AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and
Restated Employment Agreement (this “Agreement”) by and
between Lions Gate Entertainment Corp. (“Lions Gate”)
and Jon Feltheimer (“Feltheimer”) is entered into as of
December 15, 2008 with effect as of September 20, 2006 (the
“Effective Date”). The employment agreement entered
into as of September 20, 2006 between Feltheimer and Lions
Gate, as subsequently amended (the “Prior Agreement”),
is hereby amended and restated in its entirety.
The parties hereby
agree as follows:
1.
Employment . Lions Gate hereby employs Feltheimer to serve
in the capacity of Chief Executive Officer (“CEO”) and
a member of Lions Gate’s board of directors (the
“Board”) on the terms and conditions set forth herein.
Feltheimer shall have such powers and authority with respect to the
management of Lions Gate consistent with his position hereunder as
shall be determined by the Board. All employees of Lions Gate, its
divisions and subsidiaries shall report to Feltheimer and he shall
have hiring and firing authority over same; provided, however, that
subject to prior good faith consultation with Feltheimer, the Board
shall have the right to instruct Feltheimer to terminate any such
employee with respect to whom it believes in good faith it has
“cause” (as defined in Section 14(a)(iii) below)
and may thereafter terminate such employee if Feltheimer elects not
to do so. Feltheimer shall be responsible to and report solely to
the Board.
2.
Term . Feltheimer’s employment term under this
Agreement shall commence on September 20, 2006 and continue
through and including March 31, 2014 (the
“Term”).
3. Base
Salary . From the Effective Date through March 31, 2007,
Lions Gate shall pay Feltheimer an annual fixed salary of
US$850,000, payable in equal installments in accordance with Lions
Gate’s standard payroll practices. Commencing on
April 1, 2007, and continuing through the end of the Term,
Lions Gate shall pay Feltheimer an annual fixed salary of
US$1,200,000 payable in equal installments in accordance with Lions
Gate’s standard payroll practices (the “Base
Salary”). Notwithstanding the foregoing, commencing on
October 8, 2011 (the “Amendment Date”) and on each
anniversary of the Amendment Date during the remaining portion of
the Term, the Base Salary for the next twelve (12) months
shall be increased in the same proportion as the proportional
difference between the “Consumer Price Index for Urban Wage
Earners All Items (Los Angeles-Riverside-Orange County, CA),”
published by the United States Department of Labor, Bureau of Labor
Statistics (the “CPI”) in effect on March 1 of the
preceding year and the CPI in effect as of the Amendment Date and
as of each successive anniversary of the Amendment Date during the
Term.
4.
Discretionary Annual Bonus . During the Term, Feltheimer
shall be eligible to receive a discretionary annual bonus (the
“Discretionary Bonus”) based on Lions Gate’s
fiscal year in an amount to be determined in the sole and absolute
discretion of Lions Gate’s Compensation Committee, using the
following criteria (with no emphasis to be derived from the order
in which they appear) to arrive at their decision: EBITDA; revenue
and bottom line
Page 1 of 18
performance;
Lions Gate’s ability to pay such bonus; earnings; free
cash-flow levels; debt reduction; and share price increase. For the
fiscal year beginning on April 1, 2007, Lions Gate will also,
in addition to the foregoing criteria, be guided, informally, by a
formula of 100% of base salary, if annual targets are met, but the
Compensation Committee will also consider other criteria, such as
transformative transactions completed by the Company. The
Discretionary Bonus, if any, shall be payable in a timely manner,
but in any event when bonuses, if any, are generally given to Lions
Gate’s other senior-level employees and in no event later
than June 15 of each year during the Term, and, in addition,
June 15 of 2014 (for bonus amounts based on the fiscal year
ending March 31, 2014).
4A. Life and
Disability Insurance . During the Term, Lions Gate shall
provide Feltheimer with life and disability insurance policies
providing Feltheimer (or his estate, as applicable) with
US$2,000,000 in benefits.
5. Stock
Price Bonus . If, during the Term, the volume-weighted average
of the median (between the high and low of each trading day) daily
Company stock price is not less than US$13.00 per share for a
period of six (6) consecutive months, then Lions Gate shall
pay Feltheimer a one time bonus (in addition to any other
compensation payable pursuant to this Agreement) in the sum of
US$750,000 (the “Stock Price Bonus ”) within five
(5) business days following the satisfaction of the preceding
condition.
