EXHIBIT 10-2
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 9th day of October, 1996, by and between
PARADISE MUSIC & ENTERTAINMENT, INC., a Delaware corporation having offices
at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "COMPANY"), and XXXXX
XXXXX, an individual with an address at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX
00000 (the "EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Executive is currently an executive officer of All Access
Entertainment Management Group, Inc. ("ALL ACCESS"), a privately held company
co-managed by the Executive.
WHEREAS, a registration statement ("REGISTRATION STATEMENT") is to be
filed by the Company in connection with the Company's initial public offering
(the "IPO");
WHEREAS, in connection with and effective simultaneously with the
execution of this Agreement All Access will participate in a closing pursuant
to the terms of an exchange agreement (the "EXCHANGE AGREEMENT") with the
Company and other constituent parties referred to therein;
WHEREAS, the Company and the Executive wish to set forth the terms and
conditions of the Executive's employment by the Company effective as of the
closing date of the IPO ("Effective Date") under the terms of this Agreement;
WHEREAS, it is understood and agreed by the parties hereto that the
Executive shall co-manage with Xxxxxxx Xxxxx the normal day to day operations
of the continuing business of All Access after the Effective Date whether in
the form of a separate subsidiary or division ("ALL ACCESS OPERATING") on and
after the Effective Date, subject to the control of the Board of Directors of
the Company with respect to matters not constituting normal day to day
operations.
WHEREAS, it is understood and agreed by the parties hereto that the
Executive shall co-manage with Xxxxxxx Xxxxx the normal day to day operations
of the new business to be funded promptly following the IPO, whether in the
form of a separate subsidiary or division (the "Record Label"), subject to
the control of the Board of Directors of the Company with respect to matters
not constituting normal day to day operations.
NOW, THEREFORE, the parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ the Executive for the Term
specified in Section 2 and in the capacities set forth in Section 3 and the
Executive agrees to accept such employment, upon the terms and conditions
hereinafter set forth.
2. TERM. This Agreement shall be for a term commencing on the
Effective Date and expiring three years thereafter unless otherwise sooner
terminated as provided in this Agreement (the "TERM"). This Agreement shall
automatically be extended for additional one year periods unless either party
advises the other, in a writing delivered not less than 90-days prior to the
expiration of the Term then in effect, of its intention not to extend this
Agreement. If this Agreement is so extended, then the "Term" shall also be
deemed to include such extensions.
3. DUTIES AND RESPONSIBILITIES.
(a) During the Term, the Executive shall serve as an Executive Vice
President and Director of the Company and shall also serve as a co-principal
executive officer (either president or executive vice president) of All
Access Operating and the Record Label with such responsibility and status
commensurate with such position and at least equivalent to that which the
Executive currently holds with All Access. During the Term, the Executive
shall, along with Xxxxx Xxxxx and subject only to the review of the Board of
Directors regarding matters not involving day to day operations or not
otherwise in the ordinary course of business, determine the policies for and
have full control over the normal day to day operations of All Access
Operating. With respect to any bonus pool which the Company may create which
is solely payable to employees of All Access Operating or the Record Label,
the Executive and Xxxxxxx Xxxxx shall determine the allocation and payment of
bonuses thereunder.
(b) In serving the Company, the Record Label and All Access
Operating the Executive shall report to the Board of Directors of the
Company. The Executive and Xxxxxxx Xxxxx shall be responsible for the hiring
and firing, and compensation of all other employees under their direction and
consistent with the All Access and/or the Record Label Operating Budget.
(c) For purposes hereof, the All Access Operating Budget for the
fiscal year ending June 30, 1997 has been approved and consists of the budget
presented as of the date hereof with modifications therein based on actual
operations thereafter. Thereafter budgets for annual fiscal periods prepared
on a like basis shall be presented for review and approval by the Company's
Board of Directors. Such review and approval shall be consistent with sound
business practice.
