Exhibit 10.3 to
Form 10-Q
EXECUTION COPY
EMPLOYMENT AGREEMENT
This AGREEMENT is made as of September 11, 1996, by and between On
Command Corporation, a Delaware corporation ("NEWCO"), and Xxxxxx X. Xxxxxx, a
resident of the State of California (the "Executive").
WHEREAS, Ascent Entertainment Group, Inc., a Delaware corporation
("Ascent"), has entered into agreements with SpectraVision, Inc.
("SpectraVision") to combine (the "Combination") the assets and certain
liabilities of SpectraVision with the assets of Ascent's majority owned
subsidiary, On Command Video Corporation ("OCV");
WHEREAS, Ascent has created NEWCO as a holding company to own and
operate the combined assets and businesses of SpectraVision and OCV; and
WHEREAS, NEWCO desires to employ the Executive as President and
Chief Executive Officer of NEWCO, 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, NEWCO and the
Executive agree as follows:
1. Employment; Duties.
(a) Employment and Employment Period. NEWCO shall employ the
Executive to serve as President and Chief Executive Officer of NEWCO for a
period (the "Employment Period") commencing on September 11, 1996 (the
"Effective Date") and continuing thereafter for a term of four years until the
fourth anniversary of the Effective Date unless terminated in accordance with
the provisions of this Agreement. In the event that Newco desires to extend the
employment of the Executive, it must give written notice of such desire by the
third anniversary of the Effective Date, and after such notice the parties shall
enter into an exclusive negotiation period of not less than six months, unless
otherwise mutually agreed upon by the parties in writing. The Executive may also
continue to serve as a director of Ascent but would not receive any compensation
for such position in addition to the compensation provided in 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."
Notwithstanding the foregoing, if the Combination has not been consummated by
October 31, 1996 on terms reasonably similar to those set forth in the On
Command Corporation Registration Statement on Form S-4 filed with the Securities
and Exchange Commission on August 16, 1996, and if either party desires to
terminate this Agreement as a result of the failure to so consummate the
Combination, then the parties agree to negotiate in good faith an equitable
basis for such termination in light of all of the circumstances then existing.
(b) Offices, Duties and Responsibilities. Effective on the Effective
Date, Executive shall be elected President and Chief Executive Officer of NEWCO.
The Executive shall report directly and solely to the Board of Directors of
NEWCO (the "Board"). Throughout the Employment Period, NEWCO shall cause
Executive to be a member of the Board. In addition, the Executive shall be a
member of all committees of the Board (including any executive committee or
nominating committee) other than the Audit Committee and the Compensation
Committee, and other than any special committees on which he might be regarded
as a self-interested member. The Executive's offices initially shall be located
at OCV's present headquarters. The Executive shall have all duties and authority
customarily accorded a chief executive officer, including, without limitation,
the lead responsibility with full autonomy, subject to the customary authority
and direction of the Board, to direct and develop the capabilities and
performance of NEWCO. The Executive shall be a member and the chairman of any
senior executive/management committees which may be established from time to
time by the Board. All employees of NEWCO shall report, directly or indirectly,
to the Executive and the Executive shall have the authority to hire and fire all
such employees within established budget parameters, provided that the Board
shall approve (i) any salary actions (including hiring decisions) for employees
of NEWCO which result in an annual salary in excess of the amount established by
the Board from time to time, but in no event less than $150,000, and (ii) any
bonuses to be awarded to employees of NEWCO, in excess of the amount established
by the Board from time to time, and provided further that the Board reserves the
right to take any such salary or bonus actions to the Compensation Committee of
the Board (the "Compensation Committee") for approval. The Executive's
management of NEWCO shall be (x) in accordance with the policies of the Board
and NEWCO's policies and procedures, both as in effect from time to time, and
(y) within the limits of an annual budget for NEWCO which shall be approved by
the Board at least 30 days before the beginning of the fiscal year to which such
budget relates. The annual budget shall provide adequate resources for Executive
to operate the businesses of NEWCO (the "Business") in a manner substantially
consistent with the customary day to day operations of comparable first-class
businesses in the United States. If the Executive proposes the expenditure of
any amounts which exceed the applicable annual budgets for NEWCO, such excess
amounts shall not be committed to Executive's authority unless and until
specifically authorized and approved by the Board.
