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EXHIBIT 17
EMPLOYMENT AGREEMENT
This AGREEMENT made as of January 7, 2000, by and between On Command
Corporation, a Delaware corporation (the "Company"), and Xxxxx Xxxxxxx (the
"Executive").
WHEREAS, the Company desires to employ the Executive as Executive Vice
President and Chief Operating Officer, and the Executive desires to accept such
employment, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements made herein, and intending to be legally bound hereby, The Company
and the Executive agree as follows:
1. Employment; Duties.
(a) Employment and Employment Period. The Company shall
employ the Executive to serve as Executive Vice President and Chief Operating
Officer of the Company or its successor entity for a period (the "Employment
Period") commencing on January 7, 2000 (the "Effective Date") and continuing
thereafter for a term of two years until January 7, 2002 unless terminated in
accordance with the provisions of this Agreement. Each 12 month period ending
on the anniversary date of the Effective Date is sometimes referred to herein
as a "year of the Employment Period."
(b) Offices, Duties and Responsibilities. The Executive shall
report to the President or Chief Executive Officer of the Company (the "CEO").
The Executive shall have all duties and authority customarily accorded a chief
operating officer.
(c) Devotion to Interests of The Company. During the
Employment Period, the Executive shall render his business services solely in
the performance of his duties hereunder. The Executive shall use his best
efforts to promote the interests and welfare of the Company. Notwithstanding
the foregoing, the Executive shall be entitled to undertake such outside
activities (e.g., charitable, educational, personal interests, board of
directors membership, and so forth, that do not compete with the business of
the Company as do not unreasonably or materially interfere with the performance
of his duties hereunder as reasonably determined by the CEO in consultation
with the Executive.
2. Compensation and Fringe Benefits.
(a) Base Compensation. The Company shall pay the Executive a
base salary ("Base Salary") at the rate of $300,000 per year during the
Employment Period with payments made in installments in accordance with the
Company's regular practice for compensating executive personnel.
(b) Bonus Compensation. The Executive will be eligible to
receive bonuses ("Annual Bonus") during the Employment Period in accordance
with the following parameters: (i) the target bonus for each year during the
Employment Period shall be 70% of Base Salary for
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achieving 100% of the target level for the performance measures; and (ii) the
performance measures, the relative weight to be accorded each performance
measure and the amount of bonus payable in relation to the target bonus for
achieving more or less than 100% of the target level for the performance
measures shall be determined for each year during the Employment Period by the
Compensation Committee of the Company's Board of Directors after consultation
with the CEO and the Executive.
(c) Fringe Benefits. The Executive also shall be entitled to
participate in group health, dental and disability insurance programs, and any
group profit sharing, deferred compensation, supplemental life insurance or
other benefit plans as are generally made available by the Company to the
senior executives of the Company. Such benefits shall include reimbursement of
documented expenses reasonably incurred in connection with travel and
entertainment related to the Company's business and affairs. The Company
reserves the right to modify or terminate from time to time the fringe benefits
provided to the senior management group.
(d) Stock Options. The Company hereby grants to the Executive
as of the Effective Date options (the "Options") to purchase 100,000 shares of
the Company's common stock, par value $0.01 per share, exercisable at the
per-share price equal to $15.90625 (the "Exercise Price"). The Options shall be
exercisable by Executive according to the following schedule: (i) 50,000 of the
Options after January 7, 2001; and (ii) 50,000 of the Options after January 7,
2002; provided that if the Executive's employment is terminated by the Company
at any time prior to January 7, 2001 other than for "cause" (as provided in
Section 5(b)), then 50,000 Options will become exercisable and the remaining
50,000 Options shall be cancelled. The Options, to the extent they remain
unexercised, shall automatically and without further notice terminate and
become of no further force and effect only at the time of the earliest of the
following to occur: (x) Three months after the date upon which a termination
for cause by the Company (as provided in Section 5(b)) or a termination by the
Executive other than pursuant to an Executive Election Event (as provided in
Section 5(a)) shall have become effective and final; or (y) January 7, 2010.