(d) The parties agree that for the twelve month period following
the effective date of the IPO, the Company will, from the proceeds of the
IPO, invest an amount of not less than $200,000 in developing and expanding
the business and operations of All
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Access Operating in accordance with a budget prepared by Messrs., Xxxxx and
Xxxxx, and approved by the Company's Board of Directors (the "Development
Budget").
(e) For purposes hereof, the term Record Label Operating Budget
shall mean all costs and expenses associated with developing and operating
the business and affairs of the Record Label, which budget shall be
established at not less than $650,000 (plus the Base Salary of Xxxxx Xxxxx)
for the 12 month period following the Effective Date of the IPO ("Initial
Period"). In addition to said $650,000, it is agreed that the Record Label
will pay the Executive a base salary of $150,000 (the "Base Salary").
Thereafter, the Record Label Operating Budget shall be developed by Messrs.
Xxxxx and Xxxxx and presented to the Board of Directors for approval. The
Board of Directors shall approve the expenditure of an additional $650,000
(plus the Base Salary of Xxxxx Xxxxx) for the next 12 month period thereafter
if the following criteria have been met:
(i) a distribution agreement covering the releases of the
Record Label and conforming with normal industry standards has been executed
within the Initial Period with one of the six main record distribution
companies or such other distribution company reasonably acceptable to the
Board of Directors;
(ii) the Record Label has filled the positions of
marketing/sales and radio/promotion with persons having a level of experience
and reputation reasonably acceptable to the Board of Directors;
(iii)the Record Label has released at least two records under
the distribution agreement within the Initial Period; and
(iv)the Company has sold at least 70,000 units under the
distribution agreement during the Initial Period.
(f) During the Term, the Executive shall serve on the Executive
Advisory Committee of the Company, which shall be a committee comprised of
the principal executive officers of each subsidiary or division which shall
advise the Board of Directors on business matters affecting the Company,
including potential business ventures and acquisitions. Messrs. Xxxxx and
Xxxxx shall each be entitled to one vote on the Executive Advisory Committee.
(g) The Executive shall, except as provided in Schedule A, devote
substantially all his business efforts to the affairs of the Company. Other
permitted business activities of the Executive shall not be competitive and
shall not conflict with the terms of this Agreement. The Executive will (i)
devote his best efforts, skill and ability to promote the Company's
interests; (ii) carry out his duties in a competent and professional manner;
(iii) work with other employees of the Company in a competent and
professional manner; and (iv) generally promote the best interests of the
Company. Notwithstanding the foregoing, the Executive may engage in
additional activities if such activities are approved by
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a majority of the Board of Directors. After such approval SCHEDULE A shall be
amended to include such activities.
(h) The Executive's principal place of employment shall be at the
principal offices of the Company (and such locations to which such principal
office shall be relocated) subject to reasonable travel requirements on
behalf of the Company. If during the Term, the Company requires the
Executive to move his principal place of business outside of the greater
metropolitan area (a radius of more than 30 miles from Manhattan) and
Executives chooses not to accept such relocation, then the Executive may so
advise the Company, in writing, and this Agreement shall be deemed null and
void and no longer of any force and effect, and Executive shall be released
from all provisions and restrictions contained herein, including, without
limitation, the restrictions set forth in Section 11 hereof. As severance,
the Company shall forthwith pay the Executive, in equal monthly installments
the balance of his Base Salary for the remainder of the Term then in effect.
4. COMPENSATION.
(a) As compensation for services hereunder and in consideration of
his agreement not to compete as set forth in Section 10 below, the Company
shall pay the Executive during the Term, in accordance with the Company's
normal payroll practices, base salary compensation at an annual rate of
$150,000 (the "BASE SALARY"). Upon the Executive's written request, the
Company shall advance the Executive up to an additional $112,500 on the
Effective Date with such advance to be offset against the Executive's bonus.
The initial advance if requested on or after the date hereof shall be granted
automatically. The next request shall be made no earlier than the end of the
Company's first fiscal quarter following the date hereof; and all subsequent
requests shall be made no earlier than the end of each subsequent fiscal
quarter. Each subsequent request shall be reviewed by, and will be made only
if approved by, the Company's Compensation Committee based upon a
determination as to the likely attainment of budgeted goals after giving
consideration to prior compensation paid to the Executive. If the
Executive's bonus is not enough to offset such advance, then the balance of
such advance which has not been offset shall be offset in six equal monthly
installments against compensation otherwise payable to the Executive.
