EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this 1st day of
January, 1999, by and between MSH Entertainment Corporation, its affiliates and
subsidiaries (collectively the "Company") as employer, and Xxxxxxx X. Xxxxx (the
"Executive") as key employee of the company.
PRELIMINARY STATEMENTS
A. The Executive possesses intimate knowledge of the business and
affairs of the company, its policies, methods and personnel
B. The Board of Directors of the Company (the "Board") recognizes that
the Executive has contributed to the growth and success to the company
and desires to assure the Company of the Executives continued
employment and to compensate him therefor.
C. The board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the
Company
D. The Executive is willing to make his service, on the terms to serve
the Company's available to the Company on the terms and conditions
hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the promises and mutual covenants set forth
herein, the parties agree as follows:
1. Employment.
1.1 General. The company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the
Company, on the terms and subject to the conditions set forth
herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the Chief Financial Officer
("CFO") and Treasurer and Secretary of the Company, and shall
diligently perform all the services as may be assigned to him
by the Board, and shall exercise such power and authority as
may from time to time be delegated to him by the Board. The
Executive shall have full control of the Company and will be
entitled to engage in all the activities of the Company's
business activities. The Executive agrees to devote a
reasonable amount of his time and attention to the business
and affairs of the Company, render such services to the best
of his ability, and use his best efforts to promote the
interests of the Company.
2. Term.
2.1 Initial Term. The Initial Term of this Agreement and the
employment of the Executive hereunder shall be for the Three
(3) year period commencing on the date of the execution of
this Agreement (the "Initial Term"), unless sooner terminated
in accordance with the terms and conditions hereof.
2.2 Renewal Terms. The Initial Term of this Agreement, and the
employment of the Executive hereunder, may be renewed and
extended for an additional two (2) years at the election of
the Executive and for such additional periods as may be
mutually agreed to by the Company and the Executive in a
written supplement to this Agreement signed by the Executive
and the Company (the "Written Supplement").
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of One Hundred and Seventy Five Thousand
Dollars ($175,000) (the "Base Salary") during the Initial Term
of this Agreement, with such Base Salary payable, in
installments consistent with the Company's normal payroll
schedule, subject to applicable withholding and other taxes.
If the term of this Agreement shall be renewed and extended as
provided in Section 2.2 hereof, then during such renewal term
of his employment hereunder the Executive shall be paid an
increased base salary as set forth in the Written Supplement.
Such base salary shall be increased each year the amount of
which shall be made as per mutual agreement of the Executive
and Company, to account for the cost of living increases and
in no event will the increase be less than prevailing COLA
Index (U.S. Government "Cost of Living Allowance" Index) to
account for cost of living increases and shall be made
regardless of any incentive compensation.
3.2 Incentive Compensation.
(a) In addition to the Base Salary, the Executive shall be
entitled to receive annual incentive compensation (the
"Incentive Compensation") based on performance which shall
be no less than that of any other key employee and shall be
a percentage of the Company's adjusted gross profits at the
end of each calendar year during the term of the Executive's
employment hereunder.
(b) For purposes of this Agreement, the amount of the
Incentive Compensation payable with respect to any calendar
year (net of any tax or other amount properly withheld
therefrom) shall be paid by the company to the Executive
upon completion of the year end audited
financials which is not to exceed One Hundred and Twenty
Days (120) days after the end of the calendar year;
provided, however, that any amount paid shall be subject to
increase or decrease based upon the results of review of the
financial statements with respect to such year.
(c) In the event that the Executive's employment is
terminated upon the expiration of the Initial Term, the
Executive shall be entitled to payment to a prorate share of
the initial term Incentive Compensation, if any, that has
been or will be paid by the company for the period beginning
after the Initial Term to the date of termination.
4. Expense Reimbursement and Other Benefits.
4.1 Expense Reimbursement. The Executive shall be entitled to
reimbursement by the Company for all reasonable business
expenses incurred by him in connection with the performance of
his duties hereunder, provided that such entitlement is
conditioned upon the Executive providing the Company with
appropriate documentation of such expenses in accordance with
company policy set by the Chief Financial Officer.
4.2 Insurance. The Executive shall be entitled to
participation in all medical, hospitalization, disability and
group life insurance plans, and any and all other benefit
plans, as are presently and hereinafter provided by the
Company to its executives. Additionally, Executive shall be at
an amount that is no less than any other key executive of the
Company.
