Exhibit 10.17
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT made as of the 17th day of
January, 1997, by and between PARADISE MUSIC & ENTERTAINMENT, INC., a Delaware
corporation having offices at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(the "COMPANY"), and XXXX XXXXXXXX, with an address at 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, XX 00000 (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Company and the Executive entered into an Employment Agreement
dated as of October 9, 1996 (the "PRIOR AGREEMENT");
WHEREAS, the Executive controls the day to day operations of Xxxx Xxxxxxx
Music, Inc. d/b/a Rave Music Group, Inc. ("RAVE"), a wholly-owned subsidiary of
the Company;
WHEREAS, Rave participated in a closing pursuant to the terms of an
exchange agreement (the "EXCHANGE AGREEMENT") with the Company and other
constituent parties referred to therein;
WHEREAS, a registration statement ("REGISTRATION STATEMENT") has been filed
by the Company in connection with the Company's initial public offering (the
"IPO");
WHEREAS, the Company and the Executive wish to set forth the terms and
conditions of the Executive's employment by the Company effective as of the
closing date of the IPO (the "EFFECTIVE DATE") under the terms of this
Agreement;
WHEREAS, it is understood and agreed by the parties hereto that the
Executive shall retain control over the normal day to day operations of the
continuing business of Rave after the date hereof whether in the form of a
separate subsidiary or division ("RAVE OPERATING") on and after the date hereof,
subject to the control of the Board of Directors of the Company with respect to
matters not constituting normal day to day operations; and
WHEREAS, the Company and the Executive now wish to amend and restate the
Prior Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ the Executive for the Term
specified in Section 2 and in the capacities set forth in Section 3 and the
Executive agrees to accept such employment, upon the terms and conditions
hereinafter set forth.
2. TERM. This Agreement shall be for a term commencing on the date
hereof and expiring on June 30, 1999 unless otherwise sooner terminated as
provided in this Agreement (the "TERM"). This Agreement shall automatically be
extended for additional one year periods unless either party advises the other,
in a writing delivered not less than 90-days prior to the expiration of the Term
then in effect, of its intention not to extend this Agreement. If this
Agreement is so extended, then the "Term" shall also be deemed to include such
extensions.
3. DUTIES AND RESPONSIBILITIES.
(a) During the Term, the Executive shall serve as the President and
Chief Executive Officer of the Company and shall also serve as the principal
executive officer of Rave Operating with such responsibility and status
commensurate with such position and at least equivalent to that which the
Executive currently holds with Rave. During the Term, the Executive shall,
subject to the review of the Board of Directors regarding matters not involving
day to day operations or not otherwise in the ordinary course of business,
determine the policies for and have full control over the normal day to day
operations of Rave Operating, including, without limitation, the setting and
granting of bonuses to employees within Rave Operating. In so serving the
Company and Rave Operating the Executive shall report to the Board of Directors
of the Company.
(b) During the Term, the Executive shall also serve as the Chairman
of the Board of Directors of the Company and shall serve on the Executive
Advisory Committee, which shall be a committee comprised of the principal
executive officers of each subsidiary or division which shall advise the Board
of Directors on business matters affecting the Company, including potential
business ventures and acquisitions.
(c) The Executive shall, except as otherwise provided herein, devote
substantially all his business efforts to the affairs of the Company. Other
business activities of the Executive shall not materially conflict with the
terms of this Agreement. The Executive will (i) devote his best efforts, skill
and ability to promote the Company's interests; (ii) carry out his duties in a
competent and professional manner; (iii) work with other employees of the
Company in a competent and professional manner; and (iv) generally promote the
best interests of the Company. Notwithstanding the foregoing, the Executive is
permitted to engage in the activities set forth on SCHEDULE A hereto, and may
engage in additional activities if such activities are approved by a majority of
the Board of Directors, not including the Executive. After such approval
SCHEDULE A shall be amended to include such activities.
