EXHIBIT 10.63
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into
as of June 1, 2003, by and between BRILLIANT DIGITAL ENTERTAINMENT, Inc., a
Delaware corporation (the "COMPANY"), located at 0000 Xxxxxxx Xxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxxx Xxxxx, XX 00000, and Xxxxx Xxxx, an individual
("EXECUTIVE").
RECITAL
A. The Company and Executive desire to assure that the Company
retains the services of Executive, whose experience, knowledge and abilities are
extremely valuable to the Company.
NOW, THEREFORE, in consideration of the terms, conditions, covenants,
representations, warranties and promises contained in this Agreement, the
parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive and Executive
hereby accepts employment with the Company on the terms and conditions set forth
herein. Throughout the Term (as defined below), Executive shall faithfully and
diligently perform Executive's duties in conformity with the directions of each
of the Chief Executive Officer and the Board of Directors of the Company (the
"Board"), and serve the Company to the best of Executive's ability. Executive
shall devote all of Executive's working time, attention and energies to the
business and affairs of the Company. Executive shall have the title of Chief
Financial Officer, and shall report to the Chief Executive Officer. At all times
while Executive is an employee of the company, Executive shall be headquartered
in California. Executive is expressly restricted from being, directly or
indirectly, employed, participating in, or being connected in any manner with
the ownership, management, operation or control of any business, similar to, or
competitive with, the business of the Company in which the Company is presently
involved or becomes engaged during the Term. Notwithstanding anything to the
contrary contained herein, the Company recognizes that Executive may engage in
non-competitive, separate business or professional activities and that Company
shall have no right, claim or interest in or to the output or product of any
such activities by Executive. Executive has or may have non-competing business
interests in (a) the Entertainment Industry in the areas of (i) Pre-Production,
(ii) Production, (iii) Post-Production, and (iv) Distribution (non-peer to
peer), (b) the Video Game and Software Industries, and (c) the Consumer Products
and Electronics Industry. Executive shall promptly disclose to the Company all
of Executive's additional business and professional activities, and any material
change in such activities, and shall provide the Company with such information
about these activities as reasonably requested by the Company from time to time
to ensure Executive's compliance with this Agreement.
2. TERM. The initial term of this Agreement (the "INITIAL TERM")
shall commence upon the date hereof and shall terminate two (2) years
thereafter, unless sooner terminated as provided herein. The Term of this
Agreement shall automatically renew for additional one year periods (each a
"RENEWAL TERM" and, together with the Initial Term, the "TERM") unless
terminated as provided herein.
3. COMPENSATION.
3.1. ANNUAL BASE SALARY. For Executive's services
hereunder, the Company shall initially pay Executive an annual base salary of
two hundred thousand United States dollars ($200,000) (the "BASE SALARY"). The
Base Salary shall be paid in accordance with the Company's normal procedures for
paying salaried employees, but in no event less frequently than semi-monthly.
3.2. MANDATORY BASE SALARY INCREASES. The Base Salary
shall be increased each January 1st (the "ADJUSTMENT DATE"), commencing with
January 1, 2004, by an amount equal to the increase in the Consumer Price
Index-U.S. City Average, or any substantially equivalent successor thereto, for
the month of the then-current Adjustment Date, as published by the Bureau of
Labor Statistics of the United States Department of Labor.
3.3. EXECUTIVE BONUS POOL. Commencing with fiscal year
2003 and for each fiscal year during the Term thereafter during which Executive
is employed by the Company, the Company shall establish and fund a bonus pool in
accordance with the terms set forth on EXHIBIT A for distribution to Executive
and certain other senior management personnel (the "EXECUTIVE BONUS POOL"). With
respect to any fiscal year during the Term, Executive shall be entitled to
receive that portion of amounts paid out of the Executive Bonus Pool as provided
in Exhibit A, and the Company shall pay Executive such amount in cash within 110
days after the end of such fiscal year. The portion of the Executive Bonus Pool
allocated and paid to Executive shall be pro rated for the first fiscal year
during the Term based on the portion of the fiscal year during which Executive
was actually employed by the Company or providing consulting services to the
Company. The Company acknowledges that Executive has been providing consulting
services to the Company since before January 1, 2003, which makes Executive
eligible for 100% of his portion of the Executive Bonus Pool for fiscal year
2003 if he remains employed with the Company through December 31, 2003.
