Consulting Agreement - Loudeye Corp. and Anthony Bay
This Consulting Agreement, dated as of April 1, 2003, (this
"Agreement"), is by and between Anthony Bay (the "Consultant") and Loudeye
Corp., a Delaware corporation (the "Company" or "Loudeye").
WITNESSETH:
WHEREAS, the Company wishes to obtain the future services of the
Consultant for the Company; and
WHEREAS, the Consultant is the Chairman of the Board of Directors
serving in a non-executive capacity and is willing, upon the terms and
conditions herein set forth, to provide services hereunder; and
WHEREAS, defined terms not defined herein shall have the respective
meanings set forth on Schedule 1 attached hereto;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained here, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Nature of Consultancy
Consultant is and shall at all times during the Term of Consultancy be
deemed to be an independent contractor and not an employee of the Company.
2. Duties
The Consultant shall perform his obligations hereunder faithfully and
to the best of his ability under the direction of the Board of Directors and in
cooperation with the CEO of the Company. The Consultant shall devote such of his
business time, energy and skill as may be reasonably necessary for the
performance of his duties, responsibilities and obligations hereunder (except
for vacation periods and reasonable periods of illness or other incapacity),
estimated to average approximately two (2) days per week, consistent with norms
in similar positions. Nothing contained herein shall require the Consultant to
follow any directive or to perform any act which would violate any laws,
ordinances, regulations or rules of any governmental, regulatory or
administrative body, agent or authority, any court or judicial authority, or any
public, private or industry regulatory authority (collectively, the
"Regulations").
3. Compensation During the Term of Consultancy, the Company shall
pay compensation to the Consultant as follows:
(a) Base Compensation As base compensation for his services
hereunder, payable monthly in arrears, an annual base Compensation of $100,000
(the "Base Compensation"). The Board of Directors of the Company (the "Board of
Directors") shall annually, and in its sole discretion, determine whether the
Base Compensation should be increased and, if so, the amount of
<PAGE>
such increase. In no event shall Consultant's then current Base Compensation be
decreased. The Base Compensation is in addition to the Consultant's standard
compensation as a member of the Board of Directors of Loudeye.
(b) Performance Bonus. The Consultant shall be eligible to receive a
bonus of up to a maximum of One Hundred Percent (100%) of the
Consultant's Base Compensation (the "Target Bonus Amount"). The
Target Bonus Amount shall be subdivided into four separate
performance specific targeted bonus amounts which shall be awarded
based upon four separate performance factors ("Performance
Factors") as set forth on Schedule 3 hereto. With the Consultant's
consent, Schedule 3 hereto may be amended or modified to reflect
such other performance criteria as the Board of Directors may
determine from time to time. The bonus will be deemed earned upon
the first to occur of (i) the end of the applicable period, and
(ii) the day immediately preceding the date of consummation of a
Change of Control, pro rated for the quarter in which the Change of
Control occurs. The amount of the earned Target Bonus Amount, if
any, shall be determined by the Board of Directors based upon the
Company's results for the applicable period. Payment of the bonus
shall be made five (5) business days following the first to occur
of (i) the date of filing of the Company's Form 10-Q or Form 10-K
for the applicable period, or (ii) the last date, without any
extensions, that the Company must file its Form 10-Q or Form 10-K
for the applicable period without violating and SEC or NASDAQ rule
or regulation, in each case relating to achievement of the
Performance Factors. Payment of the bonus is conditioned upon the
Consultancy being in effect during the relevant performance period,
with certain exceptions discussed in Schedule 2. In addition to the
foregoing, Consultant shall have the right to a One-Time Special
Bonus as set forth below.
(c) One Time Special Bonus. In addition to the foregoing, Consultant
shall be entitled to a bonus equal to thirty percent 30% of
Consultant's Base Compensation (a "One Time Special Bonus") upon
the first to occur of: (a) the closing prices per share of Loudeye
common stock as quoted on NASDAQ Small Cap multiplied by the total
number of common shares outstanding equals a market capitalization
equal to or greater than Twenty Million Dollars ($20,000,000) for
any Thirty (30) consecutive trading day period, or (b) upon the
consummation of a Change of Control, provided that the valuation of
the total equity of the Company in connection with the Change of
Control is to or greater than Twenty Million Dollars ($20,000,000);
provided, however, that the One Time Special Bonus payable in
connection with a Change of Control shall be paid in the same
consideration as that consideration (including securities) paid to
security holders of Loudeye in connection with the Change of
Control. In the event that Consultant is terminated without Cause
or resigns with Good Reason within Six (6) months of a Change of
Control, and Consultant did not otherwise receive a One Time
Special Bonus, Consultant shall be entitled to the One Time Special
Bonus.
