AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
This
AMENDED
AND RESTATED EMPLOYMENT AGREEMENT (this
“Agreement”)
is
made and entered into as of May 12, 2008 (the “Effective
Date”),
by
and between NAPSTER,
INC.,
a
Delaware corporation with its principal offices at 0000 Xxxxxxx Xxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000 (the “Company”),
and
XXXXXXX
XXXXXXXXXXX XXXXX,
an
individual residing at 00000 Xxxxxxxx Xxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000
( the
“Executive”),
and
amends and restates in its entirety that certain Employment Agreement by
and
between the Company and the Executive dated as of August 15, 2003 (the
“Prior
Employment Agreement”).
1. Employment.
The
Company agrees to employ Executive and Executive agrees to be employed by
the
Company upon the terms and conditions set forth in this Agreement.
2. Duties.
Executive is employed by the Company to render services to the Company in
the
position of Chairman and CEO of the Company. Executive agrees to perform
such
duties, and such other duties reasonable and consistent with such office
as may
be assigned to Executive by the Company’s Board of Directors from time to time.
The principal places where Executive shall render his services hereunder
shall
be at the Company’s offices in Santa Xxxxx and Los Angeles, California, and New
York, New York, as well as in his home office, as he shall reasonably determine
from time to time is in the best interests of the Company. In no case shall
the
Executive be required to relocate his residence from Los Angeles, California,
nor to relocate his offices outside any of the cities of Santa Xxxxx, New
York
or Los Angeles without his consent. Executive will devote his full time and
efforts to the performance of Executive’s duties and responsibilities under this
Agreement and to the business and affairs of Company, its subsidiaries and
affiliates, in general, and Executive shall use his reasonable efforts to
promote the interests thereof. Executive may engage in personal, charitable,
professional and investment activities to the extent such activities do not
materially conflict or interfere with Executive’s duties and obligations under
this Agreement or Executive’s ability to perform his duties and responsibilities
under this Agreement. During the Term, Executive shall not serve on the Board
of
Directors of any other business entity without the prior approval of the
Board
of Directors. The Board of Directors is aware of and approves Executive’s
service on the Board of Directors of the following entities: House of Blues
and
Critical Path, Inc. provided that Executive’s future activities on such Boards
do not materially conflict or interfere with the performance of his duties
for
the Company.
3. Term
of Employment.
The
initial term of Executive’s employment hereunder shall commence on August 15,
2003 (the “Commencement
Date”)
and,
unless terminated sooner as provided in Paragraph 7 below, shall continue
through August 14, 2008 (“Initial
Term”).
Thereafter Executive’s employment hereunder shall automatically continue year to
year for successive terms of one year each ending on the next August 14th
(each such year being referred to herein as an “Extended
Year”),
unless at least ninety (90) days prior to the end of the Initial Term or
the
then current Extended Year, as the case may be, either Executive or the Company
delivers to the other written notice of non-renewal (“Non-Renewal
Notice”),
in
which event Executive’s employment hereunder shall terminate as of the end of
the Initial Term or the then current Extended Year, as applicable. The date
on
which Executive’s employment hereunder is terminated (either by reason of a
Non-Renewal Notice or otherwise) pursuant to the provisions of this Agreement
shall be referred to herein as the “Termination
Date.”
The
capitalized word “Term”
as
used
herein shall mean the period beginning on the Commencement Date and ending
on
the Termination Date.
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4. Compensation.
(a) Salary.
For all
services rendered by Executive hereunder, the Company agrees to pay Executive
the sum of Six Hundred Twenty Five Thousand Dollars ($625,000) per annum
(“Salary”),
payable in accordance with the Company’s then applicable payroll practices
applicable to similarly-situated executives generally. The amount of the
annual
Salary shall be subject to annual review and upward adjustment at the first
quarter board of directors meeting each fiscal year of the Term; provided,
however, that the amount of the annual Salary may not be reduced during the
Term. Any adjustment to the annual Salary shall be in the sole discretion
of the
Company.
(b) Bonus
Compensation; Equity Award Grants.
In
addition to the Salary, Executive will be eligible to participate in Company’s
annual bonus program and any other bonus plan adopted during the Term, and
will
be eligible for equity award grants, in each case as determined by the Company’s
compensation committee (the “Compensation
Committee”)
and
dependent on Executive’s performance and that of the Company.
(c) Change
in Control Gross-Up.
Executive shall be entitled to the excise tax protections set forth in
Exhibit
A
attached
hereto.
5. Benefits.
Executive shall be entitled to four (4) weeks paid vacation per each calendar
year during the Term. Executive shall also be entitled to participate in
such
life, disability, medical insurance and pension and retirement plans (and
any
other plans and benefits not otherwise referred to in this Agreement) as
the
Company may maintain or establish from time to time applicable to other Company
executives on terms no less favorable than the terms applicable to such
executives and in which Executive would be entitled to participate pursuant
to
the terms thereof. In addition, the Company shall directly pay for or reimburse
Executive for up to a total aggregate amount of $15,000 per year in order
for
Executive to purchase supplemental life and/or disability insurance, any
such
reimbursement to be made not later than the end of the calendar year following
the year in which the related expense was incurred. Executive and the Company
acknowledge that, as of the Effective Date, Executive has accrued and heretofore
unpaid vacation of approximately 143.1 hours.
