EMPLOYMENT AGREEMENT
AGREEMENT made as of January 2, 1997 (this "Agreement"), between
DELSENER/XXXXXX ENTERPRISES, INC., a Delaware corporation (the "Employer"),
and SFX BROADCASTING, INC., a Delaware corporation (the "Parent") and the
owner of all the outstanding capital stock of the Employer, and XXX XXXXXXXX
(the "Executive").
WHEREAS, pursuant to a Stock Purchase Agreement dated as of October 8th,
1996 (the "Purchase Agreement"), the Parent has caused the Employer to
acquire, on the date hereof, from the Executive the stock of each of the
corporations that conduct the business known as Delsener/Xxxxxx Enterprises,
Ltd. ("D/S Enterprises");
WHEREAS, as a result of such acquisition, the Employer will conduct the
business of D/S Enterprises on and after the date hereof;
WHEREAS, prior to such acquisition, the Executive was the owner and
Chairman of D/S Enterprises;
WHEREAS, the Employer and the Parent consider the continued services of
the Executive to be in their best interests;
WHEREAS, the Executive is desirous of serving the Employer on the terms
and conditions herein provided;
WHEREAS, on the date hereof, the Employer and the Parent are entering into
an employment agreement with Xxxxx Xxxxxx (the "Other Senior Executive" and,
together with the Executive, the "Senior Executives"), who jointly operated
D/S Enterprises with the Executive prior to the date hereof; and
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WHEREAS, terms used but not defined herein shall have the meanings
assigned thereto in the attached Annex I.
NOW, THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which is hereby acknowledged, the Employer, the Parent and the
Executive agree as follows:
1. Employment. Upon the terms and subject to the conditions of this
Agreement, the Employer hereby employs the Executive and the Executive hereby
accepts employment by the Employer on the terms hereinafter set forth.
2. Term. The term of the Executive's employment hereunder shall commence
on the date hereof (the "Effective Date") and continue until December 31,
2001 (the "Term") and shall terminate at the close of business on such date
(the "Termination Date") unless terminated earlier in accordance with the
provisions of this Agreement.
3. Executive's Position, Duties and Authority.
3.1 Position. The Employer shall employ the Executive, and the Executive
shall serve, as Co-President and Co-Chief Executive Officer of the Employer
and, subject to the terms of Section 13 of this Agreement, of any successor
to the Employer by merger, acquisition of all or substantially all of the
assets of the Employer or otherwise. The Other Senior Executive shall also
serve as the Co-President and Co-Chief Executive Officer of the Employer.
3.2 Description. The Executive shall, jointly with the Other Senior
Executive, have full executive authority and responsibility for the
day-to-day management and operational control of the Employer, with
commensurate duties and functions. Without limiting the foregoing, the Senior
Executives shall jointly control the incurrence by the Employer of all
overhead and
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operational expenses and the entering into by the Employer of new lines of
businesses, and all executives and other employees of the Employer shall
report jointly to the Senior Executives. The Executive shall report to Xxxxxx
F. X. Sillerman so long as he is the current Executive Chairman of the Board
of Directors of the Parent (the "Parent's Board"), or, if he no longer holds
such position or a similar position with the Parent, the Parent's chief
executive officer. Notwithstanding the foregoing, the following actions by
the Employer or its subsidiaries shall be subject to the ultimate authority
of the Board of Directors of the Employer and the Parent's Board: (i) entry
into new lines of business; (ii) making any material capital commitment to
invest in venues; (iii) engagement of outside accountants and attorneys; (iv)
preparation of annual budgets (except that the Senior Executives shall
exercise exclusive control over the incurrence by the Employer of all
overhead and operational expenses) and (v) making material upfront payments
and deposits to artists not consistent with past practice.
3.3 Board; Subsidiaries. During the Term, the Executive shall have the
right to serve without remuneration (i) on the Board of Directors of the
Employer (the "Board") and as a member of any committee of the Board and (ii)
as a director and executive officer (in the same capacities as provided in
this Section 3) of any subsidiaries of the Employer; provided, however, that
if the Executive exercises such right, his commitments as a director shall be
substantially consistent with past practice.
3.4 Funding. Subject to the approval of the Board of Directors of the
Parent, the Parent agrees to provide such funding to the Employer to support
and expand its business operations as the Senior Executives, at the direction
of the Board of Directors of the Employer, may reasonably request from time
to time; provided, that at such time the Parent has sufficient financial
capacity to
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comply with such request. Notwithstanding the foregoing, the Parent shall be
obligated to provide the Employer with funding sufficient (in the reasonable
judgment of the Senior Executives) to operate its business as presently
conducted. The Parent may charge the Employer interest (based on the Parent's
blended borrowing rate at the time of such borrowing) on any funds provided
by the Parent to the Employer.
4. Full-Time Services.
4.1 General. The Executive shall devote substantially all of his business
time, labor, skill and energy to conducting the business and affairs of the
Employer and to satisfying the duties and responsibilities referred to in
Section 3.2 of this Agreement ; provided, that the Executive shall not be
required in fulfilling such obligations to devote a greater number of hours
or to keep significantly different hours than he has in the past and that he
may use his reasonable discretion in determining the optimal method of
fulfilling his obligations. Notwithstanding the foregoing, the Executive
shall have the right, subject to Section 16, to devote a portion of his
business time to personal investments and commitments not related to the
business of the Employer; provided, that the time devoted thereto shall not
interfere in any material respect with the performance of the Executive's
services hereunder. In addition, except as provided in Section 16, the
Executive may serve on boards of directors of not-for-profit organizations
and companies and, with the consent of the Parent (which consent shall not be
unreasonably withheld), on boards of directors of any other organizations or
companies; provided, that the service on any such boards of directors shall
not interfere in any material respect with the performance of the Executive's
services hereunder.