4.3 Vacation. The Executive shall be entitled to four (4)
weeks vacation paid per year in accordance with the Company's
prevailing policy for its key executives; provided, however,
that in no event may a vacation be taken when to do so could
reasonably be expected to materially and adversely effect the
company's business.
4.4 Corporate Credit Card. The Executive shall be provided
with a Corporate charge card which shall be utilized solely
for Company business with full disclosure of its business
purpose in accordance with company policy.
4.5 Working Facilities. The Company shall furnish the
Executive with an office, secretarial help and other
facilities and services suitable to his position and adequate
for his performance of his duties hereunder.
4.6 Board Of Directors. The Executive shall be appointed to
full Board of Directors membership of the Company and where
possible on any and all current or future MSHE subsidiary
companies owned or formed by MSHE and/or those formed by the
Executive either individually or with non-MSHE personnel. The
Executive shall receive confirmation of the initial
appointment to the full Board of Directors of the Company in
the form of a Board resolution of no later than fourteen
business days after the signing of this agreement. The
Executive shall maintain a position on the Board and be
Chairman of the Audit Committee for the term of the Agreement.
Additionally, Executive shall be considered key management,
responsible for implementing and carrying out the policies of
the Company.
4.7 Stock Options. Executive shall be granted stock options on
the date hereof, the amount pursuant to the Option Agreement
hereto and shall participate in the stock -option plan of the
Company whereby additional stock options may be granted to
Executive by the Board of Directors depending upon the
performance of the Executive and the Executive shall be
entitled to receive the maximum level of stock options granted
any executive of the company. In addition, Executive shall be
entitled to shares and/or options of any and all new companies
and/or corporations formed by the Company. Executive shall
also be entitled to shares and/or options whereby Executive
assisted in the implementation of the forming of new
corporations in conjunction with others not associated with
the company. Executive at the signing of this Agreement has a
1.6% Equity interest in Company. Executive shall be granted
additional options on a periodic basis to maintain this
ownership level minimum.
4.8 Retirement Fund. Company shall take part in the key man
retirement fund of the Company, which has been instituted for
the Executive and Company shall contribute to and maintain
said fund for the duration of Executive's employment
hereunder.
4.9 Liquidity Event. Executive shall be granted and "Liquidity
Event" at least once per year, to sell stock as additional
compensation.
4.10 Automobile. The Company shall lease, in the company's
name, an automobile ("Leased Vehicle") for the Executive's use
during the term of this Agreement. The Leased Vehicle shall be
comparable to and shall not exceed the monthly lease payment
of Six Hundred and twenty ($620) a month. Additionally,
Company shall provide a gasoline credit card which shall be
sued for fuel related business expenses only, and shall not be
used for any repairs to the Leased Vehicle, that
responsibility of the Executive. One monthly parking space
estimated to be $283 per month, for the executive shall
be provided in an indoor garage within walking distance to the
office, for the term of this agreement. All business related
tools shall be reimbursed. In the event Executive elects not
to utilize a "Leased Vehicle" as outlined above, Company shall
pay the Executive an amount equal to above to be utilized
towards business expenses to be determined by the Executive's
sold discretion.
4.11 Deleted and not applicable.
4.12 Retirement Fund. The Executive will participate in a Key
Man split dollar retirement investment fund and will be
maintained and funded quarterly for the duration of the
Executive's employment hereunder. Executive shall be provided
funding to this fund at an amount that is no less than any
other key executive of the Company.
4.13 Director Insurance. Company shall provide Executive with
Director's and Officer's insurance in the minimum of Two
Million Dollars ($2,000,000) million coverage within ten (10)
business days after executing this agreement.
4.14 Check Signing. Executive shall be one of the five
executives granted check signing authority, the others being
Xxxxxx X. Xxxxx, Xxxxxxx Xxxxxxx, Xxxx Xxxxxxx, and Xxxx
Xxxxxxx; However, it being agreed to that all checks over Ten
Thousand Dollars ($10,000.00) have dual signatures and that
one of them be the Executive. In addition all funds received
and or disbursed by the company and/or subsidiaries be
received and/or disbursed in the company's New York City
office by the Executive.
