EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 28th day of January 2004, by and between
MediaBay Inc., a Florida corporation, with offices at 0 Xxxxxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxx Xxxxxx 00000 (the "Company"), and Xxxxxxx X. Xxxxxx residing at 000
Xxx Xxxxx Xxxx, Xxxx Xxxxxx, Xxxxxxxxxxxx 00000 (the "Executive').
W I T N E S S E T H:
WHEREAS, the Company is engaged in the audio book club, old time radio
and spoken audio digital download businesses; and
WHEREAS, the Company desires to employ the Executive; and
WHEREAS, the Executive is willing to serve the Company on the terms and
conditions herein provided.
NOW, THEREFORE, in consideration of the promises and the respective
covenants and agreements of the parties herein contained and intending to be
legally bound hereby, the parties agree as follows:
1. Recitals. The Whereas clauses recited above are hereby incorporated
by reference as though they were fully set forth herein.
2. Employment. The Company shall employ the Executive and the Executive
shall serve the Company on the terms and conditions set forth herein.
3. Term. The term of this Agreement shall commence on January 30, 2004
("Effective Date") and shall end April 30, 2006 if not terminated earlier
pursuant to the termination provisions contained herein (the "Term"). If either
the Company or the Executive wish to extend or renew the term of this Agreement
when it expires, then any such extension or renewal will be mutually agreed to
in writing by the parties.
4. Position and Duties. Subject to the terms set forth herein, the
Executive shall be employed by the Company as Chief Executive Officer of
MediaBay, Inc. His power and authority shall be and remain subject to the
direction and control of the Board of Directors and the Chairman of the Company.
The Executive shall have profit and loss responsibility for the Company and its
subsidiaries (including Audio Book Club, Inc., Xxxxx Xxxxxxx, Inc. and
XxxxxXxx.xxx, Inc.) as well as operational and marketing oversight of the
business and affairs of the Company and its subsidiaries, and any other
businesses which the Company or its subsidiaries may acquire.
5. During the Term, the Executive shall be required to devote his best
efforts and spend his full time and attention, without other outside business
interests or activities, in the performance of his duties and the Company's and
its subsidiaries' business and affairs. The exceptions to this are the
Executive's ongoing work as Founding Chairman of the Divine 9 Open, a charitable
fund raiser for the Leukemia and Lymphoma Society and existing mandates that the
Executive has made the Chairman aware of that Kauri Capital LLC has not
completed prior to the Effective Date, and outside investments that will not
materially impact his duties as Chief Executive Officer.
6. Compensation and Related Matters.
(a) Base Salary. For services rendered pursuant to this
Agreement, the Company shall pay to the Executive an annual base salary of
$225,000 in equal semi-monthly installments in arrears on the 15th and last day
of each month subject to applicable withholding and other taxes. The base salary
shall be increased to $250,000 per year upon consummation of a debt, equity, or
combination of debt and equity financing of $10,000,000 or more prior to June
30, 2004 (as measured against the Company's balance sheet as of December 31,
2003).
(b) Bonus. The Executive will be eligible to receive a
discretionary annual bonus to be determined by the Compensation Committee of the
Board of Directors of the Company in its discretion. Eligibility for such bonus
will be based upon a set of financial and non-financial objectives set by the
Compensation Committee of the Board of Directors for each fiscal year (which
ends on December 31). Executive must remain an employee through the end of the
applicable fiscal year or he will not be eligible to receive any bonus.
Determinations as to whether the Executive shall receive any bonus, including
the determination as to whether objectives have been met, shall be made at the
sole discretion of the Board. Any bonus awarded will be paid no later than April
15 of the following year.
(c) Expenses. The Executive shall receive prompt reimbursement
for all reasonable travel and business expenses in connection with services
performed hereunder in accordance with normal Company policy, as the same may be
determined from time to time.
(d) Insurance and Employee Benefits. The Executive shall be
eligible to receive such medical insurance and 401k benefits as are made
available to all officers of the Company, subject to the general eligibility and
participation provisions set forth in such plans. The Company reserves the tight
to adopt, amend, or discontinue any employee benefit, plan, or program in
accordance with then applicable law.
(e) Vacation. The Executive shall receive during each full
year of his employment, three (3) weeks (fifteen working days) paid vacation.
Unused vacation days shall not be carried forward into the following year and
the Executive shall not receive any compensation for unused vacation.
