right to engage in pre-existing outside consulting
activities (which shall be minimal), passive (whether or not
pre-existing) investment activities, charitable activities and/or
political activities so long as the activities do not directly
conflict or interfere with Feltheimer's duties under this Agreement.
12. Termination.
(a) Company's Right To Terminate. The Company shall
have the right to terminate this Agreement prior to the
expiration of the Term only for the following reasons:
(i) upon the death of Feltheimer;
(ii) by giving written notice of termination to
Feltheimer during the continuance of any disability referred to
below at any time after he has been unable to perform the
material services or material duties required of him in
connection with his employment by the Company as a result of
physical or mental disability (or disabilities) which has (or
have) continued for a period of twelve (12) consecutive weeks, or
for a period of sixteen (16) weeks in the aggregate, during any
twelve (12) consecutive month period. Notwithstanding any other
provision herein, during any period of disability hereunder which
lasts for more than two (2) consecutive weeks, in its exercise of
good faith business judgment, and in consultation with Feltheimer
(if practical), the Board may appoint an interim CEO to fulfill
the duties and responsibilities of Feltheimer and such
appointment shall not be deemed a breach of this Agreement;
provided, however, that upon the termination of Feltheimer's
disability Feltheimer shall immediately resume the position of
sole CEO and his duties and responsibilities in accordance with
the terms of this Agreement and the interim CEO shall cease
serving in such capacity;
(iii) by giving written notice of termination for
cause. "Cause" as used herein means (A) Feltheimer's conviction
of a felony; except a felony relating to a traffic accident or
traffic violation; (B) gross negligence or willful misconduct
with respect to the Company; or (C) any material breach of this
Agreement by Feltheimer; provided, however, the Company shall not
terminate Feltheimer's employment hereunder pursuant to this
subpart (iii) unless it shall first give Feltheimer written
notice of the alleged defect and the same is not cured within
fifteen (15) business days of such written notice; or
(iv) by giving notice of termination without
cause.
(b) Feltheimer's Right To Terminate. Feltheimer's
employment with Company may be terminated by Feltheimer for Good
Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) without the written consent of Feltheimer,
any action by Company that results in a material diminution in
Feltheimer's position, authority, duties or responsibilities as
in effect on the date Feltheimer executes this Agreement,
including without limitation inserting any other person in the
chain of authority between Feltheimer and the Board, but
excluding an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly
after receipt of written notice thereof given by Feltheimer;
(ii) without the written consent of Feltheimer, a
material change in any of the reporting relationships (up or
down), excluding for this purpose (A) the Board's instruction to
terminate a lower employee pursuant to Paragraph 1 above and
Feltheimer's refusal to do so or (B) an isolated, insubstantial
and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of written notice
thereof given by Feltheimer;
Page 172
(iii) a reduction of Feltheimer's Base Salary,
Discretionary Bonus for Fiscal Year 2001, Stock Price Bonus (when
payable), Option grant (and/or related vesting and exercise
rights) or the Benefits as in effect on the commencement of the
Term or as the same may be increased from time to time; or
(iv) any material breach of this Agreement by the
Company.
Good Reason shall not include death or disability.
Feltheimer's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder. The Company shall have an
opportunity to cure any claimed event of Good Reason within
fifteen (15) business days of notice from Feltheimer. The
Company shall notify Feltheimer of the timely cure of any claimed
event of Good Reason and the manner in which such cure was
effected, and upon receipt of written notice from Feltheimer of
his concurrence that a cure has been effectuated, any notice of
termination delivered by Feltheimer based on such claimed Good
Reason shall be deemed withdrawn and shall not be effective to
terminate this Agreement.
(c) Effect of Termination.
(i) With Cause. If the Company terminates this
Agreement " for cause" as defined above, the Company shall have
no further obligation to pay Feltheimer any compensation other
than accrued but unpaid (A) Base Salary, (B) Stock Price Bonus,
(C) expense reimbursement and (D) vacation pay, if any.
