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EX-10.19 3 v17781exv10w19.txt EXHIBIT 10.19 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). 1 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 2 (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. 3 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. 4 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: 5 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. 6 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. 7 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 8 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 ------------------------------------ Lawrence J. Madden President, Digital Media Solutions EXECUTIVE /s/ Michael A. Brochu ---------------------------------------- Michael A. Brochu A-1