AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, between Telemundo Group, Inc., a Delaware
corporation (the "Company"), and Xxxxxx X. Xxxxxxxxx ("Executive"), dated as of
September 10, 1997.
WHEREAS, the Company and Executive entered into that certain
Employment Agreement dated as of March 9, 1995 (the "Original Agreement").
WHEREAS, the Company and Executive desire to amend and restate
the Original Agreement in its entirety by entering into this Amended and
Restated Employment Agreement (the "Agreement").
IT IS, THEREFORE, AGREED THAT THE ORIGINAL AGREEMENT IS HEREBY
AMENDED AND RESTATED, AND THE PARTIES HEREBY AGREE, AS FOLLOWS:
1. EMPLOYMENT AND TERM. The Company hereby agrees to continue
Executive in its employ, and Executive hereby agrees to continue such employment
as President and Chief Executive Officer of the Company (or such other position
determined in accordance with Section 9(d)(ii) of this Agreement) for the period
commencing on the date first above written and ending on February 28, 2001;
PROVIDED, HOWEVER, that effective on March 1, 2001 and on each March 1
thereafter, the term of this Agreement shall be extended for an additional
period of one year from the then current expiration date unless the Company or
Executive shall have given written notice to the other of its or his election
not to so extend the term of this Agreement on or before the immediately prior
December 1, subject, however, to earlier termination as provided in Section 9
herein (the "Employment Period"). The Executive also agrees, during the
Employment Period, to serve (without additional compensation) on the Board of
Directors (and appropriate committees thereof) of the Company, if requested by
the Board of Directors.
2. TERMS OF EMPLOYMENT. (a) During the Employment Period,
Executive agrees, subject to the provisions of Section 9(d)(ii) of this
Agreement, to devote all but a DE MINIMUS amount of his business time and
attention to the business and affairs of the "Telemundo Group" (as defined
below) and to use his best efforts to perform faithfully and efficiently such
responsibilities. It is acknowledged and agreed that, in addition to such DE
MINIMUS business time as Executive is permitted to spend other than on the
business and affairs of Telemundo Group described above, Executive may also
serve as a member of the board of directors of (i) (A) Interspan Communications
Ltd., the general partner of Interspan Communications, a California limited
partnership that is an affiliate of the Company, and (B) any corporate or other
successor to such partnership,(ii) Inter-Con Securities Systems, Inc., (iii)
Beneficial Corporation, and (iv) and any other corporation that Executive deems
appropriate or desirable provided that Executive gives to the Board of Directors
advance written notice of his desire to take any such director position and the
Board of Directors approves Executive's taking of such director position, which
approval shall not be unreasonably withheld or delayed, and which activities
referred to in (i)-(iv) above Executive agrees shall not, individually or in the
aggregate, interfere or conflict with the performance of his duties hereunder.
For purposes of this Agreement, the term " Telemundo Group" shall mean any and
all of the Company and any of its current or future divisions or subsidiaries.
(b) The principal place of employment of Executive
shall be the greater Los Angeles, California area. Executive understands and
agrees that in connection with his employment hereunder, he will be required to
travel extensively on behalf of the Telemundo Group.
3. BASE SALARY. During the Employment Period Executive shall
receive a base salary (the "Base Salary") as follows. For the period of the
Employment Period ending on February 28, 1998, the Base Salary shall be payable
to Executive at an annual rate of $700,000. For the period of the Employment
Period beginning on March 1, 1998 and ending on the last day of the Employment
Period, the Base Salary shall be payable to Executive at an annual rate of
$800,000. The Base Salary shall be payable consistent with the executive payroll
practices of the Company.
4. BONUS. For fiscal year 1997 (or portion thereof) during the
Employment Period, Executive will be paid a bonus (the "Formula Bonus") as set
forth below if the Company attains the "High Point," "Target" or "Threshold"
performance targets set by the Compensation and Stock Option Committee (the
"Compensation Committee") of the Board of Directors as set forth on Exhibit A as
"Adjusted Net Contribution" ("ANC"). For each of the 1998, 1999, 2000 and 2001
fiscal years and any subsequent fiscal years (or portion thereof) during the
Employment Period, Executive will be paid a bonus (the "Budget Bonus") as set
forth below in subsection (c) (the "Formula Bonus" and the "Budget Bonus" are
hereinafter collectively referred to as the "Bonus"). Executive shall receive
Bonus only if Executive is employed by the Company on the last day of the fiscal
year to which the Bonus relates, subject to the provisions of Sections 9(a),
9(c) and 9(d). Notwithstanding anything to the contrary contained herein, in no
event shall Executive's Bonus for 1997 exceed $1,050,000.
