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Exhibit 10.15
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of October 15,
1996 (the "Effective Date") between N2K Inc. ("Company") and Xxxx Xxxxxx
("Employee").
RECITALS
A. Company, through its N2K ENCODED MUSIC division (the
"Division"), is engaged in the business of producing, manufacturing,
distributing, marketing and selling audio and audiovisual recordings and
enhanced compact discs (collectively, "Products") embodying the musical
performances and audiovisual creations of recording, multimedia and other
artists ("Company Artists").
B. Company desires to employ Employee, and Employee desires to
be employed by Company, on the terms and subject to the conditions set forth in
this Agreement.
TERMS AND CONDITIONS
1. TERM
The term of this Agreement shall commence on the Effective Date and shall
continue for three (3) years (the "Initial Term"). Company shall have the option
(the "Option"), in its sole discretion, to extend the term for an additional two
(2) year period (the "Option Period"). Company may exercise the Option at any
time during the Initial Term by providing written notice to Employee of its
intent to do so. Notwithstanding the foregoing, in the event that Company and
Employee are unable to agree on the amount of Employee's annual salary during
the Option Period after thirty (30) days good faith negotiations pursuant to
Section 4.1 below, then the Option shall be treated as if it had not been
exercised by Company.
As used herein, the "Term" shall signify both the Initial Term and, if Company
exercises the Option, the Option Period. "Contract Year" shall signify the
one-year period commencing on the Effective Date and each successive one-year
period commencing on the anniversary thereof occurring in 1997 and 1998 and, if
Company exercises the Option, in 1999 and 2000. "Fiscal Year" shall mean
Company's fiscal year.
2. DUTIES OF EMPLOYEE
2.1 Title
Employee shall be employed by Company as President of the Division, subject to
and consistent with the policies and budgets set by Company's Chief Executive
Officer (the "CEO") and/or Company's Board of Directors (the "Board"). As used
herein, "Company's Consent" shall mean the express consent of the CEO or the
Board, in his or its reasonable discretion.
Employee shall have his principal business office in New York, New York. Except
for the CEO, no other person employed by the Company in the Division shall have
a superior
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title than that held by Employee. Notwithstanding the foregoing, the Company
has employed a General Manager of the Division who shall report to the Company's
President and Chief Operating Officer and who shall have day-to-day
responsibility for financial management, control, and operations of the Division
but not for management of the Division's recording artists and record
production, which shall be the responsibility of Employee. Employee shall report
directly and only to the CEO and shall perform such duties as are assigned to
him from time to time by the CEO. Such duties shall include, but not be limited
to, the following:
a. Securing agreements with recording artists,
loanout companies or production companies
granting Company the right to manufacture
and sell Products embodying such artists'
performances (such recording artists,
loanout companies and production companies
shall be referred to herein collectively as
"Company Artists").
b. Supervising all recordings and record
production on behalf of the Division.
c. If requested by the Board, attending
meetings outside New York, New York, for the
purposes of consultation with the Board or
with the officers of Company or any of
Company's parents, subsidiaries or
affiliates.
d. Securing agreements with Company Artists to
acquire the copyrights for the Company in
and to musical compositions written, owned
or controlled, in whole or in part, by
Company Artists (hereinafter such musical
compositions shall be referred to as
"Compositions").
2.2 Prohibited Actions
Employee shall not do, authorize or contract to do any of the following without
Company's Consent:
a. Borrow money on behalf of Company or loan
any of Company's monies.
b. Assign, mortgage, encumber, transfer or sell
any of Company's assets or property.
c. Execute any agreement for a third party to
distribute, sell or manufacture Products.
d. Execute any agreements with any of Company
Artists in excess of the budgets approved by
the CEO or the Board.
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e. Execute any agreements with any Company
Artist to acquire Compositions in excess of
the budgets approved by the CEO or the
Board.
f. Purchase capital equipment (other than as
may be needed on an emergency basis and then
not to exceed $1,000 per item).
g. Purchase any real estate or enter into any
lease agreement with respect to buildings,
real property or equipment.
h. Purchase any other company or business, or
any interest or stock in any other company
or business.
i. Make any expenditures in excess of the
budgets approved by the CEO or the Board.
j. Enter into any agreement for the employment
or engagement by Company of any employee,
agent or contractor.
k. Obligate Company to pay any employee, agent
or contractor compensation based on the net
profits, revenues or gross sales of either
Company or the Division, or on any other
percentage-type basis.
2.3 Confidentiality
At no time during the Term or at any time thereafter shall Employee use or
disclose to any person any confidential, proprietary or trade secret information
of Company or its parents, subsidiaries or affiliates. No casual or inadvertent
violation of this subsection, if non-material, shall be deemed a breach of this
Agreement.
2.4 No Solicitation
At no time during the Term or within two years following the expiration or
termination of this Agreement shall Employee, or any agent acting on behalf of
Employee, directly or indirectly approach, solicit or enter into any agreement
with (a) any Company Artist or other artist, loanout company or production
company who is party to any agreement with Company or its parents, subsidiaries
or affiliates, or (b) any employee of Company or its parents, subsidiaries or
affiliates, for the purpose of procuring the services or employment of such
person, without Company's Consent.
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2.5 Selection of Professionals
Notwithstanding any other provision of this Agreement, the CEO and the Board
shall have the right to designate the independent public accountants and the
attorneys who will service the Division.
3. OUTSIDE ACTIVITIES
3.1 Exclusive Services
Except as otherwise expressly provided in this Agreement, Employee shall devote
his full time and best efforts exclusively to Company, and shall not render any
business or professional services to any third party without Company's Consent.
Except as otherwise expressly provided in this Agreement, Employee shall not
serve as a director, officer or employee of, or as consultant to, any entity
save Company during the Term.
3.2 Permissible Outside Activities
a. Company acknowledges that Employee is the
owner of a music publishing company called
"Ramone Music, Inc." Company consents to
Employee's continued involvement in the
operation of Ramone Music, Inc., provided
that Employee's involvement with Ramone
Music, Inc. does not materially interfere
with the performance of Employee's duties
under this Agreement, and provided further
that Ramone Music, Inc. shall not, during
the Term, compete with Company in any
manner, or acquire any new or additional
music publishing rights with respect to any
composition, catalog of compositions or the
work of any songwriter.
b. Employee shall be permitted to sit on the
board of directors of ED Net; provided,
however, that if the CEO or the Board
reasonably concludes that (i) ED Net has
become, or has acquired or been merged with,
consolidated into or acquired by, a
competitor of Company or (ii) Employee's
service on the board of directors of ED Net
materially interferes with Employee's
performance of his duties under this
Agreement, then Employee shall resign his
position on the ED Net board of directors
promptly following receipt of a written
request from Company, setting forth the
reason for such request, that he resign such
position. If the Company requests such
resignation from ED Net, then Company shall
reimburse Employee on a going forward basis
for the cost of one T-1 fiberoptic line to
Employee's principal residence that is
currently provided at the expense of ED Net.