(e) Conflicting Provisions. Solely to the extent of
any conflict between the provisions of this Agreement and the provisions of any
agreement between Executive, on the one hand, and the Company and any of its
affiliated or related entities, on the other hand, relating to stock-based
incentives (including the Options), life insurance, health insurance, any other
employee equity participation, profit sharing or retirement plan, group health
plan or other employee benefits (individually and collectively referred to
herein as the "Fringe Benefits"), the provisions of this Agreement will
control.
3. Trade Secrets; Return of Documents and Property. (a)
Executive acknowledges that during the course of his employment he will receive
secret, confidential and proprietary information ("Trade Secrets") of the
Company and of other companies with which the Company does business on a
confidential basis and that Executive will create and
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develop Trade Secrets for the benefit of the Company. Trade Secrets shall
include, without limitation, custom databases, "know-how," formulae, secret
processes or machines, inventions, computer programs (including documentation
of such programs), customer data and proprietary information about costs,
profits, markets and sales, customer databases, and other information of a
similar nature to the extent not available to the public, and plans for future
development. All Trade Secrets disclosed to or created by Executive shall be
deemed to be the exclusive property of the Company (as the context may
require). Executive acknowledges that Trade Secrets have economic value to the
Company due to the fact that Trade Secrets are not generally known to the
public or the trade and that the unauthorized use or disclosure of Trade
Secrets is likely to be detrimental to the interests of the Company and its
subsidiaries. Executive therefore agrees to hold in strict confidence and not
to disclose to any third party any Trade Secret acquired or created or
developed by Executive during the term of this Agreement except (i) when
Executive is required to use or disclose any Trade Secret in the proper course
of the Executive's rendition of services to the Company hereunder, (ii) when
such Trade Secret becomes public knowledge other than through a breach of this
Agreement, or (iii) when Executive is required to disclose any Trade Secret
pursuant to any valid court order in which the Executive is compelled to
disclose such Trade Secret. The Executive shall notify the Company immediately
of any such court order in order to enable the Company to contest such order's
validity. The Executive shall not use or otherwise disclose Trade Secrets
unless such information (x) becomes public knowledge or is generally known in
the entertainment or sports industry among executives comparable to the
Executive other than through a breach of this Agreement, (y) is disclosed to
the Executive by a third party who is entitled to receive and disclose such
Trade Secret, or (z) is required to be disclosed pursuant to any valid court
order, in which case the Executive shall notify the Company immediately of any
such court order in order to enable the Company to contest such order's
validity.
(b) Upon the effective date of notice of the Executive's or
the Company's election to terminate this Agreement, or at any time upon the
request of the Company, the Executive (or his heirs or personal
representatives) shall deliver to the Company (i) all documents and materials
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containing or otherwise relating to Trade Secrets or other information relating
to the Company's business and affairs, and (ii) all documents, materials and
other property belonging to the Company, which in either case are in the
possession or under the control of the Executive (or his heirs or personal
representatives). The Executive shall be entitled to keep his personal records
relating to the Company's business and affairs except to the extent those
contain documents or materials described in clause (i) or (ii) of the preceding
sentence, in which case Executive may retain copies for his personal and
confidential use.
4. Discoveries and Works. All discoveries and works made or conceived
by the Executive during his employment by the Company pursuant to this
Agreement, jointly or with others, that relate to the Company's activities
("Discoveries and Works") shall be owned by the Company. Discoveries and Works
shall include, without limitation, works of authorship, inventions, computer
programs (including documentation of such programs), technical improvements,
processes and drawings. The Executive shall (i) promptly notify, make full
disclosure to, and execute and deliver any documents reasonably requested by,
the Company to evidence or better assure title to such Discoveries and Works in
the Company, (ii) assist the Company in obtaining or maintaining for itself at
its own expense United States and foreign copyrights, trade secret protection
or other protection of any and all such Discoveries and Works, and (iii)
promptly execute, whether during his employment by the Company or thereafter,
all applications or other endorsements necessary or appropriate to maintain
copyright and other rights for the Company and to protect their title thereto.
Any Discoveries and Works which, within sixty days after the termination of the
Executive's employment by the Company, are made, disclosed, reduced to a
tangible or written form or description, or are reduced to practice by the
Executive and which pertain to work performed by the Executive while with the
Company, shall, as between the Executive and the Company, be presumed to have
been made during the Executive's employment by the Company.
