Employment Agreement - CD Radio Inc. and David Margolese
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1999 (this "Agreement"),
between CD RADIO INC., a Delaware corporation (the "Company"), and DAVID
MARGOLESE (the "Executive").
In consideration of the mutual covenants and conditions set forth
herein, the Company and the Executive hereby agree as follows:
1. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, subject to the terms and
conditions of this Agreement.
2. Duties and Reporting Relationship. (a) The Executive shall be
employed in the capacity of Chairman and Chief Executive Officer of the Company.
During the Term (as defined below), the Executive shall, on a full-time basis,
use his skills and render services to the best of his ability in supervising and
conducting the business and affairs of the Company and, in addition, shall
perform such other duties consistent with his position as the Board of Directors
of the Company shall, from time to time, reasonably direct. As part of his
duties as Chairman and Chief Executive Officer, the Executive shall be
responsible for, and have general supervisory and executive control over, the
day-to-day operations of the Company. It is acknowledged that the Executive has
made, and may continue to make, passive investments which will require a portion
of his time and attention but Executive agrees that such investments will not
interfere with his full-time commitment to the Company. The Executive shall not
be required by this Agreement to perform duties for any entity other than the
Company and its subsidiaries.
(b) The Executive shall perform his duties and conduct his business at
the principal offices of the Company in New York, New York, as the Company's
affairs shall require, and nothing in this Agreement shall cause the Executive
to perform his duties outside New York City except for required travel on the
Company's business consistent with the Executive's position, duties and
responsibilities.
(c) The Executive shall report to the Board of Directors of the Company.
3. Term. The term of this Agreement shall commence on January 1, 1999
and end on December 31, 2003, unless terminated earlier pursuant to the
provisions of Paragraph 6 below (the "Term").
4. Compensation. (a) Annual Base Salary. During the Term, the Executive
shall be paid a base salary in following amounts:
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<TABLE>
<CAPTION>
Period Amount
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<S> <C>
From January 1, 1999 to December 31, 1999 $450,000
From January 1, 2000 to December 31, 2000 $500,000
From January 1, 2001 to December 31, 2001 $550,000
From January 1, 2002 to December 31, 2002 $600,000
From January 1, 2003 to December 31, 2003 $650,000
</TABLE>
All amounts paid to the Executive under this Agreement shall be in U.S. dollars.
Executive's base salary shall be paid at least monthly and, at the option of the
Company, may be paid more frequently. In the event the Executive's employment is
terminated during the Term, the Executive's base salary shall be prorated for
such partial year.
(b) Stock Options. Subject to the terms and conditions of this
Agreement, effective as of the date of this Agreement, the Company hereby grants
to the Executive the option to purchase 1,800,000, shares (the "Options") of the
Company's common stock, par value $0.001 per share (the "Common Stock"), at a
price per share of $31.25, on such terms and subject to such conditions as are
set forth in the option agreement attached to this Agreement as Exhibit A. The
grant of the Options contained in this Agreement is subject to the approval by
the holders of a majority of the voting stock of the Company of an amendment to
the Company's Amended and Restated 1994 Stock Option Plan to increase the number
of shares available under such Plan and to increase the number of option shares
which may be granted to any single executive in a given year to accommodate the
grant of Options contemplated by this Agreement.
(c) All compensation paid to the Executive hereunder shall be subject to
any payroll and withholding deductions required by any applicable law,
including, without limitation, as of the date hereof, federal, New York state
and New York City income tax withholding, federal unemployment tax and social
security (FICA).
5. Additional Compensation; Expenses and Benefits. (a) The Company shall
promptly reimburse the Executive for all reasonable and necessary business
expenses incurred and advanced by him in carrying out his duties under this
Agreement. The Executive shall present to the Company from time to time an
itemized account of such expenses in such form as may be required by the Company
from time to time.
(b) During the Term, the Executive shall be entitled to participate
fully in any benefit plans, programs, policies and any fringe benefits which may
be made available to the officers of the Company generally including but not
limited to medical, dental and life insurance; provided, that the Executive
shall participate in any bonus, stock option, phantom stock, restricted stock or
stock purchase or compensation plan currently in effect or subsequently
established by the Company to the extent, and only to the extent, authorized by
the applicable plan document or the Board of Directors or the Compensation
Committee thereof.