(a) For the fiscal year ended December 31, 1997, if
the Company attains the Threshold ANC, but less than the Target ANC, Executive
shall receive a Formula Bonus equal to (A) (i) 50% plus (ii) the
Threshold/Target Interpolation Percentage multiplied by (B) the Base Salary for
such year. If the Company attains the Target ANC but less than the High Point
ANC, Executive shall receive a bonus equal to (A)(i) 100% plus (ii) the
Target/High Point Interpolation Percentage multiplied by (B) the Base Salary for
such year. If the Company attains at least the High Point ANC, Executive shall
receive a Formula Bonus equal to 150% of Base Salary for such year. If the
Company shall fail to achieve at least the Threshold ANC for such year, no
Formula Bonus shall be due or payable for such year.
(b) The "Threshold/Target Interpolation Percentage"
shall equal (A) 50%, in the case of the fiscal year ending on December 31, 1997,
multiplied by (B) the number resulting from dividing (x) the amount by which the
actual ANC exceeds the Threshold ANC by (y) the amount by which the Target ANC
exceeds the Threshold ANC.
The "Target/High Point Interpolation Percentage" shall equal
(A) 50% multiplied by (B) the number resulting from dividing (x) the amount by
which the actual ANC exceeds the Target ANC by (y) the amount by which the High
Point ANC exceeds the Target ANC.
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(c) For each of the 1998, 1999, 2000, 2001 fiscal
years and any subsequent fiscal years (or portion thereof) during the Employment
Period, Executive will be paid a Budget Bonus based upon the Company's
achievement of targets with respect to its earnings, before interest, taxes,
depreciation and amortization ("EBITDA") during such fiscal year (which fiscal
year target shall not be greater than the Company's budget for EBITDA for such
fiscal year), as follows. During the first quarter of each such fiscal year, the
Compensation Committee shall establish a budgeted EBITDA target (the "EBITDA
Target") for such fiscal year and notify Executive in writing of the EBITDA
Target. Pursuant to subsection (d), the Committee shall determine the Company's
EBITDA for such fiscal year and shall notify Executive of its determination of
the amount of the Company's EBITDA for such fiscal year and of the amount of
Executive's Budget Bonus for such year, which Budget Bonus shall be equal to (i)
100% of Executive's Base Salary for such fiscal year if the Company's EBITDA is
100% or more of the EBITDA Target, (ii) 50% of Executive's Base Salary for such
fiscal year if the Company's EBITDA is 90% of the EBITDA Target and (iii) pro
rated between 50% and 100% of Executive's Base Salary for such fiscal year if
the Company's EBITDA is more than 90% of the EBITDA Target but less than 100% of
the EBITDA Target. Executive shall be paid no Budget Bonus for any such fiscal
year in which the Company's EBITDA is less than 90% of the EBITDA Target for
such fiscal year.
(d) Each Bonus shall be paid upon certification by
the Compensation Committee (which the Compensation Committee will make within 30
days after the certification by the Company's independent auditors of the
financial statements for such fiscal year) that the performance targets
entitling Executive to a Bonus with respect to such fiscal year have been met.
If the Compensation Committee so certifies, the Bonus will be paid promptly but
in no event later than ten days after such certification.
(e) For purposes of this Agreement, the
"Compensation Committee" shall mean a committee consisting of at least two (2)
directors of the Company, each of whom is a "non-employee director" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and
an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
(f) The Company's obligation to pay Budget Bonuses
is conditioned upon the holders of a majority of the outstanding shares of the
Company approving a senior officer incentive plan covering Executive and the
other top three senior officers of the Company, under which plan incentive
compensation will be payable based upon the achievement of performance goals to
be established from time to time by the Compensation Committee.
5. EMPLOYEE BENEFIT PLANS; ETC. (a) Executive shall be
entitled during the Employment Period to participate in all retirement,
disability, pension, savings, medical, insurance and other plans of the Company
generally available to all senior executives (other than any performance based
bonus or option (or similar) plans). Executive shall be entitled to paid
vacations during each year of his employment consistent with the Company's
vacation policy for executive level employees (which shall provide for a least
20 vacation days per year).
(b) The Company shall engage a security service firm
to provide security protection for Executive and members of his family while
Executive and any such
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members who are traveling with Executive are traveling in Latin America in
connection with business of the Company. To this end, Executive shall have the
right to cause the Company to engage the services of an affiliate of Inter-Con
Security Systems, Inc., a company in which Executive has a financial interest,
to provide such protection. Executive agrees that the charges for such
protection services by such affiliate will be at rates that are competitive with
those offered for comparable services by similarly situated service providers
and that the total charges by such affiliate will not exceed $10,000 during any
12-month period without the approval of the Board of Directors of the Company.
(c) The Company shall reimburse Executive, up to an
aggregate of $20,000, for all actual legal expenses and costs actually incurred
by Executive in connection with the negotiation, preparation and execution of
this Agreement and the related compliance with all applicable reporting
requirements under the federal securities laws that are attendant to Executive
and his beneficial ownership of securities issued by the Company.
