FIFTH AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Fifth Amendment, dated as of April 1, 1997, is to Employment
Agreement made and entered into as of June 1, 1992 (as heretofore amended, the
"Employment Agreement") by and between XXXXX PAY-PER-VIEW INC. (now Spice
Entertainment Companies, Inc.), a Delaware corporation (the "Company"), and J.
XXXXX XXXXXXX (the "Executive").
Introduction
The parties entered into the Employment Agreement on June 1, 1992, and
thereafter entered into amendments one through four at February 22, 1993, June
15, 1993, March 23, 1994 and March 20, 1996, respectively, and now desire to
further amend certain provisions of the Employment Agreement, setting forth
herein the revised terms and conditions of the Executive's continued employment
by the Company and its subsidiaries from and after the date of this Amendment.
The Employment Agreement presently provides for automatic grant to Executive of
Options in each year of his employment beginning in 1998. The Executive and the
Company desire to eliminate such provision and, in lieu thereof, issue hereby an
option to purchase a fixed number of shares contingent upon meeting agreed upon
performance goals as established by the Compensation Committee of the Board of
Directors. The Company and Executive also desire to conform certain provisions
of the Employment Agreement to the standard employment agreement being developed
by the Company for execution between the Company and other senior executive
officers.
Accordingly, in consideration of the mutual covenants and agreements
set forth herein and the mutual benefits to be derived here from, and intending
to be legally bound hereby, the Company and the Executive agree as follows:
1. All defined terms used in this Amendment, unless otherwise defined
herein, shall have the meanings ascribed to them in the Employment Agreement.
2. The last two sentences of subparagraph 8(a) of the Employment
Agreement as heretofore amended are hereby deleted in their entirety. In
consideration for the surrender of Employee's rights therein the Company has
granted Executive a non-plan Option in the form of Exhibit A hereto. The
provisions of subparagraph 8(b) and 8(c) of the Employment Agreement shall apply
to such Options. Nothing herein shall be construed to limit Executive's
participation in any further grant of Options pursuant to any Stock Option Plan
of the Company and the grant of the Options hereby shall not be taken into
consideration with respect to any such grant.
3. The Company shall employ the Executive, on the terms set forth in
this Agreement as its Chairman and Chief Executive Officer and throughout the
term of the Agreement the Board of Directors shall appoint Executive to such
position.
4. The parties desire to conform the last sentence of Paragraph 2 to
reflect the term of the Agreement is a six-year term. Therefore, such last
sentence shall read as follows:
"Therefore, upon each January 1 of a Year, this Agreement
shall be effective for a six-year term unless prior thereto
such notice of non-renewal has been given."
5. The first paragraph of subparagraph 3(a) shall be deleted
and the following substituted therefore:
3(a) Death or Disability. If the Executive dies during the
Term, the Term shall terminate as of the date of the
Executive's death. If Executive becomes Totally Disabled (as
that term is defined below) for one hundred eighty (180) days
in the aggregate during any consecutive twelve-month period
during the Term, the Company shall have the right to terminate
the Term by giving the Executive thirty (30) days' prior
written notice thereof, and upon the expiration of such
thirty-day period, the Executive's employment under this
Agreement shall terminate. If the Executive resumes his duties
within thirty (30) days after receipt of a notice of
termination and continues to perform such duties for four (4)
consecutive weeks thereafter, the Term shall continue and the
notice of termination shall be considered null and void and of
no effect. Upon termination of the Term under this Section
7.1, the Company shall have no further obligations or
liabilities under this Agreement, except to pay the
Executive's estate or the Executive, as the case may be: (i)
the portion, if any, that remains unpaid of the Base Salary
for periods worked by the Executive plus one year's Base
Salary; and (ii) the amount of any expenses reimbursable in
accordance with Section 4 above; and (iii) any amounts due
under any Company benefit, welfare or pension plan. Any stock
options or other compensation plan benefits not vested at the
time of the termination of the Agreement under this Section
7.1 shall immediately become fully vested and options shall
remain exercisable for one year following such termination,
subject to earlier termination if the option's maximum term
occurs sooner.
