EXHIBIT 10.7
Xxxxx Dead, Inc.
0000 Xxxxxxx Xx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Employment Agreement dated as of December 1, 2002, between XXXXX DEAD, INC., a
Delaware corporation (with its successors and assigns, referred to as the
"Corporation"), and XXXXXXX X. XXXX III (hereinafter referred to as "XXXX").
XXXX and the Corporation therefore agree as follows:
1. Term of Employment. The Corporation hereby employs XXXX and XXXX hereby
accepts employment with the Corporation for the period (the "Term") commencing
on the date hereof (the "Commencement Date"), and ending on the third
anniversary of the successful completion of the Corporation's initial public
offering (the "IPO") or upon the earlier termination of the Term pursuant to
this Agreement. The Term may be extended upon mutual agreement by the parties.
The termination of the Term for any reason shall end RYAN's employment under
this Agreement, but, except as otherwise set forth herein, shall not terminate
RYAN's or the Corporation's other agreements in this Agreement.
2. Position and Duties. During the Term, XXXX shall serve as Chairman of
the Board, Chief Executive Officer and Chief Financial Officer of the
Corporation. XXXX shall also hold such additional positions and titles as the
Board of Directors of the Corporation and XXXX mutually determine from time to
time. XXXX shall report to the Board of Directors. During the Term, XXXX shall
not be required to devote his full time and attention to performing his duties
as an employee of the Corporation, but shall devote such time as is reasonably
necessary for him to perform his duties hereunder.
3. Compensation. The Corporation shall pay XXXX a fee of $25,000 upon
successful completion of the IPO and the issuance by the Corporation to
investors of the shares of Series A Preferred Stock registered in the IPO. The
Corporation will pay to XXXX additional cash compensation of $150,000 per Term,
such compensation to be paid ratably over the Term. Subject to the provisions of
Section 8, in the event the Term ends prior to its full-length, all remaining
cash compensation shall be accelerated and paid.
4. Contingent Compensation.
(a) Definition of Contingent Compensation. XXXX also shall be entitled to
receive a participation (the "Participation") equal to 1.0% of 100% of the
"Adjusted Gross Receipts" derived from the Picture. As used herein, "Adjusted
Gross Receipts" means 100% of the gross receipts derived by the Corporation
(including any parent, affiliate and subsidiary) from the distribution and
exploitation of the film "Xxxxx Dead" to be produced by the Corporation based on
a screenplay by Xxxxx Xxxxxx or the book by Xxxx Xxxxxxx (the "Picture")
(including any and all ancillary rights therein) ("Gross Receipts"), less the
Corporation's actual, direct, out-of-pocket expenses in connection therewith.
The definition of RYAN's Participation shall be no less favorable than the
definition of the participation (however denominated) payable to any other
person or company granting rights or rendering services in connection with the
Picture. For the avoidance of doubt, except to the extent necessary to set up a
reserve to cover reasonably anticipated ongoing operating expenses for the
Corporation, including, without limitation, payment of legal and accounting
fees, office expenses and the like, the Corporation shall not be entitled to
charge distribution, sales, administrative or other fees on the revenues derived
from the Picture and/or any ancillary rights therein, nor shall the Corporation
be entitled to charge overhead or any other indirect or
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similar cost (whether set forth in the budget for the Picture or payable out of
the revenues derived from the Picture) without RYAN's prior written consent.
Subject to the foregoing, Adjusted Gross Receipts shall be defined as set forth
in Exhibit A ("Short Form Definition of Participant's Net Profits") attached
hereto; and the Corporation represents and warrants that the definition set
forth on Exhibit A is and shall remain applicable to all persons and companies
receiving a Participation in the revenues derived from the Picture (i.e., no one
shall receive a more favorable definition than XXXX, and XXXX shall not receive
a more favorable definition than any other person or company receiving a
participation).
(b) Forfeiture of Participation. RYAN's Participation shall vest on a
20/60/10/10% basis over pre-production/principal photography/delivery of
Director's first cut/delivery of the answer print (with the pre-production and
principal photography vesting made in approximately equal weekly installments).
For the purpose of clarity, this means that if XXXX resigns(other than as a
result of the Corporation's breach of this Agreement), dies, is terminated for
Disability, as defined in Section 9, or is terminated by the Corporation for
Cause prior to the occurrence of the milestones identified in the previous
sentence, the portion of his Participation that will no longer be subject to
forfeiture is: (i) upon the completion of pre-production, only 80% of the
Participation will be subject to forfeiture by XXXX; (ii) upon the completion of
principal photography, only 20% of the Participation will be subject to
forfeiture by XXXX; (iii) upon the delivery of the Director's first cut, only
10% of the Participation will be subject to forfeiture by XXXX; and (iv) upon
the delivery of the answer print, RYAN's Participation will no longer be subject
to forfeiture.
