Employment Agreement - ARTISTdirect Inc. and Jon Diamond
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated September 29, 2003,
(the "Effective Date") and is entered into between ARTISTdirect, Inc., a
Delaware corporation (the "Company"), and Jon Diamond ("Employee").
RECITALS
WHEREAS, the Company desires to employ Employee to serve the Company and
its subsidiaries and Employee desires to be so employed by the Company, on the
terms and subject to the conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, the parties hereto have agreed, and do hereby mutually
agree, as follows:
1. Employment and Duties. Subject to the other terms and conditions set forth
herein, the Company hereby employs Employee, and Employee agrees to be employed
by the Company, as President and Chief Executive Officer. Employee shall have
the duties, responsibilities and authority customarily associated with the
position of president and chief executive officer of a publicly held corporation
and shall report to the Company's Board of Directors. Employee shall be
nominated by the Company for election, and shall serve, as a member of the
Company's Board of Directors.
2. Devotion to Duties. During the Term, Employee shall faithfully perform to
the best of his ability all services and acts necessary or advisable as both (a)
are consistent with his title and position and (b) may reasonably be assigned to
him by the Board (but he shall not be assigned any duties or responsibilities
that, in the aggregate, would represent a material diminution in, or would be
materially inconsistent with, his duties and responsibilities as President and
Chief Executive Officer). During the Term, Employee shall devote his business
time, skill and energies to the business of the Company and each of its
"Subsidiaries" (as defined below); provided, however, that Employee may devote a
limited amount of time to other business activities (including service on boards
of directors), so long as (a) such activities are not competitive with the
Company's business and (b) Employee's so doing does not interfere with his
performance of his duties to the Company. For purposes of this Agreement,
"Subsidiaries" shall mean those entities whose affairs the Company has, now or
in the future, the power to direct by reason of ownership of securities, by
contract, or otherwise. Without limiting the preceding sentence, any person or
entity owning directly or indirectly 50% or more of the voting securities of
another entity shall be deemed to have the power to direct the affairs of such
other entity.
3. Principal Place of Employment. During the Term, Employee's principal place
of employment shall be at the offices of the Company in the Los Angeles area;
provided, however, that, until employee relocates to California (which is
expected to occur in the first quarter of 2004) he may spend a portion of his
time, and perform his services for the Company, in New York City. In addition,
in connection with his services for the Company, Employee will be expected to
travel from time to time (at the Company's expense in accordance with the
provisions of Section 6(d) below).
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4. Term. The term of Employee's employment hereunder shall be deemed to have
commenced on the date hereof and shall continue through August 15, 2006 (the
"Term"), unless terminated sooner as provided in Section 7 below. In the event
Employee continues in the employ of the Company after August 15, 2006, such
employment shall be solely on an at-will basis. Accordingly, after August 15,
2006, Employee may resign or the Company may terminate Employee with or without
cause and with or without advance notice. During any such period of at-will
employment, Employee will be paid at the monthly base salary rate for the last
regular pay period of the scheduled Term.
5. Compensation. For all services to be rendered by Employee hereunder,
Employee shall be paid by the Company the amounts set forth in this
Section 5. Employee shall not be entitled to additional compensation for
performing any services consistent with his duties hereunder for any
Subsidiary of the Company.
(a) Base Salary. During the Term, the Company shall pay Employee a base
salary at the annual rate of One Hundred Eighty-Five Thousand Dollars ($185,000)
(the "Base Salary"), payable in accordance with the Company's standard payment
schedule for executive employees.
(b) Signing Bonus. Upon the complete execution of this Agreement, the
Company shall pay Employee a signing bonus in an amount equal to Four Thousand
Three Hundred Fifteen and 07/100 Dollars ($4,315.07).
(c) Bonuses. Employee shall be eligible to receive the following
bonuses:
(i) Discretionary Bonus. Employee shall be eligible to receive a
discretionary bonus of up to $50,000 with respect to each fiscal year of the
Term, pro-rated for any portion thereof. The amount of such discretionary bonus,
if any, shall be determined by the Compensation Committee of the Company's Board
of Directors (the "Board") or, if none, the Board (the "Committee").