(c) Devotion to Interests of NEWCO. 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 NEWCO. 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) as do not unreasonably or materially
interfere with the performance of his duties hereunder as reasonably determined
by the Board in consultation with the Executive.
2. Compensation and Fringe Benefits.
(a) Base Compensation. NEWCO shall pay the Executive a base salary
("Base Salary") at the rate of $500,000 per year during the Employment Period
with payments made in installments in accordance with NEWCO's regular practice
for compensating executive personnel, provided that in no event shall such
payments be made less frequently than twice per month. The Base Salary for the
Executive shall be reviewed for increases each year during the Employment Period
commencing the second year of the Employment Period. Any Base Salary increases
shall be approved by the Board in its sole discretion.
(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 fiscal year during the
Employment Period shall be 70% of Base Salary for 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 after consultation
with the Executive. As part of the consultation process set forth in the
preceding sentence, the Executive shall prepare before the end of each fiscal
year ending during the Employment Period a business plan for NEWCO with respect
to at least the following three year period. The Board shall consider and
approve such plans on an annual basis, subject to such modifications as are
otherwise consistent with this Agreement, and each fiscal year the current plan
shall be considered by the Compensation Committee as the basis for establishing
the bonus standards for such year with such reasonable modifications as the
Compensation Committee may reasonably determine and which are consistent with
this Agreement. In addition, in connection with awarding the bonus for any
fiscal year, the Compensation Committee will consider whether the achievement of
the standards established for that year have been materially affected by
circumstances beyond the Executive's reasonable control, such as acquisitions,
dispositions, or limitations on NEWCO's ability to raise or deploy adequate
capital to accomplish the business plan approved by the Board. For the period
from the Effective Date through December 31, 1996, the Executive shall receive
an Annual Bonus to be determined in the sole discretion of the Compensation
Committee and which may be equal to 70% of Base Salary pro rated for the period
during which the Executive is employed, but absent the standards described above
will take into consideration achievement of reasonable goals and objectives for
such period. During the final partial fiscal year of the Employment Period, the
Annual Bonus shall be based on the standards set by the Compensation Committee
for that fiscal year and pro rated for the period during which the Executive is
employed.
(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, life insurance or other benefit
plans as are generally made available by NEWCO to the senior executives of NEWCO
on a favored nations basis, which benefits shall be comparable, in the
aggregate, to the benefits available to senior executives of similarly situated
companies; provided, however, for as long as Ascent owns at least 50% of the
voting equity of NEWCO, such benefits shall not be greater in the aggregate than
those available to the senior executives of Ascent, specifically the President
and Chief Executive Officer and Executive Vice President, Finance and Chief
Operating Officer. Such benefits in all events shall include payment or
reimbursement of (i) documented expenses reasonably incurred in connection with
travel and entertainment related to NEWCO's business and affairs, (ii)
documented expenses incurred in connection with the sale of the Executive's home
in Los Angeles, California, the acquisition of a home in the greater San
Francisco or San Xxxx areas and relocation of Executive and his family to that
area (with such expenses to include, but not be limited to, closing costs,
seller's broker's fees, title insurance, interest costs associated with
maintaining more than one residence while the other residence is in the process
of being sold, prepayment penalties and reasonable temporary living expenses,
and any loss on such sale, without regard to such expenses, not to exceed
$200,000)) with such similar documented expenses as described in this subsection
(ii) to be paid in connection with any subsequent relocation of the Executive by
