EXHIBIT 10(a)
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STOCK ACQUISITION AGREEMENT
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This AGREEMENT (this "Agreement"), dated November 6, 1998, is made and
entered into by and among the Estate of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, C/O ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Executor (the "Seller"); RAS Securities Corp., a New York corporation ("RAS"),
acting for itself and certain of its customers or designees, if any, listed on
Exhibit F hereto (the "Buyer"); Kings Road Entertainment, Inc., a Delaware
corporation (the "Company"); FAB Capital Corporation, an Idaho corporation
("FAB"); and the party or parties, listed on Exhibit A hereto (the "Other
Selling Shareholders").
WHEREAS, the Buyer desires to purchase from the Seller, and the Seller
desires to sell to the Buyer, 954,860 shares (the "Shares") of the Company's
common stock, $.01 par value ("Common Stock"), comprising approximately 90% of
the shares of Common Stock beneficially owned by the Seller and 49.9% of the
1,911,748 shares of Common Stock issued and outstanding on the date hereof;
WHEREAS, the Buyer also desires to purchase additional shares of
Common Stock (the "Additional Shares"), comprising 90% of the shares of Common
Stock beneficially owned by each of the Other Selling Shareholders, set forth
with respect to each Other Selling Shareholder and in the aggregate on Exhibit A
hereto;
WHEREAS, each of the Buyer and the Company desires that, subsequent to
the execution of this Agreement, a bona fide offer be made to purchase from all
shareholders of the Company (other than the Seller and the Other Selling
Shareholders) up to 90% of the shares owned by each of them at the same price
offered to the Seller and the Other Selling Shareholders;
WHEREAS, the Buyer, in anticipation of its purchases of Common Stock
as set forth herein, has been actively exploring the possibility of stock
purchase, asset purchase, merger or acquisition transactions between the Company
and Immediate Entertainment Group, Inc., DCC Compact Classics, Inc. and
potentially other entities (the "Acquisitive Transactions"); and the Board of
Directors of the Company (the "Board") is aware that the Acquisitive
Transactions could occur subsequent to the date hereof but the Board has no
knowledge of the nature of, and has not reviewed any information regarding or
conducted any investigation of, the Acquisitive Transactions; and
WHEREAS, the members of the Board are resigning simultaneously with
the execution of this Agreement and, after reviewing the professional
biographies of certain individuals nominated by the Buyer, are electing such
individuals to serve on the Board;
NOW, THEREFORE, the parties hereto agree as follows:
1. Purchase of Stock. Subject to the terms and conditions herein set forth
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and in reliance on the representations, warranties and agreements of the
Company, the Buyer, the Seller and each of the Other Selling Shareholders herein
contained, the Buyer agrees to purchase from the Seller and each of the Other
Selling Shareholders, and each of the Seller and the Other Selling Shareholders
agrees to sell to the Buyer, the Shares and the Additional Shares, as the case
may be, at a per share price equal to the Purchase Price (as defined below) as
hereinafter set forth. Immediately upon execution of this agreement, each of the
Seller and the Other Selling Shareholders shall execute an order through the
Buyer, as its broker, to sell the Shares or the Additional Shares, as the case
may be, to the Buyer after the close of trading on The Nasdaq SmallCap Market on
the date hereof (i.e. in an aftermarket trade) at an asking price of $2.35 per
share (the "Purchase Price"), or $2,261,546 in the aggregate. The Buyer shall
simultaneously execute an order for the Buyer to buy from the Seller and the
Other Selling Shareholders the Shares and the Additional Shares, as the case may
be, at the Purchase Price after the close of trading on the date hereof. The
parties understand that RAS may purchase the Shares or the Additional Shares
hereunder for its own account and for the account of certain of its customers or
designees, if any (the "RAS Clients"), listed on Exhibit F hereto.
Notwithstanding anything to the contrary in this Agreement, the parties to this
Agreement acknowledge and agree that the Seller may deliver some or all of the
Additional Shares on behalf of the Other Selling Shareholders (such shares, the
"Loaned Shares"), in which case the proceeds from the sale of the Loaned Shares
shall be delivered to the Seller pending receipt of replacement shares by the
Seller from the Other Selling Shareholders. Each Other Selling Shareholder on
whose behalf Loaned Shares are delivered to the Buyer by the Seller shall
promptly deliver an equal number of shares of Common Stock to the Seller in
exchange for the related proceeds. If such delivery does not occur within 15
days from the date hereof, the Seller may at its option either keep the proceeds
from such Loaned Shares or ▇▇▇ for delivery of a number of shares equal to the
number of Loaned Shares attributable hereunder to the non-delivering Other
Selling Shareholder. In any case, the Buyer shall have no obligation or
liability of any kind to such Other Selling Shareholder after the Buyer makes
the payments required hereunder to the Seller with respect to the Loaned Shares.
2. Change in the Board. Simultaneously with the execution of this
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Agreement, all of the existing members of the Board will resign and elect in
their place ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (as Chairman of the Board) and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
each of whose professional biographies are attached hereto as Exhibit B, all of
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the officers of the Company, except ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, shall resign and the
authority of all existing officers to act on behalf of the Company or to manage
the Company assets or operations, including cash on hand, shall cease except as
determined by the newly elected Board and all existing bank signature cards will
be canceled and reissued at the direction of the newly elected Board.
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3. Purchase Offer. a. The Buyer has arranged for the execution and
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delivery, on the date hereof, of the letter of Music Action Ltd. ("MAC") to the
Company, the form of which is attached hereto as Exhibit C (the "Commitment
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Letter"). The Buyer agrees to cause the Company to cooperate with MAC to
complete the Purchase Offer (as defined in the Commitment Letter) and not to
cause the Board to take any action inconsistent with the completion of the
Purchase Offer as contemplated herein.
b. Each of FAB and the Company hereby covenants that it will cause the
Purchase Offer to be made as soon as practicable but in any event within 120
days following the date hereof. FAB represents, warrants and covenants that it
has a net worth of at least $5,000,000 and has, and will have for at least 120
days, cash, cash equivalents and/or credit lines equal to not less than
$1,800,000. In the event that within 90 days of the date hereof the Purchase
Offer is not made and MAC has failed to deposit not less than $1.8 million into
an irrevocable escrow account to be established by the Company with a bank with
assets of not less than $500,000,000 (the proceeds of which will be reserved for
and applied to consummate the Share Purchase, as defined in the Commitment
Letter) (the "Escrow Account"), FAB will immediately deposit not less than $1.8
million into the Escrow Account. This covenant to deposit $1,800,000 into the
Escrow Account and to cause the consummation of the Purchase Offer will be
enforceable against FAB only if the conditions to MAC's obligations set forth in
the Commitment Letter have been satisfied.
c. Each of the Buyer, FAB and the Company acknowledges that,
notwithstanding anything to the contrary in this Agreement, the shareholders of
the Company (other than the Seller and the Other Selling Shareholders) are
intended by FAB and the Company to be third party beneficiaries of the
provisions of this Section 3.
