EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 6th day of June 2005, by and between
MediaBay, Inc., a Florida corporation, with offices at 0 Xxxxxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxx Xxxxxx (the "Company"), and Xxxxxx Xxxx residing at 0 Xxxxxxx Xxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the audio book club, old time radio
and spoken audio digital download businesses; and
WHEREAS, the Company desires to employ the Executive; and
WHEREAS, the Executive is willing to serve the Company on the terms and
conditions herein provided.
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained and intending to be
legally bound hereby, the parties agree as follows:
1. Recitals. The Whereas clauses recited above are hereby incorporated
by reference as though they were fully set forth herein.
2. Employment. The Company shall employ the Executive and the Executive
shall serve the Company, on the terms and conditions set forth herein.
3. Term. The employment of the Executive by the Company as provided in
paragraph 2 shall commence on June 6, 2005 and end on the first (1st)
anniversary of such commencement (the "Term"), subject, however, to the other
termination provisions contained herein. The Term of this Agreement shall
automatically renew for successive one (1) year periods unless the Executive is
given ninety (90) days written notice of non-renewal.
4. Position and Duties. The Executive shall be employed by the Company
as Senior Vice President and Chief Financial Officer. His power and authority
shall be and remain subject to the direction and control of the Chief Executive
Officer and the Board of Directors. The Executive shall have responsibility for
the financial oversight of the business and affairs of the Company, including
without limitation responsibility for all filings with the Securities and
Exchange Commission, the Internal Revenue Service and all other agencies
(federal, state or local) and/or stock exchanges to which the Company must
report, subject to appropriate review and approval of the Board of Directors and
senior officers and such further revisions as the Executive deems necessary. The
scope of his duties and the extent of his responsibilities shall be
substantially the same as the duties and responsibilities of other chief
financial officers of public companies. The Executive shall be required to spend
his full time and attention, without other outside business interests other than
passive investment activities, in the performance of his duties and the
Company's business and affairs.
5. Compensation and Related Matters.
(a) Salary. During the term of this Agreement, the Company
shall pay to the Executive, as compensation for his services, an annual salary
of $205,000 in equal bi-monthly installments in arrears during the Term of this
Agreement. The Executive will also be eligible to participate in the Company's
discretionary bonus plan that is currently under development.
(b) Expenses. The Executive shall receive prompt reimbursement
for all reasonable travel and business expenses in connection with services
performed hereunder in accordance with normal Company policy, as the same may be
determined from time to time. The Executive shall be allowed to travel business
class for any international business trips. The Executive shall receive
reimbursement for expenses related to ISP, broadband Internet connection and
cell phone service for business-related usage.
(c) Insurance and Employee Benefits. The Executive shall
receive insurance and employee benefits applicable to all officers of the
Company. To the extent the Executive chooses not to participate in the Company's
medical insurance program, the Executive shall be reimbursed for actual premiums
paid by the Executive under another medical insurance program up to the cost of
the Company's medical insurance premium as if the Executive chose to
participate. Such reimbursement shall be paid on a monthly basis provided the
Executive provides proof of such amount. The Company reserves the right to
adopt, amend or discontinue any employee benefit, plan or program in accordance
with then applicable law; provided, however, that if the effect of such
amendment or discontinuance results in an economic detriment to the Executive as
compared to the benefits in force on the date hereof, the Company shall make
cash payments from time to time in order to provide the Executive with the
after-tax substantial equivalent of the benefits now in force. Any and all cash
payments that may be provided as per the previous sentence shall be made on a
monthly basis and shall in no case exceed the monthly contributions made by the
Company on behalf of the Executive for any employee benefit, plan or program
that has been amended or discontinued. In addition, the Executive shall be
reimbursed for reasonable costs associated with (up to 24 hours of continuing
education courses) receiving CPE credits for maintaining CPA licenses including
reasonable land travel cost to attend such courses. In addition, the Company
will reimburse the Executive for his dues to the AICPA and subscription to FASB
Pronouncements and other professional publications deemed necessary to perform
the Executive's duties.