Notwithstanding the foregoing, the Company shall have no
obligation to pay the Stock Price Bonus under this subpart
12(c)(i) if this Agreement is terminated based on Feltheimer's
commission of a material fraud against the Company; provided,
however, any such material fraud shall have been determined by
binding arbitration as set forth in sub-paragraph 19(a) below;
(ii) Death or Disability. In the event of the
termination of this Agreement for death or disability, the
Company shall have the obligation to pay Feltheimer's estate or
Feltheimer, as applicable: (A) any accrued Base Salary to the
extent not theretofore paid; (B) any accrued vacation pay to the
extent not theretofore paid; (C) the Stock Price Bonus if accrued
and theretofore not paid; and (D) any theretofore unreimbursed
business expenses of Feltheimer. If on the date of death or
termination for disability the volume-weighted average median
stock price of Company's stock for the immediately prior four (4)
month (or longer) period is US$6.00 per share or greater, then
the Stock Price Bonus shall be paid in full if it otherwise
becomes payable in accordance with the conditions set forth in
paragraph 5 above applied without regard to the early termination
of this Agreement. If on the date of death or termination for
disability the volume-weighted average median stock price of
Company's stock for the immediately prior period of less than
four (4) months is US$6.00 per share or greater, then a pro-rated
share of the Stock Price Bonus shall be paid if the Stock Price
Bonus otherwise becomes payable in accordance with the conditions
set forth in paragraph 5 above applied without regard to the
early termination of this Agreement (i.e., if the target was
achieved over the two (2) month period immediately prior to
termination for death or disability and four (4) months later the
target was achieved for the whole six (6) month period, then
Feltheimer (or his estate, if applicable) would receive one
third (1/3) of the Stock price Bonus); and
(iii) Without Cause or Termination by Feltheimer
for Good Reason. If the Company terminates Feltheimer's
employment without cause, or Feltheimer terminates his employment
with Company for Good Reason, then the Company shall pay to
Feltheimer as if the Agreement had not been terminated (i.e.,
Base Salary will continue to be paid in accordance with Company's
standard payroll practices), or, if Feltheimer so elects, in a
lump sum, the present value (using the then prevailing rate of
interest charged to the Company by its principal lender as the
discount rate) of, the following amounts: (A) the sum of
Feltheimer's Base Salary through the expiration of the Term to
the extent not theretofore
Page 173
paid; (B) any accrued vacation pay to the extent not theretofore
paid; and (C) any theretofore unreimbursed business expenses of
Feltheimer. In addition to any vested portion of the Option, any
then-unvested portion of the Option shall fully vest (i.e., 100%)
at the time of Feltheimer's termination under this subpart
12(c)(iii) and, together with the previously vested portion of the
Option, shall be exercisable as if Feltheimer had been employed
by the Company through the expiration of the Term (i.e.,
exercisable through and including ninety (90) days after the
expiration of the Term). To the extent theretofore not provided,
the Company shall also pay for or provide to Feltheimer any
Benefits and/or other incentive/bonus plans (other than the
Discretionary Bonus) which he was receiving at the time of
termination, and Feltheimer shall continue to be eligible for
the Stock Price Bonus without regard to the early termination of
this Agreement, through the expiration of the Term. If
Feltheimer's employment with Company is terminated pursuant to
subpart 12(a)(iv) and/or subparagraph 12(b) above, Feltheimer
shall have no obligation to mitigate; provided, however, that
if Feltheimer does receive employment or independent contractor
income from a third party (other than from the pre-existing
consulting activities pursuant to paragraph 11 above) after
such termination and on or before the expiration of the Term,
then such third party income shall be offset against
any Base Salary payments made to Feltheimer by the Company in
connection with such termination.
13. Indemnification. Except with respect to claims
resulting from Feltheimer's willful misconduct or acts outside
the scope of his employment hereunder, Feltheimer shall be
indemnified by the Company (whether during or after the Term) in
respect of all claims arising from or in connection with his
position or services as an officer of the Company to the maximum
extent permitted in accordance with the Company's Certificate of
Incorporation, its By-Laws and under applicable law, and shall be
covered by the Company's applicable directors and officers
insurance policy, which coverage shall be no less favorable than
that accorded any other officer or director of the Company.
14. Company Policies. Feltheimer shall abide by the
provisions of all policy statements, including without limitation
any conflict of interest policy statement, of Company or adopted
by Company from time to time during the term and furnished to
Feltheimer in writing or of which he has notice.
15. Non-Solicitation. Feltheimer shall not, during the
Term and for a period of one (1) year thereafter, directly or
indirectly, induce or attempt to induce any employee of Company
or its affiliates, to leave Company or its affiliates or to
render employment services for any other person, firm or
corporation.