6. Business
Expenses; Etc.
During
the Term, all of Executive’s reasonable travel and other expenses incurred in
the performance of Executive’s duties for the Company will be paid for or
reimbursed by the Company. When traveling by air, Executive will exercise
his
judgment regarding when economy, business class or first class air travel
is
justified. The Company will pay or reimburse Executive for reasonable expenses
relating to airline clubs, and to his participation in professional
organizations (including, without limitation, the Young Presidents Organization
or any successor organizations), provided, however, that Executive may not
exceed $20,000 per year in such expenses without prior approval of the
Compensation Committee. Executive shall be entitled to a car allowance of
$1,500
per month plus car insurance, an annual Company-paid physical examination,
a
health club subsidy and financial planning assistance (the health club subsidy
and financial planning assistance not to exceed $7,500 per year in the aggregate
on a gross basis), and such other perquisites not otherwise provided for
in this
Agreement (if any) as are accorded generally to other Company executives.
The
Company shall reimburse Executive for or pay the reasonable legal fees incurred
by Executive relating to the negotiation and preparation of this Agreement,
provided that in no event shall the Company’s obligation with respect to such
reimbursement or payment of such legal fees exceed Twenty Thousand Dollars
($20,000). Any reimbursement made to Executive pursuant to this Paragraph
6
shall be subject to the Company’s expense reimbursement policies in effect from
time to time and in all events shall be made not later than the end of the
calendar year following the year in which the related expense was
incurred.
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7. Termination
of Employment.
The
employment of Executive under this Agreement shall be terminated prior to
the
end of the Initial Term or prior to the end of an Extended Year, as the case
may
be, under the following circumstances:
(a) Termination
by Reason of Death of Executive.
Upon
the death of Executive, the employment of Executive hereunder shall
automatically terminate on the date of Executive’s death.
(b) Termination
by Reason of Disability of Executive.
In the
event Executive suffers a disability, due to illness or injury, such that
Executive is unable to perform the essential functions of his position, even
with a reasonable accommodation, for a period in excess of six (6) consecutive
months (“Disability”),
the
Company reserves the right to terminate Executive’s employment by giving
Executive written notice of termination (the “Disability
Notice”)
if
Executive remains Disabled at the time such Disability Notice is given. If
Executive disputes a Disability termination, the Company may require that
Executive be evaluated, at the Company’s expense, by an independent physician to
be selected by the Company. In the event that Executive’s physician and the
Company’s physician report contrary findings as to the nature and duration of
the Disability, the Company may require an additional evaluation, at the
Company’s expense, by a second independent physician of the Company’s choice. At
such time that the second independent physician’s evaluation of Executive is
completed, the Company will use the findings reported by two of the three
physicians to determine the nature and duration of the Disability and its
resulting effect on the continuation or termination of Executive’s employment.
(c) Termination
for Cause.
The
Company shall have the right to terminate Executive’s employment hereunder for
“Cause”
if
Cause as defined below exists and at least 2/3 of the members of the Board
of
Directors of the Company make the good faith determination that termination
is
appropriate. For purposes of this Agreement, the term “Cause” shall be limited
to (i) conviction of, or a plea of nolo contendre to, a felony or crime
involving moral turpitude; (ii) gross negligence in the performance of
Executive’s duties that has injured the reputation or business of the Company;
or (iii) willful misconduct by Executive with respect to the Company’s
business that has injured the reputation or business of the
Company.
(d) Termination
by Executive for Good Reason.
Executive shall have the right to terminate his employment under this Agreement
for “Good
Reason”
upon
thirty (30) days’ written notice to the Company. For the purposes of this
Agreement, the term “Good Reason” means the good faith determination by the
Executive that any one or more of the following has occurred: (i) without
the express, written consent of Executive, a material diminution of Executive’s
duties, titles, authority, or responsibilities; (ii) without the express,
written consent of Executive, the Company requiring Executive to report to
anyone other than the Board of Directors; (iii) any material breach by the
Company of this Agreement, including, but not limited to, failure by the
Company
to comply with any of the provisions of Paragraphs 4 and/or 5, other than
insubstantial and inadvertent failures to comply, remedied promptly by the
Company after receipt of notice thereof from Executive; (iv) without
Executive’s consent, any requirement by the Company that Executive be based at
any office or location other than an office or location located in the greater
Santa Clara, California, New York, New York, or Los Angeles, California area
(except for travel reasonably required for the performance of Executive’s
duties), or (v) any proposed termination by the Company of Executive’s
employment hereunder other than as permitted by this Agreement. Executive
agrees
that nothing has occurred on or before the Effective Date that would constitute
Good Reason under this Agreement.
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(e) Termination
by the Company Other than For Death, Disability, or Cause.