4.2 Opportunities; Investments. The Executive covenants and agrees that,
during the Term, he shall inform the Employer of each business opportunity
related to the business of the
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Employer and any of the Employer's subsidiaries, the Parent or any of the
Parent's subsidiaries in each case of which he becomes aware, and that he
will not, directly or indirectly, exploit any such opportunity for his own
account, nor will he render any services to any other person or business, or
acquire any interest of any type in any other business, that competes with
any material business of the Employer or any of the Employer's subsidiaries,
the Parent or any of the Parent's subsidiaries; provided, however, that the
foregoing shall not be deemed to prohibit the Executive from acquiring,
solely as a passive investor, up to 10% of any securities or other interests
in any partnership, trust, corporation or other entity; provided that, the
Executive may not acquire any interest in any entity that derives revenues
from the business of promoting or producing musical concerts or similar
musical or artistic events unless such revenues are not material in relation
to the other revenues of such entity.
5. Location of Employment. Unless the Executive consents otherwise in
writing, the headquarters for performance of his services hereunder, as well
as the principal offices of the Employer, shall be at 00 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx.
6. Base Salary. During the Term, the Employer shall pay or cause to be
paid to the Executive a base salary at the annual rate of not less than $1.00
(the "Base Salary").
7. Profits. Equity and Repurchases.
7.1 Profits after 1996. No later than March 31 of each year, beginning
March 31, 1998, the Executive shall receive a bonus determined by reference
to the Employer's Profits (as defined below) for the immediately preceding
year ending December 31, as follows: (i) the first $4,000,000 of Profits
shall be payable to the Parent; (ii) the next $300,000 of Profits shall be
payable 25% to the Executive and 75% to the Other Senior Executive; and (iii)
all additional Profits (that is,
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Profits in excess of $4,300,000) shall be payable 20% to the Senior
Executives and 80% to the Parent, with such Senior Executives' 20% share
payable 25% to the Executive and 75% to the Other Senior Executive. The
foregoing bonus payable based on the Profits for the year 2001 will remain so
payable notwithstanding expiration of the Term on December 31, 2001.
"Profits" shall mean the Employer's revenues minus the sum of (A) the Base
Salaries of the Senior Executives, (B) an amount equal to $600,000 and (C)
the actual overhead and operational expenses of the Employer, which overhead
and operational expenses shall exclude (i) all noncash charges (such as
depreciation and amortization expenses and charges relating to goodwill),
(ii) income taxes, (iii) any management fees charged to the Employer by the
Parent and its affiliates and (iv) the Base Salaries of the Senior
Executives. In determining "Profits", the Parent may charge the Employer
interest (based on the Parent's blended borrowing rate at the time of
borrowing) on funds provided by the Parent to the Employer. "Profits" will be
calculated on a consolidated basis for the Employer and its subsidiaries and
shall be determined by the Employer's independent accountants.
7.2 [RESERVED]
7.3 Options. During the Term, the Executive shall be granted options to
purchase such number of shares of the Parent's Class A Common Stock (the
"Class A Stock") as is determined by the Parent's Board to be fair and
appropriate for an employee in the position of the Executive, after and
pursuant to the affirmative recommendation of the Stock Option Committee of
the Parent's Board and with due regard for the recommendations of the
Executive Chairman of the Parent's Board. Each such option shall have an
exercise price equal to the average closing ask and bid price of the Class A
Stock on the date of the grant and shall be exercisable for ten years and
shall vest on
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a schedule to be determined by the Parent's Board but in no event shall the
vesting schedule exceed the Term hereof; nor shall the terms and conditions
of such options (including those terms and conditions described above) be any
less favorable than the terms and conditions (other than vesting) applicable
to options granted to the other senior executives of the Parent.
Notwithstanding the foregoing, in the event that the Executive ceases to be
employed by the Employer for any reason whatsoever (including upon death or
Total Disability of the Executive) other than as a result of a voluntary
termination (that is not a Constructive Termination Without Cause) or
termination for Cause, (x) all options granted pursuant to this Section 7.3
shall vest immediately, and (y) the balance of all remaining stock options to
be granted during the Term pursuant to this Section 7.3 shall immediately be
granted and shall vest immediately at an exercise price per share equal to
the lower of (A) the average ask and bid price of the Class A Stock on the
date of the relevant event or occurrence and (B) the exercise price of the
last option granted prior to such event or occurrence, and the Executive
shall retain the right to exercise each such option described in clauses (x)
and (y) during the remaining original term of each such option. In the event
of a termination following a Change in Control (as defined in Section
13.1.2), the exercise price shall be modified as set forth in Section 13.3(b)
below. To the extent required, this Section shall automatically be deemed to
be modified in accordance with Section 18.5 to insure that the Executive's
rights with respect to acceleration of option grants and acceleration of
option vesting are at least as favorable as the rights that from time to time
are generally applicable to other senior executives of the Parent at the
level of regional manager.
7.4 Share of Upside After Return. The provisions of Annex I hereto are
incorporated by reference herein, as if set forth in full in this Section
7.4.
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7.5 Right of First Offer. If, at any time during the first three years
following the Effective Date, the Parent desires to effect (or to permit the
Employer to effect) a transaction that would qualify as a Return Event under
clause (i), (ii), or (iii) of the definition thereof set forth in Annex I,
then the Parent shall, prior to negotiating or publicly proposing or
disclosing such transaction, first offer in writing to negotiate with the
Senior Executives for the purchase of the Employer Stock or Employer assets
that would otherwise be sold pursuant to such Return Event. If either or both
of the Senior Executives notify the Parent in writing, within 30 days of his
or their receipt of the Parent's written offer, of their interest in pursuing
such negotiations, then the Parent shall negotiate exclusively and in good
faith with either or both of the Senior Executives, as the case may be, for a
period of 60 days following delivery of such notice by the Senior Executives.
