Exhibit 10.5
FINAL
Discovery Communications, LLC
Discovery Appreciation Plan
(Amended and Restated Effective as of August 17,
2007)
Section 1.
Purpose .
The
purpose of the Plan is to provide financial incentives and rewards
to key executive and managerial employees of the Company and its
Subsidiaries. The Plan also provides a means to attract and retain
the executive and managerial talent needed to achieve the
Company’s long-term growth and profitability
objectives.
Section 2.
Definitions .
When
used herein, the following terms shall have the following
meanings:
“
Account ” shall mean the unfunded, bookkeeping account
maintained to record the vested and unvested Appreciation Units
awarded to each Participant under the Plan.
“
Additional Amount ” shall mean the additional 25% Unit
Benefit amount described in Section 7.3(a)(iii) hereof.
“
Affiliate ” shall mean any person directly or
indirectly controlling or controlled by any shareholder of the
Company, or any person under direct or indirect common control with
any shareholder of the Company.
“
Appreciation Period ” shall mean the period beginning
on the Grant Effective Date and ending (i) on the Regular
Maturity Date or (ii) in the circumstances described in
Section 7.3, on the applicable Early Termination Date.
“
Appreciation Unit ” shall mean the right to receive,
in accordance with the provisions of the Plan, a payment based on
the appreciation, if any, in the value of the Company during the
relevant Appreciation Period.
“
Award ” shall mean the grant of a number of
Appreciation Units which are allocated to a Participant’s
Account in accordance with the provisions of the Plan.
“
Beginning Unit Value ” shall mean the value per
Appreciation Unit as of the Grant Effective Date. Subject to
Section 3.3, the Beginning Unit Value as of October 1,
2005 and each Grant Effective Date thereafter shall be determined
as the product of: (A) the average closing price of a single
Class A share of DHC (trading on the Nasdaq National Market
under the symbol “DISCA”) for the ten (10) trading
days preceding and including the Grant Effective Date and the ten
(10) trading days following the Grant Effective Date, such
closing prices as according to the Wall Street Journal or a
comparable successor publication in the United States as of such
dates, multiplied by (B) one hundred ten percent.
“
Beneficiary ” shall mean any person designated in
accordance with Section 13.1 to receive the amount, if any,
payable under the Plan in the event of the death of a
Participant.
“
Cause ” shall mean the commission of any of the
following acts: (i) disorderly conduct; (ii) reporting to
work under the influence of alcohol or illegal drugs, or abuse of
alcohol or use of illegal drugs on Company premises or while on
Company business, or use outside of the Company premises which
impairs the employee’s ability to perform his or her work;
(iii) committing or attempting to commit deliberate damage to
Company property, misuse of Company property, advocating or taking
part in seizure or theft of, or trespassing on, Company property;
(iv) failing to observe established safety rules or
participating in activities which would endanger the safety of
others or damage the property or inventory of the Company;
(v) dishonesty or any act reflecting negatively on the good
reputation of the Company; (vi) obtaining employment on the
basis of false or misleading information; (vii) falsifying
time sheets, attendance or other Company records; (viii) being
absent from work without proper authority; or (ix) consistent
with the general policies and practices of the Company, such other
acts as may be determined by the Company in its sole
discretion.
“
Change in Control ” shall mean (i) the merger,
consolidation or reorganization of the Company with any other
company (or the issuance by the Company of its voting securities as
consideration in a merger, consolidation or reorganization of a
Subsidiary with any other company) other than such a merger,
consolidation or reorganization which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the other entity) at
least fifty percent of the combined voting power of the voting
securities of the Company or such other entity outstanding
immediately after such merger, consolidation or reorganization,
provided that DHC or Advance Newhouse Communications Inc. (and
their respective Affiliates) shall hold, in the aggregate, at least
fifty percent of the voting power of the voting securities of the
Company; (ii) the approval by the shareholders of the Company of a
plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of
the Company’s assets, other than any such sale or disposition
to an entity at least fifty percent of the combined voting power of
the voting securities of which is owned immediately after the sale
or disposition by DHC or Advance Newhouse Communications Inc. (and
their respective Affiliates); or (iii) any sale, transfer or
issuance of voting securities of the Company (including any series
of related transactions) as a result of which DHC or Advance
Newhouse Communications Inc. (and their respective Affiliates)
shall cease to hold, in the aggregate, directly or indirectly, at
least fifty percent of the voting power of the voting securities of
the Company.
“
Company ” shall mean Discovery Communications,
LLC.
“
Compensation Committee ” shall mean the Compensation
Committee of the Company, consisting of shareholder representatives
of the Company.