The
Company may terminate Executive’s employment at any time for any reason other
than the reasons specified in Paragraphs 7(a), 7(b) or 7(c) hereof or for
no reason whatsoever, effective thirty (30) days after written notice is
given
to Executive of such termination.
(f) Obligations
of the Company upon Termination.
(i) In
General.
Except
as otherwise expressly provided in this Agreement, all compensation otherwise
payable to Executive under this Agreement shall cease to accrue upon termination
of Executive’s employment and Executive’s entitlements under applicable plans
and programs of the Company following termination of Executive’s employment will
be determined under the terms of those plans and programs. Upon any termination
of Executive’s employment, the Company shall pay to Executive, within thirty
(30) days after the Termination Date: (i) any accrued Salary that had not
been
paid prior to the Termination Date, (ii) any bonus payable with respect to
the
fiscal year preceding the fiscal year in which the Termination Date occurs
that
had not previously been paid, (iii) a per diem amount based upon Executive’s
Salary for any accrued vacation days not previously taken by Executive prior
to
the Termination Date, and (iv) reimbursement for expenses incurred through
the
Termination Date in accordance with the provisions of Paragraph 6 of this
Agreement (the sum of the amounts described in clauses (i), (ii), (iii) and
(iv)
shall be hereinafter referred to as the “Accrued
Obligations”).
(ii) Death.
If
Executive’s employment is terminated by reason of Executive’s death during the
Term, Executive’s heirs shall be entitled to the following: (1) payment to
Executive’s estate of the Accrued Obligations set forth in 7(f)(i) above; (2)
payment to Executive’s estate or beneficiary, as applicable, any amounts due
pursuant to the terms of any applicable welfare benefit plans, including
but not
limited to any life insurance proceeds; (3) reimbursement to Executive’s
dependents for a period of eighteen (18) months following Executive’s death of
any COBRA premiums paid by Executive’s dependents to continue medical and dental
insurance coverage under COBRA; and (4) any stock options and restricted
stock
awards granted by the Company to Executive, to the extent outstanding and
unvested as of the Termination Date, shall become fully vested as of such
date,
and such stock options, together with any previously vested stock options
granted by the Company to Executive that are then outstanding, shall be
exercisable by Executive’s heirs for one (1) year thereafter (subject to earlier
termination upon the expiration of the maximum ten-year term of such options
and
further subject to earlier termination upon a dissolution, liquidation, change
of control or similar event in accordance with Section 12 of the RSOP or
similar
provisions of the particular option plan under which such options were
granted).
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(iii) Disability.
If
Executive’s employment is terminated by reason of Executive’s Disability during
the Term, Executive shall be entitled to receive, after the date of receipt
by
Executive of the Disability Notice: (1) payment of the Accrued Obligations
pursuant to 7(f)(i) above, (2) the maximum disability benefits then provided
by
Company to disabled executives and/or their families, (3) to the extent
Executive elects to continue medical and dental insurance coverage under
COBRA,
reimbursement of the COBRA premium for such continuation coverage for a period
of eighteen (18) months following the Termination Date; and (4) any stock
options and restricted stock awards granted by the Company to Executive,
to the
extent outstanding and unvested as of the Termination Date, shall become
fully
vested as of such date, and such stock options, together with any previously
vested stock options granted by the Company to Executive that are then
outstanding, shall be exercisable by Executive or Executive’s heirs, as the case
may be, for one (1) year thereafter (subject to earlier termination upon
the
expiration of the maximum ten-year term of such options and further subject
to
earlier termination upon a dissolution, liquidation, change of control or
similar event in accordance with Section 12 of the RSOP or similar provisions
of
the particular option plan under which such options were granted).
(iv) Termination
by the Company Other than For Death, Disability, or Cause; Termination by
Executive for Good Reason.
Subject
to Paragraphs 7(f)(v) and 7(f)(vi) below, if, during the Term, Executive’s
employment with the Company is terminated by the Company pursuant to Paragraph
7(e) or by Executive for Good Reason, then Executive shall be entitled to
the
following: (1) payment to Executive of the Accrued Obligations provided for
in Paragraph 7(f)(i) above; (2) subject to Paragraph 7(f)(ix) below, within
thirty (30) days after Executive’s Separation from Service (as defined below),
payment to Executive of an amount equal to Executive’s Salary which would
otherwise be payable from the Termination Date through the end of the Initial
Term, or Extended Term as the case may be, provided,
however,
that
such payment may not be more than 300% of Executive’s then-applicable Salary or
less than 165% of Executive’s then-applicable Salary; (3) to the extent
Executive elects to continue medical and dental insurance coverage under
COBRA,
reimbursement of the COBRA premium for such continuation coverage for a period
of eighteen (18) months following the Termination Date; and (4) any stock
options and restricted stock awards granted by the Company to Executive,
to the
extent outstanding and unvested as of the Termination Date, shall become
fully
vested as of such date, and such stock options, together with any previously
vested stock options granted by the Company to Executive that are then
outstanding, shall be exercisable by Executive or Executive’s heirs, as the case
may be, for the full term of such options (subject to earlier termination
upon a
dissolution, liquidation, change of control or similar event in accordance
with
Section 12 of the RSOP or similar provisions of the particular option plan
under
which such options were granted). As used herein, a “Separation
from Service”
occurs
when the Executive dies, retires, or otherwise has a termination of employment
with the Company that constitutes a “separation from service” within the meaning
of Treasury Regulation Section 1.409A-1(h)(1), without regard to the optional
alternative definitions available thereunder.
