EMPLOYMENT AGREEMENT dated as of December , 1998 between Classic Radio
Holding Corp., a Delaware corporation (the "Company"), and Xxxx Xxxxx, an
individual residing at 00 Xxxxxxx Xxx, Xxxxx Xxxxxxxxxx, XX 00000 ("Executive").
BACKGROUND
The Company desires to employ Executive on the terms and conditions set
forth herein, and Executive desires to be so engaged. The capitalized terms used
and not otherwise defined herein shall have the meaning ascribed to such terms
in the Supplemental Agreement of even date herewith among the Company, Audio
Book Club, Inc., a Delaware corporation and parent of the Company ("ABC"), Xxxxx
Xxxxxxx, Inc., an Illinois corporation ("RSI") and Executive (the "Supplemental
Agreement"). In consideration of the covenants and agreements herein contained,
the parties agree as follows:
1. Employment; Acceptance. The Company hereby employs Executive as
President of the Company and Executive hereby accepts such employment with the
Company.
2. Term. The term of Executive's employment with the Company shall commence
on the date hereof and shall continue for a period of three (3) years unless
sooner terminated in accordance with the provisions of Paragraph 6 of this
Agreement (the "Initial Employment Term"); provided, however, that the parties
hereto may mutually agree to extend the Employment Term for an additional two
(2) years (the "Option Term" together with the Initial Employment Term, the
"Employment Term") at a salary rate and on such terms as shall be mutually
acceptable to the parties.
3. Duties and Authority.
3.1. Executive shall devote Executive's full business time and
energies to the business and affairs of the Company, and shall work
exclusively for the Company during the Employment Term. Subject to the
control and direction of the Board of Directors of the Company and the
Chief Executive Officer of the Company, Xxxxxx Xxxxxxx or his successor
(the "CEO"), as set forth herein, Executive agrees to use Executive's best
efforts, skill, and abilities to promote the Company's interests, to work
with other employees of the Company in a competent and professional manner
and generally to promote the interests of the Company. Executive shall
report directly to the CEO.
3.2. Executive shall perform the services normally attributed to
Executive's position or such services as are otherwise reasonably directed
by the Board of Directors of the Company or the CEO, including, without
limitation, (i) having responsibility over all activities relating to the
classic radio products of the Company including any other classic radio
businesses which the Company, its subsidiaries or ABC may acquire, and at
the option of the Company, additional lines of business and products
related to the classic or old-time radio
business including, but not limited to, classic videos and (ii) producing
the Radio Show (collectively, the "Business") and Executive shall advise
ABC, as may be requested from time to time. Notwithstanding anything to the
contrary contained in the Agreement, provided that the Company maintains
the EBITDA thresholds set forth on Schedule 1 hereto and subject to
Paragraph 3.4 below, Executive shall have control over the day-to-day
management of the Business, including (i) employee decisions (including,
without limitation, salary issues within the parameters of the annual
business plan and budget), (ii) sales, marketing and distribution matters,
(iii) implementation of the annual budget, (iv) product development
policies, strategies and implementation, and (v) other operational matters
that arise in the ordinary course of business, so long as such decisions
are made in the best interest of the Company in Executive's reasonable
business judgment and are made at an arms' length basis (items (i) through
(v) being hereafter referred to as the "Operational Matters").
3.3. So long as Executive is employed by the Company, Executive shall
be appointed to, and serve as a member of, the Board of Directors of the
Company.
3.4. Within sixty (60) days after the Merger Date (with regard to the
1999 fiscal year of the Company) and thirty (30) days prior to the end of
the Company's 1999 and 2000 fiscal year (with regard to the 2000 and 2001
fiscal years), Executive shall submit to the Board of Directors for their
review and approval a business plan and detailed budget for each fiscal
year, setting forth in complete detail the Operational Matters for that
year. Any changes to the proposed business plan or budget must be approved
by the Board of Directors. Executive shall have the power to make all
management decisions concerning the Business, as provided in Paragraph 3.2
above, so long as such decisions are reasonably consistent with the
business plan approved by the Board of Directors. Any overages to the
approved budget must be approved by the Board of Directors before such
expenses are incurred by the Company.
