UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1997
-------------------------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________________ to ______________________
Commission file number 1-12635
---------------------------------------------------------
PARADISE MUSIC & ENTERTAINMENT, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as
specified in its charter)
Delaware 13-3906452
- ----------------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
53 West 23rd Street, New York, New York 10010
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number (212) 957-4340
-----------------------------------------------------
420 West 45th Street, New York, New York 10036
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
At November 7, 1997, the Issuer had 2,229,225 shares of Common Stock, $.01
par value, outstanding.
Transitional Small Business Disclosure Format Yes |_| No |X|
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
PART I FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1997 (Unaudited) and June 30, 1997 3
Consolidated Statements of Operations for the
Three Months Ended September 30, 1997
and 1996 (Unaudited) 4
Consolidated Statements of Stockholders' Equity
for the Three Months Ended September 30, 1997 (Unaudited) 5
Consolidated Statements of Cash Flows for the Three Months
Ended September 30, 1997 and 1996 (Unaudited) 6-7
Notes to Consolidated Financial Statements (Unaudited) 8-10
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 11-13
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1997 1997
------------ ----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 3,823,312 $ 5,086,118
Accrued interest receivable 16,533 23,162
Accounts receivable, less reserve for returns
of $902,000 at September 30, 1997 711,802 52,240
Prepaid production costs 119,288 235,645
Prepaid record master costs 394,595 350,160
Other current assets 32,291 46,216
----------- -----------
Total current assets 5,097,821 5,793,541
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization 240,302 146,754
CONSTRUCTION IN PROGRESS 252,788
OTHER 32,739 14,072
----------- -----------
$ 5,623,650 $ 5,954,367
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Deferred revenues $ 182,518 $ 501,073
Accrued payroll and related expenses 169,649 374,590
Accrued expenses and other current liabilities 781,880 371,058
----------- -----------
Total current liabilities 1,134,047 1,246,721
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
authorized 5,000,000 shares, none issued
Common stock, $.01 par value,
authorized 20,000,000 shares,
issued and outstanding 2,229,225 and
2,228,333 shares, respectively 22,292 22,283
Capital in excess of par value 5,763,153 5,752,317
Accumulated deficit (1,295,842) (1,066,954)
----------- -----------
Total stockholders' equity 4,489,603 4,707,646
----------- -----------
$ 5,623,650 $ 5,954,367
=========== ===========
See accompanying notes to consolidated financial statements.
3
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
----------------------
1997 1996
---------- ----------
REVENUES $4,187,985 $1,087,988
---------- ----------
OPERATING EXPENSES:
Cost of sales 3,179,684 559,701
Marketing, selling, general and administrative 1,282,803 455,160
---------- ----------
Total operating expenses 4,462,487 1,014,861
---------- ----------
OPERATING INCOME (LOSS) (274,502) 73,127
INTEREST INCOME, net 58,614 -
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (215,888) 73,127
INCOME TAXES 13,000 1,200
---------- ----------
NET INCOME (LOSS) $ (228,888) $ 71,927
========== ==========
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (228,888)
==========
NET LOSS PER COMMON SHARE $ (.10)
==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
USED IN COMPUTING NET LOSS PER COMMON SHARE 2,228,333
==========
PRO FORMA DATA
INCOME BEFORE PRO FORMA INCOME TAXES $ 73,127
PRO FORMA INCOME TAXES 22,000
----------
PRO FORMA NET INCOME APPLICABLE TO
COMMON SHAREHOLDERS $ 51,127
==========
PRO FORMA NET INCOME PER COMMON SHARE $ .05
==========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES USED
IN COMPUTING PRO FORMA NET INCOME PER COMMON SHARE 1,039,167
==========
See accompanying notes to consolidated financial statements.
4
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Capital in
------------------ Excess of Accumulated
Shares Amount Par Value Deficit
------------------ ----------- ------------
<S> <C> <C> <C> <C>
BALANCES, June 30, 1997 2,228,333 $22,283 $5,752,317 $(1,066,954)
COMMON STOCK, issued to outside directors 892 9 4,491
WARRANTS GRANTED FOR SERVICES 8,012
INITIAL PUBLIC OFFERING EXPENSES (1,667)
NET LOSS (228,888)
--------- ------- ---------- -----------
BALANCES, September 30, 1997 2,229,225 $22,292 $5,763,153 $(1,295,842)
========= ======= ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
----------------------
1997 1996
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (228,888) $ 71,927
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 56,496 6,251
Expenses recorded in connection with warrants granted 8,012
Provision for returns 902,000
Common stock issued to outside directors 4,500
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Accounts receivable (1,561,562) 64,275
Accrued interest receivable 6,629
Prepaid production costs 116,357 (14,746)
Prepaid record master costs (80,307)
Other current assets 13,925 (5,830)
Other (19,000)
Deferred revenues (318,555) 16,677
Accrued payroll and related expenses (204,941) 33,750
Retirement contributions payable (30,000)
Accrued expenses and other current liabilities 410,822 (61,097)
---------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (894,512) 81,207
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (113,839)
Construction in progress (252,788)
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (366,627)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Expenses related to issuance of common stock (1,667)
Payments for deferred registration costs (5,000)
---------- ---------
NET CASH USED IN FINANCING ACTIVITIES (1,667) (5,000)
---------- ---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (1,262,806) 76,207
CASH AND EQUIVALENTS, beginning of period 5,086,118 82,813
---------- ---------
CASH AND EQUIVALENTS, end of period $3,823,312 $ 159,020
========== =========
See accompanying notes to consolidated financial statements.
6
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Three Months Ended
September 30,
------------------
1997 1996
--------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION,
cash paid during the period for income taxes $ 10,010 $ -
========= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Stock issued in exchange for services $ 4,500 $ -
========= =======
Warrants granted $ 8,012 $ -
========= =======
See accompanying notes to consolidated financial statements.
7
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The financial statements included herein have been prepared by Paradise
Music & Entertainment, Inc. and Subsidiaries (the "Company") pursuant
to the rules and regulations of the Securities and Exchange Commission
and reflect all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management, necessary to
present a fair statement of results for interim periods. Certain
information and footnote disclosures have been omitted pursuant to such
rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Company's June 30, 1997 Form 10-KSB.
NOTE 2 - BUSINESS AND ORGANIZATION:
The Company was formed on July 18, 1996 and in July 1996 issued 125,000
shares of common stock. In October 1996, the Company issued 873,000
shares of common stock in exchange for the outstanding stock of its
subsidiaries in a transaction accounted for as a pooling of interest,
whereby, the financial statements for all periods prior to the
combination were restated to reflect the combined operations of its
subsidiaries, All Access Entertainment Management Group, Inc. ("All
Access"), a musical artist management company incorporated in New York,
Picture Vision, Inc. ("Picture Vision"), a video production company
incorporated in Tennessee, and John Loeffler Music, Inc. (which
operates under the name of Rave Music and Entertainment) ("Rave") a
creator of music scores and advertising themes for television and
radio, which was incorporated in New York. In February 1997, the
Company incorporated its record label, Push Records Inc. ("Push") to
operate in the recorded music business.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The consolidated financial statements
include the accounts of Paradise Music & Entertainment, Inc. and its
wholly-owned subsidiaries, Rave, Picture Vision, All Access and Push.
All significant intercompany transactions and balances have been
eliminated in consolidation.
Cash and Equivalents - For the purpose of preparing the statement of
cash flows, cash and equivalents include cash on hand and highly liquid
investments with maturities of less than three months from the purchase
date, and at times exceeds the Federal Deposit Insurance Corporation
coverage of $100,000. Management regularly monitors the financial
condition of the financial institutions in order to keep the potential
risk to a minimum.
8
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Revenue Recognition - Commercial music production revenues and the
related production costs are recognized upon acceptance of the music
production by the client. Royalty and residual income is recognized
when received. For projects which are short in duration (primarily less
than one month), video production revenues and related production costs
are recorded upon completion of the video. For projects that have a
longer term, video production revenues and related production costs are
recorded using the percentage-of-completion method which recognizes
income as work on the project progresses. Music artist management
revenues are recognized when received and, in accordance with industry
custom, the Company frequently operates its business based on oral
agreements and purchase orders with its artists and customers. Pursuant
to these arrangements the Company receives up to 20% of the gross
revenues received in connection with artist entertainment related
earnings less certain standard industry costs. Record label revenues
are recognized when records are shipped and a reserve for returns is
established against gross revenues. Costs incurred in connection with
the start-up of the Company's record label have been expensed. Costs
which are directly related to the production of the records will be
capitalized and amortized over the expected life of the record, to the
extent there is reasonable assurance that these costs will be
recoverable from future sales. The Company is accounting for these
costs in accordance with Statement of Financial Accounting Standards
(SFAS) No. 50, "Financial Reporting in the Record and Music Industry".
Income (Loss) Per Common Share - Income (loss) per common share is
computed based on net income (loss) applicable to common shareholders
divided by the weighted average number of common shares outstanding.
The weighted average includes shares issued within one year of the
Company's IPO with an issue price less than the IPO price, using the
treasury stock method.
Unaudited Financial Statements - The financial statements as of
September 30, 1997 and for the three months ended September 30, 1997
and 1996 are unaudited. These financial statements reflect all
adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the interim period. All such
adjustments, if any, are of a normal recurring nature.
Newly Issued Accounting Standard - In February 1997, the Financial
Accounting Standards Board issued SFAS No. 128, "Earnings Per Share".
SFAS No. 128 requires dual presentation of basic and diluted earnings
per share on the face of the statement of operations for all periods
presented. Basic earnings per share excludes dilution and is computed
by dividing income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. SFAS No.
128 is effective for fiscal years ending after December 15, 1997, and
when adopted, it will require restatement of prior years' earnings per
share. Management does not believe that SFAS No. 128 will have a
material impact upon historical consolidated net income (loss) per
common share as reported.
9
<PAGE>
PARADISE MUSIC & ENTERTAINMENT, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - COMMITMENTS:
In October 1996, the Company entered into employment agreements, as
amended (the "Agreements"), with four of its executives (the
"Executives"). Each of the Agreements were for a period of three years
and provided for annual base salaries of $150,000.
Effective July 1, 1997, these agreements were replaced by new
agreements. Each of the agreements is for a period of two years and
provides annual salaries of between $300,000 to $325,000. If an
Executive's subsidiary reports a pretax loss, such related Executive's
salary will be reduced, but not below $150,000 per annum, to reflect a
pretax breakeven and such reduction will be recorded as an advance with
interest payable at prime plus 1% in approximately three years. In
addition, such Executive's salary will be reduced for the subsequent
year by the amount of such reduction but not below $150,000. Pursuant
to these agreements, two bonus plans have been established for the
benefit of the Executives based upon attainment of certain financial
results.
For the three months ended September 30, 1997 approximately $306,000
has been expensed under the bonus plans and employment agreements and
are included in marketing, selling, general and administrative
expenses.