NEWCO during the Employment Period, (iii) a monthly payment for or reimbursement
of automobile and other transportation related expenses of $1,100 per month,
(iv) documented expenses reasonably incurred, for a period of one year from the
Effective Date or until the Executive has purchased and has occupied with
Executive's family a home in the greater San Francisco or San Xxxx area,
whichever is earlier, in connection with (x) travel between Executive's home in
Los Angeles and NEWCO's principal offices, and (y) local lodging expenses not
otherwise accounted for in (i) above, and (v) Executive's reasonable legal fees
and costs incurred in connection with the drafting, negotiation and execution of
this Agreement. All benefits described in the foregoing (i), (ii), (iv) and (v)
that are reportable as earned or unearned income will be "grossed up" by NEWCO
in connection with federal and state tax obligations to provide Executive with
appropriate net tax coverage so that the benefits received by the Executive from
the foregoing clauses (i), (ii), (iv) and (v) shall be net of income and
employment taxes thereon. NEWCO reserves the right to modify or terminate from
time to time the fringe benefits provided to the senior management group,
provided that the fringe benefits provided to the Executive shall not be
materially reduced on an overall basis during the Employment Period and provided
further that the benefits provided in clauses (i) through (v) above shall not be
reduced at all. Notwithstanding the foregoing, until such time as NEWCO shall
implement group health, dental and disability insurance plans for its
executives, or for a period of one year following the Combination, whichever is
less, Executive will be entitled to participate in the group health, dental, and
disability insurance plans made available to the senior management group of OCV
immediately prior to the Effective Date.
(d) [Intentionally omitted]
(e) Stock Options. NEWCO hereby grants to Executive as of the
Effective Date, options ("Options") to purchase 1,041,562 shares of NEWCO's
common stock, par value $0.01 per share (the "Common Stock"). NEWCO will use its
best efforts to register the shares of Common Stock underlying the Options by
filing and exercising best efforts to make and keep effective for the entire
period of exercise of the Options, a Registration Statement on the pertinent
form within a reasonable period of time after the Combination. The Options shall
be exercisable in the following amounts at the following per-share prices: (i)
eighty percent (80%) of the Options (833,250 shares) shall be exercisable at a
per-share price of $15.33 and (ii) twenty percent (20%) of the Options (208,312
shares) shall be exercisable at a per-share price of $17.63; provided, however,
that if the average of the daily high and low bid prices of the Common Stock on
the NASDAQ Stock Exchange for the twenty trading days following the third
trading day after NEWCO's public release of financial results for the third
quarter of 1996 is less than $17.63, then the exercise price shall be such
average. The Options shall be exercisable by the Executive according to the
following schedule:
(i) with respect to 25% of the Option shares on or after
the commencement of the second year of the Employment Period;
(ii) with respect to an additional 25% of the Option
shares on or after the commencement of the third year of the Employment Period;
and
(iii) with respect to an additional 50% of the Option shares
on or after the commencement of the fourth year of the Employment Period.
Notwithstanding the foregoing, 100% of the Options shall immediately vest and
become immediately exercisable, without any further action by the Executive,
upon the occurrence of any "NEWCO change of control" or a "Change of Control
Event," each as defined in Section 7(a) below, or upon the occurrence of any
event that results in NEWCO's Common Stock no longer being traded on any of the
New York Stock Exchange, American Stock Exchange or NASDAQ National Market
System (including, without limitation, as a result of any "going private"
transaction with Ascent). The Options, to the extent they remain unexercised,
shall automatically and without further notice terminate and become of no
further force and effect at the time of the earliest of the following to occur:
(x) Three months after the date upon which a
termination for cause by NEWCO (as provided in Section 5(b)) shall have become
effective and final; or
(y) Ten years after the Effective Date.