(d) The Company agrees that it will provide
Executive, in his capacity as an officer and as a director, with indemnification
rights which are not materially less favorable to the Executive, in his capacity
as an officer and as a director, than those provided as of the date of this
Agreement in the By-laws of the Company.
6. LIFE INSURANCE. During the Employment Period, the Company
shall, at its own cost and expense (but only to the extent Executive passes a
physical examination and is insurable at standard rates), maintain a term life
insurance policy or similar coverage on the life of Executive in the amount of
$2,000,000 payable to such beneficiary or beneficiaries as Executive may
designate. The Company may maintain such other insurance on the life of
Executive as it deems appropriate, and Executive agrees to submit to all
requested medical examinations and procedures required in connection therewith.
In lieu of the term life insurance described above,
Executive shall have the option to obtain whole life or other life insurance in
an amount equal to or greater than $2,000,000, in which case the Company shall
reimburse Executive each year during the Employment Period an amount equal to
the premium which it would have paid for $2,000,000 of term life insurance
described above.
7. STOCK OPTION AGREEMENT. Contemporaneously with and in
connection with the execution of the Original Agreement, the parties hereto
entered into a Nonqualified Stock Option Agreement For Corporate Officers
("Stock Option Agreement") with respect to an aggregate 512,500 shares of the
Company's Series A Common Stock, par value $.01 per share (the "Common Stock"),
which Stock Option Agreement is being amended concurrently with the execution of
this Agreement (the "Amended Option Agreement"). Contemporaneously with and in
connection with the execution of this Agreement, the parties hereto are entering
into a Nonqualified Stock Option Agreement For Corporate Officers with respect
to an aggregate 30,000 shares of Common Stock (the "1997 Option Agreement").
8. EXPENSES. The Company shall reimburse Executive for all
reasonable expenses properly incurred by him in accordance with the policies of
the Telemundo Group in effect from time to time, on behalf of the Telemundo
Group in the performance of his duties hereunder, provided that proper vouchers
are submitted to the Company by Executive evidencing such expenses and the
purposes for which the same were incurred.
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9. TERMINATION. The Company shall have the right to terminate
Executive's employment only as expressly provided in this Agreement.
(a) DEATH OR DISABILITY. Except as otherwise provided
herein, this Agreement shall terminate automatically upon Executive's death.
The Company may terminate this Agreement after having
established Executive's "Disability" (as defined below), by giving Executive
written notice of its intention to terminate Executive's employment. For
purposes of this Agreement, "Disability" means Executive's inability to perform
substantially all his duties and responsibilities to the Telemundo Group by
reason of a physical or mental disability or infirmity (i) for a continuous
period of twelve consecutive months or (ii) at such earlier time as Executive
submits medical evidence satisfactory to the Company or the Board of Directors
determines in good faith and upon competent medical advice that Executive has a
physical or mental disability or infirmity that will likely prevent Executive
from substantially performing his duties and responsibilities for twelve
consecutive months or longer. The date of Disability shall be the day on which
Executive receives notice from the Company pursuant to this Section 9.
Upon termination of Executive's employment because of
death or Disability, the Company shall pay Executive or his estate or other
personal representative (i) within 60 days, the amount of Executive's Base
Salary earned up to the date of death or Disability, as the case may be, through
the date of termination, (ii) all benefits and other items referred to in
Sections 5 and 8 which are due up to the date of death or Disability and (iii)
when otherwise due in accordance with the provisions of Section 4, the Bonus, if
any, earned for the year in which such termination occurred, without regard to
whether Executive is an employee of the Company on the last day of such year.
(b) CAUSE; RESIGNATION WITHOUT GOOD REASON OR AS A
SPECIFIED RESIGNATION. The Company shall have the right to terminate Executive's
employment for "Cause" as defined below. Except as provided in Section 15
herein, (i) upon termination of Executive's employment for Cause or (ii) upon
Executive resigning as an employee pursuant to a resignation that is without
Good Reason and is not a Specified Resignation (as defined in Section 9(d)(i)),
this Agreement shall terminate and the Executive shall not be entitled to
receive any compensation or other benefits other than (x) Base Salary earned up
to the date of such termination or resignation and (y) all benefits and other
items referred to in Sections 5 and 8 which are due up to the date of such
termination or resignation (and the Company shall be entitled to terminate any
life insurance payments provided pursuant to Section 6).
For purposes of this Agreement, "Cause" shall mean
(i) the willful and continued failure by Executive to perform substantially all
his duties to the Company or the failure by the Executive to comply with the
reasonable written policies, procedures and directives of the Board of Directors
(other than any such failure resulting from his death or Disability), in each
case after being given written notice by the Board of Directors of a failure to
perform or comply (which notice specifically identifies the manner in which
Executive has failed to perform or comply) and a reasonable opportunity to cure
such noncompliance or nonperformance; (ii) the willful misconduct by Executive
in the performance of his duties to the Company, provided that (for purposes of
this clause (ii) only and not for any other purpose or interpretation of this
Agreement) an act shall be considered
5
"willful" only if done in bad faith and not in the best interests of the
Company; (iii) the grossly negligent performance by Executive of his duties to
the Company; (iv) the conviction of Executive by a court of competent
jurisdiction of the commission of (x) a felony or (y) a crime involving moral
turpitude; or (v) a material breach by Executive of Sections 10 or 11 hereof.
