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EXHIBIT 10.26
EQUITY AND BONUS COMPENSATION AGREEMENT
AGREEMENT by and between Silver King Communications, Inc., a Delaware
corporation (the "Company"), and ▇▇▇▇▇ ▇▇▇▇▇▇ (the "Executive"), dated as of
the 24th day of August, 1995.
WHEREAS, the Board of Directors of the Company (the "Board") has approved
the Term Sheet entered into by the Company and the Executive, dated as of the
date hereof, relating to the subject matter hereof (the "Term Sheet"); and
WHEREAS, the Term Sheet provides for the grant to the Executive of options
to purchase the common stock, par value $.01 per share (the "Stock"), of the
Company (the "Options") in tandem with the LSARs (as defined herein), on terms
and conditions set forth in the Term Sheet; and
WHEREAS, the Term Sheet provides that the Executive will serve as Chairman
of the Board and/or Chief Executive Officer and/or President of the Company on
certain terms and conditions; and
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WHEREAS, the Term Sheet also provides for the payment of certain bonuses
to the Executive; and
WHEREAS, Executive and the Company wish to set forth the terms and
conditions of the Options and such bonuses as well as certain other matters
covered by the Term Sheet more fully in this Agreement;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Options. (a) Grant. The Company hereby grants the Executive the
Options, consisting of the right to purchase 1,895,847 shares of Stock for an
exercise price of $22.625 per share. The terms of the Options are subject to
adjustment pursuant to subparagraph (ii) of paragraph (e) of this Section 1 and
to the other terms and conditions set forth in this Section 1.
(b) Exercisability and Termination. Except as provided in paragraph (d)
of this Section 1, the Options shall become exercisable as follows: with
respect to 473,962 shares on August 24 of each of 1996, 1997 and 1998; and with
respect
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to the remaining 473,961 shares on August 24, 1999. All Options, whether then
exercisable or not, shall terminate and cease to be exercisable as follows:
(i) if the Company terminates the Executive's employment for Cause,
immediately upon the effective date of such termination; and
(ii) if the Executive terminates his employment with the Company
other than for Good Reason, at the close of business on the 90th day
(or, if such day is not a business day, at the close of business on the
first business day after such day) following the effective date of such
termination; and
(iii) in all other cases, at the close of business on August 24,
2005.
(c) Method of Exercise. (i) Notice. Subject to the provisions of this
Section 1, the Executive may exercise one or more Options at any time when they
are exercisable by giving written notice of exercise to the Company specifying:
(A) the number of shares of Stock with respect to which the Options are being
exercised; (B) the method of withholding of taxes that the Executive has chosen
pursuant to paragraph (d) of Section 9, if not previously specified; and (C)
whether the Executive elects to pay the exercise price by (1) tendering to the
Company previously owned shares of Stock with an aggregate
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Fair Market Value (calculated as of the day before the date of exercise) equal
to the aggregate exercise price of the Options being exercised or (2) delivering
to the Company (I) a copy of an irrevocable instruction from the Executive to an
underwriter or broker directing such underwriter or broker to sell shares of
Stock to be acquired by the exercise of such Options in an amount (net of
brokers' and underwriters' fees, commissions or discounts) sufficient to pay
such exercise price in full, and promptly remit to the Company the amount of
such exercise price, all of which arrangements shall be reasonably satisfactory
to the Company, (II) irrevocable instructions from the Executive to the Company
to withhold from the shares of Stock to be acquired by the exercise of such
Options a number of shares having a Fair Market Value on the date of exercise
sufficient to pay such exercise price in full or (III) a combination of
the foregoing (in the case of (I), (II) or (III), a "Cashless Exercise").
(ii) Payment of Exercise Price. Upon the exercise of an Option, except to
the extent the Executive pays the applicable exercise price by means of a
Cashless Exercise, the
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Executive shall pay the applicable exercise price in cash, by bank check or such
other instrument as the Company may accept.