3.5. Executive shall be responsible for submitting to Audio Book Club,
Inc. and its accountants on a timely basis all of the information requested
by the officers of Audio Book Club, Inc. and/or such accountants for the
preparation of Audio Book Club, Inc.'s financial statements and reports.
3.6. Executive shall perform his services at the offices located in
Schaumburg, Illinois or at such other place or places as may be mutually
agreed upon by the Company and Executive and subject to reasonable travel
as may be required in connection with performing such services.
3.7. During the Employment Term, Executive shall also serve as
President of the Company's wholly-owned subsidiary, Classic Radio
Acquisition Corp., a Delaware corporation ("Acquisition Corp."), under the
same terms and conditions as provided for herein; provided, however, that
Executive shall serve as President of Acquisition Corp. for no additional
compensation or benefits (other than payment of reasonable business
expenses in accordance with Paragraph 5.2 below), including, without
limitation, severance payments. So long as Executive is employed by
Acquisition Corp., Executive shall be appointed to, and serve as a member
of, the Board of Directors of Acquisition Corp.
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4. Salary.
4.1. The Company shall pay and Executive shall accept a base salary at
the rate of two hundred thousand dollars ($200,000) per year while employed
during the first eighteen (18) months of the Initial Employment Term. The
Company shall pay and Executive shall accept a base salary at the rate of
three hundred thousand dollars ($300,000) per year while employed during
the second eighteen (18) months of the Initial Employment Term. Of
Executive's base salary set forth above, twenty five thousand dollars
($25,000) shall be deemed to be compensation to Executive for his services
in connection with the production of the Radio Show. The balance of
Executive's salary shall be deemed to be compensation for his other
services hereunder.
4.2. All amounts of salary shall be payable in accordance with the
Company's normal payroll practices, which is currently on a monthly basis
in arrears. In no event shall salary be paid less than monthly. All amounts
of salary or other compensation which may become payable hereunder shall be
subject to such withholding as is required by law.
5. Benefits; Expenses.
5.1. Executive shall be entitled to fifteen (15) vacation days per
year during the Initial Employment Term and twenty (20) vacation days per
year during the Option Term, if the Option Term is exercised, in accordance
with the Company's vacation policy. Vacation time shall be taken at such
times as the Company reasonably approves. Executive shall be entitled to
participate in any Executive benefit plan from time to time in effect for
the benefit of Executives and other executives of the Company at a similar
level, including, but not limited to, health insurance, the Company's
401(k) Plan and similar benefits.
5.2. The Company shall pay for or reimburse Executive for reasonable
and necessary out-of-pocket expenses incurred in the course of Executive's
employment against presentation of documentation in accordance with Company
policy.
5.3. The Board of Directors of the Company may, in its sole and
absolute discretion, elect to award Executive a bonus during any year of
the Employment Term.
6. Death; Disability; Termination for Cause; Termination without Cause.
6.1. This Agreement shall terminate immediately upon the death of
Executive.
6.2. If the Company determines in its good faith discretion that
Executive is unable to perform the services required to be performed by
Executive pursuant to the terms of this Agreement by reason of Executive's
physical or mental disability and if the Executive has failed to perform
such services for an aggregate of one hundred twenty (120) days within any
three hundred sixty (360) day period, the Company may terminate Executive's
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employment under this Agreement by giving written notice thereof and
Executive's employment shall terminate upon the date of such notice.
