Document:

Promissory Note

 Exhibit 10.36 
 

 
  

			
	SPONSORED BY MICROSOFT FINANCING	 	PROMISSORY NOTE

 LOAN PRINCIPAL AMOUNT: Four Hundred and Ninety One Thousand
Three Hundred and Sixty Six Dollars and Fifteen Cents ($491,366.15) 
 Primary Loan Term: 39 months 
 Number of Primary Loan Term Payments: 39 
 Primary Loan Term Payment
Periodicity (check one) X monthly, quarterly, _semi-annually 
 Primary Loan Term Interest Rate: 4.55% per annum 
 Primary Loan Term Payment Amount: 3 months at $0.00 followed by 36 months at $14,793.65, (check one) in advance, X in arrears 
 Interim Loan Term:                     days 
 Interim Loan Term Payment Amount: $             
 Primary Loan Term Commencement Date:                    

 Final Primary Loan Term Payment
Date:                     
 FOR VALUE RECEIVED,
Orange 21 Inc. (“Borrower”) promises to pay to the order of De Lage Landen Financial Services, Inc. (“Lender”) at its office at 1111 Old Eagle School Road, Wayne, Pennsylvania 19087 in lawful money of the
United States, the Loan Principal Amount stated above and to pay interest in like money on such Loan Principal Amount from the date of this Note through its scheduled maturity (the Final Primary Loan Term Payment Date stated above) at the Primary
Loan Term Interest Rate stated above, computed on the basis of a 360-day year consisting of twelve 30-day months. The Loan principal and interest shall be paid in that number (as stated above in Number of Primary Loan Term Payments) of periodic,
consecutive, level installments of principal and interest, each in the amount stated above (Primary Loan Term Payment Amount stated above) and in the manner stated above (Primary Loan Term Payment Periodicity and in advance or in arrears, all as
stated above) during the Loan Term, the first Primary Loan Term Payment Amount to be paid on the Primary Loan Term Commencement Date stated above and the final Primary Loan Term Payment Amount to be paid on the Final Primary Loan Term Payment Date;
provided however, that in any event the last such installment shall be in amount sufficient to pay in full all accrued interest on, and the entire unpaid principal amount of this Note. Borrower also promises to pay Lender any Interim Loan Term
Payment Amount stated above, which shall be due and payable on the Primary Loan Term Commencement Date. Each installment of this Note, including, as applicable, any Interim Loan Term Interest Payment Amount, when paid, shall be first applied to the
payment of any outstanding fees owed in respect to the amount financed pursuant to this Note, second applied to the payment of interest on the principal amount of this Note, and the balance thereof to the payment of principal. If any such
installment (including any Interim Loan Term Interest Payment Amount) becomes due and payable on a day that is not a Business Day (defined hereinafter), the maturity thereof shall be extended to the next succeeding Business Day. “Business
Day” shall mean a calendar day, excluding Saturdays, Sundays, and all days on which banking institutions in the Commonwealth of Pennsylvania are required or authorized to be closed. Unless a day is designated a Business Day, the term
“day” as used herein shall mean a calendar day. 
 This Note is one of the Notes referred to in, and is issued pursuant to, a Loan Supplement No.,
dated as of May 23, 2006 (the “Loan Supplement”) by and between Borrower and Lender, which Loan Supplement incorporates by reference the terms and conditions of a Master Loan and Security Agreement (“Master
Agreement”) by and between Borrower and Lender, dated as of May 23, 2006 (the Loan Supplement, so incorporating the terms and conditions of the Master Agreement, as the same may from time to time be amended, supplemented or
otherwise modified, is herein referred to as the “Loan Agreement”) and the holder hereof is entitled to the benefits thereof, which are specifically incorporated herein by reference herein, and made a part hereof, as if set forth at
length herein, as the same may from time to time be amended, supplemented or otherwise modified. Capitalized terms used herein, and not defined herein, shall have the meanings set forth in the Loan Agreement. This Note is secured as provided in the
Loan Agreement, and is subject to prepayment, with premium, if any, only as provided therein. Reference is herein made to the Loan Agreement for a description of the provisions upon which this Note is issued and secured, and the nature and extent of
the security and the rights of the holder hereof. 
 Whenever any Note payment is not made when due, Borrower shall pay Lender, as applicable, a Finance
Charge, and/or Default Interest Charge, as provided for in the Loan Agreement. Upon the occurrence of any one or more of the Events of Default specified in the Loan Agreement, the unpaid principal balance of this Note, together with applicable
interest accrued to the date of payment, may be immediately due and payable without notice or demand, although not yet due, in accordance with the terms of the Loan Agreement, and herein. 
 Borrower hereby waives presentment, demand for payment, notice of dishonor, and any and all other notices or demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note. The obligation of Borrower to pay the amounts dues under this Note is absolute and unconditional and is not subject to cancellation, reduction, setoff or counterclaims for any reason whatsoever.
Borrower shall use the principal amount of this Note only in connection with the acquisition by Borrower of the Financed Product and the Financed Product shall secure the extension of credit hereunder to the extent provided in the Loan
Agreement. 
 In the event that any holder shall institute any action for the enforcement or collection of this Note, there shall be immediately due and
payable, in addition to the then unpaid principal balance hereof and any accrued interest, any Finance Charges or other late payment charges and all costs and expenses of such action including attorney’s fees, in addition to all other sums, if
any, due as provided in the Loan Agreement. Borrower waives the right to interpose any setoff, counterclaim or defense of any nature whatsoever. 
 This Note
shall be governed by, and construed and interpreted in accordance with, the laws of the Commonwealth of Pennsylvania, without regard to its choice of law principles. 
 Orange 21 Inc.  
 Borrower 
  