NOTE 5 - ECONOMIC DEPENDENCY:
Approximately $67,000 and $99,000 of commercial production revenues for
the three months ended September 30, 1997 and 1996, respectively, were
derived from one advertising agency. Approximately $297,000 and
$273,000 of musical talent management revenues for the three months
ended September 30, 1997 and 1996, respectively, were derived from two
musical artists. For the three months ended September 30, 1997 and 1996
approximately $2,575,000 and $468,000 of video production revenues were
derived from one and six artists, respectively. Approximately $386,000
of record shipments were derived from one customer for the three months
ended September 30, 1997. At September 30, 1997, approximately $538,000
was owed in the aggregate to the Company from these artists and
customers.
10
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company currently derives most of its revenues from: the production of
original music scores and advertising themes for television, radio, and film;
the production of music videos used to promote music artists and music specials
and programs for television networks and other video broadcasters; the
management of music artists and the record business.
The Company believes the results of operations of its operating subsidiaries are
subject to seasonal variations. As such, the Company's results of operations
from period to period may be materially affected. The timing of new record
releases, for example, could materially impact the Company's operating results.
Additionally, due to the success of particular artists, artists' touring
schedules and the timing of music television specials, it is possible that the
Company could also experience material fluctuations in revenue from year to
year.
During fiscal 1998, the Company expects to expand its four wholly-owned
subsidiaries (Rave, Picture Vision, All Access and Push), and implement its
acquisition program. The Company expects to initially target acquisitions and
joint venture arrangements with small complementary businesses in the music and
entertainment industry of up to $5,000,000. The Company's failure to expand its
business in an efficient manner could have a material adverse effect on its
business, operating results and financial condition.
Forward Looking Statements
Except for the historical information contained herein, this quarterly report on
Form 10-QSB may contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Investors are cautioned that forward-looking
statements are inherently uncertain. Actual performance and results of
operations may differ materially from those projected or suggested in the
forward-looking statements due to certain risks and uncertainties, including,
without limitation, risks associated with the Company being a recently
consolidated entity, dependence on senior management, risks inherent in the
recorded music industry such as the possibility of losses by the record label
and popularity of recording artists, the Company's ability to contract with
recording artists, the Company's ability to manage growth and the success of the
Company's music and entertainment acquisition program. The forward-looking
statements contained herein represent the Company's judgment as of the date of
this release hereof, and the Company cautions readers not to place undue
reliance on such statements.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations
Three Months Ended September 30, 1997 Compared to
Three Months Ended September 30, 1996
Commercial music production revenues decreased to $173,858 for the three months
ended September 30, 1997 from $179,375 for the three months ended September 30,
1996, a decrease of $5,517 or 3.1% while commercial music production costs of
sales increased to $91,461 for the three months ended September 30, 1997 from
$64,807 for the three months ended September 30, 1996, an increase of $26,654 or
41.1%. The decrease in revenues was due to a decrease of residual and royalty
income. The increase in costs was primarily due to costs incurred in connection
with a television series which had no related revenues. The level of residual
and royalty income varies from period to period based upon the number of
compositions airing at any one time, the medium on which such compositions are
aired and the frequency of such airings. As a result of the foregoing, gross
profit as a percentage of commercial music production revenues decreased to
47.4% for the three months ended September 30, 1997 from 63.9% for the three
months ended September 30, 1996.
Video production revenues increased to $3,287,376 for the three months ended
September 30, 1997 from $633,693 for the three months ended September 30, 1996,
an increase of $2,653,683 or 418.8%, while video production costs of sales
increased to $2,897,050 for the three months ended September 30, 1997 from
$494,894 for the three months ended September 30, 1996, an increase of
$2,402,156 or 485.4%. The increase in both revenues and costs are primarily due
to the Garth Brooks HBO Special which was completed in August.
Gross profit from video production revenues increased to $390,326 for the three
months ended September 30, 1997 from $138,799 for the three months ended
September 30, 1996, an increase of $251,527 or 181.2%. Gross profit as a
percentage of video production revenues decreased to 11.9% for the three months
ended September 30, 1997 as compared to 21.9% for the three months ended
September 30, 1996. The current period's gross profit includes the Garth Brooks
HBO Special which was a very significant and profitable project that was
completed in August, however, the gross profit percentage on this project was
lower than the Company's historical gross profit percentage on its smaller
projects. If this project were excluded the profitability on the remaining
projects would have been slightly lower than last year.
Music artist management revenues increased to $340,368 for the three months
ended September 30, 1997 from $274,920 for the three months ended September 30,
1996, an increase of $65,448 or 23.8%. The increase was primarily attributable
to an increase in the number of concerts performed by an artist. The Company's
music artist management operations have no cost of sales associated with it
since no products are produced.
Record label revenues for the three months ended September 30, 1997 were
$386,383 and resulted from shipments of Daryl Hall & John Oates' recently
released album "Marigold Sky". Gross margin amounted to $195,210. There were no
record label sales for the three months ended September 30, 1996.
The Company's marketing, selling, general and administrative expenses increased
to $1,282,803 for the three months ended September 30, 1997 from $455,160 for
the three months ended September 30, 1996, an increase of $827,643. The increase
is principally attributable to the start-up of Push, expenses to promote
"Marigold Sky", building an infrastructure to operate and manage a public
company and executive compensation.
The Company's income (loss) before income taxes decreased to a loss of $215,888
for the three months ended September 30, 1997 compared with a profit of $73,127
for the three months ended September 30, 1996, a decrease of $300,815 or 411.4%.
The decrease was primarily due to the increase in marketing, selling, general
and administrative expenses described above.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Liquidity and Capital Resources
During the three months ended September 30, 1997, the Company used cash for
operating activities in the amount of $894,512 as compared to a generation of
$81,207 for the three months ended September 30, 1996. This decrease was
primarily attributable to the an increase in accounts receivable and a decrease
in deferred revenue offset by an increase in net income and accrued expenses.
During the three months ended September 30, 1997, the Company used cash for
investing activities in the amount of $366,627. The cash was used for
construction in the Company's newly leased facility and the purchase of property
and equipment.
During the next six to twelve months, the Company will be investing
approximately $300,000 in expanding its core businesses through increased
marketing and promotion efforts. This amount includes increasing the size of the
Company's marketing staff and certain equipment and computer purchases. In
addition, the Company is in the process of consolidating its New York operations
in a new facility, before the end of the fiscal year. The Company negotiated a
ten year lease for approximately 20,000 square feet at a rental of approximately
$22,000 per month. Such relocation will include the construction of recording
studios. The ultimate costs of this are currently estimated to be $1 million.
The Company has begun to expend funds for Push Records. It is contemplated that
the expenditures required for the development of Push and its anticipated
releases over the next twelve months can be met from the funds allocated for
this purpose in the initial public offering.
The Company believes net cash generated from the proceeds of its initial public
offering and cash from operations will be sufficient to meet the Company's
operating capital requirements for at least the next 12 months. There can be no
assurance, however, that the Company will not require additional financing
before the end of such 12 month period or thereafter. A significant factor which
will affect the Company's need for additional financing is the acquisition
program. The establishment of additional record labels or other business in the
future could also require the Company to obtain additional capital. If the
Company were required to obtain additional capital in the future, there can be
no assurance that sources of capital would be available on terms acceptable or
favorable to the Company, or at all.
Inflation
The impact of inflation on the Company's operating results has been
insignificant in recent years, reflecting generally lower rates of inflation in
the economy. While inflation has not had a material impact on operating results,
there is no assurance that the Company's business will not be affected by
inflation in the future.
13
<PAGE>
PART II OTHER INFORMATION
- -------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.24 - Employment Agreement dated as of October 1, 1997 between Rave
and Paul Hoffman.
10.25 - Employment Agreement dated as of July 1, 1997 among the
Registrant, Rave and John Loeffler.
10.26 - Employment Agreement dated as of July 1, 1997 among
Registrant, All Access and Richard Flynn.
10.27 - Employment Agreement dated as of July 1, 1997 among
Registrant, Push Records and Brian Doyle.
10.28 - Employment Agreement dated as of July 1, 1997 among
Registrant, Picture Vision and Jon Small.
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended September 30, 1997.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized
PARADISE MUSIC & ENTERTAINMENT, INC.
By: /s/ John Loeffler
---------------------------------------
John Loeffler, Chairman of the Board,
Chief Executive Officer and President
By: /s/ Joseph A. Gallo
---------------------------------------
Joseph A. Gallo, Senior Vice President
and Chief Financial Officer
Date: November 14, 1997
15
EMPLOYMENT AGREEMENT
This Agreement is made as of October 1, 1997, by and between John
Leffler Music, Inc. d/b/a Rave Music and Entertainment, a New York
corporation ("Corporation") having an office at 53 West 23rd Street, New
York, N.Y. 10010 and Paul Hoffman ("Employee") residing at 338 North Citrus
Avenue, Los Angeles, California 90036.
W I T N E S S E T H
WHEREAS, the Corporation, a subsidiary of Paradise Music & Entertainment,
Inc. ("Paradise"), is engaged in the commercial music production business; and
WHEREAS, Employee has been engaged in the commercial music production
business and wishes to provide his services to the Corporation in the operation
of the commercial music production business of the Corporation based in
California (the "Division")
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Employment. The Corporation agrees to employ Employee and
Employee agrees to accept employment on the terms described in this Agreement.
Section 2. Duties. Employee shall establish the Division utilizing the
business and contacts previously developed by Employee and involving duties and
responsibilities similar to those activities in which Employee is currently
engaged on his own behalf in the commercial music production business. Employee
shall have such duties as are customarily associated with such position and
shall serve in any other executive capacity that the Corporation deems
necessary.
Section 3. Extent of Services. The Employee shall devote the majority of
his working time, attention, and energies to the performance of his duties.
Employee may invest his personal assets in such form or manner as will not
require services on his part. Employee shall at all times faithfully and to the
best of his ability perform his duties under this Agreement. The duties shall be
rendered at an office of the Corporation established in California or at such
other place or places and at such times as the needs of the Corporation may from
time-to-time reasonably dictate.
Section 4. Term. The term of this Agreement shall begin on October 1, 1997
("Effective Date"), and shall continue for a period ending June 30, 2000 unless
sooner terminated pursuant to this Agreement.
1
<PAGE>
Section 5. Compensation.
5.1 (a) Employee shall receive compensation determined in accordance with
the following formula for each year (or partial year with respect to the first
fiscal year) under this Agreement:
(i) An amount equal to 75% of the first $350,000 ($262,500
for the first fiscal year) of gross margin of the
Division from which amount otherwise payable there shall
be deducted the gross salary of Employee=s secretary;
plus
(ii) An amount equal to 15% of annual gross margin of the
Division above $350,000 ($262,500 for the first fiscal
year).
(iii) Employee will be paid periodic draw amounts, with all
appropriate tax withheld, during each quarterly period
under the Agreement. The initial draw amount will be
calculated on the basis of $200,000 per annum. During
each year, the ongoing quarterly draw amounts shall be
reviewed on a cumulative basis against amounts actually
earned pursuant to Subsections (i) and (ii) above
through such period. In the event of a cumulative short
fall, the annual rate for draw amount shall be adjusted
to reflect such short fall on a going forward basis. Any
short fall existing at the end of a year under the
Agreement shall be repaid by deducting such amount from
the amounts otherwise payable to Employee in the next
year of the Agreement. Such deduction shall be made
ratably over said year. In addition, the salary draw
amount for the commencement of the next year shall be
the lesser of $200,000 per annum ($150,000 for the first
fiscal year) or the cumulative amount earned by Employee
for the prior year.
