EXHIBIT 10.15
ASSUMPTION OF AND FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS ASSUMPTION OF AND FIRST AMENDMENT TO EMPLOYMENT AGREEMENT, shall be
effective as of July 1, 1999, (this "First Amendment") and is entered into by
and between GRTV Network, Inc. (the "Company") and Xxxxxxx X. Xxxxxx (the
"Executive"). All terms not defined herein shall have the same definitions as
those ascribed to them in the Agreement (defined below).
WHEREAS, Executive and Xxxxx-Xxxxxx Television Network, Inc. ("GRTV") are
parties to that certain Employment Agreement effective as of January 1, 1998
(the "Agreement"); and
WHEREAS, substantially all of the assets of GRTV have been purchased by TVN
Entertainment Corporation ("TVN"); and
WHEREAS, the Company, a wholly owned subsidiary of TVN, desires to assume
the Agreement, as amended herein, to retain the services of Executive.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree that the Agreement shall be assumed by the Company, as
modified herein:
A. All references in the Agreement, as amended hereby, to the "Company" shall
mean "GRTV Network, Inc." and all references in this First Amendment to the
"Company" shall be as defined in this First Amendment.
B. All references in the Agreement, as amended hereby, to "Xxxxx-Xxxxxx
Corporation" shall mean "TVN Entertainment Corporation" and all references
in this First Amendment to "Xxxxx-Xxxxxx Corporation" shall continue to
mean "Xxxxx-Xxxxxx Corporation".
C. All references in the Agreement, as amended hereby, to "Xxxxx-Xxxxxx
Television Network, Inc." shall mean "GRTV Network, Inc." and all
references in this First Amendment to "Xxxxx-Xxxxxx Television Network,
Inc." shall continue to mean "Xxxxx-Xxxxxx Television Network, Inc."
D. All references in the Agreement, as amended hereby, to "GRC" shall mean
"TVN" and all references in this First Amendment to "TVN" shall be as
defined in this First Amendment.
E. All references in the Agreement to a "Guaranteed Bonus" are deleted.
F. The following text is added to the end of Section 2(a) of the Agreement:
At some point, TVN may change the name of the Company, or combine the
Company's business with another wholly owned TVN subsidiary with a
different name, but this employment agreement will continue in effect
in either event.
G. Sections 2(c) and 2(d) of the Agreement are deleted in their entirety.
H. The following text is added as a new Section 2(c):
(c) Executive shall report to the Chief Executive Officer of Company.
Currently Xxxxx Xxxx is the Acting Chief Executive Officer, but a new
Chief Executive Officer may be later appointed by TVN or Company.
Company and/or TVN shall determine
the timing, in its/their sole discretion, of such appointment, if any,
and the identity of the individual so appointed. Executive shall not
have any right of approval or prior notice of such appointment, but if
Xxxxxxx Xxx is so appointed and Executive determines that he does not
wish to report to him, Executive may terminate this Agreement by
written notice to Company, in which event Company shall have no
further obligations or liabilities under this Agreement (including,
without limitation, under Section 4 hereof) except to pay Executive
solely the following sums: (i) any accrued but unpaid amounts of Base
Salary for the period through the date of termination and (ii) an
amount equal to six (6) months of Executive's then current Base Salary
as severance, all paid within thirty (30) calendar days of Executive's
notice of termination hereunder.
I. Section 3 of the Agreement is modified so that the term shall commence as of
July 1, 1999.
J. Section 4 of the Agreement is deleted in its entirety and is replaced by
the following text:
4. Compensation.
------------
4.1 Base Salary. During the period of July 1, 1999 through March
-----------
31, 2000, the Executive will be paid on the basis of an annual salary (each, the
"Base Salary") of TWO HUNDRED THOUSAND DOLLARS ($200,000.00) per year. During
the period of April 1, 2000 through March 31, 2001, the Executive will be paid
on the basis of an annual salary of TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS
($225,000.00) per year. During the period of April 1, 2001 through December 31,
2001, the Executive will be paid on the basis of an annual salary of TWO HUNDRED
FIFTY THOUSAND DOLLARS ($250,000.00) per year.
