EXHIBIT 10.19
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT, dated March 30,
2005, and effective as of this 31st day of January 2005 (the "Effective Date")
is between Loudeye Corp., a Delaware corporation (the "Company"), and Michael A.
Brochu ("Executive") and amends, restates and supersedes that certain Executive
Employment Agreement dated January 31, 2005.
AGREEMENTS
1. EMPLOYMENT
The Company will employ Executive and Executive will accept employment by
the Company as its President and Chief Executive Officer. Executive will have
the authority, subject to the Company's Amended and Restated Certificate of
Incorporation, as amended, and Amended Bylaws, as may be granted from time to
time by the Company's Board of Directors (the "Board"). Executive shall perform
the duties assigned from time to time by the Board, which relate to the business
of the Company, or any business ventures in which the Company may participate.
Executive has executed a Loudeye Corp. Proprietary Information and Inventions
Agreement, which contains noncompetition and nonsolicitation obligations, in the
form attached as EXHIBIT A, which is part of this Agreement.
2. ATTENTION AND EFFORT
Executive shall devote his entire productive time, ability, attention and
effort to the Company's business and shall skillfully serve its interests during
the term of this Agreement and shall not engage in any business or employment
activity that is not on Company's behalf (whether or not pursued for gain or
profit); provided, however, that Executive may devote reasonable periods of time
to (a) engaging in personal investment activities that do not involve Executive
providing any advice or services to the businesses that compete with the Company
or any of its subsidiaries; and (b) engaging in charitable or community service
activities, so long as none of the foregoing additional activities materially
interfere with Executive's duties under this Agreement. Executive may from time
to time receive requests to serve on a board of directors of another company, in
which case Executive shall notify the Board in advance of accepting any such
position in order to permit full consideration of whether such board position
would interfere with Executive's performance of his duties to the Company,
including under this Agreement. The parties agree that Executive may continue to
serve on the advisory Board of Voyager Capital, and on the Boards of Directors
of Art Technology Group (ATG), Allrecipes.com, Emphysis Medical Management, and
the Washington Software Alliance (WSA).
3. TERM
Unless earlier terminated with appropriate notice of termination, the
initial term of this Agreement shall be from the date hereof until December 31,
2005; provided, however, that, unless terminated with appropriate notice, on
each January 1 following the date of this Agreement, beginning with January 1,
2006, this Agreement shall be automatically renewed for successive one-year
terms.
4. COMPENSATION
During the term of this Agreement, the Company shall pay or cause to be
paid to Executive, and Executive shall accept in exchange for the services
rendered hereunder by him, the following compensation:
4.1 BASE SALARY
Executive's compensation shall consist of, in part, an annual base
salary (the "Base Salary") of Three Hundred Twenty Five Thousand Dollars
($325,000) before all customary payroll deductions. The Base Salary shall be
paid to Executive in substantially equal installments and at the same intervals
as other officers of the Company are paid. At the end of each year of employment
(or sooner if determined by the Board), Executive's Base Salary shall be
reviewed by the Compensation Committee of the Board in its sole discretion,
except that the Executive's Base Salary shall never be reduced below Three
Hundred Twenty Five Thousand Dollars ($325,000).
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4.2. STOCK OPTION GRANTS
On the Effective Date, the Company shall grant Executive a stock
option to purchase 1,500,000 shares (the "Initial Option") of the Company's
common stock, par value $.001 per share (the "Common Stock"). The Initial Option
shall be granted under and be subject to the terms of the Company's 2000 Stock
Option Plan, as amended (the "2000 Plan"). The Initial Option shall be an
incentive stock option to the maximum extent allowable under applicable law. The
exercise price for the Initial Option shall be the fair market value of the
Common Stock on the Effective Date. The Initial Option shall vest as follows:
25% of the shares shall vest and be exercisable on the one year anniversary date
of this Agreement and the remaining shares shall vest monthly in equal
increments over the next 36 months.
