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As filed with the Securities and Exchange Commission on June 19, 1997
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
(Name of small business issuer in its charter)
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<S> <C> <C>
DELAWARE 7812 13-3849523
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
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2621 EMPIRE AVENUE
BURBANK, CALIFORNIA 91504
(818) 567-1221
(Address and telephone number of principal executive offices)
EDWARD H. RESNICK, CHAIRMAN
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
2621 EMPIRE AVENUE
BURBANK, CALIFORNIA 91504
(818) 567-1221
(Name, address, including zip code, and telephone number of agent for service)
---------------
Copies of all communications to:
DAVID L. FICKSMAN, ESQ. HANK GRACIN, ESQ.
LOEB & LOEB LLP LEHMAN & EILEN
1000 WILSHIRE BOULEVARD, SUITE 1800 50 CHARLES LINDBERGH BOULEVARD, SUITE 505
LOS ANGELES, CALIFORNIA 90017 UNIONDALE, NEW YORK 11553
(213) 688-3400 (516) 222-0888
---------------
Approximate date of proposed sale to the public: As soon as practicable after
the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ______
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Titles of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Security(2) Offering Price(2) Fee
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Common Stock, $.001 par value per share ... 1,217,593
shares(1) $6.00 $7,305,558 $2,214
- ----------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value per share ... 450,619 $6.00 $2,703,714 $819
shares(3)
- ----------------------------------------------------------------------------------------------------------------
Underwriters' Warrants .................... 100,000 $.0001 $10.00 Nil
warrants(4)
- ----------------------------------------------------------------------------------------------------------------
Shares issuable upon exercise of 100,000 $7.80 $780,000 $236
Underwriters' Warrants .................... shares
- ----------------------------------------------------------------------------------------------------------------
Total ................................ 1,768,212 $10,789,282 $3,269
================================================================================================================
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(1) Includes 217,593 shares of Common Stock issuable to Nichols, Safina,
Lerner & Co., Inc. ("NSL") and ____________________ (the "Underwriters")
upon the exercise of an option granted to the Underwriters, to cover
over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(3) To be purchased by the Underwriters from certain selling stockholders.
(4) To be issued to the Underwriters.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission ("Commission"),
acting pursuant to said Section 8(a), may determine.
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JUNE 19, 1997
1,450,619 SHARES
[LOGO] PANORAMA INTERNATIONAL PRODUCTIONS, INC.
COMMON STOCK
----------
Panorama International Productions, Inc. ("Panorama") and certain
selling stockholders of Panorama ("Selling Stockholders") are hereby offering an
aggregate of 1,450,619 shares of Panorama's common stock, $.001 par value per
share ("Common Stock"). Prior to this offering (this "Offering"), there has been
no public market for the Common Stock of Panorama, and there can be no assurance
that such a market will develop or be sustained. See "UNDERWRITING" for a
discussion of the factors to be considered in determining the initial public
offering price of the Common Stock. Panorama has applied to have the Common
Stock approved for inclusion on the Nasdaq SmallCap Market under the proposed
symbol "PNRM."
----------
THE SECURITIES OFFERED HEREBY INVOLVE CERTAIN RISKS AND
IMMEDIATE SUBSTANTIAL DILUTION.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
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==================================================================================================
Underwriting Proceeds to
Discounts and Proceeds to Selling
Price to Public Commissions(1) Company(2) Stockholders(3)
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Per Share .............. $6.00 $.60 $5.40 $5.40
- --------------------------------------------------------------------------------------------------
Total(4) .......... $8,703,714 $870,371 $5,400,000 $2,433,343
==================================================================================================
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(1) Does not include additional compensation to be received by the
Underwriters consisting of a non-accountable expense allowance equal to
$261,111 (or $300,278 if the over-allotment option is exercised in
full), or $.18 per share, and warrants to purchase up to 100,000 shares
of Common Stock at a price equal to one hundred thirty percent (130%) of
the initial offering price, exercisable for a period of four years
commencing one year from the date of this prospectus ("Prospectus"). In
addition, Panorama has agreed to indemnify the Underwriters against
certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended ("Securities Act"). See "UNDERWRITING."
(2) Before deducting expenses of this Offering payable by Panorama estimated
at $600,000, including the Underwriters' non-accountable expense
allowance.
(3) The Selling Stockholders are selling 450,619 shares of Common Stock,
which are subject to the underwriting discount.
(4) The Underwriters have been granted an option, expiring thirty (30) days
from the date of this Prospectus, to purchase up to 217,593 additional
shares of Common Stock from Panorama, solely to cover over-allotments,
if any. If the over-allotment option is exercised in full, the Total
Price to the Public, Underwriting Discounts and Commissions and Proceeds
to be received by Panorama will be $10,009,272, $1,000,927 and
$6,575,002, respectively, See "UNDERWRITING."
The shares of Common Stock are being offered by the Underwriters named herein
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to certain other conditions. The Underwriters reserve
the right to withdraw, cancel or modify this Offering and to reject any order in
whole or in part. It is expected that delivery of certificates representing the
Common Stock will be made against payment therefor at the offices of Nichols,
Safina, Lerner & Co., Inc., 800 Third Avenue, New York, New York 10022, on or
about __________, 1997.
NICHOLS, SAFINA, LERNER & CO., INC.
The date of this Prospectus is __________, 1997
<PAGE> 3
[PHOTOGRAPHS]
Panorama is not currently a reporting company under the Securities Exchange Act
of 1934, as amended ("Exchange Act"). Panorama intends to furnish its
stockholders with annual reports containing audited financial statements and
such interim reports as it deems appropriate. Panorama's year end is December
31. In addition, as of the date of this Prospectus, Panorama will be subject to
the information requirements of the Exchange Act, and in accordance therewith,
will file reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission").
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE
OF THE COMMON STOCK OF PANORAMA AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING TRANSACTIONS MAY BE
EFFECTED ON THE NASDAQ SMALLCAP MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
PANORAMA ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M.
SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
The following summary does not purport to be complete and is
qualified in its entirety by the more detailed information and financial
statements and the related notes thereto appearing elsewhere in this Prospectus.
An investment in the securities offered hereby involves certain risks and
immediate substantial dilution. See "RISK FACTORS" and "DILUTION." Unless
otherwise indicated, the information contained in this Prospectus: (i) assumes
that the Underwriters' over-allotment option will not be exercised and (ii)
gives retroactive effect to a reverse stock split as a result of which the
5,690,527 outstanding shares of Common Stock of Panorama as of May 30, 1997 were
converted into 2,995,014 shares of Common Stock ("Reverse Stock Split").
THE COMPANY
Panorama International Productions, Inc. ("Panorama") is engaged in
the production and distribution of video tapes specializing in destination,
historical and cultural topics for the tourist industry. Panorama currently has
a library of 43 video titles which are distributed by Panorama primarily to
national and state park cooperating associations (nonprofit entities chartered
by Congress and sanctioned by the National Park Service to operate at national
parks, monuments and historic sites), concessionaires (private firms that
operate within the borders of national or state parks), retailers at gateway
communities (businesses that are located outside of the boundaries of the park,
monument or historical site), tourist groups and other souvenir and gift stores
for sale to tourists and international travelers. Panorama has video titles
featuring the most frequently visited U.S. National Parks, including the Grand
Canyon, Yellowstone, Yosemite and the Great Smoky Mountains. It also has video
titles featuring other highly visited locations, such as Ellis Island, the
U.S.S. Arizona Memorial, Big Bend National Park, Mesa Verde National Park,
Sequoia/Kings Canyon National Park, Bryce Canyon, Olympic, Mount Rainier and
Mount St. Helens. Panorama recently received eight "1997 Telly Awards" (awards
which are privately administered, funded in part by revenues from contestants
and given annually for excellence in the production of non-network commercials,
film and video productions) for four of its video titles.
In addition, Panorama produces and distributes videos featuring the
Universal Studios theme parks in Orlando, Florida and Universal City, California
pursuant to written agreements with Universal Studios.
Panorama's wholly owned subsidiary, Tellurian Press, Inc. d/b/a
Sierra Press, Inc. ("Sierra"), is a publisher of printed materials and color
photography books featuring similar topics and subject matter as Panorama's
video tapes. Sierra has approximately 50 book titles offered for sale in 84
national parks, monuments, historic sites and United States Bureau of Land
Management locations and surrounding retail locations.
Panorama also markets "ViewMaster" products and photographic slides
as a distributor to retail locations nationwide.
OPERATING STRATEGIES
Market Strategy. Panorama and Sierra (collectively, the "Company")
sell products to (a) cooperating associations, concessionaires, retailers at
gateway communities and tourist groups, (b) souvenir shops, book stores, hotel
gift shops and retailers in airports, and (c) the retail outlets at the
Universal Studios theme parks in California and Florida. Panorama releases key
video titles to this customer base in the three major video formats used
worldwide (NTSC, PAL and SECAM) in English and several other languages
(including some or all of German, French, Italian, Spanish, Chinese, Japanese
and Korean). Sierra publishes and distributes various book titles to this
customer base in English and, in some cases, with text and caption translation
inserts in French, German and Japanese. In response to the "just-in-time"
inventory requirements of their customers, the Company restocks and fills orders
from customers on a 48-hour or, in some cases, a same-day basis. Because of its
own "just-in-time" inventory system, Panorama does not need to maintain separate
warehouse or storage facilities for its products,
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which allows Panorama to utilize working capital and management resources for
operations, while still providing customers with product in a timely manner. Due
to the nature of its business, Sierra does not possess a "just-in-time"
inventory system. See "BUSINESS -- Purchasing" and "Inventory Management."
GROWTH STRATEGIES
New Products and Expansion of Retail Distribution Outlets. The
Company intends to expand its business by entering into arrangements with
customers to produce and distribute products featuring additional U.S.
destination locations which are not the topics of existing titles (focusing on
the "core" business of national and state parks) and adding products featuring
key tourist cities. The Company also intends to expand the number of retail
distribution outlets and to produce additional products to distribute through
current and new retail outlets.
Universal Studios; Other Theme Parks. The Company has been advised
that Universal Studios plans to open two new theme parks, and Panorama plans to
negotiate with Universal Studios to be a supplier of souvenir videos to those
theme parks. Panorama also will seek to develop new contract relationships with
entities similar to Universal Studios.
Expanding distribution channels. The Company is examining means of
expanding the distribution of its products into other distribution channels,
such as cable television (including home-shopping television networks), the
Internet and direct mail. Panorama has entered into an agreement with a company
to obtain direct mail marketing services for a portion of its video library.
Sierra has engaged a book distribution company to distribute Sierra's book
titles to traditional retail book stores.
Strategic Relationships. The Company is pursuing strategic
relationships and alliances with selective partners who utilize videos and books
as premiums or sales inducements. Panorama has entered into an agreement with a
multilevel marketing company for the purchase and distribution of its video
entitled "Our Country: A Musical Tribute to America's Parks and Monuments."
International Marketing. The Company intends to explore means of
marketing products overseas to potential tourists and international travelers.
Panorama was organized as a corporation under the laws of the State
of Delaware on July 27, 1995, and on September 22, 1995, succeeded to the
business of a corporation which commenced operations in 1970. Panorama's
executive offices are located at 2621 Empire Avenue, Burbank, California 91504,
and its telephone number is (818) 567-1221.
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THE OFFERING
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Common Stock offered by the Company ................... 1,000,000 shares
Common Stock offered by the Selling
Stockholders........................................... 450,619 shares
Common Stock outstanding prior to this
Offering .............................................. 2,995,014 shares (1)
Common Stock to be outstanding immediately
after this Offering ................................... 4,010,365 shares (2)
Risk Factors........................................... The securities offered hereby involve
a high degree of risk and immediate and
substantial dilution. Investors should
purchase the securities offered hereby
only if they can afford the loss of
their entire investment. See "RISK
FACTORS" and "DILUTION."
Use of Proceeds ....................................... Repayment of "Subordinated Notes"(3);
production of new video titles;
production of new book titles; updating
existing video and book titles; and
general working capital purposes. See
"USE OF PROCEEDS."
Proposed Nasdaq Symbol................................. PNRM
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(1) Includes 157,895 shares issued to Gold Leaf Properties, Inc. (the
predecessor in interest to Sierra's assets and formerly known as The
Sierra Press, Inc.) ("Gold Leaf") pursuant to an acquisition
agreement with Panorama and 26,316 shares issued to the founder of
Cinescope Enterprises, Inc. d/b/a Panorama International Productions
(the predecessor in interest to Panorama's video production and
distribution business) ("Cinescope") pursuant to an agreement with
Panorama, but excludes 236,842 shares reserved for issuance to David
K. Haspel upon exercise of certain stock options and 15,351 shares
issuable to the founder of Cinescope ("Founder") upon the completion
of this Offering. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION," "MANAGEMENT -- Employment Agreements" and "CERTAIN
TRANSACTIONS -- Issuance of Shares, Gold Leaf, and Haspel Stock
Options."
