EMPLOYMENT AGREEMENT, dated as of the 5th of September, 1995, by and
between Alliance Entertainment Corp., a Delaware corporation having its
principal office at 000 Xxxx 00xx Xxxxxx Xxx Xxxx, XX 00000, (the "Company") and
Xxxxx X. Xxxxxxx, residing at 000 Xxxxxxxxx Xxxx, Xxxxxxxxxxx, Xxx Xxxx 00000
(the "Executive").
The Company desires to employ the Executive, and the Executive desires to accept
such employment by the Company, upon the terms and conditions hereinafter-set
forth.
In consideration of the mutual covenants and agreements set forth herein the
parties agree as follows:
1. Employment and Duties.
(a) The Company agrees to employ the Executive as President and Chief Operating
Officer of each of One Way Records, Inc. ("One Way") and Deja Vu Music,
Inc.("Deja Vu"), subsidiaries of the Company, and as Senior Vice President of
the Company, and the Executive accepts such employment and agrees to perform all
duties and services consistent with the Executive's positions. The Executive
agrees to devote substantially all of the Executive's business time, attention
and energy to perform the Executive's duties and services hereunder; provided,
however, the foregoing shall not prohibit the Executive from engaging in passive
investments (including real estate investments) and activities supervising his
own investments, serving as a director of a corporation whose business is not
related to the business of Alliance, One Way or Deja Vu, or acting as a partner
in One Prospect Avenue Partners, a New York partnership.
(b) Executive's duties are set forth in Exhibit A, which is attached hereto
and made a plan hereof
2. Term of Employment
This Agreement shall commence on the date hereof and end on the fifth
anniversary of the date hereof unless sooner terminated as provided in Section 7
hereof (the "Employment Period"). For purposes hereof, the one year period
commencing on the date hereof and ending on the first anniversary of the date
hereof and each one year period thereafter ending on an anniversary of the date
hereof shall be referred to herein as a "Contract Year."
3. Consideration and Benefits.
3.1 Base Salary and Percentage Salary.
The Company shall pay the Executive a base salary of Three Hundred Twenty Five
Thousand Dollars ($325,000) per annum ("Base Salary'), commencing in the first
Contract Year. The Base Salary for each Contract Year after the first Contract
Year may be increased from time to time in the sole discretion of the Board of
Directors of the Company (sometimes hereinafter referred to as the "Board" or
the "Board of Directors" and in any event will be increased annually to reflect
corresponding increases in the United States Department of Labor, Bureau of
Lab-or Statistics, Consumer Price Index, All Urban Consumers, United States City
Average, all items (1982-88 = 100). . Ease Salary shall be payable at such
intervals as salaries are paid by the Company to its other executive employees.
3.2 Bonus.
With respect to each fiscal year of the Company during the Employment Period,
the Company shall pay the Executive a bonus (the "Bonus") in an amount to be
determined by the Board of Directors in its sole discretion. Any such Bonus
shall be paid at such times as bonuses are paid by the Company to its other
executive employees. The Bonus shall be pro rated for the year ended December
31, 1995 and for the last partial fiscal year of the Employment Period.
3.3 [Intentionally Omitted.]
3.4 Benefit Plans.
(a) During the Employment Period, the Executive s hall be entitled to
participate in all plans adopted for the general benefit of the Company's
employees or executive employees, such as pension plans, medical plans,
investment plans and group or other insurance plans and benefits (including
disability and life insurance plans). to the extent that the Executive is and
remains eligible to participate therein and subject to the eligibility
provisions of such plans in effect from time to time. Anything in the foregoing
to the contrary notwithstanding, the Company will maintain health insurance for
the Executive and his daughter comparable to the coverage the Executive now has
for himself and his daughter. In the event that the Executive's employment with
the Company is terminated hereunder for any reason whatsoever (including, but
not limited to, expiration of the term hereof or voluntary resignation by the
Executive), the Company shall, to the extent permitted by the applicable
insurance carrier, include the Executive and each member of his family in the
group health insurance plan offered by the Company or its subsidiaries to its
full-time salaried employees; provided that the Executive sbal.1, at bis, sole
cost and expense, pay all health insurance premiums and any other expenses in
Connection therewith as they become due or reimburse the Company therefor, as
the case may be.