In addition, if
during the Term the volume-weighted average of the median (between
the high and low of each trading day) daily Company stock price is
not less than US$16.00 per share for a period of six
(6) consecutive months, then Lions Gate shall pay Feltheimer a
one time additional Stock Price Bonus of US$750,000 within five
(5) business days following the satisfaction of the preceding
condition.
In addition, if
during the Term the volume-weighted average of the median (between
the high and low of each trading day) daily Company stock price is
not less than US$19.00 per share for a period of six
(6) consecutive months, then Lions Gate shall pay Feltheimer a
one time additional Stock Price Bonus of US$750,000 within five
(5) business days following the satisfaction of the preceding
condition.
For the avoidance
of doubt, Feltheimer shall not be entitled to receive the Stock
Price Bonus at any specified target more than one time and the
maximum aggregate bonus that could be payable to Feltheimer under
any scenario pursuant to this Section 5 is US$2,250,000;
provided further that a single rise in stock price can trigger all
three Stock Price Bonuses.
Notwithstanding
the foregoing, if on or before the time a Stock Price Bonus(es)
becomes payable an applicable bank has declared Lions Gate to be in
material default of any of its bank covenants, and such default is
directly attributable to Feltheimer’s negligent disregard of
any such covenants (of which he has received notice) or his
negligent supervision of any of his direct reports, Feltheimer
shall not be entitled to such Stock Price Bonus(es); provided,
however, the foregoing shall be subject to mandatory binding
arbitration as set forth in Section 21(f) below should Feltheimer
dispute Lions Gate’s position with respect
thereto.
Page 2 of 18
6.
Restricted Stock Units .
(a)
Grant of Restricted Stock Units . Provided that
Feltheimer’s employment hereunder has not previously been
terminated for cause (as defined herein), death, or disability (as
defined herein) and subject to regulatory approval, if required,
Feltheimer shall be granted a total of 640,000 Restricted Stock
Units (“RSUs”) according to the following schedule:
(i) 320,000 time vesting RSUs shall be granted promptly
following the Effective Date (the “Time Vesting RSUs”);
(ii) 320,000 performance vesting RSUs shall be granted in four
(4) annual grants (one-fourth for each year) on April 1,
2007, April 1, 2008, April 1, 2009, and April 1,
2010 (the “Performance Vesting RSUs”). Such RSUs shall
be payable upon vesting in an equal number of common shares of
Lions Gate. The foregoing RSUs shall be in addition to any equity
interest (whether options, warrants or otherwise) granted to
Feltheimer, previously or otherwise, pursuant to any employment
agreement or otherwise (collectively, the “Pre-existing
Equity”).
(b)
Date of Vesting . Subject to Feltheimer’s continued
employment hereunder through the relevant vesting date, the RSUs
shall vest as follows:
(i) The
Time Vesting RSUs (320,000 RSUs) shall vest in four (4) equal
annual installments with the first such installment vesting on
September 20, 2007, and the last vesting on September 20,
2010.
(ii) The
Performance Vesting RSUs shall be eligible to vest on an annual
schedule with the first grant being eligible to vest on
March 31, 2008, the second on March 31, 2009, the third
on March 31, 2010, and the fourth on March 31, 2011
(each, a “Performance Vesting Date”); provided,
however, that the vesting of the RSUs on each such Performance
Vesting Date shall be subject to satisfaction of annual Company
performance targets approved in advance by the Compensation
Committee for the twelve (12) month period ending on such
Performance Vesting Date. The RSUs provided for by this
Section 6(b)(ii) shall vest on a sliding scale basis if the
Company performance targets have not been fully met for a
particular year. For purposes of example only, if seventy five
(75) percent of Company targets have been met for a particular
year, seventy five (75) percent of the grant for that year
would vest. Notwithstanding the foregoing, the Compensation
Committee may, in its sole discretion, provide that any or all of
the RSUs scheduled to vest on any such Performance Vesting Date
shall be deemed vested as of such date even if the applicable
performance targets are not met. Furthermore, the Compensation
Committee may, in its sole discretion, provide that any RSUs
scheduled to vest on any such Performance Vesting Date that do not
vest because the applicable performance targets are not met may
vest on any future Performance Vesting Date if the performance
targets applicable to such future Performance Vesting Date are
exceeded.
