AGREEMENT dated as of March 25, 1998, among Central European
Media Enterprises Ltd., a Bermuda corporation ("CME" or the "Company"), CME
Development Corporation, a Delaware corporation ("Development"), CME
Programming Services, Inc., a Delaware corporation ("Programming"), The Acorn
Consulting Group, Inc., a New York corporation ("Acorn"), and Xxxxxxx X.
Xxxxxx ("Executive").
WHEREAS, Executive and CME are parties to an Employment
Agreement dated as of August 10, 1995 (the "CME Employment Agreement"),
pursuant to which Executive has been employed by CME as President and Chief
Executive Officer and that sets forth specific obligations for both during and
after the term of the CME Employment Agreement;
WHEREAS, Executive and Development are parties to an
Employment Agreement dated as of August 10, 1995 (the "Development Employment
Agreement" and, together with the CME Employment Agreement, the "Employment
Agreements"), pursuant to which Executive has been employed by Development as
President and Chief Executive Officer and that sets forth specific obligations
for both during and after the term of the Development Employment Agreement;
WHEREAS, Executive, Acorn and Programming are parties to a
Consulting Agreement dated as of August 10, 1995 (the "Consulting Agreement"
and, together with the Employment Agreements, the "Prior Agreements"),
pursuant to which Programming appointed Acorn its agent and pursuant to which
Executive, as an employee of Acorn, performed the functions of President and
Chief Executive of Programming and that sets forth specific obligations for
both during and after the term of the Consulting Agreement; and
WHEREAS, Executive, CME, Development, Programming and Acorn
have determined that it is in their collective interests for the Prior
Agreements to be terminated upon the terms and subject to the agreements and
mutual releases set forth herein;
NOW, THEREFORE, in consideration of their mutual promises
herein contained, the parties do hereby agree as follows:
1. Termination of Prior Agreements
Effective as of the date hereof, all rights and obligations
of the parties hereto contained in the Prior Agreements will cease, except to
the extent they are expressly continued pursuant to Sections 11
("Confidentiality") and 12 ("Noncompetition") hereof. In that regard, this
Agreement will constitute a written
instrument of amendment and cancellation with respect to each of the Prior
Agreements, pursuant to Section 14 of the CME Employment Agreement, Section 13
of the Development Employment Agreement and Section 12 of the Consulting
Agreement, respectively.
2. Resignation of Corporate Positions
Effective as of the date hereof, Executive hereby resigns
from all offices, board memberships and other corporate positions with CME,
Development, and Programming and will, as soon as possible, resign from all
offices, board memberships and other corporate positions with their respective
subsidiaries and affiliates, other than as a member of the Board of Directors
of CME. Effective as of the date hereof, Programming hereby revokes and
terminates its appointment of Acorn as its agent and Acorn accepts and
acknowledges such revocation and termination. Executive agrees that he will
not stand for reelection to the Board of Directors of CME.
3. Conversion of Class B Common Stock
Executive will promptly and in any event prior to the
issuance of the 1998 Proxy Statement convert all shares of the Class B Common
Stock of the Company he owns into Class A Common Stock. Executive will
promptly upon request execute such documents as CME may reasonably require to
effect such conversion.
4. Continuation of Employment; Post-Employment Consulting Services
(a) Continuation of Employment. Executive's full time
employment with CME and Development will continue, and Acorn's engagement as a
consultant to Programming will continue, from the date hereof (the
"Commencement Date") through May 1, 1998, and thereafter on a part time
employment basis through August 10, 1998 or such earlier date on which
Executive's employment (and Acorn's consultancy) terminates pursuant to
Section 6 below (the "Employment Termination Date"). The period from the
Commencement Date through the Employment Termination Date is referred to
herein as the "Employment Continuation Period." During the Employment
Continuation Period, Executive will provide services to CME and Development,
and Acorn shall provide consulting services to Programming, on an as requested
basis by their respective Chairmen or chief executive officers; provided that
such services after May 1, 1998 will not (i) unreasonably interfere with
Executive's ability to seek other employment or consulting opportunities or
(ii) exceed 20 hours per calendar month. Such consulting services may be with
respect to, but need not be limited to, the Perekhid litigation and any
matters relating thereto (including being available to the Company and its
legal and other advisors for debriefing and to assist in establishing the
factual record relating to such
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litigation). In connection with such consulting services, the Executive shall
travel to such location or locations as may be requested by the Company.
