WEB NEWS Financial Target Agreements
Under the Employment Agreement, Mr. Prast shall receive an annual salary of 120,000 euros. The Company will not provide Mr. Prast with health insurance. Instead, the Company is required to reimburse him for all of his health insurance payments, not to exceed 7,200 euros per annum. In addition to his base salary, Mr. Prast will be entitled to an annual cash performance bonus equal to a percentage of the Company’s annual Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”). The bonus will be payable within six months after the end of each calendar year commencing with calendar 2012. EBITDA will be calculated by BDO Auditores, S.L., the Company’s independent registered public accountants, or any other independent accounting firm approved by both Mr. Prast and the Company, based on the audited financial statements of the Company for fiscal years ended December 31, provided that the Employment Agreement is still in effect on the applicable fiscal year-end date. If the Company’s annual EBITDA is below 3,000,000 euros, Mr. Prast’s bonus will be equal to 5% of the EBITDA. If the annual EBITDA is equal to or greater than 3,000,000 euros, Mr. Prast will also receive 7.5% of the amount over 3,000,000 euros.
The term of Employment Agreement will continue until June 30, 2015, unless terminated earlier in accordance with the agreement. Absent a written notice from the Company or Mr. Prast to the contrary, and until either party elects to terminate the agreement, after June 30, 2015 the Employment Agreement will automatically extend in one month increments.
Resolution of Legal Issues
On June 29, 2012, Private Media Group, Inc. (the “Company”) entered into and consummated a Settlement Agreement and Release with Erik Schannen (“Schannen”), Michel Lozier (“Lozier”), Eric Johnson (“Johnson, and together with Schannen and Lozier, the “Shareholders”), Entruphema, Inc., (“Entruphema”), a subsidiary of the Company, and Sureflix Digital Distribution, Inc., a subsidiary of Entruphema (“Sureflix”). Entruphema and Sureflix were acquired by the Company in October 2009. Canada-based Sureflix engages in the business of digital distribution of adult content over the Internet.
The Settlement Agreement was entered into to settle claims made by the Shareholders alleging the Company made material misrepresentations to induce the Shareholders to enter into the 2009 acquisition agreement and materially breached the acquisition agreement, and other claims relating to the operation and management of Entruphema and Sureflix following the acquisition. As previously disclosed, the Company’s Board of Directors and new management have been working to
(i) improve the Company’s overall operations,
(ii) strengthen the Company’s financial condition, and
(iii) restructure its business, products, and geographic focus to conform to the Company’s core business. These efforts included re-evaluating both the Company’s prior expansion of its operations outside of its historical European sphere of operations, and the expansion of its product offerings. The Company’s Board of Directors has determined that the disposition of Entruphema and Sureflix is consistent with these goals.
