EMPLOYMENT AGREEMENT
EXHIBIT 10.7
THIS EMPLOYMENT AGREEMENT is effective June 9, 2006 (the “Effective Date”), by and
between New Era Studios, Inc., a Nevada corporation (the “Company”), and Xxxxx X. Xxxxxx, an
individual and resident of the State of California (“Executive”).
RECITAL
WHEREAS, Silvergraph LGT, LLC, a Delaware limited liability company (“Silvergraph”), merged
with and into the Company on June 9, 2006 for purposes of effecting a migration of Silvergraph from
Delaware to Nevada and effecting a reclassification of Silvergraph from a limited liability company
to a corporation; and
WHEREAS, Executive was a founding member of Silvergraph and was the sole member of a limited
liability company that served as a manager of Silvergraph since April 2005, and the parties desire
to ensure that the Executive’s expertise, knowledge and experience will continue to be available to
the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the covenants contained herein, the
Company and Executive agree as follows:
1. Employment and Term. In consideration of the mutual covenants herein contained,
the Company agrees to employ Executive and Executive hereby agrees to accept such employment by the
Company pursuant to the terms and conditions set forth in this Agreement. Subject to any extension
in accordance with this Section 1, or unless sooner terminated in accordance with Section 7 of this
Agreement, the term of this Agreement (the “Term”) shall begin upon the Effective Date and shall
end at the close of business on the fifth anniversary date of the Effective Date; provided,
however, that on the date of each meeting of the Board of Directors immediately after the Annual
Meeting of Stockholders (the “Annual Meeting Date”) beginning in 2007 and ending in 2011, the Term
shall be extended by one additional year, so that the Term is again five years, provided that the
Company has not, prior to that applicable Annual Meeting Date, given Executive written notice that
the Term will no longer be extended.
2. Duties. Executive is hereby engaged to work in the capacity of Secretary of the
Company, to perform such duties as are determined from time to time by the Board of Directors of
the Company. Executive agrees to use Executive’s best efforts for the Company’s benefit, and
throughout the Term shall devote Executive’s full time and effort to the performance of these
duties. Executive may, without the Company’s prior written consent, engage in other business
activities provided said business activities do not require any material time commitment or
services on the Executive’s part. Executive may invest Executive’s assets in such form or manner
as will not require any material services on Executive’s part in the operation of the affairs of
the enterprise(s) in which such investments are made.
3. Base Salary. As compensation for the services to be rendered by Executive
pursuant to this Agreement, the Company agrees to pay to Executive an annual base salary of Eighty
Two Thousand
Dollars ($82,000) per annum, payable on the Company’s regular pay dates for employees generally.
Notwithstanding the foregoing, Executive’s base salary shall increase to One Hundred Twenty
Thousand Dollars ($120,000) per annum, payable on the Company’s regular pay dates for employees
generally, at such time as the Company raises a minimum of One Million Five Hundred Thousand
Dollars ($1,500,000) in new capital from the date hereof. The Company’s Board of Directors shall
review Executive’s performance and base salary upon consummation of the share exchange by and
between Company and Pinecrest Services, Inc., a Nevada corporation (“Pinecrest”), and shall
beginning in the first quarter of 2007 and in the first quarter of each year thereafter, adjust
Executive’s salary and benefits as it determines to be appropriate. Notwithstanding the foregoing,
no decrease in base salary shall be made.
4. Signing Incentive. In addition to the Base Salary set forth in Section 3 above,
the Company shall pay to Executive a signing incentive (the “Signing Incentive”) in the aggregate
amount of Twenty Seven Thousand Dollars ($27,000), payable by the Company to Executive from time to
time and in such amounts as the Company may determine in its commercially reasonable discretion.
5. Sales Commission. In addition to the Base Salary set forth in Section 3 above and
the Signing Incentive described in Section 4 above, the Company shall pay to Executive a 5%
commission on the gross sales of the Company until Executive’s Signing Incentive has been paid in
full by the Company, at which time Executive shall receive a 2.5% commission on all future gross
sales of the Company.
