EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of June 18, 2001 by and
between Valley Media, Inc., a Delaware corporation (the "Company") and Xxxxxxx
X. Xxxxxxxx ("Executive").
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE 1. EMPLOYMENT
1.1 Employment. The Company hereby employ Executive and Executive agrees to
be employed by the Company, upon the terms and conditions set forth in this
Agreement for the period beginning on the date hereof for an initial term of
one year, and automatically extended from month to month thereafter, unless
terminated as provided in Section 1.5 ("Term").
1.2 Positions and Duties.
(a) During the Employment Period, Executive shall serve as Chief
Financial Officer at its headquarters, and under the supervision and
direction of the Company's Chief Executive Officer.
(b) Executive shall carry out the responsibilities of the position of
Chief Financial Officer as described in the position description for this
job. The position responsibility includes the total financial management
function.
(c) Executive shall devote his best efforts and full business time and
attention (except for permitted vacation periods and periods of illness or
other incapacity as provided for herein) to the business affairs of the
Company and its subsidiaries. Executive shall perform the duties and
responsibilities of his position to the best of his abilities in a
diligent, trustworthy, businesslike and efficient manner. This section
1.2(c) shall not limit Executive from serving on the Board of Directors of
a non-competing company.
(d) Executive will provide his services, when requested, necessary or
appropriate, to negotiate with prospective investors, vendors, employees,
strategic partners, and service providers.
1.3 Salary, Bonus, Options and Benefits.
(a) During the Employment Period, Executive's base salary (the "Base
Salary") shall initially be $175,000.00 per annum, which salary shall be
payable in regular installments in accordance with the Company's general
payroll practices as in place from time to time. Any adjustment in
Executive's compensation shall be determined by the Compensation Committee
of the Board (the "Compensation Committee") in its sole discretion. The
Compensation Committee shall determine, within three months of the signing
of this agreement, an appropriate bonus for Executive's first full year of
employment based upon Company's profits in excess of approximately One
Million Dollars ($1,000,000.00) for fiscal year 2002, as detailed in
Company's annual budget. The amount of the bonus for fiscal year 2002 shall
not be less than $25,000. Executive's bonuses for subsequent years of
employment will be negotiated in advance of each year between the CEO and
Executive, based upon Company's profitability, net sales levels, industry
standards, Company's attainment of its business objectives, and amounts
payable to other executive personnel of Company.
(b) Subject to approval of the Company's Board of Directors, Executive
will be awarded Incentive Stock Options (ISOs) under Section 422 of the
Internal Revenue Code to acquire 50,000 shares of Company's common stock at
an option exercise price equal to the market closing price on the date of
grant.
1
(c) All stock options shall expire if not exercised on or before April
30, 2011, except as provided in Section 1.5 (c), (d), (e), and (f). All
stock to be issued to Executive shall be restricted stock, salable and
tradable only in limited circumstances in Rules 144 and 701 under the
Securities And Exchange Act of 1933.
ISOs granted hereunder shall be subject to the terms and conditions of
Company's ISO Plan, any amendments thereto, and the Company's corresponding
grant to Executive, to the extent not inconsistent herewith.
All options granted to Executive shall vest and be granted at the
following times and in the following amounts: Options to acquire one
thousand forty two (1,042) shares shall vest and be granted on the first
day of the calendar month following the execution of this agreement, and on
the first day of each calendar month thereafter. As provided by the Option
Agreements, all unvested options shall immediately vest in the event of a
Change in Control.
(d) During the Employment Period, Executive shall be entitled to
participate in all of the Company's employee benefit programs for which
senior executive employees of the Company are generally eligible as in
effect from time to time. Executive shall be entitled to three weeks of
paid vacation per year in accordance with the Company's policies. Any
payments of benefits payable to Executive hereunder in respect of any
calendar year during which Executive is employed by the Company for less
than the entire such year shall, unless otherwise provided in the
applicable plan or arrangement or required by applicable law, be prorated
in accordance with the number of days in such calendar year during which
Executive is employed.
(e) All payments of compensation hereunder shall be subject to federal,
state, and other withholding taxes as required by applicable law and the
Company's general payroll policies as in effect from time to time.
1.4 Automobile. The Company shall provide to Executive a leased automobile
of Executive's choice, with a value not to exceed manufacturer's suggested
retail price of $35,000. The Company shall additionally provide all
maintenance and operating costs.
