EXHIBIT A
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
22nd day of September, 1999 ("Effective Date") by and between HOLLYWOOD
XXXXXXXX.XXX, INC. ("Company") and XXX X. XXXXXXX ("Employee").
RECITALS
1. ENGAGEMENT BY COMPANY.
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Company hereby engages Employee as its President and Chief Executive
Officer of Company. Employee will perform the duties as prescribed by the Board
of Directors. Employee may continue to reside in northern California but will be
expected to travel to the Company's headquarters in Los Angeles, or to other
locations required by Company's business, on a regular basis.
Employee will devote the majority of his time to the activities of
Hollywood Xxxxxxxx.xxx, Inc., but will be allowed to render limited consulting
services to the extent those services do not interfere with his duties at
Company, and to the extent that those activities do not pose a conflict of
interest with Company.
2. TERM.
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The term of this Agreement shall be September 22, 1999 through June 30,
2000, unless terminated in accordance with provisions of this Agreement or
extended by mutual agreement of the parties.
3. COMPENSATION.
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Employee shall be entitled to receive compensation at the rate of $10,000
per month, payable semi-monthly.
Employee will be given vacation, insurance and all other benefits given by
the Company to its officers.
Employee will be granted a five-year option to purchase 300,000 shares of
the Company's common stock at an exercise price of $1.07 per share. The options
will vest at the rate of 25,000 every quarter commencing September 1999. If
Employee is terminated at any time during the term of this Agreement, 100,000
options will vest immediately, inclusive of any ISO's previously granted per
this Agreement.
Any and all bonus payments shall be in the discretion of the Board. The
Company shall establish a written bonus plan applicable to Employee, and he
shall be entitled to receive bonus
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payments in accordance therewith. Such plan, when adopted, shall be affixed to
each original of this Agreement as Exhibit A.
Employee will be reimbursed for all ordinary and necessary expenses, in
reasonable amounts, which Employee incurs in performing his duties under this
Agreement, including, but not limited to, travel, entertainment, cellular
telephone, professional dues and subscriptions, subject, however, to any
limitations, rules and procedures adopted by Company and which are applicable to
executives generally.
4. ASSIGNMENT.
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This Agreement is a personal one being entered into in reliance upon and in
consideration of the singular personal skill and qualifications of Employee.
Neither Employee nor the Company shall voluntarily, or by operation of law
assign or otherwise transfer the obligations incurred on its part pursuant to
terms of this Agreement without the prior written consent of the other party.
Any attempt at assignment or transfer by either party of its obligations
hereunder, without such consent, shall be null and void.
5. NON-COMPETITION.
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Employee agrees that during the Term he shall not, directly or indirectly
(whether for compensation or otherwise), alone or as an agent, principal,
partner, officer, employee, trustee, director, shareholder, Employee or in any
other capacity own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or furnish any capital to, or be
connected in any manner with, or provide any services as a Employee for any
business which has any activities or products directly competitive with the
activities and products of the Company.
6. CHANGE OF CONTROL
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6.1 Survival. The provisions of this Section 6 shall (i) survive this
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Agreement and shall continue one (1) day past termination of Employee's
employment, and (ii) only become effective upon a "Change in Control," as
defined below. No termination or expiration of this Agreement shall limit, alter
or otherwise affect Employee's continuing rights hereunder with respect to the
benefits and rights afforded to him as provided herein.
6.2 Background.
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6.2.a The Company believes that because of its position in the
industry, financial resources and historical operating results there is a
possibility that the Company may become the subject of a Change in Control (as
defined below), either now or at some time in the future.
6.2.b The Company believes that it is in the best interest of the
Company and its shareholders to xxxxxx Employee's objectivity in making
decisions with respect to any pending or threatened Change in Control of the
Company and to assure that the Company will have the continued dedication and
availability of Employee, notwithstanding the possibility, threat or
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occurrence of a change in Control. The Company believes that these goals can
best be accomplished by alleviating certain of the risks and uncertainties with
regard to Employee's financial ad professional security that would be created by
a pending or threatened Change in Control and that inevitably would distract
Employee and could impair his ability to objectively perform his duties for and
on behalf of the Company.
6.2.c Accordingly, the Company believes that it is appropriate and
in the best interest of the Company and its shareholders to provide to Employee
compensation arrangements upon a change in Control that lessen Employee's
financial risks and uncertainties and that are reasonably competitive with those
of other corporations. With these and other considerations in mind, the Board
has authorized the Company to enter into these arrangements with Employee to
provide the protections set forth herein following a change in Control.