(iv) All amounts earned by Employee for a year in excess of
the gross draw amounts paid with respect to such year,
shall be paid as promptly as practicable after the end
of such year.
(v) Any amounts paid to Employee and not earned at the
termination of this Agreement shall be paid promptly by
Employee to the Corporation.
(b) For purposes of this Section 5.1, gross margin shall be
calculated by the Corporation in accordance with generally accepted
accounting principles.
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(c) At the end of Fiscal year 1 of this Agreement, Employee
shall reimburse the Division for overhead costs of the Division in excess
of $60,000, but in no event shall there be any allocation of overhead from
the Corporation or its parent. In years 2 and 3, respectively, Employee
shall reimburse overhead costs of the Division in excess of $83,200 and
$86,500, respectively. Any amount owed by Employee may be offset against
amounts otherwise payable to Employee under this Agreement.
5.2 Options. Employee shall be granted options to purchase 100,000 shares
of the Paradise's Common Stock at $4.75 per share. The Options will have a term
of 5 years and will be non-transferrable. The options will vest four and
one-half years after the date hereof with earlier vesting based on operations of
the Division, as defined herein, during the 1998, 1999 and 2000 Fiscal Years.
For each $3.00 of "operating income" of the Division, as defined herein, in any
Fiscal Year the option to purchase one share shall immediately vest. Any loss
incurred by the Division in a Fiscal Year will be carried over to the following
Fiscal Years until eliminated in computing operating income for such following
Fiscal Years (reducing operating income for such Fiscal, Year for vesting
purposes). Operating income shall be an amount equal to 25% of the first
$350,000 of the Division's gross margin ($262,500 for the first fiscal year) and
85% thereafter less overhead of up to $60,000 in year 1, $83,200 in year 2, and
$86,500, in year 3 but in all cases excluding depreciation.
5.3 Benefits. Employee shall have an automobile allowance of up to $250.00
per month.
5.4 Withholding. The Corporation shall withhold all amounts which are
required to be withheld from compensation otherwise payable to Employee pursuant
to applicable law.
5.5 Overhead Adjustments. The Corporation and Employee shall review the
amount of overhead not reimbursed by Employee under Section 5.1 and will
mutually agree to consider increases in said amount consistent with good
business practice.
5.6 Compensation Example. Attached as Exhibit 2 is an example which
illustrates the compensation arrangements described in all of Section 5. Such
example shall be used to assist the parties in interpreting the provisions of
Section 5.
Section 6. Allocation of Revenues and Expenses. In order to properly
reflect operations by Employee the parties agree as follows:
(a) All revenues received by Employee on or after October 1, 1997
for services performed by him, including royalties and residuals, shall be paid
over to the Division.
(b) All expenses of the Division, paid on or after October 1, 1997
shall be borne by the Division and Employee shall be reimbursed for any such
expenses previously
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paid by Employee. In addition, Employee shall be reimbursed for direct third
party expenses incurred and paid prior to October 1, 1997 as to which
reimbursement was received from clients after September 30, 1997, when received.
Section 7. Facilities. Employee shall lease space, in the name of the
Corporation and guaranteed by Employee, to be used by the Division in his own
name on terms acceptable to the Corporation. It is agreed that the Corporation
will bear up to $60,000 in the aggregate for the cost of renovation plus
security deposit. At the termination of the lease, the security deposit shall be
paid to the Corporation.
Section 8. Property Rights. Except as otherwise provided in this Section
all property rights created by or on behalf of a Division shall belong to the
Corporation. Employee agrees to execute any and all documents necessary to
transfer all such rights to the Corporation. Without limitation the forgoing of
all royalties and other residuals with respect to such property shall be owned
by, and be for the benefit of the Corporation. Set forth in Exhibit 1 annexed
hereto is a full and complete listing of all properties currently owned by
Employee which are subject to earning royalties and/or residuals.
Notwithstanding the foregoing, if the employment of Employee is not continued by
the Corporation after the end of the term of this Agreement, all vocal residuals
of the Division shall be transferred to Employee.
Section 9. Termination.
9.1 For Cause. The Corporation may terminate the Employee's employment at
any time "for cause" with immediate effect upon delivering written notice to the
Employee. For purposes of this Agreement, "for cause" shall include: (a)
embezzlement, theft, larceny, material fraud, or other comparable and material
acts of dishonesty; (b) failure to follow a specific directive within (30) days
after delivery to the Employee of a written notice to cure; or (c) conviction of
or entrance of a plea of guilty on nolo contendere to a felony or other crime
which has or may have a material adverse effect on the Employee's ability to
carry out his duties under this Agreement or upon the reputation of the
Corporation. Upon termination for cause, the Corporation's sole and exclusive
obligation will be to pay Employee the compensation to which he is entitled
through the date of termination, and the Employee shall not be entitled to any
compensation after the date of termination. Employee may terminate the Agreement
if the Corporation breaches a material provision of the Agreement and fails to
cure said breach within sixty days after written notice thereof from Employee.
9.2 Upon Death. In the event of the Employee's death during the term of
this Agreement, the Corporation's sole and exclusive obligation will be to pay
to Employee's estate, the Employee's compensation to which he is entitled and
the options which have vested through the date of death.
9.3 Upon Disability. The Corporation may terminate Employee's employment
upon
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<PAGE>
Employee's total disability. Employee shall be deemed to be totally disabled if
he is unable to perform his duties under this Agreement by reason of mental or
physical illness or accident for a period of three consecutive months. Upon
termination by reason of Employee's disability, the Corporations's sole and
exclusive obligation will be to pay Employee the compensation to which he is
entitled and the options which have vested through the date of termination.
Section 10. Confidentiality. The Employee acknowledges that he will
develop and be exposed to information that is or will be confidential and
proprietary to the Corporation. Such information shall be deemed confidential to
the extent not generally known within the trade. Employee agrees to make use of
such information only in the performance of his duties under this Agreement, to
maintain such information in confidence and to disclose the information only to
persons with a need to know. Information generally known in the trade will not
be deemed confidential and proprietary information of the Corporation.
Notwithstanding any other provision of this Agreement to the contrary, the
obligations of Employee under this Section 9 shall survive termination of this
Agreement.
Section 11. Waiver. The waiver by the Corporation of the breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by the Employee.
Section 12. Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to conflict of law principles.
Section 13. Further Action. The parties hereto shall execute and deliver
all documents, provide all information and take or for bear from all such action
as may be necessary or appropriate to achieve the purposes of the Agreement.
Section 14. Parties in Interest. Nothing herein shall be construed to be
to the benefit of any third party, nor is it intended that any provision shall
be for the benefit of any third party.
Section 15. Expenses of Litigation. In the event of any litigation
arising from disputes under this Agreement, the prevailing party shall be
entitled to reimbursement of all legal fees incurred in connection therewith.
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The parties hereto have executed this Agreement as of the date first above
written.
JOHN LEFFLER MUSIC, INC.
d/b/a RAVE MUSIC AND ENTERTAINMENT
By: /s/ John Loeffler
------------------------------------
President
/s/ Paul Hoffman
------------------------------------
Paul Hoffman, individually
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EXHIBIT 1
LISTING OF ALL PROPERTIES OWNED BY EMPLOYEE
WHICH ARE SUBJECT TO EARNING ROYALTIES AND/OR RESIDUALS
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<PAGE>
LISTING OF ALL PROPERTIES OWNED BY EMPLOYEE
WHICH ARE SUBJECT TO EARNING ROYALTIES AND/OR RESIDUALS
The following is an active list of all properties subject to earnings by Paul
Hoffman:
FORD: (Both Talent & partners and Ascap Writers)
Ranger Trucks:
F150 Trucks
Escort Z
Various Have You Driven a Ford Lately Ascap Stuff
Genuine Chevrolet:
Ascap writers
Talent and Partners if they run old spots.
Pontiac: (Talent & Partners, SAG, Ascap Writers)
Montana Mini Vans
Cadillac: (Talent & Partners, SAG)
Unchain My Heart Eldorado
Northwest Airlines: (Talent and Partners and Aftra)
Many various spots
Dominos Pizza Regional Dealers: (Talent and Partners, SAG, AFTRA)
Local market use.
Jeep Dealer Radio: (Talent and Partners, Aftra)
There may be a few more incidental things depending on whether or not old spots
are picked up.
Also included are any other like properties owned by Employee which have been
omitted from this Exhibit and appear on future revenue statements. A copy of all
statements received by Employee covering payments on properties will be
forwarded by Employee to the chief financial officer of the Corporation.
<PAGE>
Exhibit 2
Illustration of Compnesation Arrangments
Revenues 700,000
Costs of Sales 245,000
-------
Gross Margin 455,000
S, G&A 105,000
Depreciation 5,000
-------
Profit before Hoffman Salary 345,000
Hoffman Salary 253,250
-------
Pretax income 91,750
=======
-------
Options Vested 32,250
=======
Hoffman's Salary:
75% of $350,000 262,500
15% of $105,000 15,750
-------
278,250
Assistant Salary 25,000
-------
253,250
=======
Options Vested:
25% of $350,000 87,500
85% of $105,000 89,250
-------
176,750
Overhead 80,000
-------
96,750
-------
@33.3% 32,250
=======
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of July, 1997, by and among John
Leffler Music, Inc. d/b/a Rave Music Group, Inc. having offices at 53 West
23rd Street, New York, NY 10010, (the "Company"), Paradise Music
Entertainment, Inc. ("Paradise") and JOHN LOEFFLER, an individual with an
address at 53 West 23rd Street, New York, New York (the "Executive"). The
Company and Paradise are sometimes collectively referred to herein as the
"Employer."
W I T N E S S E T H:
WHEREAS, the Executive is currently an executive officer of Paradise and
the Company and under an employment agreement ("Prior Employment Agreement")
between Paradise and the Executive, dated as of October 9, 1997.
WHEREAS, the Company, Paradise and the Executive wish to set forth the
terms and conditions of the Executive's employment by the Employer effective as
of July 1, 1997 ("Effective Date") and wish to terminate the Prior Employment
Agreement as of the Effective Date and substituting the terms of this Agreement
therefor as of the Effective Date.
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 expire on June 30, 1999 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
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 principal
executive officer of the Company and as President, Director and Chief Executive
Officer of Paradise. During the Term, the Executive shall, 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 the
Company.
<PAGE>
(b) The parties acknowledge that an expenditure by the Company of up
to $100,000 for developmental expenses has been approved by the Board of
Directors of Paradise for the 1998 fiscal year (the "Development Budget").
(c) During the Term, the Executive shall serve on the Executive
Advisory Committee of Paradise, which shall be a committee comprised of the
principal executive officers of each subsidiary or division of Paradise. The
Executive Advisory Committee shall advise the Board of Directors of Paradise on
business matters affecting Paradise, including potential business ventures and
acquisitions. The Executives shall each be entitled to one vote on the Executive
Advisory Committee.
