EXHIBIT 10.1
TRANSITION AGREEMENT
Transition Agreement (this "Agreement"), dated as of January 31, 2006 (the
"Effective Date") between MediaBay, Inc. ("MediaBay" or the "Company") and
Xxxxxxxx X. Xxxxxxxx ("Xxxxxxxx").
1. Termination of Position as Chief Operating Officer. Effective as of the
Effective Date, Xxxxxxxx resigns from her position as Chief Operating Officer of
MediaBay and from all other positions as an officer of MediaBay and its
subsidiaries she may hold.
2. Xxxxxxxx 's Services.
(a) MediaBay hereby engages Xxxxxxxx to provide to MediaBay, and Xxxxxxxx
agrees to provide to MediaBay under the terms of this Agreement, the following
services during the Term (defined below): (i) identifying and pursuing major
marketing partnerships ("Marketing Partnerships"), including, but not limited
to, Marketing Partnerships with Cracker Barrel, Reader's Digest, AARP, Parking
Garages, EZPass or other transportation authorities, and (ii) any other special
projects as directed by MediaBay's Chief Executive Officer ((i) and (ii)
collectively, the "Services").
(b) During the first three (3) months of the Term (January 31, 2006
through April 30, 2006), Xxxxxxxx shall be required to devote her full time in
connection with the provision of the Services and, during the last three (3)
months of the Term (April 30, 2006 through July 31, 2006), shall be required to
devote half her time in connection with the provision of the Services. The
Services shall be performed under the direct supervision of the Chief Executive
Officer of the Company and shall be performed at such times and places and in
such manner (whether by conference, telephone, electronic communication or
otherwise) as Xxxxxxxx and the Company shall mutually agree.
3. Term; Compensation; Benefits Reimbursement of Expenses. Xxxxxxxx shall
render the Services during the period from the Effective Date through July 31,
2006, subject to earlier termination, as provided herein (the "Term"). In
exchange for the performance of the Services and specifically for the covenants
contained in Sections 4 and 5 hereof, Xxxxxxxx shall be compensated as follows:
(a) MediaBay shall pay Xxxxxxxx (i) a fee at the rate of $215,000 per
annum, payable in accordance with the regular MediaBay payroll, during the first
three (3) months of the Term, and (ii) a fee at the rate of $107,500 per annum,
payable in accordance with the regular MediaBay payroll, during the last three
(3) months of the Term. Promptly following execution of this Agreement, Xxxxxxxx
will be: (x) paid for the 12 vacation days she accrued during calendar year 2005
and (y) reimbursed for all previously unreimbursed reasonable travel and
business expenses heretofore incurred by Xxxxxxxx in connection with her
services, in accordance with normal Company policy. MediaBay shall continue to
make the deductions to Xxxxxxxx in accordance with its payroll and shall report
her consulting earnings at year-end on a Form W-2.
(b) Xxxxxxxx shall be eligible, during the Term, to receive such medical,
surgical, hospitalization, disability and life insurance benefits as are made
available to executive employees of MediaBay. In addition, Xxxxxxxx shall be
entitled to take up to ten (10) days' vacation during the Term.
(c) MediaBay shall, during the Term and through July 31, 2006, reimburse
Xxxxxxxx for bona fide out-of-pocket business expenses, to the extent such
expenses relate to Xxxxxxxx'x performance of the Services, she actually incurs
in the performance of the Services hereunder; provided however, that Xxxxxxxx
shall be required to obtain the written approval of the Chief Executive Officer
or Chief Financial Officer prior to incurring any expense or related expenses in
excess of $500. In addition, MediaBay will, during the Term, continue to provide
Xxxxxxxx with the use of the office and computer equipment Xxxxxxxx currently
uses without charge.
(d) Xxxxxxxx shall be entitled to a success fee equal to $1.00 for each
Bona Fide Subscriber (defined below) in excess of 20,000 Bona Fide Subscribers.
The term "Bona Fide Subscribers" means a customer who becomes a paying monthly
subscriber of xxxxxxxxxx.xxx services for a period of at least 60 days, and pays
in full at least two monthly subscription fees and that was acquired by MediaBay
during the Term or during the 12-month period thereafter from new marketing
partnership entered into by MediaBay during the Term as a result of the
Services.