(b) The Board of Directors shall establish a first tier bonus pool
("TIER I POOL") which the Board of Directors shall allocate among the
Company's divisions (or subsidiaries) with each division receiving its
allocated amount if it meets certain earnings targets after deducting all
expenses and taxes (before giving effect to the Tier I Pool). The amount to
be allocated, the targets ("TARGETS") to be met and the basis for
calculation, all with respect to the Tier I Pool, shall be set annually in
advance by the Board of Directors. For the initial one year period under the
Term of this Agreement the target shall be set forth on SCHEDULE B, attached
hereto. The Executive and Xxxxxxx Xxxxx shall determine, in their sole
discretion, the distribution of the Tier I Pool funds allocated to All Access
Operating. It is acknowledged and understood that the Executive and Xxxxxxx
Xxxxx shall have the discretion to allocate some or all of said funds to
themselves.
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(c) The Board of Directors of the Company shall also establish a
second tier bonus pool ("TIER II POOL") which the Board of Directors shall,
in its discretion, allocate to employees of the Company, including employees
of subsidiaries and divisions. The Tier II Pool shall be comprised of 10% of
the Company's net income before taxes above the aggregate net profits before
taxes established as the Targets in the Tier I Pools for said fiscal year.
(d) The Board of Directors of the Company shall also establish the
Record Label Bonus Plan and the Special Bonus Plan attached as Schedules C
and D respectively.
5. BENEFITS.
(a) During the Term, the Executive shall be entitled to participate
in the benefit plans established by the Company for the benefit of its key
executives.
(b) The Executive shall be entitled to four (4) weeks of paid
vacation.
(c) The Company shall establish a plan (the "PLAN") qualified under
Section 401(k) of the Internal Revenue Code of 1986, as amended (the "CODE").
The Plan shall provide for the matching by the Company of employee pre-tax
contributions to the Plan up to the limits allowed by law. The Company shall
assure that the participants in, and provisions of, the Plan are such as to
remain qualified under the Code. The Company shall be entitled to make such
reasonable restrictions on contributions required to avoid any risk of
failing to remain qualified under the Code.
6. KEY MAN INSURANCE. The Company shall have the right to obtain key
man life insurance for the benefit of the Company on the life of the
Executive. If requested by the Company, the Executive shall submit to such
physical examination and otherwise take such actions and execute and deliver
such documents as may be reasonably necessary to enable the Company to obtain
such life insurance. The Executive has no reason to believe that his life is
not insurable with a reputable insurance company at rates now prevailing in
the City of New York for healthy men of his age.
7. DISCHARGE BY COMPANY. The Company shall be entitled to
immediately terminate the Term and to discharge the Executive for cause,
which shall be limited to the following grounds:
(i) Conviction of a felony; or
(ii) Commission of a willful or intentional act which could injure
the reputation, business or business or business relationships of the
Company including the violation of the terms of Sections 10 and 11 hereof;
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8. DISABILITY, DEATH.
(a) If the Executive shall be unable to perform his duties
hereunder by virtue of illness or physical or mental incapacity or disability
(from any cause or causes whatsoever) in substantially the manner and to the
extent required hereunder prior to the commencement of such disability as
determined by a competent medical doctor (all such causes being herein
referred to as "DISABILITY") and the Executive shall fail to have performed
substantially such duties for 90 consecutive days or for periods aggregating
180 days, whether or not continuous, in any continuous period of one year
(such 90th or 180th day to be known as the "DISABILITY DATE"), the Company
shall have the right to terminate the Executive's employment hereunder as at
the end of any calendar month thereafter upon written notice to him. The
Executive shall be entitled to his Base Salary for the remainder of the Term
payable on the Company's regular payroll schedule and to bonuses earned
through such date determined at the end of the fiscal year in which
Disability occurred, with said bonuses limited to the prorated portion equal
to the portion of the fiscal year prior to termination.