6.3. The Company may terminate Executive's employment for Cause
provided that Amari is given reasonable advance written notice by the
Company of such Cause and, with respect to items (a) and (b) below, such
default shall remain uncured for five (5) days from Amari's receipt of
notice of the matter giving rise to such Cause. "Cause" shall mean (a)
Executive's repeated failure or refusal to perform, observe or otherwise
comply with any reasonable written request or directive of the Board of
Directors of the Company, the CEO of an executive nature or otherwise
consistent with Executive's position under this Agreement; (b) Executive's
failure to devote all of his business time and attention to the business
and affairs of the Company; (c) the wilful misappropriation by Executive of
funds or property of the Company; (d) Executive's use of illegal drugs or
excessive use of alcohol; (e) conviction of Executive in a court of law of,
or Executive entering into a plea of guilty or no contest to, any felony or
crime associated with his employment with the Company or involving moral
turpitude; (f) any breach by Executive of any confidentiality provision set
forth in this Agreement or the confidentiality, non-competition and/or
non-solicitation provisions in the Merger Agreement; or (g) Executive's
commission in bad faith of any act which injures or could reasonably be
expected to injure the reputation, business or business relationships of
the Company. It will be in the sole discretion of the Board of Directors of
the Company whether a default of item (a) or (b) above has been cured by
Executive to the satisfaction of the Board during the five (5) day period
after Executive receives notice thereof; it being understood that Executive
has not waived his rights to claim in an applicable court of law that such
termination was unjustified and that any such determination by the Board of
Directors of the Company was erroneous.
6.4. If at any time during his employment with the Company, Executive
is indicted or formally charged for any crime associated with his
employment with the Company or involving moral turpitude or that may result
in a felony conviction, the Company shall have the right, in its sole
discretion, to suspend all salary and other payments due to Executive
hereunder until there has been a final adjudication of such matter (the
"Suspension Period"). If Executive is convicted of such a crime or enters a
plea of guilty or no contest, then Executive's employment shall be deemed
terminated for Cause as of the date of Executive's indictment or formal
charges for such crime and the Company shall be under no obligation to make
any payments to Executive. If after a final adjudication Executive is not
convicted of such a crime and has not plead guilty or no contest, the
Company shall make a lump sum payment to Executive equal to the payments
which were due and payable by the Company to Executive during the
Suspension Period.
6.5. If this Agreement is terminated pursuant to Paragraph 6.1, 6.2,
or 6.3 hereof, the Company shall be obligated to pay, and Executive or his
estate shall be entitled to receive, accrued salary and reimbursement for
expenses through the date of termination. Rights and benefits, if any, of
the Executive or his estate under any employee benefit plan will be
determined in accordance with the terms and conditions of such plan. In the
event of such a termination, (i) except for the amounts due pursuant to
this Paragraph 6.5, the Company shall have no further liability or
obligation to Executive arising out of Executive's employment and (ii)
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except as provided in Articles IX and X of the Supplemental Agreement, the
Executive shall have no further obligations under this Agreement, subject,
however, to any claim of the Company against Executive arising as a result
of termination by the Company for "Cause" pursuant to Paragraph 6.3.
6.6. Subject to Paragraph 6.7 below, if Executive is terminated
without Cause, Executive shall have the right to receive (i) his unpaid
salary and other payments through the end of the Initial Employment Term
(or the Option Term, if such termination occurs during the Option Term) at
such times as Executive would have been entitled to receive such amounts if
Executive's employment had not been terminated without Cause, and (ii) all
stock and options that Executive is entitled to receive (when and if
earned) under the Supplemental Agreement pursuant to the terms thereof.
6.7. Notwithstanding Paragraph 6.6 above, if EBITDA (as defined and
calculated in accordance with the Supplemental Agreement) for the Company
and its subsidiary, Acquisition Corp., in each of the full calendar years
prior to the date of Executive's termination without Cause exceed,
respectively, $600,000 in 1998 (excluding any earnings attributable to the
Target Companies), $800,000 in 1999 and $1,050,000 in 2000, the Company
shall be obligated to (i) make a lump sum payment to Executive (in lieu of
the payments set forth in Paragraph 6.6 above) equal to the balance of his
salary and other payments due to him under this Agreement for the remainder
of the Initial Employment Term or the Option Term (if such termination
occurs during the Option Period), as the case may be, and (ii) send a
notice to the escrow agent to immediately release to Executive the stock
and options held in escrow pursuant to the terms of the Supplemental
Agreement that Executive would have been entitled to receive after the date
of termination, assuming for this purpose that the highest EBITDA targets
for each year set forth in Section 2.5 of the Supplemental Agreement were
achieved by the Company and Acquisition Corp.