(2) Includes 157,895 shares issued to Gold Leaf, 26,316 shares issued to
the Founder of Cinescope and 15,351 shares issuable to the Founder
upon completion of this Offering, but excludes 236,842 shares
reserved for issuance to David K. Haspel upon exercise of certain
stock options, and 100,000 shares issuable upon exercise of the
Underwriters' Warrants. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION," "MANAGEMENT -- Employment Agreements," "CERTAIN
TRANSACTIONS -- Issuance of Shares, Gold Leaf, and Haspel Stock
Options" and "UNDERWRITING."
(3) The Company intends to use a portion of the proceeds from this
Offering to fund the repayment of the promissory note component of
certain "Debt Units" issued by the Company in a private placement of
its securities concluded in July 1996. Each Debt Unit consists of a
ten-year promissory note in the original principal amount of $50,000,
made by the Company, bearing interest at a rate of 15% per annum with
interest payable monthly in arrears (the "Subordinated Note"), and
4,934 shares of Common Stock. Only the Subordinated Notes will be
offered to be repaid by the Company. There can be no assurance that
the Company will be successful in repaying the Subordinated Notes. In
the event all of the Subordinated Notes are repaid, approximately
$562,000 of deferred financing costs and debt discount will be
charged to operations in the period in which the Subordinated Notes
are repaid. See "USE OF PROCEEDS" and "RISK FACTORS."
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SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below (after giving
effect to the Reverse Stock Split) was derived from the consolidated financial
statements of the Company and should be read in conjunction with the
consolidated financial statements and related notes thereto appearing elsewhere
in this Prospectus and with "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION." Results of operations for any interim period are not necessarily
indicative of results to be expected for the full fiscal year.
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For the Period from
------------------- Three Months Ended
January 1, 1995 September 22, 1995 March 31,
to to Year Ended ----------------------
September 21, 1995(1) December 31, 1995 December 31, 1996 1996 1997
--------------------- ----------------- ----------------- ---- ----
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STATEMENT OF
OPERATIONS DATA:
Sales $1,673,000 $369,000 $2,108,000 $439,000 $569,000
Cost of sales 818,000 145,000 887,000 192,000 266,000
Income before
interest income
(expense) and
income taxes 533,000 45,000 369,000 93,000 26,000
Income (loss) before
income taxes 537,000 19,000 154,000 47,000 (34,000)
Provision (benefit) for
income taxes 8,000 5,000 27,000 8,000 (6,000)
Net income (loss) 529,000 14,000 127,000 39,000 (28,000)
Net income (loss) per
common share -- -0- .04 .01 (.01)
Weighted average number
of common shares -- 3,191,935 3,191,935 3,191,935 3,191,935
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(1) Denotes predecessor entity, which had elected to be taxed as an "S"
corporation, pursuant to which corporate earnings were taxed at the
individual stockholder level. Accordingly, net income per common
share for such period is not meaningful.
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March 31, 1997
--------------
December 31, 1996 Actual As Adjusted(1)
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BALANCE SHEET DATA:
Working capital $ 923,000 $ 788,000 $4,182,000
Total assets 3,768,000 4,263,000 7,254,000
Notes payable,
net of discount 1,240,000 1,247,000 -0-
Total liabilities 1,393,000 1,616,000 369,000
Net shareholders'
equity 2,375,000 2,647,000 6,885,000
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(1) Gives effect to the sale of 1,000,000 shares of Common Stock offered
hereby and the anticipated application of the estimated net proceeds
therefrom to the repayment of the Subordinated Notes (assuming that
all holders of the Subordinated Notes accept the Company's offer to
repay such notes), and the charge to operations of debt discount and
deferred financing costs. See "MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION."
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RISK FACTORS
The following factors should be considered carefully in addition to the
other information contained in this Prospectus before purchasing the Common
Stock offered hereby.
CONCENTRATION OF SALES TO CERTAIN CUSTOMERS. A significant percentage of
the Company's sales has been concentrated among a relatively small number of
customers. In fiscal 1995, the Company's two largest customers accounted for
approximately 29% of the Company's sales. In fiscal 1996, these two largest
customers accounted for approximately 24% of the Company's sales. Although the
Company intends to increase its customer base through expansion of distribution
channels and production of products featuring other geographic locations, there
can be no assurance that this concentration of sales among customers will not
continue in the future. Other than Universal Studios and Destiny Telecomm, Inc.,
the Company has no master purchase agreements or other contractual commitments
from its customers. Nevertheless, because Universal Studios is an independent
production company, it is possible that Universal Studios could produce its own
videos for distribution and sale at the retail outlets at its theme parks. The
loss of a significant customer (such as Universal Studios) or a substantial
decrease in sales to such a customer would have a material adverse effect on the
Company's sales and operating results.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the efforts and
abilities of its Chairman and Chief Executive Officer, Edward H. Resnick, and
its President and Chief Operating Officer, David K. Haspel. In January 1997, Mr.
Resnick had heart bypass surgery. This surgery was similar in scope to that
which he had in 1992. Mr. Resnick has returned to the Company and is currently
performing his duties as Chairman and Chief Executive Officer as provided in his
employment agreement. If the Company was to lose the services of either Mr.
Resnick or Mr. Haspel before a qualified replacement could be obtained, its
business would be materially adversely affected. Mr. Resnick has entered into a
two-year employment agreement, which contains confidentiality and
non-competition provisions. Mr. Haspel is subject to a month-to-month employment
agreement, which also contains confidentiality and non-competition provisions.
The Company has obtained a term life insurance policy on the life of Mr. Haspel,
in the amount of $1,500,000, as to which the sole beneficiary is a trust that
has been established for the benefit of the holders of the Subordinated Notes.
See "USE OF PROCEEDS," "MANAGEMENT -- Employment Agreements" and "CERTAIN
TRANSACTIONS."
COMPETITION. The specialized videotape and book publishing industries are
highly competitive. The Company competes with companies and independent
producers involved in the production and distribution of video tapes and books,
as well as with tourists themselves who make home videos and take photographs of
the national and state parks, theme parks and other subjects of the Company's
products. The Company attempts to distinguish its products by using professional
production elements (such as aerial footage taken from helicopters and aircraft)
and high-quality packaging. Most of the companies with which the Company
competes are substantially larger than the Company, and most of them have
significantly greater financial and other resources than the Company. There are
also many video production companies and book publishers that are substantially
larger than the Company, but who do not currently compete with the Company in
the U.S. destination market. There can be no assurance that these companies will
not enter the U.S. destination market in the future. In the event that these
companies enter the U.S. destination market, then there will be increased
competition for the Company, and the Company's sales and profit margins may
decrease. See "BUSINESS -- Competition."
NEW TECHNOLOGY. In addition to direct competition described above, Panorama
faces indirect competition from alternative delivery technologies which are
intended to provide video entertainment directly to the consumer. These
technologies include (i) direct broadcast satellite transmission systems, (ii)
cable systems, (iii) pay cable television systems and (iv) high-definition
television. In addition, Panorama's video tape products in the future may be in
competition with Digital Video Disc ("DVD") technology. If consumers embrace DVD
technology, Panorama may or may not be in a position to convert its video titles
to DVD. As Panorama's business is dependent upon the existence of a home video
retail market, a substantial shift in the video business to alternative
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technologies (including DVD) could have a material adverse effect on Panorama's
business. See "BUSINESS -- New Technology."
GOVERNMENT POLICIES. The Company's operations are affected by government
policies pertaining to national and state parks, monuments and historical sites.
These policies may have a significant effect on the future of the Company's
business in or near those locations. The prolonged closure of any of those
locations (such as the two closures of the National Parks System which occurred
over the Thanksgiving holiday in November 1995 and throughout the month of
December in 1995) could have a material adverse effect on the Company's
business. There can be no assurance that such closures will not occur in the
future. Further, in an effort to raise revenues, national and state parks have
raised admission fees. Increased admission fees could result in fewer tourists
and, therefore, a decrease in the Company's sales. Any policy adopted by the
federal government or the National Park Service which has the effect of reducing
the number of visitors to national parks could have a material adverse effect on
the Company's business. See "BUSINESS -- Government Policies" and "Competition."
SEASONALITY AND ACTS OF GOD. The Company's operations are subject to
seasonality and other factors which affect the number of visitors to national
and state parks, monuments and historical sites. In general, sales of the
Company's products have historically been higher in the months of April through
September. Factors such as inclement weather, natural disasters and other acts
of God, which are unpredictable, can adversely affect the Company's business.
See "BUSINESS -- Seasonality."
INTERNATIONAL TRAVELERS. Sales of the Company's products are dependent upon
the number of visits made by international travelers to national and state
parks, monuments, historical sites and urban destinations. The number of such
visits may be affected by international currency fluctuations, transportation
strikes, civil unrest, travel restrictions and other factors beyond the
Company's control. A reduction in the number of visits made by international
travelers to U.S. destinations could have a material adverse effect on the
Company's business. See "BUSINESS -- International Travelers."
LIMITED DISTRIBUTION CHANNELS. The Company currently has a limited number
of distribution channels for its products. In addition, many of the concession
services at national parks have been consolidating into a relatively small
number of entities with sophisticated retail operations, and the Company
believes that the national park concession industry may become dominated by
these large entities in the future. Some or all of these large entities may
choose to work with distributors other than the Company to manage their video
and book sections. Although the Company intends to increase its customer base
through expansion of distribution channels and production of products featuring
other geographic locations, there can be no assurance that this concentration of
customers will not continue in the future. See "BUSINESS -- Marketing and
Distribution."
CONTROL BY PRINCIPAL STOCKHOLDERS. After completion of this offering,
current management of the Company and their affiliates will own approximately
32.9% of the Company's outstanding Common Stock. Accordingly, such persons will
be able to decide all matters on which stockholders are entitled to vote,
including the election of all of the Company's directors. See "MANAGEMENT" and
"PRINCIPAL AND SELLING STOCKHOLDERS."
NO DIVIDENDS AND NONE ANTICIPATED. The Company has not paid any dividends
since its inception and does not intend to pay dividends in the immediate
future.
BROAD DISCRETION IN USE OF PROCEEDS DESIGNATED FOR WORKING CAPITAL. The
Company will have broad discretion with respect to the application of the net
proceeds of this Offering to be allocated to working capital and general
corporate purposes. While such funds are to be applied for working capital and
general corporate purposes in furtherance of the Company's business, investors
will be reliant on management as to the specific
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<PAGE> 10
application of these amounts. In addition, the amount of funds to be applied for
working capital and general corporate purposes may increase to the extent that
the holders of the Subordinated Notes do not accept the Company's offer to repay
such notes. The Company plans to offer to repay the Subordinated Notes prior to
the time period during which the Company may do so without the consent of the
note holders. Because the note holders are not obligated to accept the Company's
offer to repay the Subordinated Notes until the third anniversary of the
issuance of such notes (the period between September 1998 and July 1999), the
Company may remain indebted to such holders (and will be required to continue to
pay interest on the Subordinated Notes) if the notes are not all repaid. If the
Subordinated Notes are repaid by the Company with proceeds from this Offering,
approximately $562,000 of deferred financing costs and debt discount (or a pro
rata portion thereof if less than all of the Subordinated Notes are repaid) will
be charged to operations in the period in which such notes are repaid. If all of
the Subordinated Notes are repaid, the Company will save $225,000 per year
(representing the cash portion of annual interest expense), until such time as
either (i) the Company elects to repay the Subordinated Notes without the
consent of the note holders (as permitted under the notes after the third
anniversary of their issuance), or (ii) the Subordinated Notes become due and
payable in accordance with their terms, and the amount of working capital
available to the Company as a result of this Offering will be reduced
accordingly. See "USE OF PROCEEDS."
ISSUANCE OF PREFERRED STOCK. The Company's amended Certificate of
Incorporation authorizes the Board of Directors of the Company to issue up to
5,000,000 shares of preferred stock, in one or more series, and to fix the
number of shares and the rights, preferences and privileges of the shares of any
such series. The issuance of preferred stock by the Company would affect the
rights of the holders of the Common Stock. Such an issuance would result in,
among other things, a class of the Company's securities outstanding that would
have liquidation rights superior to those of the Common Stock. In addition, the
shares of preferred stock could have dividend rights which are superior to those
of the Common Stock. The shares of preferred stock also could have voting and
conversion rights which adversely affect the voting rights of the holders of the
Common Stock. See "DESCRIPTION OF SECURITIES -- Preferred Stock."