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c. Employee shall be permitted to produce
master recordings intended to be embodied
primarily on standard audio records for
recording artists other than Company
Artists; provided, however, that (a)
Employee shall devote no more than four
weeks (which need not be consecutive) to
such activities during any twelve-month
period; and (b) no such activities shall be
inconsistent with or interfere in any
material respect with Employee's duties
under this Agreement. Notwithstanding the
foregoing, Employee shall not be permitted
to pursue such activities in the fiscal year
which immediately follows a fiscal year in
which his total compensation from Company,
including any and all salary, bonus,
royalties (including advances against
royalties) and profit participations paid or
payable to Employee or to Xxxx Xxxxxx, Inc.
("Lender") pursuant to this Agreement or
that producer's agreement between Company
and Lender executed concurrently herewith
(the "Producer's Agreement") equals or
exceeds $750,000.00, except with Company's
Consent.
d. For purposes of this Section 3, a person or
entity that engages in the business of
producing, manufacturing, distributing,
marketing or selling audio or audiovisual
recordings, dvd's or enhanced compact discs
shall be deemed to compete with and be a
competitor of Company.
4. COMPENSATION
As full and complete compensation for all of Employee's services, all of the
results and proceeds of Employee's services, all rights granted or to be granted
to Company and all representations, warranties, indemnities and agreements made
or given by Employee in connection with this Agreement, Company shall pay to
Employee the following compensation:
4.1 Salary
Employee shall be paid an annual salary of $450,000.00 for the first Contract
Year and $550,000.00 for the second and third Contract Years. If Company
exercises the Option, Employee shall be paid $650,000 in annual salary for the
fourth Contract Year, and such annual salary for the fifth Contract Year as the
parties shall determine after good faith negotiations (which negotiations the
parties shall use best efforts to conclude within thirty (30) days after
Company's exercise of the Option). Employee's salary shall be paid in
approximately equal installments in accordance with Company's then-prevailing
payroll policy.
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4.2 Benefits and Perquisites
a. Employee shall be entitled to annual vacation time on
such terms as are afforded to Company's senior
executives, but in no event less than four (4) weeks
per annum.
b. Employee shall be entitled to a car
allowance in such amount and on such terms
as are afforded to Company's senior
executives, but in no event less than
$800.00 per month.
c. Company agrees to procure and maintain
medical and hospital, dental, life and
long-term disability insurance and to
include Employee thereunder during the Term,
on such terms and subject to such conditions
as shall apply to Company's senior
executives.
d. If Employee is required by Company business
to travel to a location outside of the New
York metropolitan area that is more than
seventy-five (75) miles from Company's
executive office, then Company shall (i) in
Company's discretion, furnish and pay for or
reimburse Employee for the cost of,
round-trip transportation, first-class if
available, by air if appropriate, between
Employee's residence or Company's office (or
wherever Employee may then be, if closer)
and such location; and (ii) reimburse
Employee for the cost of first-class lodging
and meal expenses incurred by Employee in
connection therewith. For the avoidance of
doubt, this provision shall not apply to
travel between Employee's residence and
Company's executive office. To facilitate
Company's compliance with its obligations to
reimburse Employee under this subsection,
Employee shall obtain a credit card to be
used solely for reimbursable business
expenses, the annual fee for which Company
shall reimburse Employee.
e. If Employee is required by Company business
to stay overnight in New York, New York,
then Company shall reimburse Employee for
reasonable hotel expenses incurred by
Employee, not to exceed $350 per night,
subject to cost of living adjustments as
determined by the CEO or the Board in his or
its reasonable discretion.
f. Company's obligation to reimburse Employee
for any expenses shall be subject to
Company's usual expense accounting
procedures.
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4.3 Bonus
a. On October 1, 1997, Employee shall be entitled to a
bonus of $100,000, payable in the form of a loan
whose principal and interest thereon will be forgiven
(provided that Employee has not been terminated by
the Company for cause as set forth in this agreement)
over a twelve (12) month period at a rate of
one-twelfth of the outstanding indebtedness on the
first day of each month beginning on October 1, 1998
and ending on September 1, 1999,. This loan shall be
evidenced by a promissory note substantially in the
form of Exhibit "A" attached hereto and incorporated
herein by reference.
b. If the gross revenues of the Division
(calculated in accordance with generally
accepted accounting principles ("Gross
Revenues")) are at least $8 million but not
in excess of $10 million in any Fiscal Year
during the Term, then Employee shall be paid
a bonus of $50,000.00 for any such Fiscal
Year. If Gross Revenues are in excess of $10
million in any Fiscal Year during the Term,
then Employee shall be paid a bonus of
$100,000.00 for any such Fiscal Year. In no
event shall Employee's bonus exceed
$100,000.00 with respect to any given Fiscal
Year. Any such bonus shall be paid within
ninety (90) days of the end of the relevant
Fiscal Year. If Employee is no longer in
Company's employ at the conclusion of any
given Fiscal Year, then Employee's bonus
shall be prorated by a ratio equal to the
number of days during the Fiscal Year that
Employee was employed by Company divided by
365.
c. For purposes of calculating any bonus due to
Employee under section 4.3(b), the
Division's Gross Revenues shall include only
gross revenues from Products produced,
manufactured, distributed and sold by the
Division or other divisions of the Company
that report directly to Employee (including
revenues received from the exploitation of
any master use license with respect to the
sound recording copyrights in such Products
and any licensing of the visual or other
nonmusical aspects of enhanced compact
discs). For the avoidance of doubt, gross
revenues shall not include:
(i) revenues generated by merchandising
or the exploitation of music
publishing rights with respect to
musical compositions, including
without limitation print rights,
mechanical rights, synchronization
rights, transcription rights and
public performance rights,
provided, however, that
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if, as reasonably concluded by the
CEO or the Board, Employee was
substantially responsible for a
transaction leading to the
acquisition by Company of music
publishing rights, then gross
revenues (for purposes of this
section 4.3. only) shall include
twenty-five percent (25%) of the
net publisher's share earned by
such music publishing rights during
the relevant Fiscal Year; and
(ii) revenues generated by any business
of Company, including but not
limited to any business involving
the production, manufacture,
distribution, marketing or sale of
sound recordings and enhanced
compact discs, that is not within
Employee's purview as President of
the Division; provided, however,
that gross revenues (for purposes
of this section 4.3. only) shall
include an imputed fair-market
value transfer price or usage fee
for such assets of the Division as
may be used to generate revenue by
any other business of Company.
d. For purposes of calculating any bonus due to
Employee, the gross revenues of any business
of Company which is acquired by, merged into
or consolidated with Company subsequent to
the Effective Date and is thereafter within
Employee's purview as President of the
Division (the "Acquired Business") shall be
added to the gross revenues of the Division
solely to the extent that, during the
relevant accounting period, the gross
revenues of the Acquired Business exceed a
baseline gross revenue figure equal to the
gross revenues of the Acquired Business in
the twelve calendar months immediately
preceding its acquisition, merger or
consolidation, calculated according to
generally accepted accounting principles.
e. For purposes of this Section 4.3, the
Division's Gross Revenues for each Fiscal
Year shall be calculated and determined in
good faith in accordance with generally
accepted accounting principles by Company's
independent public accountants at the
conclusion of each Fiscal Year. Within
ninety (90) days after the end of each
Fiscal Year, the Company shall deliver to
Employee a statement setting forth a
determination of the Division's Gross
Revenues for each Fiscal Year.