4. Acquisitive Transactions. The Company has been informed that the Buyer,
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in anticipation of its purchases of Common Stock as set forth herein, has been
actively exploring the Acquisitive Transactions (which may be with entities
having affiliations with the Buyer) and the Company is aware that the
Acquisitive Transactions may occur subsequent to the date hereof although the
Company has no knowledge of the nature of, and has not reviewed any information
regarding or conducted any investigation of, the Acquisitive Transactions.
5. Consulting Agreement. Simultaneously with the execution of this
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Agreement, the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall enter into a consulting
agreement, the form of which is attached hereto as Exhibit D.
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6. Representations and Warranties
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a. Representations and Warranties by the Seller and Other Selling
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Shareholders. The Seller, with respect to the Shares, and each of the Other
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Selling Shareholders, with respect to the Additional Shares set forth in Exhibit
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A in relation to each, represent and warrant to the Buyer that:
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(1) Good Title to Shares. Each of the Seller and the Other
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Selling Shareholders has good and valid title to the Shares and the
Additional Shares, as the case may be, free and clear of all claims,
liens and encumbrances; and upon delivery of the Shares and Additional
Shares and payment therefor pursuant hereto, good and valid title to
the Shares and Additional Shares, free and clear of all claims, liens
and encumbrances, will pass to the Buyer.
(2) Due Authorization. Each of the Seller and Other Selling
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Shareholders has full right, power and authority to sell the Shares
and the Additional Shares, as the case may be, on the terms set forth
herein, to enter into this Agreement and to perform all of its
obligations hereunder as contemplated hereby. All necessary actions,
including estate and other proceedings of the Seller, and each Other
Selling Shareholder, have been duly taken to authorize the execution,
delivery, and performance by each of them of this Agreement. This
Agreement has been duly authorized, executed and delivered by the
Seller and each Other Selling Shareholder, is the legal, valid, and
binding obligation of each of them, and is enforceable as to each of
them in accordance with its terms (subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of creditors'
rights generally and to general equitable principles). No consent,
authorization, approval, order, license, certificate or permit of or
from, or registration, qualification, declaration or filing with, any
federal, state, local, foreign, or other governmental authority or any
court or other tribunal is required by the Seller or Other Selling
Shareholder for the execution, delivery, or performance by each of
them of this Agreement. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding
to which the Seller or the Other Selling Shareholders is a party, or
to which any of their properties or assets are subject, is required
for the execution, delivery, or performance of this Agreement, or the
consummation of the transactions contemplated hereby and the
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, will not
violate, result in breach of, conflict with, or (with or without the
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giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement, or understanding, (except for
any such violation, breach or conflict which has been properly waived
thereunder) or violate, result in a breach of, or conflict with any
law, rule, regulation, order, judgment or decree binding on the Seller
or each of the Other Selling Shareholders, as the case may be, or to
which any of their properties, or assets are subject.
(3) Finder's Fees; Other Arrangements. Each of the Seller and the
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Other Selling Shareholders is not obligated to pay a finder's fee to
anyone in connection with the introduction of the Seller or the Other
Selling Shareholders to the Buyer or to pay for any other
arrangements, agreements or understanding relating to the Seller or
the Other Selling Shareholders.
b. Representations and Warranties by the Buyer. Contemporaneously
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herewith, each RAS Client, if any, shall deliver a letter, the form of which is
attached hereto as Exhibit G. The Buyer represents and warrants to the Seller,
the Other Selling Shareholders and the Company as follows:
(1) Due Authorization. Each of RAS and the RAS Clients has full right,
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power and authority to purchase the Shares and the Additional Shares
on the terms set forth herein. RAS has full right, power and authority
to enter into this Agreement and to perform all of its obligations
hereunder as contemplated hereby.
(2) Finder's Fees; Other Arrangements. Each of RAS and the RAS Clients
---------------------------------
is not obligated to pay a finder's fee to any third party in
connection with the introduction of the Company, the Seller or the
Other Selling Shareholders to RAS or the RAS Clients or to pay any
third party for any other arrangements, agreements or understanding
relating to the Company, the Seller or the Other Selling Shareholders.
(3) Investment. The Shares are being acquired for the accounts of RAS
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and/or the RAS Clients and not with a view to distribution of all or
any part thereof.
(4) Not Registered. Each of RAS and the RAS Clients understands that
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the Shares are neither registered under the Securities Act of 1933 nor
qualified under any applicable state laws.
(5) Sophistication of Buyer. Each of RAS and the RAS Clients has the
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requisite knowledge and experience to assess the relative merits and
risks of an acquisition of the Shares.
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(6) Legends. Each of RAS and the RAS Clients understands that each
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certificate for the Shares will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
WITH RESPECT TO THE TRANSACTION OR AN OPINION OF THE COMPANY'S COUNSEL THAT
REGISTRATION IS NOT REQUIRED.
c. Representations and Warranties by the Company and the Seller.
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Except as otherwise contemplated by this Agreement, each of the Seller and the
Company jointly and severally represents and warrants to the Buyer as follows
(provided that each of the following representations and warranties are to the
knowledge of the Seller):
(1) Due Incorporation and Qualification. The Company has been
--------------------------------------
duly incorporated, is validly existing and is in good standing under
the laws of the State of Delaware and is duly qualified (except where
the failure to so qualify would not reasonably be expected to have a
material adverse effect on the business of the Company) for the
transaction of business and is in good standing in each jurisdiction
in which the ownership or leasing of its properties or the conduct of
its business requires such qualification. The Company has all
requisite corporate power and authority and all necessary consents,
authorizations, approvals, orders, licenses and permits of and from
any governmental authority or agency or any court or other tribunal
necessary (collectively, the "Permits") to own or hold its properties
and conduct its business as described in its Annual Report on Form
10-KSB for the fiscal year ended April 30, 1998 and its Quarterly
Report on Form 10-QSB for the quarter ended July 31, 1998
(collectively, the "Disclosure Documents") (except where the failure
to have any of such Permits would not reasonably be expected to have a
material adverse effect on the business of the Company).
(2) Authorized and Outstanding Capital Stock. The Company has an
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authorized and outstanding capitalization as follows: 1,911,748 shares
of Common Stock, and no other shares of capital stock, outstanding;
12,000,000 shares of Common Stock, and no other class of capital
stock, authorized under the Company's certificate of incorporation;
and no shares of capital stock subject to issuance upon exercise of
options, warrants or other securities or instruments convertible or
exchangeable into capital stock of the Company. All of the issued and
outstanding shares of capital stock have been duly and validly
authorized and issued and are fully paid and non- assessable. None of
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the holders of such outstanding shares of capital stock is subject to
personal liability solely by reason of being such a holder. The offers
and sales of all the Company's outstanding securities were at all
relevant times either registered under the Securities Act of 1933, as
amended, and the applicable state securities or Blue Sky laws, or
exempt from such registration.
(3) No Preemptive Rights; Plans for Issuance. There is no
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commitment, plan, or arrangement to issue any share of capital stock
of the Company or any security or other instrument which by its terms
is convertible into, exercisable for, or exchangeable for capital
stock of the Company, except as may be set forth in Schedule 6.c.(3)
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attached hereto. Except as described in the Disclosure Documents no
holder of any of the Company's securities has any rights, "demand,"
"piggyback" or otherwise, to have such securities registered or to
demand the filing of a registration statement. The Company has
reserved for issuance a sufficient number of shares of capital stock
to be issued under its stock option plan.