In addition, subject to stockholder approval at the annual meeting of
the Company's stockholders anticipated to be held in May 2005 of an increase in
the authorized number of shares reserved under the 2000 Plan or stockholder
approval at such meeting for implementation of a restricted stock plan, the
Compensation Committee shall at its sole discretion either: (a) grant Executive
an option to purchase an additional 1,500,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date
the Company obtains such stockholder approval of the share reserve under the
2000 Plan; or (b) issue to Executive a number of shares of restricted Common
Stock equal to the value of the option grant in subclause (a). If the Board
elects to issue restricted stock to Executive, the minimum number of shares to
be issued to Executive shall be 750,000. This additional compensatory equity
grant, whether a stock option or restricted stock grant, shall vest over a four
year period, 25% vesting on the one year anniversary of the Effective Date and
the remainder vesting monthly over three years.
Solely in the event the stockholders do not approve either an increase
in the share reserve under the 2000 Plan or implementation of a restricted stock
plan, then the Compensation Committee shall cause to be issued on January 1,
2006, a stock option to purchase 1,500,000 shares of the Company's common stock
at an exercise price equal to the closing price for the Common Stock on the
immediately preceding trading date and vesting 25% as of January 1, 2006, the
remainder vesting monthly over three years. This option grant, or the option or
restricted stock grant set out in the preceding paragraph, is referred to as the
"Subsequent Grant."
If the Company elects to fail to renew the contract in accordance with
Section 3 or otherwise terminates this Agreement without Cause (as defined in
Section 7.7) or Executive terminates this Agreement for "Good Reason" (as
defined in Section 7.7) at any time, the Subsequent Grant (if it has not already
been made as provided above) shall nonetheless be issued even if the Company
chooses to terminate this Agreement without Cause effective December 31, 2005 or
at any time, and all options (or restricted stock, as the case may be) under the
Initial Option grant and Subsequent Grant shall accelerate vest effective
December 31, 2005 (for the portion of the options granted as of that date for
failure to renew this Agreement or otherwise terminate this Agreement) and/or
the date of termination of this Agreement.
If, on or after a Change of Control (as defined herein), Executive's
employment with the Company terminates due to an involuntary termination of
Executive by the Company other than for "Cause" (as defined in Section 7.7) or
by Executive for "Good Reason" (as defined in Section 7.7), then all of
Executive's Company stock options or restricted stock grants shall immediately
accelerate and become fully vested and exercisable immediately upon such
termination.
For purposes of this Agreement, "Change of Control" shall mean the
occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the total voting
power represented by the Company's then outstanding voting securities; or
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(ii) The consummation of the sale or disposition by the Company of all
or substantially all the Company's assets in one or a series of related
transactions; or
(iii) The consummation of a merger or consolidation of the Company or
share exchange involving any other corporation, other than (A) a merger,
consolidation or share exchange which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (B) a merger
effected solely for purposes of changing the domicile of the Company.
4.3 ONE-TIME BONUS
Within fifteen calendar (15) days of the execution of this Agreement,
Company shall pay to Executive Twenty-Five Thousand Dollars ($25,000.00), less
all customary payroll deductions.
4.4 PERFORMANCE BONUS
Executive's eligibility for a performance bonus shall be based on the
overall performance of the Company. Each year the Compensation Committee shall
set both a performance target and maximum performance goal for the Company for
the fiscal year. The performance target and maximum performance goal shall be
documented in writing and acknowledged by Executive. If, based on the Company's
audited financial statements, the performance target is met, and if the Company
is EBITDA positive (as determined in accordance with GAAP), Executive shall be
eligible for an annual bonus of up to fifty percent (50%) of his Base Salary.
If, based on the Company's audited financials, the maximum performance goal is
met, and if the Company is EBITDA positive, Executive shall be eligible for an
annual bonus of up to one hundred percent (100%) of his Base Salary. For
avoidance of doubt, executive's maximum aggregate annual bonus potential under
this Section 4.4 is 100% of his Base Salary. The parties will negotiate in good
faith to address any issues of fairness or consistency if there are changes in
GAAP between the time that the targets are established and the calculation of
eligibility for bonus.
