EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("AGREEMENT"), dated as of April 11, 2000,
between XXXXXX.XXX, Inc., a Delaware corporation (the "COMPANY"), and XXXXXX
XXXXXXX (the "EXECUTIVE"):
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to accept such employment, on the terms and conditions set forth herein,
NOW, THEREFORE, in consideration of the mutual promises,
representations and warranties set forth herein, and for other good and valuable
consideration, it is hereby agreed as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts such employment, upon the terms and conditions set
forth herein.
2. TERM. Subject to the provisions of Section 8 hereof, the initial
term of the Executive's employment under this Agreement shall commence on the
date hereof (the "COMMENCEMENT DATE") and shall end on the third anniversary of
the Commencement Date; provided, however, that at the end of the initial term
and each subsequent anniversary thereafter (each, a "RENEWAL DATE"), the term
shall be automatically extended by one (1) additional year unless, at least one
hundred twenty (120) days prior to any such Renewal Date, the Company shall
deliver to the Executive or the Executive shall deliver to the Company written
notice that the term will not be further extended. The initial term of
employment, as the same may be renewed or extended, is referred to herein as the
"TERM".
3. POSITION AND DUTIES. (a) The Executive shall serve as the Chief
Operating Officer of the Company. In his capacity as the Chief Operating
Officer, the Executive shall be in charge of all of the day to day business
operations of the Company and its wholly-owned subsidiary, 32 Records LLC,
including, but not limited to, the hiring of staff, securing facilities, working
with outside consultants, building and developing the Company's software,
developing sales, marketing and strategic relationships, public relations and
investor relations. The Executive shall also provide assistance in analyzing
potential acquisitions and investments by the Company and will participate in
the Company's capital raising activities.
(b) During the Term, the Executive shall perform and discharge the
duties that may be assigned to him by the President and Chief Executive Officer
and Board of Directors of the Company (the "BOARD") from time to time,
consistent with the provisions of Section 3(a) of this Agreement, and the
Executive shall devote his best talents, efforts and abilities to the
performance of his duties hereunder.
(c) During the Term, the Executive shall perform his duties
hereunder on a full-time basis. Notwithstanding the foregoing, the Executive
shall be permitted to continue his outside consulting practice, provided that:
(i) all consulting engagements must be approved by the Board, (ii) no consulting
engagement may be competitive with the business of the Company, and (iii) the
time spent by the Executive on such consulting maters shall not materially
interfere with the performance of his duties hereunder. The Company hereby
approves the service by the Executive as a consultant to E-Superstars. In
addition, the Executive shall, upon the prior written consent of the Board, be
permitted to serve on the board of directors of any outside company or other
entity that is not competitive with the business of the Company.
(d) During the Term, the Company agrees to nominate the Executive
for election to the Board and agrees to use its reasonable commercial efforts to
support the Executive's election to the Board.
4. COMPENSATION. For the Executive's services hereunder, the Company
shall pay the Executive an annual salary equal to the following (as the same may
be increased from time to time, the "BASE SALARY"):
(a) $200,000 in the first year of the Term;
(b) $225,000 in the second year of the Term; and
(c) $250,000 in the third year of the Term.
The Base Salary shall be payable semi-monthly in accordance with the
customary payroll practices of the Company, and shall be subject to such
increases or bonuses as the Board shall authorize in its discretion; provided,
that, if the Board establishes a bonus plan for the executives of the Company,
the Executive shall be entitled to participate therein on the same basis as
other executives.
5. BENEFITS. During the Term, the Company shall provide the Executive
with the following benefits:
(a) STOCK OPTION AGREEMENT AND LOCK-UP. On the date hereof, the
Executive and the Company have entered into a Stock Option Agreement pursuant to
which the Executive has been granted an option to purchase 500,000 shares of the
Company's common stock, $.001 par value per share, at an exercise price of $1.28
per share. In addition, on the date hereof, the Executive has executed and
delivered to the Company a Lock-Up Agreement pursuant to which the Executive is
prohibited from disposing of securities of the company upon the terms therein
set forth until March 31, 2001.
(b) MEDICAL AND HEALTH INSURANCE BENEFITS. The Company shall, at its
own expense, provide the Executive and his eligible dependents with medical,
health and dental insurance coverage generally provided by the Company to its
other executive employees.
(c) 401(K) PLAN. If the Company establishes a 401(k) Plan or other
retirement or pension plan, the Executive shall be entitled to participate in
such plan in accordance with its terms and conditions.
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(d) OTHER BENEFITS. The Company shall make available to the
Executive any and all other employee or fringe benefits (in accordance with
their terms and conditions) which the Company may generally make available to
its other executive employees.