“
Competitor ” shall mean any entity in the media or
consumer products industries that is in competition with one or
more of the businesses of the Company and its Subsidiaries as so
determined by the Company from time to time in its sole
discretion.
“
DHC ” shall mean Discovery Holding Company, Inc.
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“
Disability ” and “ Disabled ” shall
mean a condition under which a Participant (1) is unable to
engage in any substantial gainful activity by reason of any
medically determined physical or mental impairment that can be
expected to result in death or can be expected to last for a
continuous period of not less than 12 months, or (2) is,
by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than
12 months, receiving income replacement benefits for a period
of not less than three months under an accident and health policy
covering employees of Company, as defined pursuant to
Section 409A.
“
Early Termination Date ” shall mean a date determined
in accordance with Section 7.3 hereof.
“
EIP ” shall mean the Discovery Communications, Inc.
Executive Incentive Plan, as the same may hereafter be amended from
time to time.
“
EIP Conversion Units ” shall mean unvested units or
vested units that have not yet appreciated, which such units were
previously awarded to a Participant under the EIP and which have
been converted to Units under the Plan following such
Participant’s election with respect to the same.
“
Employee ” shall mean an active and regular employee
of the Company or of any Subsidiary who is not classified as a
temporary, seasonal, leased, contingent and/or contracted worker.
For purposes of the Plan and this definition of
“Employee,” a “regular employee” of the
Company or of any Subsidiary shall mean a full-time or part-time
employee of the Company or any Subsidiary who: (i) is
classified by the Company or any Subsidiary as eligible to receive
health or welfare benefits from the Company or any Subsidiary and
(ii) is issued an IRS Form W-2 by the Company or any
Subsidiary for tax reporting purposes. Notwithstanding anything in
the Plan to the contrary, an “Employee” shall not
include any individual (i) who is classified as an independent
contractor by the Company or any Subsidiary, (ii) who is
provided compensation by or through an employee leasing or staffing
company or other third-party agency or organization,
(iii) whose compensation from the Company or any Subsidiary is
not subject to tax withholding or does not provide a basis upon
which employer contributions may be made by the Company or any
Subsidiary to an employee benefit plan, or (iv) who is
classified by the Company or any Subsidiary as a leased employee or
contingent worker, in each case during the period the individual is
so described in one or more of clauses (i) through
(iv) even if such individual is later retroactively
reclassified as a common-law employee of the Company or of any
Subsidiary during all or any portion of such period pursuant to
applicable law or otherwise.
“
Ending Unit Value ” shall mean the value of a given
Unit as of the end of the applicable Appreciation Period. Subject
to Section 3.3, the Ending Unit Value shall be determined as
the product of: (A) the average closing price of a single
Class A share of DHC (trading on the Nasdaq National Market
under the symbol “DISCA”) for the ten (10) trading
days preceding and including the last day of the applicable
Appreciation Period and the ten (10) trading days following
the last day of the applicable Appreciation Period, such closing
prices as according to the Wall Street Journal or a comparable
successor publication in the United States as of such dates,
multiplied by (B) one hundred ten percent.
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“
Full-Time Employee ” shall mean an Employee whose
regular work schedule (excluding vacation and sick days to which
such employee is entitled under then-applicable Company policy and
excluding overtime and any other non-regularly scheduled work) is
at least 40 hours per week.
“
General Liability Release ” shall mean the General
Release in the form annexed hereto as Attachment A.
“
Grant Effective Date ” shall mean the date on which a
grant of Appreciation Units is made to a Participant, or such other
date (which may, without limitation, be the date on which a
Participant first becomes eligible for an Award hereunder) on which
the Compensation Committee or its delegates in accordance with
Section 3.2 shall determine that a grant of Appreciation Units
to a Participant is to be effective. A given Grant Effective Date
is a function of Plan administration subject to the discretion of
the Compensation Committee and its delegates.
“
Non-Compete Terms ” shall mean the terms of a certain
covenant not to compete as provided in accordance with
Section 7.3(a)(ii) hereof.
“
Part-Time Employee ” shall mean an Employee whose
regular work schedule (excluding vacation and sick days to which
such employee is entitled under then-applicable Company policy and
excluding overtime and any other non-regularly scheduled work) is
less than 40 hours per week (or such number of hours per week
constituting a regular work week at an Employee’s work
location, as determined by the Company).
“
Participant ” shall mean an Employee who is selected
to participate in the Plan as provided in Section 3.2.
“
Plan ” shall mean this Discovery Communications, LLC
Discovery Appreciation Plan, as the same may hereafter be amended
from time to time.
