EMPLOYMENT AGREEMENT (the "Agreement"), dated as of the 15th day of August,
1996, between Alliance Entertainment Corp., a Delaware corporation having its
principal office at 000 X. 00xx Xxxxxx (the "Company"), and Xxxxx X. Xxxxxx,
residing at 000 Xxxxxxxxx Xxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (the "Executive").
R E C I T A L S :
WHEREAS, the Company considers it essential and in the best interests
of its stockholders to more closely align the interests of the Executive with
those of its shareholders and that the Executive support the mission, values and
strategy of the Company and desires to retain the services of the Executive; and
WHEREAS, the Executive desires to accept such employment by the
Company, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties agree as follows:
1. Employment and Duties. During the full term of this Agreement, the
Company agrees to employ the Executive as Co-Chairman, President and chief
executive officer of the Company and all of its subsidiaries. In such capacity,
the Executive shall be the most senior executive of the Company and all of its
subsidiaries and report solely and directly to the Company's Board of Directors.
The Executive shall have full authority over the day-to-day operations of the
Company and all of its subsidiaries and over all officers and employees of the
Company, including, without limitation, the power to hire and, subject to
contractual commitments, fire employees. The Executive accepts such employment
and agrees to perform all duties and services consistent with the Executive's
position. The Executive agrees to devote substantially all of the Executive's
business time, attention and energy to performing the Executive's duties and
services hereunder; provided, however, that nothing in this Agreement shall
preclude the Executive: (a) from devoting time during reasonable periods to
serving as a director of (i) any company that is not engaged primarily in the
record business or (ii) any company primarily engaged in the record business to
which the Board of Directors of the Company shall consent; or (b) from investing
his personal assets in a Passive Investment (as hereinafter
defined). For purposes of this Agreement, a "Passive Investment" shall mean an
investment in a business or entity which does not require the Executive to
render any services in the operations or affairs of such business or entity and
which does not materially adversely affect or interfere with the performance of
the Executive's duties and obligations to the Company or any of its subsidiaries
or affiliates. During the Employment Period (as defined below), the Company
agrees it will nominate the Executive to serve on the Company's Board of
Directors.
1.2. Principal Place of Employment. During the Employment Period (as
defined below), the Executive's place of employment shall be at the principal
offices of the Company in the New York City area.
2. Term of Employment. The term of the Executive's employment under this
Agreement shall commence on August 15, 1996 (the "Effective Date") and shall end
on the fifth anniversary of such date, unless sooner terminated as provided in
Section 5 hereof (the "Employment Period"); provided, however that commencing on
August 15, 2001, and each August 15 thereafter, the term of this Agreement shall
automatically be renewed for one (1) additional year unless, not less than 120
and not more than 150 days prior to such date, either party shall have provided
written notice that such party elects not to renew the term of this Agreement.
Each consecutive twelve-month period during the term of this Agreement,
commencing on the Effective Date, and on each subsequent anniversary thereof, is
hereinafter referred to as a "Contract Year."
3. Compensation and Benefits.
3.1 Base Salary. The Company shall pay the Executive a base salary of not
less than One Million Five Hundred Thousand Dollars ($1,500,000) per annum
("Base Salary"). The Base Salary for each Contract Year after the first Contract
Year may be increased from time to time in the sole discretion of the Board and
in any event will be increased annually to reflect corresponding increases in
the United States Department of Labor, Bureau of Labor Statistics, Consumer
Price Index, All Urban Consumers, United States City Average, all items (1982-88
= 100). Base Salary shall be payable at such regular intervals as salaries are
paid by the Company to its other executive employees, not less frequently than
bimonthly.
3.2 Annual Bonus. In addition to Base Salary and Signing Options, with
respect to each fiscal year of the
Company (a "Fiscal Year") during the Employment Period, the Executive shall be
entitled to participate in, and be eligible for annual bonuses under, the
Company's Executive Incentive Plan and other annual bonus, incentive, stock plan
and stock option programs of any kind or nature, in accordance with their terms.
Any such bonus amount (a "Bonus") shall be payable at such time as executive
bonuses customarily are paid by the Company, but in no event later than 30 days
after the end of the Company's Fiscal Year. The initial minimum target Bonus
with respect to each Fiscal Year shall be an amount equal to 95% of Base Salary
and the initial maximum target Bonus with respect to each Fiscal Year shall be
equal to 125% of Base Salary for the applicable Fiscal Year, subject to
satisfaction of applicable performance goals established by the Compensation
Committee of the Company's Board of Directors (the "Compensation Committee");
provided, however, that such minimum and maximum Bonus amounts shall be subject
to such increases as shall be determined by the Board of Directors.
3.3 Acquisition Bonus. If, at any time during the period commencing on the
Effective Date and terminating on the first anniversary of the termination of
Executive's employment hereunder (the "First Acquisition Period"), a Change of
Control (as defined) occurs pursuant to which more than 50% of the outstanding
shares of common stock of the Company are acquired at a price, or receive value,
in cash or marketable securities equal to or in excess of $11.00 per share (the
"Acquisition Share Price"), then immediately prior to consummation of such
acquisition, the Executive shall receive a cash bonus (the "Acquisition Bonus")
equal to 1,000,000 multiplied by the difference between the Acquisition Share
Price and $11.00; provided, however, that if the term of the Executive's
employment shall extend past the third anniversary of the Effective Date, such
period shall terminate on the second anniversary of the termination of
Executive's employment hereunder (the "Second Acquisition Period"); provided,
however, that if such acquisition occurs during the last six (6) months of the
First Acquisition Period or the last twelve (12) months of the Second
Acquisition Period, the Executive shall be entitled to 50% of the amount payable
hereunder, and provided further that no Acquisition Bonus shall be payable to
Executive
if Executive's employment is terminated for Cause or if Executive terminates his
employment for other than Good Reason, death or Disability. As used in this
Agreement, "Change of Control" shall mean (i) the acquisition of all or
substantially all of the assets of the Company, (ii) the acquisition by any
party (or group, as such term is defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) not currently a holder of more than 5% of the
outstanding Common Stock of the Company of more than 50% of the outstanding
Common Stock of the Company, or (iii) any merger, combination, consolidation or
similar transaction involving the Company following which the holders of Common
Stock of the Company immediately prior to such transaction will not own more
than 50% of the Common Stock of the Company.
