Employment Agreement - The Walt Disney Co. and Michael S. Ovitz
EMPLOYMENT AGREEMENT
DATED AS OF OCTOBER 1, 1995
BETWEEN
THE WALT DISNEY COMPANY
AND
MICHAEL S. OVITZ
MICHAEL S. OVITZ ("EXECUTIVE") and THE WALT DISNEY COMPANY, a Delaware
corporation ("COMPANY"), hereby agree as follows:
1. TERM
The term of Executive's employment by Company under this Agreement shall
commence on and as of October 1, 1995 and shall expire on September 30, 2000
(the "TERM"), unless earlier terminated as hereinafter provided.
2. TITLE AND DUTIES
During the Term, Executive shall be employed by Company as its President.
As President, Executive shall report to Company's Chairman and Chief Executive
Officer. Executive shall devote his full time and best efforts exclusively to
the Company; provided, however, that the foregoing shall not preclude Executive
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from engaging in charitable and community affairs, managing his personal passive
investments and continuing his current board membership with Ziff-Davis
Holdings, Inc., provided that none of such activities or managing shall
interfere with, or be inconsistent with, the performance of his duties
hereunder. Executive shall perform such duties, which shall not be inconsistent
with his position as President of Company, as are assigned to him from time to
time by the Chairman and Chief Executive Officer of Company, and any other
duties undertaken or accepted by Executive. Company agrees to use its best
efforts to cause Executive to be
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elected to the Board of Directors of Company (or its successor in interest),
when a seat on the Board becomes available, and to nominate Executive as a
member of the management slate at each annual meeting of stockholders during his
employment hereunder at which Executive's director class comes up for election.
Executive agrees to serve on the Board if elected.
3. SALARY
Executive shall receive a salary of $1,000,000 per annum during the term
hereof. Salary payments shall be made in equal installments in accordance with
Company's then prevailing payroll policy.
4. BONUS
For each full year of the Term completed by Executive, Executive will be
eligible for an annual discretionary bonus which will be determined by the
Compensation Committee of the Board of Directors. Pursuant to Company's
applicable bonus plan as in effect from time to time, such bonus may be
determined according to criteria intended to qualify under Section 162(m) of the
Internal Revenue Code, as amended (the "CODE").
5. STOCK OPTIONS
Executive shall be granted two stock options (individually, "OPTION A" and
"OPTION B") to purchase an aggregate of 5,000,000 shares of common stock of
Company pursuant to Company's 1990 Stock Incentive Plan and related rules or
pursuant to a stock option plan hereinafter adopted by Company having terms no
less favorable to Executive than the 1990 Stock Incentive Plan and related rules
(the applicable plan and rules pursuant to
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which such options shall be granted being hereinafter referred to as the "PLAN")
in accordance with, and subject to, the following:
OPTION A:
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(a) The exercise price of Option A shall be equal to the fair market value
(determined in accordance with the applicable provisions of the Plan) of
Company's common stock on the date of grant, which date shall be October
16, 1995.
(b) Pursuant to Option A Executive shall have the right to purchase
3,000,000 shares, subject to the terms and conditions hereof and of the
Plan, and such right shall vest in increments of 1,000,000 shares on
September 30 of each year commencing September 30, 1998; provided, however,
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that, notwithstanding the foregoing, any portion of Option A scheduled to
vest on a scheduled vesting date shall not vest on such scheduled vesting
date (or at any time thereafter) if Executive's employment by Company
pursuant to this Agreement shall have terminated for any reason whatsoever
more than three months prior to such scheduled vesting date.
(c) In the event that Executive's employment shall be terminated and such
termination shall constitute a Non-Fault Termination (as defined in
subparagraph (d) below), then the vesting schedule of Option A shall be
accelerated and Option A shall become immediately exercisable in its
entirety upon such termination.
