Exhibit 10.2
EXECUTIVE SERVICES CONTRACT
THIS EXECUTIVE SERVICES CONTRACT ("AGREEMENT") is made as of the 1st day
of January 2005
A M O N G:
1078459 ONTARIO INC.,
a corporation incorporated pursuant to the
laws of Ontario
(hereinafter referred to as "ServiceCo")
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XXXXXX ENTERTAINMENT CORPORATION
a corporation incorporated pursuant to the
laws of Ontario
(hereinafter referred to as the "Corporation")
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XXXXX X. XXXXXX,
of the City of Toronto in the Municipality of
Metropolitan Toronto in the Province of Ontario
(hereinafter referred to as "Xxxxx")
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XXXXXXX XXXXX,
of the City of Toronto in the Municipality of
Metropolitan Toronto in the Province of Ontario
(hereinafter referred to as "Xxxxxxx")
WHEREAS the Corporation is a Canadian-based developer, producer and
distributor of high-quality children's and family films for the worldwide
television and cable markets, and international home video markets;
AND WHEREAS Xxxxx and Xxxxxxx are the sole shareholders and employees of
ServiceCo and are individuals knowledgeable in the film and video production
industry;
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AND WHEREAS the Corporation wishes to engage ServiceCo to perform certain
services on its behalf, and in particular to provide to the Corporation the
services of Xxxxx and Xxxxxxx as the Corporation's senior executive officers,
and ServiceCo wishes to perform such services for the Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual covenants contained hereinafter, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE 1
SERVICES
1.01 Engagement. The Corporation hereby engages ServiceCo to perform and provide
certain services on its behalf in accordance with the terms and conditions
contained in this Agreement, and ServiceCo hereby agrees to perform and provide
such services.
1.02 Services. It is understood by the parties hereto that ServiceCo, through
the provision of the services of Xxxxx and Xxxxxxx, shall perform and provide
senior management services to the Corporation. ServiceCo shall provide the
services of Xxxxx as the President and Chief Executive Officer of the
Corporation, and the services of Xxxxxxx as Chief Financial Officer and
Secretary of the Corporation in each case on a full-time basis (subject to
vacation entitlement in a quantum customarily provided by the Corporation to its
senior executives). The services of the President and of the Chief Financial
Officer may include production, direction, writing and similar activities,
depending upon the needs of the Corporation and the availability of Xxxxxxx and
Xxxxx from time to time. ServiceCo shall, and shall cause Xxxxxxx and Xxxxx to,
well and faithfully serve the Corporation and use their best efforts to promote
the interests of the Corporation during the term of this Agreement.
1.03 Powers and Duties of the President. Unless otherwise provided in the
Corporation's By-Laws, as amended from time to time, the President of the
Corporation shall be the Chief Executive Officer of the Corporation and shall
have general supervision of the affairs of the Corporation and ultimate
decision-making power concerning all matters not requiring approval of the board
of directors (the "Board") of the Corporation or the shareholders of
Corporation, including, without limitation, the making of decisions as to the
specific projects to be undertaken by the Corporation.
1.04 Powers and Duties of the Chief Financial Officer and Secretary. Unless
otherwise provided in the Corporation's By-Laws, as amended from time to time,
the Chief Financial Officer shall have such duties and exercise such powers as
the Board may from time to time prescribe. Unless otherwise determined by the
Board or provided in the Corporation's By-Laws, as amended from time to time,
the Secretary of the Corporation shall attend, and be the secretary of, all
meetings of the Board, shareholders and committees of the Board. The Secretary
of the Corporation shall enter, or cause to be entered, in records kept for that
purpose minutes of all proceedings at meetings of the Board, the shareholders
and committees of the Board, whether or not he attends such meetings. He shall
give or cause to be given, as and when instructed, all notices to directors,
shareholders, auditors and members of committees of the Board. He shall be
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the custodian of the stamp or mechanical device generally used for affixing the
corporate seal of the Corporation and of all books, papers, records, documents
and instruments belonging to the Corporation, except when some other officer or
agent has been appointed for that purpose, and he shall have such other powers
and duties as otherwise may be specified.