3.4 Stock Options. The Company hereby grants to the Executive on the
Effective Date stock options to acquire five million (5,000,000) shares of
common stock of the Company at an exercise price of $6 per share (the "Signing
Options"). One million of the Signing Options shall vest immediately. The
remaining 4,000,000 Signing Options shall vest in four equal installments,
commencing on the first anniversary of the Effective Date and annually on each
anniversary of the Effective Date for four years. The 1,000,000 options vesting
immediately, as well as the 1,000,000 options vesting on the first anniversary
of the Effective Date, shall expire six (6) years from the date of vesting with
the remaining options expiring five (5) years from the date of vesting, subject
to earlier termination in the event of death, Disability, termination for Cause
or other termination of the Executive's employment, as provided below.
3.5 Benefit Plans. During the Employment Period, the Executive shall be
entitled to participate in all plans adopted for the general benefit of the
Company's employees or executive employees, such as pension plans, medical
plans, disability plans, incentive plans, stock plans, investment plans and
group or other insurance plans and benefits, to the extent that the Executive is
and remains eligible to participate therein and subject to the eligibility
provisions of such plans in effect from time to time. In addition to the Signing
Options, the Executive shall be eligible to receive grants of options to
purchase shares of Common Stock of the Company and other awards which the
Company is permitted to grant under its Long-Term Incentive and Share Award Plan
and such other stock option or incentive plans as may be maintained by the
Company, in such amounts and at such times as shall be determined by the
Compensation Committee. The Executive's participation in such plans shall be at
the highest level afforded to officers and employees of the Company.
3.6 Business Expenses. The Executive shall be reimbursed for his reasonable
out-of-pocket expenses, commensurate with his position, incurred in the
performance of his duties upon submission of appropriate evidence thereof in
conformity with normal Company policy. The Executive shall be entitled to travel
first class and first class accommodations and the Company shall reimburse the
Executive for the cost of his spouse's air fare when she accompanies him. In
addition, the Executive shall receive a per diem of $1,000 for each day or
portion thereof he is working in the Los Angeles area and maintains his
residence in Los Angeles. The Company shall also reimburse the Executive for all
reasonable expenses incurred by him in moving to the New York City area.
Reimbursable expenses shall include: (i) cost of selling Executive's Los Angeles
residence, including brokerage commission; and (ii) moving and relocation
expenses. Following completion of (i) an equity offering for cash in an amount
of at least $35 million or (ii) a bank refinancing, the Company shall (a)
reimburse the Executive for any loss not to exceed $1,500,000 on a net after tax
basis, incurred by the Executive in selling his Los Angeles residence, based on
Executive's cost basis (including improvements) or (b) at the Company's option
(subject to Executive's consent) purchase the residence from the Executive for a
price equal to Executive's cost basis in the residence (including improvements).
3.7 Automobile. The Company shall lease a luxury automobile and
provide a driver therefor in New York City for the exclusive use and benefit of
the Executive. In addition, the Company shall lease a luxury automobile for the
exclusive use and benefit of the Executive in Los Angeles. In connection
therewith, the Company shall provide (i) insurance for both such automobiles;
(ii) a parking space at a garage in New York City designated by the Company; and
(iii) all maintenance, gas and repairs for such automobiles. If any automobile
is leased, such lease shall contain a clause allowing the Executive to purchase
the automobile at the termination of the term of the lease. With respect to any
automobile provided to the Executive pursuant to this Section 3.7 which is owned
by the Company, the Executive shall have the right to purchase such automobile
at its depreciated book value.
3.8 Perquisites. In addition to the other benefits provided to the
Executive under this Section 3, the Executive shall be entitled to business and
other perquisites commensurate with his position and/or generally afforded to
senior executives of the Company, including an office in the Company's New York
City headquarters, office furnishings and secretarial assistance at least
comparable to those of the
other Co-Chairman.
4. Vacation. For each Contract Year, the Executive shall be entitled to
paid vacation in accordance with the Company's standard policy for any of the
Company's most senior executives, but not to be less than four weeks.
5. Termination.
5.1 Death. This Agreement shall automatically terminate upon the death of
the Executive, whereupon the Company shall be obligated to pay to the
Executive's estate any unpaid Base Salary and accrued and unpaid benefits and
Bonus through the date of death and an amount equal to the greater of (i) the
Executive's Bonus for the prior Fiscal Year prorated for that portion of the
Fiscal Year which expired prior to the Executive's death or (ii) the Executive's
pro rata Bonus for the current Fiscal Year, if any, as determined by the
Compensation Committee through the date of death. The Executive's estate shall
be paid an amount equal to one-half of the Acquisition Bonus to which the
Executive would have been entitled pursuant to Section 3.3 hereof. Amounts
payable under this Section 5.1 shall be payable at the times and intervals set
forth in Sections 3.1, 3.2 and 3.3 hereof. Upon such termination, 50% of the not
yet vested Signing Options shall vest, and all then vested Signing Options shall
be exercisable by the persons to whom the Executive's rights under the Signing
Options pass by will or the laws of descent and distribution in accordance with
the terms of such options.
5.2 Disability. The Company shall have the right to terminate this
Agreement after the occurrence and during the continuance of any Disability of
the Executive, as hereinafter defined, upon thirty (30) days' prior notice to
the Executive during the continuance of the Disability. "Disability" for
purposes of this Agreement shall mean and be deemed to occur upon the
Executive's inability to perform his material duties hereunder by reason of
physical or mental incapacity or disability for a total of one hundred eighty
(180) days or more in any consecutive period of three hundred and sixty-five
(365) days, in the reasonable judgment of a physician selected by the Executive
and reasonably acceptable to the Company, which in the reasonable judgment of
such physician shall be deemed reasonably likely to continue. In the event of a
termination by reason of the Executive's Disability, the Company shall be
obligated to assist the Executive in obtaining payment under the existing
disability insurance maintained by the Company for the Executive. In addition,
the Company shall be obligated to pay the Executive any unpaid Base Salary and
accrued and unpaid benefits and Bonus through the date of termination, and the
greater of (i) the amount payable to the Executive under the Company's
disability insurance or (ii) 50% of the Executive's Bonus paid for the Fiscal
Year prior to the year in which the Disability occurred. The Executive shall be
paid an amount equal to one-half of the Acquisition Bonus to which the Executive
would have been entitled pursuant to Section 3.3 hereof. Amounts payable under
this Section 5.2 shall be payable at the times and intervals set forth in
Sections 3.1, 3.2 and 3.3 hereof. Upon such termination, 50% of the not yet
vested Signing Options shall vest, and all then vested Signing Options shall be
exercisable by the Executive or the persons to whom the Executive's rights under
the Signing Options pass by will or the laws of descent and distribution in
accordance with the terms of such options.