Notwithstanding the foregoing, the Company shall not
be entitled to terminate Executive for any of the reasons specified in clause
(i), (ii), (iii) or (v) of the immediately preceding paragraph unless such
termination is authorized by a resolution adopted by the Board of Directors of
the Company at a meeting called and held for this purpose (after five business
days' prior written notice to Executive, which prior written notice shall state
the general facts, circumstances or
deficiencies supporting a claim for Cause termination, and after affording
Executive and his counsel an opportunity to be heard before the Board of
Directors).
(c) TERMINATION WITHOUT CAUSE; NON-RENEWAL.
Notwithstanding anything to the contrary contained herein, the Company shall
have the right to terminate the employment of Executive at any time without
Cause and the Company shall be entitled to determine, in its sole and absolute
discretion, not to extend the Employment Period as provided in Section 1. Upon a
termination without Cause, except as provided in Section 15, this Agreement
shall terminate and the Executive shall not be entitled to receive any
compensation or other benefits, except that the Company shall (i) through the
later of February 28, 2001 or the first anniversary of the date of termination
of Executive's employment (the "Entitlement Date") continue to pay to Executive
the Base Salary in effect immediately prior to the date of termination, such
payments to be made in installments at the times such amounts would have been
paid if the Agreement had not been so terminated, and (ii) pay to the Executive,
when otherwise due in accordance with Section 4, the Bonus, if any, earned for
the fiscal year in which such termination occurs, without regard to whether
Executive is employed on the last day of such fiscal year and (iii) through the
Entitlement Date continue Executive's benefits and other items referred to in
Section 5 or, to the extent the Company is legally unable to provide any such
benefits or other items as a result of Executive no longer being an employee,
reimburse Executive for his cost (not to exceed the actual cost to the Company
if he were still an employee) of obtaining the equivalent coverage and benefits.
During the period in which Executive receives the payments required by the
immediately preceding sentence, Executive shall be subject to the provisions set
forth in Sections 10 and 11 below. In the event that Company elects not to
extend the Employment Period, then, absent any termination pursuant to Section
9, the Company shall continue paying to Executive his Base Salary during the
period, if any, beginning on the date Executive's employment terminates and
ending on the first anniversary of the date on which the Company gives its
notice of non-renewal to Executive. During the period in which Executive
receives the payments required by the immediately preceding sentence, Executive
shall be subject to the provisions set forth in Sections 10 and 11 below.
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(d) TERMINATION FOR GOOD REASON; SPECIFIED
RESIGNATION RIGHT.
(i) Executive shall have the right to
terminate his employment under this Agreement upon the occurrence of any event
that constitutes Good Reason by giving written notice to the Company. "Good
Reason" means any of the following: (A) a Diminution in Duty (as defined below),
(B) a Designated Relocation (as defined below), or (C) any Other Good Reason
Event (as defined below); PROVIDED, HOWEVER, that Good Reason shall not be
deemed to have occurred prior to the giving of written notice by the Executive
to the Company generally describing the alleged Good Reason, and the actions the
Executive believes are necessary to cure such alleged Good Reason, and the
Company's failure to so cure within 15 days of receipt of such notice. The
giving of such notice and the action or failure to take action by the Company
shall be irrelevant in determining whether a Good Reason has in fact occurred.
If a Change of Control Transaction (as defined in the Amended Option Agreement)
occurs, then, during the period beginning on the date that is 14 months after
the consummation of the Change of Control Transaction and ending on the date
that is 15 months after the consummation of the Change of Control Transaction,
Executive shall have the right to terminate his employment under this Agreement
for any reason whatsoever by giving written notice of such termination to the
Company (such termination being a "Specified Resignation" and, for purposes of
this Agreement, a Specified Resignation shall be treated exactly like a
termination for Good Reason). Upon a termination for Good Reason or a Specified
Resignation, except as provided in Section 15, this Agreement shall terminate
and the Executive shall not be entitled to receive any compensation or other
benefits other than the Company shall (i) through the Entitlement Date continue
to pay to Executive the Base Salary in effect immediately prior to the date of
termination, such payments to be made in installments at the times such amounts
would have been paid if the Agreement had not been so terminated, (ii) pay to
the Executive, when otherwise due in accordance with Section 4, the Bonus, if
any, earned for the fiscal year in which such termination occurs, without regard
to whether Executive is employed on the last day of such fiscal year and (iii)
through the Entitlement Date continue Executive's benefits and other items
referred to in Section 5 or, to the extent the Company is legally unable to
provide any such benefits or other items as a result of Executive no longer
being an employee, reimburse Executive for his cost (not to exceed the actual
cost to the Company if he were still an employee) of obtaining the equivalent
coverage and benefits. During such period, Executive shall be subject to the
provisions set forth in Sections 10 and 11 below.
