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Exhibit 10.1
[Letterhead of Xxxxxxx.xxx Corporation]
February 14, 2000
Xxxxxx X. Xxxxxxxx
00 Xxxxx Xxxxx X
Xxxxxx 0, Xxxxxxx
Dear Xx. Xxxxxxxx:
Xxxxxxx.xxx Corporation, a Washington corporation (the "Company"),
hereby confirms with this letter agreement ("Letter Agreement") its
understanding with you ("Consultant") concerning the consulting services that
you will provide the Company, as follows:
1. Services to be Rendered by Consultant.
During the term of this Letter Agreement, Consultant shall provide
consulting services to the Company at such times as Consultant and the Company
shall reasonably agree, provided that Consultant shall provide the consulting
services for not less than two (2) full business days each month. The consulting
and business development services to be provided shall consist of the following:
(a). Serving as member of the board of directors and attending in person
at least one board meeting each quarter;
(b). Introducing Consultant's significant contacts in the music industry
in order to assist the Company in licensing or otherwise securing music content
from successful and nationally recognized artists and other musicians, music
publishers, records labels, and other digital content related entities;
(c). Creating, forming and leading an advisory board consisting of three
or more senior level music industry executives and business leaders, including
Xxxxx Xxxxxxx, designed to advise the Company regarding the establishment and
enhancement of the Company's technology and stature in the market place
("advisory board");
(d). Initiating, generating and, where appropriate or reasonable,
attending meetings between the Company and content providers, including the
parties set forth in subparagraph (b) above; and
(e). Providing such other duties and responsibilities as the parties
shall hereafter agree.
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The consulting services will be performed principally at Consultant's
then principal residence; provided that Consultant shall upon reasonable request
from time to time meet with principals of the Company, or attend meetings in
accordance with the consulting services to be provided herein at a mutually
convenient location, including the Company's principal offices, or such other
location or locations as the parties shall so agree.
2. Compensation.
(a). As compensation for the consulting services to be performed
pursuant to this Letter Agreement, the Company shall issue to Consultant
five-year warrants, pursuant to a warrant agreement to be attached hereto as
Exhibit A, to purchase 120,000 shares of the common stock of the Company (as
adjusted for stock splits and the like) at an exercise price per share equal to
the initial public offering price of the common stock of the Company.
(b). Warrants with respect to 30,000 shares of common stock shall vest
upon execution of this Letter Agreement and warrants with respect to 2,500
shares of the common stock of the Company shall vest on the first day of each
calendar month over the next 12 months thereafter, commencing on March 1, 2000.
(c). Warrants with respect to the balance of the shares of common stock
(e.g., 60,000) shall vest at any time during the twelve (12) month period
commencing on the first anniversary of this Letter Agreement, if the average
closing price over any fifteen (15) trading-day period of the common stock of
the Company is equal to or exceeds the following:
Average Closing Price Warrants to be Vested
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$24.00 12,000
$30.00 24,000
$36.00 36,000
$42.00 48,000
$48.00 60,000
For example, if at any time the average closing price during any 15-day
trading period during the applicable 12-month period is equal to $48.00,
warrants with respect to 60,000 shares of the common stock of the Company shall
immediately vest.
(d). The closing price means the closing bid price for the common stock
of the Company as reported in the Wall Street Journal, or, if not applicable,
such other national publication as the parties shall so select. A trading day is
any business day that the common stock of the Company is actively traded and the
results of which are reported.
(e). Notwithstanding the above, all unvested warrants shall immediately
vest upon a "change of control." A change of control shall mean a sale of all or
substantially all of the Company's assets, or any merger or consolidation of the
Company with or into another corporation, other than a merger or consolidation
in which the holders of more than 50% of the shares of capital stock of the
Company outstanding immediately prior to such transaction continue to hold
(either by the voting securities remaining outstanding or by their being
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converted into voting securities of the surviving entity) more than 50% of the
total voting power represented by the voting securities of the Company, or such
surviving entity, outstanding immediately after such transaction.
3. Expense Reimbursement.
The Company shall reimburse Consultant for all reasonable out-of-pocket
expenses incurred by Consultant in the performance of Consultant's duties
pursuant to this Letter Agreement not to exceed $2,500 per month, unless
approved by the Company, and, in addition thereto, reasonable business-class
travel and lodging expenses incurred by Consultant in traveling, as agreed with
the Company.