(d) The Executive's principal place of employment shall be at the
principal offices of the Company (and such locations to which such principal
office shall be relocated) subject to reasonable travel requirements on behalf
of the Company.
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4. COMPENSATION.
(a) As compensation for services hereunder and in consideration of
his agreement not to compete as set forth in Section 10 below, the Company shall
pay the Executive during the Term, in accordance with the Company's normal
payroll practices, base salary compensation at an annual rate of $150,000 per
fiscal year of the Company commencing with the Company's 1997 fiscal year ending
June 30, 1997 (the "BASE SALARY"). Upon the Executive's written request, the
Company shall advance the Executive up to an additional $56,250 per fiscal
quarter, commencing from the date of the IPO, with such advance to be offset
against the Executive's bonus. The first advance if requested on or after the
date hereof shall be granted automatically. The next request shall be made no
earlier than March 31, 1997; and all subsequent requests shall be made no
earlier than the end of each subsequent fiscal quarter of the Company. Each
subsequent request shall be reviewed by, and will be made only if approved by,
the Company's Compensation Committee based upon a determination as to the likely
attainment of budgeted goals and consideration of prior compensation received by
the Executive. If the Executive's bonus is not enough to offset such advance,
then the balance of such advance which has not been offset shall be offset in
six equal monthly installments against compensation otherwise payable to the
Executive.
(b) The Board of Directors shall establish a first tier bonus pool
("TIER I POOL") which the Board of Directors shall allocate among the Company's
divisions (or subsidiaries) with each division receiving its allocated amount,
on a pro rata basis up to the maximum allocated amounts set forth on SCHEDULE B,
with respect to certain earnings targets set forth on SCHEDULE B after deducting
all expenses and taxes payable by such division including, without limitation,
such division's allocated amount of the Company's expenses, including, without
limitation, its share of the Company's legal, accounting, health and
administrative expenses, but excluding expenses incurred in connection with
acquisitions which are not completed (before giving effect to the Tier I Pool).
The amount to be allocated, the targets to be met and the basis for calculation,
all with respect to the Tier I Pool, shall be set annually in advance by the
Board of Directors. For the fiscal years ending June 30, 1997, 1998 and 1999
the earnings targets and allocated amounts shall be as set forth on SCHEDULE B,
attached hereto. The Executive shall determine, in his sole discretion, how
much of the Tier I Pool funds allocated to Rave Operating shall be distributed
to individuals in Rave Operating. It is acknowledged and understood that the
Executive shall have the discretion to allocate some or all of said funds to the
Executive.
(c) The Board of Directors of the Company shall also establish a
second tier bonus pool ("TIER II POOL") which the Board of Directors shall, in
its discretion, allocate to employees of the Company, including employees of
subsidiaries and divisions. The Tier II Pool shall be equal to 10% of the
consolidated pretax earnings of the Company (after giving effect to the payment
of all other bonuses), provided, however, that no Tier II bonus may be paid
unless the aggregate amount of all Tier I targets (but not necessarily each Tier
I target individually) is met for such fiscal year. In addition, the Executive
may be entitled to participate in the Special Bonus Plan attached as Schedule C.
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5. BENEFITS.
(a) During the Term, the Executive shall be entitled to participate
in the benefit plans established by the Company for the benefit of its key
executives.
(b) The Executive shall be entitled to four (4) weeks of paid
vacation.
(c) The Company shall establish a plan (the "PLAN") qualified under
Section 401(k) of the Internal Revenue Code of 1986, as amended (the "CODE").
The Plan shall provide for the matching by the Company of employee pre-tax
contributions to the Plan up to the limits allowed by law. The Company shall
assure that the participants in, and provisions of, the Plan are such as to
remain qualified under the Code. The Company shall be entitled to make such
reasonable restrictions on contributions required to avoid any risk of failing
to remain qualified under the Code.
