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 XXXXXXX 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 Xxxxx 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 Xxxxx 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 be 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, Director and Secretary 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
Xxxxx 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 Xxxxx 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 Xx. Xxxxx a base
salary of $150,000 (the "Base Salary of Xxxxx Xxxxx"). 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
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Executive may engage in additional activities if such activities are approved by
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 $50,000 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 Xxxxx Xxxxx shall
determine, in their sole discretion, the distribution of the Tier I Pool funds
allocated to All Access Operating. It is
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acknowledged and understood that the Executive and Xxxxx Xxxxx shall have the
discretion to allocate some or all of said funds to themselves.
(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
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(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;
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
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(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 consti tute or contain the confidential information or trade
secrets of the Company, or any of its affiliates.
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.
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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.
(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 tempo rary 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
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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 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
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00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
To the Executive: Xxxxxxx Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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:
-----------------------------------------
Xxxxxxx 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(1)
Management Group, $512,500 (Year 2)
Inc.(1)(2)(3) $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
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(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 prorata
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 compensations) 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.