6. Termination. (a) Termination for Cause. At any time during the Term,
the
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Company has the right and may elect to terminate this Agreement for Cause.
For purposes of this Agreement, "Cause" shall be limited to (i) any action by
the Executive involving willful malfeasance having a material adverse effect on
the business or prospects of the Company; provided that any action by the
Executive shall not constitute "Cause" if, in good faith, the Executive believed
such action to be in or not opposed to the best interests of the Company, or if
the Executive shall be entitled, under applicable law or the Articles of
Incorporation or Bylaws of the Company, to be indemnified with respect to such
action; or (ii) the Executive being convicted of a felony. Termination or the
Executive for Cause pursuant to this Paragraph 6(a) shall be communicated by a
Notice of Termination. For purposes of this Agreement a "Notice of Termination"
shall mean delivery to the Executive of a copy of a resolution or resolutions
duly adopted by the affirmative vote of not less than a majority of the
directors present and voting at a meeting of the Company's Board of Directors
called and held for that purpose after reasonable notice to the Executive and
reasonable opportunity for the Executive, together with the Executive's counsel,
to be heard before the Board prior to such vote, finding that in the good faith
opinion of the Board the Executive was guilty of conduct set forth in the first
sentence of this Paragraph 6(a) and specifying the particulars thereof in detail
(the date of such termination by the Board is referred hereinafter as the
"Termination Date"). For purposes of this Agreement, no such purported
termination of the Executive's employment shall be effective without such Notice
of Termination.
(b) Death or Disability. (i) This Agreement and the Executive's
employment hereunder shall terminate upon the death of the Executive during the
Term. The date of the Executive's death is referred to in this Agreement as the
"Termination Date."
(ii) If the Executive is unable to perform the duties and functions of
his position because of a disability within the meaning of Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended (the "Code"), for an uninterrupted
period of one hundred eighty (180) days from the date on which the Executive was
first unable to perform his duties, and the Company, in its reasonable judgment,
determines that the exigencies created by the Executive's disability are such
that termination is warranted, the Company shall have the right and may elect to
terminate the services of the Executive by a Notice of Disability Termination.
For purposes of this Agreement, a "Notice of Disability Termination" shall mean
a written notice which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under this Section 6(b)(ii). For purposes of this Agreement, no such
purported termination by the Company shall be effective without such Notice of
Disability Termination. The day after such written notice has been delivered to
the Executive shall be referenced herein as the "Termination Date."
(c) Voluntary Resignation. Should the Executive wish to resign from his
position with the Company for other than Good Reason (as defined below) during
the term of his employment, the Executive shall give sixty (60) days prior
written notice to the Company, setting forth the reasons and specifying the date
as of which his resignation is to become effective. The date specified in such
written notice is referred to herein as the "Termination Date." Failure to
provide such notice shall entitle the Company to fix the Termination Date
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as of the last business day on which the Executive reported for work at his
principal place of employment with the Company.
(d) Without Cause. The Company shall have the absolute right to
terminate the Executive's employment without cause at any time. If the Company
elects to terminate the Executive without cause, the Company shall give sixty
(60) days written notice to the Executive. The date that is sixty (60) days
after such notice is given to the Executive shall be referred to herein as the
"Termination Date."
(e) For Good Reason. Should the Executive wish to resign from his
position with the Company for Good Reason during the Term, the Executive shall
give thirty (30) days prior written notice to the Company, setting forth the
reasons and specifying the date as of which his resignation is to become
effective. The date specified in such written notice is referred to herein as
the "Termination Date." Failure to provide such notice shall entitle the Company
to fix the Termination Date as of the last business day on which the Executive
reported for work at his principal place of employment with the Company.
For purposes of this Agreement, "Good Reason" shall mean the occurrence
of any of the following (without the Executive's express prior written consent):
(i) the assignment to the Executive by the Company of duties
inconsistent with the Executive's positions, duties, responsibilities,
titles or offices at the commencement of the employment term, or any
material reduction in his duties or responsibilities or any removal of
the Executive from or any failure to re-elect the Executive to any of
such positions, except in connection with the termination of the
Executive's employment for Cause, disability or as a result of the
Executive's death or by the Executive other than for Good Reason; or
(ii) a relocation of the Company's principal executive offices to
a location outside of the New York metropolitan area; or
(iii) any material breach by the Company of any provision of this
Agreement which breach is not cured within fifteen (15) business days
following notice of such breach.