6. KEY MAN INSURANCE. The Company shall have the right to obtain key man
life insurance for the benefit of the Company on the life of the Executive. If
requested by the Company, the Executive shall submit to such physical
examination and otherwise take such actions and execute and deliver such
documents as may be reasonably necessary to enable the Company to obtain such
life insurance. The Executive has no reason to believe that his life is not
insurable with a reputable insurance company at rates now prevailing in the City
of New York for healthy men of his age.
7. DISCHARGE BY COMPANY. The Company shall be entitled to immediately
terminate the Term and to discharge the Executive for cause, which shall be
limited to the following grounds:
(i) Conviction of a felony; or
(ii) Commission of a willful or intentional act which could
injure the reputation, business or business or business relationships of the
Company including the violation of the terms of Sections 10 and/or 11 hereof;
8. DISABILITY, DEATH.
(a) If the Executive shall be unable to perform his duties hereunder
by virtue of illness or physical or mental incapacity or disability (from any
cause or causes whatsoever) in substantially the manner and to the extent
required hereunder prior to the commencement of such disability as determined by
a competent medical doctor (all such causes being herein referred to as
"DISABILITY") and the Executive shall fail to have performed substantially such
duties for 90 consecutive days or for periods aggregating 180 days, whether or
not continuous, in any continuous period of one year (such 90th or 180th day to
be known as the "DISABILITY DATE"), the Company shall have the right to
terminate the Executive's employment hereunder as at the end of any calendar
month thereafter upon written notice to him. The Executive shall
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be entitled to his Base Salary for the remainder of the Term payable on the
Company's regular payroll schedule and to bonuses earned through such date
determined at the end of the fiscal year in which Disability occurred, with said
bonuses limited to the prorated portion equal to the portion of the fiscal year
prior to termination.
(b) In case of the death of the Executive, this Agreement shall
terminate and the Company shall be obligated to pay to the Executive's estate or
as otherwise directed by the Executive's duly appointed and authorized legal
representative, his Base Salary for the remainder of the Term payable on the
Company's regular payroll schedule and to bonuses earned through such date
determined at the end of the fiscal year in which Death occurred, with said
bonuses limited to the prorated portion equal to the portion of the fiscal year
prior to termination.
9. VOLUNTARY TERMINATION. If the Executive voluntarily terminates his
employment prior to the end of the Term, he shall only be entitled to receive
compensation accrued through the date of termination.
10. CONFIDENTIAL INFORMATION. The Executive recognizes that he will
occupy a position of trust with respect to business and technical information of
a secret or confidential nature which is the property of the Company, or any of
its affiliates, and which has been and will be imparted to him from time to time
in the course of his employment with the Company. In light of this
understanding, the Executive agrees that:
(a) the Executive shall not at any time knowingly use or disclose,
directly or indirectly, any of the confidential information or trade secrets
which is the property of the Company, or any of its affiliates, to any person,
except that he may use and disclose to authorized Company personnel, licensees
or franchisees in the course of his employment; and
(b) within five (5) days from the date upon which his employment with
the Company is terminated, for any reason or for no reason, or otherwise upon
the request of the Company, he shall return to the Company any and all documents
and materials which constitute or contain the confidential information or trade
secrets of the Company, or any of its affiliates.
For purposes of this Agreement, the terms "CONFIDENTIAL INFORMATION" or "TRADE
SECRETS" shall include all information of any nature and in any form which is
owned by the Company, or any of its affiliates, and which is not publicly
available or generally known to persons engaged in businesses similar to that of
the Company, or any of its affiliates. Notwithstanding the foregoing, when the
Executive's employment with the Company is terminated, for whatever reason, the
limitations provided in this Section 10 shall not prevent the Executive from
using for his own benefit any information which he acquired prior to the date
hereof.