(d) The Executive shall, except as provided in Schedule A, devote
substantially all his business efforts to the affairs of the Employer. 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 Employer's interests;
(ii) carry out his duties in a competent and professional manner; (iii) work
with other employees of the Employer in a competent and professional manner; and
(iv) generally promote the best interests of the Employer. Notwithstanding the
foregoing, the Executive may engage in additional activities if such activities
are approved by a majority of the Board of Directors of Paradise. After such
approval Schedule A shall be amended to include such activities.
4. Compensation.
(a) As compensation for services rendered hereunder and in
consideration of his agreement not to compete as set forth in Section 11 below,
the Company shall pay the Executive during the Term, in accordance with the
Company's normal payroll practices, compensation at an annual rate of $325,000,
subject to adjustment as hereafter provided (the "Base Annual Draw").
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<PAGE>
(i) If, at the end of any fiscal year during the Term, the
Company's Pre-Tax Income excluding the Base Annual Draw is less than the Base
Annual Draw paid to Executive for said fiscal year, then the amount of the Base
Annual Draw paid to Executive which is deemed to be salary for such period shall
be the amount of the Company Pre-Tax Income as computed for such period but in
no event shall the amount of salary be reduced below $150,000..
(ii) The difference between the amount which is deemed to be
salary (i.e., the Company Pre-Tax Income) and the Base Annual Draw actually
received by Executive for such period shall be deemed to be a loan to the
Executive (a "Loan").
(iii) For the next succeeding fiscal year, the Base Annual
Draw for such period shall be reduced to a level equal to the Company Pre-Tax
Income for the previous year, which adjusted Base Annual Draw shall be paid to
the Executive during the course of such fiscal year in accordance with the
Company's normal payroll practices; provided, however, that in no event shall
the adjusted Base Annual Draw or salary paid to Executive be reduced below
$150,000 for any fiscal year.
(iv) In the event that the Company pays to Executive a Base
Annual Draw for any fiscal year at a rate which is below $325,000 and the
Company Pre-Tax Income computed for such fiscal year exceeds the Base Annual
Draw paid during such period, then (A) the Base Annual Draw for the next fiscal
year shall be adjusted up to reflect the new level of Company Pre-Tax Income,
(B) the difference between the Company Pre-Tax Income computed for such period
up to $325,000 and the Base Annual Draw paid over such period shall be promptly
paid to the Executive in cash, and (C) the amount of compensation deemed to be
salary to the Executive for such period shall again be the amount of the Company
Pre-Tax Income; provided, however, that in no event shall the adjusted Base
Annual Draw or salary paid to Executive exceed $325,000 for any fiscal year.
(v) Any amounts which are deemed to be Loans to the Executive
(as computed in accordance with subsection (ii) above) shall be repayable by the
Executive to the Company at the end of the third fiscal year following the
fiscal year in which the Loan occurred. Interest on the Loan for the entire
period that it is outstanding shall be charged at the prime rate (in effect on
June 30 of the fiscal year in which the Loan occurred) plus 1%, and such
interest shall be payable quarterly in arrears. All Loans may be prepaid, in
whole or in part, by Executive at any time and from time to time without penalty
of any kind.
For purposes hereof, the term "Company Pre-Tax Income" as computed for any
fiscal year shall mean: The revenues of the Company of every kind and nature;
Less the actual expenses related to the operation of the business of the Company
(which, for the 1998 fiscal year, shall exclude 90% of the expenses actually
incurred in furtherance of the Development Budget approved by the Board for such
fiscal year); Without deduction for items such as income taxes of any kind
attributable to the Company or its operations and Corporate Overhead (as defined
below) all as
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computed in accordance with generally accepted accounting principles
consistently applied as determined by the Company's accountants ("GAAP").
(b) The Executive shall also be entitled to a cash bonus (the
"Company Bonus") equal to 15% of the Company Pre-Tax Income as calculated in
Section 4(a); Less 100%of the expenses actually incurred in furtherance of the
Development Budget approved by the Board for such fiscal year; Less 30% of
Paradise's Corporate Overhead for fiscal 1998 and 25% of Paradise's Corporate
Overhead in each subsequent fiscal year, all as computed in accordance with
GAAP. The term "Corporate Overhead" shall mean (i) all expenses of Paradise
(inclusive of interest charges paid by Paradise but offset by interest income
received by Paradise), (ii) without consideration for income taxes of any kind
attributable to the Company or its operations, and (iii) exclusive of
"extraordinary items" (as hereafter defined) all as computed in accordance with
GAAP. For purposes hereof, the term "extraordinary items" shall mean all
expenses (in the aggregate amount of $10,000 or more) incurred by Paradise
outside of the normal course of business, including, by way of example and
without limitation, expenses relating to financing, acquisition or divestment
transactions, leasehold improvements, capital expenditures and the like. For
purposes hereof, the good faith determination of the Compensation Committee of
the Board of Directors of Paradise (after consultation with Employers'
accountants) as to which expenses shall be deemed to be "extraordinary items"
shall be binding upon the Executive. It is acknowledged and understood that the
Executive shall have the discretion to allocate some or all of the Company Bonus
to other employees of the Company, Paradise, or any subsidiaries thereof. The
Company Bonus shall be payable promptly after the amount thereof has been
calculated by the Employers' accountants.
(c) The Board of Directors of Paradise shall also establish a bonus
pool (the "Bonus Pool") from which the Compensation Committee of the Board of
Directors of Paradise shall, in its discretion, allocate bonuses to employees of
Paradise, the Company and its other subsidiaries. The Bonus Pool shall be
comprised of not less than 10% of Paradise's consolidated pre-tax income as
determined in accordance with GAAP. Cash awards from the Bonus Pool shall be
payable promptly after the amount thereof has been calculated and allocated by
the Compensation Committee.
(d) Additional compensation may be awarded to the Executive and
other employees of the Company, at the discretion of the Compensation Committee
of Paradise, to reward outstanding performance. Such compensation may include
awards comprising cash, stock, stock options or other forms of compensation.
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<PAGE>
5. Benefits.
(a) During the Term, the Executive shall be entitled to participate
in the benefit plans established by the Employer for the benefit of its key
executives.
(b) The Executive shall be entitled to four (4) weeks of paid
vacation.
(c) The Employer shall establish a retirement plan (the "Plan")
qualified under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Plan shall provide for a contribution by the
Employer to the retirement account for Executive established under the Plan of
an amount designated by the Executive up to the maximum amount permitted under
the Plan. Such contribution amount shall reduce the amount of the cash
compensation otherwise to be paid to the Executive under Section 4 for the
fiscal year to which it relates on a dollar for dollar basis.
(d) The Employers, jointly and severally, hereby agree to indemnify,
release and hold harmless the Executive when and if: (i) he is the subject of
any claim or is or becomes a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
administrative, investigative or criminal by reason of the fact that he is or
was an officer, director, employee, consultant or agent to the Employers, or by
reason of any action alleged to have been taken or omitted in such capacity;
(ii) against any and all costs, charges and expenses, including, without
limitation, reasonable attorneys' and other fees and expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by the Executive
in connection therewith and any appeal therefrom if the Executive acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
civil action, suit or proceeding by settlement or consent decree shall not, of
itself, create a presumption that the Executive did not satisfy the foregoing
standard of conduct to the extent applicable thereto.
6. Key Man Insurance. The Employer shall have the right to obtain key man
life insurance for the benefit of the Employer on the life of the Executive. If
requested by the Employer, 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 Employer 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 Employer. The Employer shall be entitled to immediately
terminate the Term and to discharge the Executive for cause, which shall be
limited to the following grounds:
(a) Conviction of a felony; or
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<PAGE>
(b) Commission of a willful or intentional act which could
materially injure the reputation, business or business relationships of the
Employer 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 Employer 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 Annual Salary for the remainder of the fiscal year in which the Disability
Date occurred plus all bonuses earned through the Disability Date for such
fiscal year. Thereafter for the remaining fiscal year or years, if any, during
the Term, the Executive shall receive compensation at the rate of $150,000 per
annum payable in equal monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
(b) In case of the death of the Executive, this Agreement shall
terminate and the Employer shall be obligated to pay to the Executive's estate
or as otherwise directed by the Executive's duly appointed and authorized legal
representative, the Annual Salary for the remainder of the fiscal year in which
death occurs and all bonuses earned through the date of death for such fiscal
year. Thereafter for the remaining fiscal year or years, if any during the Term,
the Executive's estate shall receive payments at the rate of $150,000 per annum
payable in equally monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
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; provided, however, that if
Executive voluntarily terminates his employment in accordance with Section 3(e)
or because the Employers, or any of them, have breached this Agreement, then the
Executive shall, in either case, be entitled to receive the compensation payable
to him under Section 3(e) hereof and he shall be released from the restrictions
set forth in Section 11 hereof.
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 Employer, 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 Employer. In light of this
understanding, the Executive agrees that:
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<PAGE>
(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 Employer, or any of its affiliates, to any person,
except that he may use and disclose to authorized Employer 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 Employer is terminated, for any reason or for no reason, or otherwise
upon the request of the Employer, he shall return to the Employer any and all
documents and materials which constitute or contain the confidential information
or trade secrets of the Employer, 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 Employer, or any of its affiliates, and which is not publicly
available or generally known to persons engaged in businesses similar to that of
the Employer, or any of its affiliates. Notwithstanding the foregoing, when the
Executive's employment with the Employer 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 Employer places him in a position
of confidence and trust with the Employer's artists, clients, customers and
employees. The Executive and the Employer agree that in the course of employment
hereunder, the Executive has and will continue to develop a personal
acquaintanceship and relationship with the Employer's artists, clients and
customers, and a knowledge of those artists', clients' and customers' affairs
and requirements which may constitute the Employer'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 Employer that the Executive make the covenants contained herein.
Accordingly, the Executive agrees that while he is in the Employer's employ the
Executive will not, without the prior written consent of the Employer, either
directly or indirectly, or in any capacity whether as a promoter, proprietor,
partner, joint venturer, employee, agent, consultant, director, officer,
manager, equity holder (except as an equity holder holding less than five
percent (5%) of a publicly traded company's issued and outstanding equity
securities, or otherwise) work for, act as a consultant to or own any interest
in any direct competitor of the Employer which operates in or provides services
essentially the same as the Employer in any portion of the geographic territory
where the Employer 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 Employer, the Executive will not solicit,
entice, induce or persuade: (i) any employee, artist, client or customer of the
Employer; or (ii) any person or entity had been engaged in negotiations with the
Employer to become, an employee, artist, client or customer of the Employer
during the six month period prior to the Executive's termination of employment
with the Employer, to alter, terminate or
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<PAGE>
refrain from extending or renewing any contractual or other relationship with
the Employer, 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 Employer. Notwithstanding the foregoing, when
the Executive's employment with the Employer 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 Employer 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 "Employer" shall include
subsidiaries, licensees, sub-licensees and franchisees of the Employer, 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 Employer, 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 Employer.