5. Credit. Subject to XXXX completing all material services hereunder,
XXXX will receive, on a separate, on-screen card in the Main Titles of the
Picture, credit as both (i) "Chief Executive Officer, Xxxxx Dead Inc." and (ii)
"Executive Producer." Subject to the same completion of material services
hereunder, XXXX will receive an Executive Producer credit in paid ads (billing
block portion), with size and excluded ad tie to individual producers.
6. Employee Benefits. The Corporation will not pay or make available any
employee benefits to XXXX, including vacation, pension or retirement plan
contributions or health or life insurance plans.
7. Expenses. During the Term, the Corporation shall reimburse XXXX for
actual out-of-pocket expenses incurred by him in the performance of his services
for the Corporation upon the receipt of appropriate documentation of such
expenses.
8. Termination. (a) General. The Term shall end immediately upon RYAN's
resignation, his death or Disability, as defined in Section 9, or termination by
the Corporation for Cause. Upon termination of the Term due to RYAN's d
resignation, death, Disability or for Cause, all compensation due XXXX under
this Agreement will cease. Upon the Corporation's termination of the Term for
Cause, XXXX shall have ten (10) days to cure said Cause, if curable.
(b) Notice of Termination. The Corporation shall notify XXXX in
writing of its termination of his employment hereunder. The Corporation's
failure to give notice under this Section 7(b) shall not, however, affect the
validity of the Corporation's termination of the Term.
(c) Termination by the Corporation for Cause. If terminated by the
Corporation for Cause, the Corporation shall describe to XXXX the grounds for
his termination. Upon the Corporation's termination of the Term for Cause, all
compensation due XXXX under this Agreement will cease.
(d) Termination by the Corporation other than upon Death, Disability
or Cause. In the event that the Corporation terminates its relationship with
XXXX prior to the end of the Term in
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circumstances other than Death, Disability or Cause, XXXX shall promptly receive
all compensation payable to him under Section 3 and Section 4.
9. Definitions.
(a) "Cause" Defined. "Cause" means (i) willful malfeasance or
willful misconduct by XXXX in connection with his employment; (ii) RYAN's gross
negligence in performing any of his duties under this Agreement; (iii) RYAN's
conviction of, or entry of a plea of guilty to, or entry of a plea of nolo
contendere with respect to, any felony; (iv) RYAN's habitual drunkenness or
excessive absenteeism not related to illness; (iv) RYAN's material breach of any
written policy applicable to all employees adopted by the Corporation; or (vi)
material breach by XXXX of any of his agreements in this Agreement.
(b) "Disability" Defined. "Disability" shall mean RYAN's incapacity
due to physical or mental illness that results in his being unable to
substantially perform his duties hereunder for six consecutive months (or for
six months out of any nine-month period). Upon termination, after the end of the
period of Disability, all compensation due XXXX under this Agreement shall
cease.
10. Stock Issuance. In consideration for the sum of $144 and subject
to the filing of an Amended and Restated Certificate of Incorporation increasing
the authorized capitalization of the Corporation to 900,000 shares of Common
Stock and 954,000 shares of Series A Preferred Stock in anticipation of the IPO,
the Corporation will issue to XXXX 144,000 shares of the Corporation's Common
Stock (the "Shares"). The Corporation will have the right to repurchase all of
the Shares at a price of $0.001 per Share if RYAN's employment is terminated
prior to the consummation of the IPO, provided that such right is exercised by
the Company prior to the completion of the IPO. If RYAN's employment is
terminated on or prior to the first anniversary of the completion of the IPO,
the Corporation will have the right to repurchase 75% of the Shares at a price
of $0.001 per share, provided that such right is exercised by the Company prior
to such first anniversary. If RYAN's employment is terminated prior to the
second anniversary of the completion of the IPO, the Corporation will have the
right to repurchase 50% of the Shares at a price of $0.001 per share, provided
that such right is exercised by the Company prior to such second anniversary. If
RYAN's employment is terminated prior to the third anniversary of the completion
of the IPO, the Corporation will have the right to repurchase 25% of the Shares
at a price of $0.001 per share, provided that such right is exercised by the
Company prior to such third anniversary. The Corporation shall not have any
repurchase rights if XXXX remains employed by the Corporation as of the third
anniversary of the IPO or if his employment is terminated by the Corporation at
any time prior thereto without Cause.
11. Director's Shares. The Corporation also has issued shares of the
Company's Common Stock to XXXX for cash consideration. Such shares are subject
to certain repurchase rights of the Corporation under a Director's Agreement
between the Corporation and XXXX relating to his service on the Corporation's
Board of Directors.
12. Restrictions on Selling the Corporation's Securities. XXXX agrees to
execute and deliver a "lock-up" letter reasonably requested by any underwriter
for the IPO and agrees that a restriction on selling the Corporation's
securities for up to two years shall be deemed reasonable.