			
	By:	 	 x  /s/ Jerry Kohlscheen

	Title:	 	x  Chief Operating Officer

  

					
	U.S. Loan & Security Agreement – Promissory Note - 03-31-04Management Incentive Bonus Plan

 Exhibit 10.19 
 DIGITAL MUSIC GROUP, INC. (“DMGI”) 
 MANAGEMENT INCENTIVE BONUS PLAN (THE
“PLAN”) 
 FOR THE YEAR ENDING DEC. 31, 2006 
  

	A.	Application – This Plan will be used for the year ending December 31, 2006, DMGI’s initial year as a publicly-traded company. It is envisioned that a new plan will be
developed for succeeding years. 

  

	B.	Participants – All Corporate officers, presently consisting of CEO, COO, CFO and two Vice-Presidents. Participants may be added during the year, if approved by the Compensation
Committee, on a pro rata basis; however, no additions may be made during the final five months of 2006. Only those Participants who are employed on the last day of the fiscal year shall be eligible to receive a bonus, unless there is a contractual
obligation otherwise. Also, Participants who voluntarily resign from DMGI prior to the annual earnings announcement for 2006 shall forfeit all 2006 bonuses. 

  

	C.	Payment – As soon as practical after the release of annual results for 2006 and in no event later than April 15, 2007, calculations of the actual bonus due each
Participant shall be made, approved by the Compensation Committee and paid in cash subject to applicable withholding taxes. 

  

	D.	Administration – The Compensation Committee retains the right to decide all discretionary bonus amounts and to decide all matters of interpretation with respect to this Plan.
Decisions of the Compensation Committee shall be final and binding. The Compensation Committee also retains the right to amend, clarify or redefine, prospectively or retroactively, any and all terms of the plan by a majority vote of its members.

  

	E.	Performance Criteria – Three measurement criteria will be used to calculate bonuses for 2006, as follows: 

  

	 	1.	Deployment of capital for acquisitions approved by the Content Acquisition Committee. For purposes of this criteria, “deployed capital” will consist only of fixed payments
(made or to be made, excluding any option terms) to content owners in acquisition transactions and any finders’ fees associated with the specific transactions; it will not include legal fees, due diligence costs, clearance costs, and other
ancillary costs associated with acquisitions. 

  

	 	2.	Net loss as reported on a GAAP-basis, including deductions for accrued bonuses estimated to be payable under this Plan. 

  

	 	3.	Discretionary – Assessment of qualitative factors including, but not limited to, maintaining value and liquidity in DMGI stock price; attracting and retaining high-caliber
employees in all departments; expanding the geographic and various content network of channel partners; successfully renegotiating DMGI’s contract(s) with Apple iTunes, maintaining good relationships with channel partners, content owners,
artists and other important third parties; acquiring quality catalogs, efficiently processing the new catalogs, and achieving preliminary performance consistent with the acquisition economics; implementing an effective investor relations program;
maintaining effective systems and controls over the business and financial reporting; and maintaining open and candid communications with the Board of Directors. 