The Options shall have anti-dilution provisions identical to those
contained in the Warrant Agreement between NEWCO and the Warrant Agent related
to the Warrants, except (i) for anti-dilution provisions, if any, related to
sales of Common Stock of NEWCO to non-affiliates, and (ii) there shall be no
adjustment for dividends or distributions of cash or assets unless the aggregate
amount thereof exceeds 15% of the fair market value per share, rather than the
5% provided in the Warrant Agreement, and the Options shall additionally contain
provisions permitting Executive's cashless exercise thereof by paying the
exercise price through the delivery of Options valued at the difference between
the exercise price of the Options delivered and the market value of the shares
of Common Stock underlying such Options. The Options shall be represented by a
stock option agreement between Executive and NEWCO containing only terms
consistent in all material respects with the provisions of this Agreement, which
stock option agreement shall be prepared by NEWCO and presented for Executive's
review at least ten (10) business days prior to the Effective Date, shall
otherwise qualify under Rule 16b-3 of the Securities and Exchange Commission,
and may be included under a Stock Option Plan adopted by NEWCO, which shall not
alter the terms herein related to the option or the Option shares. In addition,
if NEWCO adopts a stock option plan that in Executive's sole judgment provides
for any term(s) more favorable to the grantee than any term(s) set forth above,
Executive will be entitled to the benefit of such more favorable term(s) with
respect to the Options, other than with respect to the vesting schedule thereof,
but in no event will any term(s) applicable to the Options be less favorable to
Executive than those set forth above.
During the Employment Period, the Executive may be granted additional
non-statutory stock options but only as determined by the Compensation Committee
in its sole discretion, provided that the Executive acknowledges that he has
been advised by NEWCO that it is NEWCO's current intention not to issue any
additional options to the Executive during the three year period following the
Effective Date. Notwithstanding any other provision of this Agreement except
Section 5(b), the Compensation Committee may provide in its discretion that any
stock options granted to the Executive which have not vested prior to his
termination of employment shall continue to vest in accordance with their
original terms as if the Executive's employment had not terminated.
(f) Ascent Benefits. After the Effective Date, the Executive shall
cease to participate in Ascent's Non-Employee Directors Stock Plan, and shall
forfeit any and all rights and interests under such plan; provided, however,
that the Executive shall retain the stock options and stock awards previously
granted to him thereunder, which shall continue to vest in accordance with their
original terms as long as the Executive remains employed by NEWCO or is a member
of the Ascent Board of Directors.
(g) Consulting Compensation. If the Executive is still employed by
NEWCO on the date preceding the fourth anniversary of the Effective Date, and if
by such date the Executive and NEWCO have not executed a written agreement for
an additional term of employment, then the Employment Period shall expire and,
in addition to and without limitation of any rights of either party under this
Agreement or otherwise, NEWCO shall retain the Executive as a non-exclusive
consultant and, as compensation for such consulting services, shall pay the
Executive an amount equal to twenty-five percent (25%) of his then current Base
Salary for an additional period of twelve (12) months (the "Consulting Period"),
and during the Consulting Period the Executive shall continue to receive Fringe
Benefits (as defined below), and to vest in any employee stock options
previously awarded to the Executive, but the Executive shall not be entitled to
receive any Base Salary increases, bonuses, or further awards of stock options.
Without limiting any of the Executive's other rights under this Agreement or
otherwise, if the Executive is still employed by NEWCO on the date preceding the
fourth anniversary of the Effective Date and is retained as a consultant and is
entitled to the compensation and benefits set forth in the immediately preceding
sentence, then such compensation and benefits shall constitute the Executive's
sole compensation resulting from the expiration of this Agreement, and the
Executive waives any claims to any additional compensation other than as a
result of NEWCO's breach of this Agreement.