(b) The Executive shall be reimbursed for his reasonable out-of pocket expenses
incur-red in the performance of his duties upon submission of appropriate
evidence thereof in conformity with normal Company policy.
4. Vacation.
For each Contract Year during the Employment Period, the Executive shall be
entitled to paid vacation as follows: the greater of (a) four (4) weeks or (b)
the number of weeks' vacation provided to executives similarly situated pursuant
to Company Policy.
5. Automobile.
The Company shall assume the lease of the automobile currently leased by One Way
for the exclusive use and benefit of the Executive. Upon termination of the
current lease, the Company sham enter into a lease for the benefit of the
Executive for a luxury automobile chosen by Executive and comparable to the
automobile currently leased for Executive, on terms consistent with the
Company's policy with respect to automobiles. The lease shall contain a clause
allowing the Executive to purchase the automobile at the termination of the term
of the lease.
6. Place of Employment.
The Executive's principal place of employment with the Company shall be the
current premises of One Way at 00 Xxxxxxxxxx Xxxx Xxxx, Xxxxxx, Xxx Xxxx or the
Company's offices In New York, New York.
7. Termination.
7.1 Death.
This Agreement shall automatically terminate upon the death of the Executive,
whereupon the Company shall be obligated to pay to the Executive's estate any
unpaid Base Salary through the date of death, and the Bonus, if any, as
determined by the Board of Directors. Amounts payable under this Section 7A
shall be payable at the times and intervals set forth in Sections 3.1 and 3.2
hereof.
7.2 Disability.
The Company shall have the right to terminate this Agreement during the
continuants of any Disability of the Executive, as hereinafter defined, upon
fifteen (15) days prior notice to the Executive during the continuance of the
Disability. "Disability for purposes of this Section 7.2 shall mean an inability
by the Executive to perform a substantial portion of the Executive's duties
hereunder by reason of physical or mental incapacity or disability for a total
of one honored eighty (180) days or more in any consecutive period of three
hundred and sixty-five (365) days, as determined by the Board of Directors in
its good faith judgment. In order to enable the Board of Directors to determine
whether the Executive has a physical or mental incapacity, at the Company's
request and expense, the Executive agrees to submit to an examination by a
physician to be agreed upon between the Company and the Executive; provided,
however, that if the Company and the Executive are unable to agree as to a
physician within ten (10) days of the date of the Company's request then the
Company's good faith decision as to the physician shall bc binding on the
Executive. In the event of a termination by reason of the Executive's
Disability, the Company shall be obligated to pay the Executive any unpaid Base
Salary through the date of termination, and the Bonus, if any, as determined by
the Board of Directors. Amounts payable under this Section 7.2 shall be payable
at the times and intervals set forth in Section 3.1 hereof.
7.3 Termination for Cause.
The Company may terminate this Agreement for cause. As used herein, cause. shall
mean (i) the Executive shall have committed an act of fraud, embezzlement or
intentional misappropriation against the Company or committed a material breach
of fiduciary duty owed to the Company, or (ii) the Executive shall have been
convicted by a court of competent jurisdiction of any felony or crime involving
moral turpitude, other than (a) violations of federal, state or local obscenity
laws relating to the distribution of prerecorded music, video cassettes and
other media products or (b) criminal violations of federal antitrust or
securities laws arising out of the performance of the Executive's duties
hereunder (provided that in the event such conviction is reversed on appeal, the
Executive shall be reinstated to his former position and paid all back pay); or
(iii) the Executive shall have breached his obligations under Section 8 and 9 of
this Agreement; or (iv) the Executive's willful failure or refusal to timely
comply with a written directive of the Board of Directors of the Company,
provided that such directive is consistent with the Executive's position; and
provided further that such directive does not require the commission by the
Executive of an illegal act. In the event of a termination for cause, the
Company shall be obligated to pay the Executive any unpaid Base Salary through
the date of termination, and the Bonus, if any, as determined by the Board of
Directors. Amounts payable under this Section 73 shall be payable at the times
and intervals set forth in Sections 3.1 and 3.2 hereof.