“
Regular Maturity Date ” shall have the meaning set
forth in Section 6 hereof.
“
Retirement ” shall mean the Separation From Service by
an Employee (other than for Cause) after such employee’s
attainment of age 62 with five years of service with the Company or
any Subsidiary [(with such service credited pursuant to the rules
in effect for vesting purposes under the Company’s 401(k)
retirement plan)].
“
Section 409A ” shall mean Section 409A of
the Internal Revenue Code of 1986, as it may be amended from time
to time.
“
Separation From Service ” (and variations on the form
of the same) shall mean a separation from service with the Company
within the meaning of Section 409A.
“
SRP ” shall mean the Discovery Communications LLC
Supplemental Deferred Compensation Plan, as the same may hereafter
be amended from time to time.
4
“
SRP Election ” shall mean, in accordance with
Section 3.2(b), an election by a Participant to transfer to
the SRP the Unit Benefits that otherwise would have become payable
with respect to certain designated Appreciation Units as a result
of (a) the Participant’s death, Disability, involuntary
(except for Cause) or voluntary (including Retirement) Separation
From Service; or (b) in connection with a Regular Maturity
Date.
“
Subsidiary ” shall mean (i) any corporation,
limited liability company, partnership or other entity a majority
of the voting power of which is owned, directly or indirectly, by
the Company and (ii) any other entity in which the Company
directly or indirectly holds an interest and that is designated by
the Compensation Committee or its delegates as eligible to have its
employees participate in the Plan.
“
Unforeseeable Emergency ” shall mean a severe
financial hardship to the Participant resulting from an illness or
accident of the Participant, the Participant’s spouse, or the
Participant’s dependent (as defined in Internal Revenue Code
Section 152(a), as the same may be amended from time to time),
loss of the Participant’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, as defined
pursuant to Section 409A.
“
Unit Benefit ” shall mean the benefits payable
pursuant to Section 7.1 of the Plan with respect to each
vested Appreciation Unit credited to a Participant’s Account,
and “ Unit Benefits ” shall mean the aggregate
benefits payable pursuant to Section 7.1 with respect to all
vested Appreciation Units credited to a Participant’s
Account.
Section 3.
Administration; Designation of Participants and Grant
Elections; Share Adjustments .
3.1 Administration . The Compensation
Committee shall have the general discretionary responsibility and
authority for the administration of the Plan, including the ability
to amend or terminate the Plan. The Compensation Committee shall
have the discretionary authority to establish from time to time
policies, procedures and guidelines for the administration of the
Plan and the discretionary authority to construe and interpret the
terms of the Plan (including the discretionary authority to
determine eligibility for benefits under the Plan) and any such
policies, procedures and guidelines, and the Compensation Committee
may, in its discretion, delegate such authority to the Chief
Executive Officer or to senior management of the Company; provided,
however, that granting of Awards shall be as set forth in
Section 3.2(a) hereof, and the Compensation Committee may not
delegate authority to amend or terminate the Plan. Unless otherwise
required by applicable law or regulation, such delegates may also
be participants in the Plan; provided, however, to the extent any
determination directly affects the rights or benefits of any
delegate (except with respect to determinations that may affect
Plan participants or classes of Plan participants generally), the
delegation shall be deemed to be revoked as to such delegate.
Special rules may be adopted in respect of grants of Awards to
Employees based outside the United States.
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3.2 Designation of Participants and Grant
Elections .
(a)
Designation of Participants . Key employees of the
Company and its Subsidiaries shall be eligible to participate in
the Plan, provided such individuals are Employees (as defined in
Section 2). The Compensation Committee may, from time to time
and in its sole discretion, select those Employees who shall become
Participants in the Plan, and determine the number of Appreciation
Units to be awarded to any such Participant and the terms and
conditions that shall apply to any such Award (which eligibility
and other terms and conditions may vary); provided, however, that
effective as of the date hereof, the Compensation Committee shall
delegate authority in respect of this Section 3.2(a) to the
Chief Executive Officer until such time as the Compensation
Committee may revoke such delegation. Upon payment of (or
appropriate deferral of payments of) any of a Participant’s
Appreciation Units, a replenishment grant may be awarded at the
discretion of the Compensation Committee.
(b)
SRP Deferral . If a Participant is eligible to
participate in the SRP, such Participant may elect, pursuant to
various SRP Elections, to transfer to the SRP the Unit Benefits
that otherwise would have become payable with respect to certain
designated Appreciation Units as a result of the
Participant’s death, Disability, involuntary Separation From
Service (other than for Cause), voluntary Separation From Service
(including Retirement), or upon a Regular Maturity Date, by having
the Unit Benefit amount, if any, attributable to such Appreciation
Units credited to an unfunded bookkeeping account maintained on his
or her behalf under the SRP, to be valued thereafter in accordance
with the Participant’s elections pursuant to and in
accordance with the SRP, and in accordance with the following terms
and conditions.