11. NON-COMPETITION.
(a) The Executive agrees that his services hereunder are of a special
character, and his position with the Company places him in a position of
confidence and trust with the
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Company's artists, clients, customers and employees. The Executive and the
Company agree that in the course of employment hereunder, the Executive has and
will continue to develop a personal acquaintanceship and relationship with the
Company's artists, clients and customers, and a knowledge of those artists',
clients' and customers' affairs and requirements which may constitute the
Company's primary or only contact with such artists, clients and customers. The
Executive consequently agrees that it is reasonable and necessary for the
protection of the goodwill and business of the Company that the Executive make
the covenants contained herein. Accordingly, the Executive agrees that while he
is in the Company's employ the Executive will not, without the prior written
consent of the Company, either directly or indirectly, or in any capacity
whether as a promoter, proprietor, partner, joint venturer, employee, agent,
consultant, director, officer, manager, shareholder (except as a shareholder
holding less than five percent (5%) of a publicly traded company's issued and
outstanding capital stock, or otherwise) work for, act as a consultant to or own
any interest in any direct competitor of the Company which operates in or
provides services essentially the same as the Company in any portion of the
geographic territory where the Company operates or sells its products or
services, except as allowed pursuant to Section 3(c) of this Agreement. The
Executive further agrees that during the Term, and for the one year period
following the Executive's termination of employment with the Company, the
Executive will not solicit, entice, induce or persuade: (i) any employee,
artist, client or customer of the Company; or (ii) any person or entity had been
engaged in negotiations with the Company to become, an employee, artist, client
or customer of the Company during the six month period prior to the Executive's
termination of employment with the Company, to alter, terminate or refrain from
extending or renewing any contractual or other relationship with the Company, or
commence a similar or substantially similar relationship with the Executive, any
entity with whom the Executive is affiliated or employed by or any direct
competitor of the Company. Notwithstanding the foregoing, when the Executive's
employment with the Company is terminated, for whatever reason, the Executive
may continue to do business, without violating the terms hereof, with, any
customer, client or artist of the Company which was a customer, client or artist
of the Executive, or any company controlled by the Executive, prior to the date
hereof.
(b) As used in this Section 11, the term "COMPANY" shall include
subsidiaries, licensees, sub-licensees and franchisees of the Company, the term
"CUSTOMER" shall mean any person or entity who is then, or who had been at any
time during the one year period immediately preceding the date of termination of
the Executive's employment, a customer of the Company, and the term "ARTIST OR
CLIENT" shall mean any person or entity who is then, or who had been at any time
during the one year period immediately preceding the date of termination of the
Executive's employment, an artist or client represented by, signed by, working
for or collaborating with the Company.
(c) The parties hereto agree that the duration and area for which the
covenant not to compete set forth herein is to be effective are reasonable. In
the event that any court determines that the time period or the area, or both of
them, are unreasonable and that such covenant is to that extent unenforceable,
the parties hereto agree that the covenant shall remain
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in full force and effect for the greatest time period and in the greatest area
that would not render it unenforceable.
(d) If the Executive commits a material breach or is about to commit
a material breach, of any of the above provisions, the Company shall have the
right to temporary and preliminary injunctive relief to prevent the continuance
or commission of such breach prior to any hearing on the merits and to have the
provisions of this Agreement specifically enforced by any court having equity
jurisdiction without being required to post bond or other security and without
having to prove the inadequacy of the available remedies at law, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company. In addition, the Company may take all such
other actions and remedies available to it under law or in equity and shall be
entitled to such damages as it can show it has sustained by reason of such
breach.
(e) The existence of any claim or cause of action of the Executive
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of those covenants
and agreements.