6. REIMBURSEMENT OF EXPENSES. During the Term, the Company shall pay or
reimburse the Executive for all reasonable travel, entertainment and other
business expenses incurred or paid by the Executive in the performance of his
duties hereunder upon presentation of expense statements and/or such other
supporting information as the Company may reasonably require of the Executive.
7. VACATIONS. The Executive shall be entitled to four (4) weeks of paid
vacation during each full calendar year of the Term (and a pro rata portion
thereof for any portion of the Term that is less than a full calendar year).
Unused vacation for one year may be carried over to the next successive year.
8. TERMINATION. The employment hereunder of the Executive may be
terminated by the Company prior to the expiration of the Term only in the manner
described in this Section 8.
(a) TERMINATION BY THE COMPANY FOR GOOD CAUSE. The Company shall
have the right to immediately terminate the employment of the Executive for Good
Cause (as such term is defined herein) by written notice to the Executive
specifying the particulars of the circumstances forming the basis for such Good
Cause.
(b) TERMINATION UPON DEATH. The employment of the Executive
hereunder shall terminate automatically upon his death.
(c) VOLUNTARY RESIGNATION BY THE EXECUTIVE. The Executive shall have
the right to voluntarily resign his employment hereunder for other than Good
Reason (as such term is defined herein) by written notice to the Company.
(d) TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE. The Company shall
have the right to terminate the Executive's employment hereunder without Good
Cause upon ninety (90) days prior written notice to the Executive.
(e) TERMINATION UPON DISABILITY. If the Executive becomes physically
or mentally disabled (a "DISABILITY") during the Term so that he is unable to
perform the services required of him pursuant to this Agreement for a period of
three successive months, or an aggregate of four months in any twelve-month
period (the "DISABILITY PERIOD"), the Company may, at its option, terminate the
Executive's employment hereunder by giving written notice thereof to the
Executive. During the Disability Period, the Executive shall continue to receive
his full compensation and other benefits provided herein.
(f) RESIGNATION BY THE EXECUTIVE FOR GOOD REASON. The Executive
shall have the right to terminate his employment for Good Reason by written
notice to the Company specifying the particulars of the circumstances forming
the basis for such Good Reason.
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(g) TERMINATION DATE. The "Termination Date" is the date as of which
the Executive's employment with the Company terminates. Any notice of
termination given pursuant to the provisions of this Agreement shall specify the
Termination Date.
(h) RESTRICTIVE COVENANTS. For a period of twelve (12) months
following the termination of this Agreement, the Executive shall not, in the
geographic area in which the Company conducts its business (i.e., New York
City), directly or indirectly, as a partner, officer, employee, director,
stockholder, proprietor, other equity owner, consultant, representative, agent
or otherwise, own or operate any business or Person, or otherwise become or be
interested in, or associate with or render assistance to, any Person (other than
the Company), engaged in a business which is in direct competition with the
business of the Company; PROVIDED, HOWEVER, that the foregoing restrictions
shall not apply if the Executive's employment hereunder is terminated pursuant
to paragraph (d) or (f), above. The foregoing shall not, however, prohibit the
Executive from making passive investments.
(i) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "PERSON" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, entity, court or government (or political subdivision or agency
thereof).
(ii) "CHANGE OF CONTROL" with respect to the Company, means the
occurrence of any of the following: (A) the acquisition directly or indirectly
(in one or more related transactions) by any Person (other than the Executive,
Xxxxxx Xxxxxx, Cakewalk LLC or Dylan LLC), or two or more Persons (other than
the Executive, Cakewalk LLC or Dylan LLC) acting as a group, of beneficial
ownership (as that term is defined in Rule l3d-3 under the Securities Exchange
Act of 1934) of more than 20% of the outstanding capital stock of the Company
entitled to vote for the election of directors ("VOTING SHARES"); PROVIDED,
HOWEVER, that the consummation of the transactions contemplated in that certain
Contribution Agreement, dated as of October 29, 1999, between Cakewalk LLC and
the Company shall not constitute a Change of Control for purposes of this
Agreement; (B) the merger or consolidation of the Company with one or more other
corporations as a result of which the holders of the outstanding Voting Shares
of the Company immediately before the merger hold less than 80% of the Voting
Shares of the surviving or resulting corporation; (C) the sale of all or
substantially all of the assets of the Company; (D) the Company or any of its
shareholders enters into any agreement providing for any of the foregoing and
the transaction contemplated thereby is ultimately consummated; or (E)
individuals who as of the date of this Agreement constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of a majority of the
directors then still in office who were directors as of the date of this
Agreement.