1.05 Reporting. ServiceCo shall, and shall cause Xxxxxxx and Xxxxx to, comply
with all lawful and reasonable orders given to them by, and shall supply such
information and reports as may from time to time be requested of them to, the
Board or any person or committee designated by the Board.
ARTICLE 2
TERM OF AGREEMENT
2.01 Commencement. This Agreement shall commence as of the date first written
above (the "Effective Date").
2.02 Term. Subject to earlier termination as provided in Article 5 herein, the
duration of this Agreement shall be for a period of three (3) years, commencing
as of the Effective Date.
ARTICLE 3
FEE FOR SERVICES
3.01 Base Fee. During the term of this Agreement, the base fee payable by the
Corporation to ServiceCo for the services performed and provided by it hereunder
shall be determined by the Board or by a compensation committee of the Board
(the "Committee") appointed in accordance with the Corporation's By-Laws, as
amended from time to time. In making payments to ServiceCo hereunder, the
Corporation shall endeavor to first source such payments out of funds the
Corporation may then have available for the development and production of films
and videos in a manner that will allow the Corporation to qualify for Canadian
federal and provincial labor tax credits for salaries paid to producers and
directors of qualifying productions.
3.02 Bonus Entitlement. In addition to its base fee entitlement, ServiceCo shall
be entitled to additional fees and/or equity-based incentives in consideration
of the services performed and provided by it, as determined to be appropriate by
the Board or Committee in view of any (i) bonus paid by the Corporation to its
senior executives or (ii) film or video development and production project
undertaken by the Corporation.
3.03 Benefits. Xxxxx and Xxxxxxx shall be permitted to participate in any
incentive compensation, vacation, medical, dental, pension, life insurance,
disability insurance and other employee benefit plans and programs generally
maintained at the Corporation from time to time and offered to the Corporation's
employees generally or executive officers.
3.04 Assignment. ServiceCo shall have the right to assign all or a portion of
its right to receive any cash or non-cash consideration payable by the
Corporation under this Agreement to Xxxxx and/or Xxxxxxx.
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3.05 Expenses. The Corporation shall reimburse ServiceCo, Xxxxx and Xxxxxxx for
all ordinary and necessary business expenses reasonably incurred in connection
with the services performed and provided hereunder.
ARTICLE 4
TERMINATION
4.01 Termination by the Corporation for Cause. The Corporation may at any time
for Cause (as such term is hereinafter defined), by notice in writing to
ServiceCo, forthwith terminate this Agreement without any liability whatsoever
to the Corporation or to any of its affiliates or subsidiaries. For purposes of
this Agreement, the term "Cause" means the (i) conviction of Xxxxx and/or
Xxxxxxx for any (a) felony under the laws of the United States of America or any
state thereof or (b) felony under the federal laws of Canada or provincial laws
of Ontario, in either case, involving moral turpitude (e.g., embezzlement) which
results in demonstrable, material harm to the business or financial condition of
the Corporation or (ii) willful neglect, failure or refusal of Xxxxx and/or
Xxxxxxx to carry out his or their duties owing to the Corporation hereunder,
which results in demonstrable, material harm to the business or financial
condition of the Corporation and which willful neglect, failure or refusal
continues for a period of thirty (30) consecutive days following the receipt by
Xxxxx and/or Xxxxxxx, as the case may be, of written notice from the
Corporation; provided, however, that (y) such willful neglect, failure or
refusal is not due to the death or Permanent Disability (as such term is
hereinafter defined) of Xxxxx and/or Xxxxxxx, as the case may be, or illness
leading to the death or Permanent Disability of Xxxxx and/or Xxxxxxx, as the
case may be, and (z) any termination of the employment of Xxxxx and/or Xxxxxxx
pursuant to clause (ii) of this sentence shall be based on a good faith
determination by the Board of the facts and circumstances associated with such
termination after giving Xxxxx and/or Xxxxxxx, as the case may be, an
opportunity to appear before the Board with his or their attorney(s) to present
any reasons why Xxxxx and/or Xxxxxxx, as the case may be, believe(s) he or they
should not be terminated for Cause. For purposes of this Agreement, the term
"Permanent Disability" means, with respect to each of Xxxxx and Xxxxxxx, that he
has been or will be unable to perform the essential functions of his position,
with or without reasonable accommodation, by reason of a physical or mental
impairment that is reasonably expected to be permanent or that has been
continuing for a period of at least four (4) months in any twelve (12)-month
period.