(iii) Issuance of Stock. As soon as practicable after receiving (A)
payment of the applicable exercise price of an Option that is exercised or (B)
the certificates for the shares of Stock referred to in clause (C)(1) of
subparagraph (c)(i) of this Section 1, or (c) the instructions referred to in
clause (C)(2)(I) or (II), as applicable, of subparagraph (i) of paragraph (c)
of this Section 1 with respect to the exercise of an Option by Cashless
Exercise and the Company's reasonable satisfaction with the arrangements in
respect thereof, as applicable, but subject to the provisions of paragraph (d)
of Section 9 (pertaining to the withholding of taxes), the Company shall issue
to the Executive in accordance with his instructions one or more stock
certificates in respect of the Stock acquired by that exercise (net of any
shares to be retained by the Company pursuant to clause (C)(1) of subparagraph
(c)(i) of this Section 1), which certificates shall be registered in the name
of the Executive and shall bear an appropriate legend substantially in the
following form:
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The securities represented by this certificate
have not been registered under the Securities Act
of 1933 or under the securities laws of any
state, and may not be sold or otherwise disposed
of except pursuant to an effective registration
statement under said Act and applicable state
securities laws or an applicable exemption to the
registration requirements of such Act or laws.
In addition, such securities shall also bear an appropriate legend referring to
any restrictions on the sale, transfer, assignment, pledge or other disposition
of such Stock contained in any stockholders agreement to which the Executive is
a party. When the Executive has given proper notice of exercise of an Option
and has paid the applicable exercise price in full as provided above, the
Executive shall have all of the rights of a stockholder of the Company holding
the Stock acquired by such exercise (including, if applicable, the right to
vote the shares or express consent and the right to receive dividends).
(d) Effect of a Change in Control. (i) Options. Upon a Change in
Control, all Options that have not previously become exercisable or been
terminated shall become exercisable.
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(ii) LSARs. With respect to each Option that has not been exercised or
terminated as of the date a Change in Control occurs, from and after the date
of the Change in Control until the termination of the Options in accordance
with Section 1 above, the Executive shall have the right (an "LSAR"), in lieu of
exercising such Option in accordance with Section 1 above, upon notice to the
Company of his election to exercise an LSAR, to surrender such Option to the
Company for cancellation in exchange for cash in an amount equal to the amount
by which the Change in Control Price per share of the Stock on the date of such
election exceeds the exercise price per share of Stock under such Option,
multiplied by the number of shares of Stock subject to such Option as to which
the right granted under this paragraph (d) of Section 1 is being exercised;
provided, however, that if the Change in Control occurs within six months of the
date of this Agreement, no such election shall be made before the expiration of
six months from the date of this Agreement.
(e) Other Terms and Conditions of Options and LSARs. (i)
Nontransferability. No Option or LSAR shall be transferable by the Executive
except (i) by will or by the laws
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of descent and distribution or (ii) with the consent of the Board of Directors
of the Company. Any transfer or purported transfer in violation of this
paragraph shall be void and of no effect. All Options and LSARs shall be
exercisable, during the Executive's lifetime, only by the Executive or by the
guardian or legal representative of the Executive, it being understood that for
purposes of this Section 1, references to the Executive include the guardian and
legal representative of the Executive and any person to whom an Option and the
related LSAR is transferred by will or the laws of descent and distribution.
(ii) Adjustments. (A) Dividends, Etc. The number and kind of
securities purchasable upon the exercise of the Options and the exercise price
of the Options shall be subject to adjustment from time to time upon certain
events, as follows:
(2) If the Company pays a dividend in shares of Stock,
makes a distribution to all holders of shares of any class of
its capital stock in shares of Stock, subdivides its outstanding
shares of Stock into a greater number of shares, or combines its
outstanding shares of Stock into a smaller number of shares of
Stock, then the number of shares of Stock purchasable upon
exercise of the Options shall be adjusted so that the Executive
shall be entitled to receive the kind and number of shares or
other securities of the Company that it
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would have owned and/or been entitled to receive as a result of
any of the events described above, had such Options been
exercised immediately before such event, effective immediately
after the effective date of such event.
