EXHIBIT 10.7
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Employment Agreement (this
“ Agreement ”) is entered into on
February 28, 2008 (the “Effective Date”), between
The Orchard Enterprises, Inc. (formerly known as Digital Music
Group, Inc.), a Delaware corporation (“ The Orchard
”), and Bradley Peter Navin , a resident of New York
(the “ Executive ”). This Agreement is intended
to supersede the Employment Agreement between Executive and Digital
Music Group, Inc. dated as of December 10, 2007.
Agreement
In
consideration of the promises and the terms and conditions set
forth in this Agreement, the parties agree as follows:
1. Position and
Duties . During the term of this Agreement, The Orchard
will employ Executive, and Executive will serve The Orchard as its
Vice President, Global Licensing & Sales, or such other
position as assigned by the CEO. As such, Executive shall have such
responsibilities, duties and authority as reasonably accorded to
and expected of this position. Subject to the terms of
Sections 7.5 and 8.4 hereof, additional or different duties,
titles or positions may from time to time be assigned to or taken
from Executive by the CEO of The Orchard. Executive will report
directly to the CEO.
2. Performance of
Duties . Executive will be based at and perform his duties
under this Agreement primarily at the New York, NY offices of The
Orchard. Executive hereby represents and warrants that he is free
to enter into and fully perform this Agreement and the agreements
referred to herein without breach of any agreement or contract to
which he is a party or by which he is bound. Executive hereby
further represents and warrants that he has provided The Orchard
with copies of any employment, confidentiality, non-competition or
non-solicitation agreements currently binding upon him.
3. Exclusive
Service . Executive shall devote his full time and efforts
(from a business perspective) exclusively to this employment and
apply all his skills, effort and experience to the performance of
his duties and advancing The Orchard’s interests. Executive
shall not be engaged in any other business activity pursued for
salary, fees, profit, gain or other pecuniary advantage if such
activity interferes with Executive’s duties and
responsibilities hereunder. Executive will not engage in any
professional consulting activity nor serve on any corporate boards
except with the prior written approval of The Orchard’s CEO,
and Executive will otherwise refrain from engaging in any
activities inconsistent or in conflict with the performance of his
duties hereunder. However, the foregoing limitations shall not be
construed as prohibiting Executive from making personal investments
in a passive form or manner that will not require his services in
the operation or affairs of the companies or enterprises in which
such investments are made or from engaging in charitable, civic or
community activities that do not interfere with his duties to The
Orchard.
4. Compliance
with Policies . The Orchard has established policies,
procedures and practices, and Executive will comply with and be
bound by all such policies, procedures and practices from time to
time in effect during Executive’s employment to the extent
The Orchard has informed Executive thereof Executive will be
employed in a position of leadership within The Orchard and will be
expected to faithfully adhere to, execute and fulfill all corporate
policies established by The Orchard, now and in the future, in
addition to establishing systems for monitoring compliance with
such policies by other officers, employees and directors,
particularly The Orchard’s Code of Business Conduct.
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5. Confidential
or Proprietary Information and Inventions .
5.1 Company Information . Executive agrees at
all times during the term of his employment and thereafter, to hold
in strictest confidence and not to use, except for the benefit of
The Orchard, or to disclose to any person, firm or corporation
(except within the scope of his employment) without written
authorization of the CEO of The Orchard, any Confidential
Information of The Orchard. Executive understands that “
Confidential Information ” means any The Orchard
financial or operating information, contents of music libraries,
data bases, technical data. trade secrets or know-how, including,
but not limited to, research, product plans, products and
processes, services, customer lists, channel partner lists, target
acquisition lists and customers, channel partners and target
acquisitions (including, but not limited to, customers, channel
partners and target acquisitions of The Orchard on whom Executive
called or with whom Executive became acquainted during the term of
his employment), market data, software, inventions, music
processing techniques, formulas. technology, designs, drawings,
engineering. hardware configuration information, marketing,
financial reports or other business information disclosed to
Executive by The Orchard or prepared by Executive during his
employment by The Orchard, either directly or indirectly, in
writing, orally, by drawings, or by observation of documents,
technology or equipment. The Orchard and Executive acknowledge that
Confidential Information does not include any of the foregoing
items which have become publicly known and made generally available
through no wrongful act of Executive’s or of others who were
under confidentiality obligations as to the item or items
involved.
5.2 Third Party Information . Executive
recognizes that The Orchard has received and in the future will
receive from third parties (including, but not limited to, vendors,
customers, channel partners and acquisition targets) their
confidential or proprietary information subject to a duty on The
Orchard’s part to maintain the confidentiality of such
information and to use it only for certain limited purposes.
Executive agrees to hold all such confidential or proprietary
information in the strictest confidence and not to disclose it to
any person, firm or corporation or to use it except as necessary in
carrying out his work for The Orchard consistent with The
Orchard’s agreement with such third party.