(d) Option A shall expire on the earlier of ten years from the date of
grant or 24 months after termination of Executive's employment with
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Company; provided, however, that notwithstanding the foregoing, in the
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event that Executive's employment with Company shall be terminated without
cause (i.e., in a manner which shall constitute a breach of this Agreement
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by Company), by reason of death or total and permanent disability pursuant
to Section 11(a)(i) or (ii) hereof, or Executive shall validly terminate
his employment pursuant to Section 12 hereof (any of the foregoing being
herein referred to as a "NON-FAULT TERMINATION"), Option A shall expire on
the later of September 30, 2002, or 24 months after the date of the Non-
Fault Termination (but in no event later than ten years from the date of
grant.)
(e) Except as expressly provided herein, Option A shall be subject to all
of the standard terms and provisions of the Plan (i.e., those terms and
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provisions which are automatically applicable to any stock option granted
under the Plan in the absence of special action or specification to the
contrary with respect to such stock option by the Compensation Committee of
the Board of Directors of the Company (which Committee currently
administers the Plan)), including without limitation, such modifications
and/or substitutions of the Plan and the options granted thereunder as are
effected in connection with the acquisition by Company of Cap Cities/ABC,
Inc.
OPTION B:
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The terms and provisions of Option B shall be identical to the terms and
provisions of Option A in all respects except as follows:
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(f) Pursuant to Option B Executive shall have the right to purchase
2,000,000 shares of Company's common stock, subject to the terms and
conditions hereof and of the Plan, and such right shall vest in increments
of 1,000,000 shares on each of September 30, 2001 and September 30, 2002;
provided, however, that notwithstanding the foregoing, any portion of
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Option B scheduled to vest on a scheduled vesting date shall not vest on
such vesting date (or at any time thereafter) if Executive's employment
with Company shall have terminated for any reason whatsoever more than
three months prior to such scheduled vesting date.
(g) Notwithstanding any other term or provision of the Plan or this
Agreement, under no circumstances shall Option B vest or become exercisable
prior to October 1, 2000, and in the event that Executive's employment with
Company shall terminate prior to such date for any reason whatsoever,
Option B and all rights and claims of any nature related thereto shall
thereupon irrevocably terminate in their entirety without further action by
any party; after such date Option B shall vest in accordance with its terms
if, and only if, Executive shall have entered into, prior to the earlier of
the first scheduled vesting date of Option B or the date of any event
occurring on or after October 1, 2000 which would give rise to accelerated
vesting if the conditions of this subparagraph were met, an agreement with
Company (which shall be acceptable to Company in its sole and unfettered
discretion or which shall have been entered into pursuant to a Qualifying
Offer (as hereinafter defined in Section 10 hereof) to continue his
employment with Company until at least September 30, 2002; provided,
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however, that notwithstanding the foregoing, if Executive is actually
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employed by Company on a scheduled vesting date of Option B, the increment
of
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Option B scheduled to vest on such date shall vest in accordance with
its terms.
The parties hereto acknowledge that in order to implement certain
provisions of Section 5(d) hereto relating to the continued exercisability of
Option A for more than 24 months after a Non-Fault Termination, an amendment to
the 1990 Stock Incentive Plan is required or a new Plan permitting such
continued exercisability must be adopted. Company will implement such amendment
or adopt such new Plan, subject, however, in each case to receipt by Company of
approval by the shareholders of Company. Accordingly, all of the provisions of
Option A referred to in Section 5(d) above providing for exercisability beyond
24 months after termination of Executive's employment with Company shall be
subject to receipt by Company of such shareholder approval, and in the event
such shareholder approval shall not have been obtained within 18 months from the
date hereof or there shall have been a Non-Fault Termination at any time prior
to receipt by Company of such approval, Company and Executive (or his estate)
shall enter into good-faith negotiations with respect to alternative
compensation for Executive.
6. BENEFITS AND PERQUISITES
Executive shall be entitled to receive the benefits and perquisites
currently made available to the Chairman and Chief Executive Officer of Company.
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7. REIMBURSEMENT FOR EXPENSES
Executive shall be expected to incur various business expenses customarily
incurred by persons holding like position, including but not limited to
traveling, entertainment and similar expenses, all of which are to be incurred
by Executive for the benefit of Company. Subject to Company's policy regarding
the reimbursement and non-reimbursement of such expenses (which policy does not
necessarily provide for reimbursement of all such expenses but which shall be
applied to Executive in a manner consistent with the application of such policy
to the Chairman and Chief Executive Officer of Company), Company shall reimburse
Executive for such expenses from time to time, at Executive's request, and
Executive shall account to Company for such expenses.