(ii) "Diminution in Duty" means, without
Executive's express prior written consent: (A) the assignment to Executive of
any duties inconsistent in any respect with Executive's position on the date of
this Agreement, or (B) any adverse change in Executive's status, offices,
titles, reporting requirements, authority, duties or responsibilities as in
effect on the date of this Agreement; PROVIDED, HOWEVER, that after a Change of
Control Transaction (as defined in the Amended Option Agreement), a "Diminution
in Duty" means a change in Executive's position with the Company so that he is
neither (1) the President and Chief Executive Officer of the Company, nor (2)
the President and Chief Executive Officer of a successor to any part of the
Company's business or assets. Notwithstanding anything whatsoever to the
contrary contained in this Agreement (or in the Amended Option Agreement or in
the 1997 Option Agreement), if after a Change of Control Transaction any of the
events described in clause (A) or (B) of the immediately preceding sentence
occurs (without regard to the application of the proviso in such sentence),
Executive shall have the absolute right to change his position with the Company
to a position that has
7
such work location, time commitment, duties, responsibilities and terms as shall
be specified by Executive in his sole and absolute discretion after consultation
with the Company, and the requirement of Section 2(a) that Executive devote his
full time and attention to the Telemundo Group shall cease to apply.
(iii) "Designated Relocation" means the
Company requiring Executive's work location to be other than the Company's
headquarters in the greater Los Angeles area or other than within thirty (30)
miles of the Company's current headquarters in Glendale, California.
(iv) "Other Good Reason Event" means any of
the following: (A) a material breach of this Agreement by the Company (which
shall include, without limitation, any reduction in the amount of any
compensation or benefits provided to Executive under this Agreement) or (B) any
termination or attempted termination by the Company of Executive's employment
other than as expressly permitted in this Agreement.
(e) OFFICER AND BOARD POSITIONS. Upon the
termination of employment with the Company for any reason, Executive shall be
deemed to have resigned his position as an officer and a member of the Board of
Directors of the Company and any of its subsidiaries and as a member of any
committees of such Boards, effective on the date of termination; PROVIDED,
HOWEVER, that Executive shall not be so obligated to resign from the board of
directors of the Company so long as Xxxxxxxxx Partners is entitled to designate
a nominee for election as a director of the Company under that certain
Shareholders Agreement dated as of December 20, 1994 among Xxxxxxxxx Partners,
TLMD Partners II, L.L.C., Bastion Capital Fund, L.P., Xxxx Xxxxx, GRS Partners
II, L.P. and The Value Realization Fund, L.P.
(f) CERTAIN CONDITION. Notwithstanding anything to
the contrary contained in this Section 9, the obligations of the Company under
this Section 9 shall continue only so long as the Executive does not breach his
obligations under Section 10 and 11.
(g) CERTAIN EFFECT. As used in this Agreement,
termination of this Agreement shall also result in and mean termination of the
Employment Period hereunder.
(h) MITIGATION OF DAMAGES. Executive shall have no
duty to mitigate any of his damages in the event of any breach of or default or
failure in performance under this Agreement by the Company.
(i) STOCK OPTIONS. The references in Section 9(a),
9(b), 9(c) or 9(d) to Executive, other than as therein stated, not being
entitled to receive compensation or benefits upon termination of his employment
under any of such Sections shall not affect Executive's rights under the Amended
Option Agreement or the 1997 Stock Option Agreement.
10. CONFIDENTIALITY, ETC. Executive will not divulge, furnish
or make accessible to anyone (otherwise than in the regular course of business
of the Telemundo Group) any confidential information, plans or materials or
trade secrets of the Telemundo Group or with respect to any other confidential
or secret aspects of the business of the Telemundo Group; PROVIDED, HOWEVER,
that during his employment, Executive shall have the
8
latitude customarily given to a chief executive officer to disclose information
in good faith for the benefit of the Company and its stockholders (taken as a
whole). All memoranda, notes, lists, records and other documents or papers (and
all copies thereof), including such items stored in computer memories, on
microfiche or by any other means, made or compiled by or on behalf of Executive,
or made available to him relating to the Telemundo Group are and shall be the
Company's property and shall be delivered to the Company promptly upon the
termination of his employment with the Company; PROVIDED, HOWEVER, that (i) this
obligation shall not apply to information that (A) is not confidential (other
than as a result of Executive's breach of this Section) and (B) does not contain
certain trade secrets of the Company, (ii) Executive shall have the right to
retain such of the foregoing as shall be reasonably necessary to enforce his
rights under this Agreement and to comply with and enforce his rights, including
the right to defend himself against claims, provided copies of such retained
information are provided to the Company and the retained information remain
subject to the provision of this Section, and (iii) Executive shall have no
obligation to return information that is no longer in his possession, custody or
control. This Section 10 shall survive the expiration or termination or
termination of this Agreement, the Employment Period and the term of employment;
PROVIDED, HOWEVER, that if Executive's employment is terminated pursuant to
Section 9(c) or Section 9(d), then this Section 10 will terminate on the
Entitlement Date.