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(v) Modified
Severance Benefits on Certain Terminations.
Notwithstanding Paragraph 7(f)(iv) and subject to Paragraph 7(f)(vi), if,
during
the Term (x) Executive’s employment with the Company is terminated by the
Company pursuant to Paragraph 7(e) or by Executive for Good Reason, and
either
(y) the Termination Date occurs on or after August 15, 2008, or (z) the
Termination Date occurs on or before August 14, 2008 and the Company’s Board of
Directors, by at least a majority vote, makes a determination in its sole
discretion that the Company is not actively engaged in discussions with one
or
more third parties for a transaction that, if consummated, would result in
a
Change of Control, then Executive shall be entitled to the following (in
lieu
of, not in addition to, the benefits provided under Paragraph 7(f)(iv)):
(1) payment to Executive of the Accrued Obligations provided for in
Paragraph 7(f)(i) above; (2) if the Termination Date occurs prior to the
end of
the Initial Term, then subject to Paragraph 7(f)(ix), within thirty (30)
days
after Executive's Separation from Service, payment to Executive of an amount
equal to Executive's Salary which would otherwise be payable from the
Termination Date through the end of the Initial Term; (3) subject to Paragraph
7(f)(ix), within thirty (30) days after Executive’s Separation from Service,
payment to Executive of an amount equal to nine (9) months of Executive’s Salary
at the rate in effect on the Termination Date; (4) to the extent Executive
elects to continue medical and dental insurance coverage under COBRA,
reimbursement of the COBRA premium for such continuation coverage for a period
of eighteen (18) months following the Termination Date; and (5) on the
Termination Date, any portion of Executive’s stock options and restricted stock
awards granted by the Company that are outstanding and unvested immediately
prior to the Termination Date and would have otherwise become vested on or
before the first anniversary of the Termination Date based solely on Executive’s
continued employment through that anniversary date (had it continued through
that date and assuming that no Change of Control had occurred during such
twelve-month period and, in the case of a Termination Date that occurs on
or
after August 15, 2008, after giving effect to the modified vesting schedule
set
forth in Paragraph 7(f)(x)) shall be vested as of the Termination Date. Any
portion of Executive’s stock options and restricted stock awards that are
outstanding and unvested as of the Termination Date after giving effect to
the
preceding clause (5) shall terminate as of the Termination Date.
(vi) Certain
Terminations Prior to Change of Control.
Notwithstanding Paragraphs 7(f)(iv) and 7(f)(v), in the event that Executive’s
employment is terminated during the Term by the Company without Cause
and
a Change
of Control occurs during the period of six (6) months following the Termination
Date, Executive shall be entitled to the benefits set forth in Paragraph
8 (in
lieu of, not in addition to, benefits under any other provision of this
Paragraph 7(f)). In the event that any of Executive’s stock options or
restricted stock awards that had not vested as of the Termination Date were
cancelled or otherwise terminated prior to the date of the Change of Control
solely as a result of such termination of Executive’s employment, such awards
shall be reinstated and shall automatically become fully vested and, in the
case
of stock options, Executive shall be given a reasonable opportunity to exercise
such accelerated portion of the option before it terminates.
(vii) [Reserved.]
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(viii) No
Duplication of Benefits.
For
purposes of clarity, in no event will the Executive be entitled to benefits
under more than one of the foregoing paragraphs of this Paragraph 7(f). In
the
event that Executive is entitled to receive severance benefits under Paragraph
8
in connection with a termination of his employment, Executive shall receive
the
severance benefits provided in Paragraph 8 and not
any
severance benefits provided in this Paragraph 7(f).
(ix) Section
409A.
Notwithstanding any provision of this Agreement to the contrary, if Executive
is
a “specified employee” within the meaning of Treasury Regulation Section
1.409A-1(i) as of the date of Executive’s Separation from Service, Executive
shall not be entitled to any payment or benefit pursuant to this Paragraph
7(f)
or Paragraph 8 until the earlier of (i) the date which is six (6) months
after
Executive’s Separation from Service for any reason other than death, or (ii) the
date of Executive’s death. Any amounts otherwise payable to Executive upon or in
the six (6) month period following Executive’s Separation from Service that are
not so paid by reason of this Paragraph 7(f)(ix) shall be paid (without
interest) as soon as practicable (and in all events within thirty (30) days)
after the date that is six (6) months after Executive’s Separation from Service
(or, if earlier, as soon as practicable, and in all events within thirty
(30)
days, after the date of Executive’s death). The provisions of this Paragraph
7(f)(ix) shall only apply if, and to the extent, required to avoid the
imputation of any tax, penalty or interest pursuant to Section 409A of the
Internal Revenue Code of 1986, as amended. To the extent that the payment
of any
COBRA premiums pursuant to this Paragraph 7(f) or Paragraph 8 is taxable
to
Executive, any such payment shall be paid to Executive on or before the last
day
of Executive’s taxable year following the taxable year in which the related
expense was incurred. Executive’s right to payment of such premiums is not
subject to liquidation or exchange for another benefit and the amount of
such
benefits that Executive receives in one taxable year shall not affect the
amount
of such benefits that Executive receives in any other taxable year.