4. Term.
(a). The term of this Letter Agreement shall be twenty four months (24)
months. This Letter Agreement shall terminate upon any of the following: (i)
expiration of the term; (ii) the mutual agreement of the parties; (iii) sixty
(60) days notice by Consultant; or (iv) sixty (60) days notice by the Company,
for any reason other than bad faith. Bad faith includes the termination of this
Letter Agreement, the principal purpose of which is to terminate the continued
vesting of Consultant and is unrelated to the failure by Consultant to perform
the consulting services or to otherwise achieve the objectives of the parties
sought by this Agreement.
(b). Should Consultant contend that Consultant was terminated in bad
faith, then the Company and Consultant shall enter immediately into binding
arbitration pursuant to the American Arbitration Rules in effect as of the
effective date of this Letter Agreement, the cost of which shall be borne by the
nonprevailing party.
(c). If this Letter Agreement is terminated prior to the vesting of all
of the options set forth in paragraph 2 above, any unvested options shall be
immediately forfeited and terminated as of the date of termination of this
Letter Agreement. All vested options shall be exercisable by Consultant at any
time and from time to time within five (5) years from the date of this Letter
Agreement. The Company shall remain liable for the reimbursement of any expenses
incurred by Consultant pursuant to paragraph 3 hereof prior to the date of
termination of this Letter Agreement.
5. Performance Review.
Consultant and the chairman or chief executive officer of the Company,
or such other senior officer as the Company shall provide, shall meet from time
to time at the request of the Company, preferably not less than semi-annually,
to review and discuss Consultant's performance under this Letter Agreement.
6. Confidentiality.
Consultant recognizes and acknowledges that during the course of
Consultant's employment Consultant shall have access to certain information not
generally known to the
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public relating to the business of Company, including the terms of this Letter
Agreement ("Confidential Information"). Consultant agrees not to, directly or
indirectly, use or disclose to anyone, either during the term of this Letter
Agreement or after the termination of this Letter Agreement, except in the
performance of his duties as described in this Letter Agreement or with the
Company's prior written consent, any Confidential Information of the Company,
including the terms of this Letter Agreement, and upon termination of this
Letter Agreement for any reason whatsoever, to turn over to the Company all
documents and records containing any Confidential Information.
7. Notices.
All notices to be given hereunder shall be deemed duly given when
delivered by hand in writing, sent by facsimile with written confirmation of
receipt or when received if sent by a nationally recognized overnight delivery
service as follows:
If to the Company:
Xxxxxxx.xxx Corporation
0000 00xx Xxxxxx XX
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
With a copy to:
Xxxxx Xxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
If to Consultant:
Xxxxxx X. Xxxxxxxx
00 Xxxxx Xxxxx X
Xxxxxx 0, Xxxxxxx
Facsimile: (000) 0000-0000
With a copy to
Xxxxxxxx Xxxxxxx Xxxxxx, PLLC
00000 XX 0xx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxx
Facsimile (000) 000-0000
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8. Assignment.
This Letter Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors, heirs and assigns. No rights or
obligations of Consultant pursuant to this Letter Agreement may be assigned or
transferred; provided, however, Consultant may assign to family members or
entities consisting of family members any vested warrants under this Letter
Agreement.
9. Entire Agreement; Amendments.
This Letter Agreement contains the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to
the subject matter hereof. This Letter Agreement may not be amended orally, but
only by an agreement in writing signed by the parties hereto.
10. Governing Law; Counterparts.
This Letter Agreement shall be governed by and construed in accordance with
the laws of the State of Washington without regard to conflicts of law
principles. This Letter Agreement may be executed in counterparts and the
executed counterparts shall together constitute a single instrument.
11. Attorney's Fees.
In the event of litigation to enforce this Letter Agreement, the
prevailing party will be entitled to recover its reasonable attorneys' fees as
determined by the court.
12. Arbitration.
Any disputes arising out of or from this Letter Agreement or any exhibit
referenced herein shall be submitted to binding arbitration for resolution in
Seattle, Washington pursuant to the American Arbitration Rules in effect as of
the effective date of this Letter Agreement.
Very truly yours,
Xxxxxxx.xxx Corporation.
By: /s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
Title: Chairman and CEO
The foregoing is hereby confirmed and
accepted as of February 18, 2000.
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/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
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