3.4. TAXES. All amounts paid to Executive hereunder shall
be subject to the applicable withholding of social security, federal, state, and
other taxes and deductions as required by law.
4. BENEFITS. Executive shall be entitled to participate in the
following benefits:
4.1. GROUP MEDICAL AND DISABILITY INSURANCE BENEFITS.
During the Term, Executive shall be eligible to participate, and the premiums
shall be paid by the Company on behalf of the Executive, in any group medical
and disability insurance programs as provided generally to officers of the
Company.
4.2. VACATION. Executive shall be entitled to four (4)
weeks paid vacation for each year of full employment, pro-rated on a sub-annual
basis and accruable over the term of the agreement, exclusive of legal holidays,
in accordance with the Company's standard practices and policies. Company shall
pay Executive for any unused vacation time at the termination of this Agreement.
4.3. HOLIDAYS. Executive shall be entitled paid leave for
all US legal holidays and other holidays as observed by the Company.
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4.4. RETIREMENT PLANS. During the Term, Executive shall be
eligible to participate in any retirement, pension, or other deferred or
supplemental compensation plans operated by the Company and any subsequent or
additional retirement plans established by the Board to the same extent as
similarly situated executives.
4.5. EXPENSE REIMBURSEMENT. Upon presentment of verifiable
invoices and other documentation as may be requested by the Company, and subject
to the Company's expense reimbursement policies applicable to similarly situated
executives, the Company shall reimburse Executive for the reasonable costs and
expenses which he incurs in connection with the performance of his duties and
obligations under this Agreement including; auto, Internet access, and relevant
periodical and other subscriptions up to a monthly maximum of six-hundred and
fifty dollars ($650)
4.6. EQUIPMENT AND SUPPLIES. The Company shall, at its
expense, provide Executive with equipment and supplies that the Company
determines, in its reasonable judgment, are customarily necessary for Executive
to perform his duties hereunder.
5. STOCK OPTIONS. Pursuant to the terms and conditions of the
Brilliant Digital Entertainment, Inc. 1996 Stock Option Plan, as amended to date
(the "PLAN"), subject to the approval of the Board or Compensation Committee of
the Board, which approval shall not be unreasonably withheld, the Company shall
grant Executive an option (the "OPTION") to purchase up to seven hundred fifty
thousand (750,000) shares of the Common Stock of the Company, which shall vest
and become exercisable as to one hundred eighty seven thousand five hundred
(187,500) of the shares underlying the option on the first anniversary of the
date hereof (the "FIRST ANNIVERSARY DATE") and fifteen thousand six hundred
twenty five (15,625) of the shares underlying the Option at the end of each
month following the month in which the First Anniversary Date occurs. The option
agreement for the Option shall provide that, in the event that the Company
undergoes a change of control, then, on the occurrence of such event, the Option
shall immediately accelerate and vest entirely. A change of control shall mean:
(a) a sale to a single entity of more than 50% of the Company's outstanding
Common Stock in a single transaction or series of related transactions; (b) a
merger in which the Company's stockholders immediately prior to the merger hold
less than 50% of the surviving entity's voting securities immediately following
the merger; or (c) a sale of all or substantially all of the Company's assets.
6. TERMINATION AND EXPIRATION.
6.1. TERMINATION AT WILL.
6.1.1. BY THE COMPANY. Subject to the provisions of
this SECTION 6, the Company may terminate this Agreement at any time, for any
reason, or for no reason, either with or without Cause (as defined below).
6.1.2. BY EXECUTIVE. Subject to the provisions of
this SECTION 6, Executive may terminate this Agreement at any time, for any
reason, or for no reason, either with or without Good Reason (as defined below),
by delivering ninety (90) days' prior written notice
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to the Company; PROVIDED, HOWEVER, that the Company may reduce such ninety (90)
day period in its sole discretion.