(f) Stock Options. The Executive will be granted stock options
to acquire one million five hundred thousand (1,500,000) shares of Common Stock
in the Company pursuant to and in accordance with (and therefore subject to all
terms and conditions of) the Company's Stock Option Plan. The Executive will
receive these option grants pursuant to six separate option agreements. All six
stock option awards will be granted on the Effective Date. The First Option with
respect to Two Hundred and Fifty Thousand (250,000) shares shall vest on the 3
month anniversary of the Effective Date at a price per share of $0.99. The
Second Option with respect to Two Hundred and Fifty Thousand (250,000) shares
shall vest on the 6 month anniversary of the Effective Date at a price per share
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of $0.99. The Third Option with respect to Two Hundred and Fifty Thousand
(250,000) shares shall vest on the 12 month anniversary of the Effective Date at
a price per share of $1.55. The Fourth Option with respect to Two Hundred and
Fifty Thousand (250,000) shares shall vest on the 18 month anniversary of the
Effective Date at a price per share of $1.55. The Fifth Option with respect to
Two Hundred Thousand (250,000) shares shall vest on the 24 month anniversary of
the Effective Date at a price per share of $1.86. The Sixth Option with respect
to Two Hundred Fifty Thousand (250,000) shares shall vest on April 30, 2006 at a
price per share of $1.86.
(g) The Stock Options will vest in each instance as described
above provided that the Executive is an employee of the Company at the time such
vesting is to occur and they will expire five (5) years from the anniversary of
the Effective Date. Such options will be on the terms and conditions as more
specifically provided for in the Company's Stock Option Plan and a Stock Option
Agreement dated as of the date hereof between the Company and the Executive in
the form of Exhibit A hereto.
In the event the Executive is terminated Without Cause, the
Stock Options shall vest on the same schedule as if the Executive was
still an Employee until the date of Termination. In the event of a
Change of Control, as defined herein, all of the Stock Options granted
to the Executive shall immediately vest.
(h) Registration Statement. The Company will file with the
Securities and Exchange Commission a registration statement on Form S-8 on or
before February 9, 2005 covering the shares of Common Stock issuable upon the
exercise of the stock options granted to the Executive pursuant to Section 5 (f)
and (g) above.
7. Non-Competition and Confidentiality Covenant.
(a) During the Term of this Agreement and for a period of two
(2) years immediately following the termination of his employment, whether said
termination is occasioned by the Company, the Executive or a mutual agreement of
the parties, the Executive shall not, for himself or on behalf of any other
person, persons, firm, partnership, corporation or company, (i) engage or
participate in any activities which are competitive with the Company, at the
time of Termination, and its subsidiaries including the audiobook, old-time
radio and spoken audio digital download businesses and any businesses which are
acquired by, merged with or transferred to the Company (the "Business"), (ii)
solicit or attempt to solicit the business or patronage of any person, firm,
corporation, company or partnership, which had previously been a customer,
consultant or employee of the Company or its subsidiaries, for the purpose of
engaging in the Business or (iii) solicit, engage or hire any individual who is
then employed or was employed by the Company or its subsidiaries or is then a
consultant or was a consultant for the Company or its subsidiaries.
(b) The Executive acknowledges and agrees that: all mailing
lists; customer, member and prospect names; license or arrangement with
publishers; front-end and back-end marketing performance; financial statements;
operating system, database and other computer software, specific to the Company
or its subsidiaries; and all information which is known by the Executive to be
subject to a confidentiality agreement or obligation of confidentiality, even
without a confidentiality agreement between the Company or a subsidiary of the
Company and another person or party, shall be maintained by the Executive in a
confidential manner and the Executive agrees that the Executive will not use
such information to the detriment of the Company and its subsidiaries or
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disclose such information to any third party, except as may be necessary in the
course of performing the Executive's job responsibilities or as required by
applicable law. The Executive further agrees that these obligations of
confidentiality with respect to such information shall continue after the
Executive ceases to be employed by the Company. Disclosure of the aforementioned
information shall not be prohibited if such disclosure is directly pursuant to a
valid and existing order of a court or other governmental body or agency
provided, however, that (i) the Executive shall first have given prompt notice
to the Company of any such possible or prospective order (or proceeding pursuant
to which any such other may result), (ii) the Company shall have been afforded a
reasonable opportunity to review such disclosure and to prevent or limit any
such disclosure, and (iii) the Executive shall, if requested by the Company and
at the Company's cost and expense, use his reasonable best efforts to prevent or
limit any such disclosure by means of a protective order or a request for
confidential treatment Confidential information shall not include information
generally available to the public. The provisions of Section 7 are intended by
the parties to survive and do survive termination or expiration of this
Agreement
8. Executive's Representation and Warranties.
(a) No Breach of Contract. Executive represents and warrants
that the execution and delivery of this Agreement by the Executive and the
performance of the Executive's obligations hereunder will not conflict with or
breach any agreement, order or decree to which the Executive is a party or by
which the Executive is bound.