5. Termination. This Agreement and Executive's employment with the
Company may be terminated as follows:
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(a) By the Executive either at any time for any reason upon
ninety (90) days advance written notice to the Company, or upon an "Executive
Election Event" (as defined below) upon thirty (30) days advance written notice
to the Company. Upon an Executive Election Event or if the Executive's
employment is terminated by the Company without "cause" (as defined below), the
Executive shall be entitled to receive the following benefits through the
longer of (x) the remainder of the Employment Period as if this Agreement had
remained in effect until the end of such two-year Employment Period and (y) one
year following the date of such termination (the "Duration Period"): (i) his
Base Salary; (ii) an Annual Bonus equal to seventy percent (70%) of one year's
Base Salary; and (iii) all other benefits provided pursuant to Sections 2(c) of
this Agreement. The Executive shall have no obligation to seek other employment
in the event of his termination pursuant to this paragraph (a), and there shall
be no offset against amounts due the Executive under this Agreement on account
of any remuneration attributable to any subsequent employment that he may
obtain. The Company shall have the option at any time during the Duration
Period to pay to the Executive in a lump sum the amounts remaining under
clauses (i) and (ii) of this paragraph (a). If the Company exercises such
option, the Company shall have no further compensation payment obligations
under clauses (i) and (ii) above.
An "Executive Election Event" shall be any any substantial
reduction (except in connection with the termination of his employment
voluntarily by the Executive or by the Company for "cause" as defined below) by
the Company, without the Executive's express written consent, of his
responsibilities as Executive Vice President and Chief Operating Officer of the
Company, or any other material default of this Agreement which continues for
ten (10) business days following the Company's receipt of written notice from
the Executive specifying the manner in which the Company is in default of this
Agreement.
(b) By the Company at any time for "cause." For purposes of
this Agreement, the Company shall have "cause" to terminate the Executive's
employment hereunder upon (i) the continued and deliberate failure of the
Executive to perform his material duties, in a manner substantially consistent
with the manner reasonably prescribed by the CEO
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and in accordance with the terms of this Agreement (other than any such failure
resulting from his incapacity due to physical or mental illness), which failure
continues for ten (10) business days following the Executive's receipt of
written notice from the CEO specifying the manner in which the Executive is in
default of his duties, (ii) the engaging by the Executive in intentional
serious misconduct that is materially injurious to the Company or its
reputation, which misconduct, if it is reasonably capable of being cured, is
not cured by the Executive within ten (10) business days following the
Executive's receipt of written notice from the CEO specifying the serious
misconduct engaged in by the Executive, (iii) the conviction of the Executive
of commission of a felony, whether or not such felony was committed in
connection with the Company's business, or (iv) any material breach by the
Executive of Section 8 hereof. If the Company shall terminate the Executive's
employment for "cause," there will be no forfeiture, penalty, reduction or
other adverse effect upon any vested rights or interests relating to any Fringe
Benefits. In such event, the Company, in full satisfaction of all of the
Company's obligations under this Agreement and in respect of the termination of
the Executive's employment with the Company, shall pay the Executive his Base
Salary and all other benefits and reimbursement through the date of termination
of his employment, provided that the Options and any other stock options
granted to the Executive under the Company's option plan shall terminate three
months after the date of termination of his employment for "cause".
6. Disability; Death.
(a) If, prior to the expiration or termination of the
Employment Period, the Executive shall be unable to perform substantially his
duties by reason of disability or impairment of health for at least six
consecutive calendar months, the Company shall have the right to terminate this
Agreement by giving sixty (60) days written notice to the Executive to that
effect, but only if at the time such notice is given such disability or
impairment is still continuing. Following the expiration of the notice period,
the Employment Period shall terminate, and the Company's payment obligations to
the Executive under Section 2(a) and (b) shall terminate with the payment of
the Executive's Base
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Salary for the month in which the Employment Period terminates and a prorated
Annual Bonus through such month, and there will be no forfeiture, penalty,
reduction or other adverse effect upon any vested rights or interests relating
to any Fringe Benefits; provided that the Options and any other stock options
granted to the Executive under the Company option plan or any successor plan
shall become fully vested and shall terminate in accordance with their terms,
but in no event less than one year after such termination, notwithstanding the
limitations of Section 2(d) of this Agreement. In the event of a dispute as to
whether the Executive is disabled within the meaning of this paragraph (a), or
the duration of any disability, either party may request a medical examination
of the Executive by a doctor appointed by the Chief of Staff of a hospital
selected by mutual agreement of the parties, or as the parties may otherwise
agree, and the written medical opinion of such doctor shall be conclusive and
binding upon the parties as to whether the Executive has become disabled and
the date when such disability arose. The cost of any such medical examinations
shall be borne by the Company.