(d) Stock Option. The Consultant will receive an award effective on the
date established by the Board of Directors, in accordance with the
schedule set forth below, of options to purchase, to the extent
available, incentive stock option (ISO) shares of Loudeye, and to
the extent that ISO's are not available, non-qualified options with
an exercise price based on the closing price for Loudeye shares on
April 1, 2003.
2
<PAGE>
Date awarded Target Number of Stock Options Shares
April 1, 2003 Options to purchase 500,000 shares
(e) Vesting period. This grant shall have a ten year term and shall be
exercisable at the rate of 1/12th per month in arrears. The
exercise price per share of your Incentive Option Grant will be
equal to the Company's closing common stock price on April 1, 2003.
Vesting will accelerate upon the first to occur of (i) a Change of
Control, or (ii) the adoption by the Board of Directors of the
Company of a plan of liquidation or dissolution of Loudeye.
(f) Compensation on sale of company or assets. Consultant shall be
entitled to a bonus or bonuses ("Sale Bonus") equal to one and one
half percent (1.5%) of the total Incremental Value (as defined
below) upon consummation of a Change of Control. "Incremental
Value" for purposes hereof shall mean the difference between (x)
the aggregate sum of cash, value or other consideration related to
a transaction described in clause (i) of the definition of Change
of Control or the aggregate consideration paid or payable by or for
the benefit of Loudeye in connection with one or more transactions
described in clause (ii) of the definition of Change of Control
(each, a "Transaction"), and (y) the market value of Loudeye as of
the close of business on April 1, 2003. The Sale Bonus shall be
fully earned upon consummation of the Transaction that creates
Incremental Value, and shall be paid in the same currency as the
consideration (including securities) paid to Loudeye or the
shareholders of Loudeye in connection with such Transaction. In the
event that Consultant is terminated without Cause or resigns with
Good Reason within Six (6) months of a Transaction, and Consultant
did not otherwise receive a Sale Bonus, Consultant shall be
entitled to the Sale Bonus in amounts described above.
4. Term of Consultancy
The "Term of Consultancy" shall commence on the date hereof and shall
end on the date of termination as provided in Section 5.
5. Termination
(a) Subject to the Company's obligations to make the payments
contemplated by Section 5(b)(i), the Term of Consultancy may be terminated at
any time:
i. upon the death of the Consultant ("Death");
ii. in the event that because of physical or mental
disability the Consultant is unable to perform, and
does not perform, as certified by a mutually
agreeable competent medical physician, his material
duties hereunder for 30 days in any continuous 60 day
period ("Disability");
iii. by the Company for Cause;
3
<PAGE>
iv. by the Company for any reason and without Cause;
v. by the Consultant for Good Reason;
vi. by the Consultant voluntarily or for any reason or no
reason, in each case, after sixty (60) days' prior
written notice to the Company and the Board of
Directors ("Resignation"); or
vii. by the Consultant upon Change of Control. Upon Change
of Control, the Consultant's severance, earned and
unpaid incentive compensation and bonuses will be
considered earned and is payable in a lump sum, with
payment to be made no later than sixty (60) days from
the effective date of the Change of Control. The
Consultant will be entitled to all rights under this
Change of Control provision in the event that the
Consultant's Consultancy is terminated without Cause
within six months prior to a Change of Control.
Consultant acknowledges that no representations or promises have been made in
connection with this Agreement or any other arrangement, plan or agreement
between the Consultant and the Company concerning the grounds for termination or
the future operation of the Company's business, and that nothing contained
herein or otherwise stated by or on behalf of the Company modifies or amends the
right of the Company to terminate the Consultant at any time, with or without
Cause.