(c)
Acceleration of Vesting : If the vesting of the RSUs are
accelerated pursuant to Section 9(b) or Section 14(c)(iii)
below, then the foregoing requirement that Feltheimer be an
employee shall not apply with respect to any of the foregoing
vesting dates.
(d)
Failure to Obtain Shareholder or Regulatory Approval : If
shareholder or regulatory approval of the grant of the RSUs is
necessary and Lions Gate is unable to obtain such approval for all
or any portion of the RSUs, then Feltheimer shall be entitled to
alternative commensurate compensation, the details of which shall
be negotiated in good faith.
Page 3 of 18
(e)
Acceleration of Vesting Upon Death . In the event that this
Agreement is terminated pursuant to Section 14(a)(i) below,
all RSUs and Options granted to Feltheimer pursuant to this
Agreement, to the extent outstanding and unvested, will immediately
accelerate and become fully vested as of the date of
death.
(f)
Second Grant of Restricted Stock Units . Provided that
Feltheimer’s employment hereunder has not previously been
terminated for cause (as defined herein), death, or disability (as
defined herein) and subject to regulatory approval, if required,
Feltheimer shall be granted, on or about October 8, 2008, a
total of 916,071 Restricted Stock Units (“Second RSUs”)
according to the following schedule: (i) 458,036 time vesting
Second RSUs (the “Second Time Vesting RSUs”);
(ii) 458,035 performance vesting Second RSUs (the
“Second Performance Vesting RSUs”). Such Second RSUs
shall be payable upon vesting in an equal number of common shares
to Lions Gate. The foregoing Second RSUs shall be in addition to
any Pre-existing Equity.
(g)
Date of Vesting . Subject to Feltheimer’s continued
employment hereunder through the relevant vesting date, the Second
RSUs shall vest as follows:
(i) The
Second Time Vesting RSUs (458,036 RSUs) shall vest in three
(3) equal annual installments with the first such installment
vesting on March 31, 2012, and the last vesting on
March 31, 2014;
(ii) The
Second Performance Vesting RSUs (458,035 RSUs) shall be eligible to
vest in three (3) equal annual installments with the first
installment being eligible to vest on March 31, 2012, the
second on March 31, 2013, and the third on March 31, 2014
(each, a “Second Performance Vesting Date”); provided,
however, that the vesting of the Second RSUs on each such Second
Performance Vesting Date shall be subject to annual Company
performance targets approved in advance by the Compensation
Committee for the twelve (12) month period ending on such
Second Performance Vesting Date. The Second Performance Vesting
RSUs provided for by this Section 6(g)(ii) shall vest on a
sliding scale basis if the Company performance targets have not
been fully met for a particular year. For purposes of example only,
if seventy five (75) percent of Company targets have been met
for a particular year, seventy five (75) percent of the Second
Performance Vesting RSUs eligible to vest for that year would vest.
Notwithstanding the foregoing, the Compensation Committee may, in
its sole discretion, provide that any or all of the Second
Performance Vesting RSUs scheduled to vest on any such Second
Performance Vesting Date shall be deemed vested as of such date
even if the applicable performance targets are not met.
Furthermore, the Compensation Committee may, in its sole
discretion, provide that any Second RSUs scheduled to vest on any
such Second Performance Vesting Date that do not vest because the
applicable performance targets are not met may vest on any future
Second Performance Vesting Date if the performance targets
applicable to such Second Performance Vesting Date are
exceeded.
(h) Any
and all references to RSUs in Sections 6(c), 6(d), 6(e), 7(a),
10 and 14(b)(iii) of the Agreement shall include the Second RSUs
set forth above, unless the context requires otherwise. Any and all
references to the Time Vesting RSUs in Sections 9(b)(i) and
14(c)(iii) of the Agreement shall include the Second Time Vesting
RSUs, unless the context requires otherwise. Any and all references
to the Performance Vesting RSUs in
Sections 9(b)(ii)
Page 4 of 18
and 14(c)(iii)
of the Agreement shall include the Second Performance Vesting RSUs,
unless the context requires otherwise. Any and all references to
the Performance Vesting Date in Sections 9(b)(ii) and 14(c)(iii) of
the Agreement shall include the Second Performance Vesting Date,
unless the context requires otherwise.
