Exhibit 10.2
EXECUTION
COPY
EMPLOYMENT AGREEMENT
This Employment Agreement
(“Agreement”) by and between Lions Gate Entertainment
Corp. (“Lions Gate”) and Jon Feltheimer
(“Feltheimer”) is entered into as of September 20,
2006 (the “Effective Date”). The employment agreement
entered into as of August 15, 2003, between Feltheimer and
Lions Gate (“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 subpart 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 the Effective Date and continue through and including
March 31, 2011 (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 remaining Term of this Agreement, 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”).
4. Discretionary Annual
Bonus . Feltheimer is 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 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 30 of each year during the Term, and, in addition,
June 30 of 2011 (for bonus amounts based on the fiscal year ending
March 31, 2011).
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.
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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 Base Salary, Discretionary
Bonus, Restricted Stock Units (as defined below), Option (as
defined below) or Benefits (as defined below) 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 during the Term and the
maximum aggregate bonus that could be payable to Feltheimer under
any scenario during the Term pursuant to this Paragraph 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 Paragraph 21(f) below should Feltheimer dispute Lions
Gate’s position with respect thereto.
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 date hereof (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”).
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(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 Paragraph 9(b) or Paragraph 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.
7. Options .
(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, 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
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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 Paragraph 9(b) or Paragraph 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.
(e)
Term of Pre-Existing Equity . Notwithstanding anything to
the contrary contained in this Agreement, Paragraph 6(e) of the
Prior Agreement shall remain in effect as to any Pre-Existing
Equity (as defined therein) held by Feltheimer as of
August 15, 2003 as if this Agreement had not been executed and
the term of such Pre-Existing Equity shall remain extended, as
provided for in the Prior Agreement, through and including
September 30, 2007, but not beyond that date.
8. Stock Appreciation
Rights . Feltheimer and the Company hereby agree to the
cancellation of the 375,000 stock appreciation rights
(“SARs”) which were granted to Feltheimer pursuant to
his December 11, 2001 Agreement, and which are currently
vested, have a strike price of US$5.00 and expire on
September 30, 2007. In exchange for the cancellation of such
SARs, the Company agrees to pay Feltheimer US$2.1 million
(subject to all applicable tax withholdings) promptly following the
date hereof. Feltheimer agrees that, upon such payment, he will no
longer have 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
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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 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 RSUs granted pursuant to
Section 6(b)(i) above and any then-unvested portion of the
Options shall immediately and fully vest, and the Options shall
become immediately and fully exercisable.
(ii) The
RSUs granted pursuant to Section 6(b)(ii) above that are
eligible to vest on the next Performance Vesting Date after the
date of such Change in Control (but not including any 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 RSUs that
have not vested after giving effect to the foregoing sentence shall
immediately terminate.
(c)
Severance .
(i) If,
in connection with a Change of Control, Feltheimer’s
employment by Lions Gate is terminated for any reason, excepting
only termination for cause (as set forth in Paragraph 14(a)(iii)
below) or termination at Feltheimer’s election (pursuant to
Paragraph 9(c)(ii) below), then notwithstanding anything to
the contrary in Paragraph 14 below Feltheimer shall be
entitled to the payment of US$2,500,000 within five
(5) business days of such termination and shall continue to be
entitled to the continued payment of Base Salary through the normal
expiration of the Term;
(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
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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 to the payment of US$2,500,000 within five
(5) business days of such termination; provided, however, that
Feltheimer shall not be entitled to the further payment of Base
Salary beyond any such amounts that are then accrued but unpaid;
and
(d)
Waiver of Stock Price Bonus Condition Precedent . If at the
time of the effective date of a Change of Control Lions
Gate’s share price is US$13.00, $16.00 or $19.00 per share or
greater than any of the foregoing, then Lions Gate shall pay
Feltheimer any applicable Stock Price Bonus(es) associated with
such Lions Gate share price as set forth in Paragraph 5 above,
without regard to the potential condition precedent or reduction
set forth in Paragraph 5 above, within five (5) business
days following such Change of Control.
(e)
Section 280G . Notwithstanding any other provision in
this Agreement to the contrary, to the extent that the payments and
benefits provided under this Agreement and benefits provided to, or
for the benefit of, Feltheimer under any other Lions Gate plan or
agreement (such payments or benefits are collectively referred to
as the “Payments” for purposes of this Section 9(e))
would be subject to the excise tax (the “Excise Tax”)
imposed under Section 4999 of the Internal Revenue Code of
1986, as amended, then this Section 9(e) shall apply to the
Payments:
(i) Lions
Gate and Feltheimer shall promptly negotiate in good faith an
allocation of the Payments as between (A) a
severance/parachute payment and (B) a consulting fee for
Feltheimer’s post-Term non-exclusive consulting services to
Lions Gate so as to minimize the amount of the Excise Tax.
(ii) In
the event that it is not possible or practicable in the
circumstances to make the allocation contemplated by
Section 9(e)(i) above, either clause (x) or clause
(y) shall apply, whichever would result in Feltheimer
retaining the greatest amount of the Payments on an after-tax basis
(taking into account federal, state and local income taxes and the
Excise Tax), where (x) and (y) are as follows:
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(x) |
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The Payments shall be reduced (but not below zero) such that
the total amount of the Payments is $1 less than would cause the
Payments to be subject to the Excise Tax (such reduced amount is
referred to hereinafter as the “Limited Payment
Amount”). Unless Feltheimer shall have given prior written
notice specifying a different order to Lions Gate to effectuate the
Limited Payment Amount, Lions Gate shall reduce or eliminate the
Payments by first reducing or eliminating those payments or
benefits which are not payable in cash and then |
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