Notwithstanding the foregoing or anything else set forth herein to the contrary,
the CEO of the Company shall meet with the Compensation Committee of the Board
of Directors within no more than ninety (90) days following the commencement of
the Term of Consultancy to discuss the Consultant's effectiveness and
conformance with the terms hereof. In the event that the CEO indicates either
that; the presence of a chairman is undermining the authority of the CEO and
therefore is causing management problems, or that Consultant is not making a
valuable contribution to the Company as Chairman, then the company shall have
the right to terminate this agreement and such termination shall be treated as a
Voluntary Resignation by Consultant.
(b) If the Consultant's consultancy is terminated for any reason
whatsoever, then, subject to the execution by Consultant of a release in form
reasonably satisfactory to the Company, which shall include without limitation a
waiver of all claims the Consultant may have against Loudeye, and all of its
respective subsidiaries, affiliates, directors, officers, employees,
shareholders and agents other than rights of indemnification and any rights to
accrued benefits under the employee benefit plans (including equity plans), the
Consultant shall be entitled to (i) accrued and unpaid base compensation, earned
and unpaid incentive compensation and benefits with respect to the period prior
to termination, and (ii) reimbursement for expenses under Section 6 with respect
to such period. Except as may otherwise be expressly provided to the contrary in
this Agreement, nothing in this Agreement shall be construed as requiring the
Consultant to be treated as employed by the Company for purposes of any employee
benefit plan following the date of the termination of the Consultant's Term of
Consultancy. In the event the Consultant's consultancy is terminated pursuant
to:
(i) Death, Disability, Good Reason, without Cause or Change of
Control, the Company will also pay to Consultant (or his estate or
representative) the termination benefits in
4
<PAGE>
accordance with Schedule 2. Such payment shall be made over a period of
two (2) months as determined by the Company, provided, however, that in
the event of termination due to Change of Control, the payment shall be
made in a lump sum at the time of the consummation of the transaction
constituting a Change of Control; and
(ii) Cause or Resignation, there will be no additional amounts
owing by the Company to the Consultant under this Agreement from and
after such termination.
(c) Termination of the Term of Consultancy will not terminate any
other provisions not associated specifically with the Term of Consultancy.
(d) Upon termination of the Consultant's consultancy, the Company
shall have no further obligations to the Consultant under any option plan, share
subscription or similar plan or arrangement, except to the extent that the
documentation governing such plan or arrangement specifically requires the
Company to continue to incur such obligations.
6. Reimbursement of Expenses
During the Term of Consultancy, the Company shall reimburse Consultant
for reasonable documented travel, entertainment and other expenses reasonably
incurred by Consultant in connection with the performance of his duties
hereunder and, in each case, in accordance with the rules, customs and usages
promulgated by the Company from time to time in effect.
7. Benefits
The Company shall reimburse Consultant for insurance coverage which
Consultant will secure on its own (including, but not limited to, medical,
dental, health, accident, hospitalization and disability) provided such costs
are reasonable.
8. Confidential Information
Consultant acknowledges execution of that certain Proprietary
Information and Inventions Agreement dated ________ __, 200__ by Consultant in
favor of the Company (the "Confidentiality Agreement). The terms of the
Confidentiality Agreement shall survive termination hereof.
9. Non-Competition
The Consultant acknowledges that services to be provided give him the
opportunity to have special knowledge of the Company and of its affiliates and
subsidiaries (the "Company Group") and their Confidential Information (as such
term is defined in the Confidentiality Agreement) and the capabilities of the
individuals employed by or affiliated with the Company and that interference in
these relationships would cause irreparable injury to the Company. In
consideration of this Agreement, the Consultant covenants and agrees that for a
period of six (6) months from termination, the Consultant will not, without the
express written approval of the Board of Directors directly or indirectly, in
one or a series of transactions, or enter into any agreement to, own, manage,
operate, control, or otherwise engage or participate in, whether as a
proprietor, partner, lender, director, officer,
5
<PAGE>
employee, joint venturer, lessor, agent, representative or other participant, in
any business which competes with the Company, provided, however, that Executive
may in one or a series of transactions, own, invest or acquire an interest in up
to five percent (5%) of the capital stock of another corporation whose capital
stock is traded publicly. The Executive acknowledges that the terms of this
Section 9 are reasonable and necessary for the protection of the Company, and
that the scope and term of this Section 9 would not preclude Executive from
earning a living with an entity that does not compete
10. Non-Solicitation
During the Term of Consultancy and for a period of six (6) months
thereafter, Consultant will not and will not cause another business or
commercial enterprise to, without the express prior written approval of the
Board of Directors, in one or a series of transactions, recruit, solicit or
otherwise induce or influence any proprietor, partner, stockholder, lender,
director, officer, employee, sales agent, joint venturer, investor, lessor,
customer, consultant, agent, representative or any other person which has a
business relationship with any member of the Company Group or had a business
relationship with any member of the Company Group to discontinue, reduce or
modify such Consultancy, agency or business relationship.
