Exhibit 10.2
TERMS OF EMPLOYMENT AGREEMENT
FOR XXXXXX X. XXXXXX
1. AGREEMENT: This term sheet sets forth the agreed upon terms of the
agreement between Xxxxxx X. Xxxxxx ("Employee") and Alliance
Entertainment Corp. ("Alliance") in connection with the employment of
the Employee by Liquid Audio, Inc. ("Company") after the consummation
of the Merger contemplated in that certain Agreement and Plan of Merger
by and among the Company, Alliance and April Acquisition Corp. dated as
of June 11, 2002 (the "Merger Agreement").
2. TERM: Three years (the "Term") from the Closing Date as defined in the
Merger Agreement.
3. TITLE AND DUTIES: To be determined, from time to time, by the Chief
Executive Officer.
4. WORK LOCATION; REPORTING: Employee's principal office and place of
business during his employment will be at the Company's current offices
in Redwood City, California, or within forty miles of either such
offices or Employee's home, or at such other locations as Employee and
the Company shall from time to time agree. Employee will report to the
Chief Executive Officer.
5. SALARY AND BONUS
A. ANNUAL BASE SALARY: Annual base salary shall be no less than (i)
Employee's annual base salary at Liquid Audio, Inc. as of January
1, 2002 or (ii) an amount commensurate with other executives of the
Company with similar responsibilities and expertise.
B. RETENTION PAYMENTS:
(i) As a retention payment (subject to adjustment as set forth in
Section 7 hereof), Employee will receive a single payment of
$250,000 at the Closing Date.
(ii) On the 1st anniversary date of Employees' employment with the
Company, Employee will receive a single payment of $250,000.
(iii) On the 2nd anniversary date of the Employees' employment with
the Company, Employee will receive a single payment of
$250,000.
C. POSSIBLE DISCRETIONARY BONUS: Employee may be awarded additional
bonuses at the discretion of the Company's Board of Directors or
the Compensation Committee of the Board of Directors in connection
with annual compensation planning, provided however that the Board
of
-1-
Directors and the Compensation Committee may take into account the
Retention Payments pursuant to Section B when determining any bonus.
6. TERMINATION AND SEVERANCE BENEFITS:
(a) Upon termination without Cause at any time during the Term, Employee
shall receive, as a consulting fee: (i)an amount equal to two times
(2x) Employee's then annual base salary plus (ii) an amount equal to
any unpaid Retention Payments referred to in Section 5(B)(ii) and
(iii), as applicable, payable over time as the payments would otherwise
become due.
(b) Upon termination for Cause at any time during the Term, Employee shall
be entitled to payment of his Base Salary pursuant to Section 5(A)
hereof through the date of termination, and shall not be entitled to
any unpaid Retention Payments pursuant to Section 5(B) hereof or unpaid
amounts as set forth in Section 7 hereof.
For purposes of this Section 6, "Cause" shall mean acts or omissions on the
part of Employee involving: (a) serious misconduct, including but not
limited to, Employee's commitment of an act of fraud, embezzlement or
misappropriation against the Company, unauthorized disclosure or use of
confidential information or trade secrets, or sexual, racial or other
actionable harassment; (b) a breach of any statutory or common law
fiduciary duty owed to the Company; (c) conviction by a court of competent
jurisdiction (or entry of a plea of guilty or nolo contendere) of any
felony or crime involving moral turpitude, dishonesty or fraud (other than
a traffic offense); (d) material failure to perform his duties pursuant to
the Agreement or material failure to follow the reasonable instructions of
the Chief Executive Officer of the Company to the extent of his ability to
do so, or the material failure to comply with any other provision of the
Agreement or Company policies, where such failure in each of the above
cases is not cured within thirty days after receipt of written notice from
the Company specifying such violations; or (e) repeated violations of
clause (d) hereof.
(c) Employee may voluntarily resign as an employee of the Company with
fifteen days prior written notice to the Company. In such case Employee
shall be entitled to payment of his Base Salary pursuant to Section
5(A) through the date of termination but shall not be entitled to any
unpaid Retention Pyaments pursuant to Section 5(B) hereof or unpaid
amounts as set forth in Section 7 hereof.