NEED FOR ADDITIONAL FINANCING. Based on the Company's operating plan,
management believes that the proceeds from this offering, together with
potential future credit facilities and anticipated cash flow from operations,
will be sufficient to meet the Company's anticipated cash needs and to finance
its plans for expansion for at least the next twelve (12) months from the date
of this Prospectus. Thereafter, the Company anticipates that it may require
additional financing to meet its plans for expansion. No assurance can be given
that the Company will be successful in obtaining additional financing on
favorable terms, if at all. If the Company is unable to obtain additional
financing, its ability to meet its plans for expansion beyond twelve (12) months
could be materially adversely affected. The Company has financed its operations
to date primarily from cash flow from operations and proceeds of a private
offering of Common Stock and the Subordinated Notes. See "USE OF PROCEEDS,"
"CAPITALIZATION" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
DILUTION. Immediately upon issuance of the Common Stock hereby offered,
purchasers of the Common Stock will experience dilution in net tangible book
value per share of Common Stock of $4.94 from the public offering price assuming
an initial offering price of $6.00. See "DILUTION."
NO PRIOR MARKET FOR THE COMMON STOCK; ARBITRARY DETERMINATION OF OFFERING
PRICE. Prior to this Offering, there has been no public market for the Common
Stock of the Company. While the Company has applied for the listing of the
Common Stock on the Nasdaq SmallCap Market, there can be no assurance that an
active trading market for the Common Stock will be established, or if so
established, sustained. The initial offering price for the Common Stock has been
arbitrarily determined through negotiation between the Company and the
Underwriters based on such factors as the business potential and earnings
prospects of the Company and prevailing market conditions. Such price may not be
indicative of the market price of the Common Stock after
10
<PAGE> 11
this Offering has been consummated. See "UNDERWRITING." The trading price of the
Company's Common Stock may be highly volatile and could be subject to
significant fluctuations in response to variations in the Company's quarterly
operating results and other factors. In addition, the stock market is subject to
price and volume fluctuations affecting the market price for the securities of
many companies generally, which fluctuations often are unrelated to operating
results.
SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this offering, there
will be 4,010,365 shares of Common Stock outstanding (including the 15,351
shares issuable to the Founder of Cinescope upon completion of this Offering),
of which the 1,450,619 shares sold pursuant to this offering will be tradable
without restriction by persons other than "affiliates" of the Company. The
remaining shares of Common Stock will be "restricted" securities within the
meaning of the Securities Act and may not be sold in the absence of registration
under the Securities Act or an exemption therefrom, including the exemptions
contained in Rule 144 under the Securities Act. Without regard to the "Lock-Up
Agreements" with the Underwriters, referred to below, such shares will become
available for sale under Rule 144 at various times commencing ninety (90) days
from the date of this Prospectus. No prediction can be made as to the effect, if
any, that future sales of shares of Common Stock will have on the market price
of the shares of Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock, or the perception that these sales could occur, could
adversely affect prevailing market prices for the Common Stock and could impair
the ability of the Company to raise additional capital through the sale of its
equity securities or through debt financing. The Company and its officers and
directors have agreed to enter into agreements ("Lock-Up Agreements") under
which they will agree not to sell, pledge, encumber or otherwise dispose of any
of their shares of Common Stock or other securities of the Company (other than
pursuant to private transfers in connection with which the transferees agree to
be bound by the same "lock-up" provision) for a period of two years commencing
upon the date of this Prospectus, without the prior written consent of the
Underwriters. See "UNDERWRITING" and "SHARES ELIGIBLE FOR FUTURE SALE."
Following completion of this offering, the Underwriters will hold the
Underwriters' Warrants to purchase up to 100,000 shares of Common Stock at an
exercise price equal to one hundred thirty percent (130%) of the initial
offering price per share. The exercise of the Underwriters' Warrants may dilute
the book value per share of Common Stock. The holders of such warrants may
exercise them at a time when the Company would otherwise be able to obtain
additional equity capital on terms more favorable to the Company and have the
opportunity to benefit from increases in the price of the Common Stock without
risk of an equity investment. The Company has agreed to register under federal
and state securities laws the Common Stock underlying the Underwriters' Warrants
for resale. Such registration rights could involve substantial expense to the
Company. See "UNDERWRITING."
UNDERWRITERS' INFLUENCE ON THE MARKET. A significant number of shares of
Common Stock offered hereby may be sold to customers of the Underwriters. Such
customers subsequently may engage in transactions for the sale or purchase of
such securities through or with the Underwriters. Although they have no
obligation to do so, the Underwriters intend to make a market in the Common
Stock and may otherwise effect transactions in such securities. If they
participate in such market, the Underwriters may exert a dominating influence on
the market, if one develops, for the Common Stock. Such market-making activity
may be discontinued at any time. Moreover, if the Underwriters exercise the
Underwriters' Warrants, they may be required under the Exchange Act to
temporarily suspend market-making activities. The price and liquidity of the
Common Stock may be significantly affected by the degree, if any, of the
Underwriters' participation in such market. See "UNDERWRITING."
CONTINUED NASDAQ LISTING; POTENTIAL ADVERSE EFFECTS OF DELISTING. While the
Company's Common Stock meets the current listing requirements of the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") and is
expected to be initially included on the Nasdaq SmallCap Market, there can be no
assurance that the Company will meet the criteria for continued listing.
Continued inclusion on Nasdaq generally requires that (a) the Company maintain
at least $2,000,000 in total assets and $1,000,000 in capital and surplus, (b)
the minimum bid price of the Common Stock be $1.00 per share, (c) there
11
<PAGE> 12
be at least 200,000 shares in the public float valued at $1,000,000 or more, (d)
the Common Stock have at least two active market makers and (e) the Common Stock
be held by at least 400 holders. If the Company is unable to satisfy Nasdaq's
maintenance requirements, its Common Stock may be delisted from Nasdaq. In
addition, the Nasdaq Stock Market, Inc. has the right to review and reverse a
decision to list a security on the Nasdaq SmallCap Market. In the event of any
delisting, trading (if any) in the Common Stock would thereafter be conducted in
the over-the-counter market in the so-called "pink sheets" or the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc.
("NASD"), and it could be more difficult to obtain quotations of the market
price of the Company's Common Stock. Consequently, the liquidity of the
Company's Common Stock could be impaired, not only in the number of shares which
could be bought and sold, but also through delays in the timing of transactions,
and in a reduction of coverage of the Company by security analysts and the news
media.
The Nasdaq Stock Market, Inc. has proposed a rule change which, if adopted,
would impose substantially more stringent criteria for the initial and continued
listing of securities on the Nasdaq SmallCap Market. The proposed new rules
provide that, for initial listing on the Nasdaq SmallCap Market, a company would
need to have, among other things, (i) either net tangible assets (i.e., total
shareholders' equity less intangible assets) of $4,000,000, a market
capitalization of $50,000,000 or net income for two of the last three fiscal
years of $750,000, (ii) a minimum market value of public float of $5,000,000,
(iii) a minimum bid price of $4.00 per share, and (iv) either one year of
operating history or a market capitalization of $50,000,000. The Company
believes that it meets the requirements for initial listing under this proposal.
For continued listing on the Nasdaq SmallCap Market, a company would need to
have, among other things, (A) either net tangible assets of $2,000,000, a market
capitalization of $35,000,000, or net income for two of the last three fiscal
years of $500,000, (B) a minimum market value of public float of $1,000,000 and
(C) a minimum bid price of $1.00 per share. Additionally, for both initial
listing and continued listing on the Nasdaq SmallCap Market, companies would be
required to have at least two independent directors, and an Audit Committee, a
majority of the members of which would need to be independent directors.
If the Company's Common Stock were delisted from Nasdaq, it could become
subject to Rule 15g-9 under the Exchange Act, which imposes additional sales
practice requirements on broker-dealers that sell such delisted securities to
persons other than established customers and "accredited investors" (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000 or $300,000 together with their spouses). For transactions covered by
Rule 15g-9, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to the sale. Consequently, Rule 15g-9 may adversely affect the
ability of broker-dealers to sell the Company's Common Stock and may adversely
affect the ability of purchasers in this Offering to sell in the secondary
market of any of the Common Stock acquired.
Commission regulations define a "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless otherwise
exempt, the Commission's rules require delivery, prior to any transaction in a
penny stock, of a disclosure schedule prepared by the Commission relating to the
penny stock market. Disclosure is also required to be made about commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are required to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the
Company's Common Stock if the Common Stock is listed on Nasdaq and has certain
price and volume information provided on a current and continuing basis or the
Company meets certain minimum net tangible assets or average revenue criteria.
There can be no assurance that the Company's Common Stock or the Company will
qualify for exemption from these restrictions. In any event, even if the
Company's Common Stock or the Company was exempt from such
12
<PAGE> 13
restrictions, the Company would remain subject to Section 15(b)(6) of the
Exchange Act, which gives the Commission the authority to prohibit any person
that is engaged in unlawful conduct while participating in a distribution of a
penny stock from associating with a broker-dealer or participating in a
distribution of a penny stock, if the Commission finds that such a restriction
would be in the public interest. If the Company's Common Stock were subject to
the Commission's rules on penny stocks, the market liquidity for the Common
Stock could be severely adversely affected.
FORWARD-LOOKING STATEMENTS. This Prospectus may be deemed to contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 ("Reform Act"). The Company desires to avail
itself of certain "safe harbor" provisions of the Reform Act and is therefore
including this special note to enable the Company to do so. Forward-looking
statements in this Prospectus or hereafter included in other publicly available
documents filed with the Commission, reports to the Company's stockholders and
other publicly available statements issued or released by the Company involve
known and unknown risks, uncertainties and other factors which could cause the
Company's actual results, performance (financial or operating) or achievements
to differ from the future results, performance (financial or operating) or
achievements expressed or implied by such forward-looking statements. Such
future results are based upon management's best estimates based upon current
conditions and the most recent results of operations. These risks include, but
are not limited to, risks set forth herein, each of which could adversely affect
the Company's business and accuracy of the forward-looking statements contained
herein.
13
<PAGE> 14
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
1,000,000 shares of Common Stock offered hereby (at an assumed initial offering
price of $6.00 per share) are estimated to be $4,800,000, after deducting
underwriting discounts and commissions and other estimated expenses payable by
the Company in connection with this Offering.
The Company plans to offer to repay the Subordinated Notes, which are a
component of its outstanding "Debt Units". Each Debt Unit consists of a
Subordinate Note, and 4,934 shares of Common Stock. Only the Subordinated Notes
will be repaid by the Company. The Debt Units were issued as part of a private
placement of the Company's securities which commenced on September 22, 1995 and
concluded on July 31, 1996 ("Private Placement"). The Company used the proceeds
from the Private Placement to acquire all of the assets of Cinescope, for
working capital and for new productions. See "BUSINESS -- General." Assuming
that all holders of the Subordinated Notes voluntarily accept the Company's
offer, approximately $1,500,000 will be used first to repay the Subordinated
Notes at full face value, plus accrued interest. However, no assurances can be
given that any of the note holders will accept the Company's offer in this
regard. Furthermore, in the event that less than all of the Subordinated Notes
are repaid, the Company will be required to continue to pay interest on the
Subordinated Notes which are not repaid by the Company.
The remaining net proceeds to be received by the Company from the sale of
the 1,000,000 shares of Common Stock offered hereby, together with available
cash, will be used by the Company to produce new video and book titles, to
update existing titles and for general working capital purposes.
The following table summarizes the Company's use of the net proceeds to be
received from this Offering:
<TABLE>
<S> <C>
Repay Subordinated Notes............................... $1,500,000
Production of new video titles......................... 1,000,000
Production of new book titles.......................... 500,000
Updating existing video and book titles................ 500,000
Working capital........................................ 1,300,000
----------
TOTAL.................................................. $4,800,000
==========
</TABLE>
To the extent that less than all of the Subordinated Notes are
repaid, the Company will use the proceeds allocated toward repayment of such
notes as additional working capital. Accordingly, the amount allocated to
working capital may increase substantially if a substantial number of the
Subordinated Notes are not repaid. The proposed use of the net offering proceeds
described herein represents the Company's anticipated use of the proceeds based
upon current operating plans and certain assumptions, including those relating
to the Company's future revenue levels, expenditures and assumptions regarding
industry and general economic conditions and other conditions. Future unforeseen
events may make it necessary or advisable for the Company to reallocate the net
proceeds among the above uses or use portions of the net proceeds for other
purposes. Any such shifts will be at the discretion of the Company.