(4) No Material Adverse Changes. Except as set forth in Schedule
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6.c.(4) attached hereto, since the date of the Company's Quarterly
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Report on Form 10-QSB for the quarter ended July 31, 1998, there has
not been any change in the condition, financial or otherwise, of the
Company which would reasonably be expected to have a material adverse
effect upon the operations, business, properties or assets of the
Company.
(5) Finder's Fees; Other Arrangements. The Company is not
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obligated to pay a finder's fee to anyone in connection with the
introduction of the Company to the Buyer or to pay for any other
arrangements, agreements or understanding relating to the Buyer.
(6) No Pending Actions. Except as set forth in the Disclosure
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Documents, there are no actions, suits, proceedings, filed claims or
hearings of any kind or nature or, to the knowledge of the Company,
any investigations or inquiries, before or by any court, governmental
authority, tribunal or instrumentality (or to the knowledge of the
Company, any state of facts which would reasonably be expected to give
rise thereto), pending or threatened against the Company, or involving
the properties of the Company, which would reasonably be expected to
have a material adverse effect upon the operations, business,
properties, or assets of the Company. The Company is not in violation
of, or in default with respect to, any law, rule, regulation, order,
judgment, or decree, except as may be described in the Disclosure
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Documents or such as in the aggregate do not have a material adverse
effect upon the operations, business, properties, or assets of the
Company.
(7) Disclosure Documents. The Disclosure Documents, as of their
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respective dates, did not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statement therein, in the light of the circumstances under which they
were made, not misleading. During the twelve month period ending on
the date hereof, the Company has timely made all disclosure filings
required by the federal securities laws.
(8) Due Authorization. The Company has full right, power and
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authority to enter into this Agreement and to perform all of its
obligations hereunder as contemplated hereby. All necessary corporate
proceedings of the Company have been duly taken to authorize the
execution, delivery, and performance by the Company of this Agreement.
This Agreement has been duly authorized, executed and delivered by the
Company, is the legal, valid, and binding obligation of the Company,
and is enforceable as to the Company in accordance with its terms
(subject to applicable bankruptcy, insolvency, and other laws
affecting the enforceability of creditors' rights generally and to
general equitable principles). No consent, authorization, approval,
order, license, certificate or permit of or from, or registration,
qualification, declaration or filing with, any federal, state, local,
foreign, or other governmental authority or any court or other
tribunal is required by the Company for the execution, delivery, or
performance by the Company of this Agreement. No consent of any party
to any material contract, agreement, instrument, lease, license,
arrangement, or understanding to which the Company is a party, or to
which any of its properties or assets are subject, is required for the
execution, delivery, or performance of this Agreement, or the
consummation of the transactions contemplated hereby and the
execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, will not
violate, result in breach of, conflict with, or (with or without the
giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement, or understanding, (except for
any such violation, breach or conflict which has been properly waived
thereunder or would not reasonably be expected to have a material
adverse effect on the Company) or violate or result in breach of any
term of the certificate of incorporation or by-laws of the Company, or
violate, result in a breach of, or conflict with any material law,
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rule, regulation, order, judgment, or decree binding on the Company or
to which any of its operations, businesses, properties, or assets are
subject (except where such violation, breach or conflict would not
reasonably be expected to have a material adverse effect on the
Company).
(9) No Subsequent Actions. Subsequent to the dates as of which
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information is given in the Disclosure Documents, except as set forth
in Schedule 6.c.(9) hereto, the Company has not (A) issued any
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securities or incurred any liability or obligation, primary or
contingent, for borrowed money, (B) entered into any material
transaction not in the ordinary course of business, or (C) declared or
paid any dividend on its capital stock.
(10) No Defaults; Violations. Except as described in the
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Disclosure Documents, no default exists in the due performance and
observance by the Company of any term, covenant or condition of any
material license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other material agreement or
instrument evidencing an obligation for borrowed money, or any other
material agreement or instrument to which the Company is a party or by
which the Company may be bound or to which any of properties or assets
of the Company is subject, except where such default is not reasonably
expected to have a material adverse effect on the Company. The Company
is not in violation of any term or provision of its Certificate of
Incorporation or By-Laws or, to the Company's knowledge, in violation
of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree or any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of
its properties or business, except as described in the Disclosure
Documents or where such violation has no material adverse effect on
the business, operations, financial condition and assets of the
Company.
(11) Conduct of Business. The Company has all requisite corporate
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power and authority, and has all material authorizations, approvals,
orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies required by the Company
to own or lease properties and conduct its business as described in
the Disclosure Documents, and the Company is and has been doing
business in compliance with all such material authorizations,
approvals, orders, licenses, certificates and permits and all federal,
state and local laws, rules and regulations (except for matters which
are not reasonably expected to have a material adverse effect on the
Company).
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(12) Title to Property; Insurance. The Company has good title to,
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or valid and enforceable leasehold estates in, all items of real and
personal property (tangible and intangible) owned or leased by it,
free and clear of all liens, encumbrances, claims, security interests,
defects and restrictions of any material nature whatsoever, other than
those set forth in the Disclosure Documents, and liens for taxes not
yet due and payable (except for matters which are not reasonably
expected to have a material adverse effect on the Company). The
Company has adequately insured its properties against loss or damage
by fire or other reasonably foreseeable casualty.
(13) Intangibles. Except for matters which are not reasonably
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expected to have a material adverse effect on the Company or as set
forth in the Disclosure Documents, to the Company's knowledge, (i) the
Company owns or possesses the requisite licenses or rights to use all
trademarks, service marks, service names, trade names, patents, patent
applications, copyrights and other rights (collectively,
"Intangibles") described as used or owned by it in the Disclosure
Documents, (ii) there is no pending or threatened claim or action by
any person pertaining to, or which challenges the exclusive right of
the Company with respect to any Intangibles used in the conduct of the
Company's business, (iii) the Intangibles and the Company's current,
products, services and processes do not infringe on any intangibles
rights held by any third party, and (iv) no others have infringed upon
the Intangibles of the Company.
(14) Nasdaq Listing. Except as set forth on Schedule 6.c.(14)
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hereto and other than the direct results of the transactions
contemplated herein, the Company is not aware of any circumstances
which would result in the Common Stock being de-listed from The Nasdaq
SmallCap Market and the Company meets all of the maintenance criteria
for maintaining the listing of the Common Stock on such market. The
other representations and warranties contained in this Section 6.c.
are qualified to the extent affected by the matters set forth in
Schedule 6.c.(14) hereto.
(15) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Each of the Company and the Seller is not
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a $10 million person under the ▇▇▇▇-▇▇▇▇▇- ▇▇▇▇▇▇ Antitrust
Improvements Act of 1976.
(16) Resignation of the Board. Simultaneously with the execution
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of this Agreement, the directors of the Company shall have submitted
their resignations to the Company and shall have elected new members
to the Board, as contemplated in Section 2 hereof.
