EXHIBIT 99.7
March 28, 1997
Xxxxxxx X. Xxxxx
c/o Starwave Corporation
00000 XX Xxxxxxxx Xxx
Xxxxxxxx, Xxxxxxxxxx 00000
Dear Xxxx:
This letter confirms the terms of your employment by Starwave Corporation
(the "Employer").
1. TERM
Subject to your signing and delivering this letter agreement (the
"Agreement") to Employer and completion of the Disney Enterprises, Inc.
("Disney") investment in the Employer, the term of your employment
hereunder commences April 1, 1997, and expires on March 31, 2000, unless
earlier terminated as hereinafter provided (the "Employment Period").
2. SALARY
In full consideration for all rights and services provided by you
hereunder, you shall receive an annual salary of $290,000, $320,000 and
$360,000 for each of the three successive twelve month periods in the
Employment Period. Salary payments shall be made in equal installments
in accordance with Employer's then prevailing payroll policy.
3. BONUS
Bonus compensation, if any, shall be at the discretion of Employer.
4. STOCK OPTIONS
You acknowledge and agree that all stock options granted by Employer
pursuant to the Revised 1992 Combined Incentive and Nonqualified Stock
Option Plan (the "Plan") shall continue to be governed in accordance
with the Plan, as amended or modified from time to time. You acknowledge
receipt of the Plan. Concurrently herewith you have been granted a non-
qualified option to acquire 250,000 shares of Employer's Class A Common
Stock, exercisable at $9.07 per share. Such shares shall vest in forty-
seven (47) equal monthly installments of 5,208 shares during each of the
forty-seven (47) calendar months commencing April 1997 with a final
monthly installment of 5,224 shares, subject to continued employment and
all of the terms of the Plan and the Stock Option Agreement reflecting
such grant. In the event that you are terminated without cause prior to
the expiration of the Employment Period, then all stock options which
would have otherwise vested through the end of the Employment Period
shall vest upon such termination.
Xxxxxxx X. Xxxxx
March 28, 1997
Page 2
5. TITLE
You are being employed hereunder in the position of Chairman of the
Board of Directors and Chief Executive Officer of Employer. During the
term hereof you shall also serve as a member of Employer's Board of
Directors (the "Board").
6. DUTIES
You shall personally and diligently perform, on a full time and
exclusive basis, such services as Employer or any of its divisions may
reasonably require. You shall observe all reasonable rules and
regulations adopted by Employer in connection with the operation of its
business and carry out to the best of your ability all instructions of
Employer. Without limiting the foregoing, you shall have general
responsibility for the management of Employer. All officers of Employer
shall report to you directly or indirectly. Your principal place of
business shall be in the Bellevue/Greater Seattle area, but you shall
travel as reasonably required in connection with the performance of your
duties hereunder.
7. EXPENSES
To the extent you incur necessary and reasonable business expenses
(including, without limitation, travel and entertainment) in the course
of your employment, you shall be reimbursed for such expenses, subject
to Employer's then current policies regarding reimbursement of such
business expenses.
8. OTHER BENEFITS
You shall be entitled to those benefits that are standard for persons in
similar positions with Employer, consistent in the aggregate with
Employer's current practice subject to changes affecting all executives.
9. VACATIONS; SABBATICAL
You shall be entitled to four weeks paid vacation during each twelve
month period of this Agreement. Unused vacation time in any twelve
month period shall not be carried over to subsequent periods and you
shall not be entitled to payment in lieu of unused vacation time (except
on termination up to a maximum of four weeks of such unused time).
During the first twelve months of your employment hereunder you shall be
entitled to an additional four weeks of unpaid vacation time to be taken
at times mutually convenient to you and Employer.