6.3 Change in Control. As used in this Agreement, the phrase "change in
Control" shall mean:
6.3.a. Except as provided by Paragraph 6.3.c hereof, the acquisition
by any person, entity or "group," within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of forty percent (40%) or more of the combined voting power of the
then outstanding securities entitled to vote generally in the election of
directors of the Company; or
6.3.b. Individuals who, as of the Effective Date hereof, constitute
the Board of Directors of the Company (as of the Effective Date hereof the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Company, provided that any person becoming a director
subsequent to the Effective Date hereof who election, or nomination for election
by the Company's shareholders, is or was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual who initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
6.3.c. Approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company with any other person,
entity or corporation, other than:
(i) a merger or consolidation 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 another entity) more than sixty percent
(60%) of the combined voting power of the securities entitled to vote
generally in the election of directors of the Company or such other entity
outstanding immediately after such merger or consolidation, or
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(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
person, entity or group (other than any employee benefit plan of any of the
Company) acquires beneficial ownership of forty percent (40%) or more of
the combined voting power of the securities entitled to vote generally in
the election of directors of the Company outstanding immediately after such
merger or consolidation; or
6.3.d. approval by the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale or other
disposition by the Company of all or substantially all of such Company's assets.
6.4 Acceleration of Stock Options
Any Change of Control during the term of this Agreement will cause the
immediate vesting of all stock options granted to Employee.
7. TERMINATION
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This Agreement may be terminated on the occurrence of any one of the
following events:
7.1 The expiration of the Term hereof;
7.2 The mutual agreement of the parties;
7.3 At the Company's option, on the last day of the month in which
Employee dies or becomes permanently incapacitated. 'Permanent incapacity' as
used herein shall mean mental or physical incapacity, or both, reasonably
determined by the Company's Board of Directors based upon a certification of
such incapacity by, in the discretion of the Company's Board of Directors,
either Employee's regularly attending physician or a duly licensed physician
selected by the company's Board of Directors, rendering Employee unable to
perform substantially all of his duties hereunder and which appears reasonably
certain to continue for at least six consecutive months without substantial
improvement. Employee shall be deemed to have 'become permanently incapacitated'
on the date the Company's Board of Directors has determined that Employee is
permanently incapacitated and so notifies Employee. Under no circumstances shall
Employee's incapacity, whether permanent or not, limit Employee's right to
receive all the compensation set forth in Section 3 above.
7.4 By the Company "with cause," effective upon delivery of written notice
to Employee given at any time (without any necessity for prior notice) if any of
the following shall occur:
7.4.a A material breach of this Agreement by Employee, which breach
has not been cured within ten (10) days after a written demand for such
performance is delivered
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to Employee by the Company that specifically identifies the manner in which
the Company believes that Employee has breached this Agreement;
7.4.b The following acts or events: (i) a felony criminal conviction;
(ii) any other criminal conviction involving Employee's lack of honesty or
Employee's moral turpitude; (iii) acts of gross carelessness or gross
misconduct which continues after due written notice to Employee from the
Company specifying with particularity the nature of such gross carelessness
or gross misconduct.
In the event of a termination of Employee under this provision,
Company shall pay Employee his full base salary and accrued vacation time
through the date of termination, plus all bonus and benefits to which
Employee has a vested right at the time.
7.5 Notice of Termination
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Notwithstanding the term of this Agreement, the Company agrees to give
a minimum of sixty (60) days written Notice of Termination to Employee if the
Company has not entered into a written contract to continue the services of
Employee with the Company beyond June 30, 2000, and if Employee has not been
terminated according to Sections 7.2, 7.3 or 7.4 above. In accordance with this
provision, if no Notice of Termination has been delivered to Employee as of June
30, 2000, and Employee and Company have not entered into a written contract to
continue the services of Employee as of June 30, 2000, Employee will be entitled
to receive an additional sixty (60) days of salary and benefits without any
obligation to work beyond June 30, 2000.
7.6 Termination by Employee
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Employee may terminate this Agreement at any time for "good reason" by
providing a Notice of Termination stating such intent to terminate. "Good
reason" shall mean, without prior written consent, the occurrence of any one or
more of the following:
7.6.a. Failure by the Company to honor any of its material obligations
under this Agreement.
7.6.b Failure to maintain Employee with either or both of the titles
of Chief Executive Officer or President, or materially changing the duties
and responsibilities of Employee in these positions.
7.6.c A material negative change in the benefits offered to Employee.
7.6.d Failure by the Company to have a policy of Directors and
Officers Insurance in place substantially equivalent to that in effect on
September 22, 1999.
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7.7 Termination Without Cause
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Company may, at any time prior to June 30, 2000, discharge Employee
"without cause," whereupon his employment shall terminate on the date of
termination established by the Notice of Termination. If terminated "without
cause," Employee shall receive all base salary and accrued vacation through the
date of termination, all bonus and benefits to which Employee has a vested right
at the time, an additional payment of $120,000, and immediate vesting of the
100,000 stock options granted to Employee as described in paragraph 3 above.
8. GENERAL PROVISIONS.
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8.1 Governing Law and Jurisdiction. This Agreement shall be governed by
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and interpreted in accordance with the laws of the State of California. Each of
the Parties hereto consents to such jurisdiction for the enforcement of this
Agreement and matters pertaining to the transaction and activities contemplated
hereby.