(b) In case of the death of the Executive, this Agreement shall
terminate and the Company shall be obligated to pay to the Executive's estate
or as otherwise directed by the Executive's duly appointed and authorized
legal representative, his Base Salary for the remainder of the Term payable
on the Company's regular payroll schedule and to bonuses earned through such
date determined at the end of the fiscal year in which Death occurred, with
said bonuses limited to the prorated portion equal to the portion of the
fiscal year prior to termination.
9. VOLUNTARY TERMINATION. If the Executive voluntarily terminates his
employment prior to the end of the Term, he shall only be entitled to receive
compensation accrued through the date of termination.
10. CONFIDENTIAL INFORMATION. The Executive recognizes that he will
occupy a position of trust with respect to business and technical information
of a secret or confidential nature which is the property of the Company, or
any of its affiliates, and which has been and will be imparted to him from
time to time in the course of his employment with the Company. In light of
this understanding, the Executive agrees that:
(a) the Executive shall not at any time knowingly use or disclose,
directly or indirectly, any of the confidential information or trade secrets
which is the property of the Company, or any of its affiliates, to any
person, except that he may use and disclose to authorized Company personnel,
licensees or franchisees in the course of his employment; and
(b) within five (5) days from the date upon which his employment
with the Company is terminated, for any reason or for no reason, or otherwise
upon the request of the Company, he shall return to the Company any and all
documents and materials which constitute or contain the confidential
information or trade secrets of the Company, or any of its affiliates.
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For purposes of this Agreement, the terms "CONFIDENTIAL INFORMATION" or
"TRADE SECRETS" shall include all information of any nature and in any form
which is owned by the Company, or any of its affiliates, and which is not
publicly available or generally known to persons engaged in businesses
similar to that of the Company, or any of its affiliates. Notwithstanding the
foregoing, when the Executive's employment with the Company is terminated,
for whatever reason, the limitations provided in this Section 10 shall not
prevent the Executive from using for his own benefit any information which he
acquired prior to the Effective Date.
11. NON-COMPETITION.
(a) The Executive agrees that his services hereunder are of a
special character, and his position with the Company places him in a position
of confidence and trust with the Company's artists, clients, customers and
employees. The Executive and the Company agree that in the course of
employment hereunder, the Executive has and will continue to develop a
personal acquaintanceship and relationship with the Company's artists,
clients and customers, and a knowledge of those artists', clients' and
customers' affairs and requirements which may constitute the Company's
primary or only contact with such artists, clients and customers. The
Executive consequently agrees that it is reasonable and necessary for the
protection of the goodwill and business of the Company that the Executive
make the covenants contained herein. Accordingly, the Executive agrees that
while he is in the Company's employ the Executive will not, without the prior
written consent of the Company, either directly or indirectly, or in any
capacity whether as a promoter, proprietor, partner, joint venturer,
employee, agent, consultant, director, officer, manager, shareholder (except
as a shareholder holding less than five percent (5%) of a publicly traded
company's issued and outstanding capital stock, or otherwise) work for, act
as a consultant to or own any interest in any direct competitor of the
Company which operates in or provides services essentially the same as the
Company in any portion of the geographic territory where the Company operates
or sells its products or services, except as allowed pursuant to Section 3(c)
of this Agreement. The Executive further agrees that during the Term, and for
the one year period following the Executive's termination of employment with
the Company, the Executive will not solicit, entice, induce or persuade: (i)
any employee, artist, client or customer of the Company; or (ii) any person
or entity had been engaged in negotiations with the Company to become, an
employee, artist, client or customer of the Company during the six month
period prior to the Executive's termination of employment with the Company,
to alter, terminate or refrain from extending or renewing any contractual or
other relationship with the Company, or commence a similar or substantially
similar relationship with the Executive, any entity with whom the Executive
is affiliated or employed by or any direct competitor of the Company.