(x) Vesting
of Restricted Stock Awards.
In the
event that Executive continues to be employed with the Company through August
15, 2008, the vesting schedule of each of Executive’s then-outstanding and
unvested restricted stock awards shall be adjusted, effective as of August
15,
2008, as follows:
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The
next annual installment that is scheduled to vest under the original
vesting schedule after August 15, 2009 shall be divided into twelve
(12)
substantially equal monthly installments, with the first such installment
being scheduled to vest on August 15, 2009 and an additional installment
vesting on the 15th
day of each month thereafter through July 15,
2010.
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Each
subsequent annual installment under the original vesting schedule
(if any)
shall be divided into twelve (12) substantially equal monthly
installments, with the first such monthly installment being scheduled
to
vest on the August 15 that precedes the date such annual installment
was
originally scheduled to vest and the last such monthly installment
being
scheduled to vest on the July 15 that follows the date such annual
installment was scheduled to vest under the original
schedule.
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7
Except
as
expressly set forth in this Paragraph 7(f) and Paragraph 8 below, this Agreement
does not modify any other terms of such restricted stock awards.
8. Change
of Control.
If a
Change of Control (as defined in the RSOP) occurs during the Term (or in
the
event that Paragraph 7(f)(vi) applies), at Executive’s option, all stock options
and restricted stock awards that are granted to Executive by the Company
(including options and restricted stock awards granted to Executive after
the
date of this Agreement) and that are outstanding immediately before the Change
of Control will thereupon become fully vested and, in the case of options,
may
be exercised at any time thereafter without restriction for a period of
twenty-four (24) months (subject to earlier termination upon the expiration
of
the maximum ten-year term of such options and further subject to earlier
termination upon a dissolution, liquidation, change of control or similar
event
in accordance with Section 12 of the RSOP or similar provisions of the
particular option plan under which such options were granted). In the event
Executive resigns or is terminated (other than a termination by the Company
for
Cause) within twelve (12) months following a Change of Control, instead of
and
not in addition to the payments and benefits set forth in Paragraph 7(f)(iv)
above, Executive shall be entitled to receive the following: (1) payment of
the Accrued Obligations provided for in Paragraph 7(f)(i) above; (2) subject
to
Paragraph 7(f)(ix), a lump sum severance payment, in cash, within thirty
(30)
days after the date of Executive’s Separation from Service, in an amount equal
to two hundred ninety-nine percent (299%) of the Executive’s then-applicable
Salary, (3) a lump sum bonus for the year in which termination or resignation
occurs in an amount equal to the average of the three prior cash bonuses
received by Executive, such amount to be paid in cash within thirty (30)
days
after the date of Executive’s Separation from Service; and (4) to the
extent Executive elects to continue medical and dental insurance coverage
under
COBRA, reimbursement of the COBRA premium for such continuation coverage
for a
period of eighteen (18) months following the Termination Date. The accelerated
vesting provided for in this Paragraph 8 will apply notwithstanding the fact
that accelerated vesting may not be required in the circumstances under the
applicable Company stock option plan.
9. Exclusive
Employment, Confidential Information, Etc.
(a) Non-Competition.
Executive agrees that Executive’s employment hereunder is on an exclusive basis,
and that during the Term, Executive will not engage in any other business
activity which is in conflict with Executive’s duties and obligations hereunder,
except for any such activities which have been previously reported to Company’s
Board of Directors prior to the date of this Agreement. Subject to the
foregoing, Executive agrees that for the Term Executive shall not directly
or
indirectly engage in or participate as an officer, employee, director, agent
of
or consultant for any business in the United States directly competitive
with
that of Company, nor shall Executive make any investments in any company
or
business competing with Company; provided,
however,
that
nothing herein shall prevent Executive from investing as less than a one
(1%)
percent shareholder without limit in the securities of any company listed
on a
national securities exchange or quoted on an automated quotation
system.
(b) Confidential
Information.
