EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "AGREEMENT") is made and entered
into as of this 1st day of March, 1999, by and between DVD Express, Inc., a
California corporation (the "COMPANY") and Xxxxxxx X. Xxxxxxx ("EXECUTIVE").
1. ENGAGEMENT AND DUTIES.
1.1 Upon the terms and subject to the conditions set forth in this
Agreement, the Company hereby engages and employs Executive as an officer of the
Company, with the title and designation of Chairman of the Board, Chief
Executive Officer and President of the Company. Executive hereby accepts such
engagement and employment.
1.2 Executive's duties and responsibilities shall be those which are
normally and customarily vested in the offices of Chairman of the Board, Chief
Executive Officer and President of a corporation, subject to the supervision,
direction and control of the Board of Directors (the "BOARD") of the Company.
In addition, Executive's duties shall include those duties and services for the
Company and its affiliates as the Board shall from time to time reasonably
direct. Executive shall report directly to the Board.
1.3 Executive agrees to devote his primary business time, energies,
skills, efforts and attention to his duties hereunder, and will not, without the
prior written consent of the Company, which consent will not be unreasonably
withheld, render any material services to any other business concern. Executive
will use his best efforts and abilities faithfully and diligently to promote the
Company's business interests.
1.4 Except for routine travel incident to the business of the
Company, Executive shall perform his duties and obligations under this Agreement
principally from an office provided by the Company in Los Angeles, California,
or such other location in Los Angeles County, California, as the Board may from
time to time determine.
2. TERM OF EMPLOYMENT. Executive's employment pursuant to this Agreement
shall commence on the date set forth above and shall terminate on the earliest
to occur of the following:
(a) the close of business on February 28, 2002;
(b) the death of Executive;
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(c) delivery to Executive of written notice of termination by the
Company if Executive shall suffer a physical or mental disability which renders
Executive, in the reasonable judgment of the Board, unable to perform his duties
and obligations under this Agreement for 90 days in any 12-month period;
(d) delivery to Executive of written notice of termination by the
Company "for cause," by reason of: (i) any act or omission knowingly undertaken
or omitted by Executive with the intent of causing damage to the Company, its
properties, assets or business or its stockholders, officers, directors or
employees; (ii) any act of Executive involving a material personal profit to
Executive, including, without limitation, any fraud, misappropriation or
embezzlement, involving properties, assets or funds of the Company or any of its
subsidiaries; (iii) Executive's consistent failure to perform his normal duties
or any obligation under any provision of this Agreement, in either case, as
directed by the Board; (iv) conviction of, or pleading NOLO CONTENDERE to, (A)
any crime or offense involving monies or other property of the Company; (B) any
felony offense; or (C) any crime of moral turpitude; or (v) the chronic or
habitual use of drugs or consumption of alcoholic beverages;
(e) delivery to Executive of written notice of termination by the
Company "without cause;" or
(f) delivery to the Company of written notice of termination by
Executive upon the occurrence of a "change of control" (as defined below).
Promptly following any change of control, the Company shall provide written
notice of such fact to Executive. Executive shall have 30 days following his
receipt of such notice to elect to notify the Company that Executive is treating
such change of control as a termination of this Agreement. For purposes of this
Section 2, the following events shall constitute a "change of control": (i) any
person or entity (or group of related persons or entities acting in concert),
other than Executive or an entity controlled by Executive, shall acquire shares
of capital stock of the Company entitled to exercise 35% or more of the total
voting power represented by all shares of capital stock of the Company then
outstanding; or (ii) the Company shall enter into an agreement to sell or
otherwise transfer all or substantially all of its assets or enter into an
agreement to merge, consolidate or reorganize with any other corporation or
entity, as the result of which less than 50% of the total voting power
represented by the capital stock or other equity interests of the corporation or
entity to which the Company's assets are sold or transferred or surviving such
merger, consolidation or reorganization shall be held by the persons and
entities who were holders of common stock of the Company on January 1, 1999.
3. COMPENSATION; EXECUTIVE BENEFIT PLANS.
3.1 The Company shall pay to Executive a base salary at an annual
rate of $50,000 during each fiscal year of this Agreement. The base salary
shall be payable in installments
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throughout the year in the same manner and at the same times the Company pays
base salaries to other executive officers of the Company. In the event that
Executive's employment is terminated pursuant to Section 2(e) or Section
2(f), above, the Company shall continue to pay Executive's then-current base
salary for a period of 12 months following the effective date of such
termination.
3.2 In addition to the base salary to be paid to Executive hereunder,
the Company may pay a bonus to Executive (the "Bonus") determined in accordance
with such "corporate goals" and "individual goals" for Executive as the Board
shall from time-to-time approve. In determining whether Executive has achieved
any of the "corporate goals" or "individual goals" established for Executive by
the Board, the Board shall consider any extraordinary events or circumstances
which may occur, the impact of those events on the "corporate goals" or
"individual goals" established for Executive by the Board, and the extent to
which those events were out of the control of Executive.
3.3 Executive shall be entitled each year to vacation for a minimum
of three calendar weeks, plus such additional period or periods as the Board may
approve in the exercise of its reasonable discretion, during which time his
compensation shall be paid in full.
3.4 Executive shall be entitled to reimbursement from the Company for
the reasonable costs and expenses which he incurs in connection with the
performance of his duties and obligations under this Agreement in a manner
consistent with the Company's practices and policies as adopted or approved from
time to time by the Board for executive officers.
3.5 The Company shall reimburse Executive and Executive's covered
dependents under any Executive Benefit Plan (as defined in Section 4 hereof) for
the full amount of any cost, expense, deductible, co-payment or other amount
incurred or paid by Executive in connection with Executive's or any of
Executive's dependents' coverage under any such Executive Benefit Plan, provided
such amounts are not paid by carriers under such Executive Benefit Plans. The
Company further agrees to pay such costs directly if invoices or other
appropriate documentation for such costs are submitted in advance to the Company
for approval. Nothing contained in this Section 3.5 shall, in any manner
whatsoever, directly or indirectly, require or obligate the Company to adopt or
implement, or to prevent, preclude or otherwise prohibit the Company from
amending, modifying, curtailing, discontinuing or otherwise terminating, any
Executive Benefit Plan at any time (whether during or after the term hereof).
3.6 The Company may deduct from any compensation payable to Executive
the minimum amounts sufficient to cover applicable federal, state and/or local
income tax withholding, old-age and survivors' and other social security
payments, state disability and other insurance premiums and payments.
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4. OTHER BENEFITS. During the term of his employment hereunder,
Executive shall be eligible to participate in all operative employee benefit and
welfare plans of the Company then in effect from time to time and in respect of
which all executive officers of the Company generally are entitled to
participate ("Executive Benefit Plans"), including, to the extent then in
effect, group life, medical, disability and other insurance plans, all on the
same basis applicable to employees of the Company whose level of management and
authority is comparable to that of Executive.
5. CONFIDENTIALITY OF PROPRIETARY INFORMATION AND MATERIAL.
5.1 INDUSTRIAL PROPERTY RIGHTS. For the purpose of this Agreement,
"INDUSTRIAL PROPERTY RIGHTS" shall mean all of the Company's patents,
trademarks, trade names, inventions, copyrights, know-how or trade secrets, now
in existence or hereafter developed or acquired by the Company or for its use,
relating to any and all products which are developed, formulated and/or
manufactured by the Company.
5.2 TRADE SECRETS. For the purpose of this Agreement, "TRADE
SECRETS" shall mean any formula, pattern, device, or compilation of information
which is used in the Company's business which gives the Company an opportunity
to obtain an advantage over its competitors who do not know and/or do not use
it. This term includes, but is not limited to, information relating to the
marketing of the Company's products, including price lists, pricing information,
customer lists, customer names, the particular needs of customers, information
relating to their desirability as customers, financial information, intangible
property and other such information which is not in the public domain.
5.3 TECHNICAL DATA. For the purpose of this Agreement, "TECHNICAL
DATA" shall mean all information of the Company in written, graphic or tangible
form relating to any and all products which are developed, formulated and/or
manufactured by the Company, as such information exists as of the date of this
Agreement or is developed by the Company during the term hereof.
5.4 PROPRIETARY INFORMATION. For the purpose of this Agreement,
"PROPRIETARY INFORMATION" shall mean all of the Company's Industrial Property
Rights, Trade Secrets and Technical Data. Proprietary Information shall not
include any information which (i) was lawfully in the possession of Executive
prior to Executive's employment with the Company, (ii) may be obtained by a
reasonably diligent businessperson from readily available and public sources of
information, (iii) is lawfully disclosed to Executive after termination of
Executive's employment by a third party which does not have an obligation to the
Company to keep such information confidential, or (iv) is independently
developed by Executive after termination of Executive's employment without
utilizing any of the Company's Proprietary Information.
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5.5 AGREEMENT NOT TO COPY OR USE. Executive agrees, at any time
during the term of his employment and for a period of ten years thereafter, not
to copy, use or disclose (except as required by law after first notifying the
Company and giving it an opportunity to object) any Proprietary Information
without the Company's prior written permission. The Company may withhold such
permission as a matter within its sole discretion during the term of this
Agreement and thereafter.
6. RETURN OF CORPORATE PROPERTY AND TRADE SECRETS. Upon any termination
of this Agreement, Executive shall turn over to the Company all property,
writings or documents then in his possession or custody belonging to or relating
to the affairs of the Company or comprising or relating to any Proprietary
Information.
7. DISCOVERIES AND INVENTIONS.
7.1 DISCLOSURE. Executive will promptly disclose in writing to the
Company complete information concerning each and every invention, discovery,
improvement, device, design, apparatus, practice, process, method, product or
work of authorship, whether patentable or not, made, developed, perfected,
devised, conceived or first reduced to practice by Executive, whether or not
during regular working hours (hereinafter referred to as "Developments"), either
solely or in collaboration with others, (a) prior to the term of this Agreement
while working for the Company, (b) during the term of this Agreement or (c)
within six months after the term of this Agreement, if relating either directly
or indirectly to the business, products, practices, techniques or confidential
information of the Company.
7.2 ASSIGNMENT. Executive, to the extent that he has the legal right
to do so, hereby acknowledges that any and all Developments are the property of
the Company and hereby assigns and agrees to assign to the Company any and all
of Executive's right, title and interest in and to any and all of such
Developments; PROVIDED, HOWEVER, that, in accordance with California Labor Code
Sections 2870 and 2872, the provisions of this Section 7.2 shall not apply to
any Development that the Executive developed entirely on his own time without
using the Company's equipment, supplies, facilities or trade secret information
except for those Developments that either:
(a) relate at the time of conception or reduction to practice of
the Development to the Company's business, or actual or demonstrably anticipated
research or development of the Company; or
(b) result from any work performed by Executive for the Company.
7.3 ASSISTANCE OF EXECUTIVE. Upon request and without further
compensation therefor, but at no expense to Executive, and whether during the
term of this Agreement or
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thereafter, Executive will do all reasonable lawful acts, including, but not
limited to, the execution of papers and lawful oaths and the giving of
testimony, that, in the reasonable opinion of the Company, its successors and
assigns, may be necessary or desirable in obtaining, sustaining, reissuing,
extending and enforcing United States and foreign Letters Patents, including,
but not limited to, design patents, on any and all Developments and for
perfecting, affirming and recording the Company's complete ownership and
title thereto, subject to the proviso in Section 7.2 hereof, and Executive
will otherwise reasonably cooperate in all proceedings and matters relating
thereto.
7.4 RECORDS. Executive will keep complete and accurate accounts,
notes, data and records of all Developments in the manner and form requested by
the Company. Such accounts, notes, data and records shall be the property of
the Company, subject to the proviso in Section 7.2 hereof, and, upon request by
the Company, Executive will promptly surrender the same to it or, if not
previously surrendered upon its request or otherwise, Executive will surrender
the same, and all copies thereof, to the Company upon the conclusion of his
employment.
7.5 OBLIGATIONS, RESTRICTIONS AND LIMITATIONS. Executive understands
that the Company may enter into agreements or arrangements with agencies of the
United States Government and that the Company may be subject to laws and
regulations which impose obligations, restrictions and limitations on it with
respect to inventions and patents which may be acquired by it or which may be
conceived or developed by employees, consultants or other agents rendering
services to it. Executive agrees that he shall be bound by all such
obligations, restrictions and limitations applicable to any such invention
conceived or developed by him during the term of this Agreement and shall take
any and all further action which may be required to discharge such obligations
and to comply with such restrictions and limitations.
8. NON-SOLICITATION COVENANT.
8.1 NONSOLICITATION AND NONINTERFERENCE. During the term of this
Agreement and for a period of two years thereafter, Executive shall not (a)
induce or attempt to induce any employee of the Company to leave the employ of
the Company or in any way interfere adversely with the relationship between any
such employee and the Company, (b) induce or attempt to induce any employee of
the Company to work for, render services or provide advice to or supply
confidential business information or trade secrets of the Company to any third
person, firm or corporation or (c) induce or attempt to induce any customer,
supplier, licensee, licensor or other business relation of the Company to cease
doing business with the Company or in any way interfere with the relationship
between any such customer, supplier, licensee, licensor or other business
relation and the Company.
8.2 INDIRECT SOLICITATION. Executive agrees that, during the term of
this Agreement and the period covered by Section 8.1 hereof, he will not,
directly or indirectly, assist or encourage any other person in carrying out,
directly or indirectly, any activity that would be
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prohibited by the provisions of Section 8.1 if such activity were carried out
by Executive, either directly or indirectly; and, in particular, Executive
agrees that he will not, directly or indirectly, induce any employee of the
Company to carry out, directly or indirectly, any such activity.
9. INJUNCTIVE RELIEF. Executive hereby recognizes, acknowledges and
agrees that in the event of any breach by Executive of any of his covenants,
agreements, duties or obligations contained in Sections 5, 6, 7 and 8 of this
Agreement, the Company would suffer great and irreparable harm, injury and
damage, the Company would encounter extreme difficulty in attempting to prove
the actual amount of damages suffered by the Company as a result of such breach,
and the Company would not be reasonably or adequately compensated in damages in
any action at law. Executive therefore covenants and agrees that, in addition
to any other remedy the Company may have at law, in equity, by statute or
otherwise, in the event of any breach by Executive of any of his covenants,
agreements, duties or obligations contained in Sections 5, 6, 7 and 8 of this
Agreement, the Company shall be entitled to seek and receive temporary,
preliminary and permanent injunctive and other equitable relief from any court
of competent jurisdiction to enforce any of the rights of the Company, or any of
the covenants, agreements, duties or obligations of Executive hereunder, and/or
otherwise to prevent the violation of any of the terms or provisions hereof, all
without the necessity of proving the amount of any actual damage to the Company
or any affiliate thereof resulting therefrom; PROVIDED, HOWEVER, that nothing
contained in this Section 9 shall be deemed or construed in any manner
whatsoever as a waiver by the Company of any of the rights which the Company may
have against Executive at law, in equity, by statute or otherwise arising out
of, in connection with or resulting from the breach by Executive of any of his
covenants, agreements, duties or obligations hereunder.
10. MISCELLANEOUS.
10.1 NOTICES. All notices, requests and other communications
(collectively, "Notices") given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service or by United States first class,
registered or certified mail (return receipt requested), postage prepaid,
addressed to the party at the address set forth below:
If to Company:
DVD Express, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Board of Directors
If to Executive:
Xxxxxxx X. Xxxxxxx
c/o DVD Express, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
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Any Notice shall be deemed duly given when received by the addressee thereof,
provided that any Notice sent by registered or certified mail shall be deemed to
have been duly given three days from date of deposit in the United States mails,
unless sooner received. Either party may from time to time change its address
for further Notices hereunder by giving notice to the other party in the manner
prescribed in this section.
10.2 ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement and understanding of the parties with respect to the entire subject
matter of this Agreement, and any and all prior discussions, negotiations,
commitments and understandings, whether oral or otherwise, related to the
subject matter of this Agreement are hereby merged herein. No representations,
oral or otherwise, express or implied, other than those contained in this
Agreement have been relied upon by any party to this Agreement.
10.3 ATTORNEYS' FEES. If any action, suit or other proceeding is
instituted to remedy, prevent or obtain relief from a default in the performance
by any party of its obligations under this Agreement, the prevailing party shall
recover all of such party's costs and reasonable attorneys' fees incurred in
each and every such action, suit or other proceeding, including any and all
appeals or petitions therefrom.
10.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES THEREOF.
10.5 CAPTIONS. The various captions of this Agreement are for
reference only and shall not be considered or referred to in resolving questions
of interpretation of this Agreement.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.7 BUSINESS DAY. If the last day permissible for delivery of any
Notice under any provision of this Agreement, or for the performance of any
obligation under this Agreement, shall be other than a business day, such last
day for such Notice or performance shall be extended to the next following
business day (PROVIDED, HOWEVER, under no circumstances shall this provision be
construed to extend the date of termination of this Agreement).
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In witness whereof, the parties have executed this Agreement as of the date
first set forth above.
Company:
DVD EXPRESS, INC.
By: /s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx,
Chief Financial Officer
Executive:
/s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
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