(b) Consulting Services. Executive will make himself
available as a consultant to CME and Development, and Acorn will make itself
available as a consultant to Programming, on an as requested basis by their
respective chairmen and chief executive officers from the end of the
Employment Continuation Period through August 10, 1999 (such date the
"Termination Date" and such period the "Consulting Period"), unless earlier
terminated in accordance with Section 6; provided that such services will not
(i) unreasonably interfere with Executive's ability to seek other employment
or consulting opportunities or (ii) exceed 20 hours per calendar month. Such
consulting services may be with respect to, but need not be limited to, the
Perekhid litigation and any matters relating thereto (including being
available to the Company and its legal and other advisors for debriefing and
to assist in establishing the factual record relating to such litigation). In
connection with such consulting services, the Executive shall travel to such
location or locations as may be requested by the Company. The period from the
Commencement Date through the end of the Consulting Period is referred to
herein as the "Services Continuation Period."
(c) Services Following the Services Continuation Period.
Following the end of the Services Continuation Period (regardless of whether
earlier terminated by the Company or Executive), Executive will make himself
available on a per diem basis with respect to the Perekhid litigation and any
matters relating thereto (including being available to the Company and its
legal and other advisors for debriefing and to assist in establishing the
factual record relating to such litigation) (the "Per Diem Services").
5. Compensation, Benefits and Expenses, Etc.
(a) Base Salary. During the Employment Continuation Period,
Executive shall be paid a base salary of $180,000 per annum by CME and
$120,000 per annum by Development and Acorn shall be paid a consulting fee of
$50,000 per annum, in each case payable in equal monthly installments.
(b) Consulting Fees. During the Consulting Period, if any,
Executive shall be paid a consulting fee of $180,000 per annum by CME and
$120,000 per annum by Development and Acorn shall be paid a consulting fee of
$50,000 per annum, in each case payable in equal monthly installments.
(c) Benefit Continuation. During the Service Continuation
Period, Executive will continue to participate in CME and Development's
welfare benefit plans under substantially the same terms as Executive was
entitled to participate in such benefit
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plans prior to the Commencement Date, including reimbursement for medical
insurance costs on the same basis as is now provided.
(d) Expatriate Premium; Relocation. From the Commencement
Date through the end of the Service Continuation Period, or, if earlier, the
date Executive moves his principal residence from the U.K., Development shall
pay Executive an expatriate premium of UK(pound)3,000 per month. In the event
that Executive relocates his residence to the United States on or prior to the
Termination Date, Development will reimburse Executive for the actual and
reasonable costs of moving Executive and his belongings back to the United
States. Such payment will be made as soon as practicable following
Development's receipt of a proper invoice from Executive with documentation
supporting such relocation costs.
(e) Bonus. Executive shall be paid a bonus of $150,000 with
respect to 1997, such payment to be made no later than March 31, 1998.
(f) Stock Options. All CME stock options granted to
Executive pursuant to various stock option agreements, including the stock
option granted to Executive on August 1, 1997 which has not yet been executed
(the "Stock Option Agreements") will vest on May 1, 1998, provided that
Executive shall have satisfied his obligations under this Agreement to be
performed through such date. Pursuant to Section 4(a)(ii) of the Stock Option
Agreements, all of Executive's stock options will remain exercisable for one
year following his Termination Date. Notwithstanding any other provision
contained in this Section or in the Stock Option Agreements, all of
Executive's outstanding stock options (whether or not previously vested) will
be forfeited in the event he (or his estate) declines to execute a final
release of claims pursuant to Section 10 below. In the event that Executive is
furnished notice that he has committed a material breach of this Agreement and
such breach, if capable of being cured, shall not have been cured within 30
days of receipt of such notice, any outstanding stock options remaining
unexercised following the Termination Date will be forfeited.
(g) Per Diems. For each day (or portion thereof) that
Executive is providing Per Diem Services to the Company, the Company shall pay
Executive a per diem of $1,500, which shall be prorated on the basis of an
8-hour day for services of less than 6 hours in any one day.
(h) Expense Reimbursement. Development will reimburse
Executive for all out-of-pocket expenses (which shall be at the same class of
service to which Executive was heretofore entitled) necessary for his
performance of services requested pursuant to Section 4 above during or
following the Employment Continuation Period; provided that the Executive
obtains prior written authorization from the Chief Executive Officer (the
"CEO") of CME to incur such expenses. Such reimbursement will be paid as
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soon as practicable following Development's receipt of proper documentation
from Executive related to such expenses.