Pending application, the net proceeds of this Offering will be
invested in short-term, high-grade interest-bearing savings accounts,
certificates of deposit, United States government obligations, money market
accounts
14
<PAGE> 15
or short-term interest bearing obligations. Any proceeds received upon exercise
of the Underwriters' Warrants, as well as income from investments, will be used
for general corporate purposes.
DIVIDEND POLICY
The Company has never paid dividends on the Common Stock and does not
expect to declare or pay any cash or stock dividends in the foreseeable future.
The Company presently intends to retain all earnings, if any, to reinvest in the
Company's operations. The payment of future dividends, if any, is solely within
the discretion of the Company's Board of Directors.
15
<PAGE> 16
DILUTION
At March 31, 1997, the Company had a negative net tangible book value
of ($400,000) or $(.13) per share of Common Stock. "Net tangible book value" per
share is equal to the Company's total tangible assets less its total
liabilities, divided by the number of shares of Common Stock outstanding. After
giving effect to each of (a) the issuance of 26,316 shares of Common Stock to
the Founder; (b) the Company's obligation to issue an additional 15,351 shares
to the Founder (assuming an initial public offering price of $6.00 per share)
(see "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" and "CERTAIN
TRANSACTIONS - Issuance of Shares"); and (c) the sale by the Company of
1,000,000 shares of Common Stock offered hereby (assuming an initial public
offering price of $6.00 per share) and the initial application of the estimated
net proceeds therefrom of $4,800,000 as if the same had occurred on March 31,
1997, the net tangible book value of the Company at such date would have been
approximately $4,241,000 or $1.06 per share(1). This represents an immediate
increase in net tangible book value of $1.19 per share to the current
stockholders and an immediate dilution of $4.94 per share to new stockholders.
Dilution represents the difference between the initial public offering price
paid by purchasers in this Offering and the net tangible book value per share
immediately after completion of this Offering. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................................. $6.00
Net tangible book value per share before this Offering................ $(.13)
Increase in net tangible book value per share attributable to
the sale of the Common Stock offered hereby........................... 1.19
-----
Adjusted net tangible book value per share after this Offering................... 1.06
-----
Dilution per share to new stockholders........................................... $4.94
=====
</TABLE>
- --------------------
(1) The information set forth above does not reflect 236,842 shares of Common
Stock reserved for issuance to David K. Haspel upon exercise of certain
stock options and 100,000 shares of Common Stock issuable upon exercise of
the Underwriters' Warrants. See "MANAGEMENT -- Employment Agreements,"
"CERTAIN TRANSACTIONS -- Haspel Stock Options," and "UNDERWRITING."
---------------
The following table sets forth, as of the date of this Prospectus, a
comparison of (i) the number of shares of Common Stock acquired from the Company
by new stockholders pursuant to this Offering and previously acquired from the
Company by the current stockholders of the Company, (ii) the total consideration
paid to the Company and (iii) the respective average purchase price per share
(before deducting the underwriting discounts and estimated offering expenses).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Current stockholders................. 3,010,365(1) 75% $1,898,000 24% $0.63
New stockholders..................... 1,000,000 25% 6,000,000 76% $6.00
--------- -- ---------- --
Total..................... 4,010,365 100% $7,898,000 100%
========= === ========== ===
</TABLE>
- --------------------
(1) Includes the 15,351 shares issuable to the Founder upon completion of this
Offering, assuming an initial public offering price of $6.00 per share. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" and "CERTAIN
TRANSACTIONS - Issuance of Shares."
16
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as
of March 31, 1997 and as adjusted to reflect the issuance and sale of 1,000,000
shares of Common Stock offered by the Company hereby (at an assumed offering
price of $6.00 per share), and the initial application of the net proceeds
therefrom. See "USE OF PROCEEDS."
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Notes payable, net of discount......................... $1,247,000 $ -0-(1)
---------- ----------
Shareholders' equity:
Common Stock, $.001 par value per share, 10,000,000
shares authorized, 2,968,698 shares outstanding and
4,010,365 outstanding as adjusted(2)................. 3,000 4,000
Preferred Stock, $.001 par value per share,
5,000,000 shares authorized, none
outstanding.......................................... -0- -0-
Additional paid-in capital........................... 2,531,000 7,580,000
Retained earnings (deficit).......................... 113,000 (649,000)(3)
---------- ----------
Total shareholders' equity............................. 2,647,000 6,935,000
Less stock subscription note receivable................ -0- (50,000)
---------- ---------
Net shareholders' equity............................... 2,647,000 6,885,000
--------- ---------
Total capitalization................................... $3,894,000 $6,885,000
========== ==========
</TABLE>
- --------------------
(1) Assumes that all of the holders of the Subordinated Notes accept the
Company's offer to repay such notes.
(2) Includes 26,316 shares issued to the Founder of Cinescope and 15,351 shares
issuable to the Founder upon completion of this Offering, but excludes
236,842 shares reserved for issuance to David K. Haspel upon exercise of
certain stock options and 100,000 shares issuable upon exercise of the
Underwriters' Warrants. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION," "MANAGEMENT -- Employment Agreements," "CERTAIN TRANSACTIONS
-- Issuance of Shares" and "Haspel Stock Options" and "UNDERWRITING."
(3) Retained earnings has been adjusted to reflect (a) the charge to operations
of debt discount and deferred financing costs in the amount of $562,000,
which will result from the repayment of the Subordinated Notes; and (b) the
charge to operations of $200,000 resulting from the issuance of 26,316
shares to the Founder and the obligation to issue an additional 15,351
shares to the Founder (assuming an initial public offering price of $6.00
per share) upon completion of this Offering. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION" and "USE OF PROCEEDS."
17
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
Panorama was organized as a Delaware corporation on July 27, 1995.
Panorama did not conduct any business until September 22, 1995, when it acquired
the business and operating assets of Cinescope for $2,000,000, plus transaction
costs of $98,000, in a transaction accounted for as a purchase. Panorama
financed this transaction through the sale of 979,441 shares of Common Stock at
$1.90 per share and the proceeds from the issuance of the Subordinated Notes in
the aggregate principal amount of $325,000. Through the acquisition of the
operations of Cinescope, which had been in business since 1970, Panorama is
engaged in the production and distribution of video tapes specializing in
destination, historical and cultural topics for the tourist industry. The
financial statements for the period ended December 31, 1995 include the results
of operations of Panorama for the period from September 22, 1995 through
December 31, 1995. The financial statements of the predecessor entity
(Cinescope) are also presented for the period from January 1, 1995 through
September 21, 1995. The consolidated financial statements for the year ended
December 31, 1996 and the three months ended March 31, 1997 and 1996 include the
results of operations of Panorama for the respective periods. All share amounts
referred to herein are presented after giving retroactive effect to the Reverse
Stock Split.
On June 25, 1996, Panorama formed a wholly owned subsidiary,
Tellurian Press, Inc. ("Tellurian Press"), and on July 1, 1996, Tellurian Press
acquired the business and operating assets, and assumed certain liabilities, of
The Sierra Press, Inc. (now known as Gold Leaf) for $336,000 in a transaction
accounted for as a purchase. The Company financed this transaction by issuing
177,003 shares of Common Stock valued at $1.90 per share to the sellers. Through
the acquisition of the operations of Gold Leaf, which had been in business since
1987, the Company (through Tellurian Press) is engaged in publishing printed
materials and color photography books featuring similar topics and subject
matter as contained in Panorama's video tapes. Tellurian Press conducts business
under the trade name "Sierra Press, Inc." As used in this Prospectus, the term
"Sierra" means Tellurian Press, Inc., d/b/a Sierra Press, Inc., and the term
"Gold Leaf" means Gold Leaf Properties, Inc. (formerly known as The Sierra
Press, Inc.). The consolidated financial statements for the year ended December
31, 1996 include the results of operations of Sierra for the period from July 1,
1996 (date of acquisition of the assets of Gold Leaf) through December 31, 1996.
The consolidated financial statements for the three months ended March 31, 1997
include the results of operations of Sierra, while the financial statements for
the three months ended March 31, 1996 do not include the results of operations
of Sierra, since such period is prior to the acquisition date of the assets of
Gold Leaf.
In conjunction with the Gold Leaf transaction, and pursuant to that
certain Asset Purchase Agreement, dated June 18, 1996, the Company was required
to issue a maximum of 157,895 shares of Common Stock to the stockholders of Gold
Leaf contingent on pre-tax income of Sierra through 1998. James L. Wilson, Jr.,
a director of the Company, has been a stockholder, director and officer of Gold
Leaf since its formation in 1987. Effective in January 1997, the Company and
Gold Leaf amended the Asset Purchase Agreement to remove the contingent nature
of the issuance of the additional shares of Common Stock to Gold Leaf, and the
Company issued all 157,895 shares to Gold Leaf. The Company valued the 157,895
shares of common stock at $1.90 per share, and accounted for the shares as
additional purchase consideration. Accordingly, the Company recorded the
$300,000 as excess of cost over fair value of assets acquired, which is being
amortized over 25 years.
Pursuant to an agreement to provide certain financial and other
information and documentation, the Company agreed to sell and issue 26,316
shares of Common Stock to the Founder and sole shareholder of Cinescope at a
purchase price of $1.90 per share. On May 29, 1997, the Company issued the
Founder 26,316
18
<PAGE> 19
shares of Common Stock and in consideration therefor, the Founder paid the
Company $50 and executed a secured promissory note in the amount of $49,950 to
the Company. The promissory note is non-interest bearing, matures on May 29,
1999, is non-recourse to the Founder and is secured solely by the shares. In
accordance with the agreement with the Founder, the Company is obligated to
adjust the number of shares, without additional consideration, so that the
Founder holds no less than that number of shares of Common Stock representing an
aggregate value of $250,000 at the conclusion of this Offering. Assuming an
initial offering price of $6.00 per share, the Founder is entitled to a total of
41,667 shares, and the Company will be required to issue to the Founder an
additional 15,351 shares of Common Stock at the conclusion of this Offering.
This transaction will result in a non-cash charge to operations of $200,000
during the three months ended June 30, 1997.
Panorama and Sierra conduct their operations in one business segment,
and are collectively referred to herein as the "Company."
The following table sets forth certain historical operating data for
the periods presented:
<TABLE>
<CAPTION>
For the Period from
------------------- Three Months Ended
January 1, 1995 September 22, 1995 March 31,
to to Year Ended ----------------------
September 21, 1995(1) December 31, 1995 December 31, 1996 1996 1997
--------------------- ----------------- ----------------- ---- ----
<S> <C> <C> <C> <C> <C>
Sales $1,673,000 $369,000 $2,108,000 $439,000 $569,000
Cost of sales 818,000 145,000 887,000 192,000 266,000
Operating expenses 322,000 179,000 852,000 154,000 277,000
--------- ------- --------- ------- -------
Income before
interest income
(expense) and
income taxes 533,000 45,000 369,000 93,000 26,000
Interest income 4,000 1,000 16,000 2,000 3,000
Interest expense 0 (27,000) (231,000) (48,000) (63,000)
----------- -------- --------- -------- --------
Income (loss)
before income taxes 537,000 19,000 154,000 47,000 (34,000)
Provision (benefit)
for income taxes 8,000 5,000 27,000 8,000 (6,000)
---------- ------- --------- ------- ---------
Net income (loss) $ 529,000 $ 14,000 $ 127,000 $ 39,000 $ (28,000)
========= ======= ========= ======= =========
</TABLE>
- --------------------
(1) Denotes predecessor entity, which had elected to be taxed as an "S"
corporation, pursuant to which corporate earnings were taxed at the
individual stock holder level.