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7. Beneficiaries of the Seller. Upon the execution of this Agreement, each
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of the beneficiaries of the Seller shall have duly executed and delivered the
letter, the form of which is attached hereto as Exhibit E, pursuant to which
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each represents and warrants to the Buyer that, with respect to Seller and the
Shares (but not as to the Other Selling Shareholders and the Additional Shares),
the representations set forth in Section 6.a.(1) and 6.a.(2) herein are true and
the Seller confirms that there are no beneficiaries of the Seller who have any
claim to the Shares other than the signatories to such Exhibit E.
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8. Survival; Indemnification
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a. Survival. The representations and warranties of the parties hereto
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contained in this Agreement shall survive until the first anniversary of the
date hereof and a party seeking indemnity under this Agreement must commence a
claim for indemnification pursuant to Section 8.e. prior to the first
anniversary of the date hereof, in which case, with respect to such claim, the
representation or warranty in respect of which indemnity is sought under this
Agreement shall survive the time at which it would otherwise terminate until
such time as the claim for which indemnification is sought has been finally
resolved and indemnified.
b. Indemnification of Buyer. The Seller, at its sole expense, hereby
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agrees to indemnify the Buyer and its affiliates against and agree to hold each
of them harmless from any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding) (collectively, "Loss") incurred or suffered by the Buyer or any of
its affiliates arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by the Seller pursuant to this
Agreement.
The Company, at its sole expense, hereby agrees to indemnify the Buyer
and its affiliates against and agree to hold each of them harmless from any and
all Loss incurred or suffered by the Buyer or any of its affiliates arising out
of any misrepresentation or breach of warranty, covenant or agreement made or to
be performed by the Company pursuant to this Agreement.
Each of the Other Selling Shareholders, at its sole expense, hereby
agrees to indemnify the Buyer and its affiliates against and agrees to hold each
of them harmless from any and all Loss incurred or suffered by the Buyer or any
of its affiliates arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by the respective Other Selling
Shareholder pursuant to this Agreement.
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c. Indemnification of Seller and Other Selling Shareholders. Buyer, at
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its sole expense, hereby agrees to indemnify the Seller, the Other Selling
Shareholders and their affiliates against and agrees to hold each of them
harmless from any and all Loss incurred or suffered by any of them arising out
of any misrepresentation or breach of warranty, covenant or agreement made or to
be performed by Buyer pursuant to this Agreement.
d. Minimum Loss. Notwithstanding anything to the contrary in this
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Agreement, (i) neither the Seller, the Other Selling Shareholders or the
Company, on the one hand, nor the Buyer, on the other hand, shall be required to
indemnify the other under the terms of this Agreement unless and until the
aggregate amount of Loss of the other (which, in the case of the Buyer, includes
the collective Losses of RAS and the RAS Clients) exceeds $100,000, in which
case such indemnification obligations shall apply to all Loss in excess of such
threshold, and (ii), with respect to each of the Seller and the Other Selling
Shareholders, the Buyer may not recover more than the amount of money paid by
the Buyer to such party in consideration for such party's transfer to the Buyer
of the Shares or the Additional Shares, as applicable, pursuant to this
Agreement.
e. Procedures; Exclusivity of Remedies. The party seeking
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indemnification (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The Indemnifying
Party shall have the right to, and at the request of the Indemnified Party
shall, participate in and control the defense of any such suit, action or
proceeding at its own expense; provided, however, that the failure by the
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Indemnified Party to give prompt notice shall not release the Indemnifying Party
of its indemnification obligations hereunder, except to the extent such failure
actually prejudices the Indemnifying Party. If the Indemnifying Party does not
so assume control of the defense, the Indemnified Party shall have the right to
defend, contest, settle or compromise such Claim or defend in the exercise of
its exclusive discretion and the Indemnifying Party shall, upon request from any
Indemnified Party, promptly pay to such Indemnified Party the amount of any Loss
as incurred. If the Indemnifying Party does assume control of the defense, the
Indemnifying Party shall have the right to undertake, conduct and control,
through counsel of its own choosing and at its sole expense, the conduct and
settlement of such Claim or demand, and the Indemnified Party shall cooperate
with the Indemnifying Party in connection therewith. The Indemnifying Party may
contest or settle any third-party Claim on such terms as the Indemnifying Party
may choose; however, the Indemnifying Party will not have the right, without the
Indemnified Party's written consent, to settle any such Claim if such settlement
(i) arises from or is part of any criminal action, suit or proceeding, (ii)
contains an admission of wrongdoing on the part of the Indemnified Party, (iii)
provides for injunctive relief which is binding on the Indemnified Party, or
-12-
(iv) does not fully and unconditionally release the Indemnified Party with
respect to such Claim. For the purposes of this Agreement, "Claim" means any
claim, lawsuit, demand, suit, hearing, governmental investigation, notice of a
violation, litigation, proceeding, arbitration or other dispute, whether civil,
criminal, administrative or otherwise. The Indemnifying Party and the
Indemnified Party shall cooperate in determining the validity of any Claim for
any Loss for which a Claim of indemnification may be made hereunder. Each party
shall also use all reasonable efforts to minimize all Loss. In any case, the
Indemnifying Party and the Indemnified Party shall cooperate and assist each
other in such defense, and shall make available to the other all records,
documents and information (written or otherwise) relevant to such defense.
9. Miscellaneous
-------------
a. Notices. Any notices or other communications required or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given or
made as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by telecopy, in the case of the Seller and the
Beneficiaries of the Estate of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, to c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Executor, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, facsimile: 310-277- 0653, in the case of the Buyer,
to RAS Securities Corp., ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, attention: ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Executive Vice President, facsimile: ▇▇▇-▇▇▇-▇▇▇▇ with a copy to
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq., facsimile: (212) 644- 3603, in the case of
the Company, to ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq., facsimile: (310)
470-8354, in the case of FAB Capital Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attention: ▇▇▇▇▇▇▇ ▇▇▇▇, President, facsimile
212-785-3232, with a copy to c/o RAS Securities Corp., ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, facsimile: ▇▇▇-▇▇▇-▇▇▇▇ and with a copy to ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Esq., facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, and in the case of the Other Selling
Shareholders, to the addresses set forth with respect to each in Exhibit A
---------
hereto.
b. Amendment. This Agreement may not be amended or modified except by
---------
an instrument in writing signed by the parties or third party beneficiaries
hereto who are affected by such amendment or modification.
c. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of New York without regard to conflicts of law principles.