7. NON-COMPETE/NON-SOLICIT/NON-INTERFERENCE: For a period of 5 years following
the Closing Date: (1) Employee shall not (and shall cause Employee's
affiliates not to) prepare, plan, organize, conspire, engage or have any
equity interest in, own, manage, operate, finance, control, participate in,
or otherwise render services or advice to any competitor of the Company
anywhere in the world; (2) Employee shall not (and shall cause Employee's
affiliates not to) (a) solicit business of the same or similar type being
carried on by the Company from any
-2-
person known or who should be known to be an actual or potential customer,
client, investor or partner of the Company, (b) solicit, employ or
otherwise engage as an employee, independent contractor or otherwise any
person who is an employee of the Company or attempt to induce any employee
of the Company to terminate his/her employment with Company; or (c)
interfere with the Company's existing, expectant or potential business
relationship with any person.
In consideration for the foregoing, the Company shall pay Employee a sum
total of $750,000, payable as follows: (i) $250,000 payable upon the 1st
anniversary of the Closing Date; (ii) $250,000 payable upon the 2nd
anniversary of the Closing Date; and (iii) $250,000 payable upon the 3rd
anniversary of the Closing Date; provided however that in the event of a
termination for Cause or voluntary resignation by Employee, such
consideration shall be reduced by any amounts unpaid as of the date of
Employee's termination; and provided further that in the event of a
termination for Cause or voluntary resignation by Employee during the first
year after the Effective Date, $125,000 of the Retention Payment paid on
the Effective Date shall be allocated as consideration for the agreement
set forth in this Section 7. The amounts described above shall remain due
and payable on the specified payment dates if Employee's employment is
terminated without Cause by the Company at any time during the Term. Upon
any breach of this Section 7, Employee shall forfeit all such unpaid
amounts.
8. CONFIDENTIALITY PROVISIONS. Employee agrees to sign a
confidentiality/propriety rights agreement with the Company protecting the
Company's confidential information.
9. REIMBURSEMENT OF COSTS/PERQUISITES: Employee to receive reimbursement of
business costs and expenses in accordance with normal Company policy.
Perquisites comparable with other executives of the Company with similar
responsibilities and expertise.
10. BENEFITS: Participation in life, health, disability, other insurance
programs and other Company benefit programs during employment. Employee
shall be entitled to participate in other employee benefit plans or
insurance plans offered to other executives of the Company with similar
responsibilities and expertise.
11. VACATION: Vacation to be in accordance with normal Company policy.
12. LEGAL ACTION: In any legal action undertaken to enforce the terms of this
agreement, the prevailing party shall be reimbursed by the non-prevailing
party for such prevailing party's reasonable attorneys' fees and expenses,
including the costs of enforcing a judgment.
13. WITHHOLDING: All payments required to be made to Employee hereunder shall
be subject to all applicable federal, state and local tax withholding laws.
14. SOLE REMEDY: Employee acknowledges and agrees that the payments set forth
in this agreement, in the event of any termination of the Employee's
employment,
-3-
are fair and reasonable and shall constitute Employee's sole and exclusive
remedy, in lieu of all rights and claims of Employee, at law or in equity,
for a termination of his employment, including expressly, for termination
of his employment by the Company in a manner which shall constitute a
breach of this agreement, and for all other rights and claims of any nature
whatsoever related to any such termination, and Employee hereby irrevocably
waives all rights and claims of any nature whatsoever in respect of any
such termination except for the payments agreed to in this agreement.
15. LONG FORM: The parties contemplate the execution of more formal long form
documentation and/or other instruments incorporating the terms of this
agreement and containing customary provisions for an agreement of this
nature; provided, however, unless and until such long form documentation is
executed, the terms of this agreement shall control.
16. PREPARATION OF EMPLOYMENT AGREEMENT: Xxxxxx, Xxxxxx & Xxxxx will prepare a
draft of Employee's Employment Agreement. Each party will bear its own fees
and expenses in connection with discussions, negotiations and preparation
of the new Employment Agreement. No such fees and expenses will be charged
back to Liquid Audio, Inc.
This Agreement is dated as of June 12, 2002.
"ALLIANCE"
ALLIANCE ENTERTAINMENT CORP.
By: ______________________________
Its: ______________________________
"EMPLOYEE"
/s/ Xxxxxx X. Xxxxxx
___________________________________
Xxxxxx X. Xxxxxx
-4-