(i)
Quarterly Grant . Subject to Feltheimer’s continued
employment hereunder through the relevant grant date and subject to
regulatory approval, if required, on the first day following each
three (3) month anniversary of October 8, 2008 that
occurs during the Term (each, a “grant date”),
Feltheimer shall be issued a number of the Company’s common
shares equivalent to TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00), calculated using the closing price (in regular
trading) of the Company’s common shares on the last trading
day immediately prior to the respective grant date (each a
“Quarterly Grant”) and subject in each case to
applicable tax withholding. Each Quarterly Grant shall be fully
vested upon grant, and the shares subject to such Quarterly Grant
shall be issued not more than five (5) business days after the
applicable grant date. Notwithstanding the foregoing, subject to
Feltheimer’s continued employment hereunder through March 31,
2014 and subject to regulatory approval, if required, on
March 31, 2014 Feltheimer shall receive a pro-rata portion of
a Quarterly Grant for the period ending on March 31, 2014
based on the period of time elapsed since the immediately preceding
Quarterly Grant. Notwithstanding the foregoing, in the event that
this Agreement is terminated pursuant to Section 14(a)(iv) or
14(b), the Quarterly Grants shall continue to be granted on each
quarterly grant date through the prorated grant scheduled to be
made on March 31, 2014, and no further Quarterly Grants shall
be made after that date. For the sake of clarity, notwithstanding
Section 6(e), any future Quarterly Grants shall be forfeited
in the event that this Agreement, and Feltheimer’s employment
hereunder, is terminated pursuant to Section 14(a)(i),
14(a)(ii) or 14(a)(iii). Additionally for the sake of clarity, any
and all references to RSUs in Sections 6(c) and 6(e) of the
Agreement shall not include any Quarterly Grant. If
shareholder or regulatory approval of any Quarterly Grant is
necessary and Lions Gate is unable to obtain such approval for all
or any portion of a Quarterly Grant, then Feltheimer shall be
entitled to alternative commensurate compensation, the details of
which shall be negotiated in good faith.
(a)
Grant of Options . Provided that Feltheimer’s
employment hereunder has not been terminated for cause (as defined
herein), death or disability (as defined herein), and subject to
shareholder approval thereof (which Lions Gate acknowledges has
been received to the extent required) and regulatory approval, if
required, on or about the Effective Date Feltheimer shall be
granted an option to purchase 1,050,000 shares of Lions Gate stock
(the “Options”) at a per-share exercise price equal to
the closing price of a Lions Gate common share on the date the
Options are granted. The foregoing Options shall be in addition to
any Pre-existing Equity as well as the RSU grants provided for in
this Agreement.
(b)
Date of Vesting; Date Exercisable . Subject to
Feltheimer’s continued employment hereunder, the Options
shall vest and become exercisable as to 262,500 shares on each of
September 20, 2007, September 20, 2008,
September 20, 2009 and September 20, 2010; provided,
however, if the vesting of the Options and rights to exercise are
accelerated pursuant to
Page 5 of 18
Section 9(b) or Section 14(c)(iii)
below, then the foregoing requirement that Feltheimer be an
employee shall not apply with respect to any of the foregoing
vesting dates.
(c)
Offset; Favored Nations . Lions Gate agrees that the Options
shall be provided under the most favorable circumstances allowed
for senior executives under the plan governing such options. Except
as otherwise expressly provided herein, the Pre-existing Equity
shall continue to be subject to the terms and conditions of the
agreement(s) pursuant to which it was originally
granted.
(d)
Failure to Obtain Shareholder or Regulatory Approval . If
Lions Gate’s shareholders fail to approve Company’s
grant of the Options (in this regard, Lions Gate acknowledges that
plan approval has already been obtained), or if regulatory approval
of the grant of the Options is necessary and Lions Gate is unable
to obtain such approval for all or any portion of the Options, then
Feltheimer shall be entitled to alternative commensurate
compensation, the details of which shall be negotiated in good
faith.