6.2. TERMINATION BY THE COMPANY WITHOUT CAUSE OR
TERMINATION BY EXECUTIVE WITH GOOD REASON. If the Company terminates Executive's
employment hereunder without Cause, or if Executive terminates his employment
hereunder for Good Reason (as defined blow), then, in addition to payment of
Executive's accrued portion of the Base Salary, accrued vacation, and
reimbursable expenses as of the date of termination, Executive or Executive's
representative shall be entitled to the following:
6.2.1. SEVERANCE PAY. The Company shall pay to
Executive, in the manner and subject to the conditions provided herein, and in
addition to any other amounts to which Executive is entitled hereunder, an
amount (the "SEVERANCE PAY") equal to one (1) year of Base Salary. Fifty percent
(50%) of the Severance Pay shall be paid to Executive within ten (10) days of
termination of employment or at the next company pay period, whichever is
earlier. The remaining fifty percent (50%) of the Severance Pay shall be paid in
six (6) equal consecutive monthly installments on the last day of the calendar
month, commencing on the last day of the first full calendar month following
termination, so long as (i) Executive does not breach his obligations under the
Proprietary Rights Agreement (as defined below), or (ii) Engage in a Competing
Business (as defined below).
6.2.2. CONTINUATION COVERAGE. Except in the case of
termination of Executive's employment as a result of his death, the Company
shall pay on behalf of Executive, the premiums payable in order to continue the
same medical coverage for Executive and Executive's family under the Company's
health insurance plan existing as of the date of termination, which payments
shall be made for a period ending on the earlier of (a) expiration of the
maximum period for which COBRA coverage is available to Executive, and (b) the
date Executive and Executive's family is otherwise covered by another health
insurance plan (the "CONTINUATION COVERAGE").
6.2.3. ACCELERATED VESTING. The Option shall
immediately accelerate and vest entirely on the termination date (the
"ACCELERATED VESTING").
6.2.4. EXECUTIVE BONUS POOL. Executive shall remain
eligible to receive a pro rata amount of his portion of the Executive Bonus
Pool, if any, funded for the fiscal year during which Executive's employment
with the Company terminates. The portion of the Executive Bonus Pool, if any,
allocated and paid to Executive for the fiscal year during which Executive's
employment with the Company terminates shall be based on the portion of the
fiscal year during which Executive was actually employed by the Company. The pro
rata amount of Executive's portion of the Executive Bonus Pool, if any (the "PRO
RATA BONUS AMOUNT"), shall be paid to Executive at the time and in the manner
provided for in SECTION 3.3 above.
6.3. TERMINATION BY THE COMPANY WITH CAUSE; TERMINATION BY
EXECUTIVE WITHOUT GOOD REASON. If the Company terminates Executive's employment
with Cause, or if Executive terminates his employment with the Company without
Good Reason, Executive shall be entitled to payment of Executive's accrued
portion of the Base Salary, accrued vacation, and reimbursable expenses as of
the date of termination. Executive shall not be entitled to any of the
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Severance Pay, Continuation Coverage, Accelerated Vesting, Executive Bonus Pool
for the fiscal year preceding the fiscal year in which such termination occurs
(to the extent unpaid at the time of termination), or Pro Rata Bonus Amount for
the fiscal year in which such termination occurs.
6.4. TERMINATION OF EXECUTIVE AS A RESULT OF DEATH OR
DISABILITY. If Executive's employment terminates as a result of his death or
Disability (as defined below), Executive or Executive's representative shall be
entitled to payment of Executive's accrued portion of the Base Salary, accrued
vacation, and reimbursable expenses as of the date of termination, Executive
Bonus Pool for the fiscal year preceding the fiscal year in which such
termination occurs (to the extent unpaid at the time of termination), and the
Pro Rata Bonus Amount for the fiscal year in which such termination occurs.
7. DEFINITIONS.
7.1. CAUSE. For purposes of this Agreement, the term
"CAUSE" shall mean termination of Executive by the Company for the following, as
determined by a majority vote of the Compensation Committee of the Board: (a) a
willful breach by Executive of any material provision of this Agreement that
remains uncured by Executive within thirty (30) days of written notice of such
breach from the Board or the Compensation Committee of the Board; (b) repeated
and willful failure or refusal to perform Executive's material duties hereunder
or repeated and gross negligence in the performance by Executive of his duties
hereunder that remains uncured by Executive within thirty (30) days of written
notice from the Board; PROVIDED, HOWEVER, that the Company shall only be
required to give notice one time, or (c) if Executive is convicted of a felony.