Executive recognizes and agrees that access to and knowledge of Company’s trade
secrets and other confidential information (collectively “confidential
information”),
which
are valuable and unique assets of their businesses, is essential to the
performance of Executive’s duties hereunder. Accordingly, Executive agrees that
Executive shall not during the Term disclose any confidential information
to or
for the benefit of any third party for any purpose whatsoever (except as
may be
required by law or court order or in the performance of Executive’s duties
hereunder), nor make use of any of the same for Executive’s own purposes;
provided, however, that disclosures may be made (i) to the extent necessary
to comply with government disclosure requirements or applicable laws,
(ii) pursuant to subpoena or order of any judicial, legislative, executive,
regulatory or administrative body, or for Executive to enforce Executive’s
rights under this Agreement, (iii) to employees, advisors, counsel,
financial advisors and other third parties as may be necessary and appropriate
in connection with the proper performance and enforcement of this Agreement;
and
(iv) pursuant to Executive’s normal reporting procedures as an executive of
a publicly traded company (e.g., pursuant to Xxxxxxxx-Xxxxx requirements
or
otherwise). Confidential information includes, but is not limited to,
information regarding the businesses of Company, and Company’s customers,
vendors, policies, products, services, designs, systems, business plans,
agreements, marketing strategies, pricing and costs. Notwithstanding any
of the
foregoing to the contrary, confidential information shall be deemed not to
include information which (i) is or becomes generally available to the
public other than as a result of a disclosure by Executive or any other person
who directly or indirectly receives such information from Executive or at
Executive’s direction or (ii) is or becomes available to Executive on a
non-confidential basis from a source which is entitled to disclose it to
Executive.
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(c) Non-Solicitation
of Employees.
Executive promises and agrees that he will not, for a period of one year
following termination of his employment, directly or indirectly solicit any
of
the employees of the Company whose annualized rate of compensation was $100,000
or more at any time during the last six months of his or her employment with
the
Company to work for any business, individual, partnership, firm, corporation,
or
other entity. This Paragraph shall not apply to Executive’s Personal
Assistant.
10. Notices.
All
notices required to be given hereunder shall be given in writing, by personal
delivery or by certified mail, return receipt requested, at the respective
addresses of the parties hereto set forth above, or at such other address
as may
be designated in writing by either party, and in the case of Company, to
the
attention of the General Counsel of Company, and shall also be given to Xxxxx
Xxxxxxx, Esq., c/o O’Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx
0000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000. Copies of any notices to Executive
shall
be delivered to him at the Company’s Santa Clara, California office, and shall
also be given to M. Xxxxxxx Xxxxxxxxx, Esq., c/o Foley & Lardner LLP, 0000
Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000. Any notice
given
by mail shall be deemed to have been given three days following such
mailing.
11. Assignment.
This is
an Agreement for the performance of personal services by Executive and may
not
be assigned by Executive or the Company except that the Company may assign
this
Agreement to any successor in interest to the Company as a result of a merger,
consolidation or sale of all or substantially all of the assets of the Company,
whether by operation of law (in the case of a sale or other transfer of stock)
or otherwise (subject to the provisions of Paragraph 7 above).
9
12. California
law, Etc.
This
Agreement and all matters or issues collateral thereto shall be governed
by the
laws of the State of California applicable to contracts entered into and
to be
performed entirely therein. Any disputes regarding this Agreement or Executive’s
employment by Company will be resolved through binding arbitration with a
single
neutral arbitrator under the rules of JAMS. The proper venue for any such
action
is the County of Los Angeles. In any action to enforce this Agreement, Executive
and the Company each agree to accept service of process by mail at its address,
as applicable, as set forth above (or at any different address of which
Executive has notified the Company, or the Company has notified Executive,
as
applicable, in writing). In any action in which service is made pursuant
to this
Paragraph, Executive and the Company each waive any challenge to the personal
jurisdiction of JAMS.
13. Entire
Understanding.
This
Agreement contains the entire understanding of the parties hereto relating
to
the subject matter herein contained, and can be changed only by a writing
signed
by both parties hereto.
14. Void
Provisions.
If any
provision of this Agreement, as applied to either party or to any circumstances,
shall be adjudged by a court to be void or unenforceable, the same shall
be
deemed stricken from this Agreement and shall in no way affect any other
provision of this Agreement or the validity or enforceability of this
Agreement.
15. Supersedes
Previous Understanding.
This
Agreement embodies the entire agreement of the parties hereto respecting
the
matters within its scope. This Agreement supersedes all prior agreements
of the
parties hereto on the subject matter hereof (including, without limitation,
the
Prior Employment Agreement). Any prior negotiations, correspondence, agreements,
proposals, or understandings relating to the subject matter hereof shall
be
deemed to be merged into this Agreement and to the extent inconsistent herewith,
such negotiations, correspondence, agreements, proposals, or understandings
shall be deemed to be of no force or effect. There are no representations,
warranties, or agreements, whether express or implied, or oral or written,
with
respect to the subject matter hereof, except as set forth herein.
[Remainder
of Page Intentionally Blank]
10
IN
WITNESS WHEREOF,
the
undersigned have executed this Amended and Restated Employment Agreement
on the
date first above written.
|
NAPSTER,
INC.
|
||
|
By:
/s/
Wm. Xxxxxxxxxxx Xxxxx
|
||
|
Name:
Wm.