If the parties fail to reach agreement during such 60-day period (including
by reason of the Senior Executives failing to obtain financing), then the
Parent shall have the right to initiate (or to permit the Employer to
initiate) such transaction at any time within six months thereafter on terms
no less favorable to the Parent and the Employer than the final terms
proposed by the Senior Executives. The parties acknowledge that in the event
the Senior Executives do not jointly exercise the right provided in this
Section 7.5, the Executive may exercise the right individually, provided that
either (i) the Other Senior Executive's Employment Agreement is no longer in
effect or (ii) the Executive or the Other Senior Executive provides the
Parent with (a) written confirmation signed by the Other Senior Executive
that such Other Senior Executive will not exercise such right, or (b) a
written notice signed by the Executive providing that the Other Senior
Executive has been deemed to have made an irrevocable election not to
exercise such right pursuant to the Letter Agreement (as defined in the
Purchase Agreement) together with evidence, including copies of any notices,
satisfactory to
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the Parent, that the Executive has complied with the terms of the Letter
Agreement.
7.6 Repurchase Right. If; at any time during the first three years
following the Effective Date, a Change in Control occurs or is approved by
the Parent's Board, the Parent shall promptly provide written notice thereof
to the Senior Executives, such notice to contain (i) the Parent's
determination of the Fair Market Value of the Employer Stock then
"beneficially owned" (such term used for all purposes of this Agreement as
defined in Annex I hereto) by the Parent (the "Eligible Employer Stock") and
(ii) a reasonably detailed description of the Change in Control transaction
and the basis for the determination of such Fair Market Value. For purposes
of this Section 7.6, the term "Fair Market Value" shall have the meaning
assigned thereto in Annex I, except that the determination thereof shall be
made in good faith by the Parent's Board and an independent investment
banking firm chosen by the Parent (whose fees and expenses shall be born
solely by the Parent). After receipt of such notice from the Parent, either
or both of the Senior Executives may, within five business days thereof;
provide written notice to the Parent of either or both of the Senior
Executives' intent to pursue the purchase of the Eligible Employer Stock. If
either or both of the Senior Executives, as the case may be, provide notice
of such intended purchase, they shall have (A) an additional 10 business days
to deliver to the Parent written indications of financing support for the
intended purchase and (B) an additional 41 days to deliver commitment letters
from their financing sources. Upon complying with the foregoing, the Senior
Executives shall have the right, but not the obligation, to purchase the
Eligible Employer Stock at the Fair Market Value specified in the Change in
Control notice provided by the Parent (provided that, if such Change in
Control does not occur, such right of the Senior Executives with respect
thereto shall be void and of no further force and effect (it being understood
that the Senior Executives retain the repurchase right
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described in this Section 7.6 for any subsequent Change in Control within
three years following the Effective Date)). The parties acknowledge that in
the event the Senior Executives do not jointly exercise the right provided in
this Section 7.6, the Executive may exercise the right individually, provided
that either (i) the Other Senior Executive's Employment Agreement is no
longer in effect or (ii) the Executive or the Other Senior Executive provides
the Parent with (a) written confirmation signed by the Other Senior Executive
that such Other Senior Executive will not exercise such right, or (b) a
written notice signed by the Executive providing that the Other Senior
Executive has been deemed to have made an irrevocable election not to
exercise such right pursuant to the Letter Agreement (as defined in the
Purchase Agreement) together with evidence, including copies of any notices,
satisfactory to the Parent, that the Executive has complied with the terms of
the Letter Agreement.
7.7 Deductions. The Employer shall, in accordance with applicable law,
deduct from the Base Salary and all other cash amounts payable by the
Employer under the provisions of this Agreement to the Executive, or, if
applicable, to his estate, legal representatives or other beneficiary
designated in writing by the Executive, all social security taxes, all
Federal, state and municipal taxes and all other charges and deductions which
now or hereafter are required by law to be charges on the compensation of the
Executive or charges on cash benefits payable by the Employer hereunder to
his estate, legal representatives or other beneficiary.
8. Expenses; Automobile; Vacation. The Employer shall reimburse the
Executive, upon production of reasonably detailed accounts and vouchers or
other reasonable evidence of payment by the Executive, all in accordance with
the Employer's regular procedures in effect from time to time and in form
suitable to establish the validity of such expenses for tax purposes, all
ordinary,
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reasonable and necessary travel, entertainment and other expenses as shall be
incurred by him in the performance of his duties hereunder. The Executive
shall be entitled to paid vacation time at the rate of not less than six
weeks per calendar year during the Term. The Employer shall make an
automobile available for the Executive's exclusive use while employed under
this Agreement, such automobile to be commensurate in value to the
automobiles made available to the other senior executives of the Parent.
9. Benefits. During the Term, the Executive shall be eligible to
participate in any pension or profit-sharing plan or program of the Parent
now existing or established hereafter, on terms no less favorable than those
made available to the other senior executives of the Parent. The Executive
shall also be eligible to participate in any group life insurance,
hospitalization, medical, health and accident, disability or similar plan or
program of the Parent now existing or established hereafter, on terms no less
favorable than those made available to the other senior executives of the
Parent. In addition, the Executive shall be entitled to all prerequisites
made available to the other senior executives of the Parent to the extent not
otherwise specifically provided herein. The Parent shall cause the Employer
to be a participating employer in all benefit plans which the Parent sponsors
or maintains at any time during the Term.
10. Insurance. The Executive agrees to submit himself, upon request of the
Parent and within a reasonable period of time from such request for physical
examination by any physician designated by the Parent's Board as required or
advisable in connection with the obtaining of any key man insurance policy or
similar coverage which the Parent may wish to obtain. The costs and expenses
for such medical examinations and any such insurance shall be borne by the
Parent, and such costs and expenses shall not be deemed overhead or
operational expenses of the Employer for
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purposes of calculating "Profits" in Section 7.1.