6.8. Nothing contained in this Agreement (and no event of default or
Cause hereunder) shall be deemed to reduce, restrict, limit, or take away
any rights Executive may have to receive any other consideration or
compensation (including cash, stock and options) under any other agreement
between Employee and/or any entities owned or controlled by him, on the one
hand, and Company, Acquisition Corp. and/or ABC, on the other hand.
7. Confidential Information.
7.1. Executive shall, during the Employment Term and at all times
thereafter, treat all Confidential Material (as hereinafter defined) of the
Company or any of the Company's subsidiaries, affiliates or parent entities
(the Company and the Company's subsidiaries, affiliates and parent entities
being hereinafter collectively referred to as the "Company Group")
confidentially. Executive shall not, without the prior written consent of
the Board of Directors of the Company, disclose such Confidential Material,
directly or indirectly, to any party who at the time of such disclosure is
not an Executive or agent of any member of the Company Group, or remove
from the Company's premises any notes or records relating thereto, copies
or facsimiles thereof (whether made by electronic, electrical, magnetic,
optical, laser, acoustic or other means).
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Executive agrees that all Confidential Material, together with all notes
and records of Executive relating thereto, and all copies or facsimiles
thereof in the possession of Executive (whether made by the foregoing or
other means) are the exclusive property of the Company. Executive shall not
in any manner use any Confidential Material of the Company Group, or any
other property of any member of the Company Group, in any manner not
specifically directed by the Company or in any way which is detrimental to
any member of the Company Group.
7.2. For the purposes hereof, the term "Confidential Material" shall
mean information concerning the activities, business or affairs of any
member of the Company Group or any of the customers or clients of any
member of the Company Group or any third party with which the Company has a
contractual relationship of the type which would normally be deemed to be
confidential, including, without limitation, information concerning trade
secrets, sales and financial information, information concerning business
methods, operational processes, products and projects in development,
details of contractual relationships between the Company and any third
party marketing plans or techniques, client and customer lists, mailing
lists, data, databases, software, works in progress, manuals, catalogues,
and price lists, which information is conceived or developed by Executive
alone or with others, or furnished to Executive by any member of the
Company Group or any of its agents, customers or clients, as such, or
otherwise acquired by Executive in the course of Executive's employment
with the Company or the Company's predecessors in interest; provided,
however, that the term "Confidential Material" shall not include
information which (i) becomes generally available to the public other than
as a result of a disclosure by Executive, or (ii) becomes available to
Executive on a non-confidential basis from a source other than any member
of the Company Group or any of its agents, customers or clients, as such,
provided that such source is not bound by a confidentiality agreement with
any member of the Company Group or any of such agents, customers or
clients.
7.3. Promptly upon the request of the Company, Executive shall deliver
to the Company all Confidential Material relating to any member of the
Company Group in the possession of Executive without retaining a copy
thereof.
7.4. In the event that Executive is required, by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process, to disclose any Confidential
Material relating to any member of the Company Group, Executive shall
provide the Company with prompt notice thereof so that the Company may seek
an appropriate protective order and/or waive compliance by Executive with
the provisions hereof; provided, however, that if in the absence of a
protective order or the receipt of such a waiver, Executive is compelled to
disclose Confidential Material not otherwise disclosable hereunder to any
legislative, judicial or regulatory body, agency or authority, or else be
exposed to liability for contempt, fine or penalty or to other censure,
such Confidential Material may be so disclosed, provided such disclosure is
limited to the specific information required to be disclosed. Any
reasonable costs or expenses of Executive in connection with his
cooperation hereunder shall be reimbursed by the Company, provided such
disclosure is not a result of a Cause event.
8. Remedies. The parties hereby acknowledge and agree that the restrictions
set forth in Paragraphs 7 of this Agreement are reasonable and necessary to
protect the
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Company's legitimate business interests. Executive acknowledges that a breach or
threatened breach by Executive of Paragraph 7 may cause the Company irreparable
harm; therefore, the Company shall be entitled, in addition to any other right
and remedy it may have, at law or in equity, to seek an injunction, under such
terms as may be approved by a court of competent jurisdiction, enjoining or
restraining Executive from any violation or threatened violation of Paragraph 7
of this Agreement.