Xxxxxxxxxxx Xxxxx
|
||
|
Title:
Chief
Executive Officer
|
||
|
By:
/s/
Xxxxxx Xxxxx
|
||
|
Name:
Xxxxxx
Xxxxx
|
||
|
Title:
Chairman,
Compensation Committee
|
||
|
EXECUTIVE
|
||
|
/s/
Wm. Xxxxxxxxxxx Xxxxx
|
||
|
XXXXXXX
XXXXXXXXXXX XXXXX
|
S-1
EXHIBIT
A
SECTION
280G GROSS-UP PROVISIONS
Equalization
Payment.
If upon
or following a CIC (as defined below) the tax imposed by Section 4999 of
the
Internal Revenue Code of 1986, as amended (the “Code”),
or
any similar or successor tax (the “Excise
Tax”)
applies, because of the CIC, to any payments, benefits and/or amounts received
by Executive as severance benefits or otherwise, including, without limitation,
any amounts received or deemed received, within the meaning of any provision
of
the Code, by Executive as a result of (and not by way of limitation) any
automatic vesting, lapse of restrictions and/or accelerated target or
performance achievement provisions, or otherwise, applicable to outstanding
grants or awards to Executive under any of the Company’s incentive plans or
agreements (collectively, the “Total
Payments”),
the
Company shall pay in cash to Executive or for Executive’s benefit as provided
below an additional amount or amounts (the “Gross-Up
Payment(s)”)
such
that the net amount retained by Executive after the deduction of any Excise
Tax
on such Total Payments so received and any Federal, state and local income
and
employment taxes and Excise Tax upon the Gross-Up Payment(s) provided for
by
this Exhibit A shall be equal to such Total Payments so received had they
not
been subject to the Excise Tax. Such Gross-Up Payment(s) shall be made by
the
Company to Executive or applicable taxing authority on behalf of Executive
as
soon as practicable following the receipt or deemed receipt of any portion
of
such Total Payments so received, and may be satisfied by the Company making
a
payment or payments on Executive’s account in lieu of withholding for tax
purposes but in all events shall be made within thirty (30) days of the receipt
or deemed receipt by Executive of any portion of such Total Payments. For
purposes of this Exhibit A, “CIC”
means
the occurrence, either during the Term or, if the Executive’s employment by the
Company terminates during the Term, at any time following such termination
of
employment, of either (a) a change in the ownership or effective control
of the
Company (within the meaning of Section 280G of the Code), or (b) or a change
in
the ownership of a substantial portion of the assets of the Company (within
the
meaning of Section 280G of the Code).
Calculation
of Gross-Up Payment.
The
determination of whether a Gross-Up Payment is required pursuant to this
Exhibit
A and the amount of any such Gross-Up Payment shall be determined in writing
(the “Determination”)
by a
nationally-recognized certified public accounting firm selected by the Company
(the “Accounting
Firm”).
The
Accounting Firm shall provide its Determination in writing, together with
detailed supporting calculations and documentation and any assumptions used
in
making such computation, to the Company and Executive within twenty (20)
days
after the later of the date of the CIC or the Executive’s Termination Date.
Within twenty (20) days following delivery of the Accounting Firm’s
Determination, Executive shall have the right, at the Company’s expense, to
obtain the opinion of an “outside counsel,” which opinion need not be
unqualified, which sets forth: (a) the amount of Executive’s “annualized
includible compensation for the base period” (as defined in Code Section 280G(d)
(1)); (b) the present value of the Total Payments; (c) the amount and present
value of any “excess parachute payment;” and (d) detailed supporting
calculations and documentation and any assumptions used in making such
computations. The opinion of such outside counsel shall be supported by the
opinion of a nationally-recognized certified public accounting firm and,
if
necessary or required by the Company, a firm of nationally-recognized executive
compensation consultants. The outside counsel’s opinion shall be binding upon
the Company and Executive and shall constitute the “Determination”
for
purposes of this Exhibit A instead of the initial determination by the
Accounting Firm. The Company shall pay (or, to the extent paid by Executive,
reimburse Executive for) the certified public accounting firm’s and, if
applicable, the executive compensation consultant’s reasonable and customary
fees for rendering such opinion. For purposes of this Exhibit A, “outside
counsel” means a licensed attorney selected by Executive who is recognized in
the field of executive compensation and has experience with respect to the
calculation of the Excise Tax; provided that the Company must approve
Executive’s selection, which approval shall not be unreasonably
withheld.
A-1
Computation
Assumptions.
