EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this 1st day of
January, 1999, by and between MSH Entertainment Corporation, its affiliates and
subsidiaries (collectively the "Company"), as employer, and Xxxxxxxx X.
Xxxxxxxxx (the "Executive") as a key employee of the Company.
Preliminary Statements:
A. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
B. The Board of Directors of the Company (the "Board") recognizes that
the Executive has contributed to the growth and success of the Company and
desires to assure the Company of the Executive's continued employment and to
compensate him therefore.
C. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention and dedication to the Company.
D. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
Agreements:
NOW, THEREFORE, in consideration of the promises and mutual covenants set forth
herein, the parties agree as follows:
1. Employment.
1.1 General. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the Company, on the terms
and subject to the conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement,
the Executive shall serve as the President, Managing Director and Chief
Operating Officer ("COO") of the Company, and shall diligently perform all the
services as may be assigned to him by the Board, and shall exercise such power
and authority as may from time to time be delegated to him by the Board.
Executive shall have full control over all aspects of Company and will be
entitled to engage in all the activities of the Company's creative and business
activities. The Executive agrees to devote a reasonable amount of his time and
attention to the business and affairs of the Company, render such services to
the best of his ability, and use his best efforts to promote the interests of
the Company.
2. Term.
2.1 Initial Term. The initial term of this Agreement and the
employment of the Executive hereunder shall be for the three (3) year period
commencing on the date of the execution of this Agreement (the "Initial Term"),
unless sooner terminated in accordance with the terms and conditions hereof.
2.2 Renewal Terms. The Initial Term of this Agreement, and the
employment of the Executive hereunder, may be renewed and extended for an
additional two (2) years at the election of Executive and for such additional
periods as may be mutually agreed to by the Company and the Executive in a
written supplement to this Agreement signed by the Executive and the Company
(the "Written Supplement").
Page 2 of 8 pages
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at
the annual rate of One Hundred and Seventy-Five Thousand Dollars ($175,000.00)
(the "Base Salary") during the Initial Term of this Agreement, with such Base
Salary payable, in installments consistent with the Company's normal payroll
schedule, subject to applicable withholding and other taxes. If the term of this
Agreement shall be renewed and extended as provided in Section 2.2 hereof, then
during such renewal term of his employment hereunder the Executive shall be paid
an increased base salary as set forth in the Written Supplement. Such base
salary shall be increased each year the amount of which shall be made as per
mutual agreement of the Executive and Company, to account for cost of living
increases and in no event will the increase be less than prevailing COLA Index
(U.S. Government "Cost of Living Allowance" Index) to account for cost of living
increases and shall be made regardless of any incentive compensation.
3.2 Incentive Compensation.
(a) In addition to the Base Salary, the Executive shall
be entitled to receive annual incentive compensation (the "Incentive
Compensation") based on performance which shall be no less than that of any
other key employee and shall be a percentage of the Company's adjusted gross
profits at the end of each calendar year during the term of the Executive's
employment hereunder.
(b) For purposes of this Agreement, the amount of the
Incentive Compensation payable with respect to any calendar year (net of any tax
or other amount properly withheld therefrom) shall be paid by the Company to
Executive upon completion of the year end audited financials which is not to
exceed One Hundred and Twenty Days (120) after the end of the calendar year
provided, however, that any amount paid shall be subject to increase or decrease
based upon the results of review of the financial statements with respect to
such year.
4. Expense Reimbursement and Other Benefits.
4.1 Expense Reimbursement. The Executive shall be entitled to
reimbursement by the Company for all reasonable business expenses incurred by
him in connection with the performance of his duties hereunder, provided
however, that such entitlement is conditioned upon the Executive providing the
Company with appropriate documentation of such expenses in accordance with
Company policy and based on the guidelines currently set for the Company by the
Chief Operating Officer and the Chief Financial Officer of the Company.