8. PROTECTION OF COMPANY'S INTERESTS
(a) During the term of Executive's employment by Company, Executive will
not compete in any manner, directly or indirectly, whether as a principal,
employee, consultant, agent, owner or otherwise, with Company or any affiliate
thereof, except that the foregoing will not prevent Executive 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 Executive during the term of his employment or resulting from his
services shall be deemed to be a work made for hire and shall be the sole and
exclusive property of Company. Executive agrees to execute, acknowledge and
deliver to Company, at Company's request, such
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further documents as Company finds appropriate to evidence Company's rights in
such property. Any confidential and/or proprietary information of Company or any
affiliate thereof (including, without limitation, any information relating to
the identities, capabilities, compensatory and contractual arrangements and/or
general personnel data of employees of Company and its affiliates to which
Executive has access) shall not be used by Executive or disclosed or made
available by Executive to any person except as required in the course of his
employment, and upon expiration or earlier termination of the term of this
Agreement, Executive shall return to Company all such information that exists in
written or other physical form (and all copies thereof) under his control.
Without limiting the generality of the foregoing, Executive acknowledges signing
and delivering to Company The Walt Disney Company and Associated Companies
Confidentiality Agreement and Statement of Policy Regarding Conflicts of
Interest and Business Ethics and Questionnaire Regarding Compliance and he
agrees that all terms and conditions contained therein, and all of his
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 Section 8(b) shall survive the expiration or earlier
termination of this Agreement.
9. SERVICES UNIQUE
Executive recognizes that his 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 him (particularly, but without
limitation, with respect to the provisions hereof relating to the exclusivity of
his services and the provisions of Section 8
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hereof), Company 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.
10. CONTRACT TERMINATION PAYMENT
In the event that Company shall not have made a Qualifying Offer (as
hereinafter defined) to Executive by July 1, 2000, and no other agreement
between Executive and Company relating to the extension of Executive's
employment shall have been entered into by September 30, 2000, Executive shall
be entitled to receive, after Executive's:
(a) having given Company written notice of its failure to deliver a
Qualifying Offer; and
(b) not having received such Qualifying Offer from Company within five
business days from the delivery of such notice to Company,
a contract termination payment of $10,000,000 (the "TERMINATION PAYMENT") from
Company. Such Termination Payment shall be due by the earlier of 30 days after
the date that such payment shall not be subject to Section 162(m) of the Code or
four months after the end of the last fiscal year of the Company during which
Executive was employed by Company, but in no event shall such Termination
Payment be due earlier than October 1, 2000, except as provided in Section 11(c)
hereof. The term "QUALIFYING OFFER" shall mean a written offer of employment to
Executive which (i) shall be for a period of not less than five years from
October 1, 2000, (ii) shall include the types of compensation contained in this
Agreement, (iii) shall constitute a reasonable offer taking into account the
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compensation to Executive provided for in this Agreement, the Company's
financial and operating performance during the term of this Agreement and any
other then-current circumstances relevant to the determination of Executive's
compensation by Company for the period specified in clause (i) above, (iv) shall
not contain any terms or provisions which reduce Executive's title or duties as
stated herein, and (vii) shall state that it is irrevocable for 30 days from the
date of delivery thereof. Notwithstanding any other term or provision hereof,
Executive shall be entitled to receive the Termination Payment in accordance
with Section 11(c) hereof in the event of a Non-Fault Termination of Executive's
employment for any reason other than death (it being understood that in the
event of Executive's death prior to payment of the Termination Payment, Company
shall have no obligation under any circumstances to make a Termination Payment
to Executive's estate or any other person or entity).