11. Non-Disparagement
During and after the Term of Consultancy, Consultant agrees that he
shall not make any false, defamatory or disparaging statements about the Company
or any member of the Company Group, or the officers or directors of the Company
or any member of the Company Group. During and after the Term of Consultancy,
the Company shall not make any false, defamatory or disparaging statements about
the Consultant.
12. Defense of Claims
The Consultant agrees that from the date hereof, and continuing for a
reasonable period after termination of the Term of Consultancy, the Consultant
will cooperate with the Company in defense of any claims that may be made
against the Company provided same does not interfere with the Consultant's then
current Consultancy. The Company agrees to reimburse the Consultant for all of
the Consultant's reasonable out-of-pocket expenses associated with such
cooperation, including travel expenses and the fees and expenses of the
Consultant's legal counsel.
13. Notice
Any notice, request, demand or other communications required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, sent be certified or registered mail, return receipt
requested, sent by overnight courier or sent by facsimile transmission (with
confirmation and a copy sent by mail within one day) as follows (or to such
other addressee or address as shall be set forth in a notice given in the same
manner):
If to the Consultant: ANTHONY BAY
16224 NE 130TH STREET
REDMOND, WA 98052
6
<PAGE>
with a copy to:
If to the Company: Loudeye Corp.
1130 Ranier Ave. South
Seattle, WA 98144
Attention: JEFF CAVINS
Facsimile No.: (206) 830-5351
with a copy to: Eric J. DALE
ROBINSON & COLE LLP
Financial Centre
695 East Main Street
P.O. Box 10305
Stamford, CT 06904-2305
Facsimile No.: (203) 462-7599
Any such notices shall be deemed to be given on the date personally delivered or
sent by facsimile transmission or such return receipt is issued or the day after
if sent by overnight courier.
14. The Consultant's Representations
The Consultant hereby warrants and represents to the Company that
Consultant has carefully reviewed this Agreement and has consulted with such
advisors as Consultant considers appropriate in connection with this Agreement,
and is not subject to any covenants, agreements or restrictions, including
without limitation any covenants, agreements or restrictions arising out of
Consultant's prior Consultancy which would be breached or violated by
Consultant's execution of this Agreement or by Consultant's performance of his
duties hereunder.
15. Company's Obligation: Directors & Officers Insurance
In connection with a Change of Control, Loudeye will cause to be
maintained for a period of not less than three years from the date of the
consummation of the transaction constituting a Change of Control directors' and
officers' insurance and indemnification policies (including employment practices
liability insurance) to the extent that they provide coverage for events
occurring prior to the effective date (the "Effective Date") of the Change of
Control (the "D&O Insurance") for Consultant's service as an officer and
director of Loudeye prior to the Effective Date; provided, however, that Loudeye
may, in lieu of maintaining or causing to be maintained such D&O Insurance as
provided above, cause coverage to be provided under any policy maintained for
the benefit of Loudeye so long as the terms thereof are not less advantageous to
Consultant than the existing D&O Insurance. The Consultant agrees and
acknowledges that the obligations owed to Executive under this Agreement are
solely the obligation of the Company, and that none of the Company's members,
stockholders, directors, officers,
7
<PAGE>
or lenders will have any obligations or liabilities in respect of this Agreement
and the subject matter hereof.
16. Severability
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein. If any court determines that any
provision of this Agreement is unenforceable and therefore acts to reduce the
scope or duration of such provision, the provision in its reduced form shall
then be enforceable.