(h) Performance-Based Compensation; Conflicting Provisions. The
parties agree to use their best efforts in the administration of this Agreement
to take actions so as to comply with the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") to ensure, to the extent
possible consistent with the other terms of this Agreement and the Options, the
Federal tax deductibility under that section of compensation paid to the
Executive pursuant to performance-based compensation. 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 Ascent, NEWCO and/or any
affiliated or related entity of either of them, on the other hand, relating to
stock options (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, together
with the Ascent stock awards, 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 NEWCO and of other companies with which NEWCO does business on a
confidential basis and that Executive will create and develop Trade Secrets for
the benefit of NEWCO. Trade Secrets shall include, without limitation, (a)
literary, dramatic or other works, screenplays, stories, adaptations, scripts,
treatments, formats, scenarios, characters, titles of any kind and any rights
therein, "know-how," formulae, secret processes or machines, inventions,
computer programs (including documentation of such programs) (collectively,
"Technical Trade Secrets") and (b) matters of a business nature, such as
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
(collectively, "Business Trade Secrets"). All Trade Secrets disclosed to or
created by Executive shall be deemed to be the exclusive property of NEWCO (as
the context may require). Executive acknowledges that Trade Secrets have
economic value to NEWCO 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 NEWCO and its
subsidiaries. During the Employment Period, 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 the Employment
Period 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 NEWCO
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
NEWCO immediately of any such court order in order to enable NEWCO to contest
such order's validity. For a period of two (2) years after termination of the
Employment Period for all Business Trade Secrets and for a period of five (5)
years after termination of the Employment Period for all Technical Trade
Secrets, the Executive shall not use or otherwise disclose Trade Secrets unless
such information (x) becomes public knowledge or is generally known in any
industry in which NEWCO conducts business 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 NEWCO immediately of any such court order
in order to enable NEWCO to contest such order's validity.
(b) Upon the effective date of notice of the Executive's or NEWCO's
election to terminate this Agreement, or at any time upon the request of NEWCO,
the Executive (or his heirs or personal representatives) shall deliver to NEWCO
(i) all documents and materials containing or otherwise relating to Trade
Secrets or other information relating to NEWCO's business and affairs, and (ii)
all other documents, materials and other property belonging to NEWCO, 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 NEWCO'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 NEWCO pursuant to this Agreement, jointly
or with others, that relate to NEWCO's activities ("Discoveries and Works")
shall be owned by NEWCO, it being understood that the Discoveries and Works
referred to in this paragraph are limited to those that are made, disclosed,
reduced to tangible or written form or description, or are reduced to practice
by the Executive in the course of his performing services for NEWCO. Discoveries
and Works shall include, without limitation, literary, dramatic or other works,
screenplays, stories, adaptations, scripts, treatments, formats, scenarios,
characters, titles of any kind and any rights therein, other 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, NEWCO to evidence or better assure title to
such Discoveries and Works in NEWCO, (ii) assist NEWCO 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 NEWCO or
thereafter, all applications or other endorsements necessary or appropriate to
maintain copyright and other rights for NEWCO and to protect their title
thereto. Any Discoveries and Works which, within sixty days after the
termination of the Executive's employment by NEWCO, 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 NEWCO
shall, as between the Executive and NEWCO be presumed to have been made during
the Executive's employment by NEWCO.