In addition to historical operating data, certain unaudited pro forma
operating data is also provided, assuming that the assets of Cinescope and Gold
Leaf had both been acquired on January 1, 1995, in order to allow meaningful
comparison of the periods presented. The unaudited pro forma operating data
includes adjustments relating to amortization of deferred financing costs and
discount on the Subordinated Notes, depreciation and amortization, interest
expense, gain on sale of assets not acquired and provision for income taxes. The
following table sets forth certain unaudited pro forma operating data for the
periods presented:
19
<PAGE> 20
<TABLE>
<CAPTION> (Unaudited Pro Forma)
Years Ended December 31, (Unaudited Pro Forma)
------------------------------ Three Months Ended
1995 1996 March 31, 1996
----------- ----------- --------------------
<S> <C> <C> <C>
Sales $ 2,464,000 $ 2,357,000 $ 523,000
Cost of sales 1,098,000 971,000 219,000
Operating expenses 824,000 975,000 205,000
----------- ----------- -----------
Income before
interest income
(expense) and
income taxes 542,000 411,000 99,000
Interest income 5,000 16,000 3,000
Interest expense (254,000) (258,000) (63,000)
----------- ----------- -----------
Income before
income taxes 293,000 169,000 39,000
Provision for
income taxes 100,000 34,000 7,000
----------- ----------- -----------
Net income $ 193,000 $ 135,000 $ 32,000
=========== =========== ===========
</TABLE>
CONSOLIDATED RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD
FROM SEPTEMBER 22, 1995 THROUGH DECEMBER 31, 1995
Sales. Sales for the year ended December 31, 1996 were $2,108,000.
Sales for the period from September 22, 1995 through December 31, 1995 were
$369,000, and sales of the predecessor entity for the period from January 1,
1995 through September 21, 1995 were $1,673,000.
Pro forma sales for the year ended December 31, 1996 were $2,357,000,
as compared to $2,464,000 for the year ended December 31, 1995, a decrease of
$107,000 or 4.3%, primarily as a result of a decrease in video sales of $108,000
or 7.9% and ViewMaster sales of $54,000 or 8.1%, which was only partially offset
by an increase in print sales of $46,000 or 10.9%. Video and ViewMaster sales
decreased primarily as a result of the budgetary impasse in Washington, D.C. in
late 1995 and early 1996, pursuant to which certain national parks were closed
to the public. This resulted in a decrease of sales orders for the first part of
1996. Pro forma sales for the years ended December 31, 1995 and 1996 consisted
of the following sales by product lines:
<TABLE>
<CAPTION>
(Unaudited Pro Forma)
Fiscal Year Ended December 31,
-----------------------------------------------------------
1995 1996
-------------------------- --------------------------
Amount Percent Amount Percent
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales Category
--------------
Video $1,364,000 55% $1,256,000 53%
Print 423,000 17% 469,000 20%
ViewMaster 669,000 27% 615,000 26%
Other, net 8,000 1% 17,000 1%
---------- ---------- ---------- ----------
Total $2,464,000 100% $2,357,000 100%
========== ========== ========== ==========
</TABLE>
20
<PAGE> 21
Gross Profit. Gross profit for the year ended December 31, 1996 was
$1,221,000 or 57.9% of sales. Gross profit for the period from September 22,
1995 through December 31, 1995 was $224,000 or 60.7% of sales, and gross profit
of the predecessor entity for the period from January 1, 1995 through September
21, 1995 was $855,000 or 51.1% of sales.
Pro forma gross profit for the year ended December 31, 1996 was
$1,386,000 or 58.8% of pro forma sales, as compared to $1,366,000 or 55.4% of
pro forma sales for the year ended December 31, 1995.
The increase in pro forma gross margin in 1996 as compared to 1995
was primarily a result of a reduction in certain packaging costs.
Selling and Marketing Expenses. Selling and marketing expenses for
the year ended December 31, 1996 were $239,000 or 11.3% of sales. Selling and
marketing expenses for the period from September 22, 1995 through December 31,
1995 were $44,000 or 11.9% of sales, and selling and marketing expenses of the
predecessor entity for the period from January 1, 1995 through September 21,
1995 were $94,000 or 5.6% of sales.
Pro forma selling and marketing expenses for the year ended December
31, 1996 were $284,000 or 12.0% of pro forma sales, as compared to $178,000 or
7.2% of pro forma sales for the year ended December 31, 1995.
The increase in pro forma selling and marketing expenses in 1996 as
compared to 1995 of $106,000 or 59.6% was primarily a result of the Company
implementing a one-time change in the method by which it calculated and paid
commissions, effective June 1996.
General and Administrative Expenses. General and administrative
expenses for the year ended December 31, 1996 were $463,000. General and
administrative expenses for the period from September 22, 1995 through December
31, 1995 were $103,000, and general and administrative expenses of the
predecessor entity for the period from January 1, 1995 through September 21,
1995 were $222,000.
Pro forma general and administrative expenses for the year ended
December 31, 1996 were $551,000, as compared to $496,000 for the year ended
December 31, 1995, an increase of $55,000 or 11.1%.
Depreciation and Amortization. Depreciation and amortization for the
year ended December 31, 1996 was $150,000. Depreciation and amortization for the
period from September 22, 1995 through December 31, 1995 was $32,000, and
depreciation and amortization of the predecessor entity for the period from
January 1, 1995 through September 21, 1995 was $6,000.
Pro forma depreciation and amortization for the year ended December
31, 1996 was $152,000, as compared to $150,000 for the year ended December 31,
1995.
The increase in depreciation and amortization in 1996 as compared to
1995 was primarily a result of (a) a full year of amortization in 1996 related
to the allocation of purchase consideration in excess of net assets acquired in
the Cinescope transaction of $2,087,000, which was allocated primarily to film
library and excess of cost over fair value of assets acquired, which are being
amortized on the straight-line basis over 15 years and 25 years, respectively;
(b) additions to trademark, film and book libraries of $373,000; and (c) the
recognition of deferred financing costs of $69,000 related to the Subordinated
Notes, which costs are being amortized on the interest method over 10 years.
21
<PAGE> 22
Interest Expense. Interest expense for the year ended December 31,
1996 was $231,000. Interest expense for the period from September 22, 1995
through December 31, 1995 was $27,000. For the period January 1, 1995 through
September 21, 1995, the predecessor entity had no interest expense and $4,000 of
interest income.
Pro forma interest expense for the year ended December 31, 1996 was
$258,000, as compared to $254,000 for the year ended December 31, 1995.
The increase in interest expense in 1996 as compared to 1995 was
primarily a result of the issuance of Subordinated Notes with a face value of
$988,000 in 1995 and an additional $512,000 in 1996, the proceeds from which
were utilized to finance the Cinescope transaction, to repay a $100,000 note
payable assumed in the Gold Leaf transaction, and to fund new productions and
working capital requirements. The Subordinated Notes bear interest at 15% per
annum. In addition, discount on the Subordinated Notes of $185,000 and $96,000
was recognized in 1995 and 1996, respectively, which is being amortized as
interest expense on the interest method over the 10 year term of the
Subordinated Notes.
Net Income. Net income for the year ended December 31, 1996 was
$127,000. Net income for the period from September 22, 1995 through December 31,
1995 was $14,000, and net income of the predecessor entity for the period from
January 1, 1995 through September 21, 1995 was $529,000.
Pro forma net income for the year ended December 31, 1996 was
$135,000, as compared to $193,000 for the year ended December 31, 1995.
CONSOLIDATED RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Sales. Sales for the three months ended March 31, 1997 were $569,000,
as compared to $439,000 for the three months ended March 31, 1996. Pro forma
sales for the three months ended March 31, 1996 were $523,000. Sales for 1997 as
compared to pro forma sales for 1996 increased by $46,000 or 8.8%, primarily as
a result of increases in video sales of $25,000 or 9.4% and ViewMaster sales of
$47,000 or 28.5%, which was only partially offset by a decrease in print sales
of $13,000 or 15.5%.
Pro forma sales for the three months ended March 31, 1996 and sales
for the three months ended March 31, 1997 consisted of the following sales by
product lines:
<TABLE>
<CAPTION>
(Unaudited Pro Forma)
Three Months Ended March 31,
-------------------------------------------------------
1996 1997
------------------------ -------------------------
Amount Percent Amount Percent
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales Category
Video $ 265,000 51% $ 290,000 51%
Print 84,000 16% 71,000 12%
ViewMaster 165,000 31% 212,000 37%
Other, net 9,000 2% (4,000) -
--------- --------- --------- ---------
Total $ 523,000 100% $ 569,000 100%
========= ========= ========= =========
</TABLE>
22
<PAGE> 23
Gross Profit. Gross profit for the three months ended March 31, 1997
was $303,000 or 53.3% of sales, as compared to $247,000 or 56.3% of sales for
the three months ended March 31, 1996. Pro forma gross profit for the three
months ended March 31, 1996 was $304,000 or 58.1% of pro forma sales. The
decrease in the gross profit margin in 1997 as compared to 1996 was primarily a
result of a shift in the sales mix from higher margin video products to lower
margin ViewMaster products.
Selling and Marketing Expenses. Selling and marketing expenses for
the three months ended March 31, 1997 were $50,000 or 8.8% of sales, as compared
to $31,000 or 7.1% of sales for the three months ended March 31, 1996. Pro forma
selling and marketing expenses for the three months ended March 31, 1996 were
$45,000 or 8.6% of pro forma sales. Selling and marketing expenses increased by
$5,000 or 11.1% in 1997 as compared to 1996 pro forma selling and marketing
expenses primarily as a result of the Company implementing a one-time change in
the method by which it calculated and paid commissions, effective June 1996.
General and Administrative Expenses. General and administrative
expenses for the three months ended March 31, 1997 were $184,000, as compared to
$90,000 for the three months ended March 31, 1996. Pro forma general and
administrative expenses for the three months ended March 31, 1996 were $128,000.
General and administrative expenses increased by $56,000 or 43.8% in 1997 as
compared to pro forma 1996 general and administrative expenses primarily as a
result of increased officers' and employees' compensation and rent, repairs and
maintenance.
Depreciation and Amortization. Depreciation and amortization for the
three months ended March 31, 1997 was $43,000, as compared to $33,000 for the
three months ended March 31, 1996.
The increase in depreciation and amortization in 1997 as compared to
1996 was primarily a result of additions to fixed assets and trademark, film and
book libraries of $345,000 for the period from April 1, 1996 through December
31, 1996, and $63,000 for the three months ended March 31, 1997.
Interest Expense. Interest expense for the three months ended March
31, 1997 was $63,000, as compared to $48,000 for the three months ended March
31, 1996. Pro forma interest expense for the three months ended March 31, 1996
was $63,000.
The increase in interest expense in 1997 as compared to 1996 was a
result of the interest payable on the Subordinated Notes with a face value of
$345,000 issued during April through July 1996, the proceeds from which were
utilized to repay a $100,000 note payable assumed in the Gold Leaf transaction
and to fund new productions and working capital requirements. The Subordinated
Notes bear interest at 15% per annum. In addition, discount on the Subordinated
Notes of $65,000 was recognized on these notes in 1996, which is being amortized
as interest expense on the interest method over the 10 year term of the
Subordinated Notes.
Net Income (Loss). Net loss for the three months ended March 31, 1997
was ($28,000), as compared to net income of $39,000 for the three months ended
March 31, 1996. Pro forma net income for the three months ended March 31, 1996
was $32,000.
LIQUIDITY AND CAPITAL RESOURCES
Since its formation in 1995, the Company has funded its acquisition
and working capital requirements from the sale of Common Stock, the issuance of
the Subordinated Notes and cash flow from operations. During 1995 and 1996, the
Company sold Common Stock in the Private Placement for net proceeds of
$1,793,000 and $105,000, respectively. During 1995 and 1996, the Company also
issued Subordinated Notes in the Private Placement with a face value of $988,000
and $512,000, respectively, due in 2005 through 2006, and incurred related
deferred financing costs of $287,000 (including approximately $200,000 to
related parties) and $69,000,
23
<PAGE> 24
respectively. In connection with the issuance of the Subordinated Notes, the
Company issued 148,026 shares of Common Stock to the note holders for no
additional consideration. The 148,026 shares of Common Stock were valued at
$1.90 per share, or an aggregate value of $281,000, which was classified as
discount on Subordinated Notes payable and is being amortized as additional
interest expense over 10 years. At December 31, 1995 and 1996, accumulated
amortization was $4,000 and $21,000, respectively.
During 1995, $2,031,000 of the proceeds generated from the sale of
Common Stock and the issuance of Subordinated Notes were utilized to acquire the
business and operating assets of Cinescope. During 1996, $100,000 of such
proceeds were utilized to repay a $100,000 note payable owed by Gold Leaf and
assumed by the Company in connection with the Gold Leaf transaction.
Primarily as a result of the previously described long-term debt and
equity financings, the Company's net working capital increased by $670,000 from
December 31, 1995 to December 31, 1996. Net working capital was $923,000 at
December 31, 1996, as compared to net working capital of $253,000 at December
31, 1995, reflecting current ratios of 7.6:1 and 2.7:1, respectively. For the
year ended December 31, 1996, net cash provided by operating activities was
$260,000, as compared to cash used in operating activities of $47,000 during the
period from September 22, 1995 through December 31, 1995.