4.2 Bonuses.
-------
(a) Performance Bonus. Provided that the Executive is not
-----------------
then in material breach of this Agreement the Executive will be eligible to
receive a performance bonus (a "Performance Bonus") of up to ONE HUNDRED TWENTY
FIVE PERCENT (125%) of the Executive's blended average salary in effect during
such period (the "Maximum Bonus"), based upon annual milestones achieved by the
Company relative to those projected in the Company Business Plan for that fiscal
year, and also taking into account the overall financial results at the Company
and TVN during that year, but, subject to Section 4.2(b)(iii), the Executive's
Performance Bonus will be guaranteed at ONE HUNDRED THOUSAND DOLLARS
($100,000.00) per fiscal year and paid in cash. The Executive's Performance
Bonus shall be calculated as follows:
(i) For Fiscal Year 2000. For the Company's fiscal year
--------------------
ending 2000 (July 1, 1999 through March 31, 2000):
(A) If the Company generates at least THREE MILLION
DOLLARS ($3,000,000.00) of Net Profits during such period, the Executive will be
entitled to receive THREE QUARTERS (3/4) of the Maximum Bonus as the Executive's
Performance Bonus.
(B) If the Company generates less than THREE MILLION
DOLLARS ($3,000,000.00) of Net Profits during such period, the Executive will
receive a prorated portion of the Maximum Bonus as his Performance Bonus. For
example, in the event that the Company generates ONE MILLION EIGHT HUNDRED
THOUSAND DOLLARS ($1,800,000.00) of Net Profits during fiscal year 2000, which
is SIXTY PERCENT (60%) of the such milestone, the
Executive will receive the sum of ONE HUNDRED TWELVE THOUSAND FIVE HUNDRED
DOLLARS ($112,500.00) as the Executive's Performance Bonus.
(ii) For Fiscal Year 2001 and Beyond. For the Company's
-------------------------------
fiscal year ending 2001 and each fiscal year thereafter:
(A) If the Company attains the milestones mutually
agreed upon for each such fiscal year, and subject to Section 4.2(b)(iii) below,
the Executive will be entitled to receive the Maximum Bonus as the Executive's
Performance Bonus.
(B) If the Company fails to attain such mutually
agreed upon milestones for each such fiscal year, the Executive will receive a
prorated portion of the Maximum Bonus as the Executive's Performance Bonus. For
example, in the event that the parties mutually agree that a milestone for
fiscal year 2001 is FIVE MILLION DOLLARS ($5,000,000) of Net Profits, and the
Company generates FOUR MILLION DOLLARS ($4,000,000.00) of Net Profits during
such fiscal year, which is EIGHTY PERCENT (80%) of such milestone, the Executive
will receive the sum of TWO HUNDRED TWENTY FIVE THOUSAND DOLLARS ($225,000.00),
which is EIGHTY PERCENT (80%) of ONE HUNDRED TWENTY FIVE PERCENT (125%) of the
Executive's salary in effect during fiscal year 2001.
(iii) Proration of Bonus. In the event that the Executive
------------------
is not employed with the Company at the conclusion of a fiscal year because
either (A) Executive was terminated by Company without cause or (B) Executive
resigns or otherwise terminates his employment other than pursuant to Section
2(c), the Executive's Performance Bonus (including the Minimum Bonus) for such
fiscal year shall be pro-rated based upon the number of months which the
Executive was employed with the Company during such fiscal year.
(c) Net Profits. For purposes of this Agreement, "Net
-----------
Profits" shall mean the net profits before income taxes solely for the Company's
business, but shall not include amounts paid by or on behalf of Company to Guthy
Renker Corporation under that certain Media Access, Consulting and Services
Agreement, dated as of July 1, 1999. For purposes of calculating "Net Profits",
the amount of the expenses of TVN, owner of a majority of the issued and
outstanding common stock of the Company, attributed to the Company as an
indirect expense for TVN services provided to the Company (the "Indirect
Expenses") shall be a fixed amount (as opposed to a percentage of gross
revenues) jointly calculated and agreed upon by the Executive and TVN's
Financial Officer, and the Executive and he shall make good faith efforts to
agree upon such amounts; provided, however, that if no agreement is reached
after such good faith efforts, then TVN's Financial Officer determination shall
prevail.
(d) Payment. Each bonus payable under this Section 4.2 will
-------
be payable within ninety (90) days after each March 31 fiscal year-end, based
upon the applicable Company milestone figures compiled by TVN's finance
department.