12. RESOLUTION OF DISPUTES. Any dispute by and among the parties hereto
arising out of or relating to this Agreement, the terms, conditions or a breach
thereof, or the rights or obligations of the parties with respect thereto, shall
be arbitrated in the City of New York, New York before and pursuant to then
applicable commercial rules and regulations of the American Arbitration
Association, or any successor organization. The arbitration proceedings shall
be conducted by a panel of three arbitrators, one of whom shall be selected by
the Company, one by the Executive (or his legal representative) and the third
arbitrator by the first two so chosen. The parties shall use their best efforts
to assure that the selection of the arbitrators shall be completed within 30
days and the parties shall use their best efforts to complete the arbitration as
quickly as possible. In such proceeding, the arbitration panel shall determine
who is a substantially prevailing party and shall award to such party its
reasonable attorneys', accountants' and other professionals' fees and its costs
incurred in connection with the proceeding. The award of the arbitration panel
shall be final, binding upon the parties and nonappealable and may be entered in
and enforced by any court of competent jurisdiction. such court may add to the
award of the arbitration panel additional reasonable attorneys' fees and costs
incurred by the substantially prevailing party in attempting to enforce such
award.
13. ENFORCEABILITY. The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same, nor shall it affect any
other party's right to enforce the same, or to enforce any of the other
provisions of this Agreement; nor shall the waiver by either party of the breach
of any provision hereof be taken or held to be a waiver of any subsequent breach
of such provision or as a waiver of the provision itself.
14. ASSIGNMENT. This Agreement is a personal contract and the Executive's
rights and obligations hereunder may not be sold, transferred, assigned, pledged
or hypothecated by
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the Executive. The rights and obligations of the Company hereunder shall be
binding upon and run in favor of the successors and assigns of the Company. If
any assignment or transfer of rights hereunder is attempted by the Executive
contrary to the provisions hereof, the Company shall have no further liability
for payments hereunder.
15. MODIFICATION. This Agreement may not be cancelled, changed, modified
or amended orally, and no cancellation, change, modification or amendment shall
be effective or binding, unless it is in writing, signed by both parties to this
Agreement.
16. SEVERABILITY; SURVIVAL. If any provision of this Agreement is held to
be void and unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement nevertheless shall be binding upon the parties with
the same effect as though the void or enforceable part has been severed and
deleted.
17. NOTICE. Notices given pursuant to the provisions of this Agreement
shall be sent by certified mail, postage prepaid, or by overnight courier, or by
telex, telecopier or telegraph, charges prepaid, to the following address:
To the Company:
Paradise Music & Entertainment, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
with a copy to:
Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
To the Executive:
Xxxx Xxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
18. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
19. NO CONFLICT. The Executive represents and warrants that he is not
subject to any agreement, instrument, order, judgment or decree of any kind, or
any other restrictive agreement of any character, which would prevent him from
entering into this agreement or
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which would be breached by the Executive upon his performance of his duties
pursuant to this agreement
20. ENTIRE AGREEMENT. This agreement represents the entire agreement
between the Company and the Executive with respect to the subject matter hereof,
and all prior agreements relating to the employment of the Executive, written or
oral, are nullified and superseded hereby.
IN WITNESS WHEREOF, the parties have set their hands and seals on and as of
the day and year first above written.
PARADISE MUSIC & ENTERTAINMENT, INC.
By:
------------------------------------------
Name:
Title:
---------------------------------------------
Xxxx Xxxxxxxx
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SCHEDULE A
The Executive may engage in the following activities:
(i) exploit the intellectual property rights in previously
created music in the form of compilation or other usage not in the ordinary
course of the Company's business;
(ii) devote such time as the Executive deems appropriate, without
adversely affecting the Executive's time devoted to the business of the Company,
to work as a consultant to Grey Advertising;
(iii) devote such time as the Executive deems appropriate, without
adversely affecting the Executive's time devoted to the business of the Company,
to work as an executive of Future Call Inc.; and
(iv) devote such time as the Executive deems appropriate, without
adversely affecting the Executive's time devoted to the business of the Company,
to work for Rave Record Production Company.