1.5 Term.
(a) The commitment by Executive to be employed under this Employment
Agreement and the Company's commitment to employ Executive subject to
Section 1.1 commences with the execution of this Agreement.
(b) The Employment Period shall end on the first anniversary of the
commencement date (the "Initial Employment Period"), subject to earlier
termination (1) by reason of Executive's death or disability (as defined
below), (2) for Cause (as defined herein), (3) without Cause, or (4) by
written resignation of the Executive. The commencement of the mutual
commitment to employ and to be employed shall be the date of the execution
of this Employment Agreement, subject to the expiration provisions stated
above.
(c) If the Employment Period is terminated without Cause, the Company
shall continue to pay Executive's salary for six (6) months from the date
of the termination. Executive will not continue to accrue vacation or sick
leave. For a period of six (6) months, Executive will continue to receive
medical and dental benefits in the same manner and with the same co-payment
requirements as during his term of employment. Executive shall be entitled,
for thirty (30) days following that termination, to exercise any previously
unexercised stock options Executive shall hold as of the date of
termination. Any options not so exercised shall lapse. In the event
Executive should die during the six month period noted in this subsection,
Executive's heirs will receive any unpaid salary continuation.
(d) If Executive elects to terminate his employment with the Company or
its successor within six (6) months of a Change of Control, as defined
herein, Company or its successor shall continue to pay Executive's salary
and medical and dental benefits for six (6) months. Executive shall be
entitled, for thirty (30) days following that termination, to exercise any
previously unexercised vested stock options Executive shall hold as of the
date of termination. Any options not so exercised shall lapse.
2
(e) If Executive is terminated for Cause, as defined herein, his salary
and benefits will terminate immediately. Any vested but unexercised stock
options that Executive shall hold as of the date of termination shall
lapse.
(f) If Executive resigns, his salary and benefits will terminate
immediately as of the effective date of the resignation. Executive shall be
entitled, for thirty (30) days following that effective date of
resignation, to exercise any vested but previously unexercised stock
options Executive shall hold as of the date of resignation. Any options not
so exercised shall lapse.
(g) Except as expressly set forth in this Section 1.5, all other
compensation and other benefits shall cease to accrue upon termination of
employment.
(h) Automatic Renewal; Renewal Options. Notwithstanding the expiry of
the Initial Employment Period, the Employment Period shall automatically
renew from month to month unless terminated by Company or Executive upon
thirty (30) days written notice prior to such renewal period, or terminated
by the Company at any time during any renewal term with or without cause.
(i) Resignations Upon Termination. Upon termination of the Executive,
Executive shall resign from all corporate offices and directorships, if
any, then held with the Company or any of its subsidiaries or other
affiliates.
1.6 Confidential Information; Company Property. Executive acknowledges that
the information, observations, and data obtained by him while employed by the
Company and its subsidiaries concerning the product, efforts, business, and
affairs of the Company, its subsidiaries and any predecessor to the business
of the Company that are not generally available to the public other than as a
result of breach of this Agreement by Executive ("Confidential Information")
are the property of the Company and its subsidiaries. Executive agrees that he
shall not disclose to any unauthorized person or use for his own account any
Confidential Information without the prior written consent of the Company
unless, and in such case only to the extent that, such matters become
generally known to and available for use by the public other than as a result
of Executive's acts or omissions to act. Notwithstanding the foregoing, in the
event Executive becomes legally compelled to disclose Confidential Information
pursuant to judicial or administrative subpoena or process or other legal
obligation, Executive may make such disclosure only to the extent required, in
the opinion of counsel for Executive, to comply with such subpoena, process,
or other obligation. Executive shall, as promptly as possible and in any event
prior to the making of such disclosure, notify the Company of any such
subpoena, process, or obligation and shall cooperate with the Company in
seeking a protective order or other means of protecting the confidentiality of
the Company Information. Executive shall deliver to the Company at the
termination of the Employment Period, or at any time the Company may
reasonably request, all memoranda, notes, plans, records, reports, computer
tapes and software and other documents and data (and copies hereof)
containing, relating to, or derived from the Confidential Information or the
business of the Company or its subsidiaries which he may then possess or have
under his control. Executive agrees that he will not retain after the
termination of the Employment Period any copies of any Confidential
Information, including, without limitation, any software, documents, or other
materials originating with and/or belonging to the Company or any subsidiary
of the Company.