5.3 Termination for Cause or by Executive for Other than Good Reason.
5.3.1 Upon the early termination of this Agreement by the Company for Cause
or by the Executive during the Employment Period for other than Good Reason,
death or Disability, the Company shall only be obligated to pay the Executive
his Base Salary prorated to the date of termination and any then accrued
benefits (excluding any amount of bonus which the Executive may be eligible to
receive). Upon such termination, the Signing Options, to the extent not vested
by such termination date, shall be terminated. For purposes of this Agreement,
"Cause" shall mean (i) any willful and continuing material failure by the
Executive to perform his material duties under this Agreement, taken as a whole;
(ii) the Executive's conviction of, or plea of nolo contendere to, a felony;
(iii) the Executive's conviction of fraud or embezzlement against the Company;
(iv) any willful or intentional misconduct having the effect of materially
injuring the business of the Company; or (v) any willful and material breach by
the Executive of any of the provisions of the Confidentiality and
Non-Competition Agreement attached hereto as Attachment A. Termination for Cause
shall become effective upon notice to the Executive. Anything contained herein
to the contrary notwithstanding, none of the foregoing events or circumstances
shall constitute Cause for purposes of this Agreement unless the Company gives
the Executive written notice of such event or circumstance (a "Termination
Notice") at or following a meeting of the Board of Directors of the Company for
which the Executive was given at least thirty (30) days' advance written notice
and an opportunity to be heard, and the Executive shall have failed to commence
to cure such event or circumstance within thirty (30) days following the giving
of the Termination Notice; provided, however, that the parties acknowledge that
the mere failure of the Company to achieve projected or budgeted results or to
attain creative or artistic success at any time or from time to time shall not
constitute Cause for purposes of this Agreement unless such failure is
accompanied by one or more of the circumstances described above.
5.3.2 For purposes of this Agreement, "Good Reason" shall mean any of the
following: (i) a reduction or adverse change in, or a change which is
inconsistent with, the Executive's responsibilities, duties, authority,
reporting, power, functions, title, working conditions or status; (ii) a
reassignment to another geographic location outside of the New York City area;
(iii) a material breach by the Company of this Agreement; (iv) the Company
requiring the Executive to render material services wholly inconsistent with the
services to be rendered by the Executive hereunder; (v) any time after the
occurrence of a Change of Control; (vi) any time after the Executive shall not
be a member of the Board of Directors of the Company; or (vii) any other action
by the Company which materially interferes with the Executive's ability to carry
out his responsibilities under this Agreement.
5.4 Termination for Other Reason. If the Executive's employment is
terminated during the term of this Agreement by the Executive for Good Reason or
by the Company without Cause, then the Company shall pay the Executive a cash
lump sum in an amount equal to the greater of: (A) four times the sum of the
Executive's Base Salary in effect at the time of the termination of his
employment plus the maximum target Bonus amounts payable to the Executive with
respect to the Fiscal Year in which such termination occurs; or (B) the Base
Salary and maximum target Bonus amounts payable to the Executive for the
remainder of the Employment Period. Such amount shall be payable no later than
thirty (30) days following the Executive's termination pursuant to this Section
5.4. For the four year period after the Executive's termination of employment
pursuant to this Section 5.4, the Executive (i) shall be entitled to continued
participation in all of the Company's employee benefit plans, including, without
limitation, continued accrual for retirement benefits and continued coverage
under the Company's medical and hospitalization and life insurance plans, and
all of the other benefits and perquisites provided for under this Agreement or
(ii) be paid a cash lump sum equal to the aggregate amounts which the Executive
would have been credited or received under all of such benefit plans, incentive
plans, benefits and perquisites. In addition, the Company shall be obligated to:
(i) pay the Acquisition Bonus pursuant to Section 3.3 hereof; (ii) provide that
all options granted to the Executive under the Company's Long-Term Incentive and
Share Award Plan and such other stock option or incentive plans as may be
maintained by the Company shall vest upon such termination; (iii) transfer to
the Executive all right and title to the automobiles provided to the Executive
pursuant to Section 3.7 herein; (iv) provide coverage for the Executive under
the Company's automobile insurance policies, for which the Company shall be
reimbursed by the Executive; and (v) provide the Executive coverage under the
Company's medical plans and life insurance plans or other similar medical or
life insurance coverage, or the economic equivalent of such coverage, for so
long as the Executive shall live. Upon termination of the Executive pursuant to
this Section 5.4, all of the Signing Options and any other awards received under
any stock, incentive and benefit plans shall vest in full and be exercisable by
the Executive in accordance with their terms.
5.5 Nature of Payments. If the Executive's employment hereunder shall be
terminated, the Executive shall be under no duty to seek or accept other
employment (or otherwise mitigate damages). Any payments pursuant to the
provisions of this Section 5 shall not be subject to any offset right of the
Company.