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4.4 Profit Participation
a. Employee shall be paid ten percent (10%) of that
portion of any after-tax net profit of the Company
during any given Fiscal Year that is fairly allocable
to the Division's operations. For purposes of this
subsection 4.4.a only, losses incurred by the
Division in Fiscal Years 1997 and 1998 of operation
shall not be carried forward in calculating the
after-tax net profit in any subsequent Fiscal Year.
Employee's profit participation under this subsection
4.4.a for such Fiscal Year, if any, shall be paid to
Employee within ninety (90) days following the end of
each Fiscal Year during the Term. If Employee is no
longer in Company's employ at the conclusion of any
given Fiscal Year (including by reason of a sale as
set forth in subsections 4.4.b and 4.4.c), then
Employee's profit participation under this subsection
4.4.a for such Fiscal Year shall be prorated by a
ratio equal to the number of days during the Fiscal
Year that Employee was employed by Company divided by
365.
b. If the business of the Division is sold as a
going concern to a third party, during the
Initial Term, then Employee shall be
entitled to participate in the proceeds of
that sale (net of any and all transaction
costs, including without limitation all
applicable commissions and fees) as if the
Division were a distinct corporate entity of
which Employee was a five percent (5%)
shareholder. If Company is sold as a going
concern, then Company's independent public
accountants shall reasonably allocate a
portion of such sale price to the Division,
and Employee shall be entitled to
participate in such allocated portion of the
sales price as set forth in the immediately
preceding sentence. The Company shall be
deemed to have been "sold" if (a) the
Company sells all or substantially all of
its assets to a single purchaser or group of
purchasers or (b) a single purchaser
acquires eighty percent (80%) or more of
Company's issued and outstanding voting
shares. Such participation shall be payable
thirty (30) days after receipt by Company of
the sale proceeds, at the option of Company
either entirely in cash or in cash,
securities or other property received by
Company as consideration in the sale, in
substantially the same proportion received
by Company. The Company shall exercise its
option as to whether to pay such
participation entirely in cash or in cash,
securities or other property received by the
Company as consideration in the sale by
giving written notice of its election to
Employee within ten (10) days after
consummation of the sale. If the Company
elects to pay
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such participation in cash, the sales proceeds shall
be valued at the fair market value thereof.
c. If the business of the Division is sold as a going
concern to a third party during the Option Period,
then Employee shall be entitled to participate in the
proceeds of that sale (net of any and all transaction
costs, including without limitation all applicable
commissions and fees) as if the Division were a
distinct corporate entity of which Employee was a
seven and one-half percent (7.5%) shareholder. If
Company is sold as a going concern, then Company's
independent public accountants shall reasonably
allocate a portion of such sale price to the
Division, and Employee shall be entitled to
participate in such sale allocated portion of the
sales price as set forth in the immediately preceding
sentence. The Company shall be deemed to have been
"sold" if (a) the Company sells all or substantially
all of its assets to a single purchaser or group of
purchasers or (b) a single purchaser or group of
purchasers acquire eighty percent (80%) or more of
Company's issued and outstanding voting shares. Such
participation shall be payable thirty (30) days after
receipt by Company of the sale proceeds, at the
option of Company entirely in cash or in cash,
securities or other property received by Company as
consideration in the sale, in substantially the same
proportion received by Company. The Company shall
exercise its option as to whether to pay such
participation entirely in cash or in cash, securities
or other property received by the Company as
consideration in the sale by giving written notice of
its election to Employee within ten (10) days after
consummation of the sale. If the Company elects to
pay such participation in cash, the sales proceeds
shall be valued at the fair market value thereof.
d. If the business of the Division includes any Acquired
Business or the Division after the Effective Date has
been merged into or consolidated with another
business unit, affiliate or subsidiary of the Company
(each such Acquired Business or other business unit,
affiliate or subsidiary to the extent included in the
business of the Division being sometimes hereinafter
referred to as an "Other Business"), then for
purposes of determining any profit participation
payable to Employee under subsection 4.4.b or 4.4.c
above, the sum of the following amounts (if a
positive number) shall be deducted from the proceeds
of any sale prior to calculating such profit
participation: (i) the cost of the Other Business,
including the purchase price thereof and any
transaction costs allocable thereto; plus (ii) any
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investment made by Company in the Other
Business; plus (iii) any and all financing
costs in connection with any acquisition,
merger or consolidation referred to in
clause (i) above or any additional
investment referred to in clause (ii) above;
plus (iv) Company's imputed cost of funds on
amounts under clauses (i) and (ii) above
from the date of payment to the date of sale
of the business of the Division. For
purposes of the preceding sentence,
Company's cost of funds shall be deemed to
be two (2) percentage points above the prime
rate publicly announced from time to time in
New York, New York by Xxxxxx Guaranty Trust
Company of New York.
e. Any and all profit participations payable to
Employee under this Section 4 shall be
calculated in good faith by Company's
independent public accountants at the
conclusion of the relevant Fiscal Year or
following receipt by Company of sales
proceeds, as applicable. The net profits (or
net losses) of the Division shall be
determined in accordance with United States
generally accepted accounting principles,
consistently applied. In making the
computation of net profits (or net losses),
the following deductions, rules and
considerations, among other usual and
customary deductions, shall be applied:
(i) All usual charges and expenses of
the business of the Division,
including royalties and other
payments due in respect of rights
acquired by Company, reserves
against returns and bad debts, and
the remuneration of officers and of
employees (including the salary,
bonus and other compensation
hereunder, but not the profit
participations, payable to the
Employee for such Fiscal Year).
(ii) Interest and other financing costs
on any loans of any kind to either
Company or the Division, including
interest or other financing costs on
any loans made to Company or the
Division by Company's parents,
subsidiaries or affiliates, shall be
apportioned between the Division and
the other businesses of Company in
accordance with the use of the loan
proceeds. For purposes of this
subsection 4.4.e.(ii) only, no more
than fifty percent (50%) of the
Division's capital shall be in the
form of loans, and the interest on
such loans shall not exceed market
interest rates.