4.3 Stock Options.
-------------
(a) Grant. Upon the Executive's execution of this document
-----
and the assumption of the Agreement, as amended hereby, by the Company, and upon
the Executive's meeting eligibility requirements, the Executive will be granted
a stock option, which shall be, to the extent permitted under the applicable
rules of Section 422(d) of the Internal Revenue Code of 1986 (IRC), as amended,
an "incentive stock option" (as defined in Section 422 of the IRC) to purchase a
total of ONE HUNDRED THOUSAND (100,000) shares of TVN Common Stock, with a per
share exercise price as determined by TVN's Board of Directors, based on the
then current fair market value of TVN's Common Stock (currently anticipated to
be approximately $11.00 per share). This option shall be exercisable for a term
of ten (10) years (or shorter upon any termination of the Executive's employment
other than for "cause") and shall vest as is set forth below. This option grant
will be subject to the terms, definitions and provisions of TVN's Stock Option
Plan and an appropriate Stock Option Agreement which will be entered into by the
Executive and TVN, both of which will be provided to the Executive within a
reasonable time following the mutual execution of this letter agreement.
(b) Vesting.
-------
(i) FIFTY THOUSAND (50,000) shares of the stock options
granted under Section 4.3(a) shall vest as follows:
(A) Contingent upon the Executive's continued
employment by the Company on December 31, 1999, the Executive will vest at that
time the same percentage of the Executive's TVN option shares as the percentage
that had vested under the Executive's prior stock option agreement with GRC had
the Executive still been employed by GRC, (i.e., 1/3 of the Executive's GRC
option shares vested upon the Executive's completion of one (1) year of
employment by GRC (i.e., on January 1, 1999); so 1/3 of this TVN option shares
grant will be vested on December 31, 1999).
(B) Contingent upon the Executive's continued
employment by the Company on April 1, 2000, the Executive will vest an
additional 1/3 of this TVN option shares grant at that time, and the remaining
1/3 unvested portion of this TVN option shares grant will vest per the vesting
provisions of the TVN Stock Option Plan (5 year vesting commencing July 1,
1999).
(ii) FIFTY THOUSAND (50,000) shares of the stock options
grant under Section 4.3(a) shall vest as provided in TVN's Stock Option Plan,
over five (5) years at the rate of 20% of the shares originally subject to the
option one year from the commencement date of the Term, and one-sixtieth (1/60)
of the shares originally subject to the option each month thereafter,
conditioned upon Executive's continued employment with the Company as of each
vesting date. This option grant will be subject to the terms, definitions and
provisions of TVN's Stock Option Plan and the standard form Stock Option
Agreement which will be entered into by the Executive and TVN, both of which
will be provided to the Executive upon signing this First Amendment.
4.4 Adjustments to Compensation. During the Term, the Company
---------------------------
shall not reduce the Executive's Base Salary or Annual Bonus without the
Executive's prior written consent.
K. Section 5(a) of the Agreement is deleted in its entirety and is replaced by
the following text:
Subject to meeting eligibility requirements, the Executive will be
included in the Company's employee benefit plans then available to
other employees at the same level as the Executive, including a health
care plan that has a waiting period for eligibility, and qualification
requirements, including those applicable to pre-existing medical
conditions. This will be described in the plan, which will be
provided to the Executive.
L. The following text is added as a new Section 5(d):
(d) The Company will reimburse Executive for the COBRA premiums
incurred by him if any, between July 1, 1999 and such time as the
Executive becomes eligible for coverage under the Company's health
care plan.
M. The last sentence of Sections 6(c), 6(d)(1), 6(e)(1) and 6(g) of the
Agreement are deleted in their entirety.
N. Section 6(e)(2)(vi) of the Agreement is deleted in its entirety and is
replaced with the following text:
(vi) the appropriation by Executive of any material business
opportunity which the TVN board of directors, in good faith,
reasonably believes to be a corporate opportunity of the Company.
In the event that Executive has not previously made a material
misrepresentation of his intention with regard to such
appropriation, Executive will have five (5) days following notice
of such determination by the board to cure such business
opportunity appropriation.
O. Section 6(f)(i) is modified to delete the text ", Guaranteed Bonus".
P. Section 6(f)(ii) is modified so that the phrase "the Executive's Guaranteed
Bonus pursuant to Section 4.2(c) hereof or any other" is deleted.
Q. The second sentence (commencing with "For example,") of Section 7(a)(5) is
deleted in its entirety.