(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 Employer 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 it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Employer. In addition, the Employer
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 Employer, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Employer 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
Employer, one by
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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 Employer
hereunder shall be binding upon and run in favor of the successors and assigns
of the Employer. If any assignment or transfer of rights hereunder is attempted
by the Executive contrary to the provisions hereof, the Employer 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 Employer: Paradise Music & Entertainment, Inc.
and John Leffler Music Inc. d/b/a Rave Music Group, Inc.
53 West 23rd Street
New York, New York 10010
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with a copy to: Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attn: Walter M. Epstein, Esq.
To the Executive: John Loeffler
c/o Paradise Music & Entertainment, Inc.
53 West 23rd Street
New York, New York 10010
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 Employer 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.
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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: /s/ John Loeffler
------------------------------------------
Name: John Loeffler
Title: President
JOHN LEFFLER MUSIC, INC.
D/B/A RAVE MUSIC GROUP, INC.
By: /s/ John Loeffler
------------------------------------------
Name: John Loeffler
Title: President
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Schedule A
The Executive may engage in the following activities:
(i) exploit the intellectual property rights in previously created
music in the form of compilation or other usage not in the ordinary course of
the Company's business;
(ii) devote such time as the Executive deems appropriate, without
adversely affecting the Executive's time devoted to the business of the Company,
to work as a consultant to Grey Advertising;
(iii) devote such time as the Executive deems appropriate, without
adversely affecting the Executive's time devoted to the business of the Company,
to work as an executive of Future Call Inc.; and
(iv) devote such time as the Executive deems appropriate, without
adversely affecting the Executive's time devoted to the business of the Company,
to work for Rave Record Production Company.
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of July, 1997, by and among All Access
Entertainment Management Group, Inc., having offices at 53 West 23rd Street, New
York, NY 10010, (the "Company"), Paradise Music Entertainment, Inc. ("Paradise")
and RICHARD FLYNN, an individual with an address at 53 West 23rd Street, New
York, New York (the "Executive"). The Company and Paradise are sometimes
collectively referred to herein as the "Employer."
W I T N E S S E T H:
WHEREAS, the Executive is currently an executive officer of Paradise and
the Company and under an employment agreement ("Prior Employment Agreement")
between Paradise and the Executive, dated as of October 9, 1997.
WHEREAS, the Company, Paradise and the Executive wish to set forth the
terms and conditions of the Executive's employment by the Employer effective as
of July 1, 1997 ("Effective Date") and wish to terminate the Prior Employment
Agreement as of the Effective Date and substituting the terms of this Agreement
therefor as of the Effective Date.
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 expire on June 30, 1999 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
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 Vice President,
General Manager, Treasurer and Secretary of the Company and as Executive Vice
President, Director, Treasurer and Secretary of Paradise. During the Term, the
Executive shall, 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 the Company.
<PAGE>
(b) The parties acknowledge that an expenditure by the Company of up
to $100,000 for developmental expenses has been approved by the Board of
Directors of Paradise for the 1998 fiscal year (the "Development Budget").
(c) During the Term, the Executive shall serve on the Executive
Advisory Committee of Paradise, which shall be a committee comprised of the
principal executive officers of each subsidiary or division of Paradise. The
Executive Advisory Committee shall advise the Board of Directors of Paradise on
business matters affecting Paradise, including potential business ventures and
acquisitions. The Executives shall each be entitled to one vote on the Executive
Advisory Committee.
(d) The Executive shall, except as provided in Schedule A, devote
substantially all his business efforts to the affairs of the Employer. 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 Employer's interests;
(ii) carry out his duties in a competent and professional manner; (iii) work
with other employees of the Employer in a competent and professional manner; and
(iv) generally promote the best interests of the Employer. Notwithstanding the
foregoing, the Executive may engage in additional activities if such activities
are approved by a majority of the Board of Directors of Paradise. After such
approval Schedule A shall be amended to include such activities.
(e) 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 Executive 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 pay compensation to the
Executive, in equal monthly installments Compensation at the rate of $150,000
per annum for the remainder of the Term. Such severance shall be in lieu of any
other claims of Executive under this Agreement which are not accrued as of the
date of termination.
4. Compensation.
(a) As compensation for services rendered hereunder and in
consideration of his agreement not to compete as set forth in Section 11 below,
the Company shall pay the Executive during the Term, in accordance with the
Company's normal payroll practices, compensation at an annual rate of $300,000,
subject to adjustment as hereafter provided ( the "Base Annual Draw").
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(i) If, at the end of any fiscal year during the Term, the
Company's Pre-Tax Income excluding the Base Annual Draw is less than the Base
Annual Draw paid to Executive for said fiscal year, then the amount of the Base
Annual Draw paid to Executive which is deemed to be salary for such period shall
be the amount of the Company Pre-Tax Income as computed for such period but in
no event shall the amount of salary be reduced below $150,000..
(ii) The difference between the amount which is deemed to be
salary (i.e., the Company Pre-Tax Income) and the Base Annual Draw actually
received by Executive for such period shall be deemed to be a loan to the
Executive (a "Loan").
(iii) For the next succeeding fiscal year, the Base Annual
Draw for such period shall be reduced to a level equal to the Company Pre-Tax
Income for the previous year, which adjusted Base Annual Draw shall be paid to
the Executive during the course of such fiscal year in accordance with the
Company's normal payroll practices; provided, however, that in no event shall
the adjusted Base Annual Draw or salary paid to Executive be reduced below
$150,000 for any fiscal year.
(iv) In the event that the Company pays to Executive a Base
Annual Draw for any fiscal year at a rate which is below $300,000 and the
Company Pre-Tax Income computed for such fiscal year exceeds the Base Annual
Draw paid during such period, then (A) the Base Annual Draw for the next fiscal
year shall be adjusted up to reflect the new level of Company Pre-Tax Income,
(B) the difference between the Company Pre-Tax Income computed for such period
up to $300,000 and the Base Annual Draw paid over such period shall be promptly
paid to the Executive in cash and (C) the amount of compensation deemed to be
salary to the Executive for such period shall again be the amount of the Company
Pre-Tax Income; provided, however, that in no event shall the adjusted Base
Annual Draw or salary paid to Executive exceed $300,000 for any fiscal year.
(v) Any amounts which are deemed to be Loans to the Executive
(as computed in accordance with subsection (ii) above) shall be repayable by the
Executive to the Company at the end of the third fiscal year following the
fiscal year in which the Loan occurred. Interest on the Loan for the entire
period that it is outstanding shall be charged at the prime rate (in effect on
June 30 of the fiscal year in which the Loan occurred) plus 1%, and such
interest shall be payable quarterly in arrears. All Loans may be prepaid, in
whole or in part, by Executive at any time and from time to time without penalty
of any kind.
For purposes hereof, the term "Company Pre-Tax Income" as computed for any
fiscal year shall mean: The revenues of the Company of every kind and nature;
Less the actual expenses related to the operation of the business of the Company
(which, for the 1998 fiscal year, shall exclude 90% of the expenses actually
incurred in furtherance of the Development Budget approved by the Board for such
fiscal year); Without deduction for items such as income taxes of any kind
attributable to the Company or its operations and Corporate Overhead (as defined
below) all as
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computed in accordance with generally accepted accounting principles
consistently applied as determined by the Company's accountants ("GAAP").
(b) The Executive shall also be entitled to a cash bonus (the
"Company Bonus") equal to 15% of the Company Pre-Tax Income as calculated in
Section 4(a); Less 100%of the expenses actually incurred in furtherance of the
Development Budget approved by the Board for such fiscal year; Less 30% of
Paradise's Corporate Overhead for fiscal 1998 and 25% of Paradise's Corporate
Overhead in each subsequent fiscal year, all as computed in accordance with
GAAP. The term "Corporate Overhead" shall mean (i) all expenses of Paradise
(inclusive of interest charges paid by Paradise but offset by interest income
received by Paradise), (ii) without consideration for income taxes of any kind
attributable to the Company or its operations, and (iii) exclusive of
"extraordinary items" (as hereafter defined) all as computed in accordance with
GAAP. For purposes hereof, the term "extraordinary items" shall mean all
expenses (in the aggregate amount of $10,000 or more) incurred by Paradise
outside of the normal course of business, including, by way of example and
without limitation, expenses relating to financing, acquisition or divestment
transactions, leasehold improvements, capital expenditures and the like. For
purposes hereof, the good faith determination of the Compensation Committee of
the Board of Directors of Paradise (after consultation with Employers'
accountants) as to which expenses shall be deemed to be "extraordinary items"
shall be binding upon the Executive. It is acknowledged and understood that the
Executive shall have the discretion to allocate some or all of the Company Bonus
to other employees of the Company, Paradise, or any subsidiaries thereof. The
Company Bonus shall be payable promptly after the amount thereof has been
calculated by the Employers' accountants.
(c) The Board of Directors of Paradise shall also establish a bonus
pool (the "Bonus Pool") from which the Compensation Committee of the Board of
Directors of Paradise shall, in its discretion, allocate bonuses to employees of
Paradise, the Company and its other subsidiaries. The Bonus Pool shall be
comprised of not less than 10% of Paradise's consolidated pre-tax income as
determined in accordance with GAAP. Cash awards from the Bonus Pool shall be
payable promptly after the amount thereof has been calculated and allocated by
the Compensation Committee.
(d) Additional compensation may be awarded to the Executive and
other employees of the Company, at the discretion of the Compensation Committee
of Paradise, to reward outstanding performance. Such compensation may include
awards comprising cash, stock, stock options or other forms of compensation.
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5. Benefits.
(a) During the Term, the Executive shall be entitled to participate
in the benefit plans established by the Employer for the benefit of its key
executives.
(b) The Executive shall be entitled to four (4) weeks of paid
vacation.
(c) The Employer shall establish a retirement plan (the "Plan")
qualified under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Plan shall provide for a contribution by the
Employer to the retirement account for Executive established under the Plan of
an amount designated by the Executive up to the maximum amount permitted under
the Plan. Such contribution amount shall reduce the amount of the cash
compensation otherwise to be paid to the Executive under Section 4 for the
fiscal year to which it relates on a dollar for dollar basis.
(d) The Employers, jointly and severally, hereby agree to indemnify,
release and hold harmless the Executive when and if: (i) he is the subject of
any claim or is or becomes a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
administrative, investigative or criminal by reason of the fact that he is or
was an officer, director, employee, consultant or agent to the Employers, or by
reason of any action alleged to have been taken or omitted in such capacity;
(ii) against any and all costs, charges and expenses, including, without
limitation, reasonable attorneys' and other fees and expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by the Executive
in connection therewith and any appeal therefrom if the Executive acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
civil action, suit or proceeding by settlement or consent decree shall not, of
itself, create a presumption that the Executive did not satisfy the foregoing
standard of conduct to the extent applicable thereto.