SCHEDULE B
TIER I POOL CALCULATION
Target Tier I Pool
Division Profitability Amount
-------- ------------- -----------
All Access Entertainment $325,000 (Fiscal Year 1997) $325,000(1)
Management Group, Inc. $512,500 (Fiscal Year 1998)
(2)(3) . . . . . . . . . . $512,500 (Fiscal Year 1999)
Picture Vision, Inc. (2). . $375,000 (Fiscal Years 1997, $225,000
1998, 1999)
Xxxx Xxxxxxx Music, Inc. (2) $375,000 (Fiscal Years 1997, $225,000
. . . . . . . . . . 1998, 1999)
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Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $775,000
(1) This amount may be allocated as Messrs. Xxxxx and Xxxxx may determine in
their sole discretion.
(2) Target Profitability with respect to each fiscal year shall be determined
by the Company's independent auditors in accordance with generally accepted
accounting principles, consistently applied based on net revenues of the
applicable subsidiary before taxes after deducting all expenses, excluding:
(i) costs relating to or arising out of physically relocating the
businesses; (ii) costs of consummating the IPO, the transactions
contemplated under the Exchange Agreement and all other matters relating
thereto including costs directly associated with being a public company;
(iii) the base salary of Xxxxxxx Xxxxx, Xxxx Xxxxxxxx or Xxx Xxxxx, as the
case may be; (iv) monies expended pursuant to the Development Budget; and
(v) rent in excess of current rent unless, based on employee growth, larger
facilities are required or as a result of required lease escalations. It
is understood and agreed that the Executives will be allocated pro rata
amounts of their Tier 1 bonuses to the same extent that their operating
divisions or subsidiaries achieve Target Profitability.
(3) If the Target Profitability in Year 1 exceeds $325,000, the Target
Profitability amounts for years 2 and 3 shall each be reduced by one-half
of such excess up to an aggregate reduction of $75,000.
SCHEDULE C
SPECIAL BONUS PLAN
Set forth below are the terms of a Special Bonus Plan which has been
established by the Company to reward employees in particular areas of the
Company's business for the profitable completion of designated special projects
in their area of business. To date, two special projects ("SPECIAL PROJECTS")
have been identified, one through All Access Entertainment Management Group,
Inc. ("ALL ACCESS") and one through Picture Vision, Inc. ("PICTURE VISION").
Additional Special Projects may be submitted to the Compensation Committee for
its approval.
The Special Bonus Plan is as follows:
1. BUSINESS INCLUDED: The Special Projects as identified above.
2. BONUS THRESHOLD: The "Bonus Threshold" for a Special Project shall be
$1,000,000 of Special Project Net Profits.
3. SPECIAL PROJECT NET PROFIT; ADJUSTED SPECIAL PROJECT NET PROFIT: The
term "Special Project Net Profit" shall mean the net earnings from a Special
Project after deduction of all proper allocable costs (excluding costs that
would have been excluded for purposes of computing Tier 1 compensation) but
before income taxes and the bonus determined hereunder, all as determined by the
Company's independent auditors in accordance with generally accepted accounting
principles consistently applied. The term "Adjusted Special Project Net Profit"
shall mean Special Project Net Profits reduced by the amount of Tier 1
compensation paid to the Executive(s) of All Access or Picture Vision, as the
case may be, which relates to the period in which the Special Project Net
Profits were earned. As an example, if All Access produced $2,000,000 of
Special Project Net Profit in fiscal 1997 and paid total Tier 1 compensation of
$500,000, with respect to the corresponding period, the Adjusted Special Project
Net Profits would be $1,500,000 and the bonus would be $225,000. Assuming the
Bonus Threshold has been met for any Special Project, any further royalties or
residuals related thereto ("Future Royalty Revenue") shall be subject to a bonus
as set forth below.
4. BONUS AMOUNT: The bonus shall be 15% of Adjusted Special Project Net
Profits and 15% of Future Royalty Revenue.
5. BONUS DETERMINATION: The bonus determination shall be made and paid
within 45 days after the audited financial statements of the Company for each
fiscal year. The calculation shall be prepared by the Company's independent
auditors and shall be final.