  

	F.	Performance Calculations – For the first two criteria above, the following “milestones” will be used to determine the achievement of bonuses:

  

	 	1.	 Deployment of capital for acquisitions – If less than $18 million of capital is deployed in content acquisitions closed during 2006, zero bonus will be earned
for this criteria. For every $100,000 of capital deployed in content acquisitions over $18 million, 1.0% of the Target 

	 	 
Bonus potential for this category (see G. below) will be earned, up to a maximum of $28 million deployed (i.e., 100% of Target Bonus is earned at $28 million
deployed). By way of an example, if $25.5 million in capital is deployed in acquisitions closed during 2006, then 75% of the Target Bonus will have been earned in this criteria. 

  

	 	2.	Net loss – If the net loss for 2006, as publicly reported, is greater than $1.5 million, zero bonus will be earned for this criteria. For every $100,000 that the net loss is
reduced from $1.5 million to $1.0 million, 3% of the Target Bonus potential for this category will be earned. For every $100,000 that the net loss is further reduced from $1.0 million, an additional 10% of the Target Bonus potential for this
category will be earned, up to a reported net loss of $150,000 (i.e., 100% of the Target Bonus is earned if the net loss is less than $150,000). By way of two examples, (a) if the net loss for 2006 is $1,100,000, then 12% of the Target Bonus
will have been earned in this criteria, and (b) if the net loss for 2006 is $400,000, then 75% of the Target Bonus will have been earned in this criteria. 

  

	G.	Target Bonuses and Performance Measurement – For the CEO and CFO, the Target Bonus is established as 35/35/30, on a percentage basis applied to the three criteria in E. above,
respectively. For the COO, the Target Bonus is established as 20/50/30, on a percentage basis applied to the three criteria in E. above, respectively. For the Vice Presidents of Business Development, the Target Bonus is established as 40/20/40, on a
percentage basis applied to the three criteria in E. above, respectively. 

  

	H.	Bonus Calculation – Bonuses are to be calculated using the specific Performance Calculations and Performance Measurement factors set forth in F. and G. above, respectively, and
applied to the annual base salary in effect as of the date this Plan at the rate of 100% for the CEO, COO and CFO, and 75% for the Vice Presidents. By way of an example, assume the CEO has a annual base salary of $150,000 and DMGI deploys $22
million in capital in acquisitions in 2006 and has a net loss of $1.0 million for the year. Further assume that the Compensation Committee believes that a discretionary bonus equal to 15% of the CEO’s annual base salary is appropriate. In this
example, the CEO bonus is therefore $51,375, calculated as follows for each of the three Performance Criteria: 

  

	 	1.	Deployment of capital for acquisitions – 

  

	 	•	 	$22.0m (actual) – $18.0m (minimum) = $4.0m deployed over the minimum 

  

	 	•	 	$4.0m / $100,000 = 40 units of $100,000 each 

  

	 	•	 	40 units X 1.0% for each unit = 40% of Target Bonus earned 

  

	 	•	 	40% X 35% target for this criteria for CEO (G. above) = 14% 

  

	 	•	 	14% X $150,000 annual base salary = $21,000 bonus earned for this criteria. 

  

	 	2.	Net loss – 

  

	 	•	 	$1.5m (minimum loss) – $1.0m (actual) = $0.5m better than minimum 

  

	 	•	 	$0.5m / $100,000 = 5 units of $100,000 each 

  

	 	•	 	5 units X 3.0% for each unit = 15% of Target Bonus earned 

  

	 	•	 	15% X 35% target for this criteria for CEO (G. above) = 5.25% 

  

	 	•	 	5.25% X $150,000 annual base salary = $7,875 bonus earned for this criteria. 

  

	 	3.	Discretionary – 

  

	 	•	 	Compensation Committee can award up to 30% of base salary for CEO. 

  

	 	•	 	Compensation Committee decides on a discretionary award of 15% for CEO. 

  

	 	•	 	15% X $150,000 annual base salary = $22,500 bonus earned for this criteria.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00108-of-00352.parquet"}]]