-13-
d. Submission to Jurisdiction. Each party hereby consents to the
----------------------------
jurisdiction of the United States District Court for the Central District of
California and any of the courts of the State of California in Los Angeles
County in connection with any dispute arising under this Agreement; provided,
however, that, in connection with any claim or dispute brought by or against the
RAS Clients under this Agreement, each party hereby consents to the jurisdiction
of the United States District Court for the Southern District of New York and
any of the courts of the State of New York in New York County.
e. Entire Agreement. This Agreement sets forth the entire agreement
-----------------
and understanding of the parties hereto in respect of the subject matter
contained herein, and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by the parties hereto or their representatives.
f. Singular/Plural Tense. In the event there is only one Other Selling
---------------------
Shareholder listed on Exhibit A hereto, reference to more than one Other Selling
---------
Shareholder in this Agreement should be construed in the singular and, in the
event no Other Selling Shareholder is listed in Exhibit A hereto, reference to
---------
Other Selling Shareholders in this Agreement shall have no effect.
g. Third Party Benefits. RAS and each of the RAS Clients shall be
----------------------
beneficiaries of the representations, warranties and covenants made to the Buyer
herein and the rights of indemnification accruing to the Buyer hereunder. Except
as provided by this Section 9.g., by Section 3 and by Exhibits C and F to this
----------------
Agreement, none of the provisions of this Agreement shall be for the benefit of,
or enforceable by, any third party beneficiary.
h. No Assignment. Except as may otherwise be contemplated herein, none
-------------
of the parties may assign any of his or its rights under this Agreement without
the prior written consent of the other parties, which shall not be unreasonably
withheld; provided, however, that any assignment of rights will not relieve the
assigning party of any liabilities or obligations under this Agreement.
i. Successors and Assigns. Except as provided herein to the contrary,
----------------------
this Agreement shall be binding upon and inure to the benefit of the parties,
their respective successors and permitted assigns.
j. Attorneys' Fees. In any dispute between the parties hereto or their
---------------
representatives concerning any provision of this Agreement or the rights and
duties of any person or entity hereunder, the party or parties prevailing in
such dispute shall be entitled, in addition to such other relief as may be
-14-
granted, to the attorneys' fees and court costs incurred by reason of such
dispute.
k. Waivers Strictly Construed. With regard to any power, remedy or
----------------------------
right provided herein or otherwise available to any party hereunder (i) no
waiver or extension of time will be effective unless expressly contained in a
writing signed by the waiving party; and (ii) no alteration, modification or
impairment will be implied by reason of any previous waiver, extension of lime,
delay or omission in exercise, or other indulgence,
l. Severability. The validity, legality or enforceability of the
------------
remainder of this Agreement will not be affected even if one or more of the
provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
m. Counterparts; Facsimile Signatures. This Agreement may be executed
-----------------------------------
simultaneously in two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same instrument,
and delivery of executed copies hereof shall be deemed made upon delivery of
signatures by facsimile transmission.
-15-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
THE SELLER: ESTATE OF ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/
By: __________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Executor of the Will of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
THE BUYER: RAS SECURITIES CORP.
/s/
By: ____________________________
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Executive Vice President
THE COMPANY: KINGS ROAD ENTERTAINMENT, INC.
/s/
By: ________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
AGREED ONLY AS TO SECTION 3: FAB CAPITAL CORPORATION
/s/
By: ______________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
-16-
OTHER SELLING SHAREHOLDERS:
/s/
______________________________
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-17-
EXHIBIT A
OTHER SELLING SHAREHOLDERS
Total Shares to be
Shares Purchased Address
Name Owned by Buyer (90%) for Notice
---------------------- ----------- ---------------- -------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 8,333 7,500 c/o Kings
Road,
Entertainment,
Inc. (same as
address for
the Company)
Totals 8,333 7,500
EXHIBIT B
Professional Biographies of New Directors
[Biographies of ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ have been excluded from
filing.}
EXHIBIT C
MUSIC ACTION LTD.
▇▇▇▇-▇▇▇▇▇▇▇-▇▇▇. ▇▇-▇▇/▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
[ ], ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ Entertainment, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
In connection with the Stock Acquisition Agreement (the "Acquisition
Agreement"), dated the date hereof, by and among the Estate of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
RAS Securities Corp. (acting for itself and the RAS Clients), Kings Road
Entertainment, Inc., certain of its shareholders and FAB Capital Corporation, we
hereby agree, on our own behalf and on behalf of the MAC Fund (the "Fund") for
which we serve as exclusive manager with discretionary authority to commit and
invest Fund assets, that we, or the Fund will make or cause to be made a bona
fide offer to purchase (the "Purchase Offer") from each shareholder of record of
the Company other than the Seller, and the Additional Selling Shareholders, RAS,
the RAS Clients and any shareholder who directly or indirectly obtains any
shares from RAS or the RAS Clients (except to the extent such shareholder holds
shares acquired from a person other than RAS or the RAS Clients) (the "Record
Shareholders") up to 90% of each Record Shareholder's shares of Common Stock at
a per share price equal to the Purchase Price, or an aggregate purchase price
(assuming that all such shareholders elect to sell 90% of their shares of Common
Stock) equal to approximately $1,800,000. The purchase of the Record
Shareholder's shares as contemplated hereunder is referred to as the "Share
Purchase."
The Purchase Offer will be made as soon as practicable but in any event
within the 120-day period immediately following the date hereof provided that
the Purchase Offer is conditioned on (i) the absence of an injunction from a
court of competent jurisdiction enjoining the Share Purchase and (ii) there
being no breaches of representations and warranties of the Seller, the Other
Selling Shareholders or the Company which, in the aggregate, are reasonably
likely to result in collective damages or losses to the Company in excess of
$500,000. Notwithstanding anything to the contrary in this letter, in the event
that the Purchase Offer cannot be made within ninety (90) days of the date
hereof, we will immediately cause a deposit of not less than $1,800,000 to be
made into an escrow account to be established by the Company, the proceeds of
which will be reserved for and applied to consummate the Share Purchase, upon
the making of which deposit we will be released from all obligations under this
letter.
Music Action Ltd., on its own behalf and on behalf of the Fund,
represents, warrants and covenants to you that Music Action Ltd. has a net worth
of at least $2,000,000 and the Fund has the ability to invest up to $40 million
of irrevocably committed funds and Music Action Ltd. has, and will have for at
least 120 days, cash, cash equivalents and/or credit lines equal to $1,800,000
and will use such $1,800,000 for the Share Purchase unless other funds become
available to us to pay for the Share Purchase.
We intend that the Record Shareholders will be third party
beneficiaries of our obligations set forth in this letter.
This letter shall be governed by the laws of the State of New York
without regard to conflicts of law principles.
We consent to the jurisdiction of any federal or state court located in
the State of California in connection with any dispute arising under this
letter.
Capitalized terms used and not defined herein have the meanings
ascribed to them in the Acquisition Agreement.
Very truly yours,
MUSIC ACTION LTD.
By:
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Director
EXHIBIT D
CONSULTING AGREEMENT WITH ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of November ___, 1998, by and between
Kings Road Entertainment, Inc., a Delaware corporation having offices at 1901
Avenue of the Stars, ▇▇▇ ▇▇▇▇▇▇▇. ▇▇ ▇▇▇▇▇ (the "Company"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
having an address at
("Consultant").
WHEREAS, Consultant has previously served as Chief Executive
Officer of Company;
and
WHEREAS, Company wishes Consultant to provide certain services to
Company, and Consultant wishes to provide such services to Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
agree as follows:
1. Purpose.
Company hereby retains Consultant and Consultant hereby agrees
to be retained by Company to render non-exclusive consulting services
("Services") in connection with the acquisition and development by Company of
new literary properties for development as theatrical and/or television motion
pictures ("Projects"), upon the terms and conditions set forth hereinbelow.