(3) Whenever the number of shares of Stock purchasable upon
the exercise of the Options is adjusted pursuant to this
subparagraph (ii)(A) of paragraph (e) of Section 1, the exercise
price per share shall also be adjusted (to the nearest cent) by
multiplying the exercise price per share immediately before such
adjustment by a fraction, the numerator of which is the number
of shares of Stock purchasable upon the exercise of the Options
immediately before such adjustment, and the denominator of which
is the number of shares of Stock so purchasable immediately
thereafter.
(4) In the event that at any time, as a result of an
adjustment made pursuant to this subparagraph (ii)(A) of
paragraph (e) of Section 1, the Options shall become exercisable
for any securities of the Company other than shares of Stock,
thereafter the number of such other securities so purchasable
upon exercise of the Options and the exercise price of such
securities shall be subject to adjustment from time to time in a
manner and on terms as equivalent as practicable to the
provisions of this subparagraph (A) with respect to the shares
of Stock.
(B) Preservation of Purchase Rights Upon Reclassification, Consolidation,
etc. In case of any reclassification or change of outstanding Stock or other
securities purchasable upon exercise of the Options (other than a change in par
value or as a result of a subdivision or combination of shares of Stock),
recapitalization, separation
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(including a spin-off or other distribution of stock or property of
the Company), reorganization, any dividend or distribution not described in
subparagraph (ii)(A)(1) of this paragraph (e) of Section 1, or any
consolidation or merger of the Company with another corporation (other than a
consolidation or merger in which the Company is the surviving corporation that
does not result in any reclassification of or change in the outstanding shares
of Stock) or partial or complete liquidation, or any sale or conveyance to
another corporation of all or substantially all of the assets of the Company
(other than by mortgage or pledge), then the Company or such successor or
purchasing corporation, as the case may be, shall undertake to assure that:
(1) the Options shall be exercisable, upon payment of the applicable exercise
price in effect immediately before such action, for the kind and amount of
shares and other securities and property that the Executive would have owned
and/or been entitled to receive after such action, had such Options been
exercised immediately before such action; and (2) each such Option, and the
applicable exercise price, shall be subject to adjustments, which shall, to the
greatest extent practicable, be equivalent to, and subject to the same terms
and provisions as, the adjustments provided for
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in this paragraph (e) of Section 1. The provisions of this paragraph shall
similarly apply to successive reclassifications, consolidations, mergers, sales
and conveyances.
(C) LSARs. Upon any adjustments of an Option pursuant to the foregoing
provisions of this subparagraph (ii), corresponding adjustments to the related
LSAR shall also be made.
(D) Post-Adjustment References. Following an adjustment under this
paragraph (e) of Section 1, all references in this Section 1 to the number of
Options and LSARs, the number and kind of shares of Stock subject thereto, and
the exercise price thereof, shall be deemed to refer to such number, kind and
exercise price as adjusted.
2. Bonuses. (a) Initial Bonus. The Company shall pay the Executive a
bonus (the "Initial Bonus") equal to the amount such that, after payment of all
Taxes on the Initial Bonus, the Executive will retain an amount sufficient to
pay all Taxes that he is required to pay as a result of the
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purchase of the Initial Shares and the Additional Shares, determined as set
forth in this Section 2. The determination of the amount of the Initial Bonus
shall be made by the Accounting Firm based upon the assumption that the
Executive pays all applicable Taxes at the highest marginal rate thereof, and
such determination shall be final and binding upon the Company and the
Executive. The Accounting Firm shall notify the Company and the Executive of
the amount of the Initial Bonus as so determined on or before October 15, 1995,
and the Company shall pay the Initial Bonus to the Executive in a single cash
lump sum payment within five business days after receipt of such notice.