17. Breach; Waiver of Breach: Specific Performance
If either party breaches its obligations in connection with this
Agreement, the non-breaching party shall be entitled to pursue all remedies
available at law or in equity for such breach. The waiver by the Company or
Consultant of a breach of any provision of this Agreement by the other party
shall not operate or be construed as a waiver of any other breach of such other
party. Each of the parties (and any third party beneficiaries) to this Agreement
will be entitled to enforce its rights under any provision of this Agreement and
to exercise all other rights existing in its favor. The parties hereto agree and
acknowledge that the Company would be irreparably injured by a violation of
Sections 8 through 11 of this Agreement, that the provisions of such sections
are reasonable and that the Company could not adequately be compensated in
monetary damages, in light of the sensitivity of the non-public information of
the Company to which the Consultant will be exposed and that the Company may
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions in order to enforce or prevent
any violations of the provisions of such sections of this Agreement.
18. Assignment: Third Parties
Neither the Consultant nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other. Notwithstanding the foregoing, the Company may, in its
sole discretion and without the requirement of notice to or consent of
Consultant, assign this Agreement in the event of the sale of all or
substantially all of the assets of the Company.
19. Amendment: Entire Agreement
This Agreement may not be changed orally but only by an agreement in
writing agreed to by the parties hereto. This Agreement constitutes the entire
Agreement between the parties concerning the subject matter hereof and, except
as expressly set forth herein, supersedes all prior agreements, if any, between
the parties relating to the subject matter hereof. The enforceability of this
Agreement shall not cease or otherwise be adversely affected by the termination
of the Consultant's Consultancy
8
<PAGE>
with the Company. The Consultant and the Company agree that the language used in
this Agreement is the language chosen by the parties to express their mutual
intent, and that no rule of strict construction is to be applied against any
party hereto.
20. Choice of Law; Litigation
THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF WASHINGTON. THE
CHOICE OF FORUM SET FORTH IN THIS SECTION 20 SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT OF ANY JUDGMENT OF A WASHINGTON FEDERAL OR STATE COURT, OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SUCH A JUDGMENT, IN ANY
OTHER APPROPRIATE JURISDICTION. IN THE EVENT ANY PARTY TO THIS AGREEMENT
COMMENCES ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR
RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR
CONTEMPLATED HEREIN OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY (1) AGREE
UNDER ALL CIRCUMSTANCES ABSOLUTELY AND IRREVOCABLY TO INSTITUTE ANY LITIGATION,
PROCEEDING OR OTHER LEGAL ACTION IN A COURT OF COMPETENT JURISDICTION LOCATED
WITHIN THE STATE OF WASHINGTON; (2) AGREE THAT IN THE EVENT OF ANY SUCH
LITIGATION, PROCEEDING OR ACTION, SUCH PARTIES WILL CONSENT AND SUBMIT TO THE
PERSONAL JURISDICTION OF SUCH COURT AND TO SERVICE OF PROCESS UPON THEM IN
ACCORDANCE WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS; (3) AGREE
TO WAIVE TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT THEY MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION IN ANY
SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS BROUGHT IN ANY
INCONVENIENT FORUM; (4) AGREE, AFTER CONSULTATION WITH COUNSEL, TO WAIVE ANY
RIGHTS TO A JURY TRIAL TO RESOLVE ANY DISPUTES OR CLAIMS RELATING TO THIS
AGREEMENT; AND (5) AGREE THAT NOTHING HEREIN SHALL AFFECT THE RIGHTS OF ANY
PARTY TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
21. Headings
The headings contained in this Agreement are for convenience only and
shall not affect in any way the meaning or interpretation of this Agreement.
22. Counterparts
This Agreement may be executed in counterparts, each of which will be
deemed an original, but all of which together shall constitute one and the same
instrument.
THE NEXT PAGE IS THE SIGNATURE PAGE
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
day and year first written above.
CONSULTANT: LOUDEYE CORP.