The actual amount of any bonus payable to Executive shall be
determined by the Compensation Committee of the Board, and Executive understands
that in any year no more than twenty five percent (25%) of that year's total
positive EBITDA balance be distributed as bonus compensation individually or
collectively to the Company's executive leadership team (including Executive and
the Company's other senior executives). Any potential bonus amount that is not
payable pursuant to the prior sentence shall not be earned and shall not be
accrued by the Company. For illustration purposes only, if in a given year
Executive meets the maximum performance goal entitling Executive to a
performance bonus of $325,000 (100% of his Base Salary) and the Company's
positive EBITDA balance as of the applicable year end is $1,000,000, then the
maximum bonus amount distributable to the executive leadership team shall be
$250,000, of which Executive would receive a percentage to be determined by the
Compensation Committee of the Board. In this example, the remaining balance of
Executive's earned bonus would not be earned and would not be accrued by the
Company.
5. DIRECTOR
So long as this Agreement is in effect, the Board shall, to the maximum
extent as is consistent with its obligations under applicable law, recommend
Executive as a candidate for director at each annual meeting of the stockholders
of the Company where Executive's term as a director of the Company would
otherwise expire. As an employee of the Company, Executive shall not be entitled
to any additional compensation from the Company for his services as a director.
In the event Executive ceases to serve as Chief Executive Officer for any
reason, the Board believes that whether Executive will continue as a director is
a matter for discussion at that time with the new Chief Executive Officer and
the Board. If it is determined by the Board that Executive should not continue
to serve on the Board, then Executive agrees to immediately tender his
resignation from the Board.
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6. BENEFITS
During the term of this Agreement, the Company shall provide Executive with
the health and dental insurance provided to other senior executives. Executive
will be entitled to participate, subject to and in accordance with applicable
eligibility requirements, in fringe benefit programs that may be established by
the Company or, to the extent applicable, by the Board. During each calendar
year for the term of this Agreement, and, assuming the Agreement is renewed,
through December 31, 2007, Executive shall be entitled to four (4) weeks paid
vacation. Beginning January 1, 2008, Executive shall be entitled to five (5)
weeks paid vacation. Unused vacation time may be accrued during the term of this
Agreement, but in no event shall Executive accrue and carry over more than four
(4) weeks of paid vacation. Any unused vacation time above the three weeks that
may be carried over is forfeited.
7. PAYMENTS AND BENEFITS UPON TERMINATION
Beginning on the Effective Date, and subject to Executive executing a
release in form and substance reasonably satisfactory to the Company, Executive
shall be entitled to the following payments and benefits following termination
of Executive's employment by Executive for Good Reason (as defined below) or by
the Company for any reason other than Cause (as defined below), including
non-renewal of this Agreement, or upon Executive's death or Disability (as
defined below).
7.1 TERMINATION PAYMENT
(a) Generally. The Company shall make payments in cash to
Executive as severance pay equal to four months of Executive's annual Base
Salary in effect immediately prior to the date of Executive's termination (the
"Cash Severance"). The Cash Severance due under this Section 7.1(a) shall be
paid in a lump sum. The amount of Cash Severance to be paid under this section
shall increase to an amount equal to eight months of Executive's annual Base
Salary on December 31, 2005, and to an amount equal to twelve months of
Executive's annual Base Salary on December 31, 2006. The amount of Cash
Severance can be increased as negotiated in good faith between the Executive and
the Compensation Committee at the time of termination.
(b) Termination Payment on Change of Control. If, on or after a
Change of Control, Executive's employment with the Company terminates due to (i)
a voluntary termination for Good Reason (as defined in Section 7.7) or (ii) an
involuntary termination by the Company other than for "Cause" (as defined in
Section 7.7), then the Company shall pay Executive as severance an amount equal
to twelve months of Executive's annual Base Salary in effect immediately prior
to the date of Executive's termination. The severance due under this Section
7.1(b) shall be paid in a lump sum.
7.2 ACCRUED BENEFITS
The Company shall pay to Executive the amount of any compensation
deferred by Executive and any accrued vacation pay for the periods of service
prior to the date of termination. Such amounts shall be paid in a lump sum.
7.3 DEATH OR DISABILITY OF EXECUTIVE
Executive shall be entitled to the Cash Severance in the event of his
death or Disability. In the event of Executive's death, all benefits and
payments provided for by this Section 7 shall be paid to his spouse, if any, or
otherwise to the personal representative of his estate, unless Executive has
otherwise directed the Company in writing prior to his death.
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7.4 EXCLUSIVE SOURCE OF SEVERANCE PAY
Benefits provided under this Agreement shall replace the amount of any
severance payments to which Executive would otherwise be entitled under any
severance plan or policy generally available to executives of the Company.