5.6 Tax Gross-Up. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution made, or benefit provided, by the Company to or for the benefit of
the Executive (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but determined without regard to
any additional payments required under this Section 5.6) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended and then in effect (the "Code") (or any similar excise tax)
or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all Federal, state, local or
other taxes (including any interest or penalties imposed with respect to any
such taxes), including, without limitation, any such income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(i) Subject to the provisions of paragraph (ii) of this Section 5.6,
all determinations required to be made under this Section 5.6, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Coopers & Xxxxxxx (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive within 20 calendar
days of the receipt of written notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the change in control, the Executive shall have the
right by written notice to the Company to appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company and shall
be paid by the Company upon demand of the Executive as incurred or billed by the
Accounting Firm. Any Gross-Up Payment, as determined pursuant to this Section
5.6, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with an unqualified written opinion in form and substance satisfactory
to the Executive that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies described in paragraph (ii) of this Section 5.6
and the Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be paid by the Company to or for the
benefit of the Executive within five days of the receipt of the Accounting
Firm's determination. All determinations made by the Accounting Firm in
connection with any Gross-Up Payment or Underpayment shall be final and binding
upon the Company and the Executive.
(ii) The Executive shall notify the Company in writing of any claim
asserted in writing by the Internal Revenue Service to the Executive that, if
successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but not later than 60
days after the Executive is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall at the Company's expense:
(a) give the Company any information reasonably
requested by the Company relating to such claim,
(b) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(c) cooperate with the Company in good faith in
order effectively to contest such claim, and
(d) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly as incurred all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or any Federal, state, local
or other income or other tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 5.6,
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and xxx for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or Federal, state, local or other income or other tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(iii) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph (ii) of this Section 5.6, the Executive
becomes entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of paragraph
(ii) of this Section 5.6) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto) upon receipt thereof. If, after the receipt by the Executive of an
amount advanced by the Company pursuant to paragraph (ii) of this Section 5.6, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
In the event that the Executive is subject to any Federal, state,
local or other income taxes or any interest or penalties relating thereto with
respect to the Executive's receipt of any non-cash consideration from the
Company from any transaction or event between the Company and the Executive
(such income taxes, together with any such interest and penalties, are
hereinafter referred to as the "Income Tax"), the Company shall lend the amount
of such Income Tax to the Executive, subject to any applicable bank loan
restrictions or public indenture restrictions. Such loan shall bear interest at
the lowest interest rate at which the Company borrows funds, shall be due and
payable 10 years from the date of the loan, and shall be evidenced by a full
recourse, unsecured promissory note.
6. Confidentiality and Non-Competition Agreement. The Executive shall be
bound by the terms of the Confidentiality and Non-Competition Agreement, a copy
of which is annexed hereto as Exhibit A, during the Employment Period and for
such period following the Employment Period as is set forth in the
Confidentiality and Non-Competition Agreement. The Executive and the Company
shall execute a copy of the Confidentiality and Non-Competition Agreement
simultaneously with the execution of this Agreement.
7. Miscellaneous Provisions.
7.1 Reimbursement. Except as otherwise provided in Section 5.6 hereof, the
Executive shall reimburse the Company for any withholding tax liability (but not
any interest or penalty) respecting amounts treated as compensation to the
Executive actually paid by the Company with the Executive's consent or when the
Company's obligation to pay the same is ultimately determined to be due, the
Company using counsel of the Executive's choice, which counsel is reasonably
acceptable to the Company.
7.2 Entire Agreement. This Agreement, the Confidentiality and
Non-Competition Agreement attached hereto as Exhibit A, and the 1996 Restricted
Stock Plan attached hereto as Exhibit B set forth the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersede all prior agreements, arrangements, and understandings between the
parties with respect to the subject matter hereof.
7.3 Modification. This Agreement may be amended, modified, superseded,
canceled, renewed or extended, and the terms or covenants hereof may be waived,
only by a written instrument executed by both of the parties or in the case of a
waiver, by the party waiving compliance.
7.4 Waiver. The failure of either party at any time or times to require
performance of any provision hereof in no manner shall affect the right at a
later time to enforce the same. No waiver by either party of a breach of any
term or covenant contained in this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such breach or a waiver of any other term or covenant
contained in this Agreement.
7.5 Notices. All notices, demands, consents or other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given) upon the earlier of receipt, one business day after being sent
by
nationally-recognized overnight courier or three business days after being sent
by registered or certified mail to the parties at the addresses set forth above
or to such other address as either party shall hereafter specify by notice to
the other party. A copy of each notice, demand, consent or communication given
to the Executive hereunder shall simultaneously be given to Xxxxx Xxxxxx, Esq.,
Xxxxxx & Xxxxxxxx, 0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000. Irrespective of the foregoing, notice of change of address shall be
effective only upon receipt.
7.6 Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of New York applicable to contracts made and
to be performed wholly within such state.
7.7 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, the making, interpretation or the breach thereof, other than a
claim solely for injunctive relief for any alleged breach of the provisions of
the Confidentiality and Non-Competition Agreement as to which the parties shall
have the right to apply for specific performance to any court having equity
jurisdiction, shall be resolved by arbitration in New York, New York in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and judgment upon the award tendered by the arbitrators may be
entered in any court having jurisdiction thereof and any party to the
arbitration may, if such party so elects, institute proceedings in any court
having jurisdiction for the specific performance of any such award. The powers
for the arbitrator or arbitrators shall include, but not be limited to, the
awarding of injunctive relief. The arbitrator shall include in any award in the
prevailing party's favor the amount of his or its reasonable attorney's fees and
expenses and all other reasonable costs and expenses of the arbitration. In the
event the arbitrator does not rule in favor of the prevailing party in respect
of all the claims alleged by such party, the arbitrator shall include in any
award in favor of the prevailing party the amount of his or its reasonable costs
and expenses of the arbitration as he deems just and equitable under the
circumstances. Except as provided above, each party shall bear his or its own
attorney's fees and expenses and the parties shall bear equally all other costs
and expenses of the arbitration.
7.8 Indemnification. The Company agrees that the Executive shall be
entitled to indemnification and payment or reimbursement of expenses (including
attorneys' fees and expenses) to the fullest extent provided in the Company's
Certificate of Incorporation, as in effect on the date hereof and as it may be
hereafter amended (but in no event on terms less favorable to the Executive than
those in effect on the date hereof), for all damages, losses and expenses
incurred by the Executive in connection with any claim, action, suit or
proceeding which arises from the Executive's services and/or activities as an
officer and/or employee of the Company or any affiliate thereof. This Section
shall survive any termination of the term of this Agreement.