(ii) Formula Bonus. Employee shall be entitled to receive a formula
bonus with respect to each fiscal year of the Term in an amount equal to the
lesser of (A) Fifty Thousand Dollars ($50,000), pro-rated for any partial fiscal
year, or (B) the maximum amount that the Company could pay to Employee during
the applicable fiscal year without causing the Company to have negative, or
increased negative, earnings before interest, taxes, depreciation and
amortization in such fiscal year.
The foregoing bonuses, if any, are intended to reward contribution to the
Company's performance through the end of the applicable fiscal year, and
consequently shall be paid only if Employee is employed and in good standing on
the last day of the applicable fiscal year. Notwithstanding the foregoing, the
foregoing shall not affect Employee's right to receive bonuses otherwise payable
with respect to the period beginning January 1, 2006 and ending August 15, 2006,
so long as Employee is employed and in good standing on August 15, 2006.
(d) Stock Option. Concurrently with the execution of this Agreement, the
Company is granting Employee an option to acquire shares of the Company's Common
Stock (the "Stock Option").
Amounts payable to Employee pursuant to this Section 5 shall be subject to
required withholdings and shall be pro-rated for partial years. Employee hereby
acknowledges and
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agrees that he shall not be eligible to participate in any employee bonus plans
of the Company other than as may be provided for in this Agreement.
6. Employee Benefits; Reimbursement for Expenses.
(a) Participation in Employee Benefit Plans. Employee shall be entitled
to participate in such Company retirement, profit sharing and pension plans and
life and other insurance programs, as well as other benefit programs, as are
available to other senior executive employees of the Company, subject to the
terms of those plans and programs; provided, however, that notwithstanding
anything herein to the contrary, the Company shall not be obligated to institute
or maintain any particular benefit or insurance program or plan or aspect
thereof.
(b) Car Allowance. Employee shall be entitled to a car allowance at the
rate of $650 a month.
(c) Vacation. Employee shall be entitled to not less than four (4) weeks
vacation during each year of the Term hereof to be scheduled at mutually
agreeable times and accrued and taken in accordance with Company policy.
Employee may not accrue more than a maximum of forty (40) days of unused
vacation time and, accordingly, vacation time will cease to accrue during any
period in which Employee has forty (40) days of accrued vacation time.
(d) Reimbursement of Expenses. The Company agrees to reimburse Employee
for all reasonable and necessary out-of-pocket expenses incurred by Employee
during his employment in performing of services for the Company, including but
not limited to for business-related travel, hotel, meals, telephone calls and
entertainment. As a condition to the reimbursement of such expenses by the
Company to Employee, Employee shall provide the Company with copies of invoices,
receipts or other satisfactory documentation in sufficient detail to allow the
Company to confirm the business nature of the expenses and to claim an income
tax deduction for such paid items, if such items are deductible. The obligations
of the Company to make the reimbursements specified hereunder for expenses
accrued prior to the effective date of termination of employment shall survive
any termination of the Term.
(e) Relocation Expenses. In addition to reimbursement of expenses as
provided in Section 6(d), in accordance with a mutually determined budget
Company shall reimburse Employee for the following reasonable out-of-pocket
expenses incurred by Employee: (a) the costs of Employee periodically traveling
by air between New York and Los Angeles during the "Relocation Period" (as
defined below); and (b) the costs of Employee obtaining and maintaining a
furnished apartment in Los Angeles during the Relocation Period. For purposes of
the preceding sentence, the "Relocation Period" shall mean the period commencing
on the Effective Date and ending upon the earlier of: (i) the date Employee's
immediate family moves to Los Angeles or (ii) the date six (6) months following
the Effective Date.
7. Termination. Employee and the Company hereby agree and acknowledge that
the Company shall have the right to terminate Employee's employment for any
reason whatsoever; provided, however, that if the Company terminates Employee's
employment other than pursuant to Sections 7(a), 7(b) or 7(c) below, it shall be
obligated to make the payment described in Section 7(f)(ii) below, and the Stock
Option shall be deemed fully "vested" in accordance with its terms.
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(a) Disability. The Company may terminate Employee's employment
hereunder after the occurrence, and during the continuance, of any Disability of
Employee, upon thirty (30) days' prior written notice to Employee. For purposes
of this Agreement, "Disability" means Employee's incapacity to perform
substantially all of his then current duties as required hereunder for one
hundred eighty (180) days or more within any period of three hundred sixty-five
(365) consecutive days because of mental or physical condition, illness or
injury, consistent with applicable state and federal law. In the event of any
dispute regarding the existence of Employee's Disability, the matter shall be
resolved by the determination of a physician qualified to practice medicine in
the State of California, selected by the Company and reasonably approved by
Employee. For this purpose, Employee will submit to appropriate medical
examinations.