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(iii) Except as provided in subsection
4.4.a, all net losses incurred
during a Fiscal Year shall be
treated for all purposes hereunder
as losses incurred in the next
succeeding Fiscal Year.
(iv) The treatment of advances to Company
Artists shall be in accordance with
Company's prudent judgment and the
likely commercial realities and not
necessarily in accordance with
Company's calculation of its state
or federal income taxes.
(v) The calculation of after-tax net
profits (or net losses) as provided
herein shall only be used for the
purposes of paying Employee's profit
participation and for no other
purpose hereunder.
(vi) Within ninety (90) days after the
end of each Fiscal Year, the Company
shall deliver to Employee a
statement setting forth in detail
the computation of the Company's
after-tax net profit for such Fiscal
Year as is fairly allocable to the
Division's operations allocated and
computed as herein required and
setting forth Employee's profit
participation under subsection 4.4.a
hereof with respect thereto.
(vii) If the Company is sold as a going
concern, within thirty (30) days
thereafter, the Company shall
deliver to Employee a statement
setting forth a description of such
sale, the consideration paid or
payable with respect thereto, the
determination of and the amount of
the sale price allocated by the
Company's independent public account
to the Division and the computation
in detail as to the amount payable
to Employee with respect to such
sale.
4.5 Stock Options
a. Employee shall be granted nontransferable,
non-qualified stock options (the "Stock
Options") to purchase an aggregate number of
294,708 shares (currently equal to
approximately one percent (1%) of the total
number of issued and outstanding shares) of
Company's common stock. The shares issuable
upon exercise of the Stock Options are
referred to herein as the "Employee Shares"
and may be adjusted based on stock splits,
reverse stock splits and other
recapitalizations.
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b. The Stock Options shall have an exercise
price of $3.00 per share which may be
adjusted based on stock splits, revenue
stock splits and other recapitalizations..
c. The Stock Options shall vest as follows: (a)
twenty-five percent (25%) on the date of
grant; and (b) an additional twenty-five
(25%) percent on each of the first three (3)
anniversaries of the Effective Date,
provided that Employee is still in Company's
employ on the date of such vesting.
Notwithstanding the foregoing, the Stock
Options shall become fully vested two (2)
days prior to the consummation of any sale
of the Company (as described in subsections
4.4.b or 4.4.c hereof).
d. The Stock Options shall expire six (6) years
from the Effective Date, but not later than
one (1) year from the date Employee's
employment with Company is terminated.
e. Except (i) by bequest, inheritance or gift
to immediate family members or a bona fide
trust of whom Employee and/or Employee's
immediate family are the sole beneficiaries
and (ii) as specifically permitted below,
Employee shall not sell, transfer, assign,
encumber, hypothecate, donate or in any way
alienate or dispose of any of the Employee
Shares or any right or interest therein
without obtaining Company's Consent. The
word "transfer" includes any exchange or
gift, any creation of a security interest or
other encumbrance or any other disposition
of any kind (except as set forth above),
whether voluntary or involuntary, affecting
title to or possession of any of the
Employee Shares.
(i) Each certificate for the Employee
Shares shall be stamped or
otherwise imprinted with a legend
substantially as follows:
"PURSUANT TO THAT CERTAIN EMPLOYMENT AGREEMENT DATED OCTOBER
15, 1996, BETWEEN THE ISSUER OF THESE SECURITIES AND XXXX
XXXXXX, THE ORIGINAL HOLDER HEREOF, THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO REPURCHASE BY THE ISSUER OR
ITS DESIGNEES UPON THE OCCURRENCE OF CERTAIN CONDITIONS."
(ii) Prior to the completion of an
initial public offering by Company,
except as provided under the first
sentence of this subsection 4.5.e
neither Employee nor Employee's
heirs, successors or assigns
(collectively, "Transferees"), if
any, shall transfer
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any Employee Shares without Company's
Consent. Within a reasonable time after a
request by Employee or by any Transferee
that Company consent to any such transfer,
Company or its designee shall have the right
(but not the obligation) to repurchase, at a
price equal to Employee's proposed transfer
price, such Employee Shares as Employee or
such Transferee proposes to transfer. If
Company or its designee elects not to
repurchase such Employee Shares, then
Employee may transfer such Employee Shares
to any person or entity only upon (i) terms
no more favorable than those offered to
Company and (ii) the express written
agreement of such person or entity to be
bound by such terms and conditions of this
Agreement as relate to the ownership,
transfer and repurchase of the Employee
Shares, including without limitation this
subsection 4.5.e and section 8.4.
(iii) Subsequent to the completion of an initial
public offering by Company, the Employee
Shares shall be freely transferable.
f. Employee warrants, represents and covenants as
follows:
(i) He is acquiring the Stock Options and, upon
the exercise thereof, the Employee Shares
for his own account, for investment and not
with a view to the distribution thereof, nor
with any present intention of distributing
the same.
(ii) Employee understands that neither the Stock
Options nor the Employee Shares have been
registered or qualified under the Securities
Act of 1933, as amended, or any successor
Federal statute, and the rules and
regulations of the Securities and Exchange
Commission (or any other governmental body
or agency succeeding to the functions
thereof) thereunder, all as the same shall
be in effect from time to time (the
"Securities Act") or any applicable state
securities laws, by reason of their issuance
in a transaction exempt from the
registration or qualification requirements
of the Securities Act and such laws, and
that the Stock Options and the Employee
Shares must be held indefinitely unless a
subsequent disposition thereof is registered
or qualified under the Securities Act and
such laws or is exempt from such
registration or qualification.
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(iii) Employee further understands that,
with respect to the Stock Options
and the Employee Shares, the
exemption from registration afforded
by Rule 144 (the provisions of which
are known to Employee) promulgated
under the Securities Act depends on
the satisfaction of various
conditions and that, if applicable,
Rule 144 may only afford the basis
for sales under certain
circumstances only in limited
amounts.
(iv) Employee is an "accredited
investor" (as defined in Rule 501(a)
of Regulation D promulgated under
the Securities Act). Employee (A)
has been furnished with or has had
access to all information that
Employee has requested from Company
regarding Company or otherwise
deemed necessary in order to make an
informed decision with respect to
the Stock Options and the Employee
Shares, (B) has had an opportunity
to discuss with management of
Company the business and financial
affairs of Company, and (C) has
generally such knowledge and
experience in business and financial
matters and with respect to
investments in securities, such as
the Stock Options and Employee
Shares, of privately held companies,
such as Company, so as to enable
Employee to understand and evaluate
the risks of, and make an informed
investment decision with respect to,
the Stock Options and the Employee
Shares.
