Employment Agreement - Hollywood Media Corp. and Mitchell Rubenstein
EXTENSION AND AMENDMENT AGREEMENT
FOR
EMPLOYMENT AGREEMENT
BETWEEN
HOLLYWOOD MEDIA CORP. AND
MITCHELL RUBENSTEIN
THIS EXTENSION AND AMENDMENT AGREEMENT (the "Agreement") is entered
into effective as of the 1st day of July, 2003 (the "Effective Date") by and
between HOLLYWOOD MEDIA CORP., a Florida corporation (the "Company") and
MITCHELL RUBENSTEIN (the "Executive").
WITNESSETH:
WHEREAS, the Executive has served as Chairman of the Board and Chief
Executive Officer of the Company since its inception, and presently serves in
this capacity pursuant to a written Employment Agreement with the Company
entered into as of July 1, 1993, as amended by that certain Extension and
Amendment Agreement entered into as of July 1, 1998 between the Company and the
Executive (collectively, the "Current Employment Agreement");
WHEREAS, the five-year term of the Current Employment Agreement ends
July 1, 2003;
WHEREAS, the Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel;
WHEREAS, the Compensation Committee of the Board of Directors (the
"Committee") of the Company recognizes that the Executive's contribution to the
growth and success of the Company has been and will continue to be substantial
and desires to assure the Company of the Executive's continued employment in an
executive capacity and to compensate Executive therefore;
WHEREAS, the Committee has determined that entering into this Agreement
to extend and update the Current Employment Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company; and
WHEREAS, the Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived hereby and thereby, and the promises, representations, warranties,
covenants and other good and valuable consideration provided for herein and
therein, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows, and the Current
Employment Agreement is hereby extended and amended as follows, provided,
however, that in the event of any inconsistency between the Current Employment
Agreement and this Agreement, this Agreement shall take precedence:
Unless otherwise expressly defined herein, all capitalized terms used
herein shall have the meanings set forth in the Current Employment Agreement.
1. EXTENSION OF TERM OF CURRENT EMPLOYMENT AGREEMENT. The "Term" of the
Current Employment Agreement (as defined in Section 1.1 thereof, as amended) is
hereby extended for an additional one-year term beginning on the Effective Date
and ending on June 30, 2004, unless sooner terminated pursuant to the terms of
said Current Employment Agreement; provided, however, the Current Employment
Agreement shall automatically renew for successive one (1) year periods, unless
either party provides the other party with written notice of termination thirty
(30) days prior to the end of the applicable term; subject further to the
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applicable terms of the Current Employment Agreement and this Agreement in the
event of a "Change of Control" (as defined hereinbelow).
2. BASE SALARY AND ANNUAL INCREASES. Section 2.1 of the Current
Employment Agreement is hereby amended to provide that the "Base Salary"
effective as of July 1, 2003 shall be at the annual rate of $400,000, which Base
Salary is subject to cost-of-living increases after such date as provided in the
Current Employment Agreement.
3. ISSUANCE OF STOCK OPTIONS AND RESTRICTED STOCK. The Current
Employment Agreement is hereby amended by adding the following new Section 2.3:
"2.3 Issuance of Stock Options and Restricted Stock. The Company shall
grant the Executive the following:
(a) an option to purchase 350,000 shares of the Company's common stock,
par value $0.01 per share (the "Common Stock"), granted on July 1,
2003 (the "Grant Date"), at an exercise price equal to the closing
sale price of the Common Stock on the Nasdaq National Market on the
trading day immediately preceding the Grant Date, in accordance
with and pursuant to the terms and conditions of the Company's 1993
Stock Option Plan, as amended. The options shall vest cumulatively
at the rate of twenty-five percent (25%) on each of October 1,
2003, January 1, 2004, April 1, 2004 and July 1, 2004. The options
shall have a five-year term from the Grant Date, irrespective of
and notwithstanding any termination of Executive's employment for
any reason. The options shall also be subject to accelerated
vesting in the event of a "Change of Control", such that the option
shall be 100% vested in such event. To the extent permissible by
law, such option shall be treated as an incentive stock option.