11. Indemnification. The Employer shall indemnify the Executive and his
legal representatives to the fullest extent permitted by the laws of the
State of Delaware, and the Executive shall be entitled to the protection of
such insurance policies which the Employer hereby agrees to maintain for the
benefit of its directors and officers, against all costs, charges or expenses
whatsoever incurred or sustained by him or his legal representatives in
connection with any action, suit or proceeding to which he or his legal
representatives may be made a party by reason of his being or having been a
director or officer of the Employer or the Parent, or because of actions
taken purportedly on behalf of the Employer or the Parent after the Effective
Date. The Employer shall, upon request by the Executive, promptly advance or
pay any amount for costs, charges or expenses (including, without limitation,
legal fees and expenses incurred by counsel retained by the Executive) in
respect of his right to indemnification hereunder, subject to a later
determination as to the Executive's ultimate right to receive such payment.
The Employer shall maintain such insurance policies for the benefit of its
directors and officers to the same extent and in the same amount and type as
is maintained by the Parent.
12. Confidential Information. All records, papers, models, programs and
other documents and those kept or made by the Executive relating to the
business or affairs of the Employer and/or its clients or customers shall be
and remain the property of the Employer, and to the extent available shall be
delivered by the Executive to the Employer as required by the Board and, in
any event, upon the expiration or earlier termination of the Executive's
employment by the Employer.
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13. Termination.
13.1 For purposes of this Agreement the following definitions shall apply:
13.1.1 "Cause" shall mean:
(i) the Executive is convicted of a felony involving moral turpitude which
would render the Executive unable to perform his duties set forth in this
Agreement;
(ii) the Executive engages in conduct that constitutes willful gross
neglect or willful gross misconduct in carrying out his duties under this
Agreement, resulting, in either case, in material economic harm to the
Employer; or
(iii) a final, non-appealable determination by a court of competent
jurisdiction that the Executive has knowingly and willingly made a fraudulent
material misrepresentation in the Purchase Agreement that has a material
adverse effect on the value of the Companies to the Buyer.
13.1.2 A "Change in Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 3(a)(9) and 13(d) of
the Securities Exchange Act of 1934 (other than the Executive or entities
controlled by the Executive), becomes a beneficial owner of 50% or more of
the voting power of the Parent or of the common stock of the Parent owned
beneficially by Xxxxxx F.X. Sillerman;
(ii) all or substantially all of the assets or business of the Parent are
disposed of pursuant to a merger, consolidation, sale or other transaction
(unless the shareholders of the Parent, immediately prior to such merger,
consolidation or other transaction beneficially own, directly or indirectly,
in substantially the same proportion as they owned the voting power of the
Parent, all of the voting power or other ownership interests of the entity or
entities, if any, that
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succeed to the business of the Parent);
(iii) the Parent combines with another company and is the surviving
corporation but, immediately after such combination, the shareholders of the
Parent immediately prior to the combination hold, directly or indirectly, 50%
or less of the voting power of the combined company;
(iv) the majority of the Parent's Board consists of individuals other than
incumbent directors (which term shall mean members of the Parent's Board as
of the Effective Date), except that any person who becomes a director
subsequent to such date whose election or nomination was supported by
two-thirds of the directors who then comprise the incumbent directors shall
be considered an incumbent director; or
(v) except for a repurchase by a Senior Executive pursuant to Section 7.6,
(A) a sale or transfer of Employer Stock (including by way of merger,
consolidation or similar transaction) following which one or more persons
other than the Parent beneficially owns 50% or more of the Employer Stock or
(B) a sale or transfer of all or substantially all the assets of the Employer
and its subsidiaries as a whole.
13.1.3 "Constructive Termination Without Cause" shall mean a termination
of the Executive's employment at his initiative as provided in this Section
13 following the occurrence, without the Executive's prior written consent,
of one or more of the following events:
(i) a failure by the Employer or the Parent to fulfill in all material
respects its obligations under this Agreement;
(ii) the failure to elect or reelect the Executive to any of the positions
described in Section 3 or removal of him from any such position;
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(iii) a material diminution in the Executive's duties or the assignment to
the Executive of duties which are materially inconsistent with his duties or
which materially impair the Executive's ability to function as the
Co-President and Co-Chief Executive Officer of the Employer or the Executive
being required to report to anyone other than the person identified in
Section 3.2; or
(iv) the failure of the Employer or the Parent to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all
or substantially all of the assets or business of the Employer or the Parent
within 15 days after a merger, consolidation, sale or other transaction.
13.2 Termination by the Employer for Cause. A termination for Cause shall
not take effect unless all of the provisions of this Section 13.2 are
complied with. The Executive shall be given written notice by the Parent's
Board of the intention to terminate him for Cause, such notice (i) to state
in detail the particular act or acts or failure or failures to act that
constitute the grounds on which the proposed termination for Cause is based
and (ii) to be given within three months of the Board learning of such act or
acts or failure or failures to act. The Executive shall have 10 business days
after the date that such written notice has been given to the Executive in
which to cure such conduct, to the extent such cure is possible. If he fails
to cure such conduct, the Executive shall then be entitled to a hearing
before the Board. Such hearing shall be held within 20 business days of such
notice to the Executive, provided he requests such hearing within 15 business
days of the written notice from the Board of the intention to terminate him
for Cause. If, within five business days following such hearing, the
Executive is furnished written notice by the Board confirming that, in its
judgment, grounds for Cause on the basis of the original notice exist, he may
thereupon be
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terminated by the Board for Cause. Nothing in this Section 13.2 shall
prejudice the Executive's right to challenge the validity of his termination
by the Employer.
13.2.1 Payment. In the event the Employer terminates the Executive's
employment for Cause, he shall be entitled to:
(i) the Base Salary (if any) through the date of the termination of his
employment for Cause; and
(ii) the Executive's share of Profits for the portion of the calendar year
preceding his termination; provided, that, for purposes of calculating such
Executive's share, the Parent's and the Other Senior Executive's shares of
Profits shall also be based on the portion of the calendar year preceding the
termination. In calculating Profits pursuant to this Section the Executives'
Base Salaries and the $600,000 amount set forth as (A) and (B) under the
definition of Profits in Section 7.1 shall be pro rated for that portion of
the year actually elapsed prior to termination.