(b) No Conflict of Interest. Executive warrants that Executive
is not, to the best of Executive's knowledge and belief, involved in any
situation that might create, or appear to create, a conflict of interest with
Executive's loyalty to or duties for the Company.
(c) Notification of Materials or Documents from Other
Employers. Executive further warrants that Executive has not brought and will
not bring to the Company or use in the performance of Executive's
responsibilities at the Company any materials or documents of a former employer
that are not generally available to the public, unless Executive has obtained
express written authorization from the former employer for their possession and
use.
(d) Notification of Other Post-Employment Obligations.
Executive also understands that, as part of Executive's employment with the
Company, Executive is not to breach any obligation of confidentiality that
Executive has to former employers, and Executive agrees to honor all such
obligations to former employers during Executive's employment with the Company.
Executive warrants that Executive is subject to no employment agreement or
restrictive covenant preventing full performance of Executive's duties under
this Agreement
(e) Indemnification for Breach; Survival. In addition to other
remedies which the Company might have for breach of this Agreement, Executive
agrees to indemnify and hold the Company harmless from any breath of the
provisions of this Section 6. The terms of this Section 6 shall survive any
termination of this Agreement.
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9. Termination by the Company.
(a) General. The Company shall have the right to terminate
this Agreement with or without Cause at any time during the term of this
Agreement by giving written notice to the Employee. The termination shall become
effective on the date specified in the notice, which termination date shall not
be a date prior to the date fourteen (14) days following the date of the notice
of termination itself, provided, however, that the termination of Executive may
become effective on the date of the notice or on any date during the fourteen
(14) day period following the notice provided that the Company continues to pay
the Employee's Base Salary during the fourteen-day period following the date of
the notice. Upon termination, the Company shall immediately pay the Executive
any reimbursable expenses owed to him and make available to the Executive the
Cobra portion of his health care benefits.
(b) Cause. In the event that the Executive is terminated for
Cause (as defined below), the Company shall pay the Executive any unpaid base
salary due Executive through the date of termination and notice pay, if any, as
provided in subparagraph (a) above. Executive shall not be entitled to any
additional salary, bonus payments, severance, or other compensation.
(c) Without Cause. In the event that the Executive is
terminated Without Cause, pursuant to this Section 9(c), in addition to paying
the Executive through the date of termination and, if applicable, complying with
subparagraph (a) above, provided Executive and the Company executes a full,
general mutual release of claims against each other, the Company shall pay to
the Executive severance compensation equal to a certain number of months (as
defined below) of the Employee's Base Salary as of the date of termination,
payable on the Company's regular payroll dates in accordance with normal payroll
practices and subject to deductions as required by law. The number of months of
severance shall be determined as follows: if the termination occurs within the
first twenty-six (26) months of this Agreement, then the number of months of
severance shall be the number of months worked by Executive hereunder subtracted
from twenty-six (26).
(d) Cause Defined. For purposes of this Section 9, "Cause"
shall mean that the Board of Directors has determined in its sole discretion
that the Executive has engaged in any of the following: (i) any act or omission
which constitutes a material breach of, or material failure or refusal to
perform duties under this Agreement and any covenant or condition thereof, after
notice of such and failure to cure the same within fifteen (15) business days;
(ii) any act constituting dishonesty, fraud, immoral or disreputable conduct
which is materially harmful to the Company or its reputation; (iii) any
conviction of a felony under applicable law; (iv) refusal to abide by or
implement a lawful directive of the Board of Directors after notice of such and
failure to cure the same within fifteen business days; or (vi) gross negligence
or gross misconduct of the Executive.
10. Termination by the Employee.
(a) General. The Executive may terminate this Agreement at any
time, with or without Good Reason (as defined below), by giving at least thirty
days' written notice to the Company. Any such termination shall become effective
on the date specified in such notice, provided that if the Executive gives more
than thirty (30) days written notice the Company may elect to have such
termination become effective on any date on or after the thirtieth (30th) day
after the date of the notice and prior to the date specified in the notice.
Notwithstanding the foregoing, at the option of the Company, the termination of
Executive's employment may become effective on any date on or after the date of
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the notice upon notice to the Executive by the Company and the payment by the
Company of the Executive's base salary during the thirty-day period following
the date of Executive's notice of termination of employment. Upon termination,
the Company shall immediately pay the Executive any reimbursable expenses owed
to him and make available to the Executive the Cobra portion of his health care
benefits.
