EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of the 12 day of August 2004, by and
between MediaBay, Inc., a Florida corporation, with offices at 0 Xxxxxxxxx
Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx, Xxx Xxxxxx 00000 (the "Company"), and Xxxx X.
Xxxx, residing at 000 Xxx Xxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the spoken audio business including
audiobooks, old-time radio shows and downloadable spoken audio products; and
WHEREAS, the Company desires to continue to employ the Executive; and
WHEREAS, the Executive shall continue 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 August 12, 2004 and end on the second (2nd)
anniversary of such commencement, subject, however, to the other termination
provisions contained herein.
(4) Position and Duties. The Executive shall be employed by the Company
as Vice Chairman and Chief Financial Officer. His power and authority shall be
and remain subject to the direction and control of the Board of Directors. The
Executive shall perform the duties and responsibilities and have the powers of
Chairman, as set forth in the Company's By-laws, except that the Executive shall
remain subject to the discretion and control of the Chairman, and shall preside
at meetings of the shareholders and Board of Directors of the Company only in
the absence of the Chairman. In addition, for as long as the Executive shall be
employed as Chief Financial Officer, 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, 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
$190,000 in bi-monthly installments during the first year of the term of this
Agreement, and $210,000 in bi-monthly installments during the second year of the
term of this Agreement; provided, however, that upon the Company obtaining an
aggregate of $12 million of debt and/or equity financing after the date hereof,
the bi-monthly installments of annual salary thereinafter shall increase by 10%
of the annual salary otherwise payable to the Executive. In addition, the
Executive may receive a performance-based bonus to be determined by the Board of
Directors (or a Compensation Committee of the Board of Directors, if any).
(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.
(c) Insurance and Employee Benefits. The Executive shall receive
employee benefits applicable to all officers of the Company except the executive
will not receive medical insurance as long as his wife is eligible to receive
family coverage from Lucent, and if she is not so eligible, the Company shall
have the option to either (i) provide the Executive medical insurance for
himself or (ii) pay for the Executive's portion of the medical insurance premium
paid by his wife under her other employer's plan, if any. In addition, the
Executive shall be reimbursed for reasonable costs associated with up to
twenty-four (24) hours of continuing education courses with respect to topics
germane to his duties, including reasonable local travel costs to attend such
courses and reasonable fees for such courses. In addition, the Company will
reimburse the Executive for his dues to the AICPA and ISCPA and the Executive
can continue to use during the Term the portable computer and cellular phone
already provided to him by the Company.
(d) Vacation. The Executive shall receive, prorata during each full
year of his employment, three (3) 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. In addition,
the Executive will receive normal Company holidays, plus two (2) days off for
Rosh Hashanah and one (1) day off for Yom Kippur unless such holy days fall on a
weekend.
(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.
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(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) continued failure by the Executive to perform his duties, as contemplated
in this Agreement, as Vice Chairman or Chief Financial Officer, unless the Board
appoints another Chief Financial Officer (other than through disability as
defined in paragraph 6(b), above), (iii) conviction of a crime or alcohol or
drug abuse, or (iv) the Executive's breach of this Agreement. The termination
shall be evidenced by written notice thereof to the Executive.
(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 a majority of the directors then in
office (excluding the vote of the Executive if he is also a director), terminate
the Executive without cause upon ninety (90) days' prior written notice to the
Executive setting forth the reasons, if any, for the 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. It shall also be a termination without cause, at the election of the
Executive, if the Executive is asked to work at a business location of the
Company which is more than fifty (50) miles from Westfield, New Jersey.
Notwithstanding the foregoing, it is understood that travel in connection with
the performance of Executive's duties shall not be deemed to be termination
without cause.
(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, except as provided
in clause (iii) below, the Company terminates the Executive's employment
"without cause" within six months following the Change of Control, (iv) a Change
of Control occurs and the Company and/or its stockholders receive an amount
equal to $3.00 multiplied by the number of shares of common stock outstanding
assuming all convertible securities are converted and all options, warrants and
other securities exercisable for or exchangeable into common stock at a price
less than $3.00 per share are so exercised or exchanged or (v) 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 will be entitled to receive severance pay of equal to the annual
salary in effect on the date of termination paid in twelve equal payments
commencing thirty (30) days from such termination of the Executive's employment.