7.9 HSR Filings and Approvals. Anything in this Agreement or in any other
agreement as to which the Company and the Executive are parties notwithstanding,
if any governmental or other filings or approvals relating to or required by
Xxxx- Xxxxx-Xxxxxx are required before the Company can issue or transfer any
stock to the Executive or the Executive could receive any stock from the Company
(including from the exercise of any options granted to the Executive) pursuant
to the terms of this Agreement or any such other agreement or otherwise, then
the Company shall bear and pay directly as incurred all costs and expenses
(including, without limitation, any filing fees or any legal, accounting or
other expenses) incurred by the Executive or the Company in connection with any
such filings or in applying for any such approvals. If, after making any such
filings or applying for any such approvals, the Company is prohibited by
governmental or administrative rule, determination or otherwise from issuing or
transferring any such stock to the Executive, or the Executive is prohibited by
governmental or administrative rule, determination or otherwise from receiving
any such stock from the Company, then the Company shall use its best efforts to
exhaust all reasonable administrative or judicial remedies that may be available
and shall bear and pay directly as incurred all costs and expenses (including,
without limitation, all legal, accounting or other expenses) incurred by the
Executive or the Company in pursuing any such remedies. If, after exhausting all
such remedies, the Company is still legally prohibited from issuing or
transferring any such stock to the Executive, or the Executive is still legally
prohibited from receiving any such stock from the Company, then the Company
shall engage an investment bank (at its sole cost and expense), which investment
bank shall be acceptable to the Executive, to develop a method of providing the
Executive with equivalent consideration which shall be reasonably acceptable to
the Executive and in accordance with the essential intent and principles of this
Agreement or any such other agreement, as the case may be.
7.10 Assignability. This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive, except by operation
of law, and except that Executive's rights, but not his obligations,
hereunder may be assigned to a trust for the benefit of Executive, his spouse,
and any of the children of either. The Company may assign its rights, together
with its obligations hereunder, only to a successor by merger or by the purchase
of all or substantially all of the assets and business of the Company and such
rights and obligations shall inure to, and be binding upon, any such successor.
7.11 Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective legal representatives, heirs,
permitted successors and permitted assigns.
7.12 Headings and Word Meanings. Headings and titles in this Agreement are
for convenience of reference only and shall not control the construction or
interpretation of any provisions hereof. The words "herein," "hereof,"
"hereunder" and words of similar import, when used anywhere in this Agreement,
refer to this Agreement as a whole and not merely to a subdivision in which such
words appear, unless the context otherwise requires. The singular shall include
the plural unless the context otherwise requires.
7.13 Separability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
7.14 1996 Restricted Stock Plan. During the period commencing on the
Effective Date and terminating on the day after the fourth anniversary of the
Effective Date, the Company hereby adopts and shall maintain in effect the 1996
Restricted Stock Plan in the form annexed hereto as Exhibit B.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
ALLIANCE ENTERTAINMENT CORP.
By:/s/Xxxx X. Xxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Vice Chairman
/s/Xxxxx X. Xxxxxx
-------------------------------------
Xxxxx X. Xxxxxx
Exhibit A
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT (the
"Agreement"), entered into and effective as of the 15th day of August, 1996, is
by and between ALLIANCE ENTERTAINMENT CORP. (the "Company") and XXXXX X. XXXXXX
("Employee").
In consideration of Employee's employment by the Company, and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties agree as follows:
1. Confidential Information. By virtue of Employee's employment at the
Company, Employee may obtain confidential or proprietary information developed,
or to be developed, by the Company. "Confidential Information" means all
information, whether in oral, written, graphic or machine-readable form,
including but not limited to all: software used or developed in whole or in part
by the Company (including source code); algorithms; computer processing systems
and techniques; price lists; customer lists; procedures; improvements, concepts
and ideas; business plans and proposals; technical plans and proposals; research
and development; budgets and projections; technical memoranda, research reports,
designs and specifications; new product and service developments; comparative
analyses of competitive products, services and operating procedures; and other
information, data and documents now existing or later acquired by the Company,
regardless of whether any of such information, data or documents qualify as a
"trade secret" under applicable Federal or State law. All such information is
collectively referred to as the "Confidential Information". For purposes of this
Agreement, "Confidential Information" shall not include information which: (i)
was previously known to Employee prior to his employment with the Company; (ii)
is generally known in the music industry or otherwise generally known to the
public; (iii) is in the public domain; (iv) is independently obtained by
Employee from third parties under no obligation of confidentiality to the
Company or to any third party; or (v) is required to be disclosed by law or in
any legal or governmental investigation or proceeding.
2. Non-Disclosure. Employee agrees that, except as directed by the Company,
he will not at any time (during the term of Employee's employment by the Company
or at any time thereafter), except as may be expressly authorized by the Company
in writing and except to the Company and its officers, directors and employees,
disclose to any person or use any Confidential Information whatsoever for any
purpose whatsoever,
or permit any person whatsoever to examine and/or make copies of any reports or
any documents or software (whether in written form or stored on magnetic,
optical or other mass storage media) prepared by him or that come into his
possession or under his control by reason of his employment by the Company or by
reason of any consulting or software development services he has performed or
may in the future perform for the Company which contain or are derived from
Confidential Information. Employee further agrees that while employed at the
Company, he shall not remove Confidential Information from the Company's
business premises, without the prior written consent of the Company.
3. Company Property. As used in this Agreement, the term "Company Property"
means all documents, papers, computer printouts and disks, records, customer or
prospect lists, files, manuals, supplies, computer hardware and software,
equipment, inventory and other materials that have been created, used or
obtained by the Company, or otherwise belonging to the Company, as well as any
other materials containing Confidential Information as defined in Section 1
above. Employee recognizes and agrees that:
3.1 All Company Property shall be and remain the property of the Company;
3.2 Employee will preserve, use and hold Company Property only for the
benefit of the Company and to carry out the Company's business; and
3.3 When Employee's employment is terminated, Employee will immediately
deliver to the Company all Company Property, including all copies or any other
types of reproductions which Employee has in his possession or control.