8. Stock
Appreciation Rights . Pursuant to the Prior Agreement,
Feltheimer and the Company agreed to the cancellation of the
375,000 stock appreciation rights (“SARs”) which were
granted to Feltheimer pursuant to his December 11, 2001
Agreement. In exchange for the cancellation of such SARs, the
Company paid Feltheimer US$2.1 million (subject to all
applicable tax withholdings) following the Effective Date.
Feltheimer agrees that he no longer has any rights with respect to
such SARs.
9. Change
of Control . In the event of a “Change of Control”
as defined below, the following shall apply:
(a)
Change of Control definition . For purposes of this
Agreement, the term “Change of Control” shall
mean:
(i) if
any person, other than a trustee or other fiduciary holding
securities of Lions Gate under an employee benefit plan of Lions
Gate, becomes the beneficial owner, directly or indirectly, of
securities of Lions Gate representing 33% or more of the
outstanding shares of common stock of Lions Gate as a result of one
or more related transactions in the context of a merger,
consolidation, sale or other disposition of equity interests or
assets of Lions Gate;
(ii) if,
as a result of one or more related transactions in the context of a
merger, consolidation, sale or other disposition of equity
interests or assets of Lions Gate, there is a sale or disposition
of 33% or more of Lions Gate’s assets (or consummation of any
transaction, or series of related transactions, having similar
effect);
(iii) if,
as a result of one or more related transactions in the context of a
merger, consolidation, sale or other disposition of equity
interests or assets of Lions Gate, there occurs a change or series
of changes in the composition of the Board as a result of which
half or less than half of the directors are incumbent
directors;
(iv) if,
as a result of one or more related transactions in the context of a
merger, consolidation, sale or other disposition of equity
interests or assets of Lions Gate, a
Page 6 of 18
shareholder or
group of shareholders acting in concert obtain control of 33% or
more of the outstanding shares;
(v) if,
as a result of one or more related transactions in the context of a
merger, consolidation, sale or other disposition of equity
interests or assets of Lions Gate, a shareholder or group of
shareholders acting in concert obtain control of half of the
Board;
(vi) if
there is a dissolution or liquidation of Lions Gate; or
(vii) if
there is any transaction or series of related transactions that has
the substantial effect of any one or more of the
foregoing.
(b)
Unvested Restricted Stock Units/Options . If a Change in
Control occurs while Feltheimer is employed by Lions Gate
hereunder:
(i) Any
then-unvested portion of the Time Vesting RSUs and any
then-unvested portion of the Options shall immediately and fully
vest, and the Options shall become immediately and fully
exercisable.
(ii) The
Performance Vesting RSUs that are eligible to vest on the next
Performance Vesting Date after the date of such Change in Control
(but not including any Performance Vesting RSUs that were eligible
to vest on any preceding Performance Vesting Date and did not vest
on such date) shall immediately and fully vest. Unless otherwise
provided by the Compensation Committee, any Performance Vesting
RSUs that have not vested after giving effect to the foregoing
sentence shall immediately terminate.
(i) If,
in connection with a Change of Control, Feltheimer’s
employment is terminated by Lions Gate for any reason, excepting
only termination for cause (as set forth in Section 14(a)(iii)
below) or due to Feltheimer’s death or Disability, then,
subject to Section 14(d)(ii) but notwithstanding any other
provision to the contrary in Section 14 below, Feltheimer
shall be entitled, in addition to the Accrued Obligations, to the
payment of US$2,500,000 within five (5) business days after
Feltheimer’s Separation from Service and shall be entitled to
the continued payment of Base Salary thereafter through
March 31, 2014 in accordance with Lions Gate’s standard
payroll practices.
(ii) For
a period of thirty (30) days following the effective date of
the Change of Control (i.e., the date of the formal closing of the
transaction), Feltheimer shall have the right, exercisable in his
sole discretion, to terminate his employment hereunder by giving
written notice thereof to Lions Gate within such thirty
(30) day period, in which event Feltheimer shall be entitled,
subject to Section 14(d)(ii) and in addition to the Accrued
Obligations, to the payment of US$2,500,000 within five
(5) business days after Feltheimer’s Separation from
Service; provided, however, that Feltheimer shall not be entitled
to any further payment of Base Salary beyond any such amounts that
are then accrued but unpaid.
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