5. Termination. During the Employment Period, Executive's employment
with NEWCO may be terminated only as follows:
(a) By the Executive (an "Executive Election") at any time upon
sixty (60) days advance written notice to NEWCO upon an "Executive Election
Event" (as defined below). In such event or if the Executive's employment is
terminated by NEWCO without "cause" (as defined below), there will be no
forfeiture, penalty, reduction or other adverse effect upon any rights or
interests relating to any Fringe Benefits, all of which will fully vest, to the
extent not previously vested, immediately upon such termination becoming
effective and final. Without limiting the foregoing, in the event of an
Executive Election or if the Executive's employment is terminated without
"cause," the Executive shall be entitled to receive the following benefits
through the longer of (A) the remainder of the Employment Period as if this
Agreement had remained in effect until the end of the Employment Period and (B)
one year following the date of such termination (the "Duration Period"): (i) his
then current Base Salary; (ii) an Annual Bonus equal to seventy percent (70%) of
his then current Base Salary for each year during the Duration Period; and (iii)
all other benefits provided pursuant to Sections 2(c), (d) and (e) of this
Agreement. The Executive shall have no obligation to seek other employment in
the event of his termination pursuant to this paragraph (a), provided, however,
that his compensation from any such employment obtained shall offset up to fifty
percent (50%) of NEWCO's obligations under clauses (i) and (ii) above, but only
after payments pursuant to clauses (i) and (ii) are made with respect to a one
year period following termination. NEWCO shall have the option at any time
during the Duration Period, after prior written notice to the Executive, to pay
to the Executive in a lump sum the net present value, assuming a discount rate
equivalent to the yield to maturity of United States Treasury Bonds maturing on
the same date as the end of the Duration Period, of the amounts remaining under
clauses (i) and (ii) of this paragraph (a), and the amount of such lump sum
payment shall be reduced by compensation actually paid or payable to the
Executive from other employment for the time period remaining on NEWCO's payment
obligation under this Agreement at the time such payment is made on the basis
set forth in the preceding sentence. If NEWCO pays such lump sum, NEWCO shall
have no further compensation payment obligations under clauses (i) and (ii)
above. The Executive shall have the right to instruct NEWCO to decrease any such
payment or other benefit due under this paragraph (a) to an amount not to exceed
an amount to be designated by the Executive in writing for the purpose of
providing that such payment (together with any other benefits provided to the
Executive) shall not constitute a "parachute payment" as defined in Section 280G
of the Code; provided, however, that NEWCO's agreement to decrease such payment
shall not result in any liability from NEWCO to the Executive with respect to
any excise tax under Section 4999 of the Code (or any similar state or local
provision), or any penalties or interest with respect to such excise tax. NEWCO
shall place an amount equivalent to its obligations owed to the Executive in
connection with this Section 5(a) in an escrow account to be administered by an
unrelated third party, or shall provide some other comparable form of security
(e.g., an irrevocable letter of credit) for such obligations reasonably
acceptable to the Executive. In all circumstances of termination under this
Section 5(a), NEWCO shall remain obligated under clause (iii) and all stock
options (including the Option) will remain exercisable for the maximum period
provided in each applicable grant.
An "Executive Election Event" shall be any of the following: (I) any
change in the reporting structure set forth in Section 1(b) above; (II) any
requirement that the Executive perform material services of lesser stature than
those typically performed by the president and CEO of comparably sized
companies; (III) any reduction in Executive's title; (IV) a "Change of Control
Event" (as defined in Section 7(a) below); provided that in such event, the 50%
offset from subsequent employment set forth in the preceding paragraph shall be
increased to 100% and such offset shall apply during the first year after
termination as well; (V) any other material default of this Agreement which
continues for ten (10) business days following NEWCO's receipt of written notice
from the Executive specifying the manner in which NEWCO is in default of this
Agreement; (VI) the Board's requiring Executive to be based at any office
location other than the principal offices of NEWCO, or the relocation, without
Executive's consent, of such principal offices to a location outside the greater
San Francisco and San Xxxx areas prior to the second anniversary of the
Effective Date; (VII) any purported termination of Executive's employment
otherwise than as expressly permitted by the Agreement; or (VIII) an action by
the Board, without the prior written consent of the Executive, which results in
NEWCO materially diminishing the scope or magnitude of those operations in which
it is expected to engage immediately following the Combination.