(d) Vacation. The Executive shall receive, prorata during each
full year of his employment, four (4) weeks paid vacation approved in advance
upon reasonable notice. The Executive will make every effort to schedule the
vacation time at a time most convenient for the Company, with the Company
recognizing that the Executive's flexibility is limited by school calendars.
Notwithstanding the foregoing, the Executive shall not be entitled to vacation
during the three (3) week period prior to the date on which the Company's Annual
Report on Form 10-K or Quarterly Report on Form 10-Q are required to be filed
with the Securities and Exchange Commission unless it is agreed that filing
deadlines will not be effected. In addition, the Executive will receive normal
Company holidays plus one (1) day for Good Friday. The Executive shall not take
more than fourteen (14) consecutive days of vacation, including weekends, unless
otherwise approved by the Company's Chief Executive Officer.
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(e) Stock Options. The Executive will receive stock options to
acquire an additional one hundred thousand (100,000) shares of Common Stock in
the Company pursuant to and in accordance with the Company's Stock Option Plan.
The options granted to the Executive shall (i) vest immediately, (ii) be
exercisable at a market price per share on the execution date hereof (the
closing price of the Company's common stock on the date of the grant), (iii) be
immediately exercisable as to 40% of the shares covered thereby and shall become
exercisable as to an additional 20% of the shares covered thereby on each of the
first, second and third year anniversaries of the date of grant, and (iv) expire
ten (10) years from the grant date.
6. Termination by the Company. The Executive's employment hereunder may
be terminated by the Company without any breach of this Agreement only under the
circumstances described below.
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability. If, as a result of the Executive's incapacity
due to physical or mental illness, as determined by a physician mutually chosen
by the Executive and the Company, the Executive shall have been absent from his
duties hereunder for a consecutive period of forty-five (45) days and after
notice of termination is given (which may be given before or after the end of
such 45 day period but which will in no event be effective until, at the
earliest, the day following the forty-fifth day of the period) shall not have
returned to the performance of his duties hereunder, as that concept is
contemplated in this Agreement, within ten (10) days after the notice of
termination is given, the Company may terminate the Executive's employment
hereunder.
(c) Cause. The Company may terminate the Executive's
employment under this Agreement at any time for cause. For purposes of this
Agreement, the term "cause" shall include one or more of the following: (i)
willful misconduct, (ii) failure by the Executive to materially perform his
duties, as contemplated in this Agreement, as Chief Financial Officer of
MediaBay, Inc. (other than through disability as defined in paragraph 6(b),
above), (iii) indictment of a crime or alcohol or drug abuse, or (iv) the
Executive's material breach of this Agreement. The termination shall be
evidenced by written notice thereof to the Executive. As for (ii) above,
Executive shall have forty-eight (48) hours from receipt of written notice of
termination to cure any and all failures to perform. It will be in the sole
discretion of the Board of Directors of the Company whether a default of item
(ii) above has been cured by Executive to the satisfaction of the Board during
the forty-eight (48) hour period after Executive receives notice thereof. In the
event that the Executive is terminated for Cause, the Company shall promptly pay
to the Executive any unpaid base salary due the Executive through the date of
termination and the Executive shall not be entitled to receive any additional
salary, bonus payments, severance or other compensation.
(d) Without Cause. In addition to any other rights the Company
has to terminate the Executive's employment under this Agreement, the Company
may, at any time, by a vote of not less than fifty percent (50%) of the
directors then in office (excluding the vote of the Executive if he is also a
director), terminate the Executive without cause upon thirty (30) days' prior
written notice to the Executive setting forth the reasons, if any, for the
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termination. For purposes of this Agreement, the term "without cause" shall mean
termination by the Company on any grounds other than those set forth in
paragraphs 6(a), (b) or (c) hereof.