13.2.2 No Further Liability. In the event the Employer terminates the
Executive's employment for Cause, the Executive shall have no further
obligations or liability to the Employer or the Parent pursuant to this
Agreement (except his obligations under Sections 12 and 16, which shall
survive).
13.3 Termination Without Cause or Constructive Termination Without Cause.
(a) In the event the Executive's employment is terminated without Cause,
other than due to a Total Disability or death, or in the event there is a
Constructive Termination Without Cause, the Executive shall be entitled to:
(i) the Base Salary through the date of termination of the Executive's
employment;
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(ii) the Base Salary, at the annualized rate in effect on the date of
termination of the Executive's employment (or in the event a reduction in
Base Salary is the basis for a Constructive Termination Without Cause, then
the Base Salary in effect immediately prior to such reduction), for a period
of 36 months following such termination or until the end of the Term,
whichever is longer; provided, that, at the Executive's option, the Employer
shall pay him the present value of such salary continuation payments in a
lump sum (using as the discount rate 75% of the prime rate (as published by
The Wall Street Journal) for the month in which such termination occurs);
(iii) all stock options shall be immediately granted and shall immediately
vest and become exercisable in accordance with Section 7.3 hereof;
(iv) the Executive's share of Profits for the balance of the Term based on
the greater of (A) the Profits for the calendar year in which the termination
occurs, with such Profits being pro rated for the remainder of such year, and
(B) the Profits for the calendar year immediately preceding the termination;
provided, that, at the Executive's option, the Employer shall pay him the
present value of such share of Profits in a lump sum (using as the discount
rate 75% of the prime rate (as published by The Wall Street Journal) for the
month in which such termination occurs); and
(v) all benefits and prerequisites provided in Section 9 hereof until the
end of the Term. In calculating Profits pursuant to clause (iv) (A) above,
the Executives' Base Salaries and the $600,000 amount set forth as (A) and
(B) under the definition of Profits in Section 7.1 shall be pro rated for
that portion of the year actually elapsed prior to termination.
(b) If a termination described in Section 13.3(a) occurs following a
Change in Control, the
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Executive shall be entitled to the payments and benefits set forth in such
Section, except that the payments under clauses (ii) and (iv) of such Section
13.3(a) shall be paid in a lump sum without any discount and the exercise
price of the stock options accelerated under clause (iii) of such Section
13.3(a) shall be the lower of (A) the average ask and bid price of the Class
A Stock on the date of the termination and (B) the lowest exercise price of
any other then outstanding options granted to the Executive prior to the
Change in Control. In the event of a termination pursuant to this Section
13.3 (b), if the aggregate of all payments or benefits made or provided to
the Executive under this Agreement and under all other plans and programs of
the Employer and the Parent (the "Aggregate Payment") is determined to
constitute a Parachute Payment, as such term is defined in Section 280G(b)(2)
of the Internal Revenue Code of 1986, as amended (the "Code"), the Employer
shall pay to the Executive, prior to the time any excise tax imposed by
Section 4999 of the Code ("Excise Tax") is payable with respect to such
Aggregate Payment, an additional amount which, after the imposition of all
income, employment and excise taxes thereon, is equal to one-half of the
Excise Tax on the Aggregate Payment, or such greater portion thereof as the
other senior executives of the Parent shall be paid. The determination of
whether the Aggregate Payment constitutes a Parachute Payment and, if so, the
amount to be paid to the Executive and the time of payment pursuant to this
subsection shall be made by an independent auditor (the "Auditor") jointly
selected by the Employer and the Executive and paid by the Employer. The
Auditor shall be a nationally recognized United States public accounting firm
which has not, during the two years preceding the date of its selection,
acted in any way on behalf of the Employer, the Parent or any affiliate
thereof. If the Executive and the Employer cannot agree on the firm to serve
as the Auditor, then the Executive and the Employer shall each select one
accounting firm and those two firms shall jointly select the accounting firm
to
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serve as the Auditor.
13.4 [RESERVED].
13.5 Voluntary Termination. In the event of a termination of employment by
the Executive on his own initiative other than a termination due to death or
disability or following a Change in Control or a Constructive Termination
Without Cause, the Executive shall have the same entitlements as provided in
Section 13.2 above for a termination for Cause. A voluntary termination under
this Section 13.5 shall be effective upon 30 days' prior written notice to
the Employer and shall not be deemed a breach of this Agreement.
13.6 [RESERVED]
13.7 No Mitigation; No Offset. In the event of any termination of
employment under this Agreement, the Executive shall be under no obligation
to seek other employment and there shall be no offset against amounts due the
Executive under this Agreement or the Purchase Agreement on account of any
remuneration attributable to any subsequent employment that he may obtain or
for any amount allegedly due the Employer or the Parent by the Executive.
14. Total Disability. The Employer shall provide disability insurance
coverage to the Executive as of the Effective Date, on terms no less
favorable than those made available to the other senior executives of the
Parent. If the Executive becomes disabled during his employment hereunder so
that he is unable for a period of six consecutive months to perform his
duties under this Agreement (a "Total Disability"), the Employer shall pay to
the Executive his full Base Salary and maintain in effect his group health
insurance coverage during such six-month period (the last day of such
six-month period, the "Disability Date"); thereafter, the Employer shall pay
the Executive his full Base Salary and maintain in effect his group health
insurance coverage for an additional six-
19
month period, after which no further obligation shall be due to the Executive
from the Employer hereunder; provided, however, that at the end of such
additional six-month period, the Executive and his eligible dependents shall
be entitled to their group health insurance coverage continuation, as
provided under the Consolidated Omnibus Budget Reconciliation Act, without
any offset for the prior 12 months of group health insurance coverage
maintained in effect pursuant to this Section 14. The Employer shall have the
right to offset against the foregoing payments the amount of any proceeds
received by the Executive under any disability insurance policies maintained
by the Employer in respect of such 12-month period.