13. Confidentiality.
(a) "Corporation Information" Defined. "Corporation Information"
means all information, knowledge or data of or pertaining to (i) the
Corporation, its employees and all work undertaken on behalf of the Corporation,
and (ii) any other person, firm, corporation or business organization with which
the Corporation may do business during the Term, that is not in the public
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domain (and whether relating to methods, processes, techniques, discoveries,
pricing, marketing or any other matters).
(b) Confidentiality. XXXX hereby recognizes that the value of all
trade secrets and other proprietary data and all other information of the
Corporation not in the public domain disclosed by the Corporation in the course
of his employment with the Corporation is attributable substantially to the fact
that such confidential information is maintained by the Corporation in strict
confidentiality and secrecy and would be unavailable to others without the
expenditure of substantial time, effort or money. XXXX therefore, except as
provided in the next two sentences, covenants and agrees that all Corporation
Information shall be kept secret and confidential at all times during and after
the end of the Term and shall not be used or divulged by him outside the scope
of his employment as contemplated by this Agreement, except as the Corporation
may otherwise expressly authorize by action of the Board. In the event that XXXX
is requested in a judicial, administrative or governmental proceeding to
disclose any of the Corporation Information, XXXX will promptly so notify the
Corporation so that the Corporation may seek a protective order or other
appropriate remedy and/or waive compliance with this Agreement. If disclosure of
any of the Corporation Information is required, XXXX xxx furnish the material so
required to be furnished, but XXXX will furnish only that portion of the
Corporation Information that legally is required.
14. Restrictive Covenants. XXXX hereby confirms that since it is
reasonably necessary to protect the Corporation's goodwill, RYAN agrees that he
will not directly or indirectly (except where authorized by the Board for the
benefit of the Corporation), for or on behalf of himself or any Person
(hereinafter defined):
(i) at any time during his tenure as an officer, director, employee or
consultant of the Corporation act as or be an officer, director, stockholder,
consultant or advisor, partner or employee of, or render any service for, or
have any profit-sharing or other interest in, or lend money or make any other
financial accommodation for or on behalf of, or undertake any business
transaction with, any Person that engages in or is planning or preparing to
engage, directly or indirectly, in competition with the Corporation or any
corporate affiliate of the Corporation, where "competition" shall mean only the
production or distribution of the Picture (a "Competitive Activity"), except
that he may hold securities that are part of a publicly traded class of
securities (not in excess of 5% of the outstanding total of any class of such
securities) in competitive concerns so long as he discloses such holding to the
Corporation; or
(ii) at any time during his tenure as an officer, director, employee or
consultant of the Corporation and for a period of two years after he is no
longer any of an officer, director, employee or consultant for any reason,
engage in or plan or prepare to engage in any Competitive Activity;
(iii) at any time during his tenure as an officer, director, employee or
consultant of the Corporation and for a period of two years after he is no
longer any of an officer, director, employee or consultant for any reason,
employ or otherwise obtain services from, or solicit or otherwise attempt to
employ or otherwise obtain services from, or assist any person in employing or
otherwise obtaining services from, or soliciting or otherwise attempting to
employ or otherwise obtain services from, any person who is then, or at any time
during the preceding twelve months shall have been, in the employ of or retained
by the Corporation and/or its affiliates; or
(ivi) at any time during his tenure as an officer, director, employee or
consultant of the Corporation and for the applicable period thereafter specified
in each of the clauses above, negotiate for or enter into an agreement,
understanding or arrangement, or otherwise cause or authorize any person, to
take any of the actions prohibited by such clause.
As used herein, the term "Person" means any person, corporation, partnership or
other entity.
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15. Enforcement. XXXX agrees that any breach or threatened breach by him
of any provision of Sections 12 and 13 will, because of the unique nature of
such services rendered by him to the Corporation and the Corporation Information
entrusted to him as aforesaid, cause irreparable harm to the Corporation, and
shall entitle the Corporation, in addition to any other legal remedies available
to it, to apply to any court of competent jurisdiction to enjoin such breach or
threatened breach, without the need to show irreparable injury or to post any
bond, which are hereby waived by XXXX in any such case. The parties hereto
understand and intend that each restriction agreed to by XXXX hereinabove shall
be construed as separable and divisible from every other restriction, and the
unenforceability, in whole or in part, of any such restriction, shall not affect
the enforceability of the remaining restrictions and that one or more or all of
such restrictions may be enforced in whole or in part as the circumstances
warrant. XXXX further acknowledges that the Corporation is relying upon such
covenants as an inducement to enter into this Agreement.