6. Key Man Insurance. The Employer shall have the right to obtain key man
life insurance for the benefit of the Employer on the life of the Executive. If
requested by the Employer, 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 Employer 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 Employer. The Employer shall be entitled to immediately
terminate the Term and to discharge the Executive for cause, which shall be
limited to the following grounds:
(a) Conviction of a felony; or
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(b) Commission of a willful or intentional act which could
materially injure the reputation, business or business relationships of the
Employer 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 Employer 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 Annual Salary for the remainder of the fiscal year in which the Disability
Date occurred plus all bonuses earned through the Disability Date for such
fiscal year. Thereafter for the remaining fiscal year or years, if any, during
the Term, the Executive shall receive compensation at the rate of $150,000 per
annum payable in equal monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
(b) In case of the death of the Executive, this Agreement shall
terminate and the Employer shall be obligated to pay to the Executive's estate
or as otherwise directed by the Executive's duly appointed and authorized legal
representative, the Annual Salary for the remainder of the fiscal year in which
death occurs and all bonuses earned through the date of death for such fiscal
year. Thereafter for the remaining fiscal year or years, if any during the Term,
the Executive's estate shall receive payments at the rate of $150,000 per annum
payable in equally monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
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; provided, however, that if
Executive voluntarily terminates his employment in accordance with Section 3(e)
or because the Employers, or any of them, have breached this Agreement, then the
Executive shall, in either case, be entitled to receive the compensation payable
to him under Section 3(e) hereof and he shall be released from the restrictions
set forth in Section 11 hereof.
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 Employer, 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 Employer. In light of this
understanding, the Executive agrees that:
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(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 Employer, or any of its affiliates, to any person,
except that he may use and disclose to authorized Employer 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 Employer is terminated, for any reason or for no reason, or otherwise
upon the request of the Employer, he shall return to the Employer any and all
documents and materials which constitute or contain the confidential information
or trade secrets of the Employer, 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 Employer, or any of its affiliates, and which is not publicly
available or generally known to persons engaged in businesses similar to that of
the Employer, or any of its affiliates. Notwithstanding the foregoing, when the
Executive's employment with the Employer 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 Employer places him in a position
of confidence and trust with the Employer's artists, clients, customers and
employees. The Executive and the Employer agree that in the course of employment
hereunder, the Executive has and will continue to develop a personal
acquaintanceship and relationship with the Employer's artists, clients and
customers, and a knowledge of those artists', clients' and customers' affairs
and requirements which may constitute the Employer'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 Employer that the Executive make the covenants contained herein.
Accordingly, the Executive agrees that while he is in the Employer's employ the
Executive will not, without the prior written consent of the Employer, either
directly or indirectly, or in any capacity whether as a promoter, proprietor,
partner, joint venturer, employee, agent, consultant, director, officer,
manager, equity holder (except as an equity holder holding less than five
percent (5%) of a publicly traded company's issued and outstanding equity
securities, or otherwise) work for, act as a consultant to or own any interest
in any direct competitor of the Employer which operates in or provides services
essentially the same as the Employer in any portion of the geographic territory
where the Employer 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 Employer, the Executive will not solicit,
entice, induce or persuade: (i) any employee, artist, client or customer of the
Employer; or (ii) any person or entity had been engaged in negotiations with the
Employer to become, an employee, artist, client or customer of the Employer
during the six month period prior to the Executive's termination of employment
with the Employer, to alter, terminate or
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refrain from extending or renewing any contractual or other relationship with
the Employer, 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 Employer. Notwithstanding the foregoing, when
the Executive's employment with the Employer 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 Employer 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 "Employer" shall include
subsidiaries, licensees, sub-licensees and franchisees of the Employer, 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 Employer, 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 Employer.
(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 Employer 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 it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Employer. In addition, the Employer
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 Employer, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Employer 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
Employer, one by
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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 Employer
hereunder shall be binding upon and run in favor of the successors and assigns
of the Employer. If any assignment or transfer of rights hereunder is attempted
by the Executive contrary to the provisions hereof, the Employer 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 Employer: Paradise Music & Entertainment, Inc.
and All Access Entertainment Management Group, Inc.
53 West 23rd Street
New York, New York 10010
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with a copy to: Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attn: Walter M. Epstein, Esq.
To the Executive: Richard Flynn
c/o Paradise Music & Entertainment, Inc.
53 West 23rd Street
New York, New York 10010
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 Employer 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.
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<PAGE>
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: /s/ John Loeffler
-------------------------------------
Name: John Loeffler
Title: President
ALL ACCESS ENTERTAINMENT
MANAGEMENT, INC.
By: /s/ Richard Flynn
-------------------------------------
Name: Richard Flynn
Title: Vice President, General Manager,
Treasurer and Secretary
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<PAGE>
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
Employer, to work with the following companies:
Abtech Industries, LLC (and its affiliates)
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
The calculation shall be prepared by the independent auditors and shall be
final.
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of July, 1997, by and among Push
Records, Inc. having offices at 53 West 23rd Street, New York, NY 10010, (the
"Company"), Paradise Music Entertainment, Inc. ("Paradise") and BRIAN DOYLE,
an individual with an address at 53 West 23rd Street, New York, N.Y. 10010
(the "Executive"). The Company and Paradise are sometimes collectively
referred to herein as the "Employer."
W I T N E S S E T H:
WHEREAS, the Executive is currently an executive officer of Paradise and
the Company and under an employment agreement ("Prior Employment Agreement")
between Paradise and the Executive, dated as of October 9, 1997.
WHEREAS, the Company, Paradise and the Executive wish to set forth the
terms and conditions of the Executive's employment by the Employer effective as
of July 1, 1997 ("Effective Date") and wish to terminate the Prior Employment
Agreement as of the Effective Date and substituting the terms of this Agreement
therefor as of the Effective Date.
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 expire on June 30, 1999 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
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 President and
Chief Executive Officer of the Company and as Executive Vice President and
Director of Paradise. During the Term, the Executive shall, 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 the
Company.
(b) [Intentionally Omitted.]
<PAGE>
(c) During the Term, the Executive shall serve on the Executive
Advisory Committee of Paradise, which shall be a committee comprised of the
principal executive officers of each subsidiary or division of Paradise. The
Executive Advisory Committee shall advise the Board of Directors of Paradise on
business matters affecting Paradise, including potential business ventures and
acquisitions. The Executives shall each be entitled to one vote on the Executive
Advisory Committee.
(d) The Executive shall, except as provided in Schedule A, devote
substantially all his business efforts to the affairs of the Employer. 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 Employer's interests;
(ii) carry out his duties in a competent and professional manner; (iii) work
with other employees of the Employer in a competent and professional manner; and
(iv) generally promote the best interests of the Employer. Notwithstanding the
foregoing, the Executive may engage in additional activities if such activities
are approved by a majority of the Board of Directors of Paradise. After such
approval Schedule A shall be amended to include such activities.
(e) 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 Executive 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 pay compensation to the
Executive, in equal monthly installments Compensation at the rate of $150,000
per annum for the remainder of the Term. Such severance shall be in lieu of any
other claims of Executive under this Agreement which are not accrued as of the
date of termination.
4. Compensation.
(a) As compensation for services rendered hereunder and in
consideration of his agreement not to compete as set forth in Section 11 below,
the Company shall pay the Executive during the Term, in accordance with the
Company's normal payroll practices, compensation at an annual rate of $300,000,
subject to adjustment as hereafter provided ( the "Base Annual Draw").
(i) If, for the 1998 fiscal year, the Company Pre-Tax Income
as hereinafter defined excluding the Base Annual Draw results in a loss greater
than the projected loss ("Budgeted Loss") for such year ($578,737 subject to
adjustment to conform with generally accepted accounting principles) then the
amount of the Base Annual Draw paid to Executive
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<PAGE>
which is deemed to be salary for such period shall be the Base Annual Draw paid
less the loss in excess of the Budgeted Loss provided, however, that in no event
shall the amount of salary for the 1998 fiscal year be reduced below $150,000.
For all subsequent fiscal years during the Term, if the Company Pre-Tax Income
excluding the Base Annual Draw is less than the Base Annual Draw paid to
Executive for said fiscal year, then the amount of the Base Annual Draw paid to
Executive which is deemed to be salary for such period shall be the amount of
the Company Pre-Tax Income as computed for such period but in no event shall the
amount of salary be reduced below $150,000.
(ii) The difference between the amount which is deemed to be
salary and the Base Annual Draw actually received by Executive for such period
shall be deemed to be a loan to the Executive (a "Loan").
(iii) For the next succeeding fiscal year, the Base Annual
Draw for such period shall be reduced to the amount of the Base Annual Draw for
the previous year which was deemed to be salary.
(iv) In the event that the Company pays to Executive a Base
Annual Draw for any fiscal year at a rate which is below $300,000 and the
Company Pre-Tax Income computed for such fiscal year exceeds the Base Annual
Draw paid during such period, then (A) the Base Annual Draw for the next fiscal
year shall be adjusted up to reflect the new level of Company Pre-Tax Income,
(B) the difference between the Company Pre-Tax Income computed for such period
up to $300,000 and the Base Annual Draw paid over such period shall be promptly
paid to the Executive in cash and (C) the amount of compensation deemed to be
salary to the Executive for such period shall again be the amount of the Company
Pre-Tax Income; provided, however, that in no event shall the adjusted Base
Annual Draw or salary paid to Executive exceed $300,000 for any fiscal year.
(v) Any amounts which are deemed to be Loans to the Executive
(as computed in accordance with subsection (ii) above) shall be repayable by the
Executive to the Company at the end of the third fiscal year following the
fiscal year in which the Loan occurred. Interest on the Loan for the entire
period that it is outstanding shall be charged at the prime rate (in effect on
June 30 of the fiscal year in which the Loan occurred) plus 1%, and such
interest shall be payable quarterly in arrears. All Loans may be prepaid, in
whole or in part, by Executive at any time and from time to time without penalty
of any kind.
For purposes hereof, the term "Company Pre-Tax Income" as computed for any
fiscal year shall mean: The revenues of the Company of every kind and nature;
Less the actual expenses related to the operation of the business of the Company
without deduction for items such as income taxes of any kind attributable to the
Company or its operations and Corporate Overhead (as defined below) all as
computed in accordance with generally accepted accounting principles
consistently applied as determined by the Company's accountants ("GAAP").
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<PAGE>
(b) The Executive shall also be entitled to a cash bonus (the
"Company Bonus") equal to 15% of the Company Pre-Tax Income as calculated in
Section 4(a); Less 15% of Paradise's Corporate Overhead for fiscal 1998 and 25%
of Paradise's Corporate Overhead in each subsequent fiscal year, all as computed
in accordance with GAAP. The term "Corporate Overhead" shall mean (i) all
expenses of Paradise (inclusive of interest charges paid by Paradise but offset
by interest income received by Paradise), (ii) without consideration for income
taxes of any kind attributable to the Company or its operations, and (iii)
exclusive of "extraordinary items" (as hereafter defined) all as computed in
accordance with GAAP. For purposes hereof, the term "extraordinary items" shall
mean all expenses (in the aggregate amount of $10,000 or more) incurred by
Paradise outside of the normal course of business, including, by way of example
and without limitation, expenses relating to financing, acquisition or
divestment transactions, leasehold improvements, capital expenditures and the
like. For purposes hereof, the good faith determination of the Compensation
Committee of the Board of Directors of Paradise (after consultation with
Employers' accountants) as to which expenses shall be deemed to be
"extraordinary items" shall be binding upon the Executive. It is acknowledged
and understood that the Executive shall have the discretion to allocate some or
all of the Company Bonus to other employees of the Company, Paradise, or any
subsidiaries thereof. The Company Bonus shall be payable promptly after the
amount thereof has been calculated by the Employers' accountants.