1.7 Non-Compete; Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with the
Company he will become familiar with the Company's trade secrets and with
other confidential information concerning the Company and its predecessors
and that his services have been and will be of special, unique, and
extraordinary value to the Company. Executive agrees that, during the
period in which Executive is receiving compensation hereunder ("the Non-
Compete Period"), he shall not directly or indirectly own, manage, control,
participate in, consult with, render services for, or in any manner engage
in any business in the United States that is engaged in the sale and/or
distribution of audio or video recordings, irrespective of format. Nothing
herein shall prohibit Executive from being a passive owner of not more than
1% of the outstanding stock of another
3
corporation, so long as Executive has no active participation in the
management or the business of such corporation. Executive acknowledges that
the Company plans to rapidly expand its business and conduct such business
throughout the United States and ultimately throughout the world.
(b) Executive shall not directly or indirectly (1) induce or attempt to
induce any employee of the Company or any subsidiary of the Company to
leave the employ of the Company or such subsidiary, or in any way interfere
with the relationship between the Company or any such subsidiary and any
employee thereof; (2) induce or attempt to induce any customer, supplier,
licensee, or other business relationship of the Company or any subsidiary
of the Company to cease doing business with the Company or such subsidiary,
or in any way interfere with the relationship between any such customer,
supplier, licensee, or business relationship and the Company or any such
subsidiary; or (3) make an oral or written disparaging statement, comment,
or remark about the Company or any of its subsidiaries to any employee,
customer, supplier, licensee, or other business relationship of the Company
or any of its subsidiaries or to or for the intended use of any member of
the press.
1.8 Employment-At-Will. This Agreement constitutes employment-at-will and
that notwithstanding (i) any general or specific policies (whether written or
oral) of the Company relating to the employment or termination of its
employees, (ii) any statements made to the Executive, whether made orally or
contained in any document, pertaining to Executive's relationship with the
Company, or (iii) assignment of Cause by the Company, the Company reserves the
right to terminate the employment of Executive by the Company in which event
Executive's sole remedy shall be to receive certain payments and other
benefits upon the terms and subject to the conditions provided for herein,
from the date of termination to the date of the end of the Employment Period,
as extended.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Executive. Executive represents and
warrants to the Company that:
(a) this Agreement constitutes the legal, valid, and binding obligation
of Executive, enforceable in accordance with the terms, and the execution,
delivery, and performance of this Agreement by Executive does not and will
not conflict with, violate, or cause a breach of or default under any
agreement, contract or instrument, order, judgment or decree to which
Executive is a party or by which he is bound, and
(b) Executive is not a party to or bound by any employment agreement or
non-compete agreement with any other person or entity.
2.2 Representations and Warranties of the Company. The Company hereby
represents and warrants to Executive that the execution, delivery, and
performance of this Agreement by the Company does not and will not conflict
with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which Company is a party or by which
it is bound.
ARTICLE 3. DEFINITIONS
As used in this Agreement, the following terms shall have the definitions
set forth below:
(a) For purposes of the foregoing, "Cause" shall mean (i) indictment or
conviction of any felony or of any crime involving dishonesty; or (ii)
participation in any fraud against the company.
(b) "Disability" shall mean Executive's inability by reason of physical
or mental condition, to substantially perform his normal duties hereunder
for one (1) month or more during any twelve (12) month period determined in
good faith by the Board.
4
(c) "Subsidiary" of an entity shall mean any corporation or other
business organization of which the securities having majority of the normal
voting power in electing the board of directors or similar governing body
entity are, at the time of determination, owned by such entity directly or
indirectly through one or more subsidiaries.
(d) "Change in Control" shall mean 1) the Company shall sell
substantially all of its operating assets, 2) the Company is a party to a
corporate merger or acquisition in which the Company is not the surviving
corporation, or 3) beneficial ownership of a majority of Corporation's
issued and outstanding stock changes in a single transaction or a series of
related transactions.
ARTICLE 4. GENERAL PROVISIONS
4.2 Enforcement. It is the express intention of the parties that this
Agreement be enforced to the fullest extent permitted by applicable law in
order to give full effect to the agreements reached herein. Accordingly, if at
the time of enforcement of Sections 1.6 or 1.7, a court holds that the
restrictions stated herein are unreasonable under the circumstances then
existing, the parties hereto agree that the maximum period, scope, or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope, or area. Because Executive's services are unique and
because Executive has access to Confidential Information, the parties hereto
agree that money damages would be an inadequate remedy for any breach of this
Agreement. In the event of a breach or threatened breach of this Agreement,
the Company, its subsidiaries and their respective successors or assigns may,
in addition to other rights and remedies existing in their favor, apply to any
court of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce, or prevent any violation of, the provisions
hereof (without posting a bond or other security).