__________________________________ By:__________________________________
Anthony Bay Name:
Title:
10
<PAGE>
SCHEDULE 1
Certain Definitions
"Cause" shall include but not be limited to termination based on any of
the following grounds: (i) fraud, misappropriation, embezzlement or acts of
similar dishonesty; (ii) conviction of a felony; (iii) illegal use of drugs or
excessive use of alcohol in the workplace; (iv) intentional and willful
misconduct that may subject the Company to criminal or civil liability; (v)
breach of the Consultant's duty of loyalty, including the diversion or
usurpation of corporate opportunities properly belonging to the Company; (vi)
willful disregard of Company policies and; (vii) breach of any of the material
terms of this Agreement; and (viii) insubordination or the willful and continued
failure by the Consultant to substantially perform Consultant's duties with
Loudeye (other than any such failure resulting from Consultant's incapacity due
to physical or mental illness) after a written demand for substantial
performance is delivered to Consultant by Loudeye, which specifically identifies
the manner in which Loudeye believes that the Consultant has not substantially
performed Consultant's duties, and Consultant's failure within 30 days to cure
such insubordination or failure to perform.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related or unrelated
transactions, of all or substantially all of the assets of Loudeye and its
subsidiaries, or (ii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which Loudeye
shareholders prior to the transaction no longer represent as a group a majority
of the voting stock of Loudeye after the consummation of the transaction.
"Confidential Information" means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, "know-how", trade secrets, customer lists, details of client or
consultant contracts, pricing policies, operational methods, marketing plans or
strategies, product development techniques or plans, business acquisition plans
or any portion or phase of any scientific or technical information, ideas,
discoveries, designs, inventions, creative works, computer programs (including
source of object codes), processes, procedures, formulae, improvements or other
proprietary or intellectual property of the Company Group, whether or not in
written or tangible form, and whether or not registered, and including all
files, records, manuals, books, catalogues, memoranda, notes, summaries, plans,
reports, records, documents and other evidence thereof. Notwithstanding the
foregoing, the term "Confidential Information" does not include, and there shall
be no obligation hereunder with respect to, information that is or becomes
generally available to the public other than as a result of a disclosure by the
Consultant not permissible hereunder or that was in the possession of Consultant
prior to the date of this Agreement.
"Good Reason" shall mean: (i) any substantial material diminution of
the Consultant's authority, duties or responsibilities (ii) the knowing and
willful failure of Loudeye to make any payments provided under Subsections 3(a)
or 3(b) in accordance with the terms of each of those subsections; or (iii) the
relocation without the Consultant's consent of the Consultant's principal work
location more than 50 miles from the former Loudeye work location where the
Consultant was formally required to render services; provided, however, that the
Consultant shall not be deemed to
11
<PAGE>
have resigned for Good Reason hereunder unless with respect to each of (i), (ii)
and (iii) above, the Consultant shall have provided written notice to Loudeye
within 60 calendar days after the event that the Consultant believes gives rise
to the Consultant's right to terminate Consultancy for Good Reason, describing
in reasonable detail the facts that provide the basis for such belief, and
Loudeye shall have thirty (30) days from the date of such notice to cure any
such diminution, failure or relocation.
"Notice of Termination" Any termination of the Consultant's Consultancy
by Loudeye or by the Consultant during the Term of Consultancy (other than
termination on account of the Consultant's death) shall be communicated by
written "Notice of Termination" to the other party hereto in accordance with
Section 13.
"Operational Breakeven" shall mean EBITDA or EBIT, as allocated
Paragraph 2 of Schedule 3.
"Termination Date" shall mean: (i) if the Consultant's Consultancy is
terminated by Consultant's death, the date of Consultant's death; (ii) if the
Consultant's Consultancy is terminated on account of Disability, the date of the
Notice of Termination is transmitted to Consultant once the conditions set forth
in Section 5(a)(ii) have been satisfied; (iii) if the Consultant's Consultancy
is terminated due to a Change of Control, the date of the consummation of the
transaction that constitutes a Change of Control; and (iv) if the Consultant
Consultancy is terminated for any other reason, the date on which a Notice of
Termination is transmitted (or any later date set forth in such Notice of
Termination) or the Consultant's last day of active Consultancy, whichever date
is later.