6. Paragraph 12 shall be deleted in its entirety and the following
substituted therefore:
Change in Control.
a. Definitions. For purposes of this Paragraph (12),
a "Change on Control" shall mean a change in control of a nature that
would be required to be reported in response to Item 5(f) of Schedule
14A of Regulation 14A, as in effect on the date of this Agreement,
promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided, that whether or not required
to be reported under such Item 5(f), without limitation, such a
Change in Control shall be deemed to have occurred if (I) any
"person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Acts) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding securities;
or (II) during any period of two consecutive years, individuals who,
at the beginning of such period, constitute the Board cease for any
reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's
stockholders, of each new director was approved by Executive;
provided, however, that notwithstanding the foregoing, no Change of
Control shall be deemed to have occurred pursuant to either clause (I)
or (II) above in the event of (and notwithstanding any resultant
change in the membership of the Board) an acquisition is made by any
group comprised of senior officers of the Company, including
Executive, of 25% or more of the combined voting power of the
Company's then outstanding securities.
b. Termination Payment. Notwithstanding any provision of this
Agreement, if, within eighteen (18) months following a Change in
Control of the Company, (a) Executive's employment by the Company shall
be terminated by the Company other than as a result of the Executive
becoming Totally Disabled or (b) Executive terminates the Term for any
reason, then Executive shall be entitled to the benefits provided
below:
i. The Company shall pay Executive full Base Salary
through the date of termination (the "Termination
Date") at the rate in effect at that time, will pay
Executive for any vacation earned but not taken and
the amount, if any, of any bonus for a past Company
fiscal year which has not yet been awarded or paid;
ii. In lieu of any further salary requirements to
Executive for periods subsequent to the Termination
Date, the Company, subject to the limitation
described below, shall pay to executive on the 60th
day following the Termination Date a lump sum amount
equal to four times the Base Salary (the
"Termination Payment");
iii. All stock options held by Executive shall be fully
vested and remain outstanding for their full
original term unless sooner exercised; and
iv. The repayment of all indebtedness owed by the
Employee to the Company shall be changed by
eliminating all payments for a five-year period with
the repayment to commence in ten equal installments
of principal and interest with the first payment due
at the end of the sixth calendar year after Change
in Control.
c. Certain Additional Payments by the Company.
i. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be
determined that any payment or distribution to
or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but
determined without regard to any additional
payments required under this Section (a "Payment")
would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or
penalties are incurred by the Executive with
respect to such excise tax (such excise tax,
together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to
receive an additional payment (a Gross-Up Payment)
in an amount such that after payment by the
Executive of all taxes (including any interest or
penalties imposed with respect to such taxes),
including, without limitation, any income taxes
(and any interest and penalties imposed with
respect hereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
Subject to the provisions of Paragraph
12(c), all determinations required to be made under this Paragraph
12(c), including whether and when Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by an independent public
accounting firm selected by Executive and reasonably acceptable to the
Company (the "Accounting Firm"); provided, however, that the
Accounting Firm shall not determine that no Excise Tax is payable by
the Executive unless it delivers to the Executive a written opinion
(the Accounting Opinion) that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. In the event that
the Accounting Firm has served, at any time during the two years
immediately preceding a Change in Control Date, as accountant or
auditor for the individual, entity or group that is involve in
effecting or has any material interest in the Change in Control, the
Executive shall appoint another nationally recognized accounting firm
to make the determinations and perform the other functions specified
in this Paragraph 12(c). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Within 15 business days of the
receipt of notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Company, the Accounting Firm
shall make all determinations required under this Paragraph 12(c),
shall provide to the Company and the Executive a written report
setting forth such determinations, together with detailed supporting
calculations, and, if the Accounting Firm determines that no Excise
Tax is payable, shall deliver the Accounting Opinion to the Executive.