15. Death of Executive.
15.1 General. Upon the Executive's death this Agreement and all of the
Employer's obligations to pay salary and Profits hereunder shall terminate
(unless a notice of termination shall have previously been delivered by the
Employer or the Executive), except as provided in Sections 15.2 and 15.3.
15.2. Salary; Profits. The Executive's estate or designated beneficiary
shall be entitled to receive (i) any unpaid portions of the Executive's Base
Salary in respect of the period ending on the Executive's date of death and
(ii) any unpaid shares of Profits in respect of years or portions of years
prior to the date of death; provided, that for purposes of calculating such
Executive's share with respect to the portion of the calendar year preceding
his death, the Parent's and the Other Senior Executive's shares of Profits
shall also be based on the portion of the calendar year preceding death. In
calculating Profits pursuant to this Section the Executive's Base Salaries
and the $600,000 amount set forth as (A) and (B) under the definition of
Profits in Section 7.1 shall be pro rated for that portion of the year
actually elapsed prior to termination. The Employer shall
20
pay to such estate or beneficiary an amount equal to the present value of all
the remaining Base Salary for the balance of the Term, calculated using as
the discount rate the average yield on three-month Treasury Bills for the
30-day period prior to the date of death.
15.3 Reduction. The Base Salary and shares of Profits payable pursuant to
this Section 15 shall be reduced by the value of any benefits payable to the
Executive's estate or designated beneficiary under any life insurance plan or
policy the premiums for which are paid primarily by the Employer, other than
such insurance identified in Section 10.
16. Noncompetition.
16.1 By Executive During Term. During the Term, the Executive will not,
without the prior written approval of the Board, become employed by, or
become an officer, director or general partner of, any partnership,
corporation or other entity that competes with any business of the Employer,
any subsidiary of the Employer, the Parent or any subsidiary of the Parent,
whether now or hereafter conducted.
16.2 By Executive After Term. For a period of one year following the
termination of the Executive's employment hereunder by the Employer for Cause
or by the Executive on his own initiative (other than due to Constructive
Termination Without Cause), the Executive will not become employed by, or
become an officer, director or general partner of, any partnership,
corporation or other entity that competes with any business of the Employer
on the date of such termination nor will he render any services to any other
person or business, or acquire any interest of any type in any other
business, that competes with any material business of the Employer or any of
the Employer's subsidiaries on the date of such termination. Notwithstanding
the foregoing, the restrictions in this Section 16.2 shall in no event extend
beyond December 31, 2001.
21
16.3 By Parent. During the Term, the Parent shall not, nor shall the
Parent permit any of its subsidiaries to, engage in, directly or indirectly,
any business activities related to the promotion or production of musical
concerts or similar musical or artistic events except to the extent such
activities are incidental to the ownership or operation of radio stations
consistent with past practice.
17. Notices. Any notice, direction or instruction required or permitted to
be given hereunder shall be given in writing and may be given by telex,
telegram, facsimile transmission or similar method if confirmed by mail as
herein provided; by mail if sent postage prepaid by registered mail, return
receipt requested; or by hand delivery to any party at the address of the
party set forth below. If notice, direction or instruction is given by telex,
telegram or facsimile transmission or similar method or by hand delivery, it
shall be deemed to have been given or made on the day on which it was given,
and if mailed, shall be deemed to have been given or made on the third
business day following the day after which it was mailed. Any party may, from
time to time, by like notice give notice of any change of address and in such
event, the address of such party shall be deemed to be changed accordingly.
(a) If to the Employer or the Parent:
SFX Broadcasting, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mr. Xxxxxx F. X. Sillerman
(b) If to the Executive:
Xxx Xxxxxxxx
0 Xxxxxx Xxxxxx
Xxxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
22
(c) Copies of all communications given hereunder shall also be delivered
or sent, in like fashion, to:
Proskauer, Xxxx Xxxxx & Xxxxxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
18. General.
18.1 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws.
18.2 Captions. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.
18.3 Entire Agreement. This Agreement, including Annex I hereto, sets
forth the entire agreement and understanding of the parties relating to the
subject matter hereof; and supersedes all prior agreements, arrangements and
understandings, written or oral, between or among the parties (other than the
Purchase Agreement and the Letter Agreement), except as specifically provided
herein. There are no oral promises, conditions, representations,
understandings, interpretations or terms of any kind as conditions or
inducements to the execution hereof or in effect among the parties. No custom
or trade usage, nor course of conduct among the parties, shall be relied upon
to vary the terms hereof.
18.4 Successors and Assigns. This Agreement, and the Executive's rights
and obligations hereunder, may not be assigned by the Executive, except that
the Executive may designate pursuant to Section 18.6 one or more
beneficiaries to receive any amounts that would otherwise be payable
hereunder to the Executive's estate. This Agreement shall be binding on any
23
successor to the Employer or the Parent, as the case may be, whether by
merger, consolidation, acquisition of all or substantially all of the
Employer's or the Parent's assets or business or otherwise, as fully as if
such successor were a signatory hereto, and the Employer or the Parent, as
the case may be, shall cause such successor to, and such successor shall,
expressly assume the Employer's or the Parent's, as the case may be,
obligations hereunder. The terms "Employer" and "Parent" as used in this
Agreement shall include all such successors.
18.5 Amendments; Waivers. This Agreement cannot be changed, modified or
amended, and no provision or requirement hereof may be waived, without an
affirmative vote of the Board and the Parent's Board, and the consent in
writing of the Executive, the Employer and the Parent. The failure of a party
at any time or times to require performance of any provision hereof shall in
no manner affect the right of such party at a later time to enforce the same.
No waiver by a party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant
contained in this Agreement.
18.6 Beneficiaries. Whenever this Agreement provides for any payment to
the Executive's estate, such payment may be made instead to such beneficiary
or beneficiaries as the Executive may have designated in a writing filed with
the Employer. The Executive shall have the right to revoke any such
designation and to redesignate a beneficiary or beneficiaries by written
notice to the Employer (and any applicable insurance company) to such effect.