(b) Cause. The Company may terminate Employee's employment hereunder for
Cause. For the purposes of this Agreement, "Cause" shall mean Employee shall
have (i) been convicted of, or pleaded nolo contendere to, any felony or lesser
crime involving fraud, embezzlement or misappropriation of the property of the
Company or any of its Subsidiaries; (ii) engaged in gross negligence or willful
misconduct in the performance of Employee's duties hereunder that has resulted
in material injury to the Company; (iii) materially and willfully breached any
material provision hereof; or (iv) misappropriated for his own purpose and
benefit any material property of Company or any Subsidiary or misappropriated
for his own purpose and benefit, in violation of his fiduciary obligation to the
Company, any material opportunity of the Company or any Subsidiary.
Notwithstanding anything to the contrary contained herein, none of the events or
circumstances described in clauses (ii), (iii) or (iv) above shall constitute
"Cause" for purposes of this Agreement unless the Company gives Employee written
notice delineating the claimed event or circumstance and setting forth the
Company's intention to terminate Employee's employment if such claimed event or
circumstance is not capable of remedy or is not duly remedied within thirty (30)
days following such notice, if capable of remedy, and Employee fails to remedy
such event or circumstance within such thirty (30)-day period.
(c) Death. The employment of Employee hereunder shall be automatically
terminated on the date of Employee's death.
(d) Good Reason. Employee may terminate his employment hereunder
forthwith at any time for Good Reason upon written notice to the Company. For
purposes of this Agreement, "Good Reason" shall mean the occurrence of any of
the following: (i) a material and substantial reduction in Employee's title,
responsibilities or duties (including, but not limited to, any such reduction
following a change in control of the Company); (ii) a reassignment of Employee
to a geographic location in excess of thirty-five (35) miles from the Company's
current principal offices; or (iii) a material breach by the Company of any of
its obligations to Employee hereunder, including, but not limited to, the
Company's failure to timely make any payment due to Employee hereunder.
Notwithstanding anything to the contrary contained herein, none of the foregoing
events or circumstances shall constitute "Good Reason" for purposes of this
Agreement unless Employee gives the Company written notice delineating the
claimed event or circumstance and setting forth Employee's intention to
terminate his employment if such claimed event or circumstance is not capable of
remedy or is not duly remedied within a reasonable period following such notice
(not to exceed thirty (30) days), if capable of remedy, and the Company fails to
remedy such event or circumstance within such reasonable period.
(e) Company's Obligations upon Termination. If Employee's employment is
terminated pursuant to this Section 7, Employee shall be entitled to, and the
Company's obligation hereunder shall be limited to: (i) the payment of any
unpaid compensation accrued
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under Section 5(a) above through the effective date of such termination; (ii)
any unreimbursed expenses incurred, and other accrued employee benefits (as
described above) accrued, through the date of termination; and (iii) the
additional compensation provided in Section 7(f) below, if any.
(f) If Employee's employment is terminated:
(i) by the Company pursuant to Section 7(a) above, Employee will
receive the benefit of any Company disability plans; or
(ii) (A) by the Company other than pursuant to Sections 7(a), 7(b)
or 7(c) above, or (B) by Employee pursuant to Section 7(d) above, the Company
shall pay Employee the Severance Amount as hereinafter defined, less required
withholdings, in twelve (12) equal semi-monthly installments over the six (6)
month period immediately following such termination. The "Severance Amount"
shall mean the amount of Base Salary that would be payable to Employee pursuant
to Section 5(a) above during the shorter of (1) the eighteen (18) month period
following the effective date of such termination or (2) the remainder of the
then-current period of the Term. Furthermore, the Stock Option shall be deemed
fully "vested" in accordance with its terms. The parties hereto agree that the
consideration set forth in Section 7(e) above and this Section 7(f)(ii)
constitutes fair compensation and the sole remedy for damages for any
termination by the Company other than pursuant to Sections 7(a), 7(b) or 7(c)
above, or by Employee pursuant to Section 7(d) above.
