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Exhibit 10.04
December 28, 1992
TO: Xxxx X. Xxxxxxxx
FROM: Xxxxxx X. Xxxxx
RE: Terms of Employment
This will confirm the agreement which we have reached regarding the
terms of your employment at Entercom effective October 1, 1992.
1. Your weekly salary will be $2,710.88 (annual rate of $141,353.00).
Effective January 1, 1993 your weekly salary will be increased to $2,876.71
(annual rate of $150,000.00). Your salary will be increased annually effective
January 1 of each year commencing January 1, 1994. The increase shall be a
percentage equal to the percentage increase in the Consumer Price Index for All
Urban Consumers (CPI-U), as published by the U.S. Department of Labor for the
immediately preceding November compared to the CPI-U for the month of November
one year earlier.
2. In addition to the salary set forth in 1 above, we have agreed that
you will be paid an incentive bonus based on increases in the real cash flow of
the Company. The formula set out below attempts to do this but it cannot
anticipate significant changes in the Company's accounting methods which may
occur subsequent to the date of this letter. Therefore in the event of a
significant change in the Company's accounting methods that would result in a
significant deviation from the stated purpose of the incentive then we have
agreed to equitably adjust the formula set forth below so that after reflecting
such accounting change the formula reflects the principle that the incentive is
to be based on changes in real cash flow. Changes in the Company's accounting
methods which have occurred prior to the date of this letter have already been
considered and are fully reflected in the formula. The formula to which we have
agreed is that you will be paid incentive compensation equal to 1.0% of the
excess of the Company's annual Adjusted Net Income (as defined below) over the
ANI Base (as defined below) using an October 1 to September 30 fiscal year,
beginning with the 1992-93 fiscal year. Such incentive shall be paid on the
first regular payroll date for the corporate office which occurs after the
December 31st following the and of the fiscal year in question. In the event of
a termination of your employment, the incentive payable under this paragraph 2
for the year of termination shall be that portion of the incentive that would
have been payable for the entire fiscal year in which the termination occurs,
which is computed by multiplying the incentive for the entire fiscal year by a
fraction in which the numerator is the number of days from the start of the
fiscal year to the date of termination and the denominator is 365.
3. For purposes of this agreement the following definitions shall be
applicable.
(a) The "ANI Base" for the 1992-93 fiscal year shall be
$1,080,594.00 This amount is the ANI for the 1991-92 fiscal year. For
each fiscal year following the 1992-93 fiscal year the "ANI Base" shall
be increased by a percentage equal to the percentage
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increase in the CPI-U for September of that year compared to the CPI-U
for September one year earlier.
(b) "Normal Capital Replacements" in the 1991-92 fiscal year
shall be $56,552.22 for each radio station owned and operated by the
Company. This per station amount will be increased each fiscal year
thereafter in accordance with increases in the CPI-U for the preceding
one year period (September to September) and shall also be adjusted pro
rata for any changes in the number of stations owned and operated by
the Company during any year.
(c) "Pro Forma Taxable Income (Loss)" shall mean the net
income of the Company as shown on the audited financial statements of
the Company for the fiscal year in question adjusted for book vs. tax
permanent differences but not adjusted for book vs. tax timing
differences. For example, 20% of certain travel and entertainment
expenses are not deductible expenses for tax purposes and are a book
vs. tax permanent difference. Therefore the net income of the Company
must be increased by the non-deductible portion of such expenses in
computing "Pro Forma Taxable Income". On the other hand the difference
between book depreciation (computed on a straight line basis) and tax
depreciation (computed on an accelerated basis) is a book vs. tax
timing difference and is not to be used as an adjustment to net income
of the Company in computing "Pro Forma Taxable Income." All such book
vs. tax differences (both permanent and timing differences) are
identified on the Company's Federal Income Tax Return. In the event
that the Company files an amended tax return which changes the tax
treatment of any such book vs. tax difference from a timing difference
to a permanent difference or vice versa, then the effect of such change
on the Pro Forma Taxable Income for the amended year shall be added (or
subtracted as the case may be) from the Pro Forma Taxable Income of the
year in which such amended tax return is filed.
(d) "Shareholders Tax Obligation (Benefit)" shall mean the
amount, for any fiscal year in which the company is taxed as a
Subchapter S corporation, which is computed by multiplying the Pro
Forma Taxable Income (or Loss) of the Company by the higher of the
combined maximum income tax rates (federal, state and local) applicable
to a shareholder or shareholders resident in Lower Merion Township,
Pennsylvania or to a shareholder or shareholders holding at least 25%
of the Company's capital stock who reside in any other jurisdiction as
of the and of the calendar year in which the Company's fiscal year
ends. In the event that there is Pro Forma Taxable Income the resultant
number is the Shareholders Subchapter S Tax Obligation In the event
that there is a Pro Forma Taxable Loss the resultant number is the
Shareholders Subchapter S Tax Benefit.
(e) "Adjusted Net Income" shall mean net income of the Company
as shown on the audited financial statements of the Company for the
fiscal year in question plus charges or expenses for depreciation or
amortization (exclusive of amortization of format change expenses) less
Normal Capital Replacements (as defined above) and, so long as the
Company
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is taxed as a Subchapter S corporation, less the Shareholders
Subchapter S Tax Obligation or plus the Shareholders Subchapter S Tax
Benefit (as defined above) as the case may be.
4. In the event the Company makes a Special or Liquidating
Distribution, as defined below, you will be paid a Special Bonus equal to 0.5%
of the total amount or value of any such Special Distribution or 0.1% of any
such Liquidating Distribution. Such Special Bonus will be in addition to the
salary and incentive compensation set forth in paragraphs 1 and 2 above.
Notwithstanding anything to the contrary set forth herein, in the event that any
portion of any special or Liquidating Distribution is made in a medium other
than cash, the Company at its option may elect to pay the same portion of any
such Special Bonus in the same medium or alternatively in a similar medium or in
cash of at least equivalent value.
Such Special Bonus shall be earned as of the record date for any such
Distribution and shall be paid on the same date as such Distribution is made to
shareholders, provided that you must be employed on such record date to earn any
such Special Bonus, and further provided that no change or adjustment shall be
made to the "ANI Base" as a result of any such Special or Liquidating
Distribution in the year of any such Distribution or in any subsequent year, it
being agreed that the Special Bonus shall be in lieu of any such change or
adjustment. A Special Distribution shall be defined as any dividend or
distribution made to the shareholders except:
(a) regular dividends or distributions made on a quarterly or
other periodic basis;
(b) dividends or distributions made to defray shareholders'
liability for income taxes with respect to the taxable income of the
Company; and
(c) any dividend or distribution of stock or rights, warrants
or options to acquire stock either in the Company or any other company
which is related to it either as a parent, subsidiary, successor or
company under common or similar ownership or control; and
(d) any Liquidating Distribution.
A "Liquidating Distribution" shall be defined as any dividend or distribution
made to the shareholders pursuant to a plan of complete liquidation of the
Company.
5. You will be entitled to medical insurance for yourself and your
dependents and to life insurance, vacation and other benefits available to
officers of the company in accordance with Company policy. You will also be
eligible to participate in the Entercom Officers Profit Sharing Plan in
accordance with the terms of the Plan.
6. You will be provided with the use of a Company vehicle (to be
selected by the Company) and insurance thereon. You will be responsible for gas
for the automobile. The Company will be responsible for repairs and maintenance
(including oil).
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7. It is understood and agreed that your position is one of executive
authority involving the exercise of discretion in matters affecting the vital
interests of the Company, including the existence and degree of profitability of
the enterprise and the maintenance and renewal of its principal assets, its FCC
broadcast licenses It is therefore essential that the relationship at all time
be one of complete confidence and mutual understanding with respect to policies
and goals. Accordingly it is expressly understood that nothing herein shall be
construed as altering the "at will" nature of your employment and either party
retains the right to terminate this agreement at any time either for good cause
or solely for the convenience of either party provided that, except where there
is good cause for said termination, each party agrees to give at least thirty
(30) days' notice in advance of said termination. If you give notice of
termination, the Company may at its option waive such notice and accept your
termination effective at any time prior to the expiration of the notice period.
Please confirm your agreement to the foregoing by signing and returning
the enclosed copy of this memo.
Very truly yours,
/s/ Xxxxxx X. Field
Xxxxxx X. Field
As agreed
/s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx
Date
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Xxxx X. Xxxxxxxx Employment Agreement
Calculation of Adjusted Net Income
for Fiscal Year Ending 9/30/92
Net Income 370,187
Plus: Depreciation and Amortization 1,468,193
(exclusive of amortization of format
change expenses)
Subtotal 1,838,380
Less: Normal Capital Replacements 1 622,077
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Less: Shareholders Tax Obligation 2 135,709
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Adjusted Net Income FYE 9/30/92 1,080,594
(1) Normal Capital Replacements for FYE 9/30/92 is computed in accordance
with paragraph 3(b) as follows: Normal capital replacements for FYE
9/30/91 was $54,905.36 per station x CPI increase of 3.0% = $56,552.52
This amount x 11 stations = $622,077.75.
(2) The Shareholders Tax Obligation is computed as follows:
Pro Forma Taxable Income is equal to Net Income of $370,187 plus an
adjustment for permanent book vs. tax differentials of $29,546. Thus
Pro Forma Taxable Income is $399,733.
The applicable tax rate is 33.95%, which is the sum of the 31% Federal
Income Tax Rate and the 2.95% Pennsylvania State Income Tax Rate.
The Shareholders Tax Obligation is equal to Pro Forma Taxable Income x
the applicable tax rate: i.e. $399,733 x 33.95% which equals
$135,709.35.
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MEMORANDUM
TO: Xxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx
FROM: Xxxxxx X. Xxxxx
DATE: September 8, 1994
IN RE: Incentive Compensation Calculation
In connection with the calculation of the incentive compensation which
you are to receive based upon the special distribution paid to shareholders of
the Company on August 2, 1994, we have discussed the issue of the amount of
state tax obligation that the shareholders may have relating to the tax on the
gain on the sale of the assets of KRXX-FM - Minneapolis and KOQL-FM - Oklahoma
City. The taxation of this gain in the various states is not free from doubt.
The Company has adopted a position with respect to such state tax obligation,
which tax counsel to the Company has advised is a reasonable position. Based
upon this position, the total income tax obligation of the shareholders relating
to the sale of the assets referenced above is $8,022,582.00. Of that amount the
obligation for state income taxes is $593,159.00.
This memo will confirm that we have agreed to compute the incentive
compensation on the basis of the state tax obligation of the shareholders
determined in accordance with the above-referenced position. However, in the
event that the state tax obligation of the shareholders with respect to such
sales is increased either through final audit or settlement, then each of you
has agreed that the incentive compensation payable as a result of said special
distribution would be recomputed and in the event the incentive compensation
bonus is reduced as a result of such recomputation, your compensation at the
time of such recomputation will be reduced by the amount of the reduction in the
incentive bonus.
Please confirm your agreement to the foregoing by signing and returning
the enclosed copy of this memo.
AS AGREED:
/s/ Xxxxxx X. Xxxxx /s/ Xxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxx Xxxx X. Xxxxxxxx
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MEMORANDUM
MEMO TO: Xxxx X. Xxxxxxxx
FROM: Xxx Xxxxx
DATE: August 2, 1996
RE: Incentive Compensation
This will confirm that we have agreed to change the formula for
incentive compensation set forth in the memorandum dated 12/28/92 as modified by
memos dated 3/17/94 and 9/8/94 to eliminate the effects of the deferral of
program format change expenses and to change the treatment of amortization of
financing costs.
We have also agreed that amortization of financing costs should not be
added back to net income in order to determine ANI. This adjustment will be made
retroactive to years ending 1992 and thereafter. As a result of this change the
ANI base set forth in the memo dated 12/28/92 is amended to the sum of
$1,194,440.00.
The net adjustment in incentive for fiscal years ending 1993 and 1994,
using the new ANI base and eliminating all effects for deferral of program
format change costs results in a net additional payment to you of $5,777.00.
Please confirm your agreement to the above changes by signing and
returning the enclosed copy of this memo If you have any questions regarding
this memo please call me.
ACCEPTED AND AGREED:
BY:/s/ Xxxx X. Xxxxxxxx
DATE: 8/9/96