(c) The Board of Directors of Paradise shall also establish a bonus
pool (the "Bonus Pool") from which the Compensation Committee of the Board of
Directors of Paradise shall, in its discretion, allocate bonuses to employees of
Paradise, the Company and its other subsidiaries. The Bonus Pool shall be
comprised of not less than 10% of Paradise's consolidated pre-tax income as
determined in accordance with GAAP. Cash awards from the Bonus Pool shall be
payable promptly after the amount thereof has been calculated and allocated by
the Compensation Committee.
(d) Additional compensation may be awarded to the Executive and
other employees of the Company, at the discretion of the Compensation Committee
of Paradise, to reward outstanding performance. Such compensation may include
awards comprising cash, stock, stock options or other forms of compensation.
-4-
<PAGE>
5. Benefits.
(a) During the Term, the Executive shall be entitled to participate
in the benefit plans established by the Employer for the benefit of its key
executives.
(b) The Executive shall be entitled to four (4) weeks of paid
vacation.
(c) The Employer shall establish a retirement plan (the "Plan")
qualified under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Plan shall provide for a contribution by the
Employer to the retirement account for Executive established under the Plan of
an amount designated by the Executive up to the maximum amount permitted under
the Plan. Such contribution amount shall reduce the amount of the cash
compensation otherwise to be paid to the Executive under Section 4 for the
fiscal year to which it relates on a dollar for dollar basis.
(d) The Employers, jointly and severally, hereby agree to indemnify,
release and hold harmless the Executive when and if: (i) he is the subject of
any claim or is or becomes a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
administrative, investigative or criminal by reason of the fact that he is or
was an officer, director, employee, consultant or agent to the Employers, or by
reason of any action alleged to have been taken or omitted in such capacity;
(ii) against any and all costs, charges and expenses, including, without
limitation, reasonable attorneys' and other fees and expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by the Executive
in connection therewith and any appeal therefrom if the Executive acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
civil action, suit or proceeding by settlement or consent decree shall not, of
itself, create a presumption that the Executive did not satisfy the foregoing
standard of conduct to the extent applicable thereto.
6. Key Man Insurance. The Employer shall have the right to obtain key man
life insurance for the benefit of the Employer on the life of the Executive. If
requested by the Employer, 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 Employer 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 Employer. The Employer shall be entitled to immediately
terminate the Term and to discharge the Executive for cause, which shall be
limited to the following grounds:
(a) Conviction of a felony; or
-5-
<PAGE>
(b) Commission of a willful or intentional act which could
materially injure the reputation, business or business relationships of the
Employer 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 Employer 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 Annual Salary for the remainder of the fiscal year in which the Disability
Date occurred plus all bonuses earned through the Disability Date for such
fiscal year. Thereafter for the remaining fiscal year or years, if any, during
the Term, the Executive shall receive compensation at the rate of $150,000 per
annum payable in equal monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
(b) In case of the death of the Executive, this Agreement shall
terminate and the Employer shall be obligated to pay to the Executive's estate
or as otherwise directed by the Executive's duly appointed and authorized legal
representative, the Annual Salary for the remainder of the fiscal year in which
death occurs and all bonuses earned through the date of death for such fiscal
year. Thereafter for the remaining fiscal year or years, if any during the Term,
the Executive's estate shall receive payments at the rate of $150,000 per annum
payable in equally monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
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; provided, however, that if
Executive voluntarily terminates his employment in accordance with Section 3(e)
or because the Employers, or any of them, have breached this Agreement, then the
Executive shall, in either case, be entitled to receive the compensation payable
to him under Section 3(e) hereof and he shall be released from the restrictions
set forth in Section 11 hereof.
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 Employer, 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 Employer. In light of this
understanding, the Executive agrees that:
-6-
<PAGE>
(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 Employer, or any of its affiliates, to any person,
except that he may use and disclose to authorized Employer 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 Employer is terminated, for any reason or for no reason, or otherwise
upon the request of the Employer, he shall return to the Employer any and all
documents and materials which constitute or contain the confidential information
or trade secrets of the Employer, 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 Employer, or any of its affiliates, and which is not publicly
available or generally known to persons engaged in businesses similar to that of
the Employer, or any of its affiliates. Notwithstanding the foregoing, when the
Executive's employment with the Employer 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 Employer places him in a position
of confidence and trust with the Employer's artists, clients, customers and
employees. The Executive and the Employer agree that in the course of employment
hereunder, the Executive has and will continue to develop a personal
acquaintanceship and relationship with the Employer's artists, clients and
customers, and a knowledge of those artists', clients' and customers' affairs
and requirements which may constitute the Employer'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 Employer that the Executive make the covenants contained herein.
Accordingly, the Executive agrees that while he is in the Employer's employ the
Executive will not, without the prior written consent of the Employer, either
directly or indirectly, or in any capacity whether as a promoter, proprietor,
partner, joint venturer, employee, agent, consultant, director, officer,
manager, equity holder (except as an equity holder holding less than five
percent (5%) of a publicly traded company's issued and outstanding equity
securities, or otherwise) work for, act as a consultant to or own any interest
in any direct competitor of the Employer which operates in or provides services
essentially the same as the Employer in any portion of the geographic territory
where the Employer 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 Employer, the Executive will not solicit,
entice, induce or persuade: (i) any employee, artist, client or customer of the
Employer; or (ii) any person or entity had been engaged in negotiations with the
Employer to become, an employee, artist, client or customer of the Employer
during the six month period prior to the Executive's termination of employment
with the Employer, to alter, terminate or
-7-
<PAGE>
refrain from extending or renewing any contractual or other relationship with
the Employer, 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 Employer. Notwithstanding the foregoing, when
the Executive's employment with the Employer 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 Employer 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 "Employer" shall include
subsidiaries, licensees, sub-licensees and franchisees of the Employer, 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 Employer, 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 Employer.
(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 Employer 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 it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Employer. In addition, the Employer
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 Employer, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Employer 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
Employer, one by
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<PAGE>
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 Employer
hereunder shall be binding upon and run in favor of the successors and assigns
of the Employer. If any assignment or transfer of rights hereunder is attempted
by the Executive contrary to the provisions hereof, the Employer 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 Employer: Paradise Music & Entertainment, Inc.
and Push Records, Inc.
53 West 23rd Street
New York, New York 10010
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<PAGE>
with a copy to: Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attn: Walter M. Epstein, Esq.
To the Executive: Brian Doyle
c/o Paradise Music & Entertainment, Inc.
53 West 23rd Street
New York, New York 10010
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 Employer 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.
<PAGE>
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: /s/ John Loeffler
-------------------------------------
Name: John Loeffler
Title: President
PUSH RECORDS, INC.
By: /s/ Brian Doyle
-------------------------------------
Name: Brian Doyle
Title:
<PAGE>
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
Employer, to work with the following companies:
Abtech Industries (and its affiliates)
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
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of July, 1997, by and among Picture
Vision, Inc. d/b/a Rave Music Group, Inc. having offices at 209 Tenth Avenue
South, Suite 425, Nashville, TN 37203 (the "Company"), Paradise Music
Entertainment, Inc. ("Paradise") and JON SMALL, an individual with an address at
209 Tenth Avenue South, Suite 425, Nashville, TN 37203 (the "Executive"). The
Company and Paradise are sometimes collectively referred to herein as the
"Employer."
W I T N E S S E T H:
WHEREAS, the Executive is currently an executive officer of Paradise and
the Company and under an employment agreement ("Prior Employment Agreement")
between Paradise and the Executive, dated as of October 9, 1997.
WHEREAS, the Company, Paradise and the Executive wish to set forth the
terms and conditions of the Executive's employment by the Employer effective as
of July 1, 1997 ("Effective Date") and wish to terminate the Prior Employment
Agreement as of the Effective Date and substituting the terms of this Agreement
therefor as of the Effective Date.
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 expire on June 30, 1999 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
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 principal
executive officer of the Company and as Executive Vice President and Director of
Paradise. During the Term, the Executive shall, 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 the Company.
<PAGE>
(b) The parties acknowledge that an expenditure by the Company of up
to $100,000 for developmental expenses has been approved by the Board of
Directors of Paradise for the 1998 fiscal year (the "Development Budget").
(c) During the Term, the Executive shall serve on the Executive
Advisory Committee of Paradise, which shall be a committee comprised of the
principal executive officers of each subsidiary or division of Paradise. The
Executive Advisory Committee shall advise the Board of Directors of Paradise on
business matters affecting Paradise, including potential business ventures and
acquisitions. The Executives shall each be entitled to one vote on the Executive
Advisory Committee.
(d) The Executive shall, except as provided in Schedule A, devote
substantially all his business efforts to the affairs of the Employer. 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 Employer's interests;
(ii) carry out his duties in a competent and professional manner; (iii) work
with other employees of the Employer in a competent and professional manner; and
(iv) generally promote the best interests of the Employer. Notwithstanding the
foregoing, the Executive may engage in additional activities if such activities
are approved by a majority of the Board of Directors of Paradise. After such
approval Schedule A shall be amended to include such activities.
4. Compensation.
(a) As compensation for services rendered hereunder and in
consideration of his agreement not to compete as set forth in Section 11 below,
the Company shall pay the Executive during the Term, in accordance with the
Company's normal payroll practices, compensation at an annual rate of $320,000,
subject to adjustment as hereafter provided ( the "Base Annual Draw").
-2-
<PAGE>
(i) If, at the end of any fiscal year during the Term, the
Company's Pre-Tax Income excluding the Base Annual Draw is less than the Base
Annual Draw paid to Executive for said fiscal year, then the amount of the Base
Annual Draw paid to Executive which is deemed to be salary for such period shall
be the amount of the Company Pre-Tax Income as computed for such period but in
no event shall the amount of salary be reduced below $150,000..
(ii) The difference between the amount which is deemed to be
salary (i.e., the Company Pre-Tax Income) and the Base Annual Draw actually
received by Executive for such period shall be deemed to be a loan to the
Executive (a "Loan").
(iii) For the next succeeding fiscal year, the Base Annual
Draw for such period shall be reduced to a level equal to the Company Pre-Tax
Income for the previous year, which adjusted Base Annual Draw shall be paid to
the Executive during the course of such fiscal year in accordance with the
Company's normal payroll practices; provided, however, that in no event shall
the adjusted Base Annual Draw or salary paid to Executive be reduced below
$150,000 for any fiscal year.
(iv) In the event that the Company pays to Executive a Base
Annual Draw for any fiscal year at a rate which is below $320,000 and the
Company Pre-Tax Income computed for such fiscal year exceeds the Base Annual
Draw paid during such period, then (A) the Base Annual Draw for the next fiscal
year shall be adjusted up to reflect the new level of Company Pre-Tax Income,
(B) the difference between the Company Pre-Tax Income computed for such period
up to $320,000 and the Base Annual Draw paid over such period shall be promptly
paid to the Executive in cash and (C) the amount of compensation deemed to be
salary to the Executive for such period shall again be the amount of the Company
Pre-Tax Income; provided, however, that in no event shall the adjusted Base
Annual Draw or salary paid to Executive exceed $320,000 for any fiscal year.