10. LIQUIDITY PROVISIONS; REPURCHASE RIGHT
Xxxxxxx X. Xxxxx
March 28, 1997
Page 3
In order to provide you with the opportunity to sell shares of
Employer's Class A Common Stock prior to the time (if at all) that
Employer makes an initial public offering of its Class A Common Stock
and to provide for the repurchase of your shares of Class A Common Stock
by and at the option of Employer or Disney or its affiliates under
certain circumstances, we have mutually agreed to the following:
(a) INITIAL SALE OPPORTUNITY
(i) Employer shall purchase up to an aggregate of $4 million of
the Class A Common Stock from employees of Employer who are
employees on the Election Date ("Eligible Employees"). The
Election Date shall be July 1, 1997. The Closing Date for the
sale shall be on or before August 1, 1997. You shall have the
right to sell up to 125,000 shares of Class A Common Stock and
Xxx Xxxxxxxx shall have the right to sell up to 60,975 shares
of Class A Common Stock, and two additional Key Executives
shall have the right to sell twenty-five percent (25%) or
thirty-five percent (35%) of the Class A Common Stock held by
them at a purchase price equal to $8.21 per share minus the
exercise price of any vested options which are purchased. To
the extent that any portion of the $4 million has not been so
utilized, then other Eligible Employees shall each have the
right to sell twenty percent (20%) of the Class A Common Stock
held by such Eligible Employee at a purchase price equal to
$8.21 per share which is purchased. It shall be at the sole
and absolute discretion of each Eligible Employee as to
whether or not to sell Class A Common Stock and in what
proportion. In the event that an Eligible Employee (including
you or other Key Executives) elects not to sell the full
amount of their Class A Common Stock as described above, then
Employer shall not be obligated to purchase Class A Common
Stock from such Eligible Employee, nor to reallocate the cash
allocable to such shares to additional shares from other
Eligible Employees in excess of the applicable percentage of
their holdings provided above.
(ii) Concurrently herewith you shall have entered into an agreement
with Disney respecting its purchase of certain Class A Common
Stock and Vested Options from you and an agreement with Xxxx
Xxxxx ("Xxxxx") with respect to matters arising out of this
Agreement.
(b) ANNUAL LIQUIDITY OPPORTUNITY
For the calendar years ending December 31, 1998 and December 31, 1999,
subject in each case to your continued employment through the
Xxxxxxx X. Xxxxx
March 28, 1997
Page 4
end of each such calendar year (provided that if you are terminated
without cause, or you die or become permanently and totally
disabled, you will be entitled to a pro rata portion of such
liquidity opportunity based upon the number of calendar months in
the particular calendar year prior to such termination), the Board,
after consultation with you, shall establish both qualitative and
quantitative targets to measure Employer's performance during such
year. If the Employer meets EITHER the qualitative or quantitative
targets for such year, you may give written notice to Employer
within three months after the end of the calendar year asking that
Employer at its option purchase or seek to privately place up to
twenty-five per cent (25%) of the Eligible Securities held by you
as of the date hereof (as hereafter defined) at their Fair Market
Value (as defined). If the Employer fails to privately place such
securities within six months, then you may require Disney and Xxxx
Xxxxx ("Xxxxx") (in the following proportions: forty-five percent
(45%) Disney; fifty-five percent (55%) Xxxxx) to purchase such
securities in the subsequent sixty (60) day period at a price equal
to eighty percent (80%) of Fair Market Value. Fair Market Value
shall be established by a nationally recognized investment banking
firm selected by Employer and reasonably acceptable to you.
Appraisal cost will be paid by Employer. For purposes of
determining the Eligible Securities you may sell hereunder, the
total number of shares deemed owned by you at any time shall be the
sum of the Eligible Securities owned by you at the date hereof
other than those sold by you under clause (a) above plus all
additional Class A Common Stock and options which become vested
between the date hereof and the end of the relevant period, without
deduction for shares previously sold by you under this clause (b).
(c) RESIDUAL PUT
If at the end of six years following the date hereof so long as you
have not been terminated pursuant to paragraph 13(a), Disney has
not exercised its call on your stock under clause (e) below or
Xxxxx has not exercised his put to Disney (thereby triggering your
tagalong rights), you may require Employer for a sixty (60) day
period to purchase all or any portion of the Eligible Securities
then owned by you at a purchase price equal to eighty percent (80%)
of the Fair Market Value thereof.
