Amendment No. 2 to Employment Agreement between Michael Porche and Distribution Services, Inc.
This amendment updates the employment agreement between Michael Porche and Distribution Services, Inc., a subsidiary of American Media Operations, Inc. It extends Mr. Porche's employment term to December 31, 2009, revises his annual bonus eligibility, and clarifies employee benefits. The amendment also updates terms regarding severance pay, bonus payments, and the definition of 'cause' for termination. It includes provisions to comply with IRS Section 409A regulations on deferred compensation. Severance is payable in monthly installments if terminated without cause, subject to signing a release agreement.
Exhibit 10.23
AMENDMENT NO. 2 dated as of December 20, 2007, to that Employment Agreement dated October 22, 2004 (the Agreement) by and between Michael Porche (the Executive) and DISTRIBUTION SERVICES, INC. (DSI), a subsidiary of AMERICAN MEDIA OPERATIONS, INC. (the Company or AMI) |
Effective as of the date first written above (the Amendment Effective Date), the Agreement is hereby amended as follows:
1. Paragraph 1a of the Agreement is hereby deleted and the following substituted therefor:
Employment Term. The Company shall employ Executive until December 31, 2009 (the Employment Term) on the terms and subject to the conditions set forth in this Agreement. The Agreement shall be considered effective as of December 22, 2003 (the Effective Time).
2. Paragraph 4 of the Agreement is hereby deleted and the following substituted therefor:
Annual Bonus. With respect to each full fiscal year of DSI during the Employment Term, Executive shall be eligible to earn an annual bonus award (an Annual Bonus) of $175,000.00 (One Hundred Seventy Thousand Dollars and Zero Cents) (the Target Bonus), based on the achievement by DSI of an annual EBITDA target established by the Companys Chief Executive Officer (based on the terms and conditions of the Plan presented to Executive each fiscal year). The Target Bonus will be reviewed and adjusted by the CEO on an annual basis. Such Bonus, if any, shall be payable in a lump sum after the close of the fiscal year and the Companys 10-K has been filed (approximately 90 days after the close of the Companys fiscal year), but in no event later than March 15 of the calendar year following the calendar year in which the fiscal year ends.
3. Paragraph 5A of the Agreement is hereby deleted and the following substituted therefor:
Employee Benefits. During Executives employment with the Company, Executive shall be provided, in accordance with the terms of the Companys employee benefit plans as in effect from time to time, health insurance (available to his and his spouse and children in accordance with the requirements of the insurance plan) and short term and long term disability insurance, retirement benefits and fringe benefits (collectively, Employee Benefits) on the same basis as those benefits are generally made available to other most senior employees of the Company.
4. Paragraph 7(A) of the Agreement is hereby deleted and the following substituted therefor:
the Base Salary through the date of termination, to be paid in accordance with the Companys usual payment practices;
5. Paragraph 7(B) of the Agreement is hereby deleted the following substituted therefor:
any Annual Bonus earned but unpaid as of the date of termination for any previously completed fiscal year, to be paid in accordance with the time and form of payment described in Paragraph 4.
6. Paragraph 7(C) of the Agreement is hereby deleted and the following substituted therefor:
in accordance with the Reimbursement Policy, reimbursement for any unreimbursed business expenses properly incurred by Executive prior to the date of Executives termination; and
7. Paragraph 7(E) of the Agreement is hereby deleted and the following substituted therefor:
severance pay in the amount of twelve months of Base Salary, if termination is for any reason other than Cause or Expiration of the Employment Term or resignation by Executive. Severance pay, if any, will be payable in twelve (12) equal monthly installments. Executive will be required to execute and return the Companys form Separation and Release of Claims Agreement within 45 days after Executives termination of employment in order to receive the severance pay described above. Payment of Executives severance shall commence no earlier than seven (7) working days after the Company receives the executed Separation and Release and no later than 90 days after the date of Executives separation from service (as defined in Section 1.409A-l(h) of the Treasury Regulations) (Separation from Service), the exact payment date to be determined by the Company in its sole discretion, provided that Executive timely executes and returns the Separation and Release and Claims Agreement and does not subsequently revoke such execution. For all purposes of Section 409A of the Internal Revenue Code (the Code) and the related regulations. Executives entitlement to severance pay pursuant to this Agreement shall be treated as an entitlement to a series of separate payments. To the extent permitted under Section 409A of the Code and the related regulations, any such payments that are excluded from the definition of deferral of compensation pursuant to Section 1.409A-l(b)(4) of the Treasury Regulations shall not be taken into account in determining the eligibility of the remaining severance payments for exclusion from the definition of deferral of compensation pursuant to Section 1.409A-l(b)(9)(iii) of the Treasury Regulations. Cause shall mean (i) Executives continued failure or refusal to substantially perform Executives duties hereunder (other than as a result of total or partial incapacity due to physical or mental illness) for a period of 10 days following written notice by the Company to Executive of such failure or refusal, (ii) dishonesty in the performance of Executives duties hereunder, (iii) an act or acts on Executives part constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving moral turpitude, (iv) Executives willful malfeasance or willful misconduct in connection with Executives duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates, (v) Executives breach of any provision of this Agreement, including the attached addendum, or (vi) Executives unsatisfactory job performance.