4. Non-Solicitation. During the period of his employment and for a period
of one (1) year after termination of his employment at the Company for any
reason, Employee shall not, on his own behalf or on behalf of any person, firm
or corporation, or in any capacity whatsoever, (i) hire, offer to hire, or
otherwise entice away any officer, employee, agent or
consultant of the Company or anyone who has served in such capacities during the
most recent 6-month period during Employee's employment (not including external
accountants, counsel or financial advisors), (ii) solicit any persons or
entities with which the Company had contracts or was negotiating contracts
regarding products or services during the one-year period preceding the
termination of Employee's employment, or (iii) induce, suggest, persuade or
recommend to any such persons or entities that they terminate, alter or refrain
from renewing or extending, their relationship with the Company or become a
client of Employee or any third party, and Employee shall not himself and shall
not knowingly induce or permit any other person to approach any such person or
entity for any purpose. Should Employee become aware that any other employee or
third party has engaged in such conduct, Employee agrees to immediately advise
the Company of the circumstances of any such conduct.
5. Restrictive Covenant. Employee acknowledges that his employment with the
Company will enable him to obtain knowledge about the computer software the
Company develops or uses, as well as of the entertainment and other fields in
which the Company does business, and will also enable him to form certain
relationships with individuals and entities in the geographic area in which the
Company furnishes its services. Employee further acknowledges that the goodwill
and other proprietary interests of the Company will suffer irreparable and
continuing damage in the event Employee enters into competition with the Company
within three (3) years subsequent to the termination of his employment.
Therefore, Employee agrees that during the term of his employment and for a
period of three (3) years thereafter, regardless of the cause of the termination
of Employee's employment, he will not, without prior written consent of the
Company, engage directly or indirectly in any conduct, activity, or business
whatsoever which would provide revenue to Employee or to any third party, with
any person or entity manufacturing, distributing or supplying a product or
service competing with the Company's products or services material to the
Company's business as of the date of Employee's termination; provided, however,
that nothing herein shall prohibit Employee from owning less than five (5)
percent of the capital stock of a publicly traded company. Employee further
acknowledges that his employment with the Company constitutes fair and adequate
consideration for his agreement not to engage in such conduct within three (3)
years of the termination of his employment, regardless of the cause of such
termination. Employee further agrees that should the Company, in its sole
discretion, determine that it is desirable or appropriate to make any payment to
Employee upon termination of employment ("Severance Pay"), such
Severance Pay shall be deemed additional consideration for Employee's binding
obligation not to engage in such conduct during the three (3) year period.
However, and notwithstanding any other provision of this Agreement, it is
understood and agreed by the Company and Employee that any decision made by the
Company regarding Severance Pay, regardless of whether termination occurs with
or without cause, shall in no way discharge or release Employee from the
obligation not to engage in such conduct during the three (3) year period.
In the event that during the period of two years following the
Effective Date, the price of the Common Stock of the Company remains at or above
$9.00, $10.00, $11.00 or 12.00 per share for 25 trading days out of a period of
30 consecutive trading days, the non-compete period of three years shall be
reduced by three (3) months, six (6) months, nine (9) months or twelve (12)
months, respectively. At any time Employee may elect to reduce the non-compete
period to two years by transferring to the Company 160,000 shares of Common
Stock of the Company.
6. Work Product. Employee agrees that, during the term of his employment
with the Company:
6.1 He will disclose promptly and fully to the Company all works of
authorship, inventions, discoveries, improvements, designs, processes, software,
or any improvements, enhancements, or documentation of or to the same that he
makes, works on or conceives, individually or jointly with others, in the course
of his employment by the Company or with the use of the Company's time,
materials or facilities, in any way related or pertaining to or connected with
the present or anticipated business, development, work or research of the
Company or which results from or are suggested by any work he may do for the
Company and whether produced during normal business hours or on personal time
(collectively, the "Work Product").
6.2 All Work Product of Employee shall be deemed to be "work made
for hire" within the meaning of { 101 of the Copyright Act and all rights to
copyright shall be vested entirely in the Company. If for any reason the Work
Product is deemed not to be "work made for hire," and its rights to copyright
are thereby in doubt, this Agreement shall constitute an irrevocable assignment
by Employee to the Company of all right, title and interest in the copyright of
all Work Product created under this Agreement. The parties intend that any and
all copyright and other intellectual property rights in the Work Product,
including, without limitation, any and all rights of whatever kind and nature
now or hereafter to distribute and reproduce such Work Product in any and all
media throughout the
world, are the sole property of the Company. Employee hereby agrees to assist
the Company in any manner as shall be reasonably requested by the Company to
protect the Company's interest in such copyright and/or other intellectual
property rights, and to execute and deliver such legal instruments or documents
as the Company shall request in order for the Company to register the Company's
worldwide copyright in the Work Product with the U.S. Copyright Office and to
register and protect the Company's copyright or other intellectual property
rights in the Work Product throughout the world. Likewise, Employee hereby
agrees to assist the Company by executing such other documents and instruments
which the Company deems necessary to enable it to evidence, perfect and protect
its right, title and interest in and to the Work Product.
6.3 Employee shall make and maintain adequate and current written
records and evidence of all Work Product, including drawings, work papers,
graphs, computer records and any other document which shall be and remain the
property of the Company, and which shall be surrendered to the Company upon
request and upon the termination of Employee's employment with the Company,
regardless of cause. The provisions of this section and the term Work Product as
used herein do not apply to any invention for which no equipment, supplies,
facilities or confidential, proprietary or trade secret information of the
Company was used, and which was developed entirely on Employee's own time, while
not on the Company's business premises, and which does not relate to the
Company's business, unless: (i) the invention relates to the Company's actual or
demonstratively anticipated research development or (ii) the invention results
from any work performed by Employee for the Company.
7. Enforcement. The breach or threatened breach by Employee of any of the
provisions of this Agreement shall: (i) constitute cause for the termination of
Employee's employment and (ii) entitle the Company to seek a permanent
injunction or other injunctive relief in order to prevent or restrain any such
breach or threatened breach by Employee or his partners, agents,
representatives, servants, independent contractors, or any and all persons or
entities directly or indirectly acting for or with Employee. The rights and
remedies of the Company under this Agreement shall be in addition to and not in
limitation of any of the rights, remedies, and monetary or other damages or
redress available to it at law or equity.