16. Property of Company. Feltheimer acknowledges that the
relationship between the parties hereto is exclusively that of
employer and employee and that Company's obligations to him are
exclusively contractual in nature. Company and/or its affiliates
shall be the sole owner or owners of all interests and proceeds
of Feltheimer's services hereunder, including without limitation,
all ideas, concepts, formats, suggestions, developments,
arrangements, designs, packages, programs, scripts, audio visual
materials, promotional materials, photography and other intellectual
properties and creative works which Feltheimer may prepare, create,
produce or otherwise develop in connection with and during his
employment hereunder, including without limitation, all copyrights
and all rights to reproduce, use, authorize others to use and sell
such properties or works at any time or place for any purpose, free
and clear of any claims by Feltheimer (or anyone claiming under him)
of any kind or character whatsoever (other than Feltheimer's right to
compensation hereunder). Feltheimer shall have no right in or to
such properties or works and shall not use such properties or
works for his own benefit or the benefit of any other person.
Feltheimer shall, at the reasonable request of Company, execute
such assignments, certificates, applications, filings,
instruments or other documents consistent herewith as Company may
from time to time reasonably deem necessary or desirable to
evidence, establish, maintain, perfect, protect, enforce or
defend its right, title and interest in or to such properties or
works. Notwithstanding
Page 174
anything to the contrary herein, Feltheimer's personal rolodex shall
remain his personal property during the term of this Agreement and
following its expiration or earlier termination.
17. Confidential Information. All memoranda, notes,
records and other documents made or compiled by Feltheimer, or
made available to him during his employment with Company
concerning the business or affairs of Company or its affiliates
shall be Company's property and shall be delivered to Company on
the termination of this Agreement or at any other time on request
from the Board. Feltheimer shall keep in confidence and shall
not use for himself or others, or divulge to others, any
information concerning the business or affairs of Company or its
affiliates which is not otherwise publicly available and which is
obtained by Feltheimer as a result of his employment, including
without limitation, trade secrets or processes and information
reasonably deemed by Company to be proprietary in nature,
including without limitation, financial information, programming
or plans of Company or its affiliates, unless disclosure is
permitted by Company or required by law or legal process.
18. Right to Use Name. During the term, Company shall have
the right to use Feltheimer's approved biography, name and
approved likeness in connection with its business, including in
advertising its products and services, but not for use as a
direct or indirect endorsement.
19. Miscellaneous.
a) Governing Law/Arbitration. This Agreement shall
be governed and construed in accordance with the laws of the
State of California applicable to contracts entered into and
fully performed in California. Any dispute, or claim arising out
of or relating to this Agreement shall be submitted to binding
arbitration to be held in Los Angeles County, California.
b) Amendments. This Agreement may be amended or
modified only by a written instrument executed by each of the
parties hereto.
c) Titles and Headings. Paragraph or other headings
contained herein are for convenience of reference only and shall
not affect in any way the meaning or interpretation of any of the
terms or provisions hereof.
d) Entire Agreement. Subject to the other terms
hereof with respect to prior agreements (e.g., the Pre-existing
Equity referenced in Paragraph 6 above), this Agreement
constitutes the entire Agreement among the parties with respect
to the subject matter hereof and supercedes all prior agreements,
negotiations and understandings of the parties in connection
therewith.
e) Successors and Assigns. This Agreement is binding
upon the parties hereto and their respective successors, assigns,
heirs and personal representatives. Except as specifically
provided herein, neither of the parties hereto may assign the
rights and duties of this Agreement or any interest therein, by
operation of law or otherwise, without the prior written consent
of the other party, except that, without such consent, the
Company s hall assign this Agreement to and provide for the
assumption thereof by any successor to all or substantially all
of its stock, assets and business by dissolution, merger,
consolidation, transfer of assets or otherwise.
20. Severability. Each section, subsection and lesser
portion of this Agreement constitutes a separate and distinct
undertaking, covenant and/or provision hereof. In the event that
any provision of this Agreement shall finally be determined to be
unlawful or unenforceable, such provision shall be deemed to be
severed from this Agreement, but every other provision shall
remain in full force and effect.
Page 175
Please indicate your agreement to the foregoing by signing
in the space provided below.
Very truly yours,
LIONS GATE ENTERTAINMENT CORP.
/s/ XXXXX XXXXXXX
--------------------------------
Xxxxx Xxxxxxx
Chairman
ACCEPTED AND AGREED:
/s/ XXX XXXXXXXXXX
---------------------
Xxx Xxxxxxxxxx
Page 176