In the event that the parties shall disagree as to whether or not an offer
timely made by Company in accordance with the foregoing constitutes a Qualifying
Offer, the parties shall submit such disagreement to arbitration by a qualified
individual executive compensation expert of national reputation who shall not
have had dealings with either party during the preceding five years. Upon
failure to agree upon the selection of the arbitrator, each party shall submit a
panel of three qualified arbitrators, the other party may strike two from the
other's list, and the arbitrator shall be selected by lot from the remaining two
names. The arbitrator shall have the authority only to determine (i) whether
the matter is arbitrable under the conditions of this Agreement and (ii) whether
or not the offer made by the Company is a Qualifying Offer.
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11. TERMINATION
(a) Company shall have the right to terminate Executive's employment
with Company under the following circumstances:
(i) Upon death of Executive.
(ii) Upon notice from Company to Executive in the event of an illness or
other disability which has totally and permanently incapacitated him from
performing his duties for six consecutive months as determined in good
faith by the Board of Directors.
(iii) For good cause (A) immediately upon notice from Company if Company
shall reasonably determine that the conduct or cause specified in such
notice is not curable; or (B) upon thirty days' notice from Company, if
Company shall determine that the conduct or cause specified in such notice
is curable, unless Executive has, within ten days after the date such
notice has been given by Company, commenced in good faith to cure the
conduct or cause specified in such notice and has completed such cure
within 30 days following the date of such notice. Termination by Company
of Executive's employment for "good cause" as used in this Agreement shall
be limited to gross negligence or malfeasance by Executive in the
performance of his duties under this Agreement or the voluntary resignation
by Executive prior to expiration of the Term (other than pursuant to a
valid termination of employment by Executive in accordance with Section 12
hereof) as an employee of Company without the prior written consent of
Company.
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(b) If Executive's employment is terminated pursuant to Section 11(a)(iii)
above, Executive's rights and Company's obligations hereunder and under all
stock options granted in accordance with this Agreement shall forthwith
terminate in their entirety, except that, notwithstanding the foregoing, (i) the
expiration date of any stock options granted in accordance with this Agreement
shall be 30 days after the date of termination pursuant to Section 11(a)(iii),
and (ii) to the extent that any term or provision of this Agreement shall
expressly state that any such right or obligation shall survive termination of
the Agreement pursuant to Section 11(a)(iii) hereof, it shall so survive.
(c) If a Non-Fault Termination of Executive's employment with Company shall
occur, Executive or his estate shall be entitled to receive a lump sum payment
equal to the sum of (x) the present value (based on Company's then current cost
of borrowing for the remainder of the scheduled Term) of 100% of Executive's
base salary for the balance of the term of this Agreement (the percentage of
Executive's salary to be paid in such lump sum after such present value
calculation being referred to herein as the "PRESENT VALUE PERCENTAGE") and (y)
of an amount equal to $7,500,000 multiplied by the product of (A) the Present
Value Percentage (expressed as a decimal) and (B) the number of fiscal years of
Company in the Term not yet completed at the time of termination. The sum of
clauses (x) and (y) above is hereinafter referred to as the "NON-FAULT PAYMENT".
In addition, in the event of a Non-Fault Termination for any reason other than
death, Executive shall be entitled to receive the Termination Payment. Company
may purchase insurance to cover all or any part of its obligations set forth in
the preceding sentence, and Executive agrees to take a physical examination to
facilitate the obtaining of such insurance. The Non-Fault Payment and
Termination Payment (if applicable) shall be made to Executive
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(or to his estate, if applicable) not later than the earlier of (i) 30 days
after the date that such payment shall not be subject to Section 162(m) of the
Code, or (ii) four months after the end of the last fiscal year of Company
during which Executive was employed by Company.
(d) Whenever compensation is payable to Executive hereunder during a time
when he is partially or totally disabled and such disability would entitle him
to disability income or to salary continuation payments from Company according
to the terms of any plan now or hereafter provided by Company or according to
any Company policy in effect at the time of such disability, the compensation
payable to him hereunder shall be inclusive of any such disability income or
salary continuation and shall not be in addition thereto. If disability income
is payable directly to Executive by any insurance company under an insurance
policy paid for by Company, the amounts paid to him by said insurance company
shall be considered to be part of the payments to be made by Company to him
pursuant to this Section 11(d) and shall not be in addition thereto.
