DOW JONES NEWSWIRES
October 27, 2004 11:46 a.m.
By Chad Bray
Of DOW JONES NEWSWIRES
GEORGETOWN, Del. -- Michael Ovitz, Walt Disney Co.'s (DIS) former president, testified Wednesday that he asked the entertainment giant for a "guarantee" in his contract when he left the talent agency he founded.
Testifying in a high-profile shareholder lawsuit, the one-time top talent broker said he asked for some form of protection because he was giving up his ownership in Creative Artists Agency, a talent agency he founded.
"I spent my entire life protecting the upside and the downside for other people," Ovitz said. "It's part of the whole negotiation. One doesn't negotiate for the good times; one negotiates for the contingencies."
Ovitz, Disney Chief Executive Michael Eisner and a number of Disney's current and former directors are being sued by a group of shareholders in the Delaware Court of Chancery over an estimated $140 million severance package paid to Ovitz when he left the company after 14 months.
The shareholder derivative lawsuit, which has been in progress for more than seven years, claims Disney's board failed in their fiscal responsibilities by not properly scrutinizing Ovitz's employment contract when he joined the company in 1995 and then granting him a non-fault termination in 1996 that entitled him to the massive severance package when he left in December 1996.
Prior to joining Disney, Ovitz said he discussed joining MCA/Universal as its chairman and chief executive and bringing over key members of CAA's consulting business, but he eventually called off the talks after he became concerned about the automony he would have in making changes at the company. Ovitz said Eisner at the time advised him not to take the deal.
Ron Meyer, Ovitz's longtime partner at CAA, ended up taking the president's job at MCA/Universal because he was "burned out" as an agent, Ovitz said.
As a result, Ovitz said he began considering leaving CAA and pursued longtime overtures from Eisner. He, along with Ron Meyer and Bill Haber, sold their interest in CAA, receiving $180 million over a four-year period, he said. Ovitz's portion of the $180 million was equal to his equity stake in CAA, or 55%, he said.
The compensation package offered by Disney was less than Ovitz would have received at MCA/Universal, but he saw the Disney job as the "best opportunity," Ovitz said.
An expert witness for the shareholders said last week that Ovitz could have been fired for cause from Disney because of habitual lying and other activity at the company, such as excess expenses. Ovtiz's contract allowed him to be fired only for gross negligence or malfeasance.
Ovtiz said he was never notified by the company that he had committed gross negligence or malfeasance in his time at Disney and no one ever indicated he was committing such activity.
His understanding was that gross negligence or malfeasance would have to be activity that was "immoral" or "illegal."
Ovitz, in coming from a private company background, said he sought assistance from Irwin Russell, a board member, and others in attempting to meet Disney's expense policies.
At the same time, Ovitz said he became concerned about the cost of renovations of office space at Disney after he found construction was being done on the office at night. The shareholders group has alleged that the renovation of Ovitz's office cost more than $2 million. Ovitz's lawyers said the renovations included offices on two floors at Disney's headquarters.
"I never approved the budget, I didn't ask for this office and I had no idea what it cost," Ovitz said.
-By Chad Bray; Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com
October 27, 2004 11:46 a.m.
By Chad Bray
Of DOW JONES NEWSWIRES
GEORGETOWN, Del. -- Michael Ovitz, Walt Disney Co.'s (DIS) former president, testified Wednesday that he asked the entertainment giant for a "guarantee" in his contract when he left the talent agency he founded.
Testifying in a high-profile shareholder lawsuit, the one-time top talent broker said he asked for some form of protection because he was giving up his ownership in Creative Artists Agency, a talent agency he founded.
"I spent my entire life protecting the upside and the downside for other people," Ovitz said. "It's part of the whole negotiation. One doesn't negotiate for the good times; one negotiates for the contingencies."
Ovitz, Disney Chief Executive Michael Eisner and a number of Disney's current and former directors are being sued by a group of shareholders in the Delaware Court of Chancery over an estimated $140 million severance package paid to Ovitz when he left the company after 14 months.
The shareholder derivative lawsuit, which has been in progress for more than seven years, claims Disney's board failed in their fiscal responsibilities by not properly scrutinizing Ovitz's employment contract when he joined the company in 1995 and then granting him a non-fault termination in 1996 that entitled him to the massive severance package when he left in December 1996.
Prior to joining Disney, Ovitz said he discussed joining MCA/Universal as its chairman and chief executive and bringing over key members of CAA's consulting business, but he eventually called off the talks after he became concerned about the automony he would have in making changes at the company. Ovitz said Eisner at the time advised him not to take the deal.
Ron Meyer, Ovitz's longtime partner at CAA, ended up taking the president's job at MCA/Universal because he was "burned out" as an agent, Ovitz said.
As a result, Ovitz said he began considering leaving CAA and pursued longtime overtures from Eisner. He, along with Ron Meyer and Bill Haber, sold their interest in CAA, receiving $180 million over a four-year period, he said. Ovitz's portion of the $180 million was equal to his equity stake in CAA, or 55%, he said.
The compensation package offered by Disney was less than Ovitz would have received at MCA/Universal, but he saw the Disney job as the "best opportunity," Ovitz said.
An expert witness for the shareholders said last week that Ovitz could have been fired for cause from Disney because of habitual lying and other activity at the company, such as excess expenses. Ovtiz's contract allowed him to be fired only for gross negligence or malfeasance.
Ovtiz said he was never notified by the company that he had committed gross negligence or malfeasance in his time at Disney and no one ever indicated he was committing such activity.
His understanding was that gross negligence or malfeasance would have to be activity that was "immoral" or "illegal."
Ovitz, in coming from a private company background, said he sought assistance from Irwin Russell, a board member, and others in attempting to meet Disney's expense policies.
At the same time, Ovitz said he became concerned about the cost of renovations of office space at Disney after he found construction was being done on the office at night. The shareholders group has alleged that the renovation of Ovitz's office cost more than $2 million. Ovitz's lawyers said the renovations included offices on two floors at Disney's headquarters.
"I never approved the budget, I didn't ask for this office and I had no idea what it cost," Ovitz said.
-By Chad Bray; Dow Jones Newswires; 212-227-2017; chad.bray@dowjones.com