(b) Without Good Reason. In the event that the Executive
terminates his employment without Good Reason (as defined below), the Company
shall pay the Executive any unpaid base salary due Executive through the date of
termination and notice pay, if any, as provided in subparagraph (a) above.
Executive shall not be entitled to any additional salary, bonus payments,
severance, or other compensation.
(c) Good Reason. In addition to any unpaid base salary due
Executive through the date of termination and notice pay, if any, as provided in
subparagraph (a) above, if such termination is for Good Reason, provided the
Executive and the Company executes a full, general mutual release of claims
against each other, the Company shall pay to the Executive severance
compensation equal to a certain number of months (as defined below) of the
Employee's base salary as of the date of termination, payable on the Company's
regular payroll dates in accordance with normal payroll practices and subject to
deductions as required by law. The number of months of severance shall be
determined as follows: if the termination occurs within the first twenty-six
(26) months of this Agreement, then the number of months of severance shall be
the number of months worked by Executive hereunder subtracted from twenty-six
(26).
(d) Good Reason Defined. For purposes of this Agreement, "Good
Reason" shall mean:
(i) any reduction in the Employee's Base Salary not
agreed to by the Employee; or
(ii) a material adverse change made by the Company in
the Executive's core functions, duties or responsibilities that would constitute
a demotion and that is not agreed to by the Employee; or
(iii) a requirement that the Executive relocate to an
office more than 75 miles from the office of the Company at which the Executive
spends the majority of his time on the date of relocation without Executive's
consent.
provided however, that any actions taken by the Company to accommodate a
disability of the Executive or pursuant to the Family and Medical Leave Act
shall not be a Good Reason for purposes of this Agreement and provided further,
in each such event listed in (i) through (iii) above, the Executive shall give
the Company notice thereof which shall specify in reasonable detail the
circumstances constituting Good Reason, and there shall be no Good Reason with
respect to any such circumstances if cured by the Company within thirty (30)
days after such notice.
11. Change of Control. For purposes of this Agreement a "Change of
Control" shall be deemed to occur, unless previously consented to in writing by
the Executive, and only if the Executive is not offered continued employment
under terms substantially similar to this Agreement, upon (i) the actual
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acquisition of fifty percent (50%) or more of the voting securities of the
Company by any company or entity or affiliated group of companies or entities
(other than pursuant to a bona fide underwriting agreement relating to a public
distribution of securities of the Company) not affiliated with the Executive or
Xxxxxx Xxxxxxx and/or any of their affiliates or family members, (ii) the
completion of a tender or exchange offer for more than fifty percent (50%) of
the voting securities of the Company by any company or entity or affiliated
group of companies or entities not affiliated with the Executive or Xxxxxx
Xxxxxxx and/or any of their affiliates or family members, (iii) the completion
of a proxy contest against the management for the election of a majority of the
Board of Directors of the Company if the group (other than a group which
includes Xxxxxx Xxxxxxx and/or any of his affiliates or family members)
conducting the proxy contest owns, has or gains the power to vote at least fifty
percent (50%) of the voting securities of the Company, (iv) a merger or
consolidation in which the Company is not the surviving entity or (v) a sale of
all or substantially all of the assets of the Company.
12. Termination by Death or Disability of the Executive.
(a) Death. In the event of the Executive's death during the
term of this Agreement, all obligations of the parties hereunder shall terminate
immediately, and the Company shall pay to the Executive's legal representatives
the Base Salary (and any earned bonuses) due the Executive through the day on
which Executive's death shall have occurred.
(b) Disability. Subject to applicable state and federal law,
the Company shall at all times have the right, upon written notice to the
Executive, to terminate this Agreement based on the Executive's Disability (as
defined below). Upon any termination pursuant to this Section, the Company shall
pay to the Executive any unpaid Base Salary through the effective date of
termination specified in such notice. The Company shall have no further
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of termination, subject, however to the
provisions hereof). Termination by the Company of the Executive's employment
based on "Disability" shall mean termination because the Executive is unable to
perform the essential functions of Executive's position with or without
accommodation due to a disability (as such term is defined in the Americans with
Disabilities Act) for six consecutive months. This definition shall be
interpreted and applied consistent with the Americans with Disabilities Act, the
Family and Medical Leave Act and other applicable law.
13. Termination by Mutual Consent. If at any time during the term of
this Agreement the parties by mutual consent decide to terminate this Agreement,
they shall do so by separate agreement setting forth the terms and conditions of
such termination.