(e) Severance Pay. In the event that the Company has
terminated the Executive's employment under this Agreement (i) "without cause,"
(ii) in the event there is a "Change of Control" (as defined below) and the
Executive voluntarily terminates his employment within three (3) months of such
Change of Control, or (iii) the Executive's employment is terminated by the
Company following the expiration of the Term of this Agreement (including the
Company not offering the Executive at least a one-year employment term at the
annual salary then in effect), then the Executive shall be entitled to receive
severance pay equal to one hundred percent (100%) of his base salary for the
greater of (i) the balance of the Term or (ii) six (6) months; such payment, if
any, shall be made to the Executive in equal payments in accordance with the
Company's regular payroll over the remaining unexpired period of Executive's
employment Term or six (6) month period, as the case may be (the "Severance
Period").
(f) Change of Control. For purposes of this Agreement, a
"Change of Control" shall be deemed to occur, unless previously consented to in
writing by the Executive, and only if the Executive is not offered continued
employment under terms substantially similar to this Agreement, upon (i) the
actual acquisition of fifty percent (50%) or more of the voting securities of
the Company by any company or entity or affiliated group of companies or
entities (other than pursuant to a bona fide underwriting agreement relating to
a public distribution of securities of the Company), (ii) the completion of a
tender or exchange offer for more than fifty percent (50%) of the voting
securities of the Company by any company or entity or affiliated group of
companies or entities not affiliated with the Executive, (iii) the completion of
a proxy contest against the management for the election of a majority of the
Board of Directors of the Company if the group conducting the proxy contest
owns, has or gains the power to vote at least fifty percent (50%) of the voting
securities of the Company, or (iv) a merger or consolidation in which the
Company is not the surviving entity or a sale of all or substantially all of the
assets of the Company.
(g) Existing Options. All option agreements between the
Company and the Executive relating to options granted to the Executive prior to
the date hereof are hereby amended to provide that, notwithstanding anything
else contained in the option agreement to the contrary, if the Executive's
employment is terminated by the Company for any reason other than death,
disability or termination of services for cause (as defined in the corresponding
stock option plan or stock incentive plan or in this Agreement), all the
currently exercisable options covered by such option agreement shall not be
subject to earlier termination and shall expire on the last day(s) the option
may be exercised in accordance with the term of the respective option, as if the
Executive was still employed by the Company. Upon a Change of Control, all stock
options issued to the Executive as of such date (except for those which have
expired prior thereto), shall immediately be exercisable (in full) and any
unvested options shall immediately vest.
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(h) No Obligation to Mitigate Damages. The Executive shall not
be required to mitigate the amount of any payment provided for in this paragraph
6 by seeking other employment or otherwise nor shall the amount of any payment
provided for in this paragraph 6 be reduced by any compensation earned by the
Executive as the result of employment by another employer or business or by
profits earned by the Executive from any other source at any time before and
after the date of termination. The amounts payable to the Executive under this
Agreement shall not be treated as damages, but as severance pay to which the
Executive is entitled by reason of his employment and the circumstances
contemplated by this Agreement.
(i) The severance pay which the Executive will be entitled to
receive as a result of the termination of his employment under this Agreement,
shall be the Executive's exclusive remedy in the event of such termination.
7. Termination by the Executive
(a) Executive Termination. The Executive may terminate this
Agreement at any time by giving at least thirty (30) days prior written notice
to the Company. Any such termination shall become effective on the date
specified in such notice. Notwithstanding the foregoing, at the option of the
Company, the termination of the Executive's employment may become effective on
any date on or after the date of the notice upon notice to the Executive by the
Company and payment by the Company of the Executive's base salary through the
date of such notice; such termination shall be deemed a voluntary termination by
the Executive and not a termination by the Company. Upon termination, the
Company shall promptly pay the Executive any reimbursable expenses owed to him
and make available to the Executive continuation of his medical benefits as
required by COBRA.
(b) Good Reason. The Executive may also terminate his
employment for the following reasons ("Good Reason"): (i) any material failure
by the Company to pay the compensation and benefits provided for under this
Agreement or any other material breach by the Company of any provision of this
Agreement, which breach or failure shall continue uncured for ten (10) days
following notice thereof having been given to the Company; (ii) the sale or
discontinuance of substantially all of the business of the Company; or (iii) a
Change of Control of the Company (as defined in section 6(f) above). If the
Executive terminates his employment for Good Reason, then the Executive shall
receive the compensation and benefits set forth in section 6(e) herein
applicable to termination of the Executive's employment without cause.