12. TERMINATION BY EXECUTIVE
Prior to the expiration of the Term, Executive shall have the right to
terminate his employment under this Agreement upon 30 days' notice to Company
given within 60 days following the occurrence of any of the following events,
provided that Company shall have 20 days after the date such notice has been
given to Company in which to cure the conduct or cause specified in such notice:
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(a) Executive is not elected or retained in accordance with Section 2 hereof as
President (reporting to Company's Chairman and Chief Executive Officer) and a
director of Company.
(b) Company shall assign duties to Executive hereunder which are materially
inconsistent with his position as President.
(c) Company shall fail to grant Executive's stock options provided for herein
(other than to the extent provided in the last paragraph of Section 5 hereof) or
shall reduce his salary or shall deny Executive eligibility for annual
discretionary bonuses, or Company shall fail to make any compensation payment
required hereunder.
13. FCC PROVISION
Executive acknowledges that he has been provided by Company 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 he is familiar with the provisions thereof and that he
will fully comply therewith during the term of this Agreement. Without limiting
the foregoing, however, and whether or not Section 508 is applicable to his
activities, Executive agrees that he will not, without Company's prior written
consent, accept any compensation or gift from any person, firm or corporation
(other than Company) where such compensation or gift is, or may appear to be, in
consideration of his acting in a particular manner in relation to the business
of such person, firm or corporation.
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14. EXCLUSIVE REMEDY
Executive acknowledges and agrees that the Non-Fault Payment and
Termination Payment (if applicable) payable in the event of a Non-Fault
Termination, and the provisions relating to any Non-Fault Termination set forth
in Section 5 hereof regarding stock options (including, if applicable, any
alternative provisions which might be subsequently agreed to in accordance with
Section 5 hereof) are fair and reasonable and shall constitute Executive's sole
and exclusive remedy, in lieu of all rights and claims of Executive, at law or
in equity, for a Non-Fault Termination, including, expressly, for termination of
his employment by Company in a manner which shall constitute a breach of this
Agreement, and for all other rights and claims of any nature whatsoever related
to any such termination, and Executive hereby irrevocably waives all rights and
claims of any nature whatsoever in respect of any such termination except for
such Non-Fault Payment, Termination Payment (if applicable) and provisions
relating to stock options. Such payments shall not be limited or reduced by
amounts Executive might earn or be able to earn from any other employment or
ventures during the remainder of the scheduled Term following a Non-Fault
Termination.
15. ASSIGNMENT
Company may assign this Agreement or all or any part of its rights
hereunder to any entity that succeeds to all or substantially all of Company's
assets or that holds, directly or indirectly, all or substantially all of the
capital stock of Company or that is otherwise a successor in interest to Company
generally, and this Agreement shall inure to the benefit of, and be binding
upon, such assignee or successor in interest. This Agreement is personal to
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Executive and Executive may not, without the express written permission of
Company, assign or pledge any rights or obligations hereunder to any person,
firm, corporation or other entity.
16. NO CONFLICT WITH PRIOR AGREEMENTS
Executive represents and warrants to Company that neither his commencement
of employment hereunder nor the performance of his duties hereunder conflicts
with any contractual commitment on his part to any third party or violates or
interferes with any rights of any third party.
17. CERTAIN PAYMENTS
The parties believe that the payments to Executive hereunder do not
constitute "Excess Parachute Payments" under Section 280G of the Code.
Notwithstanding such belief, if any payment or benefit under this Agreement is
determined to be an "Excess Parachute Payment" Company shall pay Executive an
additional amount ("Tax Payment") such that (x) the excess of all Excess
Parachute Payments (including payments under this sentence) over the sum of
excise tax thereon under Section 4999 of the Code and income tax thereon under
Subtitle A of the Code and under applicable state law is equal to (y) the excess
of all Excess Parachute Payments (excluding payments under this sentence) over
income tax thereon under Subtitle A of the Code and under applicable state law.