(g) None of the payments provided for in Sections 7(e) or 7(f) shall be
reduced by any amounts earned or received by Employee from any third party at
any time. Without limiting the generality of the foregoing, if Employee's
employment under this agreement is terminated prior to August 15, 2006 for any
reason other than termination by the Company for cause or voluntary termination
by Employee without Good Reason, Employee shall not have any obligation to
mitigate damages.
(h) Nothing in this Agreement shall be deemed a release or waiver of
right to any medical or other employee benefits available to Employee on or
after the effective date of termination of the executive's employment by the
Company under any federal, state or local law that provides for the continuation
of any medical or other employee benefits after employment.
8. Rights to Works. In return for the consideration described herein,
Employee agrees as follows:
(a) All inventions, trade secrets, ideas, recordings, original works of
authorship or other work product of any kind that Employee conceives, develops,
discovers or makes in whole or in part pursuant to this Agreement or in the
scope of Employee's employment and Employee's contributions thereto (hereinafter
referred to as "Works") shall belong solely and exclusively to the Company. The
Company shall have the perpetual and exclusive right to use, exhibit,
distribute, or license throughout the universe, any Work or part thereof in
which Employee's services for the Company are utilized by all forms of audio,
visual, textual, digital, electronic or other distribution that are now known or
may hereafter exist, and otherwise exploit such Works in such media, forums and
for such uses throughout the universe as it deems appropriate; provided,
however, that no likeness or quote of Employee shall be used after the Term
without Employee's written consent. All revenues derived by the Company from the
use, exhibition, distribution, licensing, or other exploitation of such Works
shall be the sole and exclusive property of the Company.
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(b) To the extent that the Works are considered: (i) contributions to
collective works and/or (ii) as parts or components of audiovisual works, the
parties hereby expressly agree that the Works shall be considered "works made
for hire" under the United States Copyright Act of 1976, as amended (17 U.S.C.
Section 101 et seq.). In accordance therewith, the sole right of copyright in
and to the Works shall belong exclusively to the Company in perpetuity. To the
extent that the Works are deemed works other than contributions to collective
works and/or parts or components of audiovisual works, Employee hereby
irrevocably assigns and transfers to the Company to the maximum extent permitted
by law all right, title and interest in the Works, including but not limited to
all copyrights, patents, trade secret rights, and other proprietary rights in or
relating to the Works. At the Company's reasonable written request and sole
expense, Employee shall execute, verify, acknowledge, deliver and file any and
all formal assignments, recordations and any and all other documents that the
Company may prepare and reasonably call for to give effect to the provisions of
this Agreement. If Employee fails to execute any such document or instrument, or
perform any such act, within ten (10) business days, Employee shall be deemed to
have irrevocably constituted and appointed the Company, with full power of
substitution, to be Employee's true and lawful attorney, in Employee's name,
place, and stead, to execute, acknowledge, swear to, and file all instruments,
conveyances, certificates, agreements, and other documents, and to take any
action which may be necessary or appropriate to effect the provisions of this
Section 8. The powers of attorney granted herein shall be deemed to be coupled
with an interest and shall be irrevocable.
(c) It is understood that the rights granted to the Company in this
Section 8 shall continue in effect after the termination or expiration of this
Agreement to the extent necessary for the Company's full enjoyment of such
rights.
(d) All provisions of this Agreement relating to the assignment by
Employee of any invention or innovation are subject to the provisions of
California Labor Code Sections 2870, 2871 and 2872. In accordance with Section
2870 of the California Labor Code, the obligation to assign as provided in this
Agreement does not apply to an invention or innovation that Employee developed
entirely on his own time without using the Company's equipment, supplies,
facilities, or trade secret information except for those inventions that either:
(i) relate to either (A) the business of the Company or any of its Subsidiaries
at the time of conception or reduction to practice of the invention, or (B)
actual or demonstrably anticipated research or development of the Company or any
of its Subsidiaries; or (ii) result from any work performed by Employee for the
Company or any of its Subsidiaries. A copy of California Labor Code Sections
2870, 2871 and 2872 is attached to this Agreement as Exhibit 1.
(e) Employee shall disclose all inventions and innovations to the
Company, even if Employee does not believe that he or she is required under this
Agreement, or pursuant to California Labor Code Section 2870, to assign his
interest in such invention or innovation to the Company. If the Company and
Employee disagree as to whether or not an invention or innovation is included
within the terms of this Agreement, it will be the responsibility of Employee to
prove that it is not included.