(d) TERMINATION ON IPO
The rights granted in this Section 10 shall terminate concurrently
with the closing of an initial public offering of Employer's Class
A Common Stock registered under the Securities Act of 1933, as
amended.
Xxxxxxx X. Xxxxx
March 28, 1997
Page 5
(e) REPURCHASE BY DISNEY
In the event that either Disney elects to purchase all shares of
Common Stock owned by Xxxxx or his permitted transferees
(collectively, the "Xxxxx Shares") or Xxxxx elects to require
Disney to purchase the Xxxxx Shares (either an "Xxxxx Repurchase
Event"), Disney shall be required to purchase, and you shall be
required to sell, all Class A Common Stock owned by you at the same
per share price as the per share price offered to Xxxxx (less any
applicable option exercise price). If Xxxxx elects to receive
shares of Disney common stock (rather than cash) in an Xxxxx
Repurchase Event, you shall be entitled to elect to receive Disney
common stock for your Class A Common Stock, at the same per share
price as the per share price offered to Xxxxx. In the event an
Xxxxx Repurchase Event does not occur or fails to close, Disney
shall be relieved of its obligation to purchase and you shall be
relieved of your obligation to sell the Class A Common Stock.
Disney shall deliver a notice to you promptly upon the occurrence
of an Xxxxx Repurchase Event providing a ten (10) day period for
you to exercise previously vested Options. Upon the end of the ten
(10) day period, your rights to shares of Class A Common Stock
issued upon exercise of options shall terminate and be null and
void, such shares of Class A Common Stock shall be cancelled on the
books and records of the Company and your sole right with regard to
such shares shall be the compensation provided for below. Upon the
end of the ten (10) day period, all remaining vested and unvested
options held by you shall terminate and become null and void. Any
provision in any stock option or other agreement between you and
Employer to the contrary is modified and amended hereby. Disney
shall, as compensation for any unvested Options, at its sole option
either (i) make a cash payment to you for the fair market value of
the unvested options (which shall be the same per share price paid
to Xxxxx or his transferees in connection with such a repurchase
event), or (ii) recommend to the Compensation Committee of Disney's
Board that you receive options to purchase Disney common stock (in
accordance with the terms and conditions of the then prevailing
Disney stock option plan) in amounts designed to provide the
Optionee with equivalent value, as determined by Disney in its
reasonable discretion and the compensation committee makes such
grants. Any such determinations provided for in this clause (d)
shall be final and binding. Payment for any stock purchased
hereunder shall be made by Disney promptly following the closing of
an Xxxxx Repurchase Event. The Disney election provided above shall
be taken within sixty (60) .days of the closing of an Xxxxx
Repurchase Event. If Disney elects to make a cash payment, such
payment shall occur promptly following the Disney election. If
Disney elects to provide options to purchase Disney common stock,
such option grants
Xxxxxxx X. Xxxxx
March 28, 1997
Page 6
shall occur in the next regularly scheduled meeting of the
Compensation Committee, if possible, or the following regularly
scheduled meeting.
11. PROTECTION OF EMPLOYER'S INTERESTS
(a) During the term of your employment by Employer you shall not
compete in any manner, directly or indirectly, whether as a
principal, employee, agent or owner, with Employer, The Xxxx Disney
Company or any affiliate thereof, except that the foregoing will
not prevent you from holding at any time less than 5% of the
outstanding capital stock of any company whose stock is publicly
traded.
(b) To the extent permitted by law, all rights worldwide with respect
to any and all intellectual or other property of any nature
produced, created or suggested by you during the term of your
employment or resulting from your services shall be deemed to be a
work made for hire and shall be the sole and exclusive property of
Employer. You agree to execute, acknowledge and deliver to
employer at Employer's request, such further documents as Employer
finds appropriate to evidence Employer's rights in such property.