Notwithstanding the foregoing, in no event shall the amount of the Initial Bonus
exceed $1,000,000.
(b) Additional Bonuses. In addition to the Initial Bonus, the Company
shall pay the Executive the following bonuses (the "Additional Bonuses"): on
August 24, 1996, the Company shall pay the Executive, in a single cash lump sum
payment, $2,498,889.63, and on August 24, 1997, the Company shall pay the
Executive, in a single cash lump sum payment, $2,498,889.62; provided, however,
that the Additional Bonuses shall be payable immediately in full (to the extent
not
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theretofore paid) upon the first to occur of (i) a Change in Control of the
Company, or (ii) the termination of the Executive's employment with the Company
for any reason other than (A) by the Company at any time for Cause or (B) by
the Executive at any time before the Control Date without Good Reason;
provided, further, that in the event the Executive's employment is terminated
for Cause prior to the date on which an Additional Bonus is otherwise due, the
obligation of the Company to pay any such Additional Bonus shall terminate.
Except as provided in paragraph (d) of Section 9 with respect to the withholding
of taxes, neither the Company nor the Executive shall have the right to offset
all or any portion of the Additional Bonuses against any amount owed by the
Executive to the Company.
(c) Severance Bonus. If the Executive's employment with the Company is
terminated on or before August 24, 1996 for any reason other than by the
Company for Cause, the Company shall pay the Executive an additional bonus (the
"Severance Bonus") equal to two times the amount (if any) by which
$4,999,989.25 exceeds the Fair Market Value, on the date of such termination,
of the Additional Shares; provided,
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however, that the Severance Bonus shall in no event exceed $2,000,000.
(d) Penalty for Late Payment of Additional and Severance Bonuses. Subject
to the provisions of this Agreement, in the event that the Company does not pay
when due all or any portion of any of the bonuses provided for in paragraph (b)
or (c) of this Section 2, and the Executive shall have provided the Company
with written notice that such bonus is due and has not been timely paid in
full, the Company shall have three business days after receipt of such notice
to pay such unpaid amount (the "Late Payment Date"). If any portion of such
unpaid amount remains unpaid at the close of business on the Late Payment Date,
the remaining unpaid amount shall be increased by 20% (as so increased, the
"Unpaid Bonus"). The amount of the Unpaid Bonus shall accrue interest from and
after the Late Payment Date until the date of payment at the short-term
applicable federal rate, as defined in Section 1274(d) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the Unpaid Bonus, together with all
such accrued interest, shall be immediately due and payable.
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3. Registration. Upon request by the Executive, the Company shall use
all reasonable efforts promptly to effect a registration of Stock owned by the
Executive without cost to the Executive, other than underwriting discounts and
commissions, any broker or dealer fees or commissions and the fees and expenses
of any special accounting required in connection with the registration, which
shall be paid by the Executive; provided, however, that the Company shall not
be obligated to effect any registration pursuant to this paragraph if counsel
designated by the Company (which counsel shall be reasonably acceptable to the
Executive) delivers an opinion to the Executive to the effect that the number
of shares of Stock specified in such request for registration could then be
sold by the Executive within a three-month period under Rule 144 (or any
successor provision then in effect) under the Securities Act of 1933, as
amended, and the Executive is then entitled to sell Stock pursuant to said Rule
144. Such registration shall be effected pursuant to registration rights
customary under the circumstances.
4. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or
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future participation in any plan, program, policy or practice provided by the
Company or any of its stockholders or affiliated companies and for which the
Executive may qualify. Furthermore, nothing in this Agreement shall limit or
otherwise affect such rights or obligations as the Executive may have, subject
to paragraph (f) of Section 9, under any other contract or agreement with the
Company or any of its stockholders or affiliated companies.
5. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding and except as set forth below, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 5) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to
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receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of paragraph (c) of Section 5, all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Accounting Firm in its reasonable discretion and good faith, which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 5, shall be paid
by the Company to the Executive within five days of the receipt of the
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Accounting Firm's determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
paragraph (c) of Section 5 and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the GrossUp Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such
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claim prior to the expiration of the 30-day period following the date on which
the Executive gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this paragraph (c) of Section 5, the
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Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay the
tax claimed and ▇▇▇ for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and ▇▇▇ for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with
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respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount paid or advanced
by the Company pursuant to paragraphs (b) or (c) of Section 5, the Executive
becomes entitled to receive any refund with respect to such amount, the
Executive shall (subject to the Company's complying with the requirements of
paragraph (c) of Section 5) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph (c) of Section 5, a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
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6. Certain Other Terms and Conditions of Employment. (a) Expense
Reimbursement. The Company shall pay, or shall reimburse the Executive for, the
Executive's out-of-pocket expenses related to his employment by the Company, on
a basis consistent with such reimbursements from his prior employer.
(b) Incentive Compensation Plans. In addition to the compensation
provided for in this Agreement, and subject to any required approval of the
Board, the Executive shall be entitled, during his employment by the Company,
to participate in any and all incentive compensation plans of any kind
(including without limitation short-term and long-term plans and programs and
cash-based and stock-based plans and programs) maintained by the Company from
time to time for its management and/or key employees.
(c) Indemnification. If Executive or his affiliates are or become a
party or are threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, the Company shall indemnify the Executive and
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his affiliates against, and hold them harmless from, to the fullest extent
permitted by law, any and all claims, costs and expenses (including reasonable
attorneys' fees and expenses), judgments, fines and settlements (if such
settlement is approved in advance by the Company, which approval shall not be
unreasonably withheld), whether involving third parties or otherwise, incurred
by or asserted against the Executive and his affiliates (including without
limitation contests between the Company and the Executive, or between either of
them and any third party, and including without limitation contests involving
any payment pursuant to this Agreement) in connection with or arising from
the Executive's serving as Chairman of the Board and/or Chief Executive Officer
of the Company (and, if applicable, President of the Company) and the Executive
and his affiliates' entering into any and all definitive agreements contemplated
by or entered into pursuant to the Term Sheet, including without limitation the
stockholders agreement. The right of indemnification shall include the
advancement and payment of any and all expenses of the Executive and his
affiliates in connection with any matter for which the Executive may be entitled
to indemnification. Notwithstanding the foregoing, neither Executive nor his
affiliates shall be
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entitled to indemnification with respect to any action, suit or proceeding by or
on behalf of the Company in which the Executive is finally determined to have
breached the Stock Pledge Agreement.
(d) Legal Fees. The Company shall pay and/or reimburse the Executive for
all legal fees and expenses incurred by him and his affiliates in connection
with the negotiation of the Term Sheet and any and all definitive agreements
contemplated by or entered into pursuant to the Term Sheet, including without
limitation the stockholders agreement.
7. Definitions. The following terms shall have the meanings set forth in
this Section 7.
(a) The "Accounting Firm" means Price Waterhouse or any other nationally
recognized firm of certified public accountants reasonably acceptable to the
Company that the Executive may designate.
(b) The "Additional Bonuses" has the meaning assigned to it in paragraph
(b) of Section 2.
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(c) The "Additional Shares" means the Additional Shares as defined in the
Term Sheet, together with any other security into which the Additional Shares
may be converted as a result of any reclassification, stock split,
consolidation, merger or other change in the number or kind of security
represented by the Additional Shares.
(d) The "Board" has the meaning assigned to it in the second paragraph of
this Agreement.
(e) A "Cashless Exercise" has the meaning assigned to it in subparagraph
(i) of paragraph (c) of Section 1.