4.6 Audit Rights
In connection with the calculation of any bonus or profit participations payable
pursuant to sections 4.3 or 4.4 hereof, Employee shall have the right at his
expense to audit the books and records of the Company that are necessary to
assume that the Company's calculations are accurate.
4.7 Business Expenses
Company shall, in accordance with Company's regular policies with respect to the
reimbursement of expenses as determined by the CEO or the Board from time to
time, reimburse the Employee for all reasonable and necessary expenses and other
disbursements incurred by him for or on behalf of Company in connection with the
performance of his duties hereunder, subject to Company's usual expense
accounting procedures.
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5. RIGHTS
5.1 Excluding songs written by Employee (which shall not be
deemed the results and proceeds of services rendered hereunder), Employee does
hereby acknowledge, certify and agree that all materials of whatever kind
created, produced, furnished and delivered to Company by Employee hereunder, and
all results and proceeds of whatever kind of the services rendered by Employee
hereunder (collectively referred to herein as the "Work). Company is and shall
be considered to be the author of the Work and, at all stages of creation or
completion, the sole and exclusive owner throughout the universe in perpetuity
of the Work and all right, title and interest therein, including all copyrights
therein, all renewals and extensions of such copyrights and all other ownership
and exploitation rights of any kind, nature or description in, to and with
respect to the Work that may be secured under the laws now or hereinafter in
effect in the United States or any other jurisdiction (collectively, the
"Rights"). If and to the extent that under any applicable law the Work is not
deemed a work made for hire for Company or Company is not deemed to be the
author of the Work and the sole and exclusive owner of the Work and all right,
title and interest therein (including all of the Rights), then to the fullest
extent allowable and for the full term of protection otherwise accorded Employee
under such applicable law, Employee hereby irrevocably assigns, grants and
transfers to Company throughout the universe in perpetuity the Rights and, in
connection therewith, all right, title and interest of Employee in, to and with
respect to any works now or hereafter created containing the Work.
5.2 Employee agrees to execute, acknowledge and deliver to
Company such further documents as Company may deem necessary or advisable in
order to evidence, establish, maintain, protect, enforce or defend its rights
in, to and with respect to the Work or otherwise to carry out the intent and
accomplish the purposes of this Agreement.
5.2 Name and Likeness
Employee hereby grants to Company the perpetual rights, without liability to any
person, to reproduce, print, publish and disseminate (and to license others to
reproduce, print, publish and disseminate) in any medium the name, approved
likeness and approved biographical information of or concerning Employee for
purposes of advertising, promotion and trade in connection with Employee, the
manufacture, sale, marketing, distribution and other exploitation of Products
and general goodwill advertising. Employee's approval of his likeness and
biographical information shall not be unreasonably withheld. Except in
connection with audio recordings which were recorded for third parties prior to
the commencement of the Term and which such third parties own and have the right
to exploit without Employee's consent, and except as otherwise permitted
hereunder, such rights with respect to Employee shall be exclusive to Company
during the Term and nonexclusive thereafter.
6. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee represents, warrants and agrees that:
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6.1 Employee is under no disability, restriction or
prohibition, whether contractual or otherwise, with respect to (a) his right to
enter into this Agreement; (b) his ability to grant and convey the intellectual
property and other rights with respect to his services and the results and
proceeds thereof; or (c) his ability to perform the terms and conditions of this
Agreement. Without limiting the generality of the foregoing, Employee
represents, warrants and agrees that (a) the execution, delivery and performance
of this Agreement by Employee does not and will not conflict with, breach,
violate or cause a default under any agreement, contract or instrument to which
the Executive is a party or any judgment, order or decree to which the Employee
is subject and (b) the Employee is not a party to or bound by any employment
agreement, consulting agreement, non-compete agreement, confidentiality
agreement or similar agreement with any other person or entity.
6.2 To the best of Employee's knowledge, none of the Work
produced by Employee hereunder is an imitation or copy of any other work, and no
use thereof by the Division, Company or their licensees will violate or infringe
the rights of any third party, and no adverse claims exist thereon.
6.3 Neither Employee nor any third party deriving any rights
from Employee will at any time do or authorize any person or entity to do
anything that diminishes, impairs or interferes with any of Company's rights
hereunder or the full and prompt performance of Employee's obligations
hereunder.
6.4 Employee shall indemnify Company and hold harmless Company
and Company's successors, assigns and licensees (each, an "Indemnified Party")
from any and all liabilities, losses, damages, expenses and costs, including
reasonable attorneys' fees (collectively "Losses"), incurred by any Indemnified
Party in connection with or arising from (a) Employee's breach of any warranty,
representation or agreement contained herein, or (b) any claim, demand, cause of
action or proceeding ("Claims") asserted by any third person that is
inconsistent with any of the warranties, representations or agreements made by
Employee in this Agreement. Company shall, within a reasonable time after its
discovery of any Claim, provide written notice to Employee of such Claim, and
such Losses shall be paid as incurred by such Indemnified Party. Each
Indemnified Party shall have the right to select counsel of its choice and to
control its defense, provided, however, that no Indemnified Party shall pay any
money in settlement of an indemnified Claim without Employee's prior written
consent, such consent not to be unreasonably withheld.
7. COMPANY'S REPRESENTATIONS AND WARRANTIES
7.1 Company represents, warrants and agrees that Company will
not engage in the production of recorded music except through the Division
during the Initial Term and, if Company exercises the Option, during the Option
Period.
7.2 Company shall maintain Employee as an additional named
insured on such directors and officers liability insurance policies and
comprehensive general liability insurance policies as may be purchased and/or
maintained by Company with respect to the Division. Nothing in this Agreement
shall obligate Company to purchase
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or maintain any such insurance. In the absence of such insurance or if the
liability exceeds the amount of any available insurance, Company shall indemnify
Employee and hold harmless Employee from any and all liabilities, losses,
damages, expenses and costs, including reasonable attorneys' fees (collectively
"Employee Losses"), incurred by Employee within the course and scope of his
duties as President of the Division ("Employee Indemnified Claims"), provided,
however, that Company shall have no obligation to indemnify or hold harmless
Employee for Employee Losses arising from or in connection with Employee's
intentional malfeasance or gross negligence, as reasonably determined by the
Board. Company shall have the sole right to defend (including the right to
retain counsel of its choice) or, in its sole discretion, to settle or otherwise
dispose of any Employee Indemnified Claim, provided that such settlement or
resolution does not contain an admission of misconduct by Employee. Employee
shall, within a reasonable time after his discovery of any Employee Indemnified
Claim, provide written notice to Company of such Employee Indemnified Claim, and
shall cooperate fully in the defense and disposition of any such Employee
Indemnified Claim.