(b) If, prior to the expiration or termination of the
Employment Period, the Executive shall die, the Company shall pay to the
Executive's estate his Base Salary and a prorated Annual Bonus through the end
of the month in which the Executive's death occurred, at which time the
Employment Period shall terminate without further notice and there will be no
forfeiture, penalty, reduction or other adverse effect upon any vested rights
or interests relating to any Fringe Benefits; provided that the Options and any
other stock options granted to the Executive under the Company option plan or
any successor plan shall become fully vested and shall terminate one year after
the date of termination of the Executive's employment for death,
notwithstanding the limitations of Section 2(d) of this Agreement.
(c) Nothing contained in this Section 6 shall impair or
otherwise affect any rights and interests of the Executive under any
compensation plan or arrangement of the Company which may be adopted by the
Board.
7. Non-Competition.
(a) As an inducement for the Company to enter into this
Agreement, the Executive agrees that for a period
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commencing as of the Effective Date and running through the earlier of (i) the
end of the Employment Period if the Executive remains employed by the Company
for the entire Employment Period or (ii) one year following termination of the
Executive's employment by the Company for "cause" as defined in Section 5(b)
hereof, or by the Executive for any reason (other than an Executive Election
Event, in which case the provisions of this paragraph (a) shall not apply) (the
"Non-Competition Period"), the Executive shall not, without the prior written
consent of the Board, engage or participate, directly or indirectly, as
principal, agent, employee, employer, consultant, stockholder, partner or in
any other individual capacity whatsoever, in the conduct or management of, or
own any stock or any other equity investment in or debt of, any business which
is competitive with any business conducted by the Company.
For the purpose of this Agreement, a business shall be
considered to be competitive with any business of the Company only if such
business is engaged in providing services or products (i) substantially similar
to (A) any service or product currently provided by the Company during the
Employment Period; (B) any service or product which directly evolves from or
directly results from enhancements in the ordinary course during the
Non-Competition Period to the services or products provided by the Company as
of the date hereof or during the Employment Period; or (C) any future service
or product of the Company as to which the Executive materially and
substantially participated in the development or enhancement, and (ii) to
customers, distributors or clients served by the Company during the
Non-Competition Period.
(b) Non-Solicitation of Employees. During the Non-Competition
Period, the Executive will not (for his own benefit or for the benefit of any
person or entity other than the Company) solicit, or assist any person or
entity other than the Company to solicit, any officer, director, executive or
employee (other than an administrative or clerical employee) of the Company to
leave his or her employment.
(c) Reasonableness; Interpretation. The Executive
acknowledges and agrees, solely for purposes of
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determining the enforceability of this Section 8 (and not for purposes of
determining the amount of money damages or for any other reason), that (i) the
markets served by the Company are national and international and are not
dependent on the geographic location of executive personnel or the businesses
by which they are employed; (ii) the length of the Non-Competition Period is
linked to the term of the Employment Period and the severance benefit provided
for in Section 5(a); and (iii) the above covenants are reasonable as an
inducement to the Company to enter into this Agreement, and the parties
expressly agree that such restrictions have been designed to be reasonable and
no greater than is required for the protection of the Company. In the event
that the covenants in this Section 8 shall be determined by any court of
competent jurisdiction in any action to be unenforceable by reason of their
extending for too great a period of time or over too great a geographical area
or by reason of their being too extensive in any other respect, they shall be
interpreted to extend only over the maximum period of time for which they may
be enforceable, and/or over the maximum geographical area as to which they may
be enforceable and/or to the maximum extent in all other respects as to which
they may be enforceable, all as determined by such court in such action.