(iii) "GOOD CAUSE" shall exist if, and only if, the Executive
(A) willfully or repeatedly fails in any material respect to perform his
obligations hereunder as provided herein, provided that such Good Cause shall
not exist unless the Company shall first have provided the Executive with
written notice specifying in reasonable detail the factors
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constituting such material failure and such material failure shall not have been
cured by the Executive within 30 days after such notice or such longer period as
may reasonably be necessary to accomplish the cure; or (B) has been convicted of
a crime which constitutes a felony under applicable law or has entered a plea of
guilty or nolo contendere with respect thereto.
(iv) "GOOD REASON" means the occurrence of any of the following
events:
(A) the assignment to the Executive of any duties inconsistent
in any material respect with the Executive's then position (including status,
offices, titles and reporting relationships), authority, duties or
responsibilities, or any other action or actions by the Company which when taken
as a whole results in a significant diminution in the Executive's position,
authority, duties or responsibilities, excluding for this purpose any isolated,
immaterial and inadvertent action not taken in bad faith and which is remedied
by the Company promptly after receipt of notice thereof given by the Executive;
(B) a material breach by the Company of one or more provisions
of this Agreement, provided that such Good Reason shall not exist unless the
Executive shall first have provided the Company with written notice specifying
in reasonable detail the factors constituting such material breach and such
material breach shall not have been cured by the Company within thirty (30) days
after such notice or such longer period as may reasonably be necessary to
accomplish the cure;
(C) the Company requiring the Executive to be based at any
location other than within New York, New York, except for requirements of
temporary travel on the Company's business to an extent substantially consistent
with the Executive's business travel obligations existing immediately prior to
the date of this Agreement;
(D) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement;
(E) a Change of Control of the Company, provided that the
Termination Date occurs no later than one year following such Change of Control;
(F) a modification by the Company of the indemnification
provisions set forth in the Company's Certificate of Incorporation or By-laws
that would have a material adverse effect on the protection afforded to the
Executive thereunder; and
(G) Failure of the Company to provide and maintain directors'
and officers' insurance for the Executive to the same extent provided and
maintained for other executives of the Company.
9. OBLIGATIONS OF COMPANY ON TERMINATION. Notwithstanding anything in
this Agreement to the contrary, the Company's obligations upon termination of
the Executive's employment shall be as described in this Section 9, and the
Executive shall not be entitled to any payment or benefit unless specifically
set forth herein.
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(a) OBLIGATIONS OF THE COMPANY IN CASE OF TERMINATION FOR DEATH,
DISABILITY OR FOR GOOD CAUSE. Upon termination of the Executive's employment
upon death, disability or for Good Cause, the Company shall have no payment
obligations to the Executive, except for the payment, within thirty (30) days of
the Termination Date (or such shorter period as may be prescribed by law), of
any accrued and unpaid Base Salary, bonus and the reimbursement of any
unreimbursed expenses owed to the Executive through the Termination Date.
(b) OBLIGATIONS OF THE COMPANY IN THE CASE OF TERMINATION WITHOUT
GOOD CAUSE OR RESIGNATION BY THE EXECUTIVE FOR GOOD REASON. Upon termination of
Executive's employment by the Company without Good Cause or as a result of
Executive's resignation for Good Reason, the Company shall provide the Executive
with the following:
(i) Two times (2x) the sum of Executive's Base Salary and last
year's bonus, if any;
(ii) The Company shall, at its sole expense, provide the
Executive (and his dependents) with coverage under (and in accordance with the
terms and conditions of) the Company's medical and health insurance plans, as in
effect from time to time, for the otherwise remaining duration of the Term;
provided that to the extent such coverage may be unavailable under such medical
and health insurance plans due to restrictions imposed by the insurer(s) under
such plans, the Company shall take such action as may be required to provide
equivalent benefits from other sources;
(iii) The Company shall provide to the Executive, during the
twelve (12) month period commencing on the Termination Date, at the Company's
expense, executive outplacement services (commensurate with such services
customarily utilized by similarly situated persons of the Executive's title or
position).
