Employment Agreement - Youbet.com Inc. and Philip Hermann
HERMANN EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") dated as of March , 2002 is
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by and between Youbet.com, Inc., a Delaware corporation ("the Company") and
Phillip Hermann ("Executive"), in connection with the Company's engagement of
Executive for personal services and supersedes the prior employment agreement
between the Company and Executive.
1. EMPLOYMENT; DUTIES AND ACCEPTANCE:
Employment by Company.
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The Company hereby engages Executive, and Executive hereby agrees to serve
as President, Chief Operating Officer and Chief Financial Officer of the Company
on the terms and conditions of this Agreement. Throughout the Term of this
Agreement Executive shall, subject to the provisions contained herein, devote
substantially all of his work time to the employment described hereunder.
Executive shall report solely to the Chief Executive Officer and the Board of
Directors. At his election, Executive shall be a member of the Executive
Committee of the Board of Directors.
Location of Employment.
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Executive shall render his services at the Company's offices at 5901
Desoto, Woodland Hills, CA; provided, however, that Executive agrees to render
his services at such other locations from time-to-time as the proper performance
of Executive's duties may reasonably require. Notwithstanding the foregoing, the
Company's principal offices shall remain in Southern California, and Executive
need not relocate to render his duties hereunder.
2. TERM:
The term of Executive's employment hereunder shall commence concurrently
with the consummation of the sale of the notes and warrants pursuant to the
terms of the Securities Purchase Agreement between the Company and the
purchasers named therein (the "Effective Time") and end on April 30, 2004 (the
"Term") unless sooner terminated pursuant to Section 7 hereof. After the Term
the employment of Executive shall be at will, and as such either party may
terminate this Agreement upon 30 days prior written notice to the other party.
3. COMPENSATION AND BENEFITS:
(a) Salary.
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During the Term, Executive shall receive a salary (the "Annual Salary") at
the rate of $225,000 per annum. All Salary shall be less such deductions as
shall be required to be withheld by applicable law and regulations and shall be
pro-rated for any period that does not constitute a full twelve (12) month
period.
(b) Bonus.
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Executive shall participate in any formal Bonus plans instituted by the
Company for the benefit of Employees. Cash and or stock bonuses based on
performance may be offered from time to time at the discretion of the Board of
Directors of the Company.
(c) Stock Options.
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Executive shall participate in any formal Stock Option grant instituted by
the Company for the benefit of Employees. At the Effective Time, Executive shall
be granted 200,000 stock options pursuant to the Company's 1998 Stock Option
Plan. The 200,000 stock options will have an exercise price equal to the closing
price of the Company's Common Stock on the Effective Time. The stock options
will vest 25% per year commencing on the first anniversary of the Effective
Time.
Any unvested options shall terminate as provided in the Company's 1998
Stock Option Plan or as otherwise agreed between the Executive and the Company.
All unvested options will vest upon a "Change of Control" if the Executive
is employed with the Company at the time of Change of Control.
For purposes of this Agreement, the term "Change of Control" shall mean,
(i) the acquisition by a single entity or group of affiliated entities of more
than thirty-five percent (35%) of the outstanding capital stock of the Company
and which is accompanied or followed by a change either in a majority of the
members of the Board or of those members of the Board who are not full time
employees of the Company, or (ii) the consummation of any merger of the Company
or any sale, transfer or other disposition of all or substantially all of the
Company's assets, directly or indirectly, if the shareholders of the Company
immediately before the consummation of such a transaction own, immediately
following the consummation of such transaction on a fully-diluted basis, equity
securities (other than options, warrants, or rights to acquire securities)
possessing less than sixty-five percent (65%) of the voting power of the
surviving or acquiring corporation (or any corporation in control of the
surviving or acquiring corporation whose equity securities are issued or
transferred in such transaction).
(d) Severance. If this Agreement shall be terminated for any
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reason other than (i) a termination for disability pursuant to Section 7(a)
hereof, (ii) for cause pursuant to Section 7(c) hereof, (iii) without cause
pursuant to Section 7(d) hereof, or (iv) with Good Reason pursuant to Section
7(e), Executive shall be entitled to receive an amount equal to three (3) months
of his Annual Salary.
4. PARTICIPATION IN EXECUTIVE BENEFIT PLANS:
(a) Fringe Benefits. Executive shall be permitted during the Term
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to participate in any group life, medical, hospitalization, dental, health and
accident and disability plans, supplemental health care plans and plans
providing for life insurance coverage, and any other plans and benefits,
generally maintained by Company for executives of the stature and rank of
Executive during the Term hereof, each in accordance with the terms and
conditions of such
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plans (collectively referred to herein as "Fringe Benefits"); provided, however,
that Company shall not be required to establish or maintain any such Fringe
Benefits.