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8. Paragraph 7 of the Agreement is further amended by the following subparagraph (H) thereto:
Notwithstanding anything to the contrary herein, if any class of the Companys stock shall become publicly traded or if the Company becomes a member of a controlled group of companies whose stock is publicly traded and if Executive is a specified employee (as that term is defined in Section 409A(a)(2)(B)(i) of the Code and the related regulations) at the time of Executives Separation from Service, as determined by the Company in accordance with the provisions of Sections 416(i) and 409A of the Code and the regulations issued thereunder, no payment (excluding any payment that is exempt from Section 409A of the Code pursuant to Section 1.409A-l(b) of the Treasury Regulations) shall be made to Executive prior to six (6) months after his Separation from Service, provided that any such payments that would otherwise be made during the first six (6) months following Executives Separation from Sender shall be paid in the seventh (7th) month following his Separation from Service.
9. Paragraph 9 of the Agreement is hereby amended by adding the following new subparagraph (m) thereto:
Section 409A. All benefits and compensation payable pursuant to this Agreement are intended to be exempt from the definition of nonqualified deferred compensation plan or deferral of compensation under Section 409A of the Code in accordance with one or more exemptions available under the Treasury Regulations promulgated under Section 409A. To the extent that any benefit or payment is or becomes subject to Section 409A, this Agreement is intended to comply with the requirements of Section 409A as applicable to such benefit or payment. This Agreement shall be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent.
10. Paragraph 8 of Exhibit A to the Agreement is hereby deleted and the following substituted therefor:
Executive agrees that during the term of his employment with AMI and for the period of twelve (12) months following Executives voluntary termination of employment or for the period of twelve (12) months following Executives involuntary termination of employment (if Executive receives severance payments) or for three (3) months following Executives involuntary termination of employment (if Executive does not receive severance payments), he will not engage in any relationship, directly or indirectly, including but not limited to, advising, being compensated in any way by, being employed by, permitting his name to be associated with or used by, or consulting, with any Prohibited Business (as hereinafter defined) within the United States of America or Canada. For purposes of this agreement, Prohibited Business means any business which is in any way involved in the publishing, production, pre-press, marketing, racking, or servicing of products similar to those produced or serviced by AMI. Executive further agrees that he will not interfere with business relationships (whether formed before or after the date of this Agreement) between the Company or any of its affiliates and customers, suppliers, partners, members or investors of the Company or its affiliates. Executive acknowledges that AMIs products and services are marketed throughout the United States of America, Canada and elsewhere, and that therefore a restriction to the geographic area of the United States of America and Canada is reasonable with regard to AMIs business plans and the market for its products and services. In the event that the term of Executives Employment Agreement
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expires and Executive becomes an employee at will under terms and conditions similar to those contained in his Employment Agreement, and if Executives employment is terminated while Executive is an employee at will, Executive will additionally be bound by the terms of this Paragraph for a period of twelve (12) months following termination of employment, provided that AMI compensates Employee in the amount of $27,083.33 (Twenty-Seven Thousand Eighty-Three Dollars and Thirty-Three Cents) per month (Severance) for the twelve-month non-competition period. Payment of Executives Severance shall commence no later than 90 days after the date of Executives separation from service (as defined in Section 1.409A-l(h) of the Treasury Regulations), the exact payment date to be determined by the Company in its sole discretion. For all purposes of Section 409A of the Internal Revenue Code (the Code) and the related regulations, Executives entitlement to Severance shall be treated as an entitlement to a series of separate payments. To the extent permitted under Section 409A of the Code and the related regulations, any such payments that are excluded from the definition of deferral of compensation pursuant to Section 1.409A-l(b)(4) of the Treasury Regulations shall not be taken into account in determining the eligibility of the remaining Severance payments for exclusion from the definition of deferral of compensation pursuant to Section 1.409A-l(b)(9)(iii) of the Treasury Regulations. If Executive does not comply with the terms contained herein, AMI shall not be obligated to pay Executive Severance. AMI agrees to pay the greater of the Severance described above, or AMIS Severance program in effect at the time of termination of employment during the twelve-month non-competition period, provided, payment of Severance, whether under this Agreement or AMIs Severance program, shall be at a time and under a schedule such that the substitution of one benefit for the other would not cause an acceleration of nonqualified deferred compensation in violation of Section 1.409A-3(j) of the Treasury Regulations or otherwise give rise to an additional tax under Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement, Executive may, directly or indirectly own, solely as an investment, securities of any person engaged in the business of the Company or its affiliates, which securities are publicly traded on a national or regional stock exchange or on the over-the-counter market if Executive (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such person.
Except as amended herein, all other terms and conditions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment No. 2 as of the date first written above.
AMERICAN MEDIA OPERATIONS, INC. | ||||
By: | /s/ David Pecker | 2/25/08 | ||
David Pecker | Date | |||
/s/ Michael Porche | 2/25/2008 | |||
Michael Porche | Date |
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