7.4 Voluntary Termination.
The Executive may terminate this Agreement upon delivery to the Company of not
less than thirty (30) days' written notice of the Executives desire to so
terminate. In the event of a voluntary termination by the Executive, in addition
to any amounts payable to the Executive as provided in Section 11.7 herein, the
Company shall be obligated to pay the Executive any unpaid Base Salary through
the date of termination and the Bonus, if any, as determined by the Board of
Directors. Amounts payable under this Section 7.4 shall be payable at the times
and intervals set forth in Sections 3.1 and 3.2 hereof.
7.5 Termination for Other Reason.
If the Executive's employment is terminated other than by reason of (i) death,
(ii) disability, (iii) for cause, or (iv) the Executive's voluntary termination
of employment other than for good reason, then the Company shal1 pay the
Executive severance pay equal to the balance of the Base Salary and the Bonus
payable hereunder for the term of this Agreement. Such amount shall he payable
at the times and intervals set forth in Sections 3.1 and 3.2 hereof the
Company's obligation to make payments hereunder to the Executive shall
immediately cease upon the Executive's sub sequent death or Disability. In
addition the Company shall continue to provide Executive disability and health
Insurance coverage. Subject to the third sentence of Section 3.4 4 hereof, the
obligation of the Company to provide disability and health insurance shall cease
on the fifth anniversary of the date hereof Further, the following obligations
of the Company to the Executive, if any exist at the time, of such termination,
shall immediately vest and otherwise become due and payable upon such
termination: (i) a unexercised stock options previously granted to the Executive
shall vest; and (ii) the Executive shall have the right at any time following
such termination to demand that the Company effect the registration under the
Securities Act of 1933, as amended, and any applicable state securities laws of
the shares of common stock of the Company then owned by the Executive and not
previously registered, if any, for disposition by the Executive in an
underwritten offering upon terms and under procedures no less favorable to the
Executive than those provided In any agreement between the Company and any other
shareholder of the Company respecting the registration of shares of such other
shareholder.
8. Restrictions
8.1 Confidentiality.
(i) The Executive recognizes that the Executive's position with the Company is
one of trust and confidence. The Executiva acknowledges that, during the course
of the Executive's employment with the Company, the Executive will necessarily
become acquainted with confidential information relating to the customers
(including names, addresses and telephone numbers) of the Company, and trade
secrets, processes, methods of operation and other information, which the
Company regards as confidential and in the nature of trade secrets (collectively
"Confidential Information.") The Executive acknowledges and agrees that the
Confidential Information is of incalculable value to the Company and that the
Company would suffer damage if any of the Confidential Information was
improperly disclosed.
(ii) The Executive covenants and agrees that the Executive will not at any time
during or after the termination of the Executive's relationship with the
Company, reveal, divulge, or make known to any person, firm or corporation, any
confidential Information made known to the Executive or of which the Executive
has become aware, regardless of whether developed, prepared, devised or
otherwise created In whole or in pan by the efforts of the Executive, except and
to the extent that such disclosure is necessary to carry out the Executive's
duties for the Company as determined by the Executive in the good faith exercise
of the Executive's discretion. The Executive further covenants and agrees that
the Executive shall retain all Confidential Information in trust for the sole
benefit of the Company, and will not divulge or deliver or show any Confidential
Information to any unauthorized person including, without limitation, any other
employer of the Executive, and the Executive will not make use thereof in an
independent business related to the business of the Company.
(iii) The Executive agrees that, upon termination of the Executive employment
with the Company. for any reason whatsoever, or for no reason, and at any time,
the Executive shall return to the Company all papers, documents and other
property of the Corn any placed in the Executive custody or obtained by the
Executive during the course of the Executive employment which relate to
Confidential Information, and the Executive will not retain copies of any such
papers, documents or other property for any purpose whatsoever.
(iv) Notwithstanding anything herein to the contrary, Confidential Information
shall not include any such information which is publicly available, was
previously known to the Executive or was provided to the Executive by a third
party with a legal right to disclose same.