(i) Such
SRP Election shall be made, in such form and manner as may be
prescribed by the Company, before the time of Award. Unless
otherwise permitted by the Company in accordance with
Section 409A of the Internal Revenue Code of 1986, as amended,
such SRP Election must be filed with the Company prior to the
December 31 of the calendar year preceding the calendar year
in which the Award is made (or, if a service provider is not
eligible to participate at such time, not later than the earlier of
(v) thirty (30) calendar days after the date the
Participant is first eligible to participate in the Plan or
(w) the date of the Award). For purposes of this
Section 3.2(b)(i), a Participant who terminates employment,
and then becomes eligible to participate again will be treated as a
newly eligible Participant only if (x) payment for all of such
Participant’s Appreciation Units previously granted has been
made, and on and before the date of the last such payment, such
Participant was not eligible to continue to participate in the Plan
for periods after the last such payment, (y) such Participant
was not eligible to participate (other than accrual of earnings) at
any time during the 24-month period ending on the date the employee
again becomes eligible to participate, or (z) as otherwise
permitted by the Company in accordance with Section 409A. This
Section is intended to comply with Section 409A.
(ii) Such
SRP Election may be made with respect to all or a portion of the
Appreciation Units (in such minimum increments as may be determined
by the Company).
(iii) Such
SRP Election shall be effective commencing upon election and shall
be irrevocable.
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(iv) In
the event of such a deferral election, the Unit Benefits, if any,
to be credited to the SRP with respect to the Appreciation Units
for which such deferral election has been made shall be determined
in accordance with Section 7.1. The date such Unit Benefits
are credited to the SRP shall be no later than the date that such
Unit Benefits would have become payable under Section 7.2(a) in the
absence of such SRP Election.
(v) To
the extent an SRP Election is made by a Participant with respect to
Appreciation Units hereunder and an amount of Unit Benefits, if
any, is credited to the SRP, such benefit amount shall be valued
thereafter in accordance with the participant’s elections
pursuant to, and payable solely from and in accordance with the
terms and conditions of the SRP, and following the crediting of
such Unit Benefits to the SRP no Unit Benefits attributable to such
Appreciation Units shall be valued pursuant to or payable under the
Plan, and such Appreciation Units shall be terminated and canceled
under the Plan.
3.3 Share Adjustments . In the event of
any Change in Capitalization, an equitable substitution or
proportionate adjustment shall be made in the number of shares of
Company stock underlying Appreciation Units and/or in the value of
outstanding Appreciation Units, in each case as may be determined
by the Compensation Committee in its sole discretion. For purposes
of this Section 3.3, “Change in Capitalization”
means any increase, reduction, or change or exchange of shares of
the Company or DHC for a different number or kind of shares or
other securities or property by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, issuance
of warrants or rights, stock dividend, stock split or reverse stock
split, combination or exchange of shares, repurchase of shares,
change in corporate structure or otherwise or any other corporate
action, such as a declaration of a special dividend, that affects
the capitalization of the Company or DHC.
Section 4.
Vesting .
4.1 Vesting Schedule . Except as
otherwise provided in Section 5 or as the Compensation
Committee may otherwise determine, a Participant’s interest
in the Appreciation Units awarded to him or her under the Plan
shall vest in accordance with the following schedule:
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| Period of Continuous |
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| Employment with the |
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| Company Following the |
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Cumulative Vested |
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Grant Effective Date |
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Percentage |
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Less than
1 year
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0 |
% |
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At least
1 year, but less than 2 years
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25 |
% |
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At least
2 years, but less than 3 years
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50 |
% |
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At least
3 years, but less than 4 years
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75 |
% |
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At least
4 years
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100 |
% |
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4.2 Continuous Service; Breaks in Service
. Solely for purposes of Section 4.1, and unless the
Compensation Committee otherwise determines in its sole discretion,
(a) a Participant’s period of continuous employment with
the Company shall mean continuous service as a Full-Time Employee
and/or Part-Time Employee for the relevant vesting period, provided
that any such continuous service as a Full-Time Employee and/or a
Part-Time Employee shall include such service with any Subsidiary,
and (b) a Participant’s period of continuous employment
with the Company following the Grant Effective Date shall mean a
period commencing on the day immediately following the applicable
Grant Effective Date, and thus vesting shall occur on the
applicable anniversary dates of the Grant Effective Date (provided,
however, if any period of service is disregarded under
Section 5.4 in determining a Participant’s vested
interest, then vesting shall occur on the applicable dates
coinciding with the completion of the required period of continuous
employment following the Grant Effective Date). To the extent that
the application of the Vested Percentage specified in
Section 4.1 would otherwise result in vesting of fractional
Appreciation Units, then the number of such Appreciation Units that
first vest shall be the next higher whole number of Appreciation
Units and the remaining unvested fractional Appreciation Units with
respect to such Award shall be forfeited.