(e) The stock options previously granted to Xxxxxxxx set on Part I of
Schedule I hereto shall remain exercisable for their full ten (10) years from
the initial date of grant. The stock options previously granted to Xxxxxxxx set
forth on Part II of Schedule I hereto shall not be exercisable and shall
terminate as of the date hereof.
4. Noncompetition Covenant.
(a) During the Term and for a period of two (2) years following the
expiration of the Term, Xxxxxxxx shall not for herself or on behalf of any other
person, persons, firm, partnership, corporation or company, (i) engage, have an
interest in, participate in or render any services to any business (whether as
owner, manager, operator, licensor, licensee, lender, partner, equity holder,
joint venturer, employee, consultant or otherwise) in substantial and direct
competition with any business conducted by the Company or its subsidiaries at
the time of termination (including the audio book, old-time radio and spoken
audio digital download businesses and any businesses which are hereafter
acquired by, merged with or transferred to the Company prior to such termination
(collectively, the "Business")), or (ii) solicit or attempt to solicit the
business or patronage of any person, firm, corporation, company or partnership,
which had previously been an employee of the Company or its subsidiaries, for
the purpose of engaging in the Business. Notwithstanding the foregoing, nothing
herein shall prevent Xxxxxxxx from owning stock in a publicly traded corporation
whose activities compete with those of the Company and/or its subsidiaries,
provided that such stock holdings are not greater than five percent (5%) of such
corporation.
(b) During the Term and for a period of two (2) years following the
expiration of Term, Xxxxxxxx shall not, directly or indirectly, take any action
which constitutes an interference with or a disruption of any of the Company's
business activities including the solicitations of the Company's customers or
vendors or persons listed on the personnel lists of the Company.
(c) For purposes of clarification, but not of limitation, Xxxxxxxx hereby
acknowledges and agrees that the provisions of this Section 4 shall serve as a
prohibition against her, during the Term and for a period of two (2) years
following the expiration of the Term, from, directly or indirectly, hiring,
offering to hire, enticing, soliciting or in any other manner persuading or
attempting to persuade any officer, employee, agent, lessor, lessee, licensor,
licensee or customer of the Company, to discontinue or alter his, her or its
relationship with the Company.
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5. Nondisclosure Obligation. Xxxxxxxx shall not, during the Term and
thereafter, except as may be required in the course of the performance of her
duties hereunder, directly or indirectly, use, communicate, disclose or
disseminate to any person, firm or corporation any confidential information
regarding the clients, customers or business practices of the Company acquired
by Xxxxxxxx, without the prior written consent of the Company; and Xxxxxxxx also
understands that she shall be prohibited from misappropriating any trade secret
at any time during or after the Term. The term "confidential information" shall
mean any and all information (oral or written) relating to the Company or to any
of its affiliates, or to any of their respective activities, other than such
information which (A) is or comes into the public domain (such information not
being deemed to be in the public domain merely because it is embraced by more
general information which is in the public domain) other than as the result of
breach of the provisions of this Section 5, (B) was known to Xxxxxxxx without
obligation of confidentiality prior to its disclosure by the Company, as
demonstrated by competent documentary evidence in Xxxxxxxx'x possession, (C)
which properly becomes available to Xxxxxxxx, under conditions which do not
restrict further disclosure, from a third-party source who shall not have
obtained such information either directly or indirectly from the Company or its
affiliates, or (D) Xxxxxxxx is required to disclose under any applicable laws,
regulations or directives of any government agency, tribunal or authority having
jurisdiction in the matter or under subpoena or other process of law.