11. NO INTERFERENCE; AFFILIATE TRANSACTIONS.
(a) During the Employment Period and for one year
thereafter, Executive will not, directly or indirectly, for himself, or as agent
of or on behalf of, or in conjunction with, any person, firm, corporation, or
other entity, engage or participate in the Company Business (as hereinafter
defined), whether as employee, consultant, partner, principal, shareholder or
representative, or render advisory or other services to or for any person, firm,
corporation or other entity, which is engaged, directly or indirectly, in the
Company Business; PROVIDED, HOWEVER, that (i) Executive may continue to own,
manage and engage in the television business activities of Interspan
Communications, a California limited partnership or any successor to such
partnership (the "Interspan Successor"), so long as its business consists
primarily of operating television station KFWD in Dallas/Fort Worth Texas, and
(ii) Executive may own less than 5% of the common stock of a publicly traded
company that is engaged in the Company Business and (iii) Executive may own
Common Stock and securities convertible into Common Stock (or securities into
which Common Stock is converted in any business combination transaction). For
purposes of this Section 11(a), "Company Business" shall mean and be limited to
any of (x) the provision of Spanish language television programming in the
United States (which includes Puerto Rico), (y) the ownership of television
broadcast stations, networks or any over-the-air television signal, and cable in
the United States (which includes Puerto Rico) that broadcast primarily Spanish
language programming, and (z) the sale of television advertising time and
programs inside and outside the United States (which includes Puerto Rico) for
Spanish language television stations, cable and networks.
(b) During the Employment Period and for one year
after such period, Executive agrees and covenants that he will not interfere
directly or indirectly in any way with the Company. "Interfere" means to
influence or attempt to influence, directly or indirectly, present or active
prospective customers, employees, suppliers, performers, directors,
representatives, agents or independent contractors of the Company, or any of its
network affiliates to restrict, reduce, sever or otherwise alter their
relationship with the
9
Telemundo Group or any of its network affiliates; provided, that this provision
shall not restrict the Executive (i) during the Employment Period, from
conducting in the ordinary course the business that Interspan Communications now
presently conducts, whether through Interspan Communications or the Interspan
Successor, as it relates to the Dallas-Ft. Worth television station KFWD to the
extent such business is conducted in good faith and without an adverse effect
(it being understood that the solicitation for employment or employment of
Company employees would have an adverse effect) on the Company (other than any
such effects which have no greater adverse effect on the Company than the effect
that such presently conducted business of Interspan Communications presently has
on the Company), or (ii) after the Employment Period, from operating Dallas-Fort
Worth television station KFWD.
(c) Executive agrees that during the Employment
Period, except as provided in Section 5(b) with respect to security services
that may be provided by an affiliate of Inter-Con Security Systems, Inc., he
will not at any time enter into, on behalf of the Telemundo Group, or cause the
Telemundo Group to enter into, directly or indirectly, any transactions (each, a
"Transaction") with any business organization in which he or, to his knowledge
after due inquiry, any member of his family may be interested as a partner,
trustee, director, officer, employee, shareholder, lender of money or guarantor,
except to the extent disclosed to the Company and agreed to by the board of
directors of the Company in writing; PROVIDED, HOWEVER, that no such disclosure
and agreement shall be required for the Company or Telemundo Group to enter into
any transaction with a publicly traded company in which Executive or any member
of his family is a director so long as such transaction is in the ordinary
course of business of such publicly traded company and the Company or Telemundo
Group and is on no less favorable terms to the Company or Telemundo Group than
would be available to it if no such relationship existed. Executive will use his
best efforts to ensure that any Transaction is disclosed to the Board of
Directors of the Company and approved thereby prior to entering into a contract
relating thereto and/or consummation thereof, as contemplated by the preceding
sentence.
(d) From and after the termination Executive's
employment, the Executive shall not disparage the Company, its officers,
directors, employees or business, nor shall the Company or any of its officers,
directors, employees or agents disparage the Executive or members of his family,
and neither party shall disclose any facts relating to such termination;
provided, that nothing contained in this Section 11(d) shall restrict the
parties from making any statements or disclosure believed necessary to enforce
in any judicial or similar proceeding the provisions of this Agreement or as a
party believes may be required by applicable law.
(e) In the event any court having jurisdiction
determines that any part of this Section 11 is unenforceable, such court shall
have the power to reduce the duration or scope of such provision and such
provision, in its reduced form, shall be enforceable. This Section 11 shall
survive the expiration or termination of this Agreement and the Employment
Period; PROVIDED, HOWEVER, that if Executive's employment is terminated pursuant
to Section 9(c) or Section 9(d), then this Section 11 will terminate on the
Entitlement Date.