18.7 Further Assurances. The parties hereto agree that, after the
execution of this Agreement, they will make, do, execute or cause or permit
to be made, done or executed all such
24
further and other lawful acts, deeds, things, devices, conveyances and
assurances in law whatsoever as may be required to carry out the true
intention and to give full force and effect to this Agreement.
18.8 Ability to Fulfill Obligations. None of the Employer, the Parent or
the Executive is a party to or bound by any agreement which would be violated
by the terms of this Agreement.
18.9 Severability. Should any provision of this Agreement be unenforceable
or prohibited by any applicable law, this Agreement shall be considered
divisible as to such provision which shall be inoperative, and the remainder
of this Agreement shall be valid and binding as though such provision were
not included herein.
18.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original. It shall not
be necessary when making proof of this Agreement to account for more than one
counterpart.
18.11 Survival of Certain Provisions. The provisions of Section 7, 9, 11,
12, 13, 14, 15, 16 and 17 and this Section 18 shall, to the extent
applicable, continue in full force and effect notwithstanding the expiration
or earlier termination of this Agreement or of the Executive's employment in
accordance with the terms of this Agreement.
18.12 Arbitration of Disputes. Any dispute or controversy between the
parties relating to or arising out of this Agreement or any amendment or
modification hereof shall be determined by arbitration in the City and State
of New York by and pursuant to the rules then prevailing of the American
Arbitration Association. The arbitration award shall be final and binding
upon the parties and judgement may be entered thereon by any court of
competent jurisdiction. The service of any notice, process, motion or other
document in connection with any arbitration under
25
this Agreement or the enforcement of any arbitration award hereunder may be
effectuated either by personal service upon a party or by certified mail duly
addressed to him or to his executors, administrators, personal
representatives, next of kin, successors or assigns, at the last known
address or addresses of such party or parties. If the Executive is the
prevailing party on any issue in any such arbitration proceeding, he shall be
entitled to recover from the Employer any actual expenses for attorney's fees
and disbursements incurred by him.
18.13 Guarantee by Parent. The Parent hereby absolutely and
unconditionally guarantees, as a primary obligor and not merely as a surety,
to the fullest extent permitted by law, all the obligations (financial or
otherwise) of the Employer under this Agreement. The Parent also waives
presentment to, demand of compliance from and protest to the Employer of any
of the Employer's obligations under this Agreement.
[END OF PAGE]
26
18.14 Payola/Plugola. During the Term of this Agreement, the Executive
shall not pay or agree to pay any money, service or any valuable
consideration, as defined in and other than as permitted by Sections 317 and
507 of the Communications Act of 1934, as amended, for the radio broadcast of
any matter whatsoever.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
DELSENER/XXXXXX ENTERPRISES, INC.
By:
---------------------------------
Name:
Title:
SFX BROADCASTING, INC.
By:
---------------------------------
Name:
Title:
-------------------------------------
Xxx Xxxxxxxx
27
18.14 Payola/Plugola. During the Term of this Agreement, the Executive
shall not pay or agree to pay any money, service or any valuable
consideration, as defined in and other than as permitted by Sections 317 and
507 of the Communications Act of 1934, as amended, for the radio broadcast of
any matter whatsoever.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
DELSENER/XXXXXX ENTERPRISES, INC.
By:
---------------------------------
Name:
Title:
SFX BROADCASTING, INC.
By:
---------------------------------
Name:
Title:
/s/ Xxx Xxxxxxxx
-------------------------------------
Xxx Xxxxxxxx
28
ANNEX I TO
XX. XXXXXXXX'X EMPLOYMENT AGREEMENT
Share of Upside After Return
Reference is made to Section 4 of this Annex I for certain definitions.
1. General. (a) Subject to adjustment as set forth in Section 1(b) below,
upon the occurrence of a Return Event, if the sum of the Prior Proceeds and
the Deemed Proceeds exceeds the Threshold Amount (such excess, the "Upside"),
then the Senior Executives will be paid in cash an amount equal to 15% of the
Upside (plus interest thereon, at 1% over the Parent's blended borrowing
rate, from the date of the Return Event to the date of payment), with such
Senior Executives' 15% (plus any interest) being paid 25% to the Executive
and 75% to the Other Senior Executive. Such amount shall be paid, (A) in the
case of a Return Event described in clause (i) , (ii) , (iii) , (iv) or (vi)
of Section 2 below, within 10 business days after the occurrence of such
Return Event (or, if the determination of the amount of the Upside is not
finalized until a later time, then within 10 business days after such
determination) or (B) in the case of a Return Event described in clause (v)
of Section 2 below, in five equal annual installments commencing 10 business
days after the date of such Return Event (or, if the determination of the
amount of the Upside
2
is not finalized until a later time, then within 10 business days after such
determination).
(b) Notwithstanding anything in Section 1(a) above, if the Senior
Executives elect to treat a Change in Control of SFX as a Return Event under
clause (iv) of Section 2 below, they will only be entitled to an amount equal
to 7.5% or less (such lesser amount to be determined in the sole discretion
of the Senior Executives) of the Upside (plus any interest). In the event
that a Return Event under clause (iv) of Section 2 below has occurred and the
Senior Executives have elected to treat such event as a Return Event, the
percentage amount to which the Senior Executives are entitled pursuant to
Section 1(a) above with respect to any subsequent Return Event shall be
reduced by the percentage that the Senior Executives elected to receive in
connection with such earlier Return Event.