(i) Miscellaneous. Executive will be permitted to buy the
Series 3 BMW that has previously been available for Executive's use in The
Netherlands for the book value thereof. During the period from the
Commencement Date through May 1, 1998, Development will furnish Executive with
office space and secretarial assistance, or provide Executive with an
allowance to permit Executive to secure office space and secretarial
assistance. Development will reimburse Executive for up to $10,000 of the
reasonable and actual costs and disbursements of Executive's legal counsel
incurred in connection with the negotiations leading to and the execution of
this Agreement.
6. Stock Depreciation Protection
(a) Sales During the Initial Period. Executive currently
owns 223,805 shares of Common Stock of CME (the "Owned Shares"). Executive
agrees that he will not sell more than 50,000 shares of CME Common Stock prior
to the expiration of the later of (i) May 1, 1998 and (ii) three months after
the date on which Executive ceases to be a member of the Board of Directors of
CME (the "Initial Period").
(b) Payment with Respect to Sales During the Initial Period.
If Executive makes a permitted sale of shares of CME Common Stock in one or
more arm's length transactions during the Initial Period, and the average per
share selling price (before deduction for commissions and other expenses of
sale) for all shares of CME Common Stock sold during the Initial Period is
less than $27.625 per share, then CME will pay Executive an amount equal to
the difference between $27.625 and the higher of (i) $20.00 and (b) the
average selling price (before deduction for commissions and other expenses of
sale) for the shares sold.
(c) Sales After the Initial Period and on or Before April
30, 1999. On the earliest of April 30, 1999, the date that Executive shall
have disposed of all of the Owned Shares and the $30.00 Date, CME will pay
Executive an amount equal to the lesser of (x) $600,000 minus the amount, if
any paid pursuant to Section 6(b), and (y) the number of Owned Shares not
disposed of during the Initial Period multiplied by the excess, if any, of A
over B, where
A = $23.48, and
B = the sum of (1) the selling price (before
commissions and other expenses of sale) for all of
the Owned Shares that have been disposed of in an
arm's length transaction after the end of the
Initial Period and on or before the earlier of
April 30, 1999 and the
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$30.00 Date plus (2) the average of the closing
prices for a share of CME Class A Common Stock for
the 20 consecutive trading days ending on April 30,
1999 multiplied by the number of Owned Shares not
disposed of during the Initial Period or taken into
account in clause (1), divided by (3) the number of
Owned Shares not disposed of during the Initial
Period;
provided that if the average between the high and low prices for a share of
CME Class A Common Stock for any 20 consecutive trading days commencing after
the expiration of the Initial Period is $30.00 or more, the determination of
the payment due to Executive under this Section 6(c) shall be made as of the
last day of such 20-day period (the "$30.00 Date"), and $30.00 shall be the
amount used in Clause (2) of this Section 6(c).
(d) Time of Payment. Payments under this Section 6 will be
made within 30 days after each payment is determined. Notwithstanding the
foregoing, CME shall not be obligated to make any payment provided for in this
Section 6 if CME notifies Executive in writing that Executive has materially
breached this Agreement, and Executive has not cured such breach within 30
days after receiving such notice.
(e) Capital Adjustments; Effect of Stock Options . In the
event that on before April 30, 1999, CME shall have effected one or more stock
dividends, stock splits, reorganizations, recapitalizations, combination of
shares, mergers, consolidations, or other changes on the corporate structure
or stock of CME, the number of shares and the per share prices set forth in
this Section 6 shall be equitably adjusted to prevent a diminution or
enlargement of Executive's rights hereunder. If Executive disposes of any
shares of CME Common Stock acquired upon exercise of a stock option on or
before April 30, 1999, such sale shall be deemed to be a sale of Owned Shares
if made prior to the disposition of all of the Owned Shares.
7. Early Termination Provisions
The Employment Continuation Period, or, following the
Employment Continuation Period, the Consulting Period, shall earlier terminate
(i) by written notice of Executive to so terminate the Employment Continuation
Period or the Consulting Period, as the case may be, such notice to be
delivered not more than 15 and not less than 10 days prior to the effective
date thereof or (ii) by the Company for "cause," which shall mean a material
breach of this Agreement and such breach, if capable of being cured, shall not
have been cured within 30 days of receipt of such notice.