8. TERMINATION AND REMEDIES
8.1 Termination by Company
a. If the Employee dies during the Term, his employment
hereunder shall be deemed to cease as of the date of his death.
b. Company may terminate the employment of Employee for cause,
without prejudice to any other remedy to which Company might be entitled at law
or in equity, upon the occurrence of any of the following:
(i) The gross neglect by Employee of his duties
under this Agreement, provided that Employee
shall have ten (10) days to cure such
material neglect after Company gives written
notice thereof;
(ii) A willful material breach by Employee of any
term or condition of this Agreement;
(iii) Employee's gross breach of any fiduciary
duty or trust owed by him to Company;
(iv) Employee's disregard of lawful instructions,
consistent with this Agreement, of the CEO
or the Board;
(v) Employee being unable, for a period of 180
consecutive days, or an aggregate of 180
days in any twelve-month period, to perform
his duties owing to physical or mental
disability, regardless of type or cause;
(vi) Employee is convicted of a felony or of any
crime involving fraud, theft or dishonesty,
or is adjudicated non compos mentis;
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(vii) Conduct by Employee that materially injures
Company.
c. In the event of termination by Company for cause, then
Company shall have no further obligation to pay any salary, bonus, profit
participation or other compensation, and the Stock Options shall not vest
further; provided, however, that if Company terminates for cause by reason of
Employee's disability (other than any disability caused by substance abuse or a
similar self-directed cause not attributable to a previously diagnosed physical
or mental illness), then any bonus, profit participation or other compensation
otherwise payable hereunder shall be paid after being prorated by a ratio equal
to the number of days during the Fiscal Year prior to such termination divided
by 365.
d. Promptly upon termination of the employment of Employee,
Employee shall deliver to Company or its designee, and shall retain no copies
of, any and all Records, books, papers, accounts and other property of Company
and/or the Division, and shall provide such information regarding Company's
and/or the Division's affairs as Company may reasonably request.
e. Employee's sole remedy for the wrongful termination of this
Agreement by Company shall be an action at law for money damages to recover
unpaid salary, bonus or profit participations, or any unvested Stock Options.
Employee hereby covenants not to assert any action against Company seeking
injunctive relief, or to seek any preliminary or ancillary relief in the nature
of a restraining order or preliminary injunction, based upon any claim to any
copyrights or other intellectual property allegedly relating to any of the Work.
Employee further covenants not to assert, and hereby waives and relinquishes,
any and all claims, past, present and future, against Company for damages for
emotional or mental suffering, lost publicity or other consequential damages
that allegedly arise from Company's termination of this Agreement.
9. UNIQUE SERVICES
Employee agrees and acknowledges that his services are of a special, unique,
unusual, extraordinary and intellectual character giving them a peculiar value,
the loss of which cannot be reasonably or adequately compensated for in damages.
In the event of a material breach of this Agreement by Employee, including
without limitation Employee's duty to render exclusive services or his wrongful
termination of this Agreement, Company shall, in addition to any and all other
contractual, legal or equitable remedies available to it, be entitled to
injunctive relief by way of a temporary restraining order, preliminary
injunction and/or permanent injunction.
9.1 Termination by Employee
a. Employee may terminate his employment with Company upon the
material breach by Company of this Agreement, or if Company directs a material
adverse change in Employee's duties or any change in title, or changes the
location of Employee's principal business office away from the New York City
metropolitan area, by giving written notice of such termination to Company.
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b. Company shall not be deemed to be in material breach of
this Agreement unless Employee gives Company notice of the alleged breach and
Company fails to remedy such alleged breach within thirty (30) days after its
receipt of such notice.
9.2 Repurchase of Stock
a. In the event that either Company or Employee terminates
Employee's employment prior to the end of the Term (other than pursuant to
Section 8.3 above) and prior to any initial public offering of shares of
Company's common stock, then Company or its designee shall have the right (but
not the obligation) to repurchase from Employee any or all of the Employee
Shares held by Employee upon the date of such termination, at a purchase price
equal to the fair market value of the Employee Shares (or, if the termination is
pursuant to Section 8.1.b above, at a purchase price equal to the price paid by
Employee for such Employee Shares). Any Employee Shares thus repurchased by
Company are called herein the "Repurchase Securities". The Company may elect to
pay the purchase price for Repurchase Securities in three (3) equal annual
installments by delivery of a promissory note as described in subsection 8.4c.
b. The repurchase right of Company under this section may be
exercised by written notice to Employee within fifteen (15) days of the date of
termination of Employee's employment (the "Repurchase Notice"). The Repurchase
Notice shall specify the type and number of Repurchase Securities to be
repurchased and the manner of payment, as permitted by this section. Upon the
delivery of such Repurchase Notice, Employee shall be obligated to sell to the
Company or its designee that type and number of Repurchase Securities specified
in such Repurchase Notice. Repurchases of the Repurchase Securities shall be
made at the executive offices of the Company on a mutually satisfactory business
day within fifteen (15) days after the delivery of the Repurchase Notice.
Delivery of certificates or other instruments evidencing such securities duly
endorsed for transfer and free and clear of all liens, claims and other
encumbrances shall be made on such date against payment of the purchase price
therefor.
c. Notwithstanding the foregoing, Company may, in its sole
discretion, repurchase the Repurchase Securities by delivery of a promissory
note (the "Note"), payable by Company in favor of Employee. The Note shall be
for a term of three years, principal payable in three equal installment together
with interest at the rate of eight percent (8%) per annum. All other terms and
conditions related to such repurchase shall be determined by Company provided
such terms and conditions are customary and reasonable for transactions of this
kind.
10. MISCELLANEOUS
10.1 Insurance
Employee hereby grants Company the right to obtain insurance on the Employee's
life for the benefit of Company and at Company's sole cost and expense, in such
amount up to Five Million Dollars ($5,000,000) as Company shall deem
appropriate, and Employee hereby agrees to submit to usual and customary medical
examinations and to execute all
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such documents as Company shall deem necessary in connection therewith.
Employee's uninsurability shall not be deemed a breach of this Agreement. The
right granted under this Section 9.1 shall terminate upon termination of
Employee's employment hereunder for any reason.
10.2 Assignment
This Agreement is intended to and shall inure to the benefit of Company's
successors and assigns. Company may assign or delegate all or any portion of
this Agreement to any corporation or other entity as may acquire all or
substantially all of Company's assets and goodwill, or which may result from a
division or reorganization of Company. Employee acknowledges and agrees that he
may not assign or delegate all or any portion of this Agreement without
Company's Consent.
10.3 Choice of Law
This Agreement shall be governed by the internal laws of the State of New York,
as applied to contracts made and wholly performed within the State of New York
by residents thereof.
10.4 Arbitration and Litigation Costs
a. Any and all disputes arising from or related in any manner
to this Agreement shall be submitted to binding arbitration in New York County,
New York, in accordance with the rules of the American Arbitration Association.