4.02 Termination by the Corporation Without Cause. The Corporation shall have
the right to forthwith terminate this Agreement without Cause in accordance with
this Section 4.02. In the event that the Corporation terminates this Agreement
without Cause, the Corporation shall continue to pay to ServiceCo its base fee
entitlement as provided in Section 3.01 above until the expiry of the greater of
(i) the remaining term of this Agreement or (ii) eighteen (18) months (the
"Termination Payment").
4.03 Liquidated Claim. ServiceCo and the Corporation agree that the Termination
Payment stipulated hereunder shall constitute a reasonable estimate of damages
incurred in the event of termination of this Agreement without Cause and that in
no event shall the Termination Payment be construed as a penalty.
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4.04 Release. ServiceCo agrees that any payment made by the Corporation pursuant
to this Article 4 shall be in full and final settlement of any and all manner of
actions, causes of action, suits, claims and demands whatsoever which it has or
may have against the Corporation, its affiliates or subsidiaries, and any of
their directors, officers, employees and their successors and assigns. ServiceCo
shall cause Xxxxxxx and Xxxxx to promptly resign any and all directorships and
offices which they may have with the Corporation at the Corporation's request in
the event this Agreement is terminated.
4.05 Confidentiality of Settlement. Any settlement pursuant to this Article 4
shall be kept confidential and shall not be disclosed by (i) ServiceCo to any
person, corporation, group or organization whatsoever with the exception of
Xxxxxxx, Xxxxx and ServiceCo's legal, accounting and financial advisors and (ii)
the Corporation to any person, corporation, group or organization whatsoever
other than (a) its legal, accounting and financial advisors and (b) as may be
required under applicable securities laws.
ARTICLE 5
CONFIDENTIAL INFORMATION
5.01 Confidential Information. Except as may otherwise be required by applicable
law or a court of competent jurisdiction, ServiceCo hereby agrees to, and to
cause Xxxxxxx and Xxxxx to, maintain in confidence and not to disclose to any
person, corporation, group or organization whatsoever, during the term of this
Agreement and after its termination, any information respecting the business
affairs, prospects, operations, strategic plans, confidential information, data
and trade secrets respecting the Corporation or its affiliates or subsidiaries
gained in the course of the services provided under this Agreement or otherwise,
and not otherwise publicly available or disclosed.
ARTICLE 6
NON-COMPETITION COVENANTS
6.01 Non-Competition. Notwithstanding termination of this Agreement, whether or
not for Cause, ServiceCo, Xxxxxxx and Xxxxx shall not engage in any line of
business similar to that now carried on by the Corporation or any of its
affiliates or subsidiaries, or engage in employment for any person, firm or
corporation in the same or any similar line of business within:
(i) North America; or failing that,
(ii) Canada; or failing that,
(iii) Ontario and Quebec; or failing that,
(iv) Ontario; or failing that,
(v) the Regional Municipality of Metropolitan Toronto,
for a period of one (1) year from the time of such termination of this
Agreement, except as specifically approved in writing by the Corporation in
advance of such activities.
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6.02 Non-Solicitation. For a period of one (1) year from the time of such
termination of this Agreement, ServiceCo, Xxxxxxx and Xxxxx shall refrain from
interfering with the employment arrangements between the Corporation or any of
its affiliates or subsidiaries and their employees and will not in any way
solicit, recruit, hire, assist others in recruiting or hiring, or discuss
employment with any employees of the Corporation or any of its affiliates or
subsidiaries and shall refrain from soliciting, contracting with, making regular
presentations to or otherwise being concerned with the customers of the
Corporation or any of its affiliates or subsidiaries.