14. Indemnification. To the maximum extent permitted under the
corporate laws of the State of Florida, (a) the Executive shall be indemnified
and held harmless by the Company, as provided under such corporate laws for any
and all actions taken or matters undertaken, directly or indirectly, in the
performance of his duties and responsibilities under this Agreement or otherwise
on behalf of the Company, provided the Executive did not act wantonly or
recklessly or was not grossly negligent or engaged in willful misconduct, and
(b) without limiting clause (a), the Company shall indemnify and hold harmless
the Executive from and against (i) any claim, loss, liability, obligation,
damage, cost, expense, action, suit, proceeding or cause of action
(collectively, "Claims") arising from or out of or relating to the Executive's
acting as an officer, director, employee or agent of the Company or any of its
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affiliates or in any other capacity, including, without limitation, any
fiduciary capacity, in which the Executive serves at the request of the Company,
and (ii) any cost or expense (including. without limitation, fees and
disbursements of counsel) (collectively, "Expenses") incurred by the Executive
in connection with the defense or investigation thereof. If any Claim is
asserted or other matter arises with respect to which the Executive believes in
good faith the Executive is entitled to indemnification as contemplated hereby,
the Company shall, at its election) to be determined in its sole and absolute
discretion, either assume the defense or investigation of such Claim or matter
or pay the Expenses incurred by the Executive in connection with the defense or
investigation of such Claim or matter, when and as incurred, provided that the
Executive shall reimburse the Company for such amounts, plus simple interest
thereon at the then current Prime Rate as in effect from time to time,
compounded annually, if the Executive shall be found, as finally judicially
determined by a court of competent jurisdiction, not to have been entitled to
indemnification hereunder.
This Indemnification shall survive the Termination of this Agreement.
15. Governing Law. Except as preempted by federal law, this Agreement
shall be executed, construed and performed in accordance with the laws of the
State of New Jersey without reference to conflict of laws principles. The
parties agree that the venue for any dispute hereunder will be the state or
federal courts in New Jersey and the parties hereby agree to the exclusive
jurisdiction thereof.
16. Binding Agreement. This Agreement and all rights and obligations
hereunder shall inure to the benefit of and be enforceable by the parties and
their personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees and assigns, including without
limitation any successor to the Company whether by merger, consolidation, sale
of stock or otherwise.
17. Notice. For the purpose of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally, or by private
overnight courier or mail service, postage prepaid or (unless otherwise
specified) mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive: To his home address as listed in Company records at the
time notice is given
If to the Company: To its corporate headquarters at the time notice is
given, "Attention: Board of Directors"
or to such other address as the parties may furnish to each other in writing.
Copies of all notices, demands and communications shall be sent to the home
addresses of all members of the Board of Directors of the Company.
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18. Waiver and Modification.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by the parties hereto, provided, however, that this Agreement may be
modified, waived or discharged by mutual agreement in writing.
(b) No delay, waiver, omission or forbearance (whether by
conduct or otherwise) by any party hereto at any time to exercise any right,
option, duty or power arising out of breach or default by the other party of any
of the terms, conditions or provisions of this Agreement to be performed by such
other party shall constitute a waiver by such party or a waiver of such party's
rights to enforce any right, option or power as against the other party or as to
subsequent breach or default by such other party, and no explicit waiver shall
constitute a waiver of similar or dissimilar terms, provisions or conditions at
the same time or at any prior or subsequent time.
19. Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, and, in the event that any one or more
of the words, phrases, sentences, clauses, provisions, sections or articles
contained in this Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid word or words, phrase or phrases, sentence or
sentences, clause or clauses, provisions or provisions, section or sections or
article or articles had not been inserted and the remainder of this Agreement
shall remain in full force and effect.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
21. Entire Agreement. This Agreement and the Confidential Information,
Inventions Assignment, Non-Solicitation and Non-Competition Agreement attached
hereto contains the entire understanding of the Company and the Executive with
respect to the subject matter hereof. This Agreement supersedes all prior
agreements and understandings whether written or oral between the Executive and
the Company with respect to such subject matter, and there are no restrictions,
agreements, promises, warranties or covenants other than those stated in this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date shown below effective as of the date first written above.
"COMPANY"
Date Signed: January 28, 2004 MEDIABAY, INC., a Florida corporation
By: /s/ Xxxx Xxxx
-----------------------------------
Printed Name: Xxxx X. Xxxx
-------------------------
Title: Vice Chairman and CFO
"EXECUTIVE"
Date Signed: January 28, 2004 /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
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