2. Return Event; Employer Stock. (a) "Return Event" shall mean the first
of the following to occur during the Term or, in the event a Return Event
described under clause (iv) has already occurred, the next to occur of the
following during the term:
(i) an initial public offering (an "IPO") of the Employer's common stock
(the "Employer Stock");
3
(ii) a sale or transfer of Employer Stock (including by way of merger,
consolidation or similar transaction) following which one or more persons
other than the Parent beneficially owns 50% or more of the Employer Stock
(for all purposes of this Annex I and the Employment Agreement, "beneficial
ownership" will be determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934);
(iii) a sale or transfer of all or substantially all the assets of the
Employer and its subsidiaries taken as a whole (an "Asset Transfer"); or
(iv) a Change in Control of the Parent, provided that either Senior
Executive may elect, within five business days after the Deemed Proceeds with
respect to such Change in Control are determined, to not treat such Change in
Control as a Return Event (it being understood that if such election is made,
any subsequent Change in Control of the Parent would, absent such election,
be treated as a Return Event);
(v) The death or Total Disability of a Senior Executive; provided, that a
Return Event shall be considered to have occurred only for the Senior
Executive who died or was disabled, with such Senior Executive (or his
estate) being paid in connection therewith his share of the Senior
4
Executives' 15% of any Upside as provided in Section 1 above and the other
Senior Executive only being paid his share when the next Return Event occurs;
or
(vi) a Renewal Failure or a Termination Without Cause, provided that a
Return Event shall be considered to have occurred only for the Senior
Executive for which there was a Renewal Failure or a Termination Without
Cause, with such Senior Executive being paid in connection therewith his
share of the Senior Executives' 15% of any Upside as provided in Section 1
above and the other Senior Executive only being paid his share when the next
Return Event occurs.
(b) Other than as set forth in the succeeding sentence, the Employer and
its subsidiaries will each have only one class of capital stock, which will
be common stock, and will not issue or grant equity securities of any other
kind. The parties agree that the Employer may issue preferred stock provided
that appropriate modifications are made to the Employment Agreement and this
Annex I to maintain the economic and other rights of the Senior Executives as
set forth herein. During the Term (or any extension thereof) all the common
stock of the Employer beneficially owned by the Parent will be held directly
by the Parent and not through any subsidiary.
5
3. Deemed Proceeds. "Deemed Proceeds" shall mean:
(v) with respect to an IPO, the sum of (aa) the proceeds received by the
Parent or its affiliates from the sale of Employer Stock in such IPO and (bb)
the value of the remaining Employer Stock beneficially owned by the Parent,
which such value shall be deemed to equal the product of the number of shares
of Employer Stock the Parent continues to own and the average closing prices
for the Employer Stock for the 20 consecutive trading days commencing on the
60th trading day after the IPO is closed;
(w) with respect to a sale or transfer of Employer Stock, the sum of (aa)
the proceeds of such sale or transfer and (bb) the Fair Market Value of the
remaining Employer Stock beneficially owned by the Parent;
(x) with respect to an Asset Transfer, the sum of (aa) the proceeds of
such Asset Transfer and (bb) the Fair Market Value of the remaining assets of
the Employer and its subsidiaries; and
(y) with respect to a Change in Control of the Parent, the Fair Market
Value of the Employer Stock beneficially owned by the Parent at the time of
such
6
Change in Control (for the first three years following the Effective Date,
such Fair Market Value shall be determined in accordance with the terms of
Section 7. 6) ; and
(z) with respect to a Renewal Failure, a Termination Without Cause or the
death or Total Disability of a Senior Executive, the Fair Market Value of the
Employer Stock beneficially owned by the Parent at the time of the occurrence
thereof (assuming in such valuation that the terminated Senior Executive, or
the Executive who has died or become disabled, does not continue to be
employed).
4. Definitions.
"Base Purchase Price" shall mean the Fixed Payment as defined in the
Purchase Agreement.
"Fair Market Value" shall mean private market value (which, in the case of
a valuation of less than all the Employer Stock, shall be deemed to be the
applicable proportionate interest in the private market value of all the
Employer Stock) as agreed by the Parent and the Senior Executives or, if they
cannot agree, as determined by an independent investment banking firm jointly
selected by the parties (whose fees and expenses will be shared 50% by the
7
Parent and 50% by the Senior Executives, except that the Senior Executives
share shall be paid solely out of the payment due them under Section 1 of
this Annex I).
"Minority Interest Sale" shall mean any sale or transfer of (i) assets of
the Employer or its subsidiaries (other than in the ordinary course of
business) or (ii) beneficial ownership of Employer Stock (including by way of
merger, consolidation or similar transaction) to any person other than the
Parent, which such sale or transfer does not constitute a Return Event.
"Prior Proceeds" shall mean the sum of (i) the aggregate amount of all
Profits allocated or allocable to the Parent pursuant to Section 7.1 of the
Employment Agreement prior to the date of the applicable Return Event and
(ii) an amount with respect to each Minority Interest Sale prior to such date
equal to the proceeds thereof, less any amounts paid thereon to either of the
Senior Executives plus 20% interest on such difference, compounded annually,
from the date of the closing of such Minority Interest Sale to the date of
the applicable Return Event (it being understood that in connection with a
Minority Interest Sale that involves the issuance of Employer Stock or a sale
or transfer of assets, such proceeds shall only include amounts that are
either (x) dividended or otherwise distributed to
8
the Parent or its affiliates or (y) are used to replace funds so dividended
or distribution) . For purposes of the foregoing clause (i), Profits for the
year in which the Return Event occurs will be determined as of the date of
the Return Event, as if such date was the last day in such year (with no
proration for the remainder of such year).
"Renewal Failure" shall mean, if the Agreement has not yet been
terminated, the failure of the Employer to offer, within the 90-day period
immediately preceding the last 180 days of the Term, to renew each of the
Senior Executive's employment agreement for another five-year period on terms
that (i) are at least as favorable to each Senior Executive as the terms set
forth in their respective employment agreements dated as of the Effective
Date (other than with respect to Base Salaries) and (ii) provide for a Base
Salary of $300,000 for the Executive and $600,000 for the Other Senior
Executive.
"Termination Without Cause" shall mean (i) a termination of either Senior
Executive's employment due to his disability or death or without Cause or
(ii) a Constructive Termination Without Cause of either Senior Executive.
"Threshold Amount" shall mean an amount equal to the Base Purchase Price,
plus 20% interest thereon,
9
compounded annually, from January 1, 1997, to the date of the applicable
Return Event.