(f) "Cause" means the willful and continued failure of the Executive
substantially to perform his duties to the Company (other than as a result of
physical or mental illness or injury), after the Board delivers to the
Executive a written demand for substantial performance that specifically
identifies the manner in which the Board believes that he has not substantially
performed his duties.
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(g) A "Change in Control of the Company" means any transaction in which
any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than the Executive, Liberty Media Corporation ("Liberty"), ▇▇▇ ▇.
▇▇▇▇▇ ("▇▇▇▇▇"), and their respective affiliates (within the meaning of Rule
12b-2 promulgated under the Exchange Act), including any trusts or foundations
established by ▇▇▇▇▇ (a "Person"), acquires (i) beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of equity
securities of the Company representing a majority of the voting power of the
then-outstanding equity securities of the Company; (ii) all or substantially
all of the assets of the Company; or (iii) in the event that the Executive and
Liberty, and the members of their respective Stockholder Groups, collectively
cease to beneficially own equity securities of the Company representing a
majority of the voting power of the then-outstanding equity securities of the
Company (for such purpose, treating any shares of Class B Common Stock of the
Company then still subject to the Liberty Option as if they were owned by
Liberty and/or the Executive), the greatest of (w) equity securities of
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the Company representing 25 percent of the voting power of the then-outstanding
equity securities of the Company, (x) equity securities of the Company having
an aggregate voting power in excess of the aggregate voting power represented
by the equity securities of the Company then owned by Liberty and the members of
its Stockholder Group, and (y) equity securities of the Company having an
aggregate voting power in excess of the aggregate voting power represented by
the equity securities of the Company then owned by the Executive and the members
of his Stockholder Group, and (z) at any time when Liberty and the Executive (or
their respective affiliates) are parties to a stockholders agreement relating to
the ownership and voting of equity securities of the Company, the Executive and
his Stockholder Group own at least 1,000,000 shares of Stock (taking into
account all shares of Stock issuable upon exercise of all unexercised Options,
whether or not then exercisable, any other options to purchase, or securities
convertible into, shares of Stock owned by the Executive and the members of his
Stockholder Group, the Additional Shares and any other shares of Stock owned by
the Executive and the members of his Stockholder Group), and the Executive is
Chairman of the Board and/or Chief Executive Officer and/or President of the
Company,
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equity securities of the Company having an aggregate voting power in
excess of the aggregate voting power represented by the equity securities of the
Company then owned by Liberty and the Executive and the members of their
respective Stockholder Groups, collectively.
(h) The "Change in Control Price" means the higher of (i) the highest
reported sales price, regular way, of a share of Stock in any transaction
reported on the New York Stock Exchange Composite Tape or other national
exchange on which such shares are listed or on NASDAQ during the 60-day period
prior to and including the date of a Change in Control or (ii) if the Change in
Control is the result of a tender or exchange offer or merger, consolidation or
other similar transaction (a "Corporate Transaction"), the highest price per
share of Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that if the Change in Control occurs within six months of the
date of this Agreement, then the Change in Control Price shall be the Fair
Market Value of the Stock on the date the LSAR is exercised. To the extent that
the consideration paid in any such transaction described above consists all or
in part of securities or other noncash
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29
consideration, or, for purposes of the proviso in the preceding sentence, to
determine the Fair Market Value of the Stock if such value is not otherwise
determinable pursuant to the definition of "Fair Market Value" contained herein,
the value of such securities or other noncash consideration shall be determined
in good faith by the Board.
(i) The "Code" has the meaning assigned to it in paragraph (a) of Section
5.
(j) The "Company" means the Company as defined in the first paragraph of
this Agreement and any successor to its business and/or assets that assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(k) The "Control Date" means the date on which the Liberty Option shall
have been validly exercised.
(l) The "Excise Tax" has the meaning assigned to it in paragraph (b) of
Section 5.
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30
(m) The "Executive" has the meaning assigned to it in the first paragraph
of this Agreement.
