Exhibit 6(a)(iii)
AGREEMENT, dated as of September __, 1996, between The CineMasters Group,
Inc., a New York corporation with an address at 000 Xxxx 00xx Xxxxxx, Xxxxx
0000, Xxx Xxxx, XX 00000 ( CineMasters ), and Xxxx Xxxxxxx, with an address at
00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ( Xxxxxxx )
W I T N E S S E T H
WHEREAS, CineMasters, Xxxx Xxxxxx, and Avenue Pictures, Inc. ( Avenue )
are entering into a Share Exchange Agreement, dated as of the date hereof
(the Share Exchange Agreement ), pursuant to which Avenue will become a
wholly-owned subsidiary of CineMasters;
WHEREAS, Xxxxxxx and CineMasters are entering into an Employment
Agreement, dated as of the date hereof (the Employment Agreement ), pursuant to
which Xxxxxxx will be employed as Chairman of CineMasters and as President of
its Wombat Division;
WHEREAS, in connection with the Share Exchange Agreement and the
Employment Agreement, CineMasters and Xxxxxxx wish to set forth certain
additional agreements between them;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:
1. Termination of Employment of Xxxxxxx.
(a) Upon the termination of employment of Xxxxxxx at CineMasters,
(i) Xxxxxxx (or his estate) shall have the option, exercisable during the
six-month period commencing on the date of termination of his employment, (A) to
purchase all of the assets of CineMasters listed on Schedule 1(a)(i) for a cash
purchase price equal to the book value of such assets as reflected on the most
recent regularly prepared balance sheet of CineMasters existing on the date such
option is exercised and (B) to assume all of the leases of CineMasters listed on
Schedule 1(a)(i) that are assignable. If Xxxxxxx (or his estate) shall exercise
the option to assume all of such leases, CineMasters and Xxxxxxx shall enter
into an assignment and assumption agreement pursuant to which (C) CineMasters
will (1) assign the assumed leases to Xxxxxxx (or his estate) and (2) agree to
hold Xxxxxxx (or his estate) harmless with respect to any obligations under the
assumed leases relating to the period prior to the date of the assignment and
assumption and (D) Xxxxxxx (or his estate) will (1) agree to assume the assumed
leases and (2) agree to hold CineMasters harmless with respect to any
obligations under the assumed leases relating to the period on or after the date
of the assignment and assumption.
(ii) CineMasters shall pay Xxxxxxx (or, as set forth in Section
1(b), his spouse or estate) monthly payments (the Monthly Payments ) of
$8,333.33 (or, with respect to any Monthly Payment made prior to the sale or
transfer by CineMasters of all or any portion of the CineMasters Library (as
defined in the Share Exchange Agreement), such lesser amount as may be
determined pursuant to Section 1(d)) for the greater of (A) five years and (B)
the remainder of his life.
(b) If Xxxxxxx shall die prior to the receipt of all of the Monthly
Payments, the remaining Monthly Payments shall be made to the person who was his
spouse on the date of his death (the Spouse ) if she shall be living or if she
shall not be living to the estate of Xxxxxxx.
(c) If (i) the employment of Xxxxxxx at CineMasters shall terminate for
any reason other than death and Xxxxxxx shall die less than five years after the
date of such termination and (ii) the Spouse shall be living at the time the
last Monthly Payment is made, the Spouse shall be entitled to receive additional
monthly payments (the Additional Monthly Payments ) of $6,250 (or, with respect
to any Additional Monthly Payment made prior to the sale or transfer by
CineMasters of all or any portion of the CineMasters Library, such lesser amount
as may be determined pursuant to Section 1(d)) for the lesser of (iii) the
period commencing the first month that no Monthly Payment is payable and ending
five years after the date of Xxxxxxx s death and (iv) the remainder of her life.
(d) Notwithstanding Sections 1(a)(ii) and 1(c), no Monthly Payment or
Additional Monthly Payment made prior to the sale or transfer by CineMasters of
all or any portion of the CineMasters Library shall exceed 25% of the Average
Monthly Net Income Ceiling as set forth on the most recent Accountant s
Certificate (as such terms are hereinafter defined) received by the recipient of
the Monthly Payments or Additional Monthly Payments. Promptly after each
issuance of CineMasters s audited financial statements, CineMasters s
independent public accountants shall (i) calculate the average monthly net
income (which shall be determined without deduction for general and
administrative expenses) earned by CineMasters from the CineMasters Library
during the most recent fiscal year covered by such audited statements (the
Average Monthly Net Income Ceiling ) and (ii) furnish a certificate (the
Accountant s Certificate ) setting forth such calculation to CineMasters and the
recipient of the Monthly Payments or Additional Monthly Payments. The recipient
of the Monthly Payments or Additional Monthly Payments shall have the right, at
any time not more than one year after the receipt of each Accountant s
Certificate, to have his representative verify that the Average Monthly Net
Income Ceiling set forth in such Accountant s Certificate has been properly
calculated, and if it is determined that an error has been made, an adjusting
payment shall be made promptly. This Section 1(d) shall be of no further force
or effect on and after such date as CineMasters shall sell or transfer all or
any portion of the CineMasters Library.