(b) Vacation. Executive shall accrue, in addition to sick days
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and days on which Company is closed, paid vacation days at the rate of one and
one-quarter (1-1/4) days per month up to a maximum of fifteen (15) work days.
(c) Expenses. Company will reimburse Executive for actual and
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necessary travel and accommodation costs, entertainment and other business
expenses incurred as a necessary part of discharging the Executive's duties
hereunder, subject to receipt of reasonable and appropriate documentation by
Company and in accordance with Company policy. Company will also reimburse
Executive $750 per month for all business related operating expenses of
Executive's automobile.
5. CERTAIN COVENANTS OF EXECUTIVE:
Without in any way limiting or waiving any right or remedy accorded to
Company or any limitation placed upon Executive by law, Executive agrees as
follows:
(a) Confidential Information: Executive agrees that, neither
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during the Term nor at anytime thereafter shall Executive (i) disclose to any
person, firm or corporation not employed by the Company or any affiliate of
either (the "Protected Company") or not engaged to render services to any
Protected Company or (ii) use for the benefit of himself, or others, any
confidential information of any Protected Company obtained by the Executive
prior to the execution of this Agreement, during the Term or any time
thereafter, including, without limitation, "know-how," trade secrets, details of
suppliers, pricing policies, financial data, operational methods, marketing and
sales information or strategies, product development techniques or plans or any
strategies relating thereto, technical processes, designs and design projects,
and other proprietary information of any Protected Company; provided, however,
that this provision shall not preclude the Executive from (x) upon advice of
counsel and notice to the Company, making any disclosure required by any
applicable law or (y) using or disclosing information known generally to the
public (other than information known generally to the public as a result of any
violation of this Section 5(a)).
(b) Property of Company. Any interest in trademarks,
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service-marks, copyrights, copyright applications, patents, patent applications,
slogans, developments and processes which the Executive, during the Term, may
develop relating to the business of the Company in which the Company may then be
engaged and any memoranda, notes, lists, records and other documents (and all
copies thereof) made or compiled by the Executive or made available to the
Executive concerning the business of any Protected Company shall belong and
remain in the possession of any Protected Company, and shall be delivered to the
Company promptly upon the termination of the Executive's employment with Company
or at any other time on request.
(c) Non-Interference. Executive will not, during the Term hereof
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and for a period of two (2) years after the Term induce any person who is an
executive, officer or agent, customer or supplier of the Company to terminate
his relationship with the Company.
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6. OTHER PROVISIONS:
(a) Rights and Remedies Upon Breach. If the Executive breaches,
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or threatens to commit a breach of, any of the provisions of Section 5 hereof
(the "Restrictive Covenants"), the Company shall have the following rights and
remedies, each of which rights and remedies shall be independent of the other
and severally enforceable, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company at law or in equity.
(b) Accounting. The right and remedy to require the Executive to
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account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits (collectively "Benefits") derived or
received by the Executive as a result of any transactions constituting a breach
of any of the Restrictive Covenants, and the Executive shall account for and pay
over such Benefits to the Company.
(c) Severability of Covenants. If any court determines that any
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of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
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the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
(d) Blue-Penciling. If any court construes any of the Restrictive
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Covenants, or any part thereof, to be unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision and, in its reduced form, such provision
shall then be enforceable.
(e) Enforceability in Jurisdictions. The parties intend to and
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hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts
of any jurisdiction within the geographical scope of such Restrictive Covenants.
If the courts of any one or more of such jurisdictions hold the Restrictive
Covenants unenforceable by reason of the breadth of such scope or otherwise, it
is the intention of the parties that such determination not bar or in any way
affect Company's right to the relief provided in this Section 6 in the courts of
any other jurisdiction within the geographical scope of such Restrictive
Covenants, as to breaches of such Restrictive Covenants in such other respective
jurisdictions, such Restrictive Covenants as they relate to each jurisdiction
being, for this purpose, severable into diverse and independent covenants.
(f) Injunctive Relief. Executive agrees and understands that the
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remedy at law for any breach by Executive of the provisions of Section 5 hereof
may be inadequate and that damages resulting from such breach may not be
susceptible to being measured in monetary terms. Accordingly, it is acknowledged
that upon Executive's breach of any provision of Section 5 hereof, the Company
shall be entitled to seek to obtain from any court of competent jurisdiction
injunctive relief to prevent the continuation of such breach. Nothing contained
herein shall be deemed to limit the Company's remedies at law or in equity for
any breach of the provisions of Section 5 hereof which may be available to the
Company.