6. Additional Benefits.
(a) Executive shall be entitled, during the Term of this Agreement, to such (1) vacation
benefits, (2) tax-qualified profit sharing and/or savings benefits, (3) deferred compensation
benefits, and/or (4) disability, life insurance, medical (including dental and vision) and any
other similar benefits, as are consistent with the Company’s approach for the rest of its executive
group and with the terms and practices of the Company’s plans and arrangements.
(b) Executive may, at his option, elect that a portion of his salary be placed into
tax-sheltered investments and treated as deferred income to the extent permitted under plans or
arrangements in effect from time to time through the Company. Any such election shall not exceed
the maximum amounts permitted pursuant to Sections 403(b) and 457(b) of the Internal Revenue Code
of 1986.
7. Termination. Executive’s employment and this Agreement shall terminate upon (1)
Executive’s voluntary resignation; (2) Executive’s death; (3) Executive’s inability to perform his
duties for the Company for one hundred twenty (120) consecutive days due to a physical or mental
condition; or (4) termination of Executive’s employment by Company with written notice, for any
reason or for no reason. In addition, Executive has the right to terminate his employment and this
Agreement by written notice at any time after a Change in Control. For purposes of this Section 7,
Change in Control shall be deemed to have occurred if at any time (a) the person(s) owning and
having the power to vote either the Company’s capital stock or the capital stock of any company
owning all or at least fifty-one percent (51%) of the Company’s capital stock (hereinafter, a
“Parent”) immediately following the execution and delivery of this Agreement do not hold and retain
the power to vote at least fifty-one percent (51%) of
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the capital stock of Company or Parent, as applicable, (b) the Company or a Parent sells all
or any substantial portion of its assets or business outside of the regular course of business or
(c) individuals who constituted the Board of Directors of the Company, as of the Effective Date, or
a Parent, as of the closing of the share exchange between the Company and Pinecrest, cease for any
reason to constitute at least a majority of its Board of Directors then in office. Upon
Executive’s termination of employment for any reason, all rights, duties and obligations of the
Company and Executive shall cease, including Executive’s right to base salary and other
compensation and benefits, except as provided in Section 8 below, and except for any continuation
of benefits under the terms of benefit plans and arrangements in effect at the time of termination.
8. Severance Pay. If the Company terminates Executive’s employment without cause as
determined by the Company’s Board of Directors or an authorized committee thereof, or if Executive
resigns due to (i) assignment to Executive of significant duties inconsistent with Executive’s
position, responsibilities and status with the Company, (ii) the relocation of the Company’s
principal executive offices to a location outside the Los Angeles, California area or a one hundred
fifty (150) mile radius therefrom, or the Company requiring Executive to be based
anywhere other than the Company’s principal executive offices, or (iii) the failure of the Company
to obtain the assumption of all obligations under this Agreement by any successor, then Executive
shall be entitled to severance pay. Such severance pay shall be continuation of Executive’s then
monthly base salary for twenty-four (24) months after the month of termination and payment thirty
(30) days after termination of any incentive bonus for measurement periods already ended at the
date of termination. Such payment of base salary shall be reduced by fifty percent (50%) of any
base compensation earned from another employer during the period of base salary continuation. For
eighteen (18) months following such termination, the Company shall also continue to pay, at its
expense, premiums on Executive’s health and dental policies then in effect, all or a portion of
which payments may be taxable to Executive as determined under tax laws in effect when such
payments are made. All payments under this Section 8 are conditioned upon Executive’s written
agreement with the Company that Executive will not file any administrative charge or lawsuit
relating to Executive’s prior employment with the Company and agreement to release the Company and
all of its then current and former directors, trustees, officers, employees, agents, members, and
affiliated companies from any and all claims, in an agreement in such form as is determined by the
Company.
Termination by the Company of Executive’s employment for “cause” shall mean termination upon
(A) the willful and continued failure by Executive substantially to perform his duties with the
Company after written demand for substantial performance has been delivered to Executive by the
Company’s Board of Directors or authorized committee thereof and Executive has failed to cure such
failure within thirty (30) days or such longer period set by the Board; or (B) the willful engaging
by Executive in gross misconduct materially and demonstrably injurious to Company; (C) breach of
fiduciary duty involving personal profit; or (D) violation of any law, rule or regulation other
than traffic violations or similar offenses. For purposes of this definition, no act, or failure
to act, on Executive’s part shall be considered “willful” unless done, or admitted to be done, by
Executive not in good faith and without reasonably belief that Executive’s action or omission was
in the best interest of the Company.