18. KEY MAN INSURANCE
Company shall have the right to secure, in its own name or otherwise, and
at its own expense, life, disability, accident or other insurance covering
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Executive and Executive shall have no right, title or interest in or to such
insurance. Executive shall assist Company in procuring such insurance by
submitting to reasonable examinations and signing such applications and other
instruments as may be required by the insurance carriers to which application is
made for any such insurance.
19. POST-TERMINATION OBLIGATIONS
After the expiration or earlier termination of Executive's employment
hereunder for any reason whatsoever, Executive shall not either alone or
jointly, with or on behalf of others, either directly or indirectly, expressly
or impliedly, whether as principal, partner, agent, shareholder, director,
employee, consultant or otherwise, at any time during a period of two years
following such expiration or termination, solicit in any manner whatsoever the
employment or engagement of, either for his own account or for any other person,
firm, company or other entity, any person who is employed by Company or any
affiliated entity, whether or not such person would commit any breach of his
contract of employment by reason of his leaving the service of Company or any
affiliated entity.
20. ENTIRE AGREEMENT; AMENDMENTS; WAIVER, ETC.
(a) This Agreement supersedes all prior and/or contemporaneous agreements
and/or statements, whether written or oral, concerning the terms of Executive's
employment, and no amendment or modification of this Agreement shall be binding
unless set forth in a writing signed by Company and Executive. No waiver by
either party of any breach by the other party of any provision or condition of
this Agreement shall be effective unless in writing and signed by the party
effecting the waiver, and no such waiver shall be
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deemed a waiver of any similar or dissimilar provision or condition at the same
or any prior or subsequent time.
(b) 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 statute, law,
ordinance or regulation, the latter shall prevail, but in such event the
provision of this Agreement affected shall be curtailed and limited only to the
extent necessary to bring it within legal requirements.
(c) This Agreement does not constitute a commitment of Company with regard
to Executive's employment, express or implied, other than to the extent
expressly provided for herein. Upon expiration of the Term, it is the
contemplation of both parties that Executive's employment with Company shall
cease unless an employment agreement with respect to such subsequent period
shall have been entered into, and that neither Company nor Executive shall have
any obligation to the other with respect to continued employment. In the event
that Executive's employment continues for any period of time following the
stated expiration of the Term, 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.
(d) Company shall have the right but not the obligation to use Executive's
name or likeness for any publicity or advertising purpose during the term of
Executive's employment with Company. Company is under no obligation to accord
Executive credit for any production.
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(e) All payments required to be made to Executive hereunder, whether during
the term of his employment hereunder or otherwise, shall be subject to all
applicable federal, state and local tax withholding laws.
(f) This Agreement shall be governed by and construed in accordance with
the laws of the State of California. In the event of any controversy or claim
by either party hereunder the prevailing party in any final and legally binding
adjudication (as to which all periods for the filing of any appeal have expired)
with respect to such controversy or claim shall be entitled to reimbursement
from the losing party for reasonable attorney's fees and costs and for all other
reasonable expenses of such adjudication.
21. NOTICES
All notices that either party is required or may desire to give the other
shall be in writing shall be effective (i) upon personal delivery or (ii) three
business days after deposit of same with the United States Postal Service for
delivery by certified mail, return receipt requested, addressed to the party to
be given notice as follows:
To Company: 500 South Buena Vista Street
Burbank, California 91521
Attn: Chairman and Chief Executive Officer
To Executive: Michael S. Ovitz
The Walt Disney Company
500 South Buena Vista Street
Burbank, California 91521
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With copies to: Robert L. Adler, Esq.
Munger, Tolles & Olson
355 South Grand Avenue, 35th Floor
Los Angeles, California 90071
and
Michael A. Rubel, Esq.
Del, Rubel, Shaw, Mason & Derin
2029 Century Park East, Suite 3910
Los Angeles, California 90067-3025
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.
22. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE WALT DISNEY COMPANY
/s/ MICHAEL S. OVITZ By: /s/ MICHAEL D. EISNER
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Michael S. Ovitz Title: Chairman and Chief Executive Officer
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