2. Term.
The term of this Agreement shall be effective for the period
of one year commencing on the date hereof and ending on the first anniversary of
such date and shall thereafter be extended for successive one-year periods upon
the mutual consent of the parties hereto, evidenced in writing, (the "Term").
3. Duties of Consultant.
a. During the Term, Consultant shall provide Company with the
Services and agrees to perform the Services to the best of his ability and in
accordance with the reasonable directions of Company, and shall report directly
to the President, or if the President so directs, to Company's Board of
Directors. Services shall include Consultant submitting in writing proposals
("Proposals") to Company for its review, involving literary properties which
Consultant wishes to develop as theatrical and/or television motion pictures and
which Consultant believes in good faith are freely available for acquisition by
Company. Consultant shall submit all such Proposals to Company in writing and
shall not present such Proposals to third parties except as set forth herein.
Each such proposal shall be a bonafide submission made in good faith as to
Consultant's intent to develop the Project and set forth the manner (as of the
date of such Submission) that Consultant would like to develop such project
(i-e., as opposed to Consultant just submitting a list of such Projects).
b. It is understood and acknowledged by the parties hereto
that Consultant shall be obligated to render the Services in good faith,
provided, however, that nothing contained herein shall be deemed to bar
Consultant from submitting Proposals concerning Projects to third parties in
compliance with the terms of Sections 4.c, and 4.d hereof. However, all
Proposals concerning Projects shall first be submitted to the Company as
provided herein.
c. Consultant shall not have any authority to bind Company by
any promise or representation or otherwise.
4. Compensation; Benefits; Expenses.
a. As compensation for all of the Services required to be
rendered to Company by Consultant during the Term, Company shall pay Consultant
a fee of Ten Thousand Dollars ($10,000.00) per month (the "Consulting Fee"). The
Consulting Fee shall be paid by Company to Consultant on the first business day
of each month in arrears throughout the Term or, at the option of Company, may
be prepaid for any number of months. In connection with any Project Proposed by
Consultant pursuant to Paragraph 4.c. and 4.d. hereof, and developed by the
Company pursuant to such Proposal, including, without limitation, Projects (i)
currently owned and/or controlled by Company and listed on Schedule "A" and (ii)
to be acquired (to the extent not already owned and/or controlled by Company)
and/or accepted for development by Company, Consultant shall be engaged as a
producer (if a theatrical or direct-to-video motion picture) or an executive
producer (if a television motion picture or series) with respect to each such
Project in accordance with terms and conditions (other than terms and conditions
related to Consultant's compensation and credit which are addressed below)
customary in the motion picture industry for a person of Consultant's stature
(e.g., taking into account Consultant's then current deals), Consultant shall be
accorded on-screen and paid ad credit as a producer of each such Project
developed as a theatrical or direct-to-video motion picture and as an executive
producer of each such Project developed as a television motion picture or series
and Company shall pay to Consultant such additional compensation as may be
agreed upon by the parties after good faith negotiation, but, except for (i)
Projects currently owned and/or controlled by the Company and listed on Schedule
"A" (the "Schedule A Projects") and (ii) the Projects referred to in Paragraph
4.e., in no event less than the following:
2
i. A fixed producer fee equal to the amount that
is 4% of the final budget for the applicable motion picture (but in no event
shall such fixed fee be less than $25,000); and
ii. A contingent fee as follows:
A. 2 1/2% of 100% of all gross receipts
after initial breakeven, initial breakeven to be determined based on a
20% distribution fee notwithstanding that a higher fee applies;
B. Escalating to 5% of 100% of all gross
receipts after initial breakeven, breakeven to be based on a 25%
distribution fee notwithstanding that a higher fee applies; and
C. Applicable against 50% of 100% of all net
profits reduced by all gross and net profit participations payable to third
parties providing services or rights in connection with the applicable motion
picture to a "soft floor" of 20% and a "hard floor" of 10%.
b. At the option and upon request of Consultant, Company shall
provide Consultant with a private office at the Company's headquarters,
telephone and other general office support services. Such office, telephone and
office support services shall be at a level consistent with those currently
being provided to Consultant as Chief Executive Officer of Company.
c. Company shall have a period of ten (10) business days
(reducible to not less than two (2) business days for so-called "hot properties"
(e.g., properties submitted by multiple third-party producers simultaneously,
etc.)) following Consultant's submission to Company of a Proposal with respect
to any Project not currently owned and/or controlled by Company to commit in
writing to pursue the acquisition of such Project and the development of such
Project as a theatrical, direct-to-video and/or television motion picture or
television series. If Company does not elect in writing to pursue such Project
in any of such mediums by the close of business on the last day of such period
(or if after pursuing such Project in good faith Company is unable to acquire
such Project after a reasonable time), such Project shall be deemed rejected by
Company and Consultant shall have no further obligations to Company with respect
to such Project, except that if Consultant introduces a substantial change to
such project (for example, change of director, budget or cast, but excluding
changes to Consultant's compensation with respect to such Project, unless the
fixed portion of such Consultant's compensation with respect to such Project is
computed as a percentage of the final budget and such percentage is a lesser
percentage than as set forth in Paragraph 4.a. hereof before such Project is
optioned or acquired by a third party, Consultant shall resubmit such project to
Company with such substantial change in accordance with this Paragraph 4.c.
except that the period of Company's review for such resubmission shall be
reduced to no more than five (5) business days.
3
d. Consultant may also submit to Company Proposals with
respect to one or more of the Schedule A Projects which are currently owned
and/or controlled by Company. Notwithstanding anything to the contrary herein
contained, Consultant shall not submit any such Schedule A Projects to Company
earlier than thirty (30) days after the date hereof and Consultant shall not
submit to Company more than three (3) such Projects in each month of the Terms
thereafter. Company shall have a period of thirty (30) days following
Consultant's submission to Company of a Proposal with respect to a Schedule A
Project to commit in writing to pursue the active development of such Project as
a theatrical, direct-to-video and/or television motion picture and/or as a
television series. If Company does not elect in writing to so commit to such
Project in any of such mediums by the close of business on the last day of such
period, Consultant shall have an irrevocable, exclusive option for a period
equal to the earlier of (i) two (2) years from the last day of such period; or
(ii) the expiration of the six (6) month period referenced in Paragraph 15
hereof to acquire all of Company' s fights to such Project or to convey to a
third party production company, distributor, financier, etc. ("Third Party
Buyer") an exclusive and irrevocable option for a period of up to one (1) year
(extendable by an additional period of up to one (1) year) to acquire Company's
rights to such Project with such options, whether to Consultant or such Third
▇▇▇▇▇ Buyer, being exercisable upon repayment to Company of an amount not less
than all of its actual unrecouped out-of-pocket expenses with respect to such
Project and upon such repayment to Company Consultant shall have no further
obligations to Company with respect to the applicable Project except as set
forth in Paragraph 4.e. hereof.