4.15 Right to Bind. Executive shall be granted signing rights
and approval rights on any and all legal documents and
contracts of the Company, if being agreed that any two (2) of
the following individuals be the only corporate officers
allowed to sign for and bind the Company, they being the
Executive (Xxxxxxx X. Xxxxx), Xxxxxx X. Xxxxx, Xxxxxxxx
Xxxxxxxxx, Xxxx Xxxxxxx and/or Xxxxxxx Xxxxxxx.
4.17 Lodging and Travel. The Executive shall be entitled in
the performance of his duties on behalf of the Company while
working in New York City, New York to utilize the Warwick
Hotel located at 00 Xxxx 00xx Xxxxxx, XX, N.Y. or equivalent,
as a place of abode while away from his personal residence in
Cherry Hill, New Jersey. The Company shall pay all reasonable
business expenses incurred by him provided, however, that such
entitlement is conditioned upon the Executive providing the
Company with appropriate documentation of such expenses in
accordance with Company policy. The Executive shall receive a
monthly travel allowance of $600.00 and shall be entitled to
reimbursement by Company for all reasonable business expenses
incurred by him in connection with any domestic and/or foreign
trade and/or convention related or otherwise, which are in
connection with his duties hereunder. Executive, at his option
and with proper notice shall be granted permission to maintain
an apartment in New York City. Said lease to be negotiated in
good faith and be the responsibility of the company.
4.18 Personal Expenses. The Company shall not pay the
Executive's personal expenses including, but not limited to,
insurance (except as noted in this agreement), legal and
accounting expenses.
4.19 Major Medical. Executive shall be provided with major
medical insurance unless Executive elects to retain his
current insurance whereby Company agrees to pay for same as
long as the amount paid des not exceed any sum paid for major
medical insurance for any senior Company executive. Any
additional amount shall be paid by and be the responsibility
of the Executive.
4.20 Legal Fees. The Company shall pay legal fees of the
Executive, if any, incurred in connection with this Agreement,
if being agreed by the parties hereto that said legal fees
shall not exceed $10,000.
5. Termination.
5.1 Termination For Cause. The Company shall at all times have
the right, upon written notice with a reasonable opportunity
to cure any such breach by the Executive, to terminate the
Executive's employment hereunder for cause (as hereinafter
defined). For purposes of this Agreement, the term "Cause"
shall mean (a) a willful breach by the Executive of any of the
material terms or provisions of this Agreement; (b) the
charging or indictment of the Executive in connection with a
felony; (c) commission by the Executive of an act or acts
involving fraud, embezzlement, misappropriation, theft, breach
of fiduciary duty or dishonesty against property or personnel
of the Company; or (d) willful or reckless conduct by the
Executive which the Board in good faith determines could
reasonably be expected to have a material adverse effect on
the business, assets, properties, results of operations,
financial condition or prospects of the Company. Upon any
termination pursuant to this section 5.1, the Executive shall
be entitled to be paid his Base Salary to the date of
termination and the Company shall have no further liability
under this Agreement (other than for the reimbursement for
reasonable pre-approved business expenses incurred prior to
the date of termination, subject, however, to the provision of
Section 4.1).
5.2 Disability. The Company shall at all times have the right,
upon written notice to the Executive, to terminate the
Executive's employment hereunder, if the Executive shall, as
the result of mental or physical incapacity, illness or
disability become unable to perform his duties hereunder for
in excess of ninety (90) calendar days in any twelve (12)
month period. Upon any termination pursuant to this section
5.2 (a) the Company shall pay to the Executive (i) immediately
any unpaid amounts of his Base Salary accrued through the
effective date of termination plus 12 months base salary, plus
one year's living allowance plus (ii) in accordance with
section 3.2 (b), an amount equal to the Incentive
Compensation, if any, payable to him in respect of the
calendar year in which such termination occurs, prorated for
the period of service by the Executive from the beginning of
the calendar year through the date of termination, and (b) the
Company shall have no further liability under this Agreement
(other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however,
to the provisions of section 4.1).
5.3 Death. I the event of the death of the Executive during
the term of him employment hereunder, (a) the company shall
pay to the estate of the deceased Executive (i) immediately
any unpaid amounts of his Base Salary accrued through the date
of the death, plus one years living, plus (ii) in accordance
with section 3.2 (b), an amount equal to the Incentive
Compensation, if any, payable to him in respect to the
calendar year of the Company in which such death occurs,
prorated for the period of service by the Executive from the
beginning of such calendar year through the date of his death,
and (b) the Company shall have no further liability under this
Agreement (other than for reimbursement for reasonable
pre-approved business expenses incurred prior to the date of
the Executive's death, subject, however, to the provisions of
Section 4.1). All stock ownership rights and stock options
and/or warrants shall not entitle the heirs of Executive to
any management voting rights in the Company, but all
beneficial and financial rights shall vest in the heirs
accordingly.
