EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of July, 1997, by and among Picture
Vision, Inc. d/b/a Rave Music Group, Inc. having offices at 000 Xxxxx Xxxxxx
Xxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 (the "Company"), Paradise Music
Entertainment, Inc. ("Paradise") and XXX XXXXX, an individual with an address at
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 (the "Executive"). The
Company and Paradise are sometimes collectively referred to herein as the
"Employer."
W I T N E S S E T H:
WHEREAS, the Executive is currently an executive officer of Paradise and
the Company and under an employment agreement ("Prior Employment Agreement")
between Paradise and the Executive, dated as of October 9, 1997.
WHEREAS, the Company, Paradise and the Executive wish to set forth the
terms and conditions of the Executive's employment by the Employer effective as
of July 1, 1997 ("Effective Date") and wish to terminate the Prior Employment
Agreement as of the Effective Date and substituting the terms of this Agreement
therefor as of the Effective Date.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company agrees to employ the Executive for the Term
specified in Section 2 and in the capacities set forth in Section 3 and the
Executive agrees to accept such employment, upon the terms and conditions
hereinafter set forth.
2. Term. This Agreement shall be for a term commencing on the Effective
Date and expire on June 30, 1999 unless otherwise sooner terminated as provided
in this Agreement (the "Term"). This Agreement shall automatically be extended
for additional one year periods unless either party advises the other, in
writing delivered not less than 90-days prior to the expiration of the Term then
in effect, of its intention not to be extend this Agreement. If this Agreement
is so extended, then the "Term" shall also be deemed to include such extensions.
3. Duties and Responsibilities.
(a) During the Term, the Executive shall serve as principal
executive officer of the Company and as Executive Vice President and Director of
Paradise. During the Term, the Executive shall, subject only to the review of
the Board of Directors regarding matters not involving day to day operations or
not otherwise in the ordinary course of business, determine the policies for and
have full control over the normal day to day operations of the Company.
(b) The parties acknowledge that an expenditure by the Company of up
to $100,000 for developmental expenses has been approved by the Board of
Directors of Paradise for the 1998 fiscal year (the "Development Budget").
(c) During the Term, the Executive shall serve on the Executive
Advisory Committee of Paradise, which shall be a committee comprised of the
principal executive officers of each subsidiary or division of Paradise. The
Executive Advisory Committee shall advise the Board of Directors of Paradise on
business matters affecting Paradise, including potential business ventures and
acquisitions. The Executives shall each be entitled to one vote on the Executive
Advisory Committee.
(d) The Executive shall, except as provided in Schedule A, devote
substantially all his business efforts to the affairs of the Employer. Other
permitted business activities of the Executive shall not be competitive and
shall not conflict with the terms of this Agreement. The Executive will (i)
devote his best efforts, skill and ability to promote the Employer's interests;
(ii) carry out his duties in a competent and professional manner; (iii) work
with other employees of the Employer in a competent and professional manner; and
(iv) generally promote the best interests of the Employer. Notwithstanding the
foregoing, the Executive may engage in additional activities if such activities
are approved by a majority of the Board of Directors of Paradise. After such
approval Schedule A shall be amended to include such activities.
4. Compensation.
(a) As compensation for services rendered hereunder and in
consideration of his agreement not to compete as set forth in Section 11 below,
the Company shall pay the Executive during the Term, in accordance with the
Company's normal payroll practices, compensation at an annual rate of $320,000,
subject to adjustment as hereafter provided ( the "Base Annual Draw").
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(i) If, at the end of any fiscal year during the Term, the
Company's Pre-Tax Income excluding the Base Annual Draw is less than the Base
Annual Draw paid to Executive for said fiscal year, then the amount of the Base
Annual Draw paid to Executive which is deemed to be salary for such period shall
be the amount of the Company Pre-Tax Income as computed for such period but in
no event shall the amount of salary be reduced below $150,000..
(ii) The difference between the amount which is deemed to be
salary (i.e., the Company Pre-Tax Income) and the Base Annual Draw actually
received by Executive for such period shall be deemed to be a loan to the
Executive (a "Loan").
(iii) For the next succeeding fiscal year, the Base Annual
Draw for such period shall be reduced to a level equal to the Company Pre-Tax
Income for the previous year, which adjusted Base Annual Draw shall be paid to
the Executive during the course of such fiscal year in accordance with the
Company's normal payroll practices; provided, however, that in no event shall
the adjusted Base Annual Draw or salary paid to Executive be reduced below
$150,000 for any fiscal year.
(iv) In the event that the Company pays to Executive a Base
Annual Draw for any fiscal year at a rate which is below $320,000 and the
Company Pre-Tax Income computed for such fiscal year exceeds the Base Annual
Draw paid during such period, then (A) the Base Annual Draw for the next fiscal
year shall be adjusted up to reflect the new level of Company Pre-Tax Income,
(B) the difference between the Company Pre-Tax Income computed for such period
up to $320,000 and the Base Annual Draw paid over such period shall be promptly
paid to the Executive in cash and (C) the amount of compensation deemed to be
salary to the Executive for such period shall again be the amount of the Company
Pre-Tax Income; provided, however, that in no event shall the adjusted Base
Annual Draw or salary paid to Executive exceed $320,000 for any fiscal year.
(v) Any amounts which are deemed to be Loans to the Executive
(as computed in accordance with subsection (ii) above) shall be repayable by the
Executive to the Company at the end of the third fiscal year following the
fiscal year in which the Loan occurred. Interest on the Loan for the entire
period that it is outstanding shall be charged at the prime rate (in effect on
June 30 of the fiscal year in which the Loan occurred) plus 1%, and such
interest shall be payable quarterly in arrears. All Loans may be prepaid, in
whole or in part, by Executive at any time and from time to time without penalty
of any kind.
For purposes hereof, the term "Company Pre-Tax Income" as computed for any
fiscal year shall mean: The revenues of the Company of every kind and nature;
Less the actual expenses related to the operation of the business of the Company
(which, for the 1998 fiscal year, shall exclude 90% of the expenses actually
incurred in furtherance of the Development Budget approved by the Board for such
fiscal year); Without deduction for items such as income taxes of any kind
attributable to the Company or its operations and Corporate Overhead (as defined
below) all as
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computed in accordance with generally accepted accounting principles
consistently applied as determined by the Company's accountants ("GAAP").
(b) The Executive shall also be entitled to a cash bonus (the
"Company Bonus") equal to 15% of the Company Pre-Tax Income as calculated in
Section 4(a); Less 100%of the expenses actually incurred in furtherance of the
Development Budget approved by the Board for such fiscal year; Less 30% of
Paradise's Corporate Overhead for fiscal 1998 and 25% of Paradise's Corporate
Overhead in each subsequent fiscal year, all as computed in accordance with
GAAP. The term "Corporate Overhead" shall mean (i) all expenses of Paradise
(inclusive of interest charges paid by Paradise but offset by interest income
received by Paradise), (ii) without consideration for income taxes of any kind
attributable to the Company or its operations, and any depreciation related to
the build out of Paradise's corporate headquarters and (iii) exclusive of
"extraordinary items" (as hereafter defined) all as computed in accordance with
GAAP. For purposes hereof, the term "extraordinary items" shall mean all
expenses (in the aggregate amount of $10,000 or more) incurred by Paradise
outside of the normal course of business, including, by way of example and
without limitation, expenses relating to financing, acquisition or divestment
transactions, leasehold improvements, capital expenditures and the like. For
purposes hereof, the good faith determination of the Compensation Committee of
the Board of Directors of Paradise (after consultation with Employers'
accountants) as to which expenses shall be deemed to be "extraordinary items"
shall be binding upon the Executive. It is acknowledged and understood that the
Executive shall have the discretion to allocate some or all of the Company Bonus
to other employees of the Company, Paradise, or any subsidiaries thereof. The
Company Bonus shall be payable promptly after the amount thereof has been
calculated by the Employers' accountants.
(c) The Board of Directors of Paradise shall also establish a bonus
pool (the "Bonus Pool") from which the Compensation Committee of the Board of
Directors of Paradise shall, in its discretion, allocate bonuses to employees of
Paradise, the Company and its other subsidiaries. The Bonus Pool shall be
comprised of not less than 10% of Paradise's consolidated pre-tax income as
determined in accordance with GAAP. Cash awards from the Bonus Pool shall be
payable promptly after the amount thereof has been calculated and allocated by
the Compensation Committee.
(d) Additional compensation may be awarded to the Executive and
other employees of the Company, at the discretion of the Compensation Committee
of Paradise, to reward outstanding performance. Such compensation may include
awards comprising cash, stock, stock options or other forms of compensation.
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(e) The Executive shall be entitled to reimbursement of expenses up
to the amount of $40,000 per annum for business development activities of which
$15,000 per annum shall not require documentation.
5. Benefits.
(a) During the Term, the Executive shall be entitled to participate
in the benefit plans established by the Employer for the benefit of its key
executives.
(b) The Executive shall be entitled to four (4) weeks of paid
vacation.
(c) The Employer shall establish a retirement plan (the "Plan")
qualified under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Plan shall provide for a contribution by the
Employer to the retirement account for Executive established under the Plan of
an amount designated by the Executive up to the maximum amount permitted under
the Plan. Such contribution amount shall reduce the amount of the cash
compensation otherwise to be paid to the Executive under Section 4 for the
fiscal year to which it relates on a dollar for dollar basis.
(d) The Employers, jointly and severally, hereby agree to indemnify,
release and hold harmless the Executive when and if: (i) he is the subject of
any claim or is or becomes a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
administrative, investigative or criminal by reason of the fact that he is or
was an officer, director, employee, consultant or agent to the Employers, or by
reason of any action alleged to have been taken or omitted in such capacity;
(ii) against any and all costs, charges and expenses, including, without
limitation, reasonable attorneys' and other fees and expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by the Executive
in connection therewith and any appeal therefrom if the Executive acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
civil action, suit or proceeding by settlement or consent decree shall not, of
itself, create a presumption that the Executive did not satisfy the foregoing
standard of conduct to the extent applicable thereto.
6. Key Man Insurance. The Employer shall have the right to obtain key man
life insurance for the benefit of the Employer on the life of the Executive. If
requested by the Employer, the Executive shall submit to such physical
examination and otherwise take such actions and execute and deliver such
documents as may be reasonably necessary to enable the Employer to obtain such
life insurance. The Executive has no reason to believe that his life is not
insurable with a reputable insurance company at rates now prevailing in the
City of New York for healthy men of his age.
7. Discharge by Employer. The Employer shall be entitled to immediately
terminate the Term and to discharge the Executive for cause, which shall be
limited to the following grounds:
(a) Conviction of a felony; or
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(b) Commission of a willful or intentional act which could
materially injure the reputation, business or business relationships of the
Employer including the violation of the terms of Sections 10 and 11 hereof;
8. Disability, Death.
(a) If the Executive shall be unable to perform his duties hereunder
by virtue of illness or physical or mental incapacity or disability (from any
cause or causes whatsoever) in substantially the manner and to the extent
required hereunder prior to the commencement of such disability as determined by
a competent medical doctor (all such causes being herein referred to as
"Disability") and the Executive shall fail to have performed substantially such
duties for 90 consecutive days or for periods aggregating 180 days, whether or
not continuous, in any continuous period of one year (such 90th or 180th day to
be known as the "Disability Date"), the Employer shall have the right to
terminate the Executive's employment hereunder as at the end of any calendar
month thereafter upon written notice to him. The Executive shall be entitled to
his Annual Salary for the remainder of the fiscal year in which the Disability
Date occurred plus all bonuses earned through the Disability Date for such
fiscal year. Thereafter for the remaining fiscal year or years, if any, during
the Term, the Executive shall receive compensation at the rate of $150,000 per
annum payable in equal monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
(b) In case of the death of the Executive, this Agreement shall
terminate and the Employer shall be obligated to pay to the Executive's estate
or as otherwise directed by the Executive's duly appointed and authorized legal
representative, the Annual Salary for the remainder of the fiscal year in which
death occurs and all bonuses earned through the date of death for such fiscal
year. Thereafter for the remaining fiscal year or years, if any during the Term,
the Executive's estate shall receive payments at the rate of $150,000 per annum
payable in equally monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
9. Voluntary Termination. If the Executive voluntarily terminates his
employment prior to the end of the Term, he shall only be entitled to receive
compensation accrued through the date of termination; provided, however, that if
Executive voluntarily terminates his employment in accordance with Section 3(e)
or because the Employers, or any of them, have breached this Agreement, then the
Executive shall, in either case, be entitled to receive the compensation payable
to him under Section 3(e) hereof and he shall be released from the restrictions
set forth in Section 11 hereof.
10. Confidential Information. The Executive recognizes that he will
occupy a position of trust with respect to business and technical information of
a secret or confidential nature which is the property of the Employer, or any of
its affiliates, and which has been and will be imparted to him from time to time
in the course of his employment with the Employer. In light of this
understanding, the Executive agrees that:
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(a) the Executive shall not at any time knowingly use or disclose,
directly or indirectly, any of the confidential information or trade secrets
which is the property of the Employer, or any of its affiliates, to any person,
except that he may use and disclose to authorized Employer personnel, licensees
or franchisees in the course of his employment; and
(b) within five (5) days from the date upon which his employment
with the Employer is terminated, for any reason or for no reason, or otherwise
upon the request of the Employer, he shall return to the Employer any and all
documents and materials which constitute or contain the confidential
information or trade secrets of the Employer, or any of its affiliates.
For purposes of this Agreement, the terms "confidential information" or "trade
secrets" shall include all information of any nature and in any form which is
owned by the Employer, or any of its affiliates, and which is not publicly
available or generally known to persons engaged in businesses similar to that of
the Employer, or any of its affiliates. Notwithstanding the foregoing, when the
Executive's employment with the Employer is terminated, for whatever reason, the
limitations provided in this Section 10 shall not prevent the Executive from
using for his own benefit any information which he acquired prior to the
Effective Date.
11. Non-Competition.
(a) The Executive agrees that his services hereunder are of a
special character, and his position with the Employer places him in a position
of confidence and trust with the Employer's artists, clients, customers and
employees. The Executive and the Employer agree that in the course of employment
hereunder, the Executive has and will continue to develop a personal
acquaintanceship and relationship with the Employer's artists, clients and
customers, and a knowledge of those artists', clients' and customers' affairs
and requirements which may constitute the Employer's primary or only contact
with such artists, clients and customers. The Executive consequently agrees that
it is reasonable and necessary for the protection of the goodwill and business
of the Employer that the Executive make the covenants contained herein.
Accordingly, the Executive agrees that while he is in the Employer's employ the
Executive will not, without the prior written consent of the Employer, either
directly or indirectly, or in any capacity whether as a promoter, proprietor,
partner, joint venturer, employee, agent, consultant, director, officer,
manager, equity holder (except as an equity holder holding less than five
percent (5%) of a publicly traded company's issued and outstanding equity
securities, or otherwise) work for, act as a consultant to or own any interest
in any direct competitor of the Employer which operates in or provides services
essentially the same as the Employer in any portion of the geographic territory
where the Employer operates or sells its products or services, except as allowed
pursuant to Section 3(c) of this Agreement. The Executive further agrees that
during the Term, and for the one year period following the Executive's
termination of employment with the Employer, the Executive will not solicit,
entice, induce or persuade: (i) any employee, artist, client or customer of the
Employer; or (ii) any person or entity had been engaged in negotiations with the
Employer to become, an employee, artist, client or customer of the Employer
during the six month period prior to the Executive's termination of employment
with the Employer, to alter, terminate or
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refrain from extending or renewing any contractual or other relationship with
the Employer, or commence a similar or substantially similar relationship with
the Executive, any entity with whom the Executive is affiliated or employed by
or any direct competitor of the Employer. Notwithstanding the foregoing, when
the Executive's employment with the Employer is terminated, for whatever reason,
the Executive may continue to do business, without violating the terms hereof,
with, any customer, client or artist of the Employer which was a customer,
client or artist of the Executive, or any company controlled by the Executive,
prior to the Effective Date.
(b) As used in this Section 11, the term "Employer" shall include
subsidiaries, licensees, sub-licensees and franchisees of the Employer, the
term "customer" shall mean any person or entity who is then, or who had been at
any time during the one year period immediately preceding the date of
termination of the Executive's employment, a customer of the Employer, and the
term "artist or client" shall mean any person or entity who is then, or who had
been at any time during the one year period immediately preceding the date of
termination of the Executive's employment, an artist or client represented by,
signed by, working for or collaborating with the Employer.
(c) The parties hereto agree that the duration and area for which
the covenant not to compete set forth herein is to be effective are reasonable.
In the event that any court determines that the time period or the area, or both
of them, are unreasonable and that such covenant is to that extent
unenforceable, the parties hereto agree that the covenant shall remain in full
force and effect for the greatest time period and in the greatest area that
would not render it unenforceable.
(d) If the Executive commits a material breach or is about to commit
a material breach, of any of the above provisions, the Employer shall have the
right to temporary and preliminary injunctive relief to prevent the continuance
or commission of such breach prior to any hearing on the merits and to have the
provisions of this Agreement specifically enforced by any court having equity
jurisdiction it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Employer. In addition, the Employer
may take all such other actions and remedies available to it under law or in
equity and shall be entitled to such damages as it can show it has sustained by
reason of such breach.
(e) The existence of any claim or cause of action of the Executive
against the Employer, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Employer of those covenants
and agreements.
12. Resolution of Disputes. Any dispute by and among the parties hereto
arising out of or relating to this Agreement, the terms, conditions or a breach
thereof, or the rights or obligations of the parties with respect thereto, shall
be arbitrated in the City of New York, New York before and pursuant to then
applicable commercial rules and regulations of the American Arbitration
Association, or any successor organization. The arbitration proceedings shall
be conducted by a panel of three arbitrators, one of whom shall be selected by
the Employer, one by
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the Executive (or his legal representative) and the third arbitrator by the
first two so chosen. The parties shall use their best efforts to assure that the
selection of the arbitrators shall be completed within 30 days and the parties
shall use their best efforts to complete the arbitration as quickly as possible.
In such proceeding, the arbitration panel shall determine who is a substantially
prevailing party and shall award to such party its reasonable attorneys',
accountants' and other professionals' fees and its costs incurred in connection
with the proceeding. The award of the arbitration panel shall be final, binding
upon the parties and nonappealable and may be entered in and enforced by any
court of competent jurisdiction. Such court may add to the award of the
arbitration panel additional reasonable attorneys' fees and costs incurred by
the substantially prevailing party in attempting to enforce such award.
13. Enforceability. The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same, nor shall it affect any
other party's right to enforce the same, or to enforce any of the other
provisions of this Agreement; nor shall the waiver by either party of the breach
of any provision hereof be taken or held to be a waiver of any subsequent breach
of such provision or as a waiver of the provision itself.
14. Assignment. This Agreement is a personal contract and the Executive's
rights and obligations hereunder may not be sold, transferred, assigned, pledged
or hypothecated by the Executive. The rights and obligations of the Employer
hereunder shall be binding upon and run in favor of the successors and assigns
of the Employer. If any assignment or transfer of rights hereunder is attempted
by the Executive contrary to the provisions hereof, the Employer shall have no
further liability for payments hereunder.
15. Modification. This Agreement may not be canceled, changed, modified or
amended orally, and no cancellation, change, modification or amendment shall be
effective or binding, unless it is in writing, signed by both parties to this
Agreement.
16. Severability; Survival. If any provision of this Agreement is held to
be void and unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement nevertheless shall be binding upon the parties with
the same effect as though the void or enforceable part has been severed and
deleted.
17. Notice. Notices given pursuant to the provisions of this Agreement
shall be sent by certified mail, postage prepaid, or by overnight courier, or by
telex, telecopier or telegraph, charges prepaid, to the following address:
To the Employer: Paradise Music & Entertainment, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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and
Picture Vision, Inc.
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
with a copy to: Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
To the Executive: Xxx Xxxxx
c/o Picture Vision, Inc.
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
18. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
19. No Conflict. The Executive represents and warrants that he is not
subject to any agreement, instrument, order, judgment or decree of any kind, or
any other restrictive agreement of any character, which would prevent him from
entering into this agreement or which would be breached by the Executive upon
his performance of his duties pursuant to this agreement.
20. Entire Agreement. This agreement represents the entire agreement
between the Employer and the Executive with respect to the subject matter
hereof, and all prior agreements relating to the employment of the Executive,
written or oral, are nullified and superseded hereby.
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IN WITNESS WHEREOF, the parties have set their hands and seals on and as
of the day and year first above written.
PARADISE MUSIC & ENTERTAINMENT, INC.
By: /s/ Xxxx Xxxxxxxx
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Name: Xxxx Xxxxxxxx
Title: President
PICTURE VISION, INC.
By:
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Name: Xxx Xxxxx
Title: Principal Executive Officer
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Schedule A
The Executive may devote such time as the Executive deems appropriate, without
adversely affecting the Executive's time devoted to the business of the Company,
to