Any confidential and/or proprietary information of Employer or any
affiliate thereof shall not be used by you or disclosed or made
available by you to any person except as required in the course of
your employment, and upon expiration or earlier termination of the
term of your employment, you shall return to Employer all such
information that exists in written or other physical form (and all
copies thereof) under your control. Without limiting the
generality of the foregoing, you acknowledge signing and delivering
to Employer its standard confidentiality agreement for employees
and you agree that all terms and conditions contained therein, and
all of your obligations and commitments provided for therein, shall
be deemed, and hereby are, incorporated into this Agreement as if
set forth in full herein. The provisions of this paragraph shall
survive the expiration or earlier termination of this Agreement.
12. SERVICES UNIQUE
You recognize that your services hereunder are of a special, unique,
unusual, extraordinary and intellectual character giving them a peculiar
value, the loss of which cannot be reasonably or adequately compensated
for in damages, and in the event of a breach of this Agreement by you
(particularly, but without limitation, with respect to the provisions
hereof relating to the exclusivity of your services and the provisions
of paragraph 10 hereof), Employer shall, in addition to all other
remedies available to it, be entitled to equitable relief by way of
injunction and any other legal or equitable remedies.
Xxxxxxx X. Xxxxx
March 28, 1997
Page 7
13. TERMINATION
(a) Employer may terminate your employment hereunder for gross
negligence, misconduct, nonfeasance or breach of this Agreement or
for other good cause, and in any such event all obligations of
Employer hereunder (except pursuant to paragraph 10(e)) shall
immediately terminate.
(b) In the event of your death during the term hereof, this Agreement
(other than paragraphs 10(b), (c), and (e) shall terminate and
Employer shall only be obligated to pay your estate or legal
representative the salary provided for herein to the extent earned
by you prior to such event and to have all unvested options vest as
provided in your stock option agreement. In the event you are
unable to perform the services required of you hereunder as a
result of any disability and such disability continues for a period
of 90 or more consecutive days or an aggregate of 120 or more days
during any 12-month period during the term hereof, then at any time
thereafter Employer shall have the right, at its option, to
terminate your employment hereunder. In such event, all unvested
options shall vest as provided in your stock option agreement.
Unless and until so terminated, during any period of disability
during which you are unable to perform the services required of you
hereunder, your salary hereunder shall be payable to the extent of,
and subject to, Employer's policies and practices then in effect
with regard to sick leave and disability benefits.
(c) You acknowledge that you have been provided by Employer with a copy
of Section 508 of the Federal Communications Act of 1934, as
amended, relating in part to receiving or paying consideration for
product identification in television programs, that you are
familiar with the provisions thereof and that you will fully comply
therewith during the term of this Agreement. Without limiting the
foregoing, however, and whether or not Section 508 is applicable to
your activities, you agree that you will not, without Employer's
prior written consent, accept any compensation or gift from any
person, firm or corporation (other than Employer) where such
compensation or gift is, or may appear to be, in consideration of
your acting in a particular manner in relation to the business of
such person, firm or corporation. Without limiting the generality
of paragraph 13(a) hereof, it is agreed that any violation of this
paragraph 13(c) shall constitute a violation of this Agreement upon
which Employer may forthwith terminate this Agreement pursuant to
paragraph 13(a) hereof.
14. USE OF EMPLOYEE'S NAME
Xxxxxxx X. Xxxxx
March 28, 1997
Page 8
Employer shall have the right but not the obligation to use your name or
likeness for any publicity or advertising purpose. Employer is under no
obligation to accord you credit for any production.
15. ASSIGNMENT
Employer may assign this Agreement or all or any part of its rights
hereunder to any entity that succeeds to a substantial portion of
Employer's assets or business, and this Agreement shall inure to the
benefit of such assignee.
16. NO CONFLICT WITH PRIOR AGREEMENTS
You represent to Employer that neither your commencement of employment
hereunder nor the performance of your duties hereunder conflicts with
any contractual commitment on your part to any third party or violates
or interferes with any rights of any third party.