(b) 125,000 shares of restricted stock of the Company's Common Stock,
issued as of the Grant Date, in accordance with and pursuant to the
Company's 2000 Stock Incentive Plan, said grant to vest
cumulatively at the rate of twenty-five percent (25%) on each of
October 1, 2003, January 1, 2004, April 1, 2004 and July 1, 2004;
provided, however, that in the event that a "Change of Control" of
the Company occurs prior to the end of such twelve (12) month
period, said grant shall vest immediately, provided further, that
such vesting shall be deemed to have begun on July 1, 2003."
4. EARN-OUT PROVISION. The Current Employment Agreement is hereby
amended by adding the following new Section 2.4:
"2.4 Earn-Out Provision. In the event that the Company (or one of
its subsidiaries or affiliates) during the Term of this Agreement and
while the Executive is employed by the Company (including any
subsequent renewal periods), enters into an agreement for carriage of
the Company's Totally Hollywood TV network or any successor network
thereto ("THTV") or any part of its programming on one or more cable TV
systems with (a) two Multiple System Operators ("MSOs") that are among
the six MSOs listed on Exhibit A attached hereto, or (b) Comcast
Corporation (an "MSO"), (the satisfaction of the foregoing condition,
including the foregoing clause (a) or (b), as the case may be, is
referred to herein as a "Payment Event") (it being agreed that such an
agreement with a subsidiary or affiliate of such an MSO (or with any
successor or purchaser of such an MSO) shall qualify as such an
agreement with the MSO for purposes of the foregoing clauses (a) or
(b), as the case may be), then Executive shall be entitled to payments
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equivalent to five percent (5%) of the net income (as determined in
accordance with GAAP) generated operationally by each of the Company's
THTV and Hollywood.com, Inc. businesses from and after the occurrence
of the Payment Event. Such payments (the "Net Income Payments") shall
be computed and paid within 45 days after each calendar quarter (or 75
days after the fourth quarter of a fiscal year), based on such net
income for such quarter (with adjustments to the fourth quarter Net
Income Payment to take into account year end adjustments effecting net
income in the prior quarters for such year, so that if the net income
for such prior quarters is reduced (or increased) due to year end
adjustments, then any Net Income Payment otherwise payable for the
fourth quarter would be reduced (or increased) by the amount of
overpayment (or underpayment) made for such prior quarters, as the case
may be, as determined due to such year end adjustments). In the event
that THTV and/or Hollywood.com were sold or transferred by the Company
following the occurrence of the Payment Event, the Company shall
promptly give written notice of such transaction (including the
purchase price for such businesses) to the Executive prior to the
closing of such transaction, and the Executive shall have the right to
elect, by giving written notice to the Company within 10 days following
the Executive's receipt of such notice, to receive five percent (5%) of
the "net sale proceeds" (defined below) generated from the sale of such
business or businesses (a "Sale Payment") in lieu of the Net Income
Payments continuing after the sale as to such business or businesses
being sold. The Executive may sell, assign, transfer, devise, gift,
encumber and/or pledge the foregoing rights to receive payments under
this Section 2.4, and such rights shall inure to the benefit of the
Executive's heirs, successors and assigns, and such rights are and
shall be the obligations of, and binding upon the Company and its
successors and assigns. Notwithstanding anything in the Current
Employment Agreement or herein to the contrary, these payments rights,
once earned by reason of the Payment Event occurring during the Term of
employment as provided above, (i) shall survive termination or
expiration, for any reason, of Executive's employment with the Company
thereafter, and (ii) shall expire upon the cessation of the THTV (or
successor) cable channel and Hollywood.com. It is agreed that if THTV
changes its name, such as to Hollywood.com TV or Hollywood.com
Television (or otherwise), the references to THTV in this Agreement
shall constitute references to such renamed business, and the terms of
this Agreement shall apply to such renamed business in the same manner
as they apply to THTV and the related payment obligations hereunder
shall not be affected by reason of such name change.
For purposes of this Section 2.4, the "net sale proceeds" generated
from the sale of a business means (A) the sum of (i) the purchase price
paid to the Company and/or its subsidiary and/or its affiliate owning
such business at the closing of the purchase of such business, plus
(ii) any and all debt, payables and other liabilities of the business
assumed or acquired by purchaser at the close of such sale less (B) the
sum of (x) any and all debt, payables and other liabilities of the
business not assumed or acquired by purchaser at the close of such
sale, but excluding the Sale Payment to Executive and the Sale Payment
to Laurie Silvers under her employment agreement with the Company (in
other words, all liabilities of such business that remain liabilities
of the Company or any subsidiary of the Company following the closing,
other than the Sale Payment to the Executive or to Laurie Silvers), and
(y) any and all brokerage or finders fees and other transaction and
closing costs and fees incurred or paid by the Company or any
subsidiary or affiliate of the Company in connection with such business
sale.