9. Restrictions. In recognition of the considerations described herein,
Employee agrees that:
(a) Without limiting the generality of Section 2 above, Employee
acknowledges and agrees that given the extent and nature of the confidential and
proprietary information he will obtain during the course of his employment with
the Company, it would be inevitable that such confidential information would be
disclosed or utilized by Employee should he obtain
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employment from or otherwise become associated with any person or entity engaged
in any activity directly competitive with any business then carried on by, or
anticipated to be carried on by, the Company or any of its Subsidiaries (a
"Competitor"). Consequently, prior to the termination of Employee's services
under this agreement, Employee shall not, without the prior written consent of
the Board, directly or indirectly, own, manage, operate, join, control or
participate in the ownership, management, operation or control of, or be
employed by or connected in any manner with, any Competitor. Notwithstanding the
foregoing, Employee may acquire or hold, solely for investment, publicly traded
securities of any corporation, so long as such securities, in the aggregate,
constitute less than five percent (5%) of any class or series of outstanding
securities of such corporation.
(b) During the term of Employee's employment and at all times
thereafter, Employee shall hold in secrecy all trade secrets and confidential
information relating to the Company's (and its Subsidiaries') business and
affairs that come to his knowledge while employed by the Company (excluding
information that is or becomes publicly known or available for use through no
fault of Employee), including but not limited to: (i) matters of a business
nature, such as information about costs, profits, markets, sales, lists of
customers, lists of clients and other information of a similar nature, (ii)
plans or strategies for development of the business of the Company and (iii)
matters of a technical nature. Except as required in the performance of
Employee's duties to the Company under this Agreement, Employee shall not use
for his own benefit or disclose to any person (except as required by law or
legal process, provided Employee shall undertake to give the Company notice
prior to such disclosure and shall comply with any applicable protective order
or equivalent), directly or indirectly, such matters unless such use or
disclosure has been specifically authorized in writing by the Company in
advance.
(c) Until termination of Employee's services under this agreement and
for a period of one year thereafter, Employee shall not, directly or indirectly,
hire, offer to hire, entice away, or in any other manner persuade or attempt to
persuade any officer, employee, agent, representative, customer, client,
performer or songwriter of the Company or any Subsidiaries, to discontinue his
or her relationship with the Company or any Subsidiary of the Company. This
provision shall not apply, however, after termination of Employee's services if
his employment is terminated by the Company other than pursuant to Sections
7(a), 7(b) or 7(c) above or if Employee's employment is terminated by Employee
pursuant to Section 7(d) above.
10. Employee's Representations. Employee hereby represents and warrants that:
(a) he has the right to enter into this Agreement and to grant the rights
granted by him herein, (b) the provisions of this Agreement do not violate any
other contracts or agreements to which he is a party and that would adversely
affect his ability to perform his obligations hereunder, and (c) he will comply
with all policies of the Company of which he has notice, provided they are
consistent with applicable laws.
11. The Company's Representations. The Company hereby represents and warrants
that: (a) it has the right, power and authority to enter into this Agreement and
to incur the obligations incurred by it herein, (b) this Agreement has been duly
and validly authorized by the Company, and (c) the provisions of this Agreement
do not violate any other contracts or agreements to which it is a party that
would adversely affect its ability to perform its obligations hereunder.
12. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal substantive laws (and not the laws of
choice of laws) of the State of California.
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13. Entire Agreement. This Agreement constitutes the whole agreement of the
parties hereto in reference to any employment of Employee by the Company and in
reference to the subject matter hereof, and all prior agreements, promises,
representations and understandings relative thereto are merged herein.
14. Assignability. The services to be performed by Employee hereunder are
personal in nature and, accordingly, Employee may not, without the prior express
written consent of Company in each instance, assign or transfer this Agreement
or any rights or obligations hereunder. Nothing expressed or implied herein is
intended or shall be construed to confer upon or give to any person, other than
the parties hereto, any right, remedy or claim under or by reason of this
Agreement or of any term, covenant or condition hereof.
15. No Third Party Beneficiaries. Nothing expressed or implied herein is
intended or shall be construed to confer upon or give to any person, other than
the parties hereto, any right, remedy or claim under or by reason of this
Agreement or of any term, covenant or condition hereof.