16. Successors and Assigns.
(a) XXXX. This Agreement is a personal contract, and the rights and
interests that the Agreement accords to XXXX xxx not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him. All rights and benefits
of XXXX shall be for the sole personal benefit of XXXX, and no other person
shall acquire any right, title or interest under this Agreement by reason of any
sale, assignment, transfer, claim or judgment or bankruptcy proceedings against
XXXX. Except as so provided, this Agreement shall inure to the benefit of and be
binding upon XXXX and his personal representatives, distributees and legatees.
(b) The Corporation. This Agreement shall be binding upon the
Corporation and inure to the benefit of the Corporation and of its successors
and assigns.
17. Entire Agreement. This Agreement represents the entire agreement
between the parties concerning RYAN's employment with the Corporation and
supersedes all prior negotiations, discussions, understandings and agreements,
whether written or oral, between XXXX and the Corporation relating to the
subject matter of this Agreement.
18. Amendment or Modification; Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to in writing
signed by XXXX and by a duly authorized officer of the Corporation. No waiver by
any party to this Agreement of any breach by another party of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar condition or provision at the same time, any
prior time or any subsequent time.
19. Notices. Any notice to be given under this Agreement shall be in
writing and delivered personally or sent by overnight courier or registered or
certified mail, postage prepaid, return receipt requested, addressed to the
party concerned at the address indicated below, or to such other address of
which such party subsequently may give notice in writing:
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If to XXXX: Xxxxxxx X. XXXX III
000 Xxxxx Xxxxxxx
Xxx Xxxxxxxxx, XX 00000
If to the Corporation: Xxxxx Dead, Inc.
0000 Xxxxxxx Xx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Board of Directors
Any notice delivered personally or by overnight courier shall be deemed
given on the date delivered and any notice sent by registered or certified mail,
postage prepaid, return receipt requested, shall be deemed given on the date
mailed.
20. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable shall not be affected, and each provision of this
Agreement shall be validated and shall be enforced to the fullest extent
permitted by law. If for any reason any provision of this Agreement containing
restrictions is held to cover an area or to be for a length of time that is
unreasonable or in any other way is construed to be too broad or to any extent
invalid, such provision shall not be determined to be entirely null, void and of
no effect; instead, it is the intention and desire of both the Corporation and
XXXX that, to the extent that the provision is or would be valid or enforceable
under applicable law, any court of competent jurisdiction shall construe and
interpret or reform this Agreement to provide for a restriction having the
maximum enforceable area, time period and such other constraints or conditions
(although not greater than those contained currently contained in this
Agreement) as shall be valid and enforceable under the applicable law.
21. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
22. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience of reference, and no provision of
this Agreement is to be construed by reference to the heading of any section or
paragraph.
23. Withholding Taxes. All salary, benefits, reimbursements and any other
payments to XXXX under this Agreement shall be subject to all applicable payroll
and withholding taxes and deductions required by any law, rule or regulation of
and federal, state or local authority.
24. 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 constitute one and same instrument.
25. Applicable Law; Jurisdiction. The laws of the State of California
shall govern the interpretation, validity and performance of the terms of this
Agreement, without reference to rules relating to conflicts of law. Any suit,
action or proceeding against XXXX with respect to this Agreement, or any
judgment entered by any court in respect thereof, may be brought in any court of
competent jurisdiction in the State of California, as the Corporation may elect
in its sole discretion, and XXXX hereby submits to the exclusive jurisdiction of
such courts for the purpose of any such suit, action, proceeding or judgment.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
/s/ XXXXXXX X. XXXX III
---------------------------------------------
(Xxxxxxx X. XXXX III)
XXXXX DEAD, INC.
By: /s/ XXXXX XXXX
-----------------------------
(Xxxxx Xxxx)
Vice President and Secretary
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EXHIBIT A
Short Form Definition of Participant's Net Profits
XXXX shall be entitled to 2.0% of 100% of "Producer's Net Profits," which shall
mean 50% of the amount of "Adjusted Gross Receipts" (defined below) remaining,
if any, after deducting therefrom the sum of all capital raised by Xxxxx Dead,
Inc. in connection with (a) its Initial Public Offering of Class A Preferred
Stock; and (b) any additional financing, distribution, or overhead costs
(overhead costs capped at 10% of the returns ) incurred by Xxxxx Dead, Inc. in
connection with the Picture. "Gross Receipts" shall mean all cash revenues
actually received in U.S. currency by Xxxxx Dead, Inc. that are directly the end
of each calendar quarter, accompanied by an accounting statement setting forth
the calculation thereof. Participant's representatives shall have the right to
audit the books and records of Xxxxx Dead, Inc. at any time as to the
calculation of Producer's Net Profits. In no event will the definition,
calculation or payment of Producer's Net Profits to XXXX be less favorable than
that provided to any other participant.
N.B.: 1% of "Adjusted Gross Receipts" is equivalent to 2% of 100% of
"Producer's Net Profits.
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