Notwithstanding the foregoing, when the Executive's employment with the
Company is terminated, for whatever reason, the Executive may continue to do
business, without violating the terms hereof, with, any customer, client or
artist of the Company which was a customer, client or artist of the
Executive, or any company controlled by the Executive, prior to the Effective
Date.
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(b) As used in this Section 11, the term "COMPANY" shall include
subsidiaries, licensees, sub-licensees and franchisees of the Company, the
term "CUSTOMER" shall mean any person or entity who is then, or who had been
at any time during the one year period immediately preceding the date of
termination of the Executive's employment, a customer of the Company, and the
term "ARTIST OR CLIENT" shall mean any person or entity who is then, or who
had been at any time during the one year period immediately preceding the
date of termination of the Executive's employment, an artist or client
represented by, signed by, working for or collaborating with the Company.
(c) The parties hereto agree that the duration and area for which
the covenant not to compete set forth herein is to be effective are
reasonable. In the event that any court determines that the time period or
the area, or both of them, are unreasonable and that such covenant is to that
extent unenforceable, the parties hereto agree that the covenant shall remain
in full force and effect for the greatest time period and in the greatest
area that would not render it unenforceable.
(d) If the Executive commits a material breach or is about to
commit a material breach, of any of the above provisions, the Company shall
have the right to temporary and preliminary injunctive relief to prevent the
continuance or commission of such breach prior to any hearing on the merits
and to have the provisions of this Agreement specifically enforced by any
court having equity jurisdiction without being required to post bond or other
security and without having to prove the inadequacy of the available remedies
at law, it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Company. In addition, the
Company may take all such other actions and remedies available to it under
law or in equity and shall be entitled to such damages as it can show it has
sustained by reason of such breach.
(e) The existence of any claim or cause of action of the Executive
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of those covenants
and agreements.
12. RESOLUTION OF DISPUTES. Any dispute by and among the parties hereto
arising out of or relating to this Agreement, the terms, conditions or a
breach thereof, or the rights or obligations of the parties with respect
thereto, shall be arbitrated in the City of New York, New York before and
pursuant to then applicable commercial rules and regulations of the American
Arbitration Association, or any successor organization. The arbitration
proceedings shall be conducted by a panel of three arbitrators, one of whom
shall be selected by the Company, one by the Executive (or his legal
representative) and the third arbitrator by the first two so chosen. The
parties shall use their best efforts to assure that the selection of the
arbitrators shall be completed within 30 days and the parties shall use their
best efforts to complete the arbitration as quickly as possible. In such
proceeding, the arbitration panel shall determine who is a substantially
prevailing party and shall award to such party its reasonable attorneys',
accountants' and other professionals' fees and its costs incurred in
connection with the proceeding. The award of the arbitration panel shall be
final, binding upon the
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parties and nonappealable and may be entered in and enforced by any court of
competent jurisdiction. such court may add to the award of the arbitration
panel additional reasonable attorneys' fees and costs incurred by the
substantially prevailing party in attempting to enforce such award.
13. ENFORCEABILITY. The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way
affect the right of that party thereafter to enforce the same, nor shall it
affect any other party's right to enforce the same, or to enforce any of the
other provisions of this Agreement; nor shall the waiver by either party of
the breach of any provision hereof be taken or held to be a waiver of any
subsequent breach of such provision or as a waiver of the provision itself.
14. ASSIGNMENT. This Agreement is a personal contract and the
Executive's rights and obligations hereunder may not be sold, transferred,
assigned, pledged or hypothecated by the Executive. The rights and
obligations of the Company hereunder shall be binding upon and run in favor
of the successors and assigns of the Company. If any assignment or transfer
of rights hereunder is attempted by the Executive contrary to the provisions
hereof, the Company shall have no further liability for payments hereunder.
15. MODIFICATION. This Agreement may not be canceled, changed, modified
or amended orally, and no cancellation, change, modification or amendment
shall be effective or binding, unless it is in writing, signed by both
parties to this Agreement.