16. Remedies. Any material breach or violation by Employee of the terms of
Section 8 or 9 above would result in immediate and irreparable injury and harm
to the Company, and would cause damage to the Company in amounts difficult to
ascertain and for which the Company's remedies and defenses at law would be
inadequate. Accordingly, in the event of any such breach or threatened breach,
the Company shall be entitled to, and Employee hereby consents to the entry of,
the remedy of injunction, without any requirement that the Company post a bond,
as well as all other remedies to which the Company may be entitled, at law, in
equity or otherwise. Notwithstanding the foregoing, Employee shall be entitled
to dispute the factual basis of any breach asserted by the Company.
17. Covenants Reasonable as to Time and Territory. Employee and the Company
have considered carefully the nature and extent of the restrictions set forth in
this Agreement and the rights and remedies conferred upon the Company under this
Agreement, and hereby acknowledge and agree that: (i) such restrictions are
reasonable in time and territory; and (ii) the consideration provided and to be
provided to Employee is sufficient to compensate Employee for such restrictions.
18. Amendments; Waivers. This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof may be waived
only by a written instrument executed by the parties hereto or, in the case of a
waiver, by the party waiving compliance. The failure of any party at any time or
times to require performance of any provision hereof shall in no manner affect
the right at a later time to enforce the same. No waiver by any party of the
breach of any term or provision contained in this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a waiver of the breach
of any other term or covenant contained in this Agreement.
19. Notices. All notices, consents, requests and other communications
hereunder shall be in writing and, if given by personal delivery, shall be
deemed to have been validly served, given or delivered upon actual delivery and,
if mailed or delivered by overnight courier, shall be deemed to have been
validly served, given or delivered when deposited in the United States mail, as
registered or certified mail, with proper postage prepaid, or when deposited
with the courier service, and addressed to the party or parties to be notified,
at the following addresses (or such other addresses) as a party may designate
for itself by like notice):
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If to Employee: Jon Diamond
With a copy to: Proskauer Rose LLP
1585 Broadway, 22nd Floor
New York, NY 10036
Attention: Bert Abrams, Esq.
If to the Company: ARTISTdirect, Inc.
10900 Wilshire Boulevard
Suite 1400
Los Angeles, CA 90024
Attention: Chairman
With copies to: VP of Business and Legal Affairs
and
Lenard, Brisbin & Klotz LLP
1100 Glendon Avenue
Suite 1650
Los Angeles, CA 90024
Attention: Allen D. Lenard, Esq.
20. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent that a
restrictive covenant contained herein may, at any time, be more restrictive than
permitted under the laws of any jurisdiction where this Agreement may be subject
to review and interpretation, the terms of such restrictive covenant shall be
those allowed by law and the covenant shall be deemed to have been revised
accordingly. Each and every term of this Agreement shall be enforced to the
fullest extent permitted by law.
21. Section Headings. The Section headings herein are used solely for
convenience and shall not be used in the interpretation or construction of
this Agreement.
22. Counterparts; Facsimile. This Agreement may be executed in two
counterparts and by facsimile, each of which shall be deemed an original
and both of which together shall be deemed one Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"EMPLOYEE" "COMPANY"
/s/ JON DIAMOND ARTISTdirect, Inc.
------------------------
Jon Diamond
By: /s/ FREDERICK W. FIELD
----------------------
Frederick W. Field
Its: Chairman
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Exhibit 1
California Labor Code Sections 2870, 2871 and 2872
SECTION 2870
(a) Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require
an employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.
SECTION 2871
No employer shall require a provision made void and unenforceable by Section
2870 as a condition of employment or continued employment. Nothing in this
article shall be construed to forbid or restrict the right of an employer to
provide in contracts of employment for disclosure, provided that any such
disclosures be received in confidence, of all of the employee's inventions made
solely or jointly with others during the term of his or her employment, a review
process by the employer to determine such issues as may arise, and for full
title to certain patents and inventions to be in the United States,
as required by contracts between the employer and the United States or any
of its agencies.
SECTION 2872
If an employment agreement entered into after January 1, 1980, contains a
provision requiring the employee to assign or offer to assign any of his or her
rights in any invention to his or her employer, the employer must also, at the
time the agreement is made, provide a written notification to the employee that
the agreement does not apply to an invention which qualifies fully under the
provisions of Section 2870. In any suit or action arising thereunder, the burden
of proof shall be on the employee claiming the benefits of its provisions.