Notwithstanding any provision of state law, this Agreement shall be governed by
the Federal Arbitration Act. The authority of the arbitrator shall be complete,
and shall include the authority to determine any and all issues relating to the
formation, interpretation and performance of this Agreement. Company and
Employee agree and acknowledge that such issues include (i) the scope of this
Section 9.4; (ii) whether either party has waived the right to compel
arbitration; (iii) whether grounds for revoking this Agreement exist; (iv)
whether either party hereto is also a party to a pending court action or special
proceeding with a third party such that there is a possibility of conflicting
rulings on a common issue of law or fact; and (v) to fashion and award such
relief as is provided herein or by applicable law, including preliminary and
equitable relief.
b. In any and all disputes arising from or related in any
manner to this Agreement, the prevailing party shall be entitled to recover any
and all costs incurred in prosecuting or defending such claim or dispute,
including reasonable attorneys' fees and the costs of arbitration.
10.5 Integration/Modification
This Agreement is the entire agreement and understanding between the parties
hereto, and supersedes any prior or contemporaneous oral or written agreements,
understandings or representations by either party. This Agreement may be
modified or amended only in a writing signed by the party to be bound by the
modification or amendment.
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10.6 No Waiver
No waiver of any provision of this Agreement shall constitute a waiver of any
other provision, nor shall any waiver constitute a continuing waiver unless
expressly stated in writing by the party to be charged with such waiver.
10.7 Notices
Any notices which a party is required or may desire to give the other party
shall be in writing and shall be given by delivering, mailing or transmitting
such notice to the other party at the address shown below, or at such other
address as the other party may designate from time to time in writing in
accordance with this provision:
If to Company:
N2K, Inc.
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
With a copy to:
Xxxxx Xxxxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxx XX, Esq.
If to Employee:
Mr. Xxxx Xxxxxx
000 Xxxxx Xxxx Xx.
Xxxxxxx, XX 00000
Notice shall be sufficiently given when hand delivered, or deposited so
addressed, postage prepaid, in the United States mail, or when transmitted by
telegraph, telex, facsimile or similar means. By any of the aforementioned
methods, the effective date of notice shall be the date that such notice is
delivered; provided, however, that the effective date of any notice of a change
of address shall be the date of receipt.
10.8 Severability/Enforceability
If for any reason any provision in this Agreement is held to be invalid or
unenforceable by any court or arbitrator, such holding shall in no way affect
any other provision of this Agreement or the validity of the remainder of this
Agreement, and the affected provision shall be modified or curtailed only to the
extent necessary to bring it into compliance with the applicable law.
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10.9 Captions
The captions used in this Agreement are for convenience only and shall not be
deemed to be a part, or affect in any way the construction or interpretation, of
this Agreement.
10.10 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same agreement.
11. LOAN TO EMPLOYEE
Upon the full execution and delivery of this Agreement, and subject to
Employee's execution and delivery to Company of a promissory note in the form of
Exhibit "A" attached hereto and incorporated herein by reference (the "Note"),
Company shall lend to Employee, and Employee shall borrow from Company, the sum
of $100,000.00 (the "Loan Amount"). Upon receipt of the Note, Company shall
transfer the Loan Amount to such bank account of Employee as Employee shall
designate in a notice to Company. Employee agrees to repay the Loan Amount by
the date specified and as otherwise provided in the Note. Employee further
agrees (and shall cause Lender to agree) that Company shall have the right (but
not the obligation) to deduct and withhold by way of set off, any Additional
Compensation (as defined below) owed by Company to Employee or Lender pursuant
to this Agreement or the Producer's Agreement in an aggregate amount not to
exceed the Loan Amount; provided, however, that except as set forth in this
sentence, the Note and any payments pursuant to the terms thereof shall not be
subject to any other offset, withholding, counterclaim or defense of any nature.
As used herein, the term "Additional Compensation" shall mean all amounts
payable by the Company to Employee or Lender pursuant to this Agreement or the
Producer's Agreement representing bonus, profit sharing, royalties or other
compensation, with the exception of base salary, employee benefits, expense
reimbursements and advances against royalties.
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IN WITNESS WHEREOF, the parties have executed and entered into
this Agreement as of the date first above written.
N2K INC.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------
Its: Chief Executive Officer
--------------------------
/s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx
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EXHIBIT "A"
PROMISSORY NOTE
OF
XXXX XXXXXX
DUE OCTOBER 1, 0000
Xxx Xxxx, Xxx Xxxx
$100,000 September 26, 1997
FOR VALUE RECEIVED, the undersigned, XXXX XXXXXX (together with his
successors and assigns, the "Maker"), hereby promises to pay to the order of N2K
INC. (together with its successors and assigns, the "Company"), the principal
sum of One Hundred Thousand Dollars ($100,000) (the "Principal Amount"), without
interest (except as expressly provided herein), in accordance with the terms,
conditions and procedures set forth below. All payments of principal and
interest hereunder shall be made in lawful money of the United States of America
in immediately available funds to the Company. This Note is being issued by the
Maker contemporaneously with and in connection with the consummation of the
transactions contemplated by that certain employment agreement, dated as of
October 15, 1996, between the Maker and the Company (the "Employment
Agreement").
Prepayments
The Maker shall have the right at any time, upon one Business Day
(as defined below) prior written notice to the Company, to prepay, without
premium or penalty, in whole or in part, the unpaid Principal Amount of this
Note and any accrued but unpaid interest thereon.
Maturity
Unless earlier prepaid or as otherwise provided herein, the
Principal Amount of this Note shall be due and payable to the Company as
follows:
October 1, 2000 $100,000
Each date on which all or a portion of the Principal Amount of this Note is due
and payable is hereinafter referred to as a "Payment Date." If a Payment Date
shall fall on a day on which banks in New York City are required or authorized
to close, such Payment Date shall be extended to the next succeeding day on
which such banks are not authorized or required to close (a "Business Day") and
such date shall be deemed to be a Payment Date for the purpose hereof.
Interest
Upon (i) an Event of Default (as defined below) or (ii) the failure
to pay the relevant portion of the Principal Amount on any Payment Date (a
"Payment Failure"), the interest rate on the unpaid Principal Amount shall, from
and after the day on which the Event of Default or the Payment Failure occurred
(the "Default Date"), be equal to 15% per annum (the "Default Rate") (to the
extent that the payment of such interest shall
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be legally enforceable) from the Default Date until such Event of Default has
been cured or waived. Interest on this Note shall be calculated on the basis of
a year of 360 days for the actual number of days elapsed from the Default Date,
as the case may be. All interest accrued hereunder shall be payable on the next
succeeding Payment Date after the accrual of such interest (or if later than the
last Payment Date quarterly thereafter). No interest shall be payable with
respect to this Note except as expressly provided in this paragraph. The
provisions of this paragraph shall be subject to the further provisions of this
Note under the heading "Set Off."