The Company's net working capital decreased by $135,000, from
$923,000 at December 31, 1996 to $788,000 at March 31, 1997, reflecting a
current ratio of 3.2:1, as a result of the normal seasonal slowdown during the
first calendar quarter of the fiscal year. During the three months ended March
31, 1997, the Company utilized cash resources to support increases in accounts
receivables, inventories, fixed assets, and additions to trademark, film and
book libraries, offset in part by an increase in accounts payable.
Accounts receivable at December 31, 1995 and 1996, and March 31,
1997, were $101,000, $151,000 and $340,000, net of provision for bad debt,
respectively. The increase in accounts receivable of $50,000 from December 31,
1995 to December 31, 1996 was primarily a result of accounts receivable acquired
in the Gold Leaf transaction. The increase in accounts receivable of $189,000
from December 31, 1996 to March 31, 1997 reflects a normal seasonal increase.
Approximately 15% of accounts receivable at December 31, 1996 consists of two
customers which provided approximately 24% of total 1996 sales. Approximately
14% of accounts receivable at March 31, 1997 consists of the same two customers.
Inventories at December 31, 1995 and 1996, and March 31, 1997, were
$132,000, $404,000 and $452,000, respectively. The increase in inventories of
$272,000 from December 31, 1995 to December 31, 1996 was primarily a result of
inventories acquired in the Gold Leaf transaction. As compared to Panorama's
video tape business, Sierra typically maintains a higher level of inventory as a
result of longer lead times and higher minimum order quantities associated with
its print media products.
During the three months ended March 31, 1997, the Company recorded
deferred costs of $94,000 related to this Offering. These costs consist of legal
fees and other related costs, and will be charged to shareholders' equity upon
successful completion of this Offering or charged to operations if this Offering
is not completed.
In conjunction with this Offering, the holders of the Subordinated
Notes will have the option of having the Company repay such notes at full face
value, plus accrued interest. During 1998 and 1999, three years after the
issuance date, the Company has the right to repay the Subordinated Notes without
the consent of the note holders. The Company believes that most, if not all, of
the note holders will accept the Company's offer to repay the Subordinated Notes
upon the completion of this Offering. Should all of the note holders elect to
have the Company repay such notes, during the period of such redemption the
Company will record a non-recurring non-cash charge to operations aggregating
$562,000, consisting of unamortized deferred financing costs and unamortized
discount on the Subordinated Notes, which had balances of $309,000 and $253,000,
respectively, at
24
<PAGE> 25
March 31, 1997. Should all of the note holders elect to have the Company repay
the Subordinated Notes, the Company will save $225,000 per year (which
represents the cash portion of annual interest expense), until such time as
either (i) the Company elects to repay the Subordinated Notes without the
consent of the note holders (as permitted under the notes after the third
anniversary of their issuance), or (ii) the Subordinated Notes become due and
payable in accordance with their terms, and the amount of working capital
available to the Company as a result of this Offering will be reduced
accordingly.
Based on the Company's operating plan, management believes that the
proceeds from this Offering, together with potential future credit facilities
and anticipated cash flow from operations, will be sufficient to meet the
Company's anticipated cash needs and to finance its plans for expansion for at
least the next twelve (12) months from the date of this Prospectus. Thereafter,
the Company anticipates that it may require additional financing to meet its
plans for expansion. No assurance can be given that the Company will be
successful in obtaining additional financing on favorable terms, if at all. If
the Company is unable to obtain additional financing, its ability to meet its
plans for expansion beyond twelve (12) months could be materially adversely
affected.
SEASONALITY
The highest number of visits by tourists to national and state parks,
monuments, historical sites, urban destinations and theme parks occurs during
the spring and summer months. Therefore, sales of the Company's products have
historically been higher in the second and third calendar quarters. Sales are
highest in the second calendar quarter, reflecting shipments to customers in
advance of the summer season. Accordingly, the Company considers its business to
be materially affected by seasonality, with approximately 60% of sales revenues
consistently generated during the period from April through September of each
fiscal year. For the year ended December 31, 1996, pro forma sales by quarter
were as follows:
<TABLE>
<CAPTION>
(Unaudited
Pro Forma)
Quarter Total Sales Percent
------- ----------- -------
<S> <C> <C>
1 $ 523,000 22%
2 864,000 37%
3 567,000 24%
4 403,000 17%
---------- ---
Total $2,357,000 100%
========== ===
</TABLE>
INFLATION
The Company believes that inflation in recent years has not had, and
is not expected to have, a material adverse effect on its net sales or
profitability. The Company has been successful, in many cases, in reducing the
effects of increases in costs of providing its products principally by taking
advantage of vendor incentive programs, economies of scale resulting from
increased volume of purchases and selective forward buying.
25
<PAGE> 26
INDUSTRY OVERVIEW
Tourism remains one of the growth industries in the United States,
and the U.S. has been a preferred destination for the international traveler.
When the U.S. dollar is weak, the U.S. becomes a relatively inexpensive place to
visit for international travelers. The conventional wisdom in the tourist
industry is that the farther the tourist travels to reach a destination, the
more likely he/she will purchase souvenirs during the visit, such as video
tapes. The retail video tapes business has experienced strong growth during the
last five years, with sales of over $8 billion in 1996, and such business is
expected to continue to grow. The Company produces video and book souvenirs for
the U.S. destination market, which is comprised of national and state parks,
monuments, historic places, urban destinations and theme parks.
The U.S. national and state park systems offer visitors an
interesting, varied and relatively inexpensive vacation experience. U.S.
citizens are attracted to national and state parks because of their family
appeal and their easy accessibility by automobile. International travelers are
attracted to national and state parks because of their unusual geology and
mysterious nature. Interest in national parks and other key tourist destinations
is expected to increase, particularly for the international traveler. The Grand
Canyon, Yellowstone, Yosemite and the Great Smoky Mountains are the most
frequently visited U.S. National Parks. Other sites with high levels of
visitation include Ellis Island in New York, the U.S.S. Arizona Memorial at
Pearl Harbor in Hawaii, Big Bend National Park in Texas, Mesa Verde National
Park in Colorado, Death Valley and Sequoia/Kings Canyon National Parks in
California, Bryce Canyon, Glen Canyon and Zion National Parks in Utah and
Olympic, Mount Rainier and Mount St. Helens in the State of Washington.
There are basically three types of retailers that sell souvenirs at
national and state parks, monuments and historic sites: cooperating
associations, concessionaires and retailers at gateway communities. Cooperating
associations are nonprofit entities chartered by Congress and sanctioned by the
National Park Service to assist in the interpretation and preservation of
national parks, monuments and historic places. Cooperating associations usually
are located in the visitor centers at the parks and maintain retail operations
within those centers. By law, cooperating associations may only offer
merchandise for sale which is interpretative of the park or other location, such
as books, videos and other graphic art items. Concessionaires are private firms
with the contractual right to operate retail establishments within the borders
of a national or state park. Concessionaires offer books, videos, graphic art
materials and other souvenir items such as apparel, gift items, cups, key
chains, pins and food items. Gateway community retailers are businesses which
are located outside of the boundaries of the park, monument or historic site
that provide tourist services to visitors to the parks and other nearby
attractions.
The most frequently visited national parks (such as the Grand Canyon,
Yellowstone and Yosemite) have both cooperating associations and concessionaires
within their borders. Other locations have either a cooperating association or a
concessionaire; for example, Ellis Island only has a concessionaire, and the
U.S.S. Arizona Memorial only has a cooperating association. In those locations
with both cooperating associations and concessionaires, the concessionaires
compete directly with the cooperating association with respect to videos, books
and other graphic art materials.
Urban destinations and theme parks are the other segments of the U.S.
destination market. Cities such as Las Vegas, Los Angeles, New York, Washington,
D.C., New Orleans, Orlando, Miami, Boston and San Francisco are popular tourist
destinations. Each of these destinations has numerous souvenir shops, book
stores, hotel gift shops and retail outlets in high-traffic tourist areas (such
as airports) which sell souvenirs. Theme parks, such as Disneyland, Disneyworld,
Universal Studios, Six Flags, Sea World and Knotts Berry Farm, among others, are
also popular vacation spots. All major theme parks have a series of retail
outlets which sell souvenirs to visitors.
26
<PAGE> 27
BUSINESS
GENERAL
Panorama was formed as a Delaware corporation on July 27, 1995 by an
investor group to acquire all of the assets of Cinescope. Cinescope was founded
in 1970 by a cinematographer to produce super 8mm color films featuring the
Grand Canyon, Yellowstone, Yosemite and several other U.S. national parks. As
video tapes began to replace home movies, Cinescope began producing videos of
these national parks and other locations. Panorama produces and distributes
videos featuring various U.S. tourist destinations, with an emphasis on national
and state parks, monuments and historic sites. The Company recently received
eight "1997 Telly Awards" for four of its video titles. The Telly Awards were
founded in 1980, and are privately administered awards given annually for
excellence in the production of non-network commercials, film and video
productions. The awards are partially funded from revenues received by
contestants. Panorama produces and distributes videos featuring a number of
popular cities that are tourist destinations, and produces and supplies to
Universal Studios (both in California and Florida) videos featuring Universal's
theme parks. The Universal Studios videos are hosted and narrated by veteran
actor and personality John Forsythe. In addition, Panorama sells its video
products to over 350 gift and souvenir shop locations located in or near
national and state parks, hotels and airports. Panorama also markets
"ViewMaster" products and photographic slides as a distributor to retail
locations nationwide.
Sierra was formed in California on June 25, 1996 by Panorama to
acquire all of the assets of Gold Leaf. Gold Leaf was formed on June 25, 1987,
by James L. Wilson, Jr., and Jeffrey D. Nicholas (who were both employed as
photography teachers by the Ansel Adams Gallery at Yosemite National Park).
Messrs. Wilson and Nicholas believed that a market existed for high quality, yet
affordable, books about America's national parks. Utilizing Gold Leaf, they
developed and refined formats of such books for the Yosemite market, and then
expanded to include additional national park locations. In July 1996, Sierra
acquired all of the assets of Gold Leaf and hired Messrs. Wilson and Nicholas as
employees. Presently, Sierra has 50 books featuring national parks, and sells
them to over 200 gift and souvenir shop locations in or near national and state
parks, hotels and airports.
VIDEO LIBRARY
The following is a list of Panorama's video library:
1. Bandelier National Monument & Santa Fe, New Mexico: A Unique Cultural
Legacy
2. Big Bend: America's Last Primitive Frontier
3. Bryce, Zion, Lake Powell: Amphitheaters of Art
4. Cabrillo National Monument (San Diego): A Voyage of Discovery
5. Columbia River Gorge, Multnomah Falls & Portland: Northwest's Primitive
Panorama
6. Crater Lake National Park: Relic of a Vanished Mountain
7. Ellis Island National Monument: Remembering Ellis Island - Everyman's
Monument
8. Grand Canyon: An Aerial Odyssey
9. Grand Canyon National Park: A Journey into Discovery
10. Great Smoky Mountains National Park, Blue Ridge Parkway & Shenandoah
National Park: The Wonders of the Appalachians
11. Great Smoky Mountains National Park: A Wildlands Sanctuary
12. Hearst Castle, California: The Enchanted Hill
13. Hoover Dam: The Historic Construction
14. Hopi Pottery: A Handmade Heritage
15. John Muir: The Man, the Poet, the Legacy
16. Las Vegas: The Glamour & the Glitter
17. Los Angeles: A Paradox of Plenty
27
<PAGE> 28
18. Mesa Verde National Park: Where the Spirits Rise
19. Molokai & Kalaupapa, Hawaii: The People, the Place, the Legacy
20. Mount Rainier National Park: Arctic Island in the Sky
21. Mount St. Helens National Volcanic Monument: The Turmoil of Creation
Continues
22. Muir Woods National Monument-San Francisco: The Majesty & Splendor of the
Redwoods
23. New River Gorge: Grand Canyon of the East
24. Nowhere But Las Vegas!
25. Olympic: A Wonderland of Shore, Mountain & Rainforest
26. Our Country: A Musical Tribute to America's Parks and Monuments
27. Philadelphia, Pennsylvania: Birthplace of a Nation
28. Remembering Pearl Harbor: The U.S.S. Arizona Memorial
29. San Diego: America's Historic Cornerstone
30. San Francisco, California: The City of Grandeur & Exhibition
31. Sea Lion Caves & Oregon Coast: The Tempestuous Shore
32. Sequoia & Kings Canyon National Park: Monarchs of the Forest
33. Shenandoah National Park: The Historic Wonderland
34. We Were There, Pearl Harbor
35. Where Earth Touches The Sky
36. Wonders Of Yosemite: Wildlife, Wildflowers
37. Yellowstone & Grand Teton: The Place Where Hell Bubbled Up
38. Yellowstone National Park
39. Yosemite National Park: A Landscape of Wonders
40. Yosemite: The First 100 Years (1890-1990)
41. Yosemite: A Winter Wonderland
42. Yosemite's Mariposa Grove
43. Yosemite's Yesterdays
44. Universal Studios Hollywood: A Universe of Cinemagic
45. Universal Studios Florida: The Magic of Movies
BOOK LIBRARY
The following is a list of Sierra's book library:
Pocket Portfolio Series
1. Arches & Canyonlands 7. Yosemite
2. Grand Canyon 8. Death Valley
3. Mount St. Helens 9. Sequoia/Kings Canyon
4. Rendezvous 10. Yosemite-The 100 Year Flood
5. Ribbons of Sand 11. Assateague, Island of Wild Ponies
6. Wildflowers of Yosemite
28
<PAGE> 29
Wish You Were Here and Visual Interpretation
1. Bryce Canyon 7. Rocky Mountain
2. Death Valley 8. Windows of the Past (2
3. Grand Canyon (2 titles, paper and cloth) titles, paper and cloth)
4. Grand Teton 9. Yellowstone (2 titles,
5. Islands in the Sky (2 titles, paper and cloth)
paper and cloth) 10. Yosemite (2 titles,
paper and cloth)
6. Monument Valley 11. Zion
Postcard Books
1. Arches 13. Monument Valley
2. Art on the Rocks 14. Petrified Forest
3. Bryce Canyon 15. Rocky Mountain
4. Cactus Flowers 16. Ruins of the Southwest
5. Capitol Reef 17. Sequoia & Kings Canyon
6. Carlsbad Caverns 18. Wildlife of the Rockies
7. Death Valley 19. Yellowstone
8. Desert Dunes 20. Yellowstone Wildlife
9. Glen Canyon 21. Yosemite
10. Grand Canyon 22. Zion
11. Grand Canyon, Vol. 2 23. Mesa Verde
12. Grand Teton
OPERATIONS
Videos. For most video projects, Panorama assumes the sole
responsibility for development, production, distribution, display and customer
service. Panorama writes, produces and directs video projects using both its own
personnel as well as outside contractors under independent contractor
"work-for-hire" arrangements. Panorama owns the underlying rights for every key
video title in its library, except for the videos featuring the Universal
Studios theme parks. Universal Studios owns the underlying rights to the subject
matter of those videos, and Panorama may not, without the prior consent of
Universal Studios, duplicate and sell those videos to retailers other than those
retailers at Universal Studios' theme parks. See "Marketing and Distribution."
Books. Sierra completes all book development projects by obtaining
necessary photographs from landscape photographers on a "single use-fee" basis
(pursuant to which Sierra pays the photographer a one-time fee to use the
photographs in the book being developed), and by obtaining narrative written
text on a work-for-hire basis. Sierra owns all of the copyrights to its products
and, with two exceptions, does not pay royalties to authors or photographers.
Sierra uses printers in Singapore and South Korea to print book titles in print
runs that provide Sierra with inventory sufficient to last for one to three
years.
Purchase Requirements. In most instances, the Company does not impose
any minimum purchase requirements on customers. When the Company decides to
develop a new video or book, it enters into discussions with the cooperating
association and concessionaires in order to determine the production and display
requirements of such cooperating association and concessionaires for that video
or book. This arrangement benefits the cooperating associations/concessionaires,
because they do not need to make any advance investment for the production. This
arrangement benefits the Company because the cooperating association and
concessionaire have expended time and resources in providing the Company with
their input on the project. Accordingly, the Company
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<PAGE> 30
believes that cooperating association and concessionaire are more likely to
remain committed to distribute the finished product until it is no longer a
viable retail product.
ViewMaster. The Company is a non-exclusive wholesale distributor of
certain ViewMaster products (consisting of viewers and three-dimensional images
on a rotating "card"). ViewMaster is a 60-year old company whose products are
sold at retail worldwide. In particular, the Company is the distributor of
ViewMaster's "Scenic" series (which includes national parks, monuments and
historical sites), and distributes custom ViewMaster products for sales at
specific locations such as Universal Studios' theme parks, Graceland in Memphis,
Tennessee and various city zoos). Those custom products usually may not be sold
to any other retailer or location.
OPERATING STRATEGY
Market Strategy. The Company serves the U.S. destination market, by
selling its products to (a) cooperating associations, concessionaires, retailers
at gateway communities and tourist groups at national and state parks, monuments
and historic sites; (b) souvenir shops, book stores, hotel gift shops and
retailers at airports in certain cities and urban destinations (such as Las
Vegas and San Francisco); and (c) retail outlets at the Universal Studios theme
parks located in California and Florida. The Company expects to increase its
presence in each of these market segments. See "INDUSTRY OVERVIEW."
Video Formats. Panorama releases its key video titles in the three
major video formats used worldwide: NTSC (National Television Systems Committee)
used in the United States, Canada, Japan, Korea, Mexico and parts of South
America; PAL (Phase Alternation Line) used in Europe (other than France), China,
India and parts of South America; and SECAM (System Electronique Couler Avec
Memoire) used in France, the former Soviet Union and sections of North Africa.
Languages. Panorama releases key video titles with narration in
English and several other languages, including some or all of German, French,
Italian, Spanish, Chinese, Japanese and Korean. The determination of how many
and which languages to be used in a particular video is determined by the
demographics of visitors to the locations covered by the video and other
customer requirements. In addition, Sierra publishes all of its book titles in
English and has inserts with text and caption translations for some of its book
titles in French, German and Japanese.
Just-in-Time Inventory. Panorama has been able to meet customer
demand by use of a "just-in-time" inventory system. Panorama has the ability to
process and ship its products typically within 48 hours of its receipt of a
purchase order, by maintaining its own videocassette duplication facilities,
which it uses for small orders, and by using outside sources for videocassette
duplication jobs for larger orders. Sierra has been able to meet customer
demand, although it does not have a "just-in-time" inventory system. Sierra has
the ability to process and ship its products from existing inventory typically
within 24 hours of its receipt of a purchase order. See "Inventory Management."
GROWTH STRATEGY
New Products. There are approximately 375 national parks, monuments
and historical sites within the United States. Presently Panorama has video
titles featuring 32 of these locations, and Sierra has books featuring 84 of
these locations. Panorama and Sierra intend to expand their respective
businesses by producing and distributing products featuring many other
locations. Panorama intends to produce a composite video from existing footage
which will cover several national parks and cities. This video can be produced
at a low cost and can be widely marketed covering a number of different
locations. Other product expansion opportunities under consideration by the
Company include adding or updating products featuring key tourist cities such as
New York, Los Angeles, San Francisco, New Orleans, Washington D.C. and Miami.
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<PAGE> 31
Updates and Additions to Existing Videos. Panorama will update and
add material to its existing video titles in order to keep them current. This
process entails additional scripting, filming and editing.
Expansion of Retail Distribution Outlets. The Company intends to
expand and increase the number of retail distribution outlets for products (by
producing new titles and engaging in specialized marketing). It also intends to
increase sales of products through existing retail outlets (by producing
additional, but related, or updated, products with additional language tracks to
distribute to such outlets).
Universal Studios; Other Theme Parks. The Company has been advised
that Universal Studios expects to open a new theme park in Japan in 1999, and
another new theme park called "Islands of Adventure" in Florida. Panorama plans
to negotiate with Universal Studios to be a souvenir video supplier for those
new theme parks. However, there are no assurances that Panorama will be
successful in this regard. In addition, because Universal Studios is an
independent production company, there are no assurances that Universal Studios
will continue to utilize Panorama's products and services. See "RISK FACTORS --
Concentration of Sales to Certain Customers." The Company will seek to develop
new contract relationships with other entities who own and operate theme parks.
Expanding distribution channels. The Company is examining means of
expanding the distribution of products into other distribution channels, such as
cable television (including home-shopping television networks), the Internet and
direct mail. In April 1997, Panorama entered into an agreement with Questar Home
Video ("Questar"), pursuant to which Panorama has agreed to license a portion of
its video library to Questar for direct mail marketing purposes. In addition,
in 1996 Sierra entered into an agreement with Falcon Press, a book distribution
company, to manage sales of Sierra's books to traditional retail book stores.
Strategic Relationships. The Company is pursuing strategic
relationships and alliances with selective partners who utilize videos and books
as premiums or sales inducements. Panorama has entered into an agreement with
Destiny Telecomm, Inc., a multilevel marketing company offering telephone
service on a global basis ("Destiny"), for the purchase and distribution of
Panorama's video entitled "Our Country: A Musical Tribute to America's Parks and
Monuments." Destiny has agreed to purchase a total of $1,260,000 of these video
units in 1997 and another $2,340,000 of these video units in 1998. Destiny
expects to market Panorama's video to and through its 500,000 associate members.
CUSTOMER SERVICE
The Company believes that customer service is an important factor in
marketing its products. Emphasis is placed on having local market
representatives provide responsive customer service. The Company has an outside,
commissioned sales force, with local market representatives in Las Vegas, the
Grand Canyon, Yosemite and Orlando, Florida. The national sales manager (also a
commissioned independent contractor) is located in Las Vegas, which is a central
location of the park business of the Company. The Company provides customer
service to all other locations, usually on a weekly basis through an experienced
telemarketing sales representative or by Company management.
PURCHASING
Panorama utilizes a number of suppliers for videocassettes,
videotapes and packaging. It is not materially dependent upon any of such
suppliers. Sierra utilizes one or two printers in each of Singapore and South
Korea for book printing and binding services in order for its business to be
cost-effective. However, due to the significant number of entities providing
similar services in those countries, Sierra believes that it is not materially
dependent on the services of its current printers.
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<PAGE> 32
INVENTORY MANAGEMENT
In the past, many of the Company's customers ordered enough
quantities of product at one time to last for an entire tourist season. This
practice was beneficial to the Company, but proved to be costly to customers in
terms of inventory expense, additional warehouse space and carrying costs.
Recently, many of the Company's customers have transformed the management of
their inventory to a "just-in-time" system, which demands small (and more
frequent) shipments from suppliers. The ability to meet the demands of a
just-in-time inventory system is important in the tourist industry, because if a
retailer does not have the product in stock, the sale is lost. There are few
repeat retail customers or repeat retail sales in the souvenir industry.
Because Panorama maintains its own video duplication facilities, it
is able to manage the evolving retail requirements of just-in-time inventory for
its customers. Panorama maintains a balance between using its own duplicating
facilities (typically for smaller orders) and using third party duplicating
facilities. As a result, Panorama typically ships its product within 48 hours of
its receipt of a purchase order. Sierra maintains a significant inventory so
that it typically is able to process and ship its products within 24 hours of
its receipt of a purchase order.
Panorama also has its own just-in-time inventory system, which
permits it to avoid outside warehousing and storage costs and allows it to
utilize working capital and management resources for production and customer
service (without sacrificing its ability to fill customers' new orders). Sierra
usually orders one printing run for its book titles, during the months of
February and March of each year, based upon its projected sales of those titles.
Sierra maintains its pre-produced inventory of titles at its own warehouse
facilities and places some inventory on consignment with certain distributors.
Because its print runs are based upon projected sales, it is possible for Sierra
to run out of inventory of a particular title if customer demand for that title
exceeds Sierra's projections. In such instances, however, Sierra has the ability
to order a special printing run to replenish its inventory for that title in
order to meet customer demand.
MARKETING AND DISTRIBUTION
The Company markets and distributes products to the key segments of
the U.S. destination market (i.e., national and state parks, monuments and
historic sites, popular urban destinations and theme parks). In addition to
these key tourist destinations, the Company has begun attempts to market
products through specialized distribution channels and by developing strategic
relationships with key corporate clients, distributors and retailers. The
Company also is building and utilizing a database for marketing purposes. Sierra
has a full-color brochure listing many of its titles for direct mail and other
marketing purposes, and is in the process of developing a "web site" for
inclusion on the Internet.