9. Representation and Warranty. Executive represents and warrants to the
Company that Executive is not subject to any non-compete, non-solicitation, or
other restriction which may prevent Executive from performing the services
contemplated by this Agreement and that as of the date hereof, to Executive's
knowledge, Executive does not have any illness or physical or metal disability
that would prevent Executive from performing his services hereunder.
10. Waivers. No waiver by either party of any breach or non-performance of
any provisions or obligations of this Agreement shall be deemed to be a waiver
of any preceding or succeeding breach of the same or any other provision of this
Agreement.
11. Notices. All notices or other communications required or permitted
under this Agreement shall be in writing addressed to the parties at the
addresses set forth below and shall be deemed to be given upon the earlier of
(i) actual delivery by hand, or (ii) three (3) days after being mailed by
registered or certified mail, return receipt requested:
if to the Company, to:
Classic Radio Acquisition Corp.
00 Xxxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx Xxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
and
Audio Book Club, Inc.
0000 Xxxxxxxxx Xxxx., X.X.
Xxxxx 000
P.O. Box 5010
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
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with a copy to:
Frankfurt, Xxxxxx, Xxxxx & Xxxx, P.C.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 212-593-9175
if to Executive, to:
Xx. Xxxx Xxxxx
00 Xxxxxxx Xxx
Xxxxx Xxxxxxxxxx, XX 00000
Telephone No.: 000-000-0000
with a copy to:
Xxxxxxxx & Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
12. Assignment. Executive may not assign this Agreement or any part
thereof, and any assignment in violation of this provision shall be null and
void ab initio. Notwithstanding the foregoing, nothing herein shall preclude one
or more beneficiaries of Executive from receiving any amount that may be payable
following the occurrence of his legal incompetency or his death and shall not
preclude the legal representative of his estate from receiving such amount or
from assigning any right hereunder to the person or persons entitled thereto
under his will or, in the case of intestacy, to the person or persons entitled
thereto under the laws of intestacy applicable to his estate. In the event of an
assignment of this Agreement by the Company, it is understood that the Company
and ABC shall remain liable for the assignee's performance of this Agreement,
unless such assignment is to a public company with a tangible net worth and
gross revenues not less than the tangible net worth and gross revenues of ABC
and its affiliates at the time of the assignment of this Agreement.
13. Severability. In the event that any provision of this Agreement or the
application thereof becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void
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or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
14. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
15. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to its subject matter hereof and may not be amended,
supplemented, canceled, or discharged except by a written instrument signed by
both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CLASSIC RADIO HOLDING CORP.
By: /s/ Xxxxxx Xxxxxxx
---------------------------------
Authorized Officer
/s/ Xxxx Xxxxx
---------------------------------
Xxxx Xxxxx
Solely with respect to Paragraph 3.7 hereof:
CLASSIC RADIO ACQUISITION CORP.
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Authorized Officer
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ABC hereby unconditionally and irrevocably guarantees the full and complete
payment and performance of all duties, obligations, promises, covenants and
undertakings of the Company set forth herein including, without limitation, the
provisions of Paragraph 3.3 hereof.
AUDIO BOOK CLUB, INC.
By: /s/ Xxxxxx Xxxxxxx
---------------------------------
Authorized Officer
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SCHEDULE 1
EBITDA THRESHOLDS
Period EBITDA Threshold*
------ -----------------
January 1, 1998 - December 31, 1998 $700,001**
January 1, 1999 - December 31, 1999 $900,001
January 1, 2000 - December 31, 2000 $1,150,001
* EBITDA shall be calculated in accordance with the terms of the Supplemental
Agreement.
** Includes 1998 EBITDA for Xxxxx Xxxxxxx, Inc. through the Merger Date and
EBITDA for the Company and Classic Radio Acquisition Corp. for the period
beginning on the Merger Date and ending December 31, 1998, which is
attributable to the business of Xxxxx Xxxxxxx, Inc. and such other business
as shall be included in the EBITDA calculation for the fiscal year ending
December 31, 1998 as provided in the Supplemental Agreement.
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