8.2 No-Competition.
(a) The Executive agrees that during the Employment Period, the Executive shall
not: (i) engage, directly or indirectly, in North America, alone or as a
shareholder, partner, officer, director, employee or consultant of any other
business organization, in the business of the wholesale or independent
distribution of prerecorded music, music Videos and accessories (the
'Business'), (ii) divert to any organization In the Business any customer of the
Company or any of its subsidiaries or business units, or (iii) hire, solicit or
encourage any officer, employee or consultant of the Company or any of its
subsidiaries to leave its employ for employment by or with any organization in
the Business. Notwithstanding the forego4 however, nothing contained herein
shall prohibit the Executive from (1) being employed by any of Warner Elecktra
Atlantic, Polygram Group Distribution, Cema Distribution, UNI Distribution
Corp., BMG Distribution, or Sony Music Entertainment, Inc.; (2) engaging in the
business of manufacturing or producing recorded music; (3) owning less than five
(5%) percent of the outstanding capital stock of any other corporation in the
Business, including, without restriction, SPJ Music, Inc.; (4) purchasing or
otherwise beneficially-owning, without restriction on amount, any securities
issued by the Company; or (5) otherwise pursuing a passive investment strategy
other than in the Business.
(b) The Executive further agrees to the "Restrictions", as hereinafter defined,
for the periods and on The conditions hereinafter set forth. Clauses (ii) and
(iii) of Section 8.2(a) and the following Additional Restriction, all as
modified by Clauses (1) through (5) of Section 8.2(a), shall hereinafter be
referred to as the "Restrictions." The "Additional Restriction" shall mean that:
the Executive shall not engage, directly or indirectly, in North America, alone
or as a shareholder, partner, officer, director, employee or consultant of any
other business organization, in the wholesale distribution of prerecorded budget
music:
(i) In the event the Executive's employment by the Company terminates during the
First Contract year, then the Executive agrees to be bound by the Restrictions
for a period of two (2) years from the date of such termination, provided that
the Company continues to pay to the Executive the then-applicable Base Salary
during such two-year period;
(ii) In the event the Executive's employment by the Company terminates during
the Second Contract year, then the Executive agrees to be bound by the
Restrictions for a period of one (1) year from the date of such termination,
provided that the Company continues to pay to the Executive the then-applicable
Base Salary during such one-year period;
(iii) In the event the Executive's employment by the Company terminates during
the Third Contract year, then the Executive agrees to be bound by the
Restrictions for a period of six (6) months from the date of such termination,
provided that the Company continues to pay to the Executive the then-applicable
Base Salary during such six-month period.
Base Salary amounts payable under this Section 8.2(b) shall be payable at the
time and intervals set forth in Section 3.1 hereof.
(c) If at any time the provisions of this Section 8.2 shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 81 shall be considered divisible and
. shall become and be immediately amended to only such area, duration and scope
of activity as shall be determined to be reasonable and enforceable by the court
or other body having jurisdiction over the matter; and the Executive agrees that
this Section 8.2 as so amended shall be valid and binding as though any invalid
or unenforceable provision bad not been included herein.
9. Work Product.
The Executive agrees that all innovations, inventions, improvements
developments, methods, designs, analyses, drawings, reports, and all similar or
related information which relates to the Company's actual business or product
lines or any business or product lines which the Company has taken significant
fiction to pursue, and which are conceived, developed or made by the Executive
while employed by the Company (any of the foregoing, hereinafter "Work
Product"), belong to the Company. The Executive will promptly disclose all such
Work Product to the Board of Directors and perform all actions reasonably
requested by the Board to establish and confirm such ownership (including
without limitation, assignments, consents, powers of attorney and other
instruments).
10. Enforcement.
The Executive acknowledges that the Company will suffer substantial and
irreparable damages not readily ascertainable or compensable in terms of money
In the event of the breach of any of the Executive's obligations under Sections
8 and 9 hereof. The Executive therefore agrees that the provisions of Sections 8
and 9 shall be, construed as an agreement independent of the other provisions of
this Agreement and any other agreement and that the Company, in addition to any
other remedies (including damages) provided by law, shall have the right and
remedy to have such provisions specifically enforced by any court having equ4
jurisdiction thereto the rights and remedies Set forth in this Section 10 shall
be in addition to, and not in lieu of, any other rights and remedies available
to the Company under law and equity.
11. Miscellaneous Provisions.
11.1 Entire Agreement.
This Agreement sets forth the entire agreement and understanding between the
par-ties with respect to the subject matter hereof and supersedes all prior
agreements, arrangements, and understandings between the parties with respect to
the subject matter hereof. -
11.2 Modification.
This Agreement may be amended, modified, superseded, canceled, renewed or
extended, and the terms of covenants hereof may be waived, only by a written
instrument executed by both of the parties or in the case of a waiver, by the
party waiving compliance.