(f) Compensation and Benefits Upon Termination. If the employment of the
Executive is terminated for any reason except (i) by the Company for Cause, (ii)
by Executive for other than for Good Reason, or (iii) by reason of death or
disability, the Executive shall be entitled to receive, and the Company shall
pay without setoff, counterclaim or other withholding, the sum of $5,000,000.
Such amount shall be paid to Executive by wire transfer on or before the tenth
business day following Executive's termination.
7. Change of Control Matters. (a) If following the occurrence of a
Change in Control the employment of the Executive is terminated for any reason
(including by the Executive for Good Reason), the Executive shall be entitled to
receive, and the Company
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shall pay without setoff, counterclaim or other withholding, the sum of
$8,000,000. Such amount shall be paid to Executive by wire transfer on or before
the business day of the Executive's termination.
(b) If as a result of a Change in Control, the Executive is required to
pay an excise tax on "excess parachute payments" (as defined in Section 280G(b)
of the Code) under Section 4999 of the Code solely as a result of an
acceleration of the vesting of options, the Company shall reimburse the
Executive for the amount of such taxes paid. In addition, the Company shall pay
the Executive such additional amounts as are necessary to place the Executive in
the same financial position that he would have been in if he had not incurred
any tax liability under Section 4999 of the Code as a result of such change in
control; provided, however, that the Company shall in no event pay the Executive
any amounts with respect to any penalties or interest due under any provision of
the Code. The determination of the amount, if any, of any "excess parachute
payments" and any tax liability under Section 4999 of the Code shall be made by
a nationally-recognized independent accounting firm selected by the Executive.
The fees and expenses of such accounting firm shall be paid by the Company. The
determination of such accounting firm shall be final and binding on the parties.
The Company agrees to pay to the Executive any amounts to be paid or reimbursed
under this Paragraph 7 within three (3) days after receipt by the Company of
written notice from the accounting firm which sets forth such accounting firm's
determination.
(c) For the purposes of this Agreement, "Change in Control" shall
occurrence of any of the following events: (a) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (the "Exchange Act")), other than the Executive is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total outstanding voting stock of the
Company; (b) the Company consolidates with, or merges with or into another
person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates with
or merges with or into the Company, in any such event, pursuant to a transaction
in which the outstanding voting stock of the Company is converted into or
exchanged for cash, securities or other property; (c) during any consecutive
two-year period, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors whose
election to such Board of Directors, or whose nomination for election by the
stockholders of the Company, was approved by a vote of 66-2/3% of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Company
then in office; or (d) the Company is liquidated or dissolved or a special
resolution is passed by the stockholders of the Company approving the plan of
liquidation or dissolution.
8. Nondisclosure of Confidential Information. The Executive acknowledges
that in the course of his employment hereunder he will occupy a position of
trust and confidence.
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The Executive shall not, except as may be required to perform his duties
hereunder or as required by applicable law, disclose to others or use, whether
directly or indirectly, any Confidential Information regarding the Company and
its proposed business and operations. "Confidential Information" shall mean
information about the Company and its proposed business and operations that is
not disclosed by the Company for financial reporting purposes and that was
learned by Executive in the course of his employment by the Company, including
(without limitation) any proprietary knowledge, patents, trade secrets, data,
formulae, information and client and customer lists and all papers, resumes and
records (including computer records) of the documents containing such
Confidential Information. The Executive acknowledges that such Confidential
Information is specialized, unique in nature and of great value to the Company,
and that such information gives the Company a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon as
possible thereafter, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information (and all copies thereof)
furnished by the Company or prepared by the Executive in the course of his
employment by the Company and its Subsidiaries.