7.5 NONSEGREGATION
No assets of the Company need be segregated or earmarked to represent
the liability for benefits payable hereunder. The rights of Executive to receive
benefits hereunder shall be only those of a general unsecured creditor.
7.6 WITHHOLDING
All payments under this Section 7 are subject to applicable federal
and state payroll withholding or other applicable taxes.
7.7 "CAUSE" AND "GOOD REASON" DEFINITIONS
For purposes of this Agreement, "Cause" means (a) violation by
Executive of a state or federal criminal law involving the commission of a crime
against the Company, or any felony; (b) habitual or repeated misuse by Executive
of alcohol or controlled substances; (c) fraud, intentional misrepresentation or
dishonesty by Executive with respect to the business of the Company; (d) any
incident materially compromising Executive's reputation or ability to represent
the Company with the public; (e) any intentional act by Executive that
substantially impairs the Company's business, goodwill or reputation; or (f) a
determination by a majority of the Company's directors (other than the
Executive) within thirty (30) days after the end of each of two (2) consecutive
calendar quarters that the Company (or the Executive) has not substantially met
the Quarterly Goals (as defined below). For purposes of this Agreement,
"Quarterly Goals" shall mean specific targeted metrics of Company performance
(financial or otherwise) and / or Executive performance for a calendar quarter.
The Quarterly Goals shall be agreed to in writing by the Executive and the
Company within the thirty (30) day periods prior to the beginning of each
calendar quarter. The first set of Quarterly Goals shall be for the Second
Quarter of 2005.
For purposes of this Agreement, "Good Reason" shall mean, without
Executive's express written consent: (a) the material reduction of (i)
Executive's duties, benefits, authority or responsibilities (as determined in
good faith by the Board of Directors), or (ii) compensation ; (b) the relocation
of the principal place of Executive's employment to a location that is more than
fifty (50) miles away from its current location; and (c) the uncured breach of
any material provision of this Agreement by the Company, including, without
limitation, failure by the Company to pay Executive's Base Salary or bonus;
provided, however, that the Executive shall not be deemed to have resigned for
Good Reason hereunder unless with respect to each of (a) and (b) and (c) above,
the Executive shall have provided written notice to the Company within 60
calendar days after the event that the Executive believes gives rise to the
Executive's right to terminate employment for Good Reason, describing in
reasonable detail the facts that provide the basis for such belief, and the
Company shall have thirty (30) days from the date of such notice to cure any
such material reduction, relocation or breach.
7.8 TERMINATION FOR FAILURE TO MEET QUARTERLY GOALS
Notwithstanding anything stated elsewhere in this Agreement, the
parties agree that if Executive is terminated by the Company for failing to
substantially meet the Quarterly Goals after the end of each of two successive
quarters, Executive shall be entitled to severance under Section 7.1(a) of this
Agreement, but shall not be entitled to any accelerated vesting of any
outstanding options.
8. TERMINATION
Employment of Executive pursuant to this Agreement may be terminated as
follows:
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8.1 BY THE COMPANY
Until December 31, 2005, the Company may terminate the employment of
Executive with or without Cause upon giving written notice of termination
("Notice of Termination"), which notice shall be effective immediately if
termination is for Cause and thirty (30) days later if termination is not for
Cause. After January 1, 2006, the Company may terminate this Agreement without
Cause upon sixty (60) days' prior written notice in the form of a Notice of
Termination. This Agreement shall terminate upon the effective date specified in
such Notice of Termination. Payments due to Executive pursuant to Section 7, if
any, shall commence on the effective date of the Notice of Termination.
8.2 BY EXECUTIVE
Executive may terminate this Agreement upon sixty (60) days' prior
written notice in the form of a Notice of Termination, and this Agreement shall
terminate upon the effective date specified in such Notice of Termination.
Payments due to Executive pursuant to Section 7, if any, shall commence on the
effective date of the Notice of Termination. Notwithstanding the preceding
sentence, the Company shall have the right to accelerate Executive's termination
of employment to be effective on the date that the Notice of Termination is
received by the Company, or any date of the Company's choosing between that date
and the effective date specified in the Notice of Termination.