5.3 No Prior Inventions . Executive represents
that, as of the Effective Date of this Agreement, other than
musical composition and sound recording copyrights, he has no
inventions, original works of authorship, developments,
improvements or trade secrets which were made by him prior to his
employment with The Orchard, which relate to The Orchard’s
business, operations, digitization processes, music library or
research and development.
5.4 Future Inventions . The Orchard shall own
all right, title and interest (including patent rights, copyrights,
trade secret rights, mask work rights, sui generis database
rights and all other intellectual and industrial property rights of
any sort) to any and all inventions (whether or not patentable),
works of authorship, mask works, designs, know-how, ideas and
information made or conceived or reduced to practice. in the whole
or in part. by Executive during the term of his employment with The
Orchard to and only to the fullest extent allowed by applicable
law; provided, however , the foregoing shall only apply to
any of the foregoing that are directly related to the business of
The Orchard (collectively referred to herein as “
Inventions ”). Executive agrees that he will promptly
make full written disclosure to The Orchard, will hold in trust for
the sole right and benefit of The Orchard, and hereby assign to The
Orchard or its designee, all his right, title, and interest in and
to any and all Inventions. To the extent allowed by law, this
section includes all right of paternity, integrity, disclosure and
withdrawal and any other rights that may be known as or referred to
as “moral rights” or the like. To the extent Executive
retains any such moral rights under applicable law, Executive
hereby ratifies and consents to any action that may be taken with
respect to such moral rights by or authorized by The Orchard and
agrees not to assert any moral rights with respect thereto.
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Executive will confirm any such ratifications, consents and
agreements from time to time as requested by The Orchard.
5.5 Maintenance of Records . Executive agrees
to keep and maintain adequate and current written records of all
Inventions made by him (solely or jointly with others) during the
term of his employment with The Orchard. The records will be in the
form of notes, sketches, drawings and any other format that may be
specified by The Orchard. The records will be available to and
remain the sole property of The Orchard at all times.
5.6 Patent and Copyright Registrations .
Executive agrees to assist The Orchard, or its designee, at The
Orchard’s expense, in every proper way to secure The
Orchard’s rights in any Inventions and any copyrights,
patents, mask work rights or other intellectual property rights
relating thereto in any and all countries, including the disclosure
to The Orchard of all pertinent information and data with respect
thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which The Orchard shall
reasonably deem necessary in order to apply for and obtain such
rights and in order to assign and convey to The Orchard, its
successors, assigns and nominees the sole and exclusive rights,
title and interest in and to such Inventions, and any copyrights,
patents, mask work rights or other intellectual property rights
relating thereto. Executive further agrees that his obligation to
execute or cause to be executed, when it is in his power to do so,
any such instrument or papers shall continue after the termination
of this Agreement. If Executive is unable because of his mental or
physical incapacity or for any other reason to secure his signature
to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or
original works of authorship assigned to The Orchard as above, then
Executive hereby irrevocably designates and appoints The Orchard
and its duly authorized officers and agents as his agent and
attorney in fact, to act for and in his behalf and stead to execute
and file any such applications and to do all other lawfully
permitted acts to further the processing and issuance of letters
patent or copyright registrations thereon with the same legal force
and effect as if executed by Executive.
6. Compensation
and Benefits .
6.1 Base Salary . Beginning on the Effective
Date, The Orchard shall pay Executive a base salary of one hundred
and sixty thousand dollars ($160,000) per year, adjusted as
provided herein (the “ Base Salary ”), payable
as earned in accordance with The Orchard’s customary payroll
practice. On at least an annual basis, the Compensation Committee
of the Board of Directors will review Executive’s performance
and consider an increase to the then current Base Salary as it
deems warranted by individual and corporate performance, market
conditions and other factors. No reductions will be made to
Executive’s Base Salary unless it is part of a company-wide
expense reduction plan authorized by the Board of Directors of The
Orchard, applying ratably to the base salaries of all senior
executives and to the fees earned by Directors; provided,
however , that in no event may Executive’s Base Salary be
reduced by more than fifteen percent (15%) at any one time or in
the aggregate over any twenty-four (24) month period without
his consent.
6.2 Additional Benefits . Executive will be
eligible to participate in The Orchard’s employee benefit
plans of general application to The Orchard’s senior
executives in effect from time to time, as amended, including
without limitation, those plans covering pension and profit
sharing, executive perquisites, stock purchases, and those plans
covering life, health, and dental insurance in accordance with the
rules established for individual participation in any such plan and
applicable law. Once Executive is eligible for health and dental
insurance coverage hereunder, Executive’s spouse and
dependents shall also be eligible for such coverage in accordance
with the terms of The Orchard’s policies and plans and the
contracts with third party providers. In addition, beginning on the
Effective Date, Executive will receive such other
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benefits, including holidays and sick leave, as The Orchard
generally provides to its senior executives.