National Parks, Monuments, etc. Cooperating associations and
concessionaires account for the largest amount of sales of videos and books to
tourists visiting national and state parks, monuments and historical sites. In
addition, the Company sells products to retailers at gateway communities and
directly to tour companies, particularly those tour companies specializing in
Asian tourists. The key firms in the national park business (such as ARAMARK,
Delaware North and Amfac) are transforming retailing at the parks into more
sophisticated operations. Many of these firms are installing state-of-the-art
price scanners, store fixtures and display units. In order to maintain these
accounts, the Company has designed custom display units (in the form of rotating
floor towers which require only about one square foot of floor space) to
increase the attractiveness of its products and to reduce required shelf space,
thereby providing efficiency to the retailers' stores. These display units
typically are provided at no charge to the retailer when the retailer purchases
enough videos and books to fully-stock the display unit. The display units are
designed to effectively display the Company's products (which are of a somewhat
unique size) as well as to make it difficult for competitors' products to be
placed on the unit. In certain
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<PAGE> 33
instances, Panorama will provide key retailers with video monitors to feature
its video products at the point-of-sale location.
Cities. The Company's products featuring popular city tourist
destinations are sold to souvenir shops, book stores, hotel gift shops, airport
gift shops and other high-tourist traffic locations.
Theme Parks. Panorama's videos featuring the Universal Studios theme
parks are sold to the retail outlets at each theme park for resale to park
visitors. Panorama, at its sole expense, develops the scripts, manages the
production, designs the packaging, duplicates and assists the Universal Studios
retailers with displays at each location. However, there is no requirement for
Universal Studios to purchase a minimum number of video units from Panorama.
Additionally, Universal Studios is not precluded from producing and distributing
its own videos. See "RISK FACTORS -- Concentration of Sales to Certain
Customers."
COMPETITION
The video production and book publishing businesses are highly
competitive. Retailers consider customer service, display, sales force
relationships, quality of production and price as important factors in their
purchase decisions. Tourists and other visitors consider price, packaging and
recommendations from the retailer's representative important factors in their
purchase decisions.
Video. Panorama's primary competitors are Finley Holiday (whose
videos appear at most national park and monument locations); Arizona Highway
(whose videos are featured at the Grand Canyon); Readers' Digest (whose videos
are featured at the Grand Canyon, Yellowstone and Yosemite) and Encounter Video
(whose videos appear at most major national parks). Most of the companies with
which Panorama competes are substantially larger than Panorama, and most of them
have significantly greater financial and other resources than Panorama. There
also are several local independent video producers at some locations who offer
modest, but specialized, productions for sale. Finally, Panorama faces
competition from tourists and other visitors themselves, who make their own home
videos of the locations. In order to effectively compete, Panorama attempts to
produce videos with professional production elements (such as aerial footage
taken from helicopters and aircraft) that are considerably different from those
of their competitors and from what visitors can produce on their own.
Books. There is significant competition in the book publishing
segment of the national park market. Each cooperating association also is a book
publisher. However, the book products of the cooperating associations are
generally interpretive titles with an emphasis on text and not photographs,
which does not make them commercially viable for traditional book publishers. In
addition, larger concessionaires such as Yosemite Concession Services and
Hamilton Stores (at Yellowstone) have produced their own visitor-oriented books
for their locations. Other commercial, photography-oriented publishers that are
heavily involved in the national parks are K.C. Publications, Canyonlands
Publications and World Wide Research and Publishing (which produces the National
Parkways Series). Finally, both the National Geographic Society and Woodlands
Press specialize in coffee table books on selected national parks.
Pricing. Competition in the video production and book publishing
businesses also extends to pricing. As souvenir retail operations become more
sophisticated at national parks and other tourist destinations, the Company
believes that there will be considerable pressure by retailers for wholesalers
such as the Company to reduce wholesale prices. If wholesale price reductions
occur, and retailers reduce retail prices, there could be an increase in overall
volume to offset the decreases in the wholesaler's margins. However, if
retailers do not reduce retail prices, the Company believes that sales could
become stagnant and result in reduced gross margins for wholesalers. The
Company's pricing strategy is to remain competitive with its leading competitor
in whichever markets the Company enters.
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NEW TECHNOLOGY
In addition to the direct competition described above, Panorama faces
indirect competition from alternative delivery technologies which are intended
to provide video entertainment directly to the consumer. These technologies
include (i) direct broadcast satellite transmission systems (which broadcast
films in digital format direct from satellites to small antennas in the home);
(ii) cable systems (which transmit digital format films to the home over cable
systems employing fiber optic technology); (iii) pay cable television systems
(which may employ digital data compression techniques to increase the number of
channels available and, hence, the number of films which can be transmitted);
and (iv) high-definition television (a system of digital transmission of
television signals which are received by a technologically advanced form of
television set). Digital Video Disc ("DVD") technology also may indirectly
compete with Panorama. The DVD will contain space for a minimum of three spoken
languages and four subtitled languages. Currently, the cost of producing a DVD
master is considerably higher than that of producing a traditional video tape
master but the cost of duplicating a DVD disc is considerably less than that of
duplicating a standard video tape. If DVD becomes the format of choice for
consumers, then eventually consumers will demand souvenir videos in DVD format.
Because consumers will need to adjust to the new format and may wait to see if
retail prices for DVDs and DVD players decrease over time, Panorama may need to
release titles in both DVD and video formats, which will add to Panorama's costs
of operation. Panorama intends to carefully monitor the progress of DVD and to
produce its videos in the DVD format if demanded by its customers.
GOVERNMENTAL POLICIES
Government policy has considerable impact on national and state
parks. Therefore, these policies have a significant effect on the future of
business in or near the parks. The federal government's unprecedented shut down
of the National Parks System during the Thanksgiving holiday in November 1995
and during the entire month of December 1995 had a material adverse effect on
the souvenir business in or near those parks. The shutdowns occurred during the
only periods that significant visitation occurs in the winter months. The effect
on retailers during the shutdowns was immediately felt (since there were no
visitors to purchase any products). Arguably more harmful was the impact that
the shutdowns had on international travelers who were planning vacations during
the shutdown periods. Rather than risk a summer trip to a closed national or
state park, the Company believes that a large number of international travelers
went elsewhere during this past fiscal year. There can be no assurances that a
prolonged shutdown of the national parks will not occur in the future. Any such
shutdown could have a material adverse effect on the Company's business.
The National Park Service has the dual mission of protecting the
national parks while making them accessible to as many visitors as possible. At
times these missions conflict with each other. There are factions within the
National Park Service, together with certain environmental groups, that desire
to severely restrict the number of private vehicles entering sensitive areas of
the national parks. For example, there are on-going discussions concerning
implementing public transportation into such sensitive park areas. Some
environmental groups want to reduce the number of retail outlets, hotel rooms,
food services and parking offered in the parks. For example, some of these
groups have discussed reductions in connection with Yosemite National Park,
which recently experienced damage caused by floodings. Any policy adopted by the
National Park Service which has the effect of reducing the number of visitors to
national parks could have a material adverse effect on the Company's business.
SEASONALITY AND ACTS OF GOD
The Company's operations are subject to seasonality and other factors
which affect the number of visitors to national and state parks, monuments and
historical sites. In general, sales of the Company's products are higher during
the months of April through September. Factors such as inclement weather,
natural disasters
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and other acts of God, which are unpredictable, may adversely affect the
Company's business because they directly affect the number of visitors to
national and state parks. For example, the landslide in Yosemite National Park,
which occurred in the summer of 1996, had a material adverse effect on the
Company's business at that national park.
INTERNATIONAL TRAVELERS
International travelers represent a significant portion of the
purchasers of videos and books at U.S. destinations. Therefore, a decrease in
the number of international travelers to U.S. destinations may have a negative
effect on retail sales of videos and books. A decrease in the number of
international travelers may occur as a result of several factors, such as
international currency fluctuations, transportation strikes, civil unrest,
travel restrictions and other factors, all of which are beyond the control of
the Company.
EMPLOYEES
The Company has eight full time employees and two part time
employees, of whom six are salaried and four are employed on an hourly basis.
The Company also has appointed commissioned sales representatives who are
independent contractors. None of the Company's employees is a party to any
collective bargaining agreement. The Company has not experienced any work
stoppages and considers its employee relations to be excellent.
PROPERTIES
Panorama currently leases facilities in Burbank, California
consisting of 4,350 square feet at a rent equal to $3,481.60 per month (subject
to cost of living increases, increases for higher property taxes and the pro
rata cost of utilities). The lease expires on November 30, 1999. Sierra leases
from Gold Leaf facilities in Mariposa, California (near Yosemite National Park)
consisting of 8,600 square feet at a rent equal to $3,000 per month. The lease
expires on June 30, 2001. See "CERTAIN TRANSACTIONS -- Gold Leaf." Panorama also
utilizes the services of outside storage or "vault" companies to store and
secure original film elements and video masters.
TRADEMARKS AND COPYRIGHTS
Panorama owns no registered trademarks or service marks. Panorama
believes that its business is not materially dependent on any patent, trademark
or service mark. Panorama believes that it owns the copyrights and other
intellectual property rights on substantially all of its video titles, other
than its titles produced for Universal Studios and its "John Muir: The Man, the
Poet, the Legacy" title. Sierra owns the federal trademark registration for its
logo and its series title "Wish You Were Here." Sierra's business is materially
dependent upon the ownership of all rights to its book titles.
LEGAL MATTERS
There are no pending material legal proceedings against the Company
or any of its properties nor, to the knowledge of the Company, are any legal
proceedings threatened.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of Panorama, their ages as of
June 1, 1997 and their positions are set forth below.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Edward H. Resnick 59 Chairman, Chief Executive Officer,
Secretary, Chief Financial
Officer and Director
David K. Haspel 48 President, Chief Operating Officer
and Director
Simon A. Hershon 49 Director
James L. Wilson, Jr. 49 Director
</TABLE>
All directors of Panorama hold office until the next annual meeting
of stockholders or until their successors have been duly elected and qualified.
As soon as practicable after the effective date of this Offering, the Company
shall recruit and elect individuals to the Board of Directors with the result
that a majority of the Board will be comprised of independent directors.
EDWARD H. RESNICK has been the Chairman of the Board, the Chief
Executive Officer and Secretary of Panorama since its formation in 1995. He
recently was appointed as the Chief Financial Officer of Panorama. Mr. Resnick
is also the Chairman of the Board of Sierra. From 1988 to 1995, he was a real
estate investor and consultant and an advisor to the boards of directors of
various small companies. From 1987 to 1988, Mr. Resnick was the acting Chief
Executive Officer and Chairman of the Executive Committee of Scandia Down
Corporation (a national retail chain specializing in fine European bedding
products). From 1985 to 1987, he was the treasurer and a director of East/West
Network, Inc., a privately-owned company which was the largest publisher of
airline "in-flight" magazines. From 1983 to 1985, Mr. Resnick was a partner of
Memel & Resnick, a law firm located in Los Angeles. From 1980 to 1983, he was an
investor (primarily in real estate) and a consultant to various small companies.
From 1974 to 1980, he was Chairman and Chief Executive Officer of RB Industries,
Inc., a major home furnishings retailer and manufacturer listed on the New York
Stock Exchange. Mr. Resnick received a B.S. degree in economics from the Wharton
School of Finance, and a J.D. degree from Boston University Law School.
DAVID K. HASPEL has been the President, Chief Operating Officer and a
director of Panorama since its formation in 1995. From 1985 to 1995, he was the
President and founder of Haspel Communications, a Los Angeles-based marketing
and communications company, and a consultant to the Arden Group, Inc. (Gelson's
markets) and Nicole Miller Designs. From 1989 to 1991, he was a partner in
Westwood Pictures, L.P. (the predecessor to Samuelson Productions). From 1972 to
1985, he was an advertising executive with Tracy-Locke/BBDO, Bozell and the
Bloom Agency in Dallas, Texas. Mr. Haspel is a member of the board of directors
of the Starbright Foundation (a Los Angeles-based children's charity). He
received a B.A. degree in journalism from the University of Oklahoma and a MBA
degree in marketing from Southern Methodist University. In 1996, Mr. Haspel
completed the Executive Program at UCLA's John E. Anderson Graduate School of
Management.
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SIMON A. HERSHON has been a director of Panorama since its formation
in 1995. He is the President and Chief Executive Officer of the InterBank
Companies, which offer financial consulting, asset management, merchant banking
and investment services to businesses, institutions and individuals in the
hospitality, real estate, finance and communications industries. Mr. Hershon
graduated from the U.S. Naval Academy and received Masters and Doctorate degrees
in business administration from Harvard University.
JAMES L. WILSON, JR. has been