9. Covenant Not to Compete. For a period beginning on the date of this
Agreement and ending two (2) years after the Termination Date (the "Restricted
Period"), unless the Executive has been terminated without Cause, or has
resigned for Good Reason, the Executive will not, directly or indirectly, enter
into the employment of, render services to or acquire any interest whatsoever in
(whether for his own account as an individual proprietor, or as a partner,
associate, stockholder, officer, director, consultant, trustee or otherwise), or
otherwise assist, any person or entity engaged in any operations in North
America involving the transmission of radio entertainment programming in
competition with the Company or that competes, or is likely to compete, with any
other aspect of the business of the Company as conducted on the Termination
Date; provided, that nothing in this Agreement shall prevent the purchase or
ownership by the Executive by way of investment of up to nine percent (9%) of
the shares or equity interest of any corporation or other entity. Without
limiting the generality of the foregoing, the Executive agrees that during the
two (2) year Restricted Period, the Executive will not call on or otherwise
solicit business or assist others to solicit business from any of the customers
or potential customers of the Company as to any product or service that competes
with any product or service provided or marketed by or actually under
development by the Company at the Termination Date. The Executive furthermore
agrees that during the Restricted Period he will not solicit or assist others to
solicit the employment of or hire any employee of the Company without the prior
written consent of the Company.
10. Remedies. The Executive agrees that damages for breach of his
covenants under Paragraph 9 above will be difficult to determine and inadequate
to remedy the harm which may be caused thereby, and therefore consents that
these covenants may be enforced by temporary or permanent injunction without the
necessity of bond. Such injunctive relief shall be in addition to and not in
place of any other remedies available at law or equity. The Executive believes
that the provisions of this Agreement are reasonable and that the Executive is
capable of gainful employment without breaching this Agreement. In
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the event any court or tribunal declines to enforce any provision of Paragraph 8
or 9 of this Agreement, this Agreement shall, to the extent applicable in the
circumstances before such court or tribunal, be deemed to be modified to
restrict the Executive's competition with the Company to the maximum extent of
time, scope and geography which the court or tribunal shall find enforceable,
and such provisions shall be so enforced. The losing party shall reimburse the
prevailing party for any costs and attorneys fees incurred in connection with
any action to enforce the covenants contained in Paragraph 8 of this Agreement.
The Company and the Executive shall have available to them all remedies at law
and in equity for the enforcement of this Agreement, which remedies (including
but not limited to termination of this Agreement as provided herein) shall be
cumulative and not elective.
11. Indemnification. The Company shall indemnify the Executive to the
full extent provided in the Company's Certificate of Incorporation and Bylaws
and the law of the State of Delaware in connection with his activities as an
officer and director of the Company.
12. Entire Agreement. The provisions contained herein and the exhibits
hereto constitute the entire agreement between the parties with respect to the
subject matter hereof and supersede any and all prior agreements, understandings
and communications between the parties, oral or written, with respect to such
subject matter.
13. Modification. Any waiver, alteration, amendment or modification of
any provisions of this Agreement and the exhibits hereto shall not be valid
unless in writing, approved by a majority of the directors of the Company who
are not full time employees of the Company, and signed by both the Executive and
the Company.
14. Severability. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof, which shall
remain in full force and effect.
15. Assignment. The Executive may not assign any of his rights or
delegate any of his duties hereunder without the written consent of the Company.
The Company may not assign any of its rights or delegate any of its obligations
hereunder.
16. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the successors in interest of the Executive and the Company.
17. Notice. All notices and other communications required or permitted
hereunder shall be made in writing and shall be deemed effective when initially
transmitted by courier or facsimile transmission and five (5) days after mailing
by registered or certified mail:
(i) if to the Company:
CD Radio Inc.
1221 Avenue of the Americas
37th Floor
New York, New York 10036
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Attention: General Counsel
(ii) if to the Executive:
David Margolese
c/o Metromedia Inc.
2171 Avenue Road
Suite 202
Toronto, Ontario, Canada M5M 4B4
or to such other person or address as either of the parties shall furnish in
writing to the other party from time to time.
18. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York.
19. Attorneys' Fees. In the event of arbitration arising out of or in
connection with this Agreement, the prevailing party shall be entitled to
recover from the other party all of its attorneys' fees and other expenses
incurred in connection with such arbitration.
20. Non-Mitigation. After the termination of his employment hereunder,
the Executive shall not be required to mitigate damages or the amount of any
benefit or payment provided under this Agreement by seeking other employment, or
otherwise; nor shall the amount of any benefit or payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above mentioned.
CD RADIO INC.
By: /s/ Patrick L. Donnellly
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Patrick L. Donnelly
Executive Vice President,
General Counsel and Secretary
EXECUTIVE
/s/ David Margolese
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David Margolese