17. POST-TERMINATION OBLIGATIONS
After the termination of your employment hereunder for any reason
whatsoever, you shall not either alone or jointly, with or on behalf of
others, either directly or indirectly, whether as principal, partner,
agent, shareholder, director, employee, consultant or otherwise, at any
time during a period of two years following such termination, offer
employment to, or solicit the employment or engagement of, or otherwise
entice away from the employment of Employer or any affiliated entity,
either for your own account or for any other person, firm or company,
any person who is employed by Employer or any such affiliated entity,
whether or not such person would commit any breach of his contract of
employment by reason of his leaving the service of Employer or any
affiliated entity.For purposes of this paragraph 17, Disney and its
affiliates (other than Employer) shall not be considered to be
affiliated entities of Employer.
18. ENTIRE AGREEMENT; AMENDMENTS; WAIVER; ETC.
(a) This Agreement supersedes all prior or contemporaneous agreements
and statements, whether written or oral, concerning the terms of
your employment, and no amendment or modification of this Agreement
shall be binding against Employer unless set forth in a writing
signed by Employer and delivered to you. No waiver by either party
of any breach by the other party of any provision or condition of
this Agreement shall be deemed a waiver of any similar or
dissimilar provision or condition at the same or any prior or
subsequent time.
(b) You have given no indication, representation or commitment of any
nature to any broker, finder, agent or other third party to the
effect that any fees or commissions of any nature are, or under any
circumstances
Xxxxxxx X. Xxxxx
March 28, 1997
Page 9
might be, payable by Employer or any affiliate
thereof in connection with your employment hereunder.
(c) Nothing herein contained shall be construed so as to require the
commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement and any present or
future statue, law, ordinance or regulation, the latter shall
prevail, but in such event the provision of the Agreement affected
shall be curtailed and limited only to the extent necessary to
bring it within legal requirements.
(d) This Agreement does not constitute a commitment of Employer with
regard to your employment, express or implied, other than to the
extent expressly provided for herein. Upon termination of this
Agreement, it is the contemplation of both parties that your
employment with Employer shall cease, and that neither Employer nor
you shall have any obligation to the other with respect to
continued employment. In the event that your employment continues
for any period of time following the stated expiration dates of
this Agreement, unless and until agreed to in a new subscribed
written document, such employment or any continuation thereof is
"at will," and may be terminated without obligation at any time by
either party's giving notice to the other.
(e) This Agreement shall be governed by and construed in accordance
with the laws of the State of Washington. In accordance with the
Immigration Reform and Control Act of 1986, employment hereunder is
conditioned upon satisfactory proof of your identity and legal
ability to work in the United States.
(f) To the extent permitted by law, you will keep the terms of this
Agreement confidential, and you will not disclose any information
concerning this Agreement to anyone other than your immediate
family and professional representatives (provided they also agree
to keep the terms of this Agreement confidential).
(g) Disney and its affiliates are express beneficiaries of your
agreements and obligations hereunder and may enforce them to the
same extent that Employer may.
20. NOTICES
All notices that either party is required or may desire to give the
other shall be in writing and given either personally or by depositing
the same in the United States mail addressed to the party to be given
notice as follows:
Xxxxxxx X. Xxxxx
March 28, 1997
Page 10
To Employer: Starwave Corporation
00000 X.X. Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
To Employee: At the address shown for you on the first page
hereof.
Either party may by written notice designate a different address for
giving of notices. The date of mailing of any such notices shall be
deemed to be the date on which such notice is given.
21. HEADINGS
The headings set forth herein are included solely for the purpose of
identification and shall not be used for the purpose of construing the
meaning of the provisions of this Agreement.
Xxxxxxx X. Xxxxx
March 28, 1997
Page 11
If the foregoing accurately reflects our mutual agreement, please sign
where indicated.
STARWAVE CORPORATION
By: /s/ Xxxx X. Xxxxx
---------------------
Title: Sr. Vice President Business & Legal
EMPLOYEE
/s/ Xxxxxxx X. Xxxxx
-------------------------
XXXXXXX X. XXXXX