Usury
It is the intention of the Maker and the Company to conform strictly
to applicable usury and similar laws. Accordingly, notwithstanding anything to
the contrary in this Note, it is agreed that the aggregate of all charges which
constitute interest under applicable usury and similar laws that are contracted
for, chargeable or receivable under or in respect of this Note, shall under no
circumstances exceed the maximum amount of interest permitted by such laws, and
any excess, whether occasioned by acceleration of maturity of this Note or
otherwise, shall be canceled automatically, and if theretofore paid, shall be
either refunded to the Maker or credited on the principal amount of this Note.
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) failure by the Maker to pay any portion of the Principal
Amount of this Note when the same becomes due and payable in accordance
with the terms hereof;
(b) failure by the Maker to pay any interest on this Note when
the same becomes due and payable in accordance with the terms hereof;
(c) default by the Maker in the performance of or compliance
in any material respect with any other term or agreement contained in
this Note, which default continues unremedied for a period of thirty
(30) days after notice by the Company requesting that such default be
cured;
(d) if the Maker shall make a general assignment for the
benefit of creditors, or shall file a voluntary petition in bankruptcy,
or shall file any petition or answer seeking for himself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law
or regulation, or shall file any answer admitting or not contesting the
material allegations of a petition filed against the Maker in any such
proceeding or shall seek or consent to or acquiesce in the appointment
of any trustee, receiver or liquidator of the Maker; or
(e) if there shall be filed against the Maker any petition or
application for relief under any bankruptcy or similar laws or which
seek the appointment of a
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receiver or dissolution of the Maker, which is not discharged within
sixty (60) days after such petition or application is filed; or
(f) if the Maker shall cease for any reason to be employed by
the Company;
then the Company may at any time (unless all defaults shall have been sooner
remedied) at its option, by written notice to the Maker, declare the entire
unpaid Principal Amount and any accrued but unpaid interest thereon due and
payable, whereupon the same shall forthwith become immediately due and payable;
provided, however, (i) if such date shall not be a Business Day, all monies
payable pursuant to this paragraph shall be due and payable on the next
succeeding Business Day and (ii) no notice shall be required in the case of an
Event of Default under paragraphs (d) or (e) above (a "Bankruptcy Default") and
the entire unpaid amount of any accrued, but unpaid, interest shall
automatically become due and payable. No course of dealing and no delay on the
part of the Company or any registered assign which is a holder of this Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice rights of the Company or such holder. The Maker hereby
waives demand, protest, presentment for payment, notice of dishonor and
diligence and any and all other notices or demands in connection with this Note.
Transferability
The Maker may not transfer or assign its obligations hereunder
without the prior written consent of the Company. This Note may be not
negotiated, assigned, pledged or transferred by the Company except to: (a)
equity shareholders of the Company on the date hereof; (b) an Affiliate (as
defined below) of the Company; (c) any holder who receives an equity interest by
will or intestacy in each case in compliance with applicable federal and state
securities laws or (d) a bona fide pledgee (which is a U.S. domiciled and based
commercial bank of recognized national standing reasonably acceptable to the
Company) as security for indebtedness incurred by the Company pursuant to an
agreement entered into prior to or concurrently with the pledge, but only if
such pledgee shall, prior to the pledge, execute and deliver to the Company a
written agreement satisfactory to the Company not to dispose of this Note so
pledged, or retain any of this Note in full or partial satisfaction of such
indebtedness, without complying with the relevant provisions of this Note. In
the event of the assignment or transfer of this Note by the Company, the Maker
shall, if requested by the Company, assist in the execution and delivery of a
new Note or Notes in the name of the designated assignee(s) in a Principal
Amount or Amounts equal, in the aggregate, to the unpaid Principal Amount of,
and dated the date to which principal has been paid on, the Note so surrendered.
"Affiliate" shall mean, as to any person, any other person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such person.
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Set Off
The Maker acknowledges and agrees that this Note is issued pursuant
to and in accordance with the terms of the Employment Agreement. The Maker
acknowledges and agrees, and shall cause Xxxx Xxxxxx, Inc. ("Lender") to
acknowledge and agree, that the Company may deduct and withhold by way of set
off, any Additional Compensation (as defined below) owed by the Company to the
Maker pursuant to the Employment Agreement or to Lender pursuant to that
producer's agreement between Company and Lender executed concurrently herewith
(the "Producer's Agreement") in an amount not to exceed the Principal Amount
hereof; provided, however, that except as set forth in this sentence, this Note
and any payments pursuant to the terms thereof shall not be subject to any other
offset, withholding, counterclaim or defense of any nature. As used herein, the
term "Additional Compensation" shall mean all amounts payable by the Company to
Employee or Lender pursuant to this Agreement or the Producer's Agreement
representing bonus, profit sharing, royalties or other compensation, with the
exception of base salary, employee benefits, expense reimbursements and advances
against royalties.
Notices
Notices to be given hereunder shall be in writing and shall be
deemed to have been sufficiently given if delivered personally or sent by
overnight courier or messenger or sent by registered or certified mail (air mail
if overseas), return receipt requested, or by telex, facsimile transmission,
telegram or similar means of communication. Notices shall be deemed to have been
received on the date of personal delivery, telex, facsimile transmission,
telegram or similar means of communication, or if sent by overnight courier or
messenger, shall be deemed to have been received on the next delivery day after
depositing with the courier or messenger, or if sent by certified or registered
mail, return receipt requested, shall be deemed to have been received on the
third business day after the date of mailing. The address of the Maker is 000
Xxxxx Xxxx Xxxx, Xxxxxxx, Xxx Xxxx 00000, Attention: Xxxx Xxxxxx, Facsimile
Number: ___-___-____, and all notices shall be copied to ______________ , The
address of the Company is c/o N2K Inc., 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attention: Xxxxx Xxxxx, and all notices shall be copied to Xxxxx
Xxxxxxxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxx X. Xxxxxx XX, Esq., Facsimile Number: 000-000-0000. Each party shall give
written notice of any change of address to the other.
Miscellaneous
Any term of this Note may be amended and the observance of any term,
representation, warranty or covenant thereof may be waived (either generally or
in a particular instance) only with the written consent of the Maker and of the
Company. All of the provisions of this Note, as it may be amended from time to
time, shall bind and inure to the benefit of the Maker, the Company and their
respective successors and assigns and, in particular, shall inure to the benefit
of and be enforceable by any holder or holders at the time of the Note or any
part thereof. This Note shall be governed by, and
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construed in accordance with the laws of the State of New York without regard
to choice of law doctrine.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed
and delivered by its duly authorized officer, as of the day and year and the
place first above written.
/s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
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