8. Non-Competition and Confidentiality Covenant.
(a) The Executive hereby covenants and agrees that he will not
serve as an officer of or perform any functions for any other company during the
Term of his employment under this Agreement. In addition, during the Term of
this Agreement and for the Severance Period following the termination of his
employment, whether said termination is occasioned by the Company, the Executive
or a mutual agreement of the parties, the Executive shall not, for himself or on
behalf of any other person, persons, firm, partnership, corporation or company,
engage or participate in any activities which are in conflict with the interests
of the Company or solicit or attempt to solicit the business or patronage of any
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person, firm, corporation, company or partnership, which had previously been a
customer of the Company, for the purpose of selling products and services
similar to those provided by the Company.
(b) The Executive acknowledges and agrees that: all mailing
lists; customer, member and prospect names; license or arrangement; front-end
and back-end marketing performance; financial statements; operating system,
database and other computer software, specific to the Company; and all
information which is known by the Executive to be subject to a confidentiality
agreement or obligation of confidentiality, even without a confidentiality
agreement between the Company and another person or party, shall be maintained
by the Executive in a confidential manner and the Executive agrees that the
Executive will not use such information to the detriment of the Company or
disclose such information to any third party, except as may be necessary in the
course of performing the Executive's job responsibilities. The Executive further
agrees that these obligations of confidentiality with respect to such
information shall continue after the Executive ceases to be employed by the
Company. Disclosure of the aforementioned information shall not be prohibited if
such disclosure is directly pursuant to a valid and existing order of a court or
other governmental body or agency within the United States; provided, however,
that (i) the Executive shall first have given prompt notice to the Company of
any such possible or prospective order (or proceeding pursuant to which any such
order may result), (ii) the Company shall have been afforded a reasonable
opportunity to review such disclosure and to prevent or limit any such
disclosure, and (iii) the Executive shall, if requested by the Company and at
the Company's cost and expense, use his best efforts to prevent or limit any
such disclosure by means of a protective order or a request for confidential
treatment.
(c) During the Term and thereafter, the Executive shall not
directly or indirectly disparage the commercial, business or financial
representation of the Company or any of its officers, directors, employees or
affiliates.
(d) (i) The parties hereto hereby acknowledge and agree that
(A) the Company would be irreparably injured in the event of a breach by the
Executive of any of his obligations under this Section 8, (B) monetary damages
would not be an adequate remedy for any such breach, and (C) the Company shall
be entitled to injunctive relief, in addition to any other remedy which it may
have, in the event of any such breach.
(ii) Each of the rights and remedies enumerated in Section
8 shall be independent of the other, and shall be severally enforceable, and all
of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity.
(iii) If any provision contained in this Section 8 is found
to be unenforceable by reason of the extent, duration or scope thereof, or
otherwise, then the court making such determination shall have the right to
reduce such extent, duration, scope or other provision and in its reduced form
any such restriction shall thereafter be enforceable as contemplated hereby.
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(iv) It is the intent of the parties hereto that the
covenants contained in this Section 8 shall be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in which
enforcement is sought (the Executive hereby acknowledging that said restrictions
are reasonably necessary for the protection of the Company). Accordingly, it is
hereby agreed that if any of the provisions of this Section 8 shall be
adjudicated to be invalid or unenforceable for any reason whatsoever, said
provision shall be (only with respect to the operation thereof in the particular
jurisdiction in which such adjudication is made) construed by limiting and
reducing it so as to be enforceable to the extent permissible, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of said provision in any other jurisdiction.
(v) The Executive's obligations under this Section 8 shall
survive the termination of this Agreement for any reason whatsoever.