7.2. DISABILITY. For the purposes of this Agreement,
"DISABILITY" shall mean any physical or mental disability which causes Executive
to be unable to substantially perform Executive's normal duties as an employee
of the Company; PROVIDED, HOWEVER, that Executive shall not be considered
disabled until (i) Executive has been so disabled for one hundred eighty (180)
days; (ii) Executive's attending physician shall have furnished to the Company
certification that the return of Executive to his duties as an employee of the
Company is impossible or improbable; and (iii) Executive is determined to be
totally disabled by the disability insurer then insuring Executive, if any.
7.3. ENGAGE IN A COMPETING BUSINESS. For purposes of this
Agreement, "ENGAGE IN A COMPETING BUSINESS" shall mean directly or indirectly,
either individually or as a principal, partner, agent, employee, employer,
consultant, stockholder, joint venture, or investor, or as a director or officer
of any corporation or association, or in any other manner or capacity
whatsoever, engaging in, assisting or having any active interest in a business
operating anywhere in the world that utilizes peer-to-peer and distributed
computing including but not limited to distributed use of CPU, bandwidth and
storage of a client (peer) PC, distribution of digital content, and 3D real time
animation for use with the Internet. Notwithstanding the above, this paragraph
shall not be construed to prohibit Executive from owning less than one percent
(1%) of the securities of a publicly held corporation.
7.4. GOOD REASON. For purposes of this Agreement, the term
"GOOD REASON" shall mean Executive's termination of his employment with the
Company for one or more of the
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following reasons: (a) the material reduction of Executive's title, authority,
duties or responsibilities, or the assignment to Executive of duties materially
inconsistent with Executive's position with the Company as set forth in SECTION
1 hereof that remains uncured by the Company within thirty (30) days of written
notice from Executive to the Chief Executive Officer of the Company; (b) the
relocation of more than 100 miles from the Company's executive offices at 0000
Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, XX 00000, without
Executive's concurrence; or (c) any other material breach by the Company of this
Agreement that remains uncured by the Company within thirty (30) days of written
notice from Executive to the Chief Executive Officer of the Company.
8. CONFIDENTIALITY AND NON-SOLICITATION. During the Term,
Executive will have access to and become acquainted with what Executive and the
Company acknowledge are trade secrets and other confidential information (the
"CONFIDENTIAL INFORMATION") which are the exclusive property of the Company. In
light of the sensitive and proprietary nature of the Confidential Information,
notwithstanding any provision in this Agreement, Executive agrees to execute and
be bound by the Company's Employee Confidential Information and Non-Solicitation
Agreement attached hereto as EXHIBIT B.
9. MISCELLANEOUS PROVISIONS.
9.1. NOTICES. Except as otherwise provided in this
Agreement, all notices, requests, demands, and other communications under this
Agreement shall be given in writing and shall be served either personally, by
facsimile or delivered by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
If to the Company:
c/o Brilliant Digital Entertainment, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
If to Executive:
At Executives primary residence address as shown on the
records of the Company.
Notices shall be deemed received at the earliest of actual receipt, confirmed
facsimile or three (3) days following mailing.
9.2. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
contained herein and supersedes all prior agreements, representations, and
understandings of the parties.
9.3. AMENDMENTS. This Agreement may not be amended,
supplemented, canceled, or discharged except by written instrument executed by
the parties hereto.
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9.4. WAIVERS. All waivers hereunder shall be in writing.
No waiver by any party hereto of any breach or anticipated breach of any
provision of this Agreement by any other party shall be deemed a waiver of any
other contemporaneous, preceding, or succeeding breach or anticipated breach,
whether or not similar, on the part of the same or any other party.
9.5. SEVERABILITY. In the event that any provision of this
Agreement shall be unenforceable or inoperative as a matter of law, the
remaining portions or provisions shall remain in full force and effect.
9.6. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, representatives, executors, administrators, successors, and assigns,
provided, however, that Executive may not assign any or all of his rights or
duties hereunder except following the prior written consent of the Company.
9.7. COUNTERPARTS. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an original, but all
such counterparts together shall constitute one and the same Agreement.
9.8. SECTION HEADINGS. The section headings used in this
Agreement are inserted for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
9.9. GOVERNING LAW. Except where otherwise indicated, this
Agreement shall be construed and enforced in accordance with the laws of the
State of California, County of Los Angeles, without regard to conflicts of law
principles of such state.
9.10. ARBITRATION. The parties agree that they will use
their best efforts to amicably resolve any dispute arising out of or relating to
this Agreement. Any controversy, claim or dispute that cannot be so resolved
shall be settled by final binding arbitration in accordance with the rules of
the American Arbitration Association and judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. Any such arbitration shall be conducted in Los Angeles, California, or
such other place as may be mutually agreed upon by the parties. Within fifteen
(15) days after the commencement of the arbitration, each party shall select one
person to act arbitrator, and the two arbitrators so selected shall select a
third arbitrator within ten (10) days of their appointment. Each party shall
bear its own costs and expenses and an equal share of the arbitrator's expenses
and administrative fees of arbitration.
9.11. AUTHORITY. The Company represents that the officer
executing this Agreement on the Company's behalf has full right, authority and
power to enter into this Agreement on behalf of Company.
9.12. BOOKS OF ACCOUNT. Executive shall have the right,
personally or through his agent, to examine the Company's relevant books of
account at any reasonable time designated by Executive for the purpose of
auditing the Company's revenues and payments due to Executive hereunder based
thereon. The Company agrees that it shall maintain such books of account in
accordance with Generally Accepted Accounting Principles.
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9.13. ADVICE OF COUNSEL. Executive acknowledges that he has
been advised to seek independent legal counsel for advice regarding the effect
of the terms and provisions hereof, and has either obtained such advice of
independent legal counsel, or has voluntarily and without compulsion elected to
enter into and be bound by the terms of this Agreement without such advice of
independent legal counsel.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Employment Agreement as of the date first above written.
BRILLIANT DIGITAL ENTERTAINMENT, INC.
By: /S/ XXXXX XXXXXXXXXX
------------------------------------
Name: XXXXX XXXXXXXXXX
Title: CHIEF EXECUTIVE OFFICER
EXECUTIVE:
/S/ XXXXX XXXX
---------------------------------
Xxxxx Xxxx
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EXHIBIT A
EXECUTIVE BONUS POOL
A. SUMMARY:
1. The Executive Bonus Pool will be based upon the Contribution
Margin (as defined below).
2. The percentage of Contribution Margin that will be funded into
the Executive Bonus Pool in any fiscal year and distributed to
participants will be determined by the amount of the Company's
EBITDA for the immediately preceding fiscal year, as shown on
the Company's audited financial statements.
3. Achieving a Contribution Margin equal to at least 85% of
Budgeted Contribution Margin is required before any Executive
Bonus Pool amount will be awarded.
4. Each participant in the Executive Bonus Pool will be entitled
to that portion of the amount paid out of the Executive Bonus
Pool as is equal to the ratio determined by dividing (a) the
participant's annual Base Salary by (b) the aggregate amount
of all participants' annual Base Salary.
B. EXECUTIVE BONUS POOL CALCULATIONS:
If the Contribution Margin for a fiscal year is equal to or greater
than 85% of the Budget Contribution Margin for that fiscal year, then:
1. If EBITDA in a fiscal year is less than $3,000,000 million,
then the amount funded into the Executive Bonus Pool will be
3% of the Contribution Margin for that fiscal year.
2. If EBITDA in a fiscal year is between $3,000,000 and
$4,999,999, inclusive, the amount funded into the Executive
Bonus Pool will be 4% of the Contribution Margin for that
fiscal year.
3. If EBITDA in a fiscal year is between $5,000,000 and
$8,999,999, inclusive, the amount funded into the Executive
Bonus Pool will be 5% of the Contribution Margin for that
fiscal year.
4. If EBITDA in a fiscal year is $9,000,000 or more, then the
Executive Bonus Pool will be 8% of the Contribution Margin for
that fiscal year.
In no event, however, shall the amount funded into the Executive Bonus
Pool for any fiscal year exceed two (2) times the aggregate amount of
all participants' Base Salary (the "MAXIMUM EXECUTIVE BONUS POOL").
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C. EXECUTIVE BONUS POOL PAYOUTS:
1. If the Contribution Margin for a fiscal year is less than 85%
of the Budgeted Contribution Margin for the same fiscal year,
then no amount shall be paid to participants in the Executive
Bonus Pool.
2. If the Contribution Margin for a fiscal year is between 85%
and 89.99%, inclusive, of the Budgeted Contribution Margin for
the same fiscal year, then an amount equal to 25% of the
amount funded into the Executive Bonus Pool shall be paid to
participants in the Executive Bonus Pool.
3. If the Contribution Margin for a fiscal year is between 90%
and 94.99%, inclusive, of the Budgeted Contribution Margin for
the same fiscal year, then an amount equal to 50% of the
amount funded into the Executive Bonus Pool shall be paid to
participants in the Executive Bonus Pool.
4. If the Contribution Margin for a fiscal year is between 95%
and 99.99%, inclusive, of the Budgeted Contribution Margin for
the same fiscal year, then an amount equal to 75% of the
amount funded into the Executive Bonus Pool shall be paid to
participants in the Executive Bonus Pool.
5. If the Contribution Margin for a fiscal year is equal to or
greater than 100% of the Budgeted Contribution Margin for the
same fiscal year, then an amount equal to 100% of the amount
funded into the Executive Bonus Pool shall be paid to
participants in the Executive Bonus Pool.
Amounts funded into the Executive Bonus Pool which are not paid out of
the Executive Bonus Pool shall be forfeited, and no participant shall
be entitled to all or any portion of such amounts during any present or
future period.
D. EXAMPLES:
If the EBITDA for a given fiscal year was greater than $9m, then the
amount funded into the Executive Bonus Pool would be 8% of Contribution
Margin. If the Budgeted Contribution Margin was $20 million, and the
Contribution Margin was $17 million (or 85% of budget), then
participants in the Executive Bonus Pool would receive, in the
aggregate, $340,000, calculated as follows: an amount equal to
$17,000,000 multiplied by 8% (or $1,360,000), would be funded into the
Executive Bonus Pool, of which 25% of that amount (or $340,000) would
be distributed to all participants and $1,020,000 would be forfeited.
If a Contribution Margin of $15 million was achieved (representing 75%
of budget), no payout would be made.
If a Contribution Margin of $20 million was achieved (representing 100%
of budget), then participants in the Executive Bonus Pool would
receive, in the aggregate, $1,600,000, calculated as follows: an amount
equal to $20,000,000 multiplied by 8% (or $1,600,000), would be funded
into the Executive Bonus Pool, of which 100% of that
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amount would be distributed to all participants. Notwithstanding the
foregoing, if $1,600,000 exceeded the Maximum Executive Bonus Pool,
then the $1,600,000 would be reduced to an amount equal to the Maximum
Executive Bonus Pool.
E. DEFINITIONS:
For purposes of calculating the Executive Bonus Pool and amounts
payable to participants hereunder, the following terms shall have the
following meanings:
The term "CONTRIBUTION MARGIN" shall mean, with respect to any fiscal
year, an amount equal to the Company's Gross Revenue (other than Gross
Revenue attributable to eNewMedia) for such fiscal year, LESS the
following third party costs accrued during such fiscal year, all as
determined in accordance with GAAP: (a) all costs related to payment
processing by the Company including but not limited to; third party
credit card/payment processing charges, charge backs, disputed charges,
and credits issued, (b) fees paid to host browse channels and serve
digital files to "seed" the files into a peer-to-peer network and to
serve as a quality of service backup to ensure that the files are
always available, (c) fees paid to convert and digitally encode content
into the proper format, (d) fees paid to DRM content and provide HTML
and database entry services associated with publishing content, (e) all
costs and fees associated with the license of content and technology
from a content and/or technology provider, and (f) any Company internal
employment costs associated with any of the foregoing costs.
The Term "BUDGETED CONTRIBUTION MARGIN" shall mean, with respect to any
fiscal year, an estimate of the Contribution Margin for such fiscal
year as determined in good faith by the Company's Board of Directors or
Compensation Committee of the Board of Directors. Executive shall be
entitled to participate in discussions relating to determination of the
Budgeted Contribution Margin, and the Board shall consider (but shall
not be obligated to adopt) Executive's input in determining the
Budgeted Contribution Margin.
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