4.2 Insurance. The Executive shall be entitled to
participation in all medical, hospitalization, disability and group life
insurance plans, and any and all other employee benefit plans, as are
hereinafter provided by the Company to its executives. Additionally, Executive
shall be provided with a "key man" insurance policy which shall an amount that
is no less than any other key executive of the Company, effective within a
reasonable time after receiving the results of a doctor's physical.
4.3 Vacation. The Executive shall be entitled to four (4)
weeks paid vacation per year in accordance with the Company's prevailing policy
for its executives; provided, however, that in no event may a vacation be taken
when to do so could reasonably be expected to materially and adversely affect
the Company's business.
Page 3 of 8 pages
4.4 Automobile. The Company shall lease, in the Company's
name, an automobile ("Leased Vehicle") for the Executive's use during the term
of this Agreement. The Leased Vehicle shall be comparable to and shall not
exceed the monthly lease payment of Six Hundred and Twenty ($620) a month.
Additionally, Company shall provide a gasoline credit card which shall be used
for fuel related business expenses only, and shall not be used for any repairs
to the Leased Vehicle, that responsibility of the Executive. One monthly parking
space, estimated to be $283 per month, for the Executive shall be provided in an
indoor garage within walking distance to the office, for the term of this
Agreement. All business related tolls shall be reimbursed. In the event
Executive elects not to utilize a "leased vehicle" as outlined above, Company
shall pay Executive an amount equal to above to be utilized towards business
expenses to be determined by the Executive's sole discretion.
4.5 Living Allowance. Executive shall receive a living
allowance ("Living Allowance") commencing on the date of signing this Agreement
in the amount of Sixty Thousand Dollars ($60,000) annually. Said Living
Allowance shall be payable on the first day of each month thereafter in the
amount of Five Thousand Dollars ($5,000.00) per month.
4.6 Corporate Credit Card. The Executive shall be provided
with an American Express Corporate charge card which shall be utilized solely
for Company business with full disclosure written on each customers copy receipt
as to the nature of the business expenditure.
4.7 Board Of Directors. The Executive shall maintain his
position as a member of the Board for the term of the Agreement and shall be
elected to each committee of the Board of Directors. Additionally, Executive
shall be considered key management, responsible for implementing and carrying
out the policies of the Company.
4.8 Stock Options. Executive shall be granted stock options
on the date hereof, the amount pursuant top the Option Agreement hereto and
shall participate in the stock-option plan of the Company whereby additional
stock options may be granted to Executive by the Board of Directors depending
upon the performance of the Executive and the Executive shall be entitled to
receive the maximum level of stock options granted any executive of the Company.
Executive has and shall maintain an Eight Percent Equity (8%) interest in
Company. Executive shall be granted additional options to, on a periodic basis,
maintain this ownership level.
4.9 Liquidity Event. Executive shall be granted a "Liquidity
Event" at least once per year to be able to sell stock as additional
compensation.
4.10 Retirement Fund. Company shall take part in the key man
retirement fund of the Company, which has been instituted for the Executive and
Company shall contribute to and maintain said fund for the duration of
Executive's employment hereunder.
4.11 Director's Insurance. Company shall provide Executive
with Director's and officer's insurance in the minimum amount of Two Million
Dollars ($2,000,000) within ten (10) business days after executing this
Agreement
4.12 Right To Bind. Executive shall be granted signing rights
and approval rights on any and all legal documents and contracts of the Company,
it being agreed that any two (2) of the following individuals be the only
corporate officers allowed to sign for and bind the Company, they being the
Executive, Xxxxxx Xxxxx and Xxxxxxx Xxxxx.
Page 4 of 8 pages
4.12 Check Signing. Executive shall be one (1) of four (4)
executives granted check signing power, the others being Xxxxxx Xxxxx, Xxxx
Xxxxx and Xxxx Xxxxxxx: however, it being agreed to that all checks over Ten
Thousand Dollars ($10,000.00) have dual signatures, one of them being the Chief
Financial Officer of the Company, unless agreed to otherwise.
4.13 Legal Fees. The Company shall pay the legal fees of the
Executive, if any, incurred in connection with this Agreement, it being agreed
by the parties hereto that said legal fees shall not exceed $l0.000.
4.14. Producer. Executive shall be entitled to be a paid
producer, supervising producer and/or executive producer and/or writer fees from
any and all programs that the Executive's services are requested. Said fees
shall be set by the budgetary guidelines for each production and shall not
exceed industry standards and in many cases may be below industry standards. It
is not the intent of the Company to have the Executive produce specific
programs, but only those which the Executive may be requested to produce and/or
executive producer by a broadcaster, distributor, buyer, production partner
and/or joint venture partner.
4.15 Moving Expenses. Company shall pay the moving expenses
of the Executive from Executive's current place of residency to the required
place of residency in New York for the performance of the Executive's duties,
said moving expenses are not to exceed the total sum of Ten Thousand Dollars
($10,000.00). If Executive elects to maintain a residence in both New York and
Los Angeles in conjunction with Executive's duties hereunder, Company shall only
be obligated to move the Executive's belongings, or partial belongings, whatever
the case may be, one time only and to one coast only.
4.16. Major Medical. Executive shall be provided with major
medical insurance unless Executive elects to retain his current insurance
whereby Company agrees to pay for same as long as the amount paid by Company
does not exceed any sum paid for major medical insurance for any senior
executive of the Company. Any amount over and above shall be borne by and be the
responsibility of the Executive.
4.17. Other Benefits. Notwithstanding the foregoing, the
Executive shall be entitled to any additional employee benefits which are no
less favorable than those currently in operation in the Company.
5. Termination.
5.1 Termination For Cause. The Company shall at all times
have the right, upon written notice with a reasonable opportunity to cure any
such breach by the Executive, to terminate the Executive's employment hereunder
for cause (as hereinafter defined). For purposes of this Agreement, the term
"Cause" shall mean (a) a willful breach by the Executive of any of the material
terms or provisions of this Agreement; (b) the charging or indictment of the
Executive in connection with a felony; (c) commission by the Executive of an act
or acts involving fraud, embezzlement, misappropriation, theft, breach of
fiduciary duty or dishonesty against property or personnel of the Company; or
(d) willful or reckless conduct by the Executive which the Board in good faith
determines could reasonably be expected to have a material adverse effect on the
business, assets, properties, results of operations, financial condition or
prospects of the Company. Upon any termination pursuant to this Section 5.1, the
Executive shall be entitled to be paid his Base Salary to the date of
termination and the Company shall have no further liability under this Agreement
(other than for the reimbursement for reasonable pre-approved business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1).
Page 5 of 8 pages
5.2 Disability. The Company shall at all times have the right
upon written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability become unable to perform his duties hereunder
for in excess of ninety (90) calendar days in any twelve (12) month period. Upon
any termination pursuant to this Section 5.2, (a) the Company shall pay to the
Executive (I) immediately any unpaid amounts of his Base Salary accrued through
the effective date of termination plus 12 months base salary, (ii) one year's
living allowance, plus (ii) in accordance with Section 3.2 (b), an amount equal
to the Incentive Compensation, if any, payable to him in respect of the calendar
year in which such termination occurs, prorated for the period of service by the
Executive from the beginning of the calendar year through the date of
termination, and (b) the Company shall have no further liability under this
Agreement (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 4.1).
5.3 Death. In the event of the death of the Executive during
the term of his employment hereunder, (a) the Company shall pay to the estate of
the deceased Executive (I) immediately any unpaid amounts of his Base Salary
accrued through the date of death, (ii) one year's living expenses, plus (ii) in
accordance with Section 3.2(b), an amount equal to the Incentive Compensation,
if any, payable to him in respect to the calendar year of the Company in which
such death occurs, prorated for the period of service by the Executive from the
beginning of such calendar year through the date of his death, and (b) the
Company shall have no further liability under this Agreement (other than for
reimbursement for reasonable pre-approved business expenses incurred prior to
the date of the Executive's death, subject, however, to the provisions of
Section 4.1). All stock ownership rights and stock-options vested at the time of
death shall inure to the Estate of Executive. Heirs of Executive shall have the
same time frame to exercise options as the Executive had, had he been still
living. Said stock, stock-options and/or warrants shall not entitle the heirs of
Executive to any management voting rights in the Company, but all beneficial and
financial rights shall vest in the heirs accordingly.
5.4 Resignation By Executive. Executive is required, and
agrees, to give the Company a two (2) month notice prior to such resignation or
voluntary termination of his employment, the purpose of which is to allow the
Company ample time to locate a senior management replacement for the Executive's
vacant position. Executive shall have the right to terminate for "good cause,"
for example, an occurrence whereby there is a change of control within the
Company and/or the Company defaults on any payment Should the default not be
remedied after a 14 day cure period, Executive shall receive 10% of the Company
as liquidated damages.
6. Restrictive Covenants.
6.1 Non-competition. Except as provided in Section 1.2 and
with the Company's knowledge and acceptance that Executive has an ownership in
other projects previously created prior to the date of this Agreement between
Executive and other third parties, Executive, while employed by the Company and
during the Non-competition Period (as hereinafter defined), the Executive,
except as previously indicated, shall not, directly or indirectly, engage in or
have any interest in any sole proprietorship, partnership, corporation or
business or any other person or entity (whether as an employee, officer,
director, partner, agent, security holder, creditor, consultant or otherwise)
that directly or indirectly engages in any type of entertainment production,
business, marketing, computer or cell animation, graphics, distribution,
producing, writing, directing and/or manufacturing of any type of entertainment
product including, but not limited to, toys, records, videos, CD-ROM and
merchandising items anywhere throughout the universe. For purpose of this
Section 6.1, the term "Non-competition Period" shall mean (a) the Executive's
employment is terminated pursuant to Section 5.4 above, the period beginning on
the effective date of resignation and ending one (1) year thereafter. Because
such mandatory restrictive covenants are being placed on the Executive, the
Company shall pay the Executive's base salary hereunder for a period of twelve
(12) months after termination of employment.
Page 6 of 8 pages
6.2 Nondisclosure. The Executive shall not divulge,
communicate, or use to the detriment of the Company or for the benefit of any
other person or persons, or misuse in any way, any confidential information,
trade secrets, secret information, confidential business information,
proprietary technology, internal financial statements or any and all other
sensitive data now known or hereafter acquired by the Executive with respect to
the business of the Company (which shall include, but not be limited to,
information concerning the Company's financial condition, prospects, customers,
sources of leads, methods of doing business, and the manner of design,
manufacture, financing marketing and distribution of the Company's productions)
shall be deemed a valuable, special and unique asset of the Company that is
received by the Executive in confidence and as a fiduciary, and the Executive
shall remain a fiduciary to the Company with respect to all such information.
6.3 Books and Records. All books, records and accounts
relating in any manner to the business, customers, suppliers or clients of the
Company and all other documents, disks, software or other items containing
confidential information relating to the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately, together
with any copies, to the Company on the termination of the Executive's employment
hereunder, or on the Company's request at any time.
6.5 Ownership of Inventions and Other Developments. Company
shall be entitled to own and control all proprietary technology and all
financial, operating and creative ideas, works, scripts, processes and
materials, including works of expression and copyrights in such works, that are
developed, written, or conceived by Executive during Executive's employment
hereunder to the extent that they relate to Company's current or potential
business. Accordingly, Executive will disclose, deliver, and assign to Company
all such created works, inventions, discoveries, improvements, trade secrets and
all works subject to copyright. Executive agrees to execute all documents,
patent applications, and arrangements necessary to further document such
ownership such ownership and/or assignment and to take whatever other steps may
be needed to give Company the full benefit of them. Executive agrees that all
copyrightable materials generated or developed during the term of this Agreement
shall be considered works made for hire under the copyright laws of the United
States and that they shall, upon creation, be owned exclusively by the Company,
and Company shall be entitled to register and hold in its own name all
copyrights in respect to such materials. In regard to all properties conveyed or
anticipated to be conveyed under this Agreement, in the event Company is
dissolved or unable to meet its obligations under the stock purchase agreement,
then all such works shall revert to Executive and Executive shall have first
right of refusal to purchase all other works owned by Company.
7. Injunction. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. Bankruptcy. In the event of bankruptcy of the Company, Executive
shall have the first right of refusal, along with other key management, to
purchase and acquire the key assets, underlying patents and copyrights owned
and/or held by the Company at fair market value.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
Page 7 of 8 pages
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between and among the Executive, the
Company and/or any of their affiliates with respect to the subject matter
contained herein. Except for the obligation to pay any accrued but unpaid salary
due the Executive, all such prior agreements, understandings and arrangements
for the provision of services by the Executive to the Company and/or any of its
affiliates and the compensation of the Executive in any form shall automatically
terminate upon the consummation of the transactions contemplated by the Purchase
Agreement and each party shall thereupon and thereby, without any further
action, release and forever discharge the other (and the other's affiliates)
from any and all liabilities and obligations of any nature arising out of or in
connection with any and all such prior agreements, understandings or
arrangements. This Agreement may not be modified in any way unless by a written
instrument signed by both the Company and the Executive.
11. Notices. Any notice required or permitted to be given hereunder
shall be deemed given when delivered by hand, by facsimile or three (3) business
days after being deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, (I) if to the Company, to the
address of the Company's principal offices at 000 Xxxx 00xx Xxxxxx, 12th floor,
New York, New York, 10019, (ii) to the Executive, to his address as reflected on
the payroll records of the Company, or to such other address as either party
hereto may from time to time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns, including without limitation, any successor to the Company, whether by
merger, consolidation, sale of stock, sale of assets or otherwise; provided,
however, that under no circumstances may the Executive delegate his employment
obligations hereunder or any portion thereof.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more words, phrases, sentences, clauses
or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
14. Waiver. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
15. Damages; Prevailing Party. Nothing contained herein shall be
construed to prevent the Company or the Executive from seeking and recovering
from the other damages sustained by either or both of them as a result of its or
his breach of any term or provision of this Agreement. If there is any legal
action or proceeding to enforce or interpret any provision of this Agreement or
to protect or to establish any right or remedy of any party, the non-prevailing
party to such action or proceeding shall pay to the prevailing party all costs
and expenses, including reasonable attorney's fees and costs, incurred by such
prevailing party in such action or proceeding, in enforcing its judgment, and in
connection with any appeal from such judgment. Reasonable attorney's fees and
costs incurred in enforcing any judgment or in connection with any appeal shall
be recoverable separately from and in addition to any other amount included in
such judgment. The prevailing party's rights under this Section 14 shall not
merge into any judgment and shall survive until all such fees and costs have
been paid.
16. Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this agreement.
Page 8 of 8 pages
17. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
18. Subsidiaries. All reference to the "Company" in this Agreement,
including but not limited to those in Section 6, shall be deemed to include any
and all of the Company's direct and indirect subsidiaries to the extent the
context may require.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
By:/S/ Xxxxxx X. Xxxxx By:/S/ Xxxxxxxx Xxxxxxxxx
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Company Executive
It's: Chief Executive Officer Xxxxxxxx Xxxxxxxxx
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Print Name Print Name
____________________________ _________________________
Address Address
____________________________ _________________________
Address Address
____________________________ Social Security # _______