Any Gross-Up Payment, as determined pursuant to this Paragraph 12(c),
shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Subject to the
remainder of this Paragraph 12(c), any determination by the Accounting
Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made by
the Company should have been made (Underpayment), consistent with the
calculations required to be made hereunder. In the event that it is
ultimately determined in accordance with the procedures set forth in
Paragraph 12(c) that the Executive is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
The Executive shall notify the Company
in writing of any claims by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as practicable but
no later than 30 days after the Executive actually receives notice in
writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid;
provided, however, that the failure of the Executive to notify the
Company of such claim (or to provide any required information with
respect thereto) shall not affect any rights granted to the Executive
under this Paragraph 12(c) except to the extent that the Company is
materially prejudiced in the defense of such claim as a direct result
of such failure. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which he gives
such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of
such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim;
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing
from time to time, including, without limitation, accepting
legal representation with respect to such claim by an
attorney selected by the Company and reasonably acceptable to
the Executive;
(iii) cooperate with the Company in good faith
in order effectively to contest such claim; and
(iv) if the Company elects not to assume and
control the defense of such claim, permit the Company to
participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Paragraph 12(c), the Company shall have the right, as its sole option,
to assume the defense of an control all proceedings in connection with
such contest, in which case it may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim, and may either direct the
Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on
an interest-free basis, and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided, that any extension of
the statute of limitations relating to payment of taxes for the taxable
year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Company's right to assume the defense of and control
the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Paragraph 12(c) the
Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company's complying with the
requirements of Paragraph 12(c) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Paragraph
12(c) a determination is made that the Executive shall not be entitled
to any refund with respect to such claim, and the Company does not
notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required
to be paid.
7. Paragraph 13(a) is hereby deleted and the following substituted
therefore:
(a) Executive recognizes that in each of the highly
competitive businesses in which the Company is
engaged, personal contact is of primary importance in
securing new customers and in retaining the accounts
and goodwill of present customers and protecting the
business of the Company. The Executive, therefore,
agrees that during the Employment Period and, if the
Date of Termination occurs by reason of the Executive
terminating his employment for reasons other than
Total Disability or Good Reason or change in control,
for a period of one year after the Date of
Termination, he will not, with respect to the adult
television, cable and pay-per-view entertainment
industry, or any other electronically disseminated
adult entertainment media, in the United States,
Canada and Europe (the "Relevant Geographic Area"),
(i) accept employment or render service to any Person
that is engaged in a business directly competitive
with the business then engaged in by the Company or
any of its affiliated companies or (ii) enter into or
take part in or lend his name, counsel, or assistance
to any business, either as proprietor, principal,
investor, partner, director, officer, executive,
consultant, advisor, agent, independent contractor,
or in any other capacity whatsoever, for any purpose
that would be competitive with the business of the
Company or any of its affiliated companies (all of
the foregoing activities are collectively referred to
as the "Prohibited Activity").
8. Miscellaneous.
(a) The Employment Agreement, as amended by
this Amendment and the previous amendments, constitutes the entire
understanding and agreement between the Company and the Executive regarding its
subject matter and supersedes all prior negotiations and agreements, whether
oral or written, between them with respect to its subject matter. This Agreement
may not be modified except by a written agreement signed by the Executive and
a duly authorized officer of the Company.
(b) This Amendment may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(c) The Company shall pay Executive's reasonable
legal fees in connection with this amendment.
IN WITNESS WHEREOF, this Agreement has been executed
by the Executive and on behalf of the Company by its duly authorized officer on
the date first written above.
XXXXX PAY-PER-VIEW INC.
(Now Spice Entertainment Companies, Inc.)
By: /s/ Xxxxxx X. Xxxxxx
________________________________
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
and General Counsel
By: /s/ J. Xxxxx Xxxxxxx
________________________________
J. Xxxxx Xxxxxxx