6.03 Time and Scope Reduction. ServiceCo, Xxxxxxx and Xxxxx agree that each of
the covenants set out in subarticles 6.01(i), (ii), (iii), (iv) and (v)
constitute separate and distinct covenants and that if any should be adjudged
unreasonable in a proceeding before a court of common jurisdiction, then same
shall be severed by elimination of such portion thereof deemed unreasonable, so
that the covenants herein may be enforced in such manner as may be adjudged to
be reasonable.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.01 Amendment and Waiver. No amendment, modification or waiver of any provision
of this Agreement or consent to any departure by the parties from any provision
of this Agreement is effective unless it is in writing and signed by the parties
and then the amendment, modification, waiver or consent is effective only in the
specific instance and for the specific purpose for which it is given.
7.02 Further Assurances. ServiceCo and the Corporation shall do, execute,
acknowledge and deliver or cause to be done, executed, acknowledged and
delivered such further acts and documents as shall be reasonably required to
accomplish the intention of this Agreement.
7.03 Applicable Law and Jurisdiction. This Agreement and all of the rights and
obligations arising herefrom shall be interpreted and applied in accordance with
the laws of the Province of Ontario and the courts of the Province of Ontario
shall have exclusive jurisdiction to determine all disputes relating to this
Agreement and all of the rights and obligations created hereby. ServiceCo,
Xxxxxxx, Xxxxx and the Corporation hereby irrevocably attorn to the jurisdiction
of the courts of the Province of Ontario.
7.04 Prohibitive Provisions. In the event that any provision or any part of any
provision hereof is deemed to be invalid by reason of the operation of any law
or by reason of the interpretation placed thereon by a court, this Agreement
shall be construed as not containing such provision or part of such provision
and the invalidity of such provision or such part shall not affect the validity
of any other provision or the remainder of such provision hereof. All other
provisions hereof which are otherwise lawful and valid shall remain in full
force and effect.
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7.05 Notice Provisions.
(a) Except as otherwise expressly provided herein, all notices
shall be in writing and either delivered personally or by
registered or certified mail, telex, telegram, cable,
reputable overnight courier or telecopier. In the case of the
Corporation, notice shall be delivered to the Chief Executive
Officer at the Corporation's head office. In the case of
ServiceCo, notice shall be delivered to the most current
residence address of each of Xxxxxxx and Xxxxx on file with
the Corporation.
(b) Any notice which is delivered personally shall be effective
when delivered and any notice which is delivered by telex,
telecopier, cable, reputable overnight courier or telegram
shall be effective on the business day following the day of
sending.
(c) Any notice given by telex, telecopier, cable or telegram shall
immediately be confirmed by registered or certified mail.
7.06 Entire Agreement. This Agreement constitutes the entire agreement among the
parties as to the matters dealt with herein. There are not and shall not be any
oral statements, representations, warranties, undertakings or agreements between
the parties. This Agreement may not be amended or modified in any respect except
in accordance with Section 7.01 above.
7.07 Binding Effect. This Agreement and all of its provisions shall enure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
7.08 Assignment. This Agreement may not be assigned by any party hereto without
the prior consent in writing of the other parties hereto, except that (i) the
Corporation may assign this Agreement without such consent to any of its
subsidiaries or affiliates provided that it agrees to guarantee such assignee's
obligations hereunder and (ii) ServiceCo may assign its rights to the extent
provided in Section 3.04 above without such consent.
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IN WITNESS WHEREOF the parties hereto have executed and delivered this
Agreement or caused this Agreement to be executed and delivered as of the date
first above written.
SIGNED, SEALED AND DELIVERED
in the presence of:
/s/ Xxxxxx Xxxxx /s/ Xxxxx X. Xxxxxx
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(Witness) Xxxxx X. Xxxxxx
/s/ Xxxxxx Xxxxx /s/ Xxxxxxx Xxxxx
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(Witness) Xxxxxxx Xxxxx
1078459 ONTARIO INC.
Per: /s/ Xxxxx X. Xxxxxx
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Per: /s/ Xxxxxxx Xxxxx
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XXXXXX ENTERTAINMENT CORPORATION
Per: /s/ /Xxxxx X. Xxxxxx
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Per: /s/ Xxxxxxx Xxxxx
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