11.3 Waiver.
The failure of either party at any time or times to require performance of any
provision hereof in no manner shall affect the right at a later time to enforce
the same. No waiver by either party of a breach of any term or covenant
contained in this Agreement whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such breach or a waiver of any other term or covenant contained in this
Agreement.
11.4 Notices.
All notices, demands consents or other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given) upon
the earlier of receipt, one business day after being sent by telecopier or five
(5).business days after being sent by registered or certified mail to the
parties at the addresses set forth above or to such other address as either
party shall hereafter specify by notice to the other party. Irrespective of the
foregoing notice of change of address shall be effective only upon receipt.
11.5 Governing Law
This Agreement Shall be construed in accordance with and governed by laws of the
State of New York applicable to contracts made and to be performed wholly within
such state.
11.6 Arbitration.
Any controversy or claim arising out of or relating to this Agreement, the
making, interpretation or breach thereof other than a claim solely for
injunctive relief for any alleged breach of the provisions of Sections 8 or 9 as
to which the parties shall have the right to apply for specific performance to
any court having equity jurisdiction, shall be resolved by arbitration in New
York, New York, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof and any
party to the arbitration may, if such party so elects, institute proceedings in
any court having jurisdiction for the specific performance of any such award.
Toe powers of the arbitrator or arbitrators shall include, but not be limited
to, the awarding of injunctive relief. The arbitrator shall include in any award
in the prevailing party's, favor the amount of his or its reasonable attorney's
fees and expenses and all other reasonable costs and expenses of the
arbitration. In the event the arbitrator does not rule in favor of the
prevailing party in respect of all the claims alleged by such party, the
arbitrator shall include in any award In favor of the prevailing party the
amount of his or its reasonable costs and expenses of the arbitration as be
deems just and equitable under the circumstances. Except as provided above, each
party shall bear his or its own attorneys fees and expenses, and the parties
shall bear equally all other costs and expenses of the arbitration.
11.7 Assignability.
This Agreement, and the Executive's rights and obligations hereunder, may not be
assigned by the Executive. The Company may assign its rights, together with its
obligations hereunder, only to a successor by merger or by the purchase of all
or substantially all of the assets and business of the Company, and such rights
and obligations shall inure to, and be binding upon, any such successor;
provided, however, upon the occurrence of any such assignment (i) all
unexerci5ed stock options previously granted to the Executive shall vest; and
(U) the Executive shall have the right to demand registration of the shares of
common stock of the Company or the Company's successor, as applicable, then
owned by the Executive and not previously registered, if any, as set forth in
paragraph 7-5 hereof.
11.8 Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective legal representatives, heirs, permitted successors
and permitted assigns.
11.9 Headings and Word Meanings.
Headings and titles in this Agreement are for convenience of reference only and
shall not control the construction or interpretation of any provisions hereof.
The words "herein," "hereof," "hereunder" and words of similar import, when used
anywhere in this Agreement, refer to this Agreement as a whole and not merely to
a subdivision in which such words appear, unless the context otherwise requires.
The singular shall include the plural unless the context otherwise requires.
11.10 Separability.
Any term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering -invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
ALLIANCE ENTERTAINMENT CORP. THE EXECUTIVE
By /s/Xxxxxx X. Xxxxxx By /s/Xxxxx X. Xxxxxxx
-------------------------------------- -----------------------------
Xxxxxx X. Xxxxxx Xxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
ACKNOWLEDGED AND AGREED as of the date first written above:
ONE WAY RECORDS, INC.
By /s/Xxxxxx X. Xxxxxx
----------------------------------------
DEJA VU MUSIC, INC.
By/s/Xxxxxx X. Xxxxxx
----------------------------------------
EXHIBIT A
Executive's Duties
The Executive shall perform such duties, consistent with the Executive's
position, as shall be from time to time directed by the Board of Directors of
the Company.
The Executive may buy surplus or "cut-out" audio and video products from the
suppliers he chooses, in his sole discretion, subject only to the Executive's
fiduciary duty to the Company.