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7. TERMINATION:
(a) Termination Upon Death or Disability. If during the Term,
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Executive should (i) die or (ii) become so physically or mentally disabled
whether totally or partially, that Executive is unable to perform the duties,
functions and responsibilities required hereunder for (aa) a period of three (3)
consecutive months or (bb) shorter periods aggregating to four (4) months within
any period of twelve (12) months ("Disability"), then in such event, Company
may, at any time thereafter, by written notice to Executive, terminate
Executive's employment hereunder. Executive agrees to submit to reasonable
medical examinations upon the request of Company. A reputable physician selected
by Company who is experienced in the relevant field of medicine shall make the
determination of whether a Disability exists. If Executive's services are
terminated, as aforesaid, Executive or the designated beneficiary of Executive,
shall be entitled to receive Executive's Annual Salary, accrued share of the
Bonus for that Fiscal Year and unused vacation, if any, and Fringe Benefits
earned through the date of Executive's termination and continuing thereafter
through the end of the Term and shall also receive four (4) months' of his
Annual Salary. The Company shall deduct any disability payments made to
Executive from any insurance source from payments required to be made to
Executive after the termination date.
(b) Designation of Beneficiary. The parties hereto agree that the
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Executive shall designate, by written notice to the Company, a beneficiary to
receive the payments described in Section 7 in the event of his death and the
Executive may change the designation of any such beneficiary from time to time
by written notice to the Company. In the event the Executive fails to designate
a beneficiary as herein provided, any payments which are to be made to the
Executive's designated beneficiary under Section 7 shall be made to the
Executive's widow, if any, during her lifetime. If the Executive has no
designees or widow, such payments shall be paid to the Executive's estate.
(c) Termination for Cause. The Company shall have the option to
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terminate Executive upon the occurrence of any of the following:
Executive shall have breached any of the terms of this Agreement and shall
have failed to cure such breach (if such breach is curable) within 15 days of
notice thereof by the Company;
Executive shall have been convicted of a crime involving moral turpitude
Executive shall materially breach any of the representations and warranties
hereunder.
If Executive's services are terminated as set forth in this subsection,
Executive's services shall cease as of such effective date of termination and
all compensation shall cease as of such effective date.
(d) Termination Without Cause. If the Executive is terminated by
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the Company without cause the Executive shall be entitled to receive his Annual
Salary, health benefits, accrued share of any bonus for that year and unused
vacation, if any, earned through the date of Executive's termination. Executive
shall also receive his Annual Salary and additional compensation equal to the
current health benefits until the end of the Term, and for an additional
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four (4) months thereafter. Notwithstanding the above, if the Company sells,
transfers, or otherwise divests itself to of a majority interest of the Domestic
horse racing business to an independent party and the Executive is offered
comparable employment terms with the acquiring entity, then no additional pay or
benefits shall be due except as accrued through normal service.
(e) Termination With Good Reason. If during the Term the Company
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retains another President or Chief Operating Officer or person performing the
duties normally attendant to such officers, Executive may, by notice to the
Company within three (3) months of the retention of such person, terminate this
Agreement. In such case Executive shall continue to receive all compensation and
other benefits provided hereunder for twelve (12) months following the
termination of this Agreement. Payments due to Executive pursuant to this
Section 7(e) shall not be offset or reduced by payments received from other
employers.
(f) Executive Stock Options. If the Executive is terminated
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without cause by the Company during the Term or Executive terminates this
Agreement for Good Reason, the period within which Executive must exercise stock
options granted under the 1995 Stock Option Plan or the 1998 Stock Option Plan
shall be changed to three years and all options granted to Executive which would
have vested during the Term shall vest.
8. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES:
(a) Right to Enter Into Agreement. Executive has the unfettered
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right to enter into this entire Agreement on all of the terms, covenants and
conditions hereof; and Executive has not done or permitted to be done anything,
which may curtail or impair any of the rights granted to Company herein.
(b) Breach Under Other Agreement or Arrangement. Neither the
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execution and delivery of this Agreement nor the performance by Executive of any
of his obligations hereunder will constitute a violation or breach of, or a
default under, any agreement, arrangement or understanding, or any other
restriction of any kind, to which Executive is a party or by which Executive is
bound.
(c) Services Rendered Deemed Special, Etc. Executive acknowledges
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and agrees that the services to be rendered by him hereunder are of a special,
unique, extraordinary and intellectual character which gives them peculiar
value, the loss of which cannot be adequately compensated for in an action at
law and that a breach of any term, condition or covenant hereof will cause
irreparable harm and injury to the Company and in addition to any other
available remedy the Company will be entitled to seek injunctive relief.
9. USE OF NAME:
The Company shall have the right during the Term hereof to use Executive's
name, biography and approved likenesses in connection with Company's business,
including advertising their products and services; and the Company may grant
such rights to others, but not for use as a direct endorsement.
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10. ARBITRATION:
Any dispute whatsoever arising out of or referable to this Agreement,
including, without limitation, any dispute as to the rights and entitlements and
performance of the parties under this Agreement or concerning the termination of
Executive's employment or of this Agreement or its construction or its validity
or enforcement, or as to the arbitrator's jurisdiction, or as to the ability to
arbitrate any such dispute, shall be submitted to final and binding arbitration
in Los Angeles, California by and pursuant to the Labor Arbitration Rules of the
American Arbitration Association with discovery proceedings pursuant to Section
1283.05 of the California Code of Civil Procedure. The arbitrator shall be
entitled to award any relief, which might be available at law or in equity,
including that of a provisional, permanent or injunctive nature. The prevailing
party in such arbitration as determined by the arbitrator, or in any proceedings
in respect thereof as determined by the person presiding, shall be entitled to
receive its or his reasonable attorneys' fees incurred in connection therewith.
11. NOTICES:
(a) Delivery. Any notice, consent or other communication under
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this Agreement shall be in writing and shall be delivered personally, telexed,
sent by facsimile transmission or overnight courier (regularly providing proof
of delivery) or sent by registered, certified, or express mail and shall be
deemed given when so delivered personally, telexed, sent by facsimile
transmission or overnight courier, or if mailed two (2) days after the date of
deposit in the United States mail as follows: to the parties at the following
addresses (or at such other address as a party may specify by notice in
accordance with the provisions hereof to the other):
If to Phillip Hermann, to his address at:
10809 Eton Avenue
Chatsworth, CA 91311
If to Company, to its address at:
Youbet.com, Inc.
5901 Desoto Avenue
Woodland Hills, CA 91367
Attention: Chief Executive Officer
Fax (818) 668-2121
Copy to:
Christensen, Miller, Fink, Jacobs
Glaser, Weil & Shapiro, LLP
2121 Avenue of the Stars, 18th Floor
Los Angeles, CA, 90067
Attention: Steve Silbert
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(b) Change of Address. Either party may change its address for
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notice hereunder by notice to the other party in accordance with this Section
11.
12. COMPLETE AGREEMENT; MODIFICATION AND TERMINATION:
This Agreement together with the Agreement of even date herewith between
the Company and Executive, a copy of which is attached hereto, contains a
complete statement of all the arrangements between the parties with respect to
the matters covered hereby and, supersedes all existing agreements between the
parties concerning the subject matter hereof, including that certain Employment
Agreement dated as of February 23, 1999 between the Company and Executive and
that certain Employment Agreement dated November 8, 2001 between the Company and
the Executive (the "Previous Agreement"); provided that until the Effective Time
the Previous Agreement shall remain in full force and effect. This Agreement may
be amended, modified, superseded or canceled, and the terms and conditions
hereof may be waiver, by the party waiving compliance. No delay on the part of
any party in exercising any shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right or remedy, nor any single or
partial exercise of any such right or remedy preclude any other or further
exercise thereof or the exercise of any other right or remedy.
13. GOVERNING LAW:
This Agreement shall be governed by and construed in accordance with the
laws of the State of California applicable to agreements entered into and
performed entirely within such State.
14. HEADINGS:
The headings in this Agreement are solely for the convenience of reference
and shall not affect its interpretation.
15. INDEMNIFICATION:
The Company will indemnify, defend, and hold Executive harmless from any
costs, claims, causes of action, or liabilities (including reasonable attorney's
fees) arising out of: (i) any breach of the Company's covenants, warranties, or
representations; and (ii) any other matter relating to or arising out of
Executive's employment hereunder which does not arise from Executive's gross
negligence, willful misconduct, or a breach of Executive's covenants,
warranties, or representations hereunder.
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WHEREFORE, the parties hereto have executed this Agreement as of the day
and year first above written.
By:
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Phillip Hermann
Agreed to and Accepted:
Youbet.com, Inc., a
Delaware corporation
By:
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Its:
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