5.3 Resignation By Executive. Executive is required, and
agrees, to give the Company a two (2) month notice prior to
such resignation or voluntary termination of his employment,
the purpose of which is to allow the Company ample time to
locate a senior management replacement for the Executive's
vacant position. Executive shall have the right to terminate
for "good cause", for example, an occurrence whereby there is
a change of control within the Company and/or the Company
defaults on any payment. Should the default not be remedied
after a 14 day cure period, Executive shall receive at a
minimum 1.6% of the Company as liquidated damages.
6. Restrictive Covenants.
6.1 Non-competition. Except as provided in Section 1.2 and
with the Company's knowledge and acceptance that Executive and
other third parties, Executive, while employed by the Company
and during the Non-competition Period (as hereinafter
defined), the Executive, except as previously indicated, shall
not, directly or indirectly, engage in or have any interest in
any sole proprietorship, partnership, corporation or business
in any other person or entity (whether as an employee,
officer, director, partner, agent, security holder, creditor,
consultant, or otherwise) that directly or indirectly engages
in any type of entertainment production, business, marketing,
computer or cell animation, graphics, distribution, producing,
writing, directing and/or manufacturing of any type of
entertainment product including, but not limited to toys,
records, videos, CD-ROM and merchandising items anywhere
throughout the universe. For purpose of the Section 6.1, the
term "Non-competition Period" shall mean (a) the Executive's
employment is terminated pursuant to Section 5.4 above, the
period beginning on the effective date of resignation and
ending one (1) year thereafter. Because such mandatory
restrictive covenants are being placed on the Executive, the
Company shall pay the Executive's base salary hereunder for a
period of twelve (12) months after termination of employment.
6.2 Nondisclosure. The Executive shall not divulge,
communication, or use to the detriment of the Company or for
the benefit of any other person or persons, or misuse in any
way, any confidential information, trade secrets, secret
information, confidential business information, proprietary
technology, internal financial information or any and all
other sensitive data now known or hereafter acquired by the
Executive with respect to the business of the Company (which
shall include, but not limited to, information concerning the
Company's financial, marketing and distribution of the
Company's productions) shall be deemed a valuable, special and
unique asset of the Company that is received by the Executive
in confidence and as a fiduciary, and the Executive shall
remain a fiduciary to the Company with respect to all such
information.
6.3 Books and Records. All books and records accounts relating
in any manner to the business, customers, suppliers or clients
of the Company and all other documents, disks, software or
other items containing confidential information relating to
the Company, whether prepared by the Executive or otherwise
coming into the Executive's possession, shall be the exclusive
property of the Company and shall be returned immediately,
together with any copies, to the Company on the termination of
the Executive's employment hereunder, or on the Company's
request at any time.
6.4 Ownership of inventions and Other Development. Company
shall be entitled to own and control all proprietary
technology and all financial, operating and creative ideas,
works, scripts, processes and materials, including works of
expression and copyrights in such works,
that are developed, written, or conceived by Executive during
Executive's employment hereunder to the extent that they
relate to Company's current or potential business.
Accordingly, Executive will disclose, deliver, and assign to
Company all such created works, inventions, discoveries,
improvements, trade secrets and all works subject to
copyright. Executive agrees to execute all documents, patent
applications, and arrangements necessary to further document
such ownership and/or assignment and to take whatever other
steps may be needed to give Company the full benefit of them.
Executive agrees that all copyrightable materials generated or
developed during the term of this Agreement (Shall be
considered works made for hire under the copyright laws of the
United States and that they shall, upon creation, be owned
exclusively by the Company, and Company shall be entitled to
register and hold in its own name all copyrights in respect to
such materials. In regard to all properties conveyed or
anticipated to be conveyed under this Agreement, in the event
Company is dissolved or unable to meet its obligations under
the stock purchase agreement, then all such works shall revert
to Executive and Executive shall have first right of refusal
to purchase all other work owned by Company.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the
covenants contained in Section 6 of this Agreement will cause
irreparable harm and damage to the Company, the monetary
amount of which may be virtually impossible to ascertain. As a
result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court
of competent jurisdiction enjoining and restraining any
violation of any or all of the covenants contained in Section
6 of the agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly,
and that such right to injunction shall be cumulative and in
addition to whatever other remedies the Company may possess.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
New York.
9. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the
subject matter hereof and, upon its effectiveness, shall
supersede all prior agreements, understandings and
arrangements, both oral and written, between and among the
Executive, the Company and/or any of their affiliates with
respect to the subject matter contained herein. Except for the
obligation to pay any accrued but unpaid salary due the
Executive all such prior agreements, understandings and
arrangements for the provision of services by the Executive to
the Company and/or any of its affiliates and the compensation
of the Executive in any form shall automatically terminate
upon the consummation of the transactions contemplated by the
Purchase Agreement, and each party shall thereupon and
thereby, without any further action, release and forever
discharge the other (and the other's affiliates) from any and
all liabilities and obligations of any nature arising out of
or in connection with any and all such prior agreements,
understandings or arrangements. This Agreement may not be
modified in any way unless by a written instrument signed by
both the Company and the Executive.
11. Notices. Any notice required or permitted to be given
hereunder shall be deemed given when delivered by hand, by
facsimile or three (3) business days after being deposited in
the United States mail, by registered or certified mail,
return receipt requested, postage prepaid, if to the Company,
to the address of the Company's principal offices at 000 Xxxx
00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Y 10019, (ii) to the
Executive, to his address as reflected on the payroll records
of the Company, or to such other address as either party
hereto may from time to time give notice of to the other.
12. Benefits: Binding Effect. This agreement shall be for the
benefit of and binding upon the parties hereto and their
respective heirs, personal representatives, legal
representatives, successors and, where applicable, assigns,
including without limitation, any successor to the Company,
whether by merger, consolidation, sale of stock, sale of
assets or otherwise, provided, however, that under no
circumstances may the Executive delegate his employment
obligations hereunder or any portion thereof.
13. Severability. The invalidity of any one or more of the
words, phrases, sentences, clauses or sections contained in
this agreement shall not affect the enforceability of the
remaining portions of this Agreement or any part thereof, all
of which clauses or sections contained in this Agreement are
inserted conditionally on their being valid in law, and, in
the event that any one or more words, phrases, sentences,
clauses or sections contained in this Agreement shall be
declared invalid, this Agreement shall be construed as if such
invalid word or words, phrase or phrases, sentence or
sentences, clause or clauses, or section or sections had not
been inserted. If such invalidity is caused by length of time
or size of area, or both, the otherwise invalid provision will
be considered to be reduced to a period or are which would
cure such invalidity.
14. Waiver. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not
operate nor be construed as a waiver of any subsequent breach
or violation.
15. Damages, Prevailing Party. Nothing contained herein shall
be construed to prevent the Company or the Executive from
seeking and recovering from the other damages sustained by
either or both of them as a result of its or his breach of any
term or provision of this Agreement. If there is any legal
action or proceeding to enforce or interpret any provision of
this AGREEMENT or to protect or to establish any right or
remedy of any party, the non-prevailing party to such action
of proceeding shall pay to the prevailing party all costs and
expenses, including reasonable attorney's fees and costs,
incurred by such prevailing party in such action or
proceeding, in enforcing its judgment, and in connection with
any appeal from such judgment. Reasonable
attorney fees and costs incurred in enforcing any judgment or
in connection with any appear shall be recoverable separately
from and in addition to any other amount included in such
judgment. The prevailing party's rights under section 14 shall
not merge into any judgment and shall survive until all such
fees and costs have been paid.
16. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this agreement.
17. No Third Party Beneficiary. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to
confer upon or implied in this Agreement is intended, or shall
be construed, to confer upon or give any person other than the
Company, the parties hereto and their respective heirs,
personal representatives, legal representatives, successors
and assigns, any rights or remedies under or by reason of this
Agreement.
18. Subsidiaries. All references to the "Company" in this
agreement, including but not limited to those in Section 6,
shall be deemed to include any and all of the Company's direct
and indirect subsidiaries to the extent the context may
require.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
BY: /s/Xxxxxx X. Xxxxx BY: /s/Xxxxxxx X. Xxxxx
----------------------------- -----------------------------
MSH Entertainment Corporation Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Chairman and CEO
000 X. 00xx Xxxxxx 000 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000 Xxxxxx Xxxx, XX 00000