8.3 AUTOMATIC TERMINATION
This Agreement and Executive's employment shall terminate
automatically upon Executive's death or Executive's inability, for any reason,
to perform his duties with the Company for 120 days in any twelve (12) month
period ("Disability").
8.4 EFFECT OF TERMINATION
Notwithstanding any termination or expiration of this Agreement, the
Company shall remain liable for any rights or payments arising prior to such
event to which Executive is entitled under this Agreement.
9. GOLDEN PARACHUTE TAXES.
In the event that (i) any amounts paid or deemed paid to Executive
under this Agreement are deemed to constitute "excess parachute payments" as
defined in Section 280G of the Code (taking into account any other payments made
to Executive under any other agreement and any other compensation paid or deemed
paid to Executive), or if Executive is deemed to receive an "excess parachute
payment" by reason of his or her vesting in the option grants or restricted
stock grants set forth in Section 4.2, and (ii) such deemed "excess parachute
payments" would be subject to the excise tax of Section 4999 of the Code, then
at the election of the Executive, the amount of any or all of such payments or
deemed payments, as selected by Executive, may be reduced (or, alternatively the
provisions of Section 4.2 may be waived so as not act to vest options to such
Executive), so that no such payments or deemed payments shall constitute excess
parachute payments. The determination of whether a payment or deemed payment
constitutes an excess parachute payment shall be made in the sole discretion of
the Board.
10. MISCELLANEOUS
10.1 AMENDMENT
This Agreement may not be amended except by written agreement between
Executive and an authorized representative of the Company following approval by
the Compensation Committee.
10.2 NO MITIGATION
All payments and benefits to which Executive is entitled under this
Agreement shall be made and provided without offset, deduction or mitigation on
account of income Executive could or may receive from other employment or
otherwise.
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10.3 LEGAL EXPENSES
In connection with any litigation, arbitration or similar proceeding,
whether or not instituted by the Company or Executive, with respect to the
interpretation or enforcement of any provision of this Agreement, the
substantially prevailing party shall be entitled to recover from the other party
all costs and expenses, including reasonable attorneys' fees and disbursements,
in connection with such litigation, arbitration or similar proceeding.
10.4 NOTICES
Any notices required under the terms of this Agreement shall be
effective hand delivered or when mailed, postage prepaid, by certified mail and
addressed to, in the case of the Company:
Loudeye Corp.
1130 Rainier Avenue S
Seattle, WA 98144
Attention: Compensation Committee
and: General Counsel
with a copy to:
Cairncross & Hempelmann, P.S.
524 Second Avenue, Suite 500
Seattle, WA 98104
Attn: Rosemary Daszkiewicz
and to, in the case of Executive:
Michael A. Brochu
16548 SE 59th Pl
Bellevue, WA 98006-5556
Either party may designate a different address by giving written notice of
change of address in the manner provided above.
10.5 WAIVER; CURE
No waiver or modification in whole or in part of this Agreement, or
any term or condition hereof, shall be effective against any party unless in
writing and duly signed by the party sought to be bound. Any waiver of any
breach of any provision hereof or any right or power by any party on one
occasion shall not be construed as a waiver of, or a bar to, the exercise of
such right or power on any other occasion or as a waiver of any subsequent
breach.
10.6 BINDING EFFECT; SUCCESSORS
This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the Company and Executive and their respective heirs, legal
representatives, successors and assigns.
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10.7 SEVERABILITY
Any provision of this Agreement which is held to be unenforceable or
invalid in any respect in any jurisdiction shall be ineffective in such
jurisdiction to the extent that it is unenforceable or invalid without affecting
the remaining provisions hereof, which shall continue in full force and effect.
The enforceability or invalidity of a provision of this Agreement in one
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the state of Washington applicable to contracts made and to be
performed there.
SIGNATURE PAGE FOLLOWS
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SIGNATURE PAGE TO EMPLOYMENT AGREEMENT
The Company and Executive have executed this Agreement at Seattle,
Washington as of the Effective Date.
Loudeye Corp.
By: /s/ Lawrence J. Madden
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Lawrence J. Madden
President, Digital Media Solutions
EXECUTIVE
/s/ Michael A. Brochu
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Michael A. Brochu
A-1