4.3 Survival. Sections 1.6 and 1.7 and this Article 4 shall survive and
continue in full force and effect in accordance with their terms
notwithstanding any termination of employment.
4.4 Notices. All notices or other communication to be given or delivered
under or by reason of the provisions of this Agreement will be in writing and
will be deemed to have been given when delivered personally, one (1) business
day following when sent via a nationally recognized overnight courier, or when
sent via facsimile confirmed in writing to the recipient. Such notices and
other communications will be sent to the address indicated below:
To the Company:
Valley Media, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
To Executive:
Xxxxxxx X. Xxxxxxxx
0 Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
4.5 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal, or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed, and enforced in such jurisdiction as if such invalid,
illegal, or unenforceable provision had never been contained herein.
4.6 Entire Agreement. This Agreement and those documents expressly referred
to herein embody the complete agreement and understanding among the parties
and supersede and preempt any prior understandings, agreements, or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
5
4.7 Amendments and Waivers. Any provision of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive.
4.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
4.9 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
4.10 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement or of any term or provision hereof.
4.11 Conflict. In the event of any conflict between the provisions of this
Agreement and the policies and practices of the Company, the provisions of
this Agreement shall govern.
4.12 Negotiation of Agreement. Each of the parties acknowledge that it has
been represented by independent counsel of its choice throughout all
negotiations that have preceded the execution of this Agreement and that it
has executed the same with consent and upon the advice of said independent
counsel. Each party of its counsel cooperated in the drafting and preparation
of this Agreement and the documents referred to herein, and any and all drafts
relating thereto shall be deemed the work product of the parties and may not
be construed against any party by reason of its preparation. Accordingly, any
rule of law, or any legal decision that would require interpretation of any
ambiguities in this Agreement against the part that drafted it, is of no
application and is hereby expressly waived.
4.13 Parties in Interest; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
permitted successors, assigns, heirs, and/or personal representatives, except
that neither this Agreement nor any interest herein shall be assigned or
assignable by operation of law or otherwise, by Executive without the prior
written consent of the Company, which such consent the Company may grant or
withhold in its sole discretion. The Company may, without the consent of
Executive, assign this Agreement or interest herein, by operation of law or
otherwise, to (i) any successor to all or substantially all of its stock,
assets or business by dissolution, merger, consolidation, transfer of assets,
or otherwise, or (ii) any direct or indirect subsidiary, affiliate or division
of the Company or of any such successor referred in 3(d) hereof. Nothing in
this Agreement, expressed or implied, is intended to confer on any person
other than the parties and their respective successors and permitted assigns
any rights or remedies under or by reason of this Agreement.
4.14 Dispute Resolution Process. The parties hereby agree that, in order to
obtain prompt and expeditious resolution of any disputes under this Agreement,
each claim, dispute or controversy of whatever nature, arising out of, in
connection with, or in relation to the interpretation, performance of breach
of this Agreement (or any other agreement contemplated by or related to this
Agreement or any other agreement between the Company and Executive), including
without limitation, any claim based on contract, tort or statute, or the
arbitrability of any claim hereunder (a "Claim"), (but excluding actions for
injunctive relief for violations of Sections 1.6 and 1.7 which may be brought
in any court having jurisdiction), shall be settled at the request of any part
of this Agreement, by final and binding arbitration conducted in Sacramento,
California with arbiters to be mutually selected and agreed upon.
4.15 Full Understanding. Executive represents and agrees that he fully
understands his right to discuss all aspects of the Agreement with his private
attorney, and that to the extent, if any, that he desired, he availed himself
of such right. Executive further represents that he has carefully read and
fully understands all of the provisions of this Agreement (including the non-
compete provisions of Section 1.7), that he is competent to execute this
Agreement, that his agreement to execute this Agreement has not been obtained
by any duress and that he freely and voluntarily enters into it, and that he
has read this document in its entirety and fully understands the meaning,
intent, and consequences of this document.
6
IN WITNESS WHEROF, this Agreement has been signed and sealed the day first
above written.
DATED: June 18, 2001
By: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx, EXECUTIVE
DATED: June 18, 2001 VALLEY MEDIA, INC.
By: /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx, President and COO
7