(b) By NEWCO at any time for "cause." For purposes of this
Agreement, NEWCO shall have "cause" to terminate the Executive's employment
hereunder upon (i) the continued and deliberate failure of the Executive to
perform those material duties reasonably prescribed by the Board 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 Board specifying those duties which the Executive is so
failing to perform, (ii) the engaging by the Executive in intentional serious
misconduct that is materially and demonstrably injurious to NEWCO 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 Board specifying the serious misconduct
engaged in by the Executive, (iii) the conviction of the Executive of commission
of a felony involving a crime of moral turpitude, whether or not such felony was
committed in connection with NEWCO's business, or (iv) any material breach by
the Executive of Section 8 hereof. If NEWCO 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, NEWCO, in full satisfaction of all of NEWCO's
obligations under this Agreement and in respect of the termination of the
Executive's employment with NEWCO, shall pay the Executive his Base Salary, a
prorated Annual Bonus and all other compensation, benefits and reimbursement
through the date of termination of his employment, provided that the Option and
any other stock options granted to the Executive under the NEWCO option or any
successor plan or under Ascent's Non-Employee Director Stock 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, NEWCO shall have the right to terminate Executive's employment
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, (i) the Employment
Period shall terminate with the payment of the Executive's Base Salary for the
month in which notice is given and a prorated Annual Bonus through such month,
(ii) there will be no forfeiture, penalty, reduction or other adverse effect
upon any vested rights or interests relating to any Fringe Benefits and (iii)
the Option shall vest in its entirety and shall remain exercisable for its full
term as if the Executive had not become disabled, notwithstanding the
limitations of Section 2(e) 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 NEWCO.
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, NEWCO 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 upon the Executive's death the Option and
any other stock options granted to the Executive under the NEWCO 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(e) 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 NEWCO which may be adopted by the Board.
7. Change of Control.
(a) If, prior to the termination of the Employment Period, there is
a "Change of Control Event" (as hereinafter defined in this paragraph (a)), the
Executive shall have the right to exercise his Executive Election in accordance
with Section 5(a), but shall not have the right to give notice in accordance
with Section 5(a) in any event later than 120 days following such Change of
Control Event. Prior to any "change of control" (as hereinafter defined in this
paragraph (a)), and from time to time thereafter at the Executive's request upon
relevant changed circumstances in the ownership or management of NEWCO, the
Executive and the Board will mutually determine whether such "change of control"
or changed circumstances would be reasonably likely to have a materially
detrimental effect on the condition, reputation or future prospects of NEWCO or
its successor entity, the day-to-day circumstances of the Executive's employment
or the compensation payable to the Executive hereunder. An affirmative
determination with respect to any of the foregoing by the Executive and the
Board, or by an arbitrator as provided below, shall be referred to herein as a
"Change of Control Event", it being agreed that the arbitrator shall award the
Executive costs and attorneys' fees under Section 11(c) if the Executive has
submitted the matter to arbitration with a reasonable basis for doing so, even
if the Executive is not the prevailing party therein. If the Executive and the
Board are unable to agree on such determination, the Executive shall have the
right: (i) to submit to arbitration pursuant to Section 11 below the
determination of whether the "change of control" or changed circumstances would
be reasonably likely to have any of the materially detrimental effects mentioned
above, and an affirmative determination by the arbitrator shall constitute a
"Change of Control Event"; (ii) to accept continued employment with NEWCO or its
successor entity on the terms of this Agreement; or (iii) to terminate his
employment by giving sixty (60) days written notice to NEWCO to that effect. If
the Executive elects to terminate his employment pursuant to clause (iii) of
this paragraph (a), following the expiration of the notice period provided
therein, the Employment Period shall terminate with the payment of the
Executive's Base Salary for the month in which notice is given. "Change of
control" for purposes of this paragraph (a) shall mean either, any event as a
result of which a single third party, or "group" as defined in Rule 13d-3 of the
Securities Exchange Act of 1934, as amended, other than Ascent or its affiliates
owns more than fifty percent (50%) of the voting stock of NEWCO (a "NEWCO change
of control"), or, any event as a result of which a single third party, or
"group" (as defined above) other than COMSAT Corporation or its affiliates
directly or indirectly owns more than fifty percent (50%) of Ascent.