10. EXCISE TAXES. In the event that any payments made and/or benefits
provided to the Executive under this Agreement (including, without limitation,
the Options) (hereinafter called the "Payments") are subject to any excise
taxes, including, without limitation, excise taxes imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") (the "EXCISE TAXES"),
the Company shall pay the Executive such additional cash payment(s) (hereinafter
collectively called the "GROSS UP PAYMENT") such that the net amount that the
Executive would retain after deduction and/or payment of any Excise Taxes on the
Payments, and any interest and/or penalties assessed by the Internal Revenue
Service with respect to the Excise Taxes, and taking into account the tax
consequences of all additional cash payments made by the Company pursuant to
this Section 10, shall be equal to the aggregate value of Payments. The
determination of whether such Excise Taxes are payable and the amount thereof
shall be based upon the opinion of counsel selected by the Executive and
acceptable to the Company. Any such additional cash payment by the Company shall
be paid by the Company to the Executive in one lump sum cash payment within
thirty (30) days following the date such opinion of counsel is rendered. If such
opinion is not accepted by the Internal Revenue Service, then the Executive
shall determine and notify the Company of the appropriate adjustments in the
Gross Up Payment (taking into account any and all Excise Taxes, interest,
penalties and the tax consequences of all additional cash payments made by the
Company pursuant to this Section 10) and the Company shall pay the Executive the
difference between the final amount of the Gross
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Up Payment and the amount previously paid, if any, to the Executive by the
Company pursuant to this Section 10 (hereinafter called the "ADJUSTMENT
PAYMENT"). Any such Adjustment Payment shall be paid by the Company to the
Executive in one lump sum cash payment within ten (10) days following such
notification.
11. MARKET "STAND-OFF" AGREEMENT. Executive agrees, if requested by an
underwriter or placement agent of the Company, that he will not sell, pledge or
otherwise dispose of any securities beneficially owned by him in the Company for
a period not to exceed 270 days following the effective date of a Registration
Statement filed by the Company with the Securities and Exchange Commission or
the closing of a private placement, as the case may be, PROVIDED, HOWEVER, that
Executive shall only be required to enter into a written stand-off agreement to
the extent and on the same terms and conditions as the other executives of the
Company are required to do so. The Company may impose stop-transfer instructions
with respect to the securities of the Executive subject to the foregoing
restriction until the end of the stand-off period.
12. SEVERABILITY. Should any provision of this Agreement be held, by a
court of competent jurisdiction, to be invalid or unenforceable, such invalidity
or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each other provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
13. SUCCESSORS AND ASSIGNS. (a) This Agreement and all rights under
this Agreement are personal to the Executive and shall not be assignable;
PROVIDED, HOWEVER, that any rights to compensation upon Death or Disability
hereunder shall inure to the benefit of the Executive's heirs, personal
representatives, designees or other legal representatives, as the case may be.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns. Any Person succeeding to the
business of the Company by merger, purchase, consolidation or otherwise may
assume by contract or operation of law the obligations of the Company under this
Agreement.
14. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflicts of laws thereof.
15. NOTICES. All notices, requests and demands given to or made upon
the respective parties hereto shall be deemed to have been given or made three
business days after the date of mailing when mailed by registered or certified
mail, postage prepaid, or on the date of delivery if delivered by hand, or on
the date of delivery by Federal Express or other reputable overnight delivery
service, addressed to the parties at their addresses set forth below or to such
other addresses furnished by notice given in accordance with this Section 15:
(a) if to the Company, to XXXxxx.xxx, Inc., 00 X. 00 Xx., 0xx Xxxxx, Attention:
Xxxxxx Xxxxxx, President, with a copy to Xxxx Marks & Xxxxx LLP, 000 Xxxxx
Xxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxx X. Xxxxxx, Esq. and (b) if to the
Executive, to Xxxxxx Xxxxxxx, 0 Xxxxxxx Xxxxx, Xxx, Xxx Xxxx 00000, with a copy
to Xxxxxxxxxx Helpern Syracuse & Hirschtritt LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attn: Xxxx X. Xxxxxxxxxxx, Esq.
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16. WITHHOLDING. All payments required to be made by the Company to the
Executive under this Agreement shall be subject to withholding taxes, social
security and other payroll deductions in accordance with applicable law and the
Company's policies applicable to employees of the Company.
17. COMPLETE UNDERSTANDING. Except as expressly provided below, this
Agreement supersedes any prior contracts, understandings, discussions and
agreements relating to employment between the Executive and the Company, and
constitutes the complete understanding between the parties with respect to the
subject matter hereof. No statement, representation, warranty or covenant has
been made by either party with respect to the subject matter hereof except as
expressly set forth herein.
18. MODIFICATION; WAIVER. (a) This Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case
of an amendment, by the Company and the Executive or in the case of a WAIVER, by
the party against whom the waiver is to be effective. Any such waiver shall be
effective only to the extent specifically set forth in such writing.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
19. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
20. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, (which may be transmitted by facsimile) each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by the other party hereto.
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IN WITNESS WHEREOF, the Company and the Executive have signed and
delivered this Employment Agreement as of the day and year first above written.
XXXXXX.XXX, INC.
By: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx,
President
/s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
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