e. All monies and other items of value actually received by
Company and/or Consultant from a Third ▇▇▇▇▇ Buyer with respect to the rights to
a Project referenced in Paragraph 4.d. above (and from Regal Productions and/or
its successors and assigns with respect to the "Kickboxer" project currently in
development with Regal Productions and from PolyGram and/or its successors and
assigns with respect to the "Winesburg, Ohio" project currently in development
with PolyGram) and including with respect to the provision by Consultant of
producing Services or for any other reason, excluding amounts paid to Consultant
as reimbursement of out-of-pocket expenses paid to third parties in connection
with such Project, shall as between Company and Consultant be allocated, paid
and accounted for as follows:
(i) The first $50,000 shall be paid 1/2 to
Consultant and 1/2 to Company;
(ii) Such monies thereafter received shall be paid
to Company until it has recouped its theretofore unrecouped, actual, direct,
out-of-pocket expenses with respect to the acquisition and/or development of
such Project excluding interest, overhead, or other non-direct charges;
4
(iii) Such monies thereafter received shall be
paid to Consultant until Consultant has actually received pursuant to this
Paragraph 4.e.(iii) an aggregate amount equal to the aggregate amount
theretofore paid to Company pursuant to Paragraphs 4.e.(ii) above; and
(iv) The balance of such monies thereafter received
shall be paid 1/2 to Consultant and 1/2 to Company.
f. In addition to the Consulting Fee, Company shall reimburse
Consultant for all out-of-pocket expenses incurred in performing Services
pursuant to this Agreement ("Monthly Expenses"), subject, however, to Company's
prior written authorization with respect to travel expenses and for any expenses
exceeding an aggregate of $1,000 in any one-month period.
g. At the end of each month, Consultant shall submit a report
detailing his Monthly Expenses, together with the receipts therefor, to Company
and Company shall thereafter provide reimbursement by the thirtieth (30th)] day
of the immediately following month.
h. Consultant shall be responsible for the payment of all
federal, state and local taxes, including F.I.C.A. and income taxes, payable on
any fees paid by Company to Consultant hereunder.
i. Company shall pay or, at Consultant's election, reimburse
Consultant for the cost of medical insurance for Consultant and his family
during the Term. Such medical insurance shall be on terms at least as favorable
to Consultant and his family as the medical insurance currently being provided
to Consultant by Company.
j. Notwithstanding anything to the contrary herein contained,
Consultant may submit written proposals to Company with respect to Projects
owned and/or controlled by Company but not listed on Schedule "A," including for
the development of Projects based upon the ancillary and subsidiary rights
(e.g., remake, sequel and series rights) to motion pictures currently owned
and/or controlled by the Company. In such case, if the Company decides to
proceed with any such Project, the Company will pay to Consultant such
additional compensation and accord Consultant such credit as agreed upon. If
Company elects not to pursue the active development of any such Projects,
Consultant shall not obtain any right to option or acquire and/or convey to a
Third Party Buyer the right to option or acquire Company's rights to such
project.
5. Confidential Information.
Consultant acknowledges that he has had access to and has
become acquainted with, and during the Term will have access to and become
acquainted with, Company's confidential records, secrets and other proprietary
information not readily available to the public,
5
including, without limitation, business plans, Projects in which Company has
rights, is developing or licensing (whether alone or in conjunction with others)
or which are or have been under consideration by Company, names of Company's
employees, customer and supplier lists and other matters. Except as set forth
herein to the contrary, Consultant hereby agrees that all such information is
the sole and exclusive property of Company, regardless of whether or not
Consultant developed such information for Company before or during the Term and
that Consultant will not use any such confidential information other than in the
course of providing the Services to Company pursuant to this Agreement.
Consultant further agrees that upon expiration or termination of this Agreement,
Consultant shall not take or use ally such confidential information, records or
files of Company, and Consultant will return to Company all such records and
files that it may have previously removed to assist in providing the Services
pursuant to this Agreement. Anything contained herein to the contrary
notwithstanding, Consultant shall have the right to present or recommend
Projects, including without limitation Projects currently owned and/or
controlled by Company and listed on Schedule "A," to others as provided in
Sections 4.c. and, 4.d. hereof and to advise third parties as to the amount of
monies expended by Company in connection with such Projects, and to provide
third parties with copies of all agreements, including without limitation,
chain-of- title agreements, pertaining or relating to such Projects, and with
copies of all literary materials, budgets, location information, and other
materials and information concerning such Projects in order to enable such third
parties to acquire, finance, develop, produce, produce, market and exploit such
Projects.
6. Restrictive Covenants.
a. Except as otherwise specified herein, during the Term and
at all times thereafter, Consultant agrees not to (i) disclose or divulge to any
person or entity any trade secret or know-how relating to the business or
operations of Company (the "Business"), or any of Company's confidential or
proprietary information, including, without limitation, the information referred
to in Section 5 hereof, or (ii) engage in any willful act which is materially
adverse to the business interests of Company.
b. Consultant hereby specifically acknowledges and agrees that
the restrictive covenants set forth in Section 5 hereof and this Section 6 are
material provisions relied upon by Company in entering into this Agreement.
c. Consultant specifically acknowledges that it has been
advised by Company to review this Agreement with its counsel, and that
Consultant has satisfied itself that the restrictive covenants set forth in this
Agreement are reasonable in all respects.
6
d. Consultant acknowledges and agrees that a violation of any
covenant contained in this Agreement shall cause irreparable harm to Company,
and that Company shall be entitled to specific performance of this Agreement or
an injunction without proof of special damages, together with the costs and
reasonable attorney's fees incurred by Company in enforcing its rights and to
prevent or halt a violation of Consultant's obligations under this Agreement. It
is expressly understood and agreed by the parties hereto that nothing contained
herein shall be construed as prohibiting Company from pursuing any other
remedies available for a breach or threatened breach of this Agreement,
including without limitation, the recovery of damages by Company.
7. Notices.
Any notice or other communication given under this Agreement
shall be in writing and shall be deemed given to a party three (3) days
following the deposit thereof in the U.S. mail if sent from the Continental
United States by certified or registered mail, return receipt requested, postage
prepaid, or the next following business day after being sent by a nationally
recognized overnight courier service, if addressed to such party at the address
of such party set forth below, or such other address which such party may
Specify by notice given pursuant to this Section 7:
If to Company:
Kings Road Entertainment 1901 Avenue
of the Stars ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
With a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to Consultant:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to:
Manart, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
7
8. Independent Contractor.
It is expressly understood and agreed by the parties hereto
that Consultant's relationship to Company is that of an independent contractor
and that neither this Agreement nor the Services to be rendered hereunder shall,
for any purpose whatsoever, or in any way or manner or for any purpose
constitute "wages" or create an employer-employee relationship between Company
and Consultant.
9. Non-Waiver.
The failure or refusal of any party hereto to insist upon the
strict performance of any provision of this Agreement, or to exercise any right
in any one or more instances or circumstances shall not be construed as a waiver
or relinquishment of such provision or right, nor shall such failure or refusal
be deemed a custom or practice contrary to such provision or right.