(b) In the event that NEWCO adopts any "change of control"
provisions applicable to any NEWCO benefits plans, respectively, providing for
the accelerated vesting and/or payment of any benefits for its senior management
group, to the extent that such provisions give Executive greater rights than
those provided in paragraph (a) above, such provisions shall apply to the
Executive to the same extent as other NEWCO senior executives on a favored
nations basis with respect to the benefits affected by such NEWCO provisions.
8. Non-Competition.
(a) As an inducement for NEWCO to enter into this Agreement, the
Executive agrees that for a period 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 NEWCO for the entire Employment Period or (ii) one
year following termination of the Executive's employment by NEWCO for "cause" as
defined in Section 5(b) hereof, or by the Executive for any reason (other than
an Executive Election Event or an event described in Section 7(a)(iii) above, 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, undertake employment or services for a company engaged in
a business which is or has publicly announced its intention to become directly
competitive with the business then being primarily conducted by NEWCO, with
respect to any geographic area in which NEWCO then engages in such business, if
the loyal and complete fulfillment of the duties of the competitive employment
or services would call upon Executive to reveal, to make judgments on or
otherwise to use Trade Secrets of NEWCO (as defined in Section 3 above) to which
Executive had access by reason of his employment by NEWCO.
(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 NEWCO) solicit, or assist any person or entity other
than NEWCO to solicit, any officer, director, executive or employee (other than
an administrative or clerical employee) of NEWCO to leave his or her employment.
(c) Reasonableness; Interpretation. The Executive acknowledges and
agrees, solely for purposes of 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 NEWCO 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 manifestly reasonable on their face, and the parties expressly agree that
such restrictions have been designed to be reasonable and no greater than is
required for the protection of NEWCO. 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 NEWCO,
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.
9. Indemnification; Liability Insurance. The Executive shall be entitled
to indemnification and coverage under NEWCO's liability insurance policy for
directors and officers to the same extent as other directors and officers of
NEWCO. During and after the term of employment, NEWCO hereby agrees to indemnify
and hold Executive harmless against any and all claims arising from or in
connection with his employment by or service to NEWCO to the full extent
permitted by law and, in connection therewith, to advance the expenses of
Executive incurred in defending against such claims subject to such limitations
as may actually be required by law.
10. Enforcement; Joint and Several Liability. 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 Business and NEWCO, 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 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, NEWCO shall be
entitled to seek specific performance and injunctive relief.
11. Arbitration. (a) Subject to NEWCO'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 NEWCO shall be settled by arbitration which
shall be conducted in the greater San Francisco and San Jose, California area,
or any other location where the Executive then resides at NEWCO'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 the greater San Francisco and San Jose, California area or any other
location where the Executive then resides at NEWCO's request.
(c) Subject to Section 7(a), 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.
12. Severability. Should any provision of this 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.
13. Assignment. The Executive's rights and obligations under this
Agreement shall not be assignable by the Executive. NEWCO's rights and
obligations under this Agreement shall not be assignable by NEWCO except as
incident to the transfer, by merger or otherwise, of all or substantially all of
the business of NEWCO. In the event of any such assignment by NEWCO, all rights
of NEWCO hereunder shall inure to the benefit of the assignee.
14. 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:
Xxxxxx X. Xxxxxx
000 X. Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
With a copy to:
Xxxxxx Xxxxx, Esq.
Xxxxxx, Xxxxxx & Xxxxx
000 Xxxxx Xxxxx Xxx.
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telecopier No. (000)000-0000
If to NEWCO, addressed to:
On Command Corporation c/o
Ascent Entertainment Group, Inc.
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Telecopier No. (000) 000-0000
With a copy to:
Ascent Entertainment Group, Inc.
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopier No. (000) 000-0000
15. 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.
/THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK/
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
October 10, 1996.
/s/_____________________________
Xxxxxx X. Xxxxxx, Executive
ON COMMAND CORPORATION
By:___________________________
Title:
