EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 10th day of November, 1997, by and between
Audio Book Club, Inc., a Florida corporation, with offices at 0000 Xxxxxxxxx
Xxxxxxxxx, X.X., Xxxxx 000, P.O. Box 5002, Boca Raton, Florida 33431-0802 (the
"Company"), and Xxxx X. Xxxx, residing at 000 Xxx Xxxx Xxxx, Xxxxxxxxx, Xxx
Xxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the audio book club business; and
WHEREAS, the Company desires to employ the Executive; and
WHEREAS, the Executive is willing to commit himself to serve and to
establish a minimum period during which he will serve the Company on the terms
and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained and intending to be
legally bound hereby, the parties agree as follows:
1. Recitals. The Whereas clauses recited above are hereby incorporated
by reference as though they were fully set forth herein.
2. Employment. The Company shall employ the Executive and the
Executive shall serve the Company, on the terms and conditions set forth
herein.
3. Term. The employment of the Executive by the Company as provided in
paragraph 2 shall commence on the effective date of this Agreement and end
on the second (2nd) anniversary of the effective date, subject, however, to
the other termination provisions contained herein.
4. Position and Duties. The Executive shall be employed by the Company
as an Executive Vice President and Chief Financial Officer. His power and
authority shall be and remain subject to the direction and control of the
Board of Directors and all officers senior to him including but not limited
to the Chief Operating Officer Xxxxxxx Xxxxxxx and the Chief Executive
Officer Xxxxxx Xxxxxxx. The Executive shall have responsibility for the
financial oversight of the business and affairs of the Company, including
without limitation responsibility for all filings with the
Securities and Exchange Commission, the Internal Revenue Service and all
other agencies (federal, state or local) and/or stock exchanges to which
the Company must report, subject to appropriate review and approval of the
Board of Directors and senior officers and such further revisions as the
Executive deems necessary. The scope of his duties and the extent of his
responsibilities shall be substantially the same as the duties and
responsibilities of other chief financial officers of public companies. The
Executive shall be required to spend his full time and attention, without
other outside business interests, in the performance of his duties and the
Company's business and affairs.
5. Compensation and Related Matters.
(a) Salary. During the term of this Agreement, the Company shall pay to the
Executive, as compensation for his services, an initial annual salary of
$135,000 in equal monthly installments during the first year of the term of this
Agreement; and $150,000 during the second year of the term of this Agreement. In
addition, the Executive may receive a performance-based bonus to be determined
by the Chief Executive Officer in his sole and absolute discretion with a
minimum bonus at the end of year one, provided the Executive is still employed
by the Company at that time, of Seven Thousand Five Hundred and 00/100 U.S.
Dollars ($7,500.00) and a minimum bonus at the end of year two, provided the
Executive is still employed by the Company at that time, of Twelve Thousand Five
Hundred and 00/100 U.S. Dollars ($12,500.00); such bonuses shall be paid within
forty-five (45) days after the end of each year.
(b) Expenses. The Executive shall receive prompt reimbursement for all
reasonable travel and business expenses in connection with services performed
hereunder in accordance with normal Company policy, as the same may be
determined from time to time.
(c) Insurance and Employee Benefits. The Executive shall receive insurance
and employee benefits applicable to all officers of the Company. In addition,
the Executive shall be reimbursed for reasonable costs associated with up to
twenty-four (24) hours of continuing education courses with respect to topics
germane to his duties, including reasonable local travel costs to attend such
courses and reasonable fees for such courses. In addition, the Company will
reimburse the Executive for his dues to the AICPA and ISCPA and subscriptions to
the Wall Street Journal, Business Week, Forbes Magazine and America Online. The
Executive will be provided with a portable computer, cellular phone and pocket
electronic organizer at the Company's expense.
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(d) Vacation. The Executive shall receive, prorata during each full year of
his employement, three (3) weeks paid vacation approved one (1) month in
advance. The Executive will make every effort to schedule the vacation time at a
time most convenient for the Company, with the Company recognizing that the
Executive's flexibility is limited by school calendars. Notwithstanding the
foregoing, the Executive shall not be entitled to vacation during the three (3)
week period prior to the date on which the Company's Annual Report on Form
10-KSB (or Form 10-K) or Quarterly Report on Form 10-QSB (or Form 10-Q) are
required to be filed with the Securities and Exchange Commission. In addition,
the Executive will receive normal Company holidays, plus two (2) days off for
Rosh Hashanah and one (1) day off for Yom Kippur unless such holy days fall on a
weekend.
(e) Stock Options. The Executive will receive stock options to acquire
thirty thousand (30,000) shares of Common Stock in the Company pursuant to and
in accordance with the Company's Stock Option Plan. Options with respect to ten
thousand (10,000) shares shall vest at the end of year one, provided that the
Executive is an employee of the Company at that time and options with respect to
twenty thousand (20,000) shares will vest at the end of year two, provided that
the Executive is still employed by the Company at that time. Such options shall
be exercisable at a price per share equal to one hundred ten percent (110%) of
the public offering price of the Common Stock in the initial public offering,
which was completed on October 27, 1997, and will be on the terms and conditions
as more specifically provided for in the Company's Stock Option Plan.
6. Termination by the Company. The Executive's employment hereunder may be
terminated by the Company without any breach of this Agreement only under the
circumstances described below.
(a) Death. The Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of the Executive's incapacity due to
physical or mental illness, as determined by a physician mutually chosen by the
Executive and the Company, the Executive shall have been absent from his duties
hereunder for a consecutive period of forty-five (45) days and after notice of
termination is given (which may be given before or after the end of such 45 day
period but which will in no event be effective until, at the earliest, the day
following the forty-fifth day of the period) shall not have returned to the
performance of his duties hereunder, as
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that concept is contemplated in this Agreement, within ten (10) days after the
notice of termination is given, the Company may terminate the Executive's
employment hereunder.
(c) Cause. The Company may terminate the Executive's employment under this
Agreement at any time for cause. For purposes of this Agreement, the term
"cause" shall include one or more of the following: (i) willful misconduct, (ii)
continued failure by the Executive to perform his duties, as contemplated in
this Agreement, as Chief Financial Officer (other than through disability as
defined in paragraph 6(b), above), (iii) conviction of a crime or alcohol or
drug abuse, or (iv) the Executive's breach of this Agreement. The termination
shall be evidenced by written notice thereof to the Executive.
(d) Without Cause. In addition to any other rights the Company has to
terminate the Executive's employment under this Agreement, the Company may, at
any time, by a vote of not less than sixty percent (60%) of the directors then
in office (excluding the vote of the Executive if he is also a director),
terminate the Executive without cause upon ninety (90) days' prior written
notice to the Executive setting forth the reasons, if any, for the termination.
For purposes of this Agreement, the term "without cause" shall mean termination
by the Company on any grounds other than those set forth in paragraphs 6(a), (b)
or (c) hereof. It shall also be a termination without cause, at the election of
the Executive, if the Executive is asked to work at a business location of the
Company which is more than fifty (50) miles from Westfield, New Jersey.
Notwithstanding the foregoing, it is understood that travel in connection with
the performance of Executive's duties shall not be deemed to be termination
without cause.
(e) Severance Pay. In the event that the Company has terminated the
Executive's employment under this Agreement (i) "without cause" or (ii) in the
event there is a "Change of Control" (as defined below), then the Executive will
be entitled to receive severance pay equal to fifty percent (50%) of his base
salary for the unexpired period of his two (2) year employment term; such
payment, if any, shall be made to the Executive within thirty (30) days of such
termination of the Executive's employment.
(f) Change of Control. For purposes of this Agreement, a "Change of
Control" shall be deemed to occur, unless previously consented to in writing by
the Executive, and only if the Executive is not offered continued employment,
upon (i) the actual acquisition of fifty percent (50%) or more of the voting
securities of the Company by any company or entity or affiliated group of
companies or entities (other than pursuant to a bona fide underwriting agreement
relating to a public distribution of securities of the Company), (ii) the
completion of a tender or exchange offer for more
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than fifty percent (50%) of the voting securities of the Company by any company
or entity or affiliated group of companies or entities not affiliated with the
Executive, (iii) the completion of a proxy contest against the management for
the election of a majority of the Board of Directors of the Company if the group
conducting the proxy contest owns, has or gains the power to vote at least fifty
percent (50%) of the voting securities of the Company, or (iv) a merger or
consolidation in which the Company is not the surviving entity or a sale of or
substantially all of the assets of the Company.
(g) Change of Control Compensation. In the event of a completion of a
tender or exchange offer for more than fifty percent (50%) of the voting
securities of the Company by any company or entity or affiliated group of
companies or entities not affiliated with the Executive, the stock options,
described in paragraph 5(e), shall immediately be exercisable and any unvested
shall immediately vest.
(h) The Executive shall not be required to mitigate the amount of any
payment provided for in this paragraph 6 by seeking other employment or
otherwise nor shall the amount of any payment provided for in this paragraph 6
be reduced by any compensation earned by the Executive as the result of
employment by another employer or business or by profits earned by the Executive
from any other source at any time before and after the date of termination. The
amounts payable to the Executive under this Agreement shall not be treated as
damages, but as severance pay to which the Executive is entitled by reason of
his employment and the circumstances contemplated by this Agreement.
(i) The severance pay which the Executive will be entitled to receive as a
result of the termination of his employment under this Agreement, shall be the
Executive's exclusive remedy in the event of such termination.
7. Non-Competition and Confidentiality Covenant. The Executive hereby
covenants and agrees that he will not serve as an officer of or perform any
functions for any other company during the term of his employment under this
Agreement, except that the Executive shall be permitted to serve as a board
member of the Israel Histradrut Group Foundation, a not-for-profit entity,
provided serving as a board member for such entity does not interfere with the
performance of the Executive's duties under this Agreement. In addition, during
the term of this Agreement and for a period of two (2) years immediately
following the termination of his employment, whether said termination is
occasioned by the Company, the Executive or a mutual agreement of the parties,
the Executive shall not, for himself or on behalf of any other person, persons,
firm, partnership, corporation or company, engage or participate in any
activities which are in direct or indirect conflict
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with the interests of the Company or solicit or attempt to solicit the business
or patronage of any person, firm, corporation, company or partnership, which had
previously been a customer of the Company, for the purpose of selling products
and services similar to those provided by the Company.
Furthermore, the Executive acknowledges and agrees that: all mailing lists;
customer, member and prospect names; license or arrangement; front-end and
back-end marketing performance; financial statements; operating system, database
and other computer software, specific to the Company; and all information which
is known by the Executive to be subject to a confidentiality agreement or
obligation of confidentiality, even without a confidentiality agreement between
the Company and another person or party, shall be maintained by the Executive in
a confidential manner and the Executive agrees that the Executive will not use
such information to the detriment of the Company or disclose such information to
any third party, except as may be necessary in the course of performing the
Executive's job responsibilities. The Executive further agrees that these
obligations of confidentiality with respect to such information shall continue
after the Executive ceases to be employed by the Company. Disclosure of the
aforementioned information shall not be prohibited if such disclosure is
directly pursuant to a valid and existing order of a court or other governmental
body or agency within the United States; provided, however, that (i) the
Executive shall first have given prompt notice to the Company of any such
possible or prospective order (or proceeding pursuant to which any such order
may result), (ii) the Company shall have been afforded a reasonable opportunity
to review such disclosure and to prevent or limit any such disclosure, and (iii)
the Executive shall, if requested by the Company and at the Company's cost and
expense, use his best efforts to prevent or limit any such disclosure by means
of a protective order or a request for confidential treatment.
The Executive further acknowledges that the Executive will not disclose any
information with respect to the Company, its operations or its officers and
directors, whether or not such information is confidential, to Xxxxxxx Xxxx or
any entity or company in which Xxxxxxx Xxxx has an ownership interest or is a
director, officer or employee or to any attorneys, accountants, agents or
representatives of Xxxxxxx Xxxx or any of the aforementioned companies or
entities.
8. Indemnification. To the maximum extent permitted under the corporate
laws of the State of Florida or, if more favorable, the Articles of
Incorporation and/or By-Laws of the Company as in effect on the date of this
Agreement, (a) the Executive shall be indemnified and held harmless by the
Company, as provided under such corporate laws or such Articles of Incorporation
and/or By-
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Laws, as applicable, for any and all actions taken or matters undertaken,
directly or indirectly, in the performance of his duties and responsibilities
under this Agreement or otherwise on behalf of the Company, provided the
Executive did not act wantonly or recklessly or was not grossly negligent or
engaged in willful misconduct, and (b) without limiting clause (a), the Company
shall indemnify and hold harmless the Executive from and against (i) any claim,
loss, liability, obligation, damage, cost, expense, action, suit, proceeding or
cause of action (collectively, "Claims") arising from or out of or relating to
the Executive's acting as an officer, director, employee or agent of the Company
or any of its affiliates or in any other capacity, including, without
limitation, any fiduciary capacity, in which the Executive serves at the request
of the Company, and (ii) any cost or expense (including, without limitation,
fees and disbursements of counsel) (collectively, "Expenses") incurred by the
Executive in connection with the defense or investigation thereof. If any Claim
is asserted or other matter arises with respect to which the Executive believes
in good faith the Executive is entitled to indemnification as contemplated
hereby, the Company shall, at its election, to be determined in its sole and
absolute discretion, either assume the defense or investigation of such Claim or
matter or pay the Expenses incurred by the Executive in connection with the
defense or investigation of such Claim or matter, provided that the Executive
shall reimburse the Company for such amounts, plus simple interest thereon at
the then current Prime Rate as in effect from time to time, compounded annually,
if the Executive shall be found, as finally judicially determined by a court of
competent jurisdiction, not to have been entitled to indemnification hereunder.
9. Binding Agreement. This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, divisees and legatees. In addition, this Agreement and the
obligations and rights of the Company hereunder shall be binding on any person,
firm or corporation which is a successor-in-interest to the Company.
10. Notice. For the purpose of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally, or by private
overnight courier or mail service, postage prepaid or (unless otherwise
specified) mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
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If to the Executive: To the address at the head of this Agreement
If to the Company: Audio Book Club, Inc.
0000 Xxxxxxxxx Xxxxxxxxx, X.X., Xxxxx 000
P.O. Box 5002
Xxxx Xxxxx, Xxxxxxx 00000-0000
(000) 000-0000
or to such other address as the parties may furnish to each other in writing.
Copies of all notices, demands and communications shall be sent to the home
addresses of all members of the Board of Directors of the Company.
11. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the parties hereto, provided, however, that this Agreement may be modified,
waived or discharged by mutual agreement in writing.
(b) No delay, waiver, omission or forbearance (whether by conduct or
otherwise) by any party hereto at any time to exercise any right, option, duty
or power arising out of breach or default by the other party of any of the
terms, conditions or provisions of this Agreement to be performed by such other
party shall constitute a waiver by such party or a waiver of such party's rights
to enforce any right, option or power as against the other party or as to
subsequent breach or default by such other party, and no explicit waiver shall
constitute a waiver of similar or dissimilar terms, provisions or conditions at
the same time or at any prior or subsequent time.
12. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Florida and any action brought by either party shall be
commenced in the courts of the State of Florida. The Executive and the Company
hereby irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Florida and the United States of
America located in Palm Beach County, Florida for any and all actions, suits or
proceedings arising out of or resulting from or relating to this
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Agreement and the transactions contemplated hereby and the parties agree not to
commence any action, suit or proceeding relating thereto except in such courts.
The parties hereby irrevocably and unconditionally waive any objection to the
laying of venue of any such action, suit or proceeding arising out of, resulting
from or relating to this Agreement or the transactions contemplated hereby in
such courts and hereby further irrevocably and unconditionally waive and agree
not to plead or claim in any such court that such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
13. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
15. Entire Agreement. This Agreement contains the entire understanding of
the Company and the Executive with respect to his employment by the Company.
This Agreement supersedes all prior agreements and understandings whether
written or oral between the Executive and the Company, and there are no
restrictions, agreements, promises, warranties or covenants other than those
stated in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
shown below effective as of the date first written above.
"COMPANY"
Date Signed: 11/19, 1997 AUDIO BOOK CLUB, INC., a Florida
corporation
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Printed Name: XXXXXX XXXXXXX
--------------------------
Title: CEO
---------------------------------
"EXECUTIVE"
Date Signed: 11/19, 1997 /s/ Xxxx X. Xxxx
---------------------------------------
Printed Name: Xxxx X. Xxxx
--------------------------
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AMENDMENT TO EMPLOYMENT AGREEMENT
The Employment Agreement by and between Audio Book Club, Inc. (Company) and Xxxx
X. Xxxx (Executive) is hereby amended to clarify that the term "effective date"
of the Employment Agreement is November 10, 1977 provided that the Executive
shall not be elected to the offices of Executive Vice President and Chief
Financial Officer until January 1, 1998 and prior to such time shall serve as an
employee of the Company and receive compensation during such period at the
annual rate specified in the Employment Agreement prorated for the period
November 10, 1997 through December 31. 1997.
Dated as of November 11, 1997 "COMPANY"
Audio Book Club, Inc. a Florida Corporation
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Xxxxxx Xxxxxxx, CEO
"EXECUTIVE"
/s/ Xxxx X. Xxxx
-------------------------------------------
Xxxx X. Xxxx