12. INJUNCTIVE RELIEF. Executive acknowledges that the
provisions of Sections 10 and 11 herein are reasonable and necessary for the
protection of the Telemundo Group and the Telemundo Group will be irrevocably
damaged if such provisions are not
10
specifically enforced. Accordingly, Executive agrees that, in addition to any
other relief to which the Company may be entitled in the form of damages, the
Company shall be entitled to seek and obtain injunctive relief from a court of
competent jurisdiction (without the posting of a bond therefor) for the purposes
of restraining Executive from any actual or threatened breach of such
provisions.
13. REMEDIES; SERVICE OF PROCESS.
(a) Except when a party is seeking an injunction or
specific performance hereunder, the parties agree to submit any dispute
concerning this Agreement to binding arbitration. The parties may agree to
submit the matter to a single arbitrator or to several arbitrators, may require
that arbitrators possess special qualifications or expertise or may agree to
submit a matter to a mutually acceptable firm of experts for decision. In the
event the parties shall fail to thus agree upon terms of arbitration within
twenty (20) days from the first written demand for arbitration, then such
disputed matter shall be settled by arbitration under the Rules of Employment
Arbitration of the American Arbitration Association, by three arbitrators
appointed in accordance with such Rules. Such arbitration shall be held in Los
Angeles, California. Once a matter has been submitted to arbitration pursuant to
this section, the decision of the arbitrators shall be final and binding upon
all parties. The cost of arbitration shall be shared equally by the parties and
each party shall pay the expenses of his/its attorneys, except that the
arbitrators shall be entitled to award the costs of arbitration, attorneys and
accountants' fees, as well as costs, to the party that they determine to be the
prevailing party in any such arbitration.
(b) The Company and Executive hereby irrevocably
consent to the jurisdiction of the Courts of the State of California and of any
Federal Court located in such State in connection with any action or proceedings
arising out of or relating to the provisions of Sections 10 and 11 of this
Agreement. Executive further agrees that he will not commence or move to
transfer any action or proceeding arising out or relating to the provisions of
Sections 10 and 11 of this Agreement to any Court other than one located in the
State of California. In any such litigation, Executive waives personal service
of any summons, complaint or other process and agrees that the service thereof
may be made by certified mail directed to Executive at his address for purposes
of notice under Section 17(b) hereof.
14. SUCCESSORS. This Agreement and the rights and obligations
hereunder are personal to Executive and without the prior written consent of the
Company and Executive shall not be assignable.
15. SURVIVAL OF PROVISIONS. Notwithstanding anything to the
contrary contained herein, the provisions of Sections 5(d), 9, 10, 11, 12, 13,
14, 15, 16 and 17 hereof shall survive the termination or expiration of this
Agreement, irrespective of the reasons therefor.
11
16. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything to the contrary
contained herein, if it shall be determined that any payment, distribution or
benefit received or to be received by Executive from the Company ("Payments"),
whether under this Agreement or otherwise (including, without limitation, the
Amended Option Agreement and the 1997 Option Agreement), would be subject to the
excise tax imposed by Section 4999 of the Code, or any successor or counterpart
section thereto (the "Excise Tax"), then Executive shall be entitled to receive
an additional payment (the "Excise Tax Gross-Up Payment") in an amount such that
the net amount retained by Executive, after the calculation and deduction of any
Excise Tax on the Payments and any federal, state and local income taxes,
employment taxes and excise tax on the Excise Tax Gross-Up Payment provided for
in this Section 16, shall be equal to the Payments. For the avoidance of doubt,
in determining the amount of the Excise Tax Gross-Up Payment attributable to
federal income taxes the Company shall take into account the maximum reduction
in federal income taxes that could be obtained by the deduction of the portion
of the Excise Tax Gross-Up Payment attributable to state and local income taxes.
Finally, the Excise Tax Gross-Up Payment shall be net of any income or excise
tax withholding payments made by the Company or any affiliate to any federal,
state or local taxing authority with respect to the Excise Tax Gross-Up Payment
that was not deducted from compensation payable to Executive.
(b) All determinations required to be made under this
Section 16, including whether and when an Excise Tax Gross-Up Payment is
required and the amount of such Excise Tax Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, except as specified in Section
16(a) above, shall be made by Deloitte & Touche LLP (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and
Executive within 15 business days after the Company becomes obligated to make
any Payments to Executive. The determination of tax liability made by the
Accounting Firm shall be subject to review by Executive's tax advisor and, if
Executive's tax advisor does not agree with the determination reached by the
Accounting Firm, then the Accounting Firm and Executive's tax advisor shall
jointly designate a nationally recognized public accounting firm, which shall
make the determination. All fees and expenses of the accountants and tax
advisors retained by either Executive or the Company shall be borne by the
Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this Section
16 shall be paid by the Company to Executive within five days after the receipt
of the determination. Any determination by a jointly designated public
accounting firm shall be binding upon the Company and Executive.