6.3 Incentive Bonus Plan . For 2008 and all
subsequent years during the Term, subject to the terms of The
Orchard’s management incentive bonus plan, as amended from
time to time (the “Bonus Plan”), Executive will be
eligible to earn cash bonuses on an annual basis, payable as
determined under the Bonus Plan, but not until such time as the
Compensation Committee of the Board of Directors of The Orchard
determines the targets, milestones, performance objectives and
measurement criteria to be met each fiscal year and approves the
payment of specific cash bonuses after the end of each fiscal year
based upon the objective calculations and discretionary judgments
as called for in the Bonus Plan. For 2007, Executive shall be
entitled to receive a discretionary cash bonus in an amount and in
accordance with the parameters set forth on Schedule A
attached hereto. Any such 2007 discretionary bonus, if earned, will
be payable within two and one half (2 1 / 2 ) months following the year in which it
vests or is no longer subject to a substantial risk of
forfeiture.
6.4 Expenses . Executive shall prepare and
submit timely expense reports and The Orchard will reimburse
Executive for all reasonable and necessary travel and other
expenses incurred by Executive in connection with The
Orchard’s business, provided that such expenses are in
accordance with The Orchard’s applicable expense reporting
and reimbursement policy and are properly documented and accounted
for in accordance with the requirements of the Internal Revenue
Service.
6.5 Vacation . Executive will be entitled to
paid vacation as set forth in The Orchard’s policies and/or
employee manual (as they may be applicable to The Orchard’s
executive officers and key employees). as approved by the Board of
Directors.
6.6 Equity Incentive Awards . On the Effective
Date, Executive will receive options to purchase 5,000 shares of
The Orchard’s Common Stock (“Common Stock”) and
16,667 restricted shares of Common Stock, with such options and
shares being granted and awarded pursuant to and under the terms
and conditions of The Orchard’s Amended and Restated 2005
Stock Plan (the “ The Orchard Stock Plan ”).
Such stock options and shares of restricted Common Stock shall vest
33.3% after the first twelve months and then quarterly in eight (8
equal installments of 8.33%) such that they will be fully vested
thirty six (36) months from the Effective Date; except that in
the event of a Termination Without Cause under Section 7.4
below or Termination for Good Reason under Section 7.5 below,
the vesting of the foregoing stock options and shares of restricted
Common Stock shall be accelerated by six (6) months. The stock
options will expire on the seventh anniversary of the Effective
Date. Notwithstanding the forgoing, the Common Stock Options and
awards issued under the December 10, 2007 Agreement shall
remain in effect on the terms and conditions established under the
Stock Option Agreement and Restricted Stock Option Agreement except
subject to the same six (6)-month acceleration provision provided
hereinabove.
7. Term and
Termination . This Agreement will commence on the Effective
Date and will continue until the earlier of three (3) years
after the Effective Date or when terminated pursuant to any one of
the following:
7.1 Death . The death of Executive shall
immediately terminate this Agreement.
7.2 Disability . If, as a result of
Disability, as determined by The Orchard, Executive shall have been
absent from his full-time duties hereunder or unable to materially
fulfill his full-time duties (as determined by The Orchard)
hereunder for three (3) consecutive months, then thirty
(30) days after receiving written notice (which notice may
occur on or after
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the end
of such three (3) month period), The Orchard may terminate
Executive’s employment hereunder provided Executive is unable
to resume his full-time duties at the conclusion of such notice
period. Also, Executive may initiate termination of his employment
under this Section 7.2 if as a result of Disability his health
should become impaired to an extent that makes the continued
performance of his duties hereunder hazardous to his physical or
mental health, provided that Executive shall have furnished The
Orchard with a written statement from a qualified doctor to such
effect and provided, further, that, at The Orchard’s request
made within ten (10) days from the date of receipt of such
written statement, Executive shall submit on a timely basis to an
examination by a qualified doctor selected by The Orchard who is
acceptable to Executive or Executive’s doctor (such
acceptability will not be unreasonably withheld) and such doctor
shall have concurred with the conclusion of Executive’s
doctor. For purposes of this Agreement, “Disability”
means the Executive is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
(12) months. In order to receive Disability benefits,
Executive must cooperate with The Orchard in making such Disability
determination, including providing such medical evidence as may
reasonably be requested by The Orchard or submission to a medical
examination(s) by a qualified doctor(s) selected by The Orchard.
Executive must comply with any such requests within ten
(10) days.
7.3 For Cause . The Orchard may terminate
Executive’s employment under this Agreement for
“cause,” which shall be defined herein as follows:
(a) Executive’s material and irreparable breach of this
Agreement; (b) Executive’s gross negligence or willful
insubordination in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice
from The Orchard of the need to cure) of any of Executive’s
assigned duties and responsibilities hereunder;
(c) Executive’s willful dishonesty, fraud,
misrepresentation or misconduct with respect to the business and
affairs of The Orchard which adversely affects the operations,
reputation or business prospects of The Orchard;
(d) Executive’s willful, reckless or grossly negligent
violation of a material provision of The Orchard’s Code of
Business Conduct or other written corporate policy;
(e) Executive’s willful or reckless violation of any
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