8.2 Attorneys' Fees. In the event a dispute arises with respect to this
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Agreement, the party prevailing in such dispute shall be entitled to recover all
expenses, including, without limitation, reasonable attorneys' fees and expenses
incurred in ascertaining such party's rights, in preparing to enforce or in
enforcing such party's rights under this Agreement, whether or not it was
necessary for such party to institute suit.
8.3 Complete Agreement. This Agreement supersedes any and all of the
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other agreements, either oral or in writing, between the Parties with respect to
the subject matter hereof and contains all of the covenants and agreements
between the Parties with respect to such subject matter in any manner
whatsoever. Each Party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
Party, or anyone herein, and that no other agreement, statement or promise not
contained in this Agreement shall be valid or binding. This Agreement may be
changed or amended only by an amendment in writing signed by all of the Parties
or their respective successors-in-interest.
8.4 Binding. This Agreement shall be binding upon and inure to the
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benefit of the successors-in-interest, assigns and personal representatives of
the respective Parties.
8.5 Notices. All notices and other communications provided for or
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permitted hereunder shall be made by hand delivery, first class mail, or
facsimile, addressed as follows:
Party: Company: Hollywood Xxxxxxxx.xxx, Inc.
------ 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Attn.: Xxxx Xxxxxxx, Chairman
Phone: 000-000-0000
Fax: 000-000-0000
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Employee: Xxx X. Xxxxxxx
1800 Avenue of the Stars, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five (5) business days
after deposit in any United States Post Office in the continental United States,
postage prepaid, if mailed; and when receipt is acknowledged or confirmed, if
telecopied.
8.6 Unenforceable Terms. Any provision hereof prohibited by law or
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unenforceable under the law of any jurisdiction in which such provision is
applicable shall as to such jurisdiction only be ineffective without affecting
any other provision of this Agreement. To the full extent, however, that such
applicable law may be waived to the end that this Agreement be deemed to be a
valid and binding agreement enforceable in accordance with its terms, the
Parties hereto hereby waive such applicable law knowingly and understanding the
effect of such waiver.
8.7 Execution in Counterparts. This Agreement may be executed in several
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counterparts and when so executed shall constitute one agreement binding on all
the Parties, notwithstanding that all the Parties are not signatory to the
original and same counterpart.
8.8 Further Assurance. From time to time each Party will execute and
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deliver such further instruments and will take such other action as any other
Party may reasonably request in order to discharge and perform their obligations
and agreements hereunder and to give effect to the intentions expressed in this
Agreement.
8.9 Incorporation by Reference. All exhibits referred to in this
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Agreement are incorporated herein in their entirety by such reference.
8.10 Miscellaneous Provisions. The various headings and numbers herein
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and the grouping of provisions of this Agreement into separate articles and
paragraphs are for the purpose of convenience only and shall not be considered a
party hereof. The language in all parts of this Agreement shall in all cases be
construed in accordance with its fair meaning as if prepared by all Parties to
the Agreement and not strictly for or against any of the Parties.
9. INDEMNIFICATION.
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The Company shall indemnify Employee, to the maximum extent then permitted
by applicable law, from and against any and all claims, actions, suits, losses,
fines, judgments, interest, costs and expenses (including without limitation
actual attorney's fees and disbursements) arising out of or relating to
Employee's actions or omissions as an officer, director or employee of the
Company and/or any affiliate of the Company and/or as a trustee or fiduciary of
any plan, trust or other program established by the Company. This Section 9
shall survive termination or expiration of this Agreement.
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10. CONFIDENTIALITY
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Employee recognizes that during the course of Employee's activities on
behalf of the Company, he will accumulate certain proprietary and confidential
information and trade secrets used in the Company's business and will have
divulged to him certain confidential and proprietary information and trade
secrets about the business, operations and prospects of the Company, which
constitute valuable business assets of the Company. Employee hereby acknowledges
and agrees that such information, except for information which is in the public
domain prior to Employee's receipt thereof, or which subsequently becomes part
of the public domain other than by Employee's breach of a confidentiality
obligation, or which Employee can clearly demonstrate was in his possession
prior to receipt thereof from the Company and was developed by Employee or
received by Employee from a third-party without breach of such third-parties
confidentiality obligations with respect thereto ("Proprietary Information") is
confidential and proprietary and constitutes trade secret information and the
Proprietary Information belongs to the Company and not to Employee. Employee
agrees, to the extent not prohibited by law, that he shall not, at any time
during or after the Term of this Agreement and two years after the expiration or
termination of this Agreement, disclose, divulge or make known, directly or
indirectly, to any person, or otherwise use or exploit in any manner any
Proprietary Information obtained by Employee under this Agreement, except in
connection with and to the extent required by his performance of his duties
hereunder for the Company. Upon termination of this Agreement, Employee shall
deliver to Company all tangible displays and repositories of Proprietary
Information.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first above written.
"COMPANY" "EMPLOYEE"
HOLLYWOOD XXXXXXXX.XXX, INC.
By ________________________________ ________________________________
Xxxx Xxxxxxx Xxx X. Xxxxxxx
Chairman of the Board of Directors
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