(n) "Fair Market Value" means, as of any given date, the mean between the
highest and lowest reported sales prices of the Stock in the over-the-counter
market, as reported by NASDAQ, or, if the Stock is listed on a national
securities exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
security exchange on which the Stock is listed or admitted to trading, on that
date or, if there are no reported sales on that date, on the next day after
that date on which there are such reported sales.
(o) "Good Reason" means the assignment to the Executive of any duties
inconsistent in any respect with his position as Chairman of the Board and/or
CEO and/or President, as the case may be, of the Company, or any other action
by the Company that results in a diminution in his position, authority, duties
or responsibilities; any reduction of the Executive's compensation or benefits
below what is required by the terms of his employment with the Company; and any
purported
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31
termination of the Executive's employment by the Company other than for Cause.
(p) The "Initial Bonus" has the meaning assigned to it in paragraph (a) of
Section 2.
(q) The "Initial Shares" means the 220,994 shares of Stock purchased by
the Executive in exchange for cash as of August 24, 1995.
(r) The "Liberty Option" means the option, held by Liberty on the date
hereof, to acquire shares of Class B Common Stock of the Company from RMS
Limited Partnership.
(s) The "LSARs" has the meaning assigned to it in subparagraph (ii) of
paragraph (d) of Section 1.
(t) "NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations System.
(u) The "Options" has the meaning assigned to it in the third paragraph of
this Agreement.
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32
(v) The "Severance Bonus" has the meaning assigned to it in paragraph (c)
of Section 2.
(w) The "Stock" means the common stock of the Company, par value $.01 per
share.
(x) "Stockholder Group" means, in the case of Liberty, Liberty and the
controlled affiliates of Liberty and Tele-Communications, Inc. and, in the case
of the Executive, the Executive and his 90-percent owned and controlled
affiliates.
(y) "Taxes" means all federal, state and local income and other applicable
taxes.
(a) The "Term Sheet" has the meaning assigned to it in the second
paragraph of this Agreement.
(aa) An "Underpayment" has the meaning assigned to it in paragraph (b) of
Section 5.
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33
8. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive except by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
guardian and legal representatives. The Executive shall be entitled to assign
any rights of the Executive under this Agreement to any corporation or other
entity at least 90% owned by the Executive, in which case all references in
this Agreement to the Executive shall thereafter refer to such corporation or
other entity, as the case may be, and such corporation or entity shall thereupon
become bound hereby, provided, that prior to such time as the Executive ceases
to own at least 90% of such corporation or entity, the Executive shall cause
such rights to be reassigned to the Executive or another corporation or entity
at least 90% owned by the Executive.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
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34
(c) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place,
except as otherwise provided in subparagraph (ii) of paragraph (e) of Section
1.
9. Miscellaneous. (a) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or
by facsimile, overnight
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35
courier, or registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or facsimile number as any party shall have furnished
to the others in writing in accordance with this paragraph (b) of Section 9.
Notice and communications shall be effective when actually received by the
addressee.
(c) Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
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36
(d) Withholding Taxes. No later than the date as of which an amount first
becomes includible in the gross income of the Executive for federal income tax
purposes with respect to any Options under this Agreement, the Executive shall
pay to the Company, or make arrangements satisfactory to the Company regarding
the payment of, any Taxes that are required by law to be withheld with respect
to such amount. The obligations of the Company under this Agreement shall be
conditional on such payment or arrangements.
(e) No Waiver. The failure of the Executive or the Company to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have under this Agreement shall not
be deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(f) Entire Agreement. The Executive and the Company acknowledge that this
Agreement supersedes any prior agreement (including the Term Sheet) between the
parties with respect to the subject matter of this Agreement.
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(g) Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same original.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to authorization from their respective governing authorities, the
Company has caused this Agreement to be executed in its name on their behalf,
all as of the day and year first above written.
____________________________
▇▇▇▇▇ ▇▇▇▇▇▇
SILVER KING COMMUNICATIONS, INC.
By__________________________
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