6. Termination.
This Agreement may be terminated by the Company for Cause (defined below)
immediately upon written notice to Xxxxxxxx. In the event of termination by the
Company for Cause, Xxxxxxxx shall be entitled to no further compensation or
benefits other than payment of amounts owed to Xxxxxxxx through the date of such
termination and reimbursement of expenses incurred through the date of
termination in accordance with Section 3(c). For purposes of this Section 6,
"Cause" shall mean that the Board of Directors of the Company has reasonably
determined that Xxxxxxxx has engaged in any of the following: (i) any material
breach of Section 4 or 5 of this Agreement; (ii) any act or omission which
constitutes a material breach of, or material failure or refusal to perform
duties under this Agreement or any covenant or condition thereof after notice
thereof and failure to cure the same within fifteen (15) business days (except
that no such notice and right to cure shall apply to any breach of Section 4 or
5 hereof); (iii) any act constituting dishonesty, fraud, immoral or disreputable
conduct or breach of fiduciary duty or other misconduct which is materially
harmful (monetarily or otherwise) to the Company or its reputation; (iv) any
conviction of a felony under applicable law; (v) refusal to abide by or
implement a lawful directive of the Chief Executive Officer after notice of such
and failure to cure the same within fifteen (15) business days; or (vi) gross
negligence or gross misconduct of Xxxxxxxx in the performance of her duties
hereunder.
7. Miscellaneous.
(a) This Agreement contains, and is intended as, a complete statement of
all of the terms of the arrangement between the parties with respect to its
subject matter and supersedes all previous negotiations, promises, agreements
and understandings with respect to those matters, whether oral or written.
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(b) No provision of this Agreement shall be waived, amended, modified,
superceded, canceled, terminated, renewed or extended except in a written
instrument signed by the party against whom any of the foregoing actions is
asserted. Any waiver shall be limited to the particular instance and for the
particular purpose when and for which it is given.
(c) Xxxxxxxx hereby agrees that each provision herein shall be treated as
a separate and independent clause, and the unenforceability of any one clause
shall in no way impair the enforceability of any of the other clauses of the
Agreement. Moreover, if one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to scope,
activity, subject or otherwise so as to be unenforceable at law, such provision
or provisions shall be construed by the appropriate judicial body by limiting or
reducing it or them, so as to be enforceable to the maximum extent compatible
with the applicable law as it shall then appear. Xxxxxxxx hereby further agrees
that the language of all parts of this Agreement shall in all cases be construed
as a whole according to its fair meaning and not strictly for or against either
of the parties.
(d) The Company shall respond to third-party reference inquiries in
respect of Xxxxxxxx solely by stating, in words or substance, that Xxxxxxxx
voluntarily resigned from her employment with the Company, that her dates of
employment were April 4, 2005 to January 31, 2006, that her service to the
Company was satisfactory, and that she became a consultant to the Company in
order to devote additional time to her family. Except for the filing of a
Current Report Form 8-K with the Securities and Exchange Commission announcing
Xxxxxxxx'x resignation and the execution of this Agreement, the Company shall
not make any public or private statement concerning Xxxxxxxx inconsistent with
the preceding sentence. Xxxxxxxx shall not disparage the commercial, business or
financial reputation of the Company or any of its officers, directors or
employees.
(e) This Agreement, the Services to be performed and all rights hereunder
are unique to Xxxxxxxx and Xxxxxxxx and may not be performed on Xxxxxxxx'x
behalf by any person other than Xxxxxxxx and may not be transferred or assigned
by Xxxxxxxx or by the Company at any time.
(f) This Agreement shall be construed and enforced in accordance with the
internal laws of the State of New Jersey without reference to its conflicts of
laws provisions.
IN WITNESS WHEREOF, the parties hereby execute this Agreement this 31st
day of January 2006.
MEDIABAY, INC.
By: /s/ Xxxxxx Xxxx
---------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Financial Officer and Senior
Vice President
/s/ Xxxxxxxx X. Xxxxxxxx
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Xxxxxxxx X. Xxxxxxxx, individually
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SCHEDULE 1 TO
TRANSITION AGREEMENT
Part I
No. of Shares Exercise Price Date Exercisable Expiration Date
------------- -------------- ---------------- ---------------
56,667 $3.54 4/4/05 4/4/10
28,333 $3.54 4/4/06 4/4//10
60,000 $1.35 12/31/05 12/31/15
Part II
No. of Shares Exercise Price Date Exercisable Expiration Date
------------- -------------- ---------------- ---------------
28,333 $3.54 4/4/07 4/4/10
28,333 $3.54 4/4/08 4/4//10
30,000 $1.35 12/31/06 12/31/15
30,000 $1.35 12/31/07 12/31/15
30,000 $1.35 12/31/08 12/31/15
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