Section 5. Special
Vesting Provisions .
5.1 Termination for Cause . If a
Participant’s employment with the Company and its
Subsidiaries is terminated for Cause, then, notwithstanding any
other provision of the Plan, his or her interest in (i) any
Appreciation Units credited to his or her Account, whether or not
then vested, and (ii) any Unit Benefit transferred to the SRP
Plan and earnings thereupon, shall be forfeited immediately upon
the giving of notice of such termination, and no Unit Benefits or
benefits under the SRP Plan arising from or relating to any
transferred Unit Benefit shall be payable with respect to such
Participant.
5.2 Certain Terminations . If a
Participant voluntarily or involuntarily (other than for Cause)
Separates From Service with the Company and its Subsidiaries other
than for death, Disability or Retirement, any unvested Appreciation
Units as of the date such termination is effective shall be
forfeited and any vested Appreciation Units shall be payable in
accordance with Section 7.
5.3 Other Vesting Events . If either
(a) a Participant’s employment with the Company and its
Subsidiaries is terminated as a result of his or her death,
Disability or Retirement, (b) a Participant’s employment
with the Company and its Subsidiaries is terminated by the Company
not for Cause within twelve months after the date of a Change in
Control, or (c) the Plan shall be terminated as provided in
Section 17, then upon the happening of any of such events, any
unvested Appreciation Units credited to the Participant’s
Account as of the date of such event (other than any Appreciation
Units that have been forfeited or are otherwise subject to
forfeiture under Section 5.4(a)) shall become one hundred
percent (100%) vested.
8
5.4 Change in Status .
(a)
Change in Status from Full-Time Employee to Part-Time
Employee . If a Participant who is a Full-Time Employee
becomes a Part-Time Employee, or if the number of hours normally
worked by a Part-Time Employee is reduced but the Participant
remains a Part-Time Employee, then (i) as of the date such
change in status is effective, that percentage of any unvested
Appreciation Units that is proportional to the percentage of hours
by which such Employee’s regular work schedule was reduced
shall be forfeited, (ii) unvested Appreciation Units not so
forfeited shall continue to vest in accordance with
Section 4.1 and the terms and conditions of the Plan as long
as such Participant remains an Employee, and (iii) any vested
Appreciation Units shall be payable on the Regular Maturity Dates
in accordance with Section 7 or deferred in accordance with
Section 3.2(b). If any Participant who is subject to the
foregoing sentence has unvested Appreciation Units that vest in
more than one tranche, or tranches of vested Appreciation Units to
which more than one Appreciation Period applies, then forfeiture or
payment (or deferral into the SRP), as applicable, shall be made
with respect to the applicable proportional amount of each tranche;
provided that, if such forfeiture or payment (or deferral into the
SRP) would otherwise result in the forfeiture or payment (or
deferral into the SRP) of fractional Appreciation Units, then to
the extent necessary to prevent the forfeiture or payment (or
deferral into the SRP) of fractional Appreciation Units, in the
Company’s discretion, (A) the total number of
Appreciation Units to be so forfeited or paid (or deferred into the
SRP) shall be rounded to the next lower whole number of
Appreciation Units, and/or (B) the number of Appreciation
Units so forfeited or paid (or deferred into the SRP) shall be
adjusted by rounding the tranche that was or would be the last to
vest to the next higher number and the other fractions of an
Appreciation Unit shall be forfeited.
(b)
Temporary Change in Status; Leaves of Absence .
Notwithstanding any other provision of this Section 5.4, an
Employee who temporarily changes status or takes an authorized
leave of absence (including, without limitation, as a result of a
condition which could, with the passage of time, cause a
Participant to become Disabled), in either case for a period
generally not to exceed six months, may, if the Company shall in
its sole discretion so consent, have the provisions of subsection
(a) suspended, or shall deem that no Separation from Service
has occurred (to the extent permitted by Section 409A), during
the period of such temporary change in status or leave of absence;
provided that, during the period in which such Participant is on
such temporary s
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