R. Section 7(b)(3) of the Agreement is deleted in its entirety and is replaced
by the following text:
(3) Nothing in this Section 7 is intended to prohibit the Executive
from (a) for a period not to extend beyond December 31, 1999, actively
participating in the completion of Executive's current infomercial
project relating to a Windows '98 product; provided that executive
shall not do so during Company's normal business hours of 9:00AM
through 6:00PM, Monday through Friday, or (b) providing passive
financing of third-party infomercials so long as (i) such infomercials
are produced by someone other than Executive and who is not under
Executive's direction or control, (ii) Executive's financing of such
infomercials does not take away from, or interfere with, Executives'
focus on his full-time duties for the Company, and (iii) Executive
does not manage/oversee the media buying for or backend process of
such infomercials. If the Company believes that Executive's passive
financing of infomercials or work on the Windows '98 infomercial
project is taking away from his full-time duties for the Company, it
shall notify Executive and give him fifteen (15) days to cure. If
Executive fails to so cure, then the Company may elect to terminate
this Agreement. It is understood that passive financing (i.e., acting
solely in the manner of a limited partner) of third party infomercials
undertaken in accordance with this Section 7(b)(3) shall not be deemed
to be in competition with the Company.
S. The following text is added as a new Section 7(d):
(d) Nonsolicitation.
---------------
(i) Executive agrees that he and his agents and representatives
will not, during the twelve-month period following the
cessation of Executive's employment, or in contemplation of
the cessation of his employment hereunder, induce, entice
or solicit employees of Company, its parent company, or its
subsidiaries, (each, a "Company Employee"), to leave his or
her employment with Company, its parent company, or its
subsidiaries, without first obtaining the written consent
of the Chief Operating Officer of TVN.
(ii) With the sole exception of those activities permitted under
Section 7(b)(3) above, during the term of this Agreement,
Executive will not (i) become employed by, (ii) perform
consulting services for, or (iii) engage in any other
occupation for an entity which, primarily, is in the
infomercial or television direct response business.
(iii) Commencing six (6) months following the cessation of
Executive's employment hereunder, in the event that a
Company Employee initiates a solicitation to Executive for
employment with Executive, Executive shall be presumed not
to have violated Section 7(d)(i) above if both Executive
and such Company Employee provide Company with sworn
statements that Executive had not induced, enticed or
solicited such Company Employee to leave Company's employ
and to become employed by Executive.
T. Section 13 of the Agreement is deleted in its entirety and is replaced by
the following text:
13. Notices. All notices and other communications hereunder shall be
--- -------
in writing and shall be deemed given when received if delivered
personally or mailed by registered or certified mail (return receipt
requested), sent by telecopy with a copy via earliest overnight
delivery and confirmation of facsimile received, or sent by recognized
overnight delivery service, return receipt requested, to the parties
at the following addresses and telecopy numbers (or at such other
address or number for a party as shall be specified by like notice):
If to the Executive:
Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxxxxxx, XX 00000
with a copy to:
Xx Xxxxxx, West & Chodorow, Inc.
Fourteenth Floor East
00000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Company, to:
c/o TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Legal Department
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
or to such other address as a party provides (in accordance herewith)
to the other party from time to time. Notice shall be effective when
so delivered personally or by courier service, or if by facsimile,
upon receipt, or if mailed, three (3) days after the date of mailing.
U. Section 15 of the Agreement is deleted in its entirety, and is replaced
with the following text:
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and permitted
assigns. The Executive may not assign any of his rights or
obligations hereunder without the prior written consent of the
Company.
V. Section 20 of the Agreement is deleted in its entirety, and is replaced with
the following text:
20. Guarantee. The performance and obligations of the Company under
---------
this Agreement, as amended hereby, shall be guaranteed by TVN.
W. Each party represents and warrants that it has full power and authority to
enter into this First Amendment and to undertake each of the modifications
set forth herein.
X. This First Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and will become effective and binding
upon the parties at such time as all of the signatories hereto have signed
each counterpart of this Agreement. Each of the parties hereto shall sign a
sufficient number of counterparts so that each party will receive a fully
executed originals of this Agreement.
Y. All provisions of the Agreement not herein expressly modified shall remain
in full force and effect as originally presented in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
executed by their duly authorized representatives as of the day and year first
written above.
GRTV NETWORK, INC. XXXXXXX X. XXXXXX
By: /s/ Xxxxxx Xxxxxx /s/ Xxxxxxx X. Xxxxxx
----------------- ----------------------
Name: Xxxxxx Xxxxxx Date: July 30, 1999
Title: Senior Executive Vice President
Date: July 30, 1999
The undersigned is executing this document solely to agree to be bound it
obligations under Section V of this First Amendment, and for no other purpose.
TVN ENTERTAINMENT CORPORATION
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Senior Executive Vice President
Date: July 30, 1999