9. Indemnification. The Company shall indemnify and hold harmless the
Executive to the fullest extent permitted by the Florida Business Corporation
Act, the federal securities laws, the Xxxxxxxx-Xxxxx Act of 2002 and the
Company's Articles of Incorporation and By-laws, each as amended from time to
time, for all amounts (including without limitation, judgments, fines,
settlement payments, expenses and attorney's fees) incurred or paid by the
Executive in connection with any action, suit, investigation or proceeding
arising out of or relating to the performance by the Executive of services for,
or the acting by the Executive as a director, officer or employee of the
Company, or any other person or enterprise at the Company's request. If any
claim is asserted or other matter arises with respect to which the Executive
believes in good faith the Executive is entitled to indemnification as
contemplated hereby, the Company shall have the right to assume the defense or
investigation of such Claim or matter. The Executive shall reimburse the Company
for any amounts advanced to the Executive, plus simple interest thereon at the
then current Prime Rate as in effect from time to time, compounded annually, if
the Executive shall be found, as finally judicially determined by a court of
competent jurisdiction, not to have been entitled to indemnification hereunder.
To the fullest extent permitted by the Florida Business Corporation Act, the
federal securities laws, the Xxxxxxxx-Xxxxx Act of 2002 and the Company's
Articles of Incorporation and By-laws, each as amended from time to time, the
Company shall advance and pay the expenses (including attorneys' fees and
disbursements) incurred by the Executive in defending any proceeding in advance
of its final disposition. If a claim by the Executive for indemnification or
payment of expenses under this Section 9 is not paid in full after a written
claim therefor has been received by the Company, the Executive may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim, including
reasonable attorneys' fees; in any such action, the Company shall have the
burden of proving that the Executive is not entitled to the requested
indemnification or payment of expenses under applicable law. This Section 9
shall survive the termination of this Agreement.
10. Binding Agreement. This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, divisees and legatees. In addition, this Agreement and the
obligations and rights of the Company hereunder shall be binding on any person,
firm or corporation which is a successor-in-interest to the Company.
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11. Notice. For the purpose of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally, or by private
overnight courier or mail service, postage prepaid or (unless otherwise
specified) mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive: To the address at the head of this Agreement
If to the Company: MediaBay, Inc.
0 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
(000) 000-0000
or to such other address as the parties may furnish to each other in writing.
12. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the parties hereto, provided, however, that this Agreement may be
modified, waived or discharged by mutual agreement in writing.
(b) No delay, waiver, omission or forbearance (whether by
conduct or otherwise) by any party hereto at any time to exercise any right,
option, duty or power arising out of breach or default by the other party of any
of the terms, conditions or provisions of this Agreement to be performed by such
other party shall constitute a waiver by such party or a waiver of such party's
rights to enforce any right, option or power as against the other party or as to
subsequent breach or default by such other party, and no explicit waiver shall
constitute a waiver of similar or dissimilar terms, provisions or conditions at
the same time or at any prior or subsequent time.
13. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New Jersey (except that Section 9 shall be governed by
and construed in accordance with the Florida Corporation Business Act) and any
action brought by either party shall be commenced in the state or federal courts
of the State of New Jersey. The Executive and the Company hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the state or
federal courts of the State of New Jersey for any and all actions, suits or
proceedings arising out of or resulting from or relating to this Agreement and
the transactions contemplated hereby and the parties agree not to commence any
action, suit or proceeding relating thereto except in such courts. The parties
hereby irrevocably and unconditionally waive any objection to the laying of
venue of any such action, suit or proceeding arising out of, resulting from or
relating to this Agreement or the transactions contemplated hereby in such
courts and hereby further irrevocably and unconditionally waive and agree not to
plead or claim in any such court that such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
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14. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
16. Entire Agreement. This Agreement contains the entire understanding
of the Company and the Executive with respect to his employment by the Company.
This Agreement supersedes all prior agreements and understandings whether
written or oral between the Executive and the Company (other than any option
agreements between the Company and the Executive relating to the grant of stock
options by the Company to the Executive), and there are no restrictions,
agreements, promises, warranties or covenants other than those stated in this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date shown below effective as of the date first written above.
"COMPANY"
Date Signed: June 6, 2005 MEDIABAY, INC., a Florida corporation
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
"EXECUTIVE"
Date Signed: June 6, 2005 /s/ Xxxxxx Xxxx
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Xxxxxx Xxxx
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