8. Acknowledgment. Employee acknowledges that he has carefully read and
considered the provisions of this Agreement, and having done so, agrees that the
restrictions set forth are fair and reasonably required for the protection of
the interests of the Company. In the event that, notwithstanding the foregoing,
any part of the covenants set forth shall be held to be invalid or
unenforceable, the remaining parts thereof shall nevertheless continue to be
valid and enforceable as though the invalid or unenforceable parts had not been
included therein. In the event that any provision of this Agreement shall be
declared by a court of competent jurisdiction to be unreasonable or
unenforceable, the court shall enforce the provision in a way which it deems to
be reasonable and enforceable.
9. Survival. This Agreement shall survive any termination of Employee's
employment, whether or not for cause.
10. The Company Defined. As used in this Agreement, the term "the Company"
includes the Company, any assignee or other successor in interest of the
Company, and any parent, subsidiary, or other corporation or partnership under
common ownership or control with the Company.
11. Notices. All notices in accordance with this Agreement shall be in
writing and given by hand delivery, overnight express delivery, or certified
U.S. mail, return receipt requested, and properly addressed to the party for
whom it is intended at the following addresses or such other address as is most
recently noticed for such party:
If to the Company: Alliance Entertainment Corp.
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx,
Co-Chairman
If to Employee: Xxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxxxx & Xxxxxxxx
2121 Avenue of the Stars
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
12. Miscellaneous. This Agreement is legally
binding on both Employee and the Company and benefits their successors and
assigns. This Agreement is only assignable by the Company to the same extent as
is set forth in Section 7.10 of the Employment Agreement dated as of August 15,
1996 and the Xxxxxxxx.Xx may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. It represents the parties' entire understanding regarding the
subject matter of this Agreement and supersedes any and all other prior
agreements regarding the same subject matter. The terms and provisions of this
Agreement cannot be terminated, modified, or amended except in a writing signed
by the party against whom enforcement is sought. This Agreement shall be
construed in accordance with the laws of the State of New York, and any suit,
action or proceeding arising out of or relating to this Agreement shall be
commenced and maintained in any court of competent subject-matter jurisdiction
in the State of New York, with exclusive venue in New York County. In any suit,
action or proceeding arising out of or in connection with this Agreement, the
prevailing party shall be entitled to an award of the amount of attorneys' fees
and disbursements actually billed to such party, including fees and
disbursements on one or more appeals.
13. No Guarantee of Employment. Nothing in this Agreement shall be
interpreted or construed to be a guarantee of ongoing employment, or to
otherwise limit the Company's right to terminate Employee's employment at any
time.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
EMPLOYEE: ALLIANCE ENTERTAINMENT CORP.
/s/Xxxxx Xxxxxx /s/Xxxx X. Xxxxxx
------------------------- -------------------------
(signature) (signature)
Xxxxx Xxxxxx Xxxx X. Xxxxxx
------------------------ -------------------------
(name printed) (name printed)
President & Vice Chairman
-------------------------
(title)
EXHIBIT B
ALLIANCE ENTERTAINMENT CORP.
1996 RESTRICTED STOCK PLAN
1. Purpose. The purpose of the Alliance Entertainment Corp. (the "Company")
1996 Restricted Stock Plan (the "Plan") is to provide incentive to certain
employees of the Company to remain in the employ or service of the Company and
its present and future subsidiary corporations and affiliates ("Subsidiaries"),
to encourage ownership of shares in the Company by such employees and to provide
additional incentive for such employees to promote the success of the Company's
business.
2. Effective Date of the Plan. The Plan shall become effective on the
earlier to occur of: (i) the date of approval of the Plan by the Board of
Directors of the Company (the "Board"); and (ii) the date of commencement of
employment as Chief Executive Officer ("CEO") of Xxxxx X. Xxxxxx (the "Effective
Date").
3. Stock Subject to Plan. 500,000 of the authorized but unissued shares of
common stock, $.0001 par value (the "Common Stock"), of the Company are hereby
reserved for issuance under the Plan; provided, however, that the number of
shares so reserved may be reduced to the extent that the total of the Tranche 1
Shares and the Tranche 2 Shares (as hereinafter defined) available for
distribution is less than 500,000. The shares available for distribution by the
Plan are hereinafter referred to as "Restricted Shares."
(a) Tranche 1. If, at any time during the period from the
Effective Date to the second anniversary of the Effective Date, the price of the
Common Stock remains at or above the Target Prices indicated on the schedule
below for any 25 trading days out of a period of 30 consecutive days, then the
corresponding percentage of 250,000 shares of Common Stock shall become
available for distribution (the "Tranche 1 Shares") by the Plan.
Target Price % of Tranche 1 Stock
$ 9.00 25.00%
$ 9.25 31.25%
$ 9.50 37.50%
$ 9.75 43.75%
$ 10.00 50.00%
$ 10.25 56.25%
$ 10.50 63.50%
$ 10.75 69.75%
$ 11.00 75.00%
$ 11.25 81.25%
$ 11.50 87.50%
$ 11.75 93.75%
$ 12.00 100.00%
(b) Tranche 2. If, at any time during the period from the
Effective Date to the fourth anniversary of the Effective Date, the price of the
Common Stock remains at or above the Target Prices indicated on the schedule
below for any 85 trading days out of a period of 90 consecutive trading days,
then the corresponding percentage of 250,000 shares of Common Stock shall become
available for distribution (the "Tranche 2 Shares") by the Plan.
Target Price % of Tranche 2 Stock
$ 13.00 50.00%
$ 13.50 56.50%
$ 14.00 62.50%
$ 14.50 68.75%
$ 15.00 75.00%
$ 15.50 81.25%
$ 16.00 87.50%
$ 16.50 93.75%
$ 17.00 100.00%
(c) Change of Control. In the event of a Change of control of
the Company, all of the Tranche 1 Shares and the Tranche 2 Shares not previously
available for distribution shall become immediately available for distribution
by the Plan. As used herein, "Change of Control" shall mean (i) the acquisition
of all or substantially all of the assets of the Company, (ii) the acquisition
by any party (or group, as such term is defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) not currently a holder of more than
5% of the outstanding Common Stock of the Company of more than 50% of the
outstanding Common Stock of the Company, (iii) any merger, combination,
consolidation or similar transaction involving the Company following which the
holders of Common Stock of the Company immediately prior to such transaction
will not own more than 50% of the Common Stock of the Company.
(d) Adjustments. In the event that the Company shall at any
time (i) subdivide (by any stock split, stock dividend or otherwise) one or more
classes of its outstanding Common Stock into a greater number of shares of
Common Stock, (ii) combine (by reverse stock split or otherwise) one or more
classes of its outstanding Common Stock into a smaller number of shares or (iii)
pay any extraordinary cash dividend on one or more classes of its outstanding
Common Stock; then the number of shares subject to the Plan and the target
prices shall be proportionately adjusted.
4. Administration and Eligibility. The CEO shall allocate, in his sole and
absolute discretion, the Restricted Shares subject to the Plan to any employee
or employees of the Company, including himself, on the terms and conditions set
forth herein; provided, however, that no Restricted Shares shall be delivered
until such shares become available for distribution by the Plan pursuant to the
terms hereof. The CEO shall also have authority to interpret the Plan and to
prescribe, amend and rescind rules and regulations relating to it. Any
determination by the CEO in carrying out, administering or construing the Plan
shall be final and binding for all purposes and upon all interested persons and
their respective heirs, successors and personal representatives.
5. Registration. The issuance by the Company of the Shares shall be
registered by the Company under the Securities Act of 1933 on an effective
registration statement as promptly as reasonably practicable following the
adoption of the Plan, which registration statement shall be maintained in effect
for not less than 5 years after the Effective Date.
6. Restrictions. (a) The Restricted Shares shall be subject to such
restrictions, if any, as the CEO shall determine in his sole discretion,
including but not limited to, vesting schedules and provisions relating to
forfeiture.
(b) The employee receiving Restricted Shares shall (i) agree that
such employee's Restricted Shares shall be subject to, and shall be held by him
or her in accordance with all of the applicable terms and provisions of, the
Plan, and (ii) agree that the Company may place on the certificates representing
the Restricted Shares or new or additional or different shares or securities
distributed with respect to the Restricted Shares such legend or legends as the
Company may deem appropriate and that the Company may place a stop transfer
order with respect to such Restricted Shares with the Transfer Agent(s) for the
Common Stock.
(c) Any Restricted Shares that are forfeited by the Participant
shall become immediately available for reallocation and redistribution under the
Plan.
(d) Restricted Shares issued under the Plan must be held for not
less than six months from the date of issue unless the allocation and
distribution of such shares has been approved by the Board or a Committee of the
Board consisting solely of two (2) or more non-employee members of the Board.
7. Expenses of Administration. All costs and expenses incurred in the
operation and administration of the Plan shall be borne by the Company.
8. No Employment Right. Neither the existence of the Plan nor the
allocation of any Restricted Shares hereunder shall require the Company to
continue any Participant in the employ of the Company or any Subsidiary.
9. Amendment of Plan. The Company shall, at any time and from time to time,
at the request of the CEO, make such modifications of the Plan as it shall deem
advisable. No amendment of the Plan may, without the consent of the Participants
to whom any Restricted Shares shall theretofore have been allocated, adversely
affect the rights or obligations of such Participants with respect to such
Restricted Shares. The CEO may, in his discretion, cause the restrictions
imposed in accordance with the provisions of Section 6 hereof with respect to
any Restricted Shares to terminate, in whole or in part, prior to the time when
they would otherwise terminate.
10. Expiration and Termination of the Plan. The Plan shall terminate the
day after the fourth anniversary of the Effective Date; provided, however, that
such termination shall not, without the consent of the Participants to whom any
Restricted Shares shall theretofore have been allocated, adversely affect the
rights or obligations of such Participants with respect to such Restricted
Shares.
11. Governing Law. The Plan shall be governed by the laws of the State of
New York applicable to agreements made and to be performed wholly therein.
Alliance Entertainment Corp.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
August 26, 1996
Xx. Xxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Dear Al:
Reference is hereby made to the Employment Agreement dated as of August 15,
1996, (the "Employment Agreement") between Alliance Entertainment Corp.
("Alliance") and you. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Employment Agreement.
Alliance and you desire to clarify certain provisions of the Employment
Agreement, including, without limitation, the Restricted Stock Plan attached as
Exhibit B thereto (the "Plan").
Accordingly, in consideration of our mutual agreements and obligations,
Alliance and you hereby agree as follows:
1. The "Effective Date" for all purposes of the Plan shall be deemed to be
the Effective Date as such term is defined in the Stock Acquisition and Merger
Agreement dated as of August 15, 1996, (the "Acquisition Agreement") among you,
Xxxxxxxxxxx & Co., Inc., U.S. Equity Partners, L.P., U.S. Equity Partners
(Offshore), L.P., Red Ant Box, Inc., Alliance, and Alliance Acquisition Co.,
Inc.
2. Alliance confirms (i) that the references to "the exhibits hereto," the
"agreements referenced herein" and "the transactions contemplated by the
Agreement" contained in the representations and warranties in Section 6 of the
Acquisition Agreement include the Plan and (ii) that such representations and
warrranties are true and correct as they apply to the Plan.
3. Alliance hereby represents and warrants that upon the issuance of any
shares of Common Stock of the Company pursuant to the Plan, and pursuant to the
Stock Option Agreement between the Company and you dated as of August 15, 1996,
such shares will be duly and validly issued, fully paid, and nonassessable.
4. This Letter Agreement may be executed in one or more counterparts, each
of which shall be an original, but all of which, taken together, shall
constitute one agreement.
Very truly yours,
ALLIANCE ENTERTAINMENT CORP.
By:/s/ Xxxxxxxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxxxxxxx X. Xxxxx
Title: Senior Vice President, General
Counsel, and Assistant Secretary
ACCEPTED AND AGREED:
/s/Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