(d) Investment. Nothing in this Agreement shall be deemed to
prohibit the Executive from owning equity or debt investments in any
corporation, partnership or other entity which is competitive with the Company,
provided that such investments (i) are passive investments and constitute five
percent (5%) or less of the outstanding equity securities of such an entity the
equity securities of which are traded on a national securities exchange or
other public market, or (ii) are approved by the Board.
8. Liability Insurance. The Executive shall be covered under the
Company's liability insurance policy for directors and officers to the same
extent as other officers of the Company.
9. Enforcement. The Executive acknowledges that a breach of the
covenants or provisions contained in Sections 3, 4 and 8 of this Agreement will
cause irreparable damage to the Company, the exact amount of which will be
difficult to ascertain, and that the remedies at law for any such breach will
be inadequate. Accordingly, the Executive
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agrees that if the Executive breaches or threatens to breach any of the
covenants or provisions contained in Sections 3, 4 and 8 of this Agreement, in
addition to any other remedy which may be available at law or in equity, the
Company shall be entitled to seek specific performance and injunctive relief.
10. Arbitration.
(a) Subject to the Company's right to enforce Sections 3, 4
and 8 hereof by an injunction issued by a court having jurisdiction (which
right shall prevail over and supersede the provisions of this Section 11), any
dispute relating to this Agreement, including the enforceability of this
Section 11, arising between the Executive and the Company shall be settled by
arbitration which shall be conducted in Denver, Colorado, or any other location
where the Executive then resides at the Company's request, before a single
arbitrator in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA"). Within 90 days after the Effective Date, the
parties shall mutually agree upon three possible arbitrators, one of whom shall
be selected by the AAA within 2 days after notice of a dispute to be arbitrated
under this Section 11. The parties shall instruct the arbitrator to use his or
her best efforts to conclude the arbitration within 60 days after notice of the
dispute to AAA.
(b) The award of any such arbitrator shall be final. Judgment
upon such award may be entered by the prevailing party in any federal or state
court sitting in Denver, Colorado or any other location where the Executive
then resides at the Company's request.
(c) The parties will bear their own costs associated with
arbitration and will each pay one-half of the arbitration costs and fees of
AAA; however, the arbitrator may in his sole discretion determine that the
costs of the arbitration proceedings, including attorneys' fees, shall be paid
entirely by one party to the arbitration if the arbitrator determines that the
other party is the prevailing party in such arbitration.
11. Severability. Should any provision of this
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Agreement be determined to be unenforceable or prohibited by any applicable
law, such provision shall be ineffective to the extent, and only to the extent,
of such unenforceability or prohibition without invalidating the balance of
such provision or any other provision of this Agreement, and any such
unenforceability or prohibition in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
12. Assignment. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. The Company's rights and
obligations under this Agreement shall not be assignable by the Company except
as incident to the transfer, by merger or otherwise, of all or substantially
all of the business of the Company. In the event of any such assignment by the
Company, all rights of the Company hereunder shall inure to the benefit of the
assignee.
13. Notices. All notices and other communications which are required
or may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received if personally delivered; when transmitted if
transmitted by telecopy, electronic or digital transmission method, provided
that in such case it shall also be sent by certified or registered mail, return
receipt requested; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (e.g., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. Unless otherwise changed by notice, in each case notice
shall be sent to:
If to Executive, addressed to:
Xxxxx Xxxxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
If to the Company, addressed to:
On Command Corporation
0000 Xxx Xxxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: President and CEO
Telecopier No. (000) 000-0000
With a copy to:
Ascent Entertainment Group
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0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telecopier No. (000) 000-0000
14. Miscellaneous. This Agreement constitutes the entire agreement,
and supersedes all prior agreements, of the parties hereto relating to the
subject matter hereof, and there are no written or oral terms or
representations made by either party other than those contained herein. No
amendment, supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. The
validity, interpretation, performance and enforcement of the Agreement shall be
governed by the laws of the State of California. The headings contained herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
/s/ XXXXX XXXXXXX
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Xxxxx Xxxxxxx, Executive
ON COMMAND CORPORATION
By:
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Title: Chairman and Acting
Chief Executive Officer
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