EXHIBIT 10.4
AMENDMENT TO EMPLOYMENT AGREEMENT
On January 1, 1994, Media Arts Group, Inc. ("Employer") and Xxxxxxx X. Xxxxxx
("Employee") entered into an employment agreement ("Employment Agreement"),
which is attached hereto. The Employment Agreement, except as modified below,
shall be incorporated by reference into and made part of this Amendment as if
written directly into this Amendment. Employer and Employee now wish to amend
the Employment Agreement as follows:
SECTION 1 - EMPLOYMENT
Shall be amended to REPLACE "President and Chief Executive Officer" with
"Chairman of the Board".
SECTION 2 - RESPONSIBILITIES AND DUTIES OF EMPLOYEE
Shall be amended to REPLACE entire section with the following language:
It is agreed that Employee is employed on a full-time basis, which is defined to
mean Employee's entire productive time, ability and attention. It is further
agreed that for so long as the Employee is employed with the Employer, Employee
shall not engage in any other business duties or pursuits without the express
written consent of the Board. In his capacity as Chairman of the Board,
Employee shall have such duties and responsibilities as listed below:
a. Represent the Corporation externally to the investment banking
community, analysts, banks, investors, industry and government groups,
public relations, etc .;
b. Be responsible for overseeing new business development, new channel
development and licensing, as directed by the Board of Directors;
c. Coordinate the day-to-day activities of the Board of Directors;
d. Be the Corporation's spokesperson for the business and financial
opportunities the Corporation creates;
e. Provide strategic input in formulating the Business Plan;
f. Help Xxxxxx Kinkade in any way to accomplish his goals internally
and externally;
g. Lead negotiations on an as-appropriate basis and execute
appropriate documentation
h. Be available in areas where the Chief Executive Officer and
President requests his experience and expertise, and in this
capacity, seek only to be a support as any other Board member
would.
In addition, Employee shall perform such other duties and responsibilities as
the Board shall designate as are not inconsistent with Employee's position with
the Employer, including the performance of duties with respect to any
subsidiaries of the Employer.
Employee shall at all times perform the duties set forth herein faithfully,
industriously, and to the best of Employee's ability, experience and talent.
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SECTION 3 - LOCATION OF EMPLOYEE'S WORK
Shall be amended to REPLACE "principal executive offices" with "New Business
Development offices, currently located at 000 X. Xxxxx Xxxxx Xxxxxx, Xxxxx 0000,
Xxx Xxxx, XX 00000".
SECTION 5(C)(I) - COMPENSATION TO EMPLOYEE, BONUSES, SENIOR MANAGEMENT BONUS
BASED ON PROFITABILITY
The title of this section shall be amended to REPLACE entire title with the
following language: COMPENSATION TO EMPLOYEE, BONUSES
Further, this section of the Employment Agreement shall be amended to REPLACE
sections 5(c)(i) and 5(c)(ii):
(i) An Earnings Per Share (EPS) Bonus based on the annual growth in EPS for
the fiscal year over the Base EPS. Base EPS is defined as the prior
fiscal year published EPS. Base EPS for year one (Fiscal 1998) will be
$0.30. A predetermined cash bonus will be paid if established levels of
published EPS growth are achieved. The cash bonus amounts are equivalent
to approximately 15% of the growth in net income, measured in 10%
increments of EPS growth. This bonus will be paid twice per year based on
the year to date performance in comparison to the Employer's business
plan.
(ii) A Trailing Twelve Months (TTM) Bonus, contingent upon continued employment
and paid pro-rata every pay period during the following fiscal year. The
bonus will be cumulative and equal to a) the prior year TTM Bonus plus b)
the annual growth rate of the published EPS for the fiscal year times the
sum of i) the base salary plus ii) the prior year TTM Bonus paid during
the fiscal year. In the event that EPS growth is negative, it will result
in a negative adjustment to the prior year TTM bonus, but not below the
base salary amount.
(iii) A New Business Bonus equal to 5% of the operating income contributed by
the New Business venture before reduction by this bonus. The New Business
Bonus is subject to the following criteria:
A. The Pro Forma will be based on the Business Plan projected P&L ratios
for the year, adjusted either positively or negatively for major
functional areas of operating expenses which may be used or not used
in the new business.
B. The bonus will be paid based upon actual results with an updated Pro
Forma for significant changes in circumstances, which will include the
following:
(i) Actual sales and returns;
(ii) Standard costs of goods adjusted for actual variances, whether
positive or negative;
(iii) The addition or deletion of significant costs attributable to
operating expenses of the major functional areas used in the
new business;
(iv) An allocation of interest and other direct financing costs
based upon the average period of unrecovered costs;
(v) Other significant changes in circumstances
(iv) A Debt Bonus as an incentive to retire Employer's senior subordinated debt
as quickly as possible. To the extent that the Employer prepays principal
installments to Xxxxxx Xxxxxxxxx Capital Partners, L.P., Employee will
receive 50% of the interest saved as a result of such prepayment.
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(v) If Employer achieves the business plan projection in fiscal year 1998, and
realizes a 20% or a 40% growth rate the following two years, ignoring the
possibility of growth in New Business Bonus, Employee's compensation under
the above plan would be as follows:
(Tables below in 000's)
Fiscal Year Fiscal Year Fiscal Year
20% Growth 1998 1999 2000
---------------------------------------------------------------------
Base Salary 360 360 360
TTM Bonus 0 180 288
EPS Bonus 253 152 182
New Business 31 31 31
Debt Bonus 118 143 204
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Total 762 866 1,065
40% Growth 1998 1999 2000
---------------------------------------------------------------------
Base Salary 360 360 360
TTM Bonus 0 180 396
EPS Bonus 253 304 425
New Business 31 31 31
Debt Bonus 118 143 204
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Total 762 1,018 1,416
SECTION 5(C)(II) -DISCRETIONARY BONUS
This entire section 5(c)(ii) shall be removed.
ENTIRE AGREEMENT:
This Amendment, and through incorporation by reference, the Employment
Agreement, represent the entire employment agreement of the parties hereto. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by any of the parties which
are not expressly set forth in this Amendment or the Employment Agreement.
ACCEPTED AND AGREED:
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxxx Xxxxx
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Xxxxxxx X. Xxxxxx Xxxxxxx Xxxxx
Employee Director, Compensation Committee Chairman
Media Arts Group, Inc
Attest: /s/ Xxxxx X. Xxxxxxx, Xx. 10/29/97
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Xxxxx X. Xxxxxxx, Xx.
Secretary
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