2. Sale of the CineMasters Library.
(a) CineMasters shall not sell any portion of the CineMasters Library
prior to the rightful termination of the employment of Xxxxxxx at CineMasters.
(b) Subject to the terms and conditions of this Section 2(b), CineMasters
hereby grants to Xxxxxxx (or his estate) a right of first offer with respect to
the sale of the CineMasters Library during the five-year period (the First Offer
Period ) commencing on the date of termination of the employment of Xxxxxxx at
CineMasters. Each time CineMasters proposes to offer for sale or sell the
CineMasters Library during the First Offer Period, CineMasters shall first offer
to sell the CineMasters Library to Xxxxxxx (or his estate) in accordance with
the following provisions:
(i) CineMasters shall deliver a notice (the Notice ) to Xxxxxxx (or his
estate) stating its bona fide intention to sell the CineMasters Library and
setting forth the price and other terms and conditions on which it proposes to
sell.
(ii) During the 30-day period commencing on the date of receipt of the
Notice, Xxxxxxx (or his estate) may elect to purchase the CineMasters Library
for the price and on the other terms and conditions set forth in the Notice (if
the stated price includes any property other than cash, such stated price shall
be deemed to be the amount of any cash included in the stated price plus the
fair market value of the other property included in the stated price).
(iii) If Xxxxxxx (or his estate) does not elect to purchase the
CineMasters Library for the price and on the other terms and conditions set
forth in the Notice, CineMasters may, during the 90-day period following the
30-day period referred to in Section 2(b)(ii), offer for sale and sell the
CineMasters Library to any person or persons for a price and on other terms and
conditions no less favorable to CineMasters than those set forth in the Notice.
(iv) If CineMasters does not sell the CineMasters Library within the
90-day period referred to in Section 2(b)(iii), the right to sell the
CineMasters Library pursuant to Section 2(b)(iii) shall expire and the right of
first offer set forth in this Section 2(b) shall again apply.
(c) During the First Offer Period, CineMasters shall not sell less than
all of the CineMasters Library to any person or persons.
3. Rights to Future Productions.
(a) In the event that Xxxxxxx (or his estate) exercises the option set
forth in Section 1(a)(i) and Xxxxxxx (or his estate) thereafter completes any
production, Xxxxxxx (or his estate) shall deliver a notice to CineMasters
describing such production in reasonable detail. CineMasters shall have the
right, during the 30-day period commencing on the date of receipt of such
notice, to acquire, for nominal consideration, all right, title, and interest of
Xxxxxxx (or his estate) in and to such production, subject to (i) the rights of
Xxxxxxx (or his estate) to receive commercially reasonable producer fees, (ii)
the rights, if any, of A&E Television Networks, as licensee, consistent with
past practice, and (iii) the distribution rights of Xxxxxx Associates, Inc.
pursuant to the Distribution Agreement, dated July 1, 1995, between Xxxxxx
Associates, Inc. and Wombat Productions (a division of CineMasters).
(b) If CineMasters shall exercise its right pursuant to Section 3(a) to
acquire all right, title, and interest of Xxxxxxx (or his estate) in and to any
production, CineMasters shall pay to Xxxxxxx (or, after his death, to the Spouse
if she shall be living or if she shall not be living to the estate of Xxxxxxx)
an amount equal to 25% of the net income earned by CineMasters with respect to
such production. Promptly after each issuance of CineMasters s audited financial
statements, CineMasters s independent public accountants shall (i) calculate the
aggregate amount required to be paid pursuant to this Section 3(b) with respect
to the most recent fiscal year covered by such audited statements and (ii)
furnish a certificate setting forth such calculation to CineMasters and the
person entitled to receive such payment. CineMasters shall pay such amount to
the person entitled thereto not more than ten business days after receipt of
such certificate. The person entitled to receive such payment shall have the
right, at any time not more than one year after the receipt of each such
certificate, to have his representative verify the calculation set forth in such
certificate, and if it is determined that an error has been made, an adjusting
payment shall be made promptly.
4. Modification.
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements between
them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
5. Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given at the address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 5). Notice to the estate of
Xxxxxxx shall be sufficient if addressed to Xxxxxxx as provided in this Section
5. Any notice or other communication given by certified mail shall be deemed
given at the time of certification thereof, except for a notice changing a
party's address which shall be deemed given at the time of receipt thereof.
6. Waiver.
Any waiver by either party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
7. Binding Effect.
The provisions of this Agreement shall be binding upon and inure to the
benefit of Xxxxxxx and his heirs and personal representatives, and shall be
binding upon and inure to the benefit of CineMasters and its successors.
8. Third Party Beneficiaries.
This Agreement does not create, and shall not be construed as creating,
any rights enforceable by any person not a party to this Agreement, except
(a) as provided in Section 7 and (b) the Spouse shall be a third party
beneficiary of this Agreement.
9. Headings.
The headings in this Agreement are solely for the convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
10. Counterparts; Governing Law.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and the same
instrument. It shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
The CineMasters Group, Inc.
By_____________________
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Xxxx Xxxxxxx