10. Severability.
If any section, term or provision of this Agreement shall be
held or determined to be unenforceable, the balance of this Agreement shall
nevertheless continue in full force and effect unaffected by such holding or
determination. In addition, in any such event, the parties hereto agree that it
is their intention and agreement that any such section, term or provision which
is held or determined to be unenforceable as written, shall nonetheless be
enforced and binding to the fullest extent permitted by law as though such
section, term or provision had been written in such a manner and to such an
extent as to be enforceable under the circumstances. Without limitation of the
foregoing, with respect to any restrictive covenant contained herein, if it is
determined that any such provision is excessive as to duration or scope, it is
intended that it nonetheless be enforced for such shorter duration or with such
narrower scope as will render it enforceable.
11. Assignability.
No party hereto may assign this Agreement, but as contemplated
hereunder Consultant may exercise or permit third parties to exercise
Consultant's option to acquire the Schedule A Projects and/or convey to Third
Party Buyer(s) exclusive options to acquire Company's fights in such Projects,
provided that in such case such Third Party Buyer assumes Consultants obligation
with respect to such Project hereunder. Consultant may not delegate the
performance of any of its duties hereunder. Any such purported delegation or
assignment shall be null and void and of no force or effect.
8
12. Public Disclosure: Statements.
Consultant agrees that it shall make no statement which
detracts from the reputation or is otherwise critical of, or is in any manner
harmful to, Company, any of its affiliates or any director, officer, consultant,
employee or other agent of Company or any of its affiliates. As used in the
Agreement, the term "affiliate" shall mean any person, corporation, partnership,
trust or other entity controlling, controlled by, or under common control with,
Company.
13. Governing Law.
This Agreement has been prepared and negotiated in the State
of California and shall be governed by and construed in accordance with the laws
of the State of California, without giving effect to the principles thereof
relating to the conflict of laws. Each party hereto consents to the service of
process in any action or legal proceeding on such party by means of registered
or certified mail, return receipt requested, in care of the address for such
party set forth in Section 9 hereof or such other address as such party may
designate for notice pursuant to the terms of said Section 9.
14. Headings.
The headings herein are for reference purposes only and shall
not affect in any way the meaning and interpretation of this Agreement.
15. Termination; Survival.
a. If Consultant actually renders exclusive services to a
third party other than with respect to Projects referenced in Paragraph 4.d.
hereof Company shall have the right, but not the obligation, to terminate the
agreement within five (5) business days of being advised or made aware that
Consultant is rendering such exclusive services.
b. The provisions of Sections 4.h., 5 through 10, and 12
through 17 and Consultant's options to acquire Company's Projects pursuant to
the terms hereof shall survive the termination of this Agreement, in whatever
manner it may occur, for a period of six (6) months. Notwithstanding anything
herein to the contrary including, without limitation the preceding sentence,
(i) If Consultant is in active negotiations with a
Third Party Buyer for the acquisition and/or option by such Third Party Buyer of
a Schedule A Project at the end of such six month period then Consultant shall
have a period of up to 60 days to complete such negotiations and enter into an
agreement with such Third ▇▇▇▇▇ Buyer for such acquisition and/or option; and
9
(ii) Consultant's rights with respect to Projects
"set-up" (e.g., placed in development) with Company prior to the termination of
this Agreement shall survive the termination of this Agreement (e.g., the right
to be employed as a producer (or executive producer) and be compensated and
accorded credit it in accordance with this Agreement; and
(iii) Third Party Buyer's rights to Company's
Projects as provided in this Agreement shall not be changed, modified and/or
affected in any way by the termination of this Agreement, including without
limitation, Consultant's rights to be employed as producer (or executive
producer), and be compensated and accorded credit in accordance with this
Agreement.
16. INTENTIONALLY DELETED.
17. Entire Agreement.
This Agreement sets forth the entire agreement among the
parties hereto with respect to the matters set forth herein. This Agreement, and
any provisions hereof, may not be changed, altered, waived, modified or amended
except in a writing signed by both parties.
This Agreement may be executed in counterparts, which together
shall constitute one and the same document.
(SIGNATURES ON NEXT PAGE)
10
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
COMPANY:
KINGS ROAD ENTERTAINMENT, INC.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
CONSULTANT:
/s/
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
EXHIBIT E
[ ], 1998
RAS Securities Corp.
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
The RAS Clients
Dear Sirs:
In connection with the Stock Acquisition Agreement (the "Acquisition
Agreement"), dated the date hereof, by and among the Estate of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
RAS Securities Corp. (acting for itself and the RAS Clients), Kings Road
Entertainment, Inc., certain of its shareholders and FAB Capital Corporation,
each of the undersigned, being all of the beneficiaries of the Seller having any
rights to the Shares, jointly and severally represent and warrant to each of RAS
and the RAS Clients that, with respect to the Seller and the Shares (but not as
to the Other Selling Shareholders and the Additional Shares), the
representations set forth in Section 6.a.(1) and 6.a.(2) of the Acquisition
Agreement are true correct as of the date hereof and there are no residual
beneficiaries with regard to the Shares.
This letter shall be governed by the laws of the State of New York without
regard to conflicts of law principles.
We consent to the jurisdiction of any federal or state court located in the
State of California in connection with any dispute arising under this letter.
Capitalized terms used and not defined herein have the meanings ascribed to
them in the Acquisition Agreement.
Very truly yours,
THE BENEFICIARIES: --------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
EXHIBIT F
LIST OF RAS CLIENTS
Western Union Leasing Ltd.
FAB Capital Corp.
MBO Music Verlag GmbH
EXHIBIT G
[ ], ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ Entertainment, Inc.
1901 Avenue of the Stars
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The Estate of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
The Other Selling Shareholders
Dear Sirs:
In connection with the Stock Acquisition Agreement (the "Acquisition
Agreement"), dated the date hereof, by and among the Estate of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
RAS Securities Corp. (acting for itself and the RAS Clients), Kings Road
Entertainment, Inc., certain of its shareholders and FAB Capital Corporation,
each of the undersigned, being the RAS Clients, represents and warrants to the
Company, the Seller and each of the Other Selling Shareholders, with respect to
the Shares being purchased by each under the Acquisition Agreement, the
representations set forth in Section 6.b. of the Acquisition Agreement are true
correct as of the date hereof.
This letter shall be governed by the laws of the State of New York without
regard to conflicts of law principles.
We consent to the jurisdiction of any federal or state court located in the
State of New York in connection with any dispute arising under this letter.
Capitalized terms used and not defined herein have the meanings ascribed to
them in the Acquisition Agreement.
Very truly yours,
-------------------------
--------------------------
Schedule 6.c.(3)
The Company's 1998 Stock Option Plan authorizes 400,000 shares of
Common Stock to be issued pursuant to such plan. Contemporaneously with the
execution of this Agreement, the Company is making an aggregate cash payment of
$113,754 to the holders of options to purchase 100,667 shares of Common Stock
and such cash payment shall be in complete satisfaction of such options. No
other options are outstanding.
Schedule 6.c.(4)
----------------
None.
Schedule 6.c.(9)
----------------
See Schedule 6.c.(3)
Schedule 6.c.(14)
-----------------
The matters described in the attached letter from the Nasdaq Stock Market to the
Company, dated October 9, 1998.
[The text of the letter from Nasdaq to the Company has been excluded from
filing.]