(c) As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination hereunder,
it is possible that Excise Tax Gross-Up Payments will not have been made by the
Company that should have been made consistent with the purpose of this Section
16 ("Underpayment"). In the event that Executive is required to make a payment
of any Excise Tax, any such Underpayment calculated in accordance with and in
the same manner as the Excise Tax Gross-Up Payment in Section 16 above shall be
promptly paid by the Company to or for the benefit of Executive. In the event
that the Excise Tax Gross-Up Payment exceeds the amount subsequently determined
to be due, such excess shall constitute a loan from the Company to Executive
payable on the fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
12
17. MISCELLANEOUS. (a) This Agreement shall be governed by
and construed in accordance with the laws of the State of California, without
reference to principles of conflict of laws.
(b) All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered,
telecopied or mailed, certified or registered mail, return receipt requested:
If to Executive:
Xxxxxx Xxxxxxxxx
000 Xxxxx Xxx Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxx, Esq.
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
If to the Company:
Telemundo Group, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Chairman
Phone: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Telemundo Group, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee or upon refusal if properly delivered.
(c) The Company may withhold from any amounts payable
under this Agreement such Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(d) Executive represents and warrants that he is not
a party to any agreement, contract or under-standing, whether employment or
otherwise, which would in
13
any way restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Agreement.
(e) This Agreement, the Amended Option Agreement and
the 1997 Option Agreement set forth the entire understanding of the parties with
respect to the subject matter hereof, and no statement, representation, warranty
or covenant has been made by either party except as expressly set forth herein.
This Agreement shall not be changed or terminated orally. This Agreement amends
the Original Agreement and supersedes and cancels all other prior agreements
between the parties, whether written or oral, relating to the employment of
Executive. The headings and captions contained in this Agreement are for
convenience only and shall not be deemed to affect the meaning or construction
of any provision hereof.
(f) If, at any time subsequent to the date hereof,
any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any provision of
this Agreement.
(g) The Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof. Executive's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a waiver
of such provision or any other provision hereof.
(h) This Agreement shall inure to the benefit of and
be binding upon any successor to the Company and shall inure to the benefit of
Executive's successors, heirs and personal representatives.
(SIGNATURE PAGE FOLLOWS)
14
IN WITNESS WHEREOF, Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ XXXXXX X. XXXXXXXXX
----------------------------
Xxxxxx X. Xxxxxxxxx
TELEMUNDO GROUP, INC.
By: /s/ XXXXX XXXXXXX
-----------------------
Name: Xxxxx Xxxxxxx
Title: Chairman of the
Compensation Committee
15
Telemundo Group, Inc.
Bonus Schedule
(dollars in thousands)
ADJUSTED NET CONTRIBUTION 1
---------------------------
AS OF DECEMBER 31,
------------------
TARGETS 1997
------- ----
High Point 45,540
Target 39,600
Threshold 33,660
--------
1 "Adjusted Net Contribution" means operating income plus depreciation and
amortization determined in accordance with generally accepted accounting
principles without giving effect to any income, gain or loss associated with
Telenoticias del Mundo, LP., but determined consistent with the accounting
method for determining "Net Contribution before Telenoticias" on the Company's
internal financial statements in prior periods and adjusted to eliminate the
impact of changes in accounting principles after the date of this Agreement, and
of acquisitions or divestitures of operating units after the date of this
Agreement if taking such operating units into account would either increase or
decrease the actual Net Contribution by at least 5% of the Adjusted Net
Contribution target in the year of acquisition or divestiture on an annualized
basis, and also adjusted to eliminate (i) all monetary compensation paid to
presently serving executive officers who are terminated during calendar year
1995 (but only such compensation paid after such termination), (ii) any legal
fees and costs paid by the Company with respect to item (i), (iii) $95,000 of
expenses in 1995, (iv) the expense associated with the exercise of options to
acquire common stock held on March 7, 1995 by the executive officers of the
Company, to the extent not in the Company's budget, (v) the expense associated
with the exercise of options issued to those person who are executive officers
of the Company on March 7, 1995 in connection with their termination prior to
July, 1995, to the extent not in the Company's budget, (vi) direct costs
incurred in the Company's bankruptcy reorganization, to the extent not included
in the Company's budget, (vii) direct costs incurred in settling the Xxxxx
litigation, to the extent not included in the Company's budget and (viii)
certain contingent expenses relating to Puerto Rico as discussed between the
parties, to the extent not included in the Company's budget. The adjustment set
forth in clauses (i)-(viii) (other than clause (iii) shall occur only when and
to the extent actually expensed by the Company and to the extent considered in
the calculation of Adjusted Net Contribution.
16