9. Restrictive Covenant.
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(a) Executive agrees that, (1) for a period of two years following (w) the Company’s
termination of Executive’s employment for cause (as defined in Section 8 above) or (x) Executive’s
termination of his own employment for any reason whatsoever, or (2) for the earlier of (y) a period
of two years following the Company’s termination of Executive’s employment without cause, or (z) so
long as the Company shall pay the Severance Pay as set forth in Section 8 above, if any, following
the Company’s termination of Executive’s employment without cause (each such period shall
hereinafter be referred to as, the “Covenant Period”), he will not:
(i) directly or indirectly own, manage, operate, control, be employed by, participate in, or
be connected in any manner whatsoever with the ownership, management, operation or control of any
business engaged in the same or similar business as the Company;
(ii) approach or solicit any person who is employed by the Company or any affiliate with a
view to hiring such employee, persuading such employee to leave such employment, or actually hire
an employee of the Company or an affiliate for any other entity.
(b) Executive further agrees that he shall not, during the applicable Covenant Period,
disparage or act in any manner, directly or indirectly, which may damage the Company or any
affiliate.
(c) Executive recognizes that certain information of and about the Company is confidential,
including but not limited to trade secrets, know-how, and marketing plans. Executive agrees that
he will not, at any time, either while employed by Company or after the termination of his
employment, reveal such confidential information to any other person, firm or corporation except as
required by law.
Executive has carefully considered the nature and extent of the restrictions upon him and the
rights and remedies conferred upon the Company and its affiliates under the provisions of this
Section 9, and Executive hereby acknowledges and agrees that the same are reasonable in time and
territory, do not stifle the inherent skill and experience of Executive, would not operate as a bar
to Executive’s sole means of support, are fully required to protect the legitimate interests of the
Company, and do not confer a benefit upon the Company disproportionate to the detriment to
Executive which is caused by the provisions of this Section 9.
In the event of a breach or a threatened breach by Executive of this Section 9, the Company
and its affiliates shall be entitled to an injunction restraining Executive from the commission of
such breach. Nothing herein contained shall be construed as prohibiting the Company and any
affiliate from pursuing any other remedies available to it for such breach or threatened breach,
including the recovery of money damages. These covenants and disclosures shall each be construed
as independent of any other provisions in this Agreement, and the existence of any claim or cause
of action by Executive against the Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company and affiliates of such covenants
and agreements.
10. Severability. The provisions of this Agreement are severable, and, if any one or
more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions of this Agreement and any partially unenforceable provision of this Agreement,
to the extent enforceable in any jurisdiction, shall nevertheless be binding and enforceable
hereunder. If any
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provision of this Agreement is invalid in part or in whole, it will be deemed to have been amended,
whether as to time, area covered or otherwise, as and to the extent required for its validity under
applicable law and, as so amended, will be enforceable.
11. Construction. This Agreement shall be construed and interpreted under and be
governed by and enforced according to the laws of the State of California. The captions and
headings set forth in this Agreement are for convenience and reference only and shall not be deemed
to construe or interpret any term or provision set forth in this Agreement.
12. Benefit. This Agreement shall inure to the benefit of and be enforceable by the
parties hereto and their respective heirs, executors, administrators, successors and assigns.
13. Entire Agreement. This instrument contains the entire agreement of the parties.
It may not be changed orally but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is sought.
IN TESTIMONY WHEREOF, the parties have executed this Agreement as of the day and year first
above written.
| EXECUTIVE: | ||||||
| /s/ Xxxxx X. Xxxxxx | ||||||
| Xxxxx X. Xxxxxx | ||||||
| COMPANY: | ||||||
| NEW ERA STUDIOS, INC. | ||||||
| By: | /s/ Xxxxxxx X. Xxx
|
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