12
<PAGE>
SCHEDULE 2
Termination Benefits
a) Termination by Loudeye Without Cause. In the event Loudeye terminates
Consultant's Consultancy hereunder without Cause, Loudeye shall provide the
Consultant with nine (9) months' severance, inclusive of Consultant's then
current Base Compensation, earned and unpaid incentive compensation and
bonuses, and reimbursement of insurance pursuant to Section 7, to be paid
within sixty (60) days from the date of termination and, as to any Bonus
payment, on the date it would have been made had the Consultant remained in
active status (collectively, the "Severance Payments").
b) Termination by Loudeye For Cause. Loudeye may terminate Consultant's
Consultancy immediately for "Cause", in which case Consultant shall receive
only Consultant's Base Compensation and normal benefits or reimbursements
through the last day of Consultant's active consultancy. For purposes of
this Agreement, the term "Cause" shall be defined in Schedule 1.
c) Termination By Consultant Due to Voluntary Resignation. The Consultant may
terminate Consultant's Consultancy hereunder by voluntarily resigning
Consultant's Consultancy and providing Loudeye with sixty (60) days prior
notice of such resignation. In such event, Consultant shall continue to
receive Base Compensation, earned incentive compensation and reimbursement
of benefits during the period in which Consultant remains in active
Consultancy or Loudeye may, in its sole discretion, terminate the
Consultancy at any time within such sixty (60) day period with no further
obligation to Consultant.
d) Termination By Consultant for Good Reason. The Consultant shall have the
right to resign for Good Reason and any such resignation shall be deemed a
Termination by Loudeye without Cause under Section (a).
e) Termination By Death or Disability. Consultant's Consultancy shall
terminate if the Consultant is unable to perform the duties of Consultant's
position due to death or disability. In such case, the Consultant's heirs,
beneficiaries, successors, or assigns shall not be entitled to any of the
compensation or benefits to which Consultant is entitled under this
Agreement, except: (a) with respect to any base Compensation earned prior
to the Consultant's death or incapacity; or (b) to the extent specifically
provided in this Consulting Agreement. For purposes of this Agreement, the
term "Disability" shall mean that, as a result of the Consultant's
incapacity due to physical or mental illness, the Consultant shall have
been unable to substantially perform Consultant's duties hereunder for a
period of 6 consecutive months or 180 days within any 270 day period.
13
<PAGE>
SCHEDULE 3
Performance Factors
1. Reduction of Lease Liabilities: Twenty Five Percent (25%) of the Target
Bonus Amount shall be earned at such time as the Company's (inclusive
of its subsidiaries) total lease obligation or monthly lease expense
("Real Estate Expense") is reduced by not less than 70% compared with
the Real Estate Expense on February 28, 2003 or, if the Company
determines not to sell its Vidipax division pursuant to the plan
approved by the Board and to occupy the space located at 111 W. 19th
Street, not less than __% compared with the Real Estate Expense on
February 28, 2003. This bonus will be paid in full to Consultant upon
execution of definitive agreements.
2. Operational Breakeven: Eighteen and Three Quarters Percent (18.75%) of
the Target Bonus Amount shall be earned at such time as the Company
achieves EBITDA for the applicable quarter, and Six and One Quarter
(6.25%) of the Target Bonus Amount shall be earned at such time as the
Company achieves EBIT for the applicable quarter.
3. Cash Usage Breakeven: Twenty Five Percent (25%) of the Target Bonus
Amount shall be earned upon the Company having unrestricted cash and
short-term investments at the end of a quarter that are equal to or
greater than unrestricted cash and short-term investments of the prior
quarter
4. Revenue: Twenty Five Percent (25%) of the Target Bonus Amount shall be
earned upon delivering results in which revenue exceeds the Board of
Directors' approved revenue plan, (Schedule 4) by not less than Twenty
Five Percent (25%) over the immediately preceding quarter, with such
revenue measured on a pro forma basis with adjustments for any
acquisitions or divestitures. This shall be pro rated annually and paid
on a quarterly basis. By way of example only, if the Company's revenue
exceeds the Board of Directors' approved revenue plan by not less than
Twenty Five Percent (25%) over the immediately preceding quarter in
three of four quarters, Consultant would be entitled to a bonus of
18.75% of Base Compensation based upon this Performance Factor and
would be paid 6.25% following each quarter in which the Performance
Factor is achieved.
14