For
purposes of determining whether any payments, benefits and/or amounts, including
amounts paid as severance benefits, will be subject to Excise Tax, and the
amount of any such Excise Tax:
(a) Any
other
payments, benefits and/or amounts received or to be received by Executive
in
connection with or contingent upon a CIC of the Company or Executive’s
termination of employment (whether pursuant to the terms of this Agreement
or
any other plan, arrangement or agreement with the Company, or with any person
whose actions result in a CIC of the Company or any person affiliated with
the
Company or such persons) shall be combined to determine whether Executive
has
received any “parachute payment” within the meaning of Section 280G(b)(2) of the
Code, and if so, the amount of any “excess parachute payments” within the
meaning of Section 280G(b)(1) that shall be treated as subject to the Excise
Tax, unless in the opinion of the person or firm rendering the Determination,
such other payments, benefits and/or amounts (in whole or in part) do not
constitute parachute payments, or such excess parachute payments represent
reasonable compensation for services actually rendered within the meaning
of
Section 280G(b)(4) of the Code in excess of the base amount within the meaning
of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise
Tax;
(b) The
value
of any non-cash benefits or any deferred payment or benefit shall be determined
by the person or firm rendering the Determination in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
(c) The
compensation and benefits provided for in this Agreement, and any other
compensation earned prior to the Termination Date by Executive pursuant to
the
Company’s compensation programs (if such payments would have been made in the
future in any event, even though the timing of such payment is triggered
by the
CIC), shall for purposes of the calculation pursuant to this Exhibit A be
deemed
to be reasonable; and
(d) Executive
shall be deemed to pay Federal, state, and local income taxes at the highest
applicable marginal rate of taxation (subject, in the case of employment
taxes,
to any applicable wage base limitations) in the calendar year in which the
Gross-Up Payment is to be made. Furthermore, the computation of the Gross-Up
Payment shall assume (and adjust for the fact) that (i) there is a loss of
miscellaneous itemized deductions under Section 67 of the Code (or analogous
federal or state provisions) on account of the Gross-Up Payment and (ii)
a loss
of itemized deductions under Section 68 of the Code (or analogous federal
or
state provisions) on account of the Gross-Up Payment. The computation of
the
Gross-Up Payment shall take into account any reduction in the Gross-Up Payment
due to Executive’s share of the hospital insurance portion of FICA and any state
withholding taxes (other than any state withholding tax for income tax
liability). The computation of the state and local income taxes applicable
to
the Gross-Up Payment shall be based on the highest marginal rate of taxation
in
the state and locality of Executive’s residence on the Termination Date, and
shall take into account the maximum reduction in Federal income taxes that
could
be obtained from the deduction of such state and local taxes.
A-2
Executive’s
Obligation to Notify Company.
Executive shall promptly notify the Company in writing of any claim by the
Internal Revenue Service (or any successor thereof) or any state or local
taxing
authority (individually or collectively, the “Taxing
Authority”)
that,
if successful, would require the payment by the Company of a Gross-Up Payment
in
excess of any Gross-Up Payment as originally set forth in the Determination.
If
the Company notifies Executive in writing that it desires to contest such
claim,
Executive shall: (a) give the Company any information reasonably requested
by
the Company relating to such claim; (b) 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 selected by the Company that is reasonably
acceptable to Executive; (c) cooperate with the Company in good faith in
order
to effectively contest such claim; and (d) permit the Company to participate
in
any proceedings relating to such claim; provided that the Company shall bear
and
pay directly all attorneys fees, costs and expenses (including additional
interest, penalties and additions to tax) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax
basis,
for all taxes (including, without limitation, income and excise taxes),
interest, penalties and additions to tax imposed in relation to such claim
and
in relation to the payment of such costs and expenses or indemnification.
Without limitation on the foregoing provisions of this paragraph, and to
the
extent its actions do not unreasonably interfere with or prejudice Executive’s
disputes with the Taxing Authority as to other issues, the Company shall
control
all proceedings taken in connection with such contest and, in its reasonable
discretion, may pursue or forego 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 Executive to pay the
tax,
interest or penalties claimed and xxx for a refund or contest the claim in
any
permissible manner, and 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 Executive to pay
such
claim and xxx for a refund, the Company shall advance an amount equal to
such
payment to Executive, on an interest-free basis, and shall indemnify and
hold
Executive harmless, on an after-tax basis, from all taxes (including, without
limitation, income and excise taxes), interest, penalties and additions to
tax
imposed with respect to such advance or with respect to any imputed income
with
respect to such advance, as any such amounts are incurred; and, further,
provided, that any extension of the statute of limitations relating to payment
of taxes, interest, penalties or additions to tax for the taxable year of
Executive with respect to which such contested amount is claimed to be due
is
limited solely to such contested amount; and, provided, further, that any
settlement of any claim shall be reasonably acceptable to Executive and the
Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder, and Executive shall
be
entitled to settle or contest, as the case may be, any other issue.
A-3
Subsequent
Recalculation.
In the
event of a binding or uncontested determination by the Taxing Authority that
adjusts the computation set forth in the Determination so that Executive
did not
receive the greatest net benefit required pursuant to this Exhibit A, the
Company shall reimburse Executive as provided herein for the full amount
necessary to place Executive in the same after-tax position as he would have
been in had no Excise Tax applied. In the event of a binding or uncontested
determination by the Taxing Authority that adjusts the computation set forth
in
the Determination so that Executive received a payment or benefit in excess
of
the amount required pursuant to this Exhibit A, then Executive shall promptly
pay to the Company (without interest) the amount of such excess.
A-4