16. SEVERABILITY; SURVIVAL. If any provision of this Agreement is held
to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement nevertheless shall be binding upon the
parties with the same effect as though the void or enforceable part has been
severed and deleted.
17. NOTICE. Notices given pursuant to the provisions of this Agreement
shall be sent by certified mail, postage prepaid, or by overnight courier, or
by telex, telecopier or telegraph, charges prepaid, to the following address:
To the Company: Paradise Music & Entertainment, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
with a copy to: Xxxxx Xxxx Xxxxx Constant & Xxxxxxxx
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
To the Executive: Xxxxx Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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18. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
19. NO CONFLICT. The Executive represents and warrants that he is not
subject to any agreement, instrument, order, judgment or decree of any kind,
or any other restrictive agreement of any character, which would prevent him
from entering into this agreement or which would be breached by the Executive
upon his performance of his duties pursuant to this agreement.
20. ENTIRE AGREEMENT. This agreement represents the entire agreement
between the Company and the Executive with respect to the subject matter
hereof, and all prior agreements relating to the employment of the Executive,
written or oral, are nullified and superseded hereby.
IN WITNESS WHEREOF, the parties have set their hands and seals on and as
of the day and year first above written.
PARADISE MUSIC & ENTERTAINMENT, INC.
By:
------------------------------------------------
Name:
Title:
------------------------------------------------
Xxxxx Xxxxx
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SCHEDULE A
The Executive may devote such time as the Executive deems appropriate,
without adversely affecting the Executive's time devoted to the business of
the Company, to work with the following companies:
Baseball Cares
Character References, Inc.
Cyberson Partners, L.P.
Digital Entertainment Marketing, Inc.
The Baseball Players Hall Of Fame
The World Of New York
Uniform Remote Control
SCHEDULE B
TIER I POOL CALCULATION
Division Target Profitability Tier I Pool Amount
-------- -------------------- ------------------
All Access Entertainment $325,000 (Year 1) $325,000
Management Group, Inc.(1)(2)(3) $512,500 (Year 2)
$512,500 (Year 3)
$475,000 for all subsequent years
Picture Vision, Inc.(2) $375,000 (All Years) $225,000
Xxxx Xxxxxxx Music, Inc.(2) $375,000 (All Years) $225,000
Total....................................................................$775,000
_____________
(1) This amount may be allocated as Messrs. Xxxxx and Xxxxx may determine in
their sole discretion.
(2) Target Profitability with respect to each fiscal year shall be determined
by the Company's independent auditors in accordance with generally accepted
accounting principles, consistently applied based on net revenues of the
applicable subsidiary before taxes after deducting all expenses, excluding
(i) costs relating to or arising out of physically relocating the
businesses, (ii) costs of consummating the IPO, the transactions
contemplated under the Exchange Agreement and all other matters relating
thereto including costs directly associated with being a public company,
(iii) the base salary of Xxxxxxx Xxxxx, Xxxx Xxxxxxxx or Xxx Xxxxx, as the
case may be, (iv) monies expended pursuant to the Development Budget, (v)
rent in excess of current rent unless, based on employee growth, larger
facilities are required or as a result of required lease escalations. It is
understood and agreed that the Executives will be allocated pro rata
amounts of their Tier 1 bonuses to the same extent that their operating
divisions or subsidiaries achieve Target Profitability.
(3) If the Target Profitability in Year 1 exceeds $325,000, the Target
Profitability amounts for years 2 and 3 shall each be reduced by one-half
of such excess up to an aggregate reduction of $75,000.
SCHEDULE C
SPECIAL BONUS PLAN
Set forth below are the terms of a Special Bonus Plan which has been
established by the Company to reward employees in particular areas of the
Company's business for the profitable completion of designated special projects
in their area of business. To date, two special projects ("Special Projects")
have been identified, one through All Access Entertainment Management Group,
Inc. ("All Access") and one through Picture Vision, Inc. ("Picture Vision").
Additional Special Projects may be submitted to the Compensation Committee for
its approval.