For purposes of this Section 2.4, Hollywood.com shall include the
"Hollywood.com" website and all successors to it and all other assets
acquired in the Company's acquisition of Hollywood.com, Inc. (formerly
known as Hollywood Online Inc.) from The Times Mirror Company,
excluding the URLs movieticket.com, movietickets.com, theater.com,
theaters.com and theatres.com, but including all other URLs (and
proceeds of sales of, or profits generated by, said URLs now or in the
future) that are or were owned by Hollywood Online Inc."
5. EFFECT OF TERMINATION. The Current Employment Agreement is hereby
amended by adding the following new Section 4.5:
"4.5 Effect of Termination. The Executive will continue to receive
his salary until the expiration of the Term (including any subsequent
renewal periods) of this Agreement, as amended, if his employment is
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terminated by the Company for any reason other than death, disability
or Cause.
6. CHANGE OF CONTROL AND AMENDMENT OF SECTION 6(A) OF THE CURRENT
EMPLOYMENT AGREEMENT. Section 6(a) of the Current Employment Agreement is hereby
amended by deleting in its entirety the present Section 6(a) and substituting in
lieu thereof the following new Section 6(a):
"(a) For purposes of this Agreement, a "Change of Control" shall be
deemed to have taken place if: (i) any person, including a "group"
as defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, becomes the owner or beneficial owner of Company
securities, after July 1, 2003, having 20% or more of the combined
voting power of the then outstanding securities of the Company that
may be cast for the election of directors of the Company (other than
as a result of an issuance of securities initiated by the Company,
or open market purchases approved by the Board of Directors of the
Company, as long as the majority of the Board of Directors of the
Company approving the purchases is the majority at the time the
purchases are made), or (ii) the persons who were directors of the
Company before such transaction shall cease to constitute a majority
of the Board of Directors of the Company, or any successor to the
Company, as the direct or indirect result of or in connection with,
any cash tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any
combination of the foregoing transactions, or (iii) the sale or
transfer of the Company in its entirety or all or substantially all
of the assets of the Company through any structure or form of
transaction (whether or not in connection with a liquidation of the
Company), including, but not limited to, a direct or indirect
acquisition, merger, consolidation, restructuring, liquidation or
any similar or related transaction."
For purposes of clarity, it is hereby acknowledged and agreed that in the event
of a "Change of Control", as defined hereinabove, in addition to the terms
included in this Agreement, Executive shall be entitled to all rights set forth
in the Current Employment Agreement, which shall remain in full force and
effect, except for the revision of the definition of "Change of Control" as set
forth hereinabove, and the lump sum payment due Executive under the Current
Employment Agreement in the event of a Change of Control if the Company
terminates Executive's employment thereafter, shall also be payable if at any
time within 60 days after such Change of Control, Executive terminates his
employment under the Current Employment Agreement (as amended hereby) for any
reason.
7. SURVIVAL. Other than as specifically set forth above, no provision
of this Agreement shall be deemed to enlarge, alter or amend the terms or
provisions of the Current Employment Agreement. Except as provided in this
Agreement, all other provisions, terms and benefits set forth in the Current
Employment Agreement shall remain in full force and effect.
8. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which, when executed, shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
[signatures on following page]
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IN WITNESS WHEREOF, the parties hereto have or have caused their
respective duly authorized representatives to execute this Agreement as of the
Effective Date.
COMPANY:
HOLLYWOOD MEDIA CORP.,
a Florida corporation
By: /s/ Nicholas Hall
-------------------------
Name: Nicholas Hall
Title: Chief Operating Officer
EXECUTIVE:
/s/ Mitchell Rubenstein
-----------------------
Mitchell Rubenstein
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Exhibit A
Time Warner Cable
Charter Communications, Inc.
Adelphia Communications Corporation
Advance/Newhouse Communications
Insight Communications
Mediacom Communications Corporation
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