8. Release of Claims Against Development and Media Enterprises
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In consideration of the commitments and payments set forth
in this Agreement, Executive, for himself and his heirs and personal
representatives, and Acorn, for itself, any of its successors, or any person
who might claim through Acorn, hereby fully and forever release CME,
Development, Programming, Media Enterprises and their respective subsidiaries,
shareholders (including indirect shareholders), affiliates, officers,
directors, employees, agents and representatives, from any and all claims,
liabilities, promises, contracts, and suits which have been or could have been
asserted by Executive or Acorn, or on his or its behalf, in any forum by
reason of matters arising prior to the date of this Agreement.
9. Release of Claims Against Executive and Acorn
CME, Development and Programming hereby fully and forever
release Executive and Acorn from any and all claims, liabilities, promises,
contracts, and suits which have been or could have been asserted by any or all
of them or on their behalf in any forum by reason of matters arising prior to
the date of this Agreement, other than any claim, liability, promise, contract
or suit based in material part on a state of facts or matter of which CME,
Development and Programming do not currently have actual knowledge and for
which Executive could have been dismissed for "Cause" under the CME Employment
Agreement or the Development Employment Agreement.
10. Final Release of Claims
Notwithstanding any other provisions of this Agreement,
Executive (or his estate) and Acorn will be required, as a condition precedent
to Executive's right to receive any amounts payable pursuant to Sections 4
hereof upon his termination of employment, to execute a final release of
claims dated as of the Termination Date and substantially in the form attached
hereto as Exhibit A.
11. Confidentiality
(a) The parties to this Agreement agree not to disclose the
terms of this Agreement except to their legal counsel, tax advisors and
accountants, and to maintain its confidentiality, except as required by law
(including, but not limited to, any securities laws pertaining to disclosure);
provided that nothing herein will be deemed to prohibit the parties from
disclosing the same as may be required in the conduct of their respective
businesses.
(b) Notwithstanding any other provision of this Agreement,
Executive and Acorn will continue to be bound by the confidentiality
provisions contained in Sections 5.3 or each of the Employment Agreements and
Section 4.1 of the Consulting Agreement.
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12. Noncompetition
Notwithstanding any other provision of this Agreement and
except as otherwise agreed by CME or CME Development in writing, from the
Commencement Date through the earlier of (x) the Termination Date and (y) the
effective date of a termination by Executive pursuant to clause (i) of Section
6, Executive will continue to be bound by the covenants related to
noncompetition that are contained in section 5.2 of each of the Employment
Agreements with the following modifications to such sections: (A) the words
"licensing of television or radio stations and provision of programming or
telecommunications services" in the first sentence of Section 5.2 of the CME
Employment Agreement shall be and hereby are replaced by the words "licensing
and operation of television or radio stations and providing broadcast
programming services of the type heretofore provided by CME or any member of
the CME Group", and (B) the phrase "at any time in the Term" in the first
sentence of section 5.2 of each of the Employment Agreements shall be and
hereby is replaced by the phrase "at any time in the Term or, as of March 25,
1998, plans to seek to conduct such business."
13. No Disparaging Comments
Executive, Acorn, CME, Development and Programming, for
themselves and on behalf of their subsidiaries, each agrees not to make
disparaging or derogatory comments about the other party or parties (including
such party's officers, directors, shareholders (including indirect
shareholders) or family members, as applicable), except to the extent required
by law, and then only after consultation with the other party to the maximum
extent possible in order to maintain goodwill for each of the parties.
14. Return of Property
As soon as practicable after May 1, 1998, Executive and
Acorn will (i) return to CME, Development and Programming all documents,
records, notebooks, computer diskettes and tapes and anything else containing
Confidential Information (as defined in Section 5.3 of the Employment
Agreements and Section 4.1 of the Consulting Agreement), and any other
property or Confidential Information of CME, Development or Programming,
including all copies thereof in Executive's or Acorn's possession, custody or
control, and (ii) delete from any computer or other electronic storage medium
owned by Executive or Acorn any of the proprietary or Confidential Information
of CME, Development and/or Programming.
15. Withholding Taxes; etc.
Any amounts payable hereunder shall be subject to any
required withholding taxes and employment-related or other similar taxes.
8
16. Arbitration of All Disputes
All disputes and controversies related to this Agreement
will be fully and finally resolved by binding and non-appealable arbitration,
before a single arbitrator selected by the procedure set forth below, held in
New York City.
(a) The single arbitrator (the "Arbitrator") will be
selected from among the New York City members of the New York Regional Panel
of Distinguished Neutrals (the "Panel") of the Center for Public Resources
("CPR") by mutual agreement of the parties, or if the parties are unable to
agree, by the following means:
(i) CME, Development and Programming together, on
one hand, and Executive and Acorn, on the other hand, will
simultaneously exchange lists each containing the names of
five members of their choice of the Panel who have indicated
a willingness to serve.
(ii) If a single name appears on both lists, that
individual will be appointed.
(iii) If more than one name appears on both
parties' lists, the Arbitrator will be selected from the
common names by mutual agreement of the parties or by the
toss of a coin.
(iv) If the lists contain no names in common, each
party will strike four names from the other party's list and
the Arbitrator will be selected from the remaining two names
by mutual agreement of the parties or by the toss of a coin.
(v) If the CPR ceases to have a Panel or it is
otherwise impossible to select the Arbitrator from the Panel
as contemplated by this Agreement, the Arbitrator will be
selected by the President of the CPR in the manner that the
President deems closest to satisfying the purposes of this
Section, or, if such person is unable to do so, by the
President of the Association of the Bar of the City of New
York.
(b) The Arbitrator, after appropriate consultation with the
parties, will (i) determine, in his or her sole discretion, the rules
governing the arbitration proceeding, including whether and to what extent the
parties will have any right to pre-hearing discovery or other forms of
disclosure, the manner of presentation of arguments and/or evidence before or
at any hearing, whether and to what extent formal rules of evidence will
govern the proceeding and the parties' rights following the proceeding, and
(ii) be governed in exercising such discretion by the goal of reaching a fair
and reasonable
9
decision in an expeditious and efficient manner while endeavoring to
streamline the process and avoid undue litigation costs.
(c) The Arbitrator will assess the costs of the proceeding
(including the prevailing party's reasonable attorney's fees) on any
unsuccessful party to the extent the Arbitrator concludes that such party is
unsuccessful, unless he or she concludes that matters of equity or important
considerations of fairness dictate otherwise.
(d) The Arbitrator will be required to state his or her
decision in writing and may, but will not be required to, elaborate on the
reasons for such decision.
(e) All proceedings in connection with any arbitration,
including its existence, the content of the proceedings and any decision, will
be kept confidential to the maximum extent possible consistent with the law.
17. Executive's Consultation With Counsel
Executive acknowledges that he has consulted with his own
legal counsel in connection with this Agreement and the matters contemplated
herein, and understands the terms and consequences to him of this Agreement.
18. Governing Law
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
19. Notices.
All notices under this Agreement shall be in writing and
shall be deemed to have been given at the time when mailed by registered or
certified mail or when delivered by hand or recognized overnight courier
service, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To CME at:
Central European Media Enterprises Ltd.
Clarendon House
Church Street
Xxxxxxxx XX CX Bermuda
10
To CME Development and Programming at:
00 X'Xxxxxx Xxxxxx
Xxxxxx X0X 0XX Xxxxxxx
Attention: Xxxx Xxxxxxxxx
with a copy to each of:
Central European Media Enterprises Ltd.
00 X'Xxxxxx Xxxxxx
Xxxxxx X0X 0XX Xxxxxxx
Attention: Legal Department
and
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
To Executive and Acorn:
00 Xxxxxxx Xxxx Xxxx - Xxx. 0X
Xxx Xxxx, Xxx Xxxx 00000
with a copy to:
Xxxxxxx & Co., P.C.
000 Xxxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
20. Separate Agreements
If any of the parties request that a separate agreement be
executed relating only to his or its rights and obligations with respect to
any other party, the parties shall cooperate to have such separate agreement
prepared and executed. The preparation of such separate agreements shall not
enlarge or diminish the rights of any of the parties hereunder.
21. Miscellaneous
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This Agreement constitutes the entire Agreement and
understanding among the parties hereto concerning the subject matter hereof
and supersedes and replaces all prior negotiations, proposed agreements and
agreements, written or oral. The parties agree that neither they nor any of
their representatives, agents or attorneys have made any promises,
representations or warranties whatsoever, expressed or implied, which are not
specifically set forth herein, and neither party has executed this Agreement
in reliance upon any such promises, representations or warranties. This
Agreement may not be amended or modified except in a writing signed by the
parties hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first set forth above.
CENTRAL EUROPEAN MEDIA ENTERPRISES
LTD.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title:
CME DEVELOPMENT CORPORATION
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxx
Title:
CME PROGRAMMING SERVICES, INC.
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxx
Title:
THE ACORN CONSULTING GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title:
XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
------------------------------------
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