(v) Any amounts which are deemed to be Loans to the Executive
(as computed in accordance with subsection (ii) above) shall be repayable by the
Executive to the Company at the end of the third fiscal year following the
fiscal year in which the Loan occurred. Interest on the Loan for the entire
period that it is outstanding shall be charged at the prime rate (in effect on
June 30 of the fiscal year in which the Loan occurred) plus 1%, and such
interest shall be payable quarterly in arrears. All Loans may be prepaid, in
whole or in part, by Executive at any time and from time to time without penalty
of any kind.
For purposes hereof, the term "Company Pre-Tax Income" as computed for any
fiscal year shall mean: The revenues of the Company of every kind and nature;
Less the actual expenses related to the operation of the business of the Company
(which, for the 1998 fiscal year, shall exclude 90% of the expenses actually
incurred in furtherance of the Development Budget approved by the Board for such
fiscal year); Without deduction for items such as income taxes of any kind
attributable to the Company or its operations and Corporate Overhead (as defined
below) all as
-3-
<PAGE>
computed in accordance with generally accepted accounting principles
consistently applied as determined by the Company's accountants ("GAAP").
(b) The Executive shall also be entitled to a cash bonus (the
"Company Bonus") equal to 15% of the Company Pre-Tax Income as calculated in
Section 4(a); Less 100%of the expenses actually incurred in furtherance of the
Development Budget approved by the Board for such fiscal year; Less 30% of
Paradise's Corporate Overhead for fiscal 1998 and 25% of Paradise's Corporate
Overhead in each subsequent fiscal year, all as computed in accordance with
GAAP. The term "Corporate Overhead" shall mean (i) all expenses of Paradise
(inclusive of interest charges paid by Paradise but offset by interest income
received by Paradise), (ii) without consideration for income taxes of any kind
attributable to the Company or its operations, and any depreciation related to
the build out of Paradise's corporate headquarters and (iii) exclusive of
"extraordinary items" (as hereafter defined) all as computed in accordance with
GAAP. For purposes hereof, the term "extraordinary items" shall mean all
expenses (in the aggregate amount of $10,000 or more) incurred by Paradise
outside of the normal course of business, including, by way of example and
without limitation, expenses relating to financing, acquisition or divestment
transactions, leasehold improvements, capital expenditures and the like. For
purposes hereof, the good faith determination of the Compensation Committee of
the Board of Directors of Paradise (after consultation with Employers'
accountants) as to which expenses shall be deemed to be "extraordinary items"
shall be binding upon the Executive. It is acknowledged and understood that the
Executive shall have the discretion to allocate some or all of the Company Bonus
to other employees of the Company, Paradise, or any subsidiaries thereof. The
Company Bonus shall be payable promptly after the amount thereof has been
calculated by the Employers' accountants.
(c) The Board of Directors of Paradise shall also establish a bonus
pool (the "Bonus Pool") from which the Compensation Committee of the Board of
Directors of Paradise shall, in its discretion, allocate bonuses to employees of
Paradise, the Company and its other subsidiaries. The Bonus Pool shall be
comprised of not less than 10% of Paradise's consolidated pre-tax income as
determined in accordance with GAAP. Cash awards from the Bonus Pool shall be
payable promptly after the amount thereof has been calculated and allocated by
the Compensation Committee.
(d) Additional compensation may be awarded to the Executive and
other employees of the Company, at the discretion of the Compensation Committee
of Paradise, to reward outstanding performance. Such compensation may include
awards comprising cash, stock, stock options or other forms of compensation.
-4-
<PAGE>
(e) The Executive shall be entitled to reimbursement of expenses up
to the amount of $40,000 per annum for business development activities of which
$15,000 per annum shall not require documentation.
5. Benefits.
(a) During the Term, the Executive shall be entitled to participate
in the benefit plans established by the Employer for the benefit of its key
executives.
(b) The Executive shall be entitled to four (4) weeks of paid
vacation.
(c) The Employer shall establish a retirement plan (the "Plan")
qualified under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Plan shall provide for a contribution by the
Employer to the retirement account for Executive established under the Plan of
an amount designated by the Executive up to the maximum amount permitted under
the Plan. Such contribution amount shall reduce the amount of the cash
compensation otherwise to be paid to the Executive under Section 4 for the
fiscal year to which it relates on a dollar for dollar basis.
(d) The Employers, jointly and severally, hereby agree to indemnify,
release and hold harmless the Executive when and if: (i) he is the subject of
any claim or is or becomes a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
administrative, investigative or criminal by reason of the fact that he is or
was an officer, director, employee, consultant or agent to the Employers, or by
reason of any action alleged to have been taken or omitted in such capacity;
(ii) against any and all costs, charges and expenses, including, without
limitation, reasonable attorneys' and other fees and expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by the Executive
in connection therewith and any appeal therefrom if the Executive acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
civil action, suit or proceeding by settlement or consent decree shall not, of
itself, create a presumption that the Executive did not satisfy the foregoing
standard of conduct to the extent applicable thereto.
6. Key Man Insurance. The Employer shall have the right to obtain key man
life insurance for the benefit of the Employer on the life of the Executive. If
requested by the Employer, 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 Employer 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 Employer. The Employer shall be entitled to immediately
terminate the Term and to discharge the Executive for cause, which shall be
limited to the following grounds:
(a) Conviction of a felony; or
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<PAGE>
(b) Commission of a willful or intentional act which could
materially injure the reputation, business or business relationships of the
Employer 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 Employer 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 Annual Salary for the remainder of the fiscal year in which the Disability
Date occurred plus all bonuses earned through the Disability Date for such
fiscal year. Thereafter for the remaining fiscal year or years, if any, during
the Term, the Executive shall receive compensation at the rate of $150,000 per
annum payable in equal monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
(b) In case of the death of the Executive, this Agreement shall
terminate and the Employer shall be obligated to pay to the Executive's estate
or as otherwise directed by the Executive's duly appointed and authorized legal
representative, the Annual Salary for the remainder of the fiscal year in which
death occurs and all bonuses earned through the date of death for such fiscal
year. Thereafter for the remaining fiscal year or years, if any during the Term,
the Executive's estate shall receive payments at the rate of $150,000 per annum
payable in equally monthly installments. Amounts payable hereunder shall be
reduced by the aggregate outstanding Loans to the Executive plus accrued
interest thereon.
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; provided, however, that if
Executive voluntarily terminates his employment in accordance with Section 3(e)
or because the Employers, or any of them, have breached this Agreement, then the
Executive shall, in either case, be entitled to receive the compensation payable
to him under Section 3(e) hereof and he shall be released from the restrictions
set forth in Section 11 hereof.
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 Employer, 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 Employer. In light of this
understanding, the Executive agrees that:
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<PAGE>
(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 Employer, or any of its affiliates, to any person,
except that he may use and disclose to authorized Employer 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 Employer is terminated, for any reason or for no reason, or otherwise
upon the request of the Employer, he shall return to the Employer any and all
documents and materials which constitute or contain the confidential
information or trade secrets of the Employer, 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 Employer, or any of its affiliates, and which is not publicly
available or generally known to persons engaged in businesses similar to that of
the Employer, or any of its affiliates. Notwithstanding the foregoing, when the
Executive's employment with the Employer 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 Employer places him in a position
of confidence and trust with the Employer's artists, clients, customers and
employees. The Executive and the Employer agree that in the course of employment
hereunder, the Executive has and will continue to develop a personal
acquaintanceship and relationship with the Employer's artists, clients and
customers, and a knowledge of those artists', clients' and customers' affairs
and requirements which may constitute the Employer'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 Employer that the Executive make the covenants contained herein.
Accordingly, the Executive agrees that while he is in the Employer's employ the
Executive will not, without the prior written consent of the Employer, either
directly or indirectly, or in any capacity whether as a promoter, proprietor,
partner, joint venturer, employee, agent, consultant, director, officer,
manager, equity holder (except as an equity holder holding less than five
percent (5%) of a publicly traded company's issued and outstanding equity
securities, or otherwise) work for, act as a consultant to or own any interest
in any direct competitor of the Employer which operates in or provides services
essentially the same as the Employer in any portion of the geographic territory
where the Employer 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 Employer, the Executive will not solicit,
entice, induce or persuade: (i) any employee, artist, client or customer of the
Employer; or (ii) any person or entity had been engaged in negotiations with the
Employer to become, an employee, artist, client or customer of the Employer
during the six month period prior to the Executive's termination of employment
with the Employer, to alter, terminate or
-7-
<PAGE>
refrain from extending or renewing any contractual or other relationship with
the Employer, 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 Employer. Notwithstanding the foregoing, when
the Executive's employment with the Employer 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 Employer 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 "Employer" shall include
subsidiaries, licensees, sub-licensees and franchisees of the Employer, 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 Employer, 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 Employer.
(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 Employer 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 it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to the Employer. In addition, the Employer
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 Employer, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Employer 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 Employer, one by
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<PAGE>
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 Employer
hereunder shall be binding upon and run in favor of the successors and assigns
of the Employer. If any assignment or transfer of rights hereunder is attempted
by the Executive contrary to the provisions hereof, the Employer 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 Employer: Paradise Music & Entertainment, Inc.
53 West 23rd Street
New York, New York 10010
-9-
<PAGE>
and
Picture Vision, Inc.
209 Tenth Avenue South, Suite 425
Nashville, TN 37203
with a copy to: Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attn: Walter M. Epstein, Esq.
To the Executive: Jon Small
c/o Picture Vision, Inc.
209 Tenth Avenue South, Suite 425
Nashville, TN 37203
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 Employer 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.
-10-
<PAGE>
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: /s/ John Loeffler
----------------------------------
Name: John Loeffler
Title: President
PICTURE VISION, INC.
By:
----------------------------------
Name: Jon Small
Title: Principal Executive Officer
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<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,823,312
<SECURITIES> 00
<RECEIVABLES> 1,613,802
<ALLOWANCES> 902,000
<INVENTORY> 00
<CURRENT-ASSETS> 5,097,821
<PP&E> 454,803
<DEPRECIATION> 214,501
<TOTAL-ASSETS> 5,623,650
<CURRENT-LIABILITIES> 1,134,047
<BONDS> 00
00
00
<COMMON> 22,292
<OTHER-SE> 4,467,311
<TOTAL-LIABILITY-AND-EQUITY> 5,623,650
<SALES> 4,187,985
<TOTAL-REVENUES> 4,187,985
<CGS> 3,179,684
<TOTAL-COSTS> 3,179,684
<OTHER-EXPENSES> 1,282,803
<LOSS-PROVISION> 00
<INTEREST-EXPENSE> 00
<INCOME-PRETAX> (215,888)
<INCOME-TAX> 13,000
<INCOME-CONTINUING> (228,888)
<DISCONTINUED> 00
<EXTRAORDINARY> 00
<CHANGES> 00
<NET-INCOME> (228,888)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> 00
</TABLE>