The Special Bonus Plan is as follows:
1. BUSINESS INCLUDED: The Special Projects as identified above.
2. BONUS THRESHOLD: The "Bonus Threshold" for a Special Project shall be
$1,000,000 of Special Project Net Profits.
3. SPECIAL PROJECT NET PROFIT; ADJUSTED SPECIAL PROJECT NET PROFIT: The
term "Special Project Net Profit" shall mean the net earnings from a Special
Project after deduction of all proper allocable costs (excluding costs that
would have been excluded for purposes of computing Tier 1 compensation) but
before income taxes and the bonus determined hereunder, all as determined by the
Company's independent auditors in accordance with generally accepted accounting
principles consistently applied. The term "Adjusted Special Project Net Profit"
shall mean Special Project Net Profits reduced by the amount of Tier 1
compensation paid to the Executive(s) of All Access or Picture Vision, as the
case may be, which relates to the period in which the Special Project Net
Profits were earned. As an example, if All Access produced $2,000,000 of
Special Project Net Profit in fiscal 1997 and paid total Tier 1 compensation of
$500,000, with respect to the corresponding period, the Adjusted Special Project
Net Profits would be $1,500,000 and the bonus would be $225,000. Assuming the
Bonus Threshold has been met for any Special Project, any further royalties or
residuals related thereto ("Future Royalty Revenue") shall be subject to a bonus
as set forth below.
4. BONUS AMOUNT: The bonus shall be 15% of Adjusted Special Project Net
Profits and 15% of Future Royalty Revenue.
5. BONUS DETERMINATION: The bonus determination shall be made and paid
within 45 days after the audited financial statements of the Company for each
fiscal year. The calculation shall be prepared by the Company's independent
auditors and shall be final.
SCHEDULE D
RECORD LABEL BONUS PLAN
Upon the consummation of the initial public offering by the Company,
an initial record label will be established through a wholly owned subsidiary
("PRM") to be operated under the direction of Xxxxx Xxxxx and Xxxxxxx Xxxxx.
Set forth below is a bonus arrangement to compensate Xxxxx Xxxxx, Xxxxxxx Xxxxx
and others designated by them upon meeting the targets set forth below This
bonus, which is a one-time bonus only, is in addition to any other bonuses of
the Company including, without limitation the Tier I and Tier 2 bonus set forth
in the Employment Agreements of Xxxxx Xxxxx and Xxxxxxx Xxxxx.
The Record Label Bonus Plan is as follows:
1. BUSINESS INCLUDED: The initial record label operated by PRM and all
other record labels thereafter operated by PRM or under the principal direction
of Messrs. Xxxxx and/or Xxxxx.
2. BONUS THRESHOLD: No bonus shall be payable until the completion of
the first fiscal year in which the "Cumulative Net Profit" as herein defined of
PRM exceeds $1,000,000. No bonus shall be payable with respect to any fiscal
year after the fiscal year ending June 30, 2001.
3. CUMULATIVE NET PROFIT: Shall mean the cumulative net earnings before
taxes of PRM from inception through the end of its current fiscal year
determined by the Company's independent auditors in accordance with generally
accepted accounting principles consistently applied except that no deduction
shall be made for bonuses payable under the Record Label Bonus Plan and there
shall be added to Cumulative Net Profit the base salary paid by PRM to Xxxxx
Xxxxx for each year (or partial year).
4. (i) BONUS LEVELS: A bonus of $250,000 shall be payable with respect
to the first fiscal year in which Cumulative Net Profits exceed $1,000,000.
(ii) An additional bonus of $250,000 shall be payable with respect to
the first fiscal year in which Cumulative Net Profits exceed $2,000,000.
(iii) An additional bonus of $100,000 shall be payable with respect
to the first fiscal year in which Cumulative Net Profits exceed $2,400,000.
(iv) The maximum total bonus payable under the Record Label Bonus
shall be $600,000.00.
5. BONUS DETERMINATION: The bonus determination shall be made and paid
within 45 days after the completion of the audited financial statements of the
Company for a fiscal year. The calculation shall be prepared by the independent
auditors and shall be final.