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(f) Change of Control. For purposes of this Agreement, a "Change of
Control" shall be deemed to occur, upon (i) the actual acquisition of fifty
percent (50%) or more of the voting securities of the Company by any persons,
company or entity or affiliated group of persons, companies or entities (other
than pursuant to a bona fide underwriting agreement relating to a public
distribution of securities of the Company) and, following such transaction, no
holder of ten percent (10%) or more of the Company's common stock as of the date
hereof is a stockholder 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 or substantially all of the assets of the Company.
(g) Amendment to Option Agreements; Change of Control Compensation.
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, 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 shall immediately vest.
(h) No Mitigation Required. 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) Exclusive Remedy. 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.
(j) Appointment of Chief Financial Officer. Notwithstanding
anything herein to the contrary, if the Board of Directors determines to appoint
another Chief Financial Officer, the Executive shall no longer serve as Chief
Financial Officer or have the duties and responsibilities of Chief Financial
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Officer, and such action shall not serve as a termination of this Agreement or a
breach of this Agreement by the Company or the Executive.
(7) Non-Competition and Confidentiality Covenant. 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 a period of
two (2) years immediately following the termination of his employment, whether
said termination is occasioned by the Company unless the Company terminates
Executive's employment with six months following a Change of Control, 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
direct or indirect conflict with the interests of the Company or solicit or
attempt to solicit the business or patronage of any 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.
Furthermore, 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.
The Executive further acknowledges that the Executive will not disclose
any information with respect to the Company, its operations or its officers and
directors, whether or not such information is confidential, to Xxxxxxx Xxxx or
any entity or company in which Xxxxxxx Xxxx has an ownership interest or is a
director, officer or employee or to any attorneys, accountants, agents or
representatives of Xxxxxxx Xxxx or any of the aforementioned companies or
entities.
(8) Indemnification. To the maximum extent permitted under the
corporate laws of the State of Florida, (a) the Executive shall be indemnified
and held harmless by the Company, as provided under such corporate laws for any
and all actions taken or matters undertaken, directly or indirectly, in the
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performance of his duties and responsibilities under this Agreement or otherwise
on behalf of the Company, provided the Executive did not act wantonly or
recklessly or was not grossly negligent or engaged in willful misconduct, and
(b) without limiting clause (a), the Company shall indemnify and hold harmless
the Executive from and against (i) any claim, loss, liability, obligation,
damage, cost, expense, action, suit, proceeding r cause of action (collectively,
"Claims") arising from or out of or relating to the Executive's acting as an
officer, director, employee or agent of the Company or any of its affiliates or
in any other capacity, including, without limitation, any fiduciary capacity, in
which the Executive serves at the request of the Company, and (ii) any cost or
expense (including, without limitation, fees and disbursements of counsel)
(collectively, "Expenses") incurred by the Executive in connection with the
defense or investigation thereof. 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, at its
election, to be determined in its sole and absolute discretion, either assume
the defense or investigation of such Claim or matter or pay the Expenses
incurred by the Executive in connection with the defense or investigation of
such Claim or matter, provided that the Executive shall reimburse the Company
for such amounts, 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.
(9) 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, devisees 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.
(10) 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
Attention: Chairman
Or to such other address as the parties may furnish to each other in writing.
Copies of all notices, demands and communications shall be sent to the home
addresses of all members of the Board of Directors of the Company.
(11) 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.
(12) Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New Jersey (except to the extent that the Florida
Business Corporation Act applies to Section 8 hereof) and any action brought by
either party shall be commenced in the 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 courts of the State of New Jersey
and the United States of America located in Xxxxxx County, 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.
(13) 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.
(14) 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. Facsimile signatures shall
be effective and binding as original signatures.
(15) 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, 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.
Date Signed: August 12, 2004 MEDIABAY, INC., a Florida corporation
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: CEO
"EXECUTIVE"
Date Signed: August 12, 2004 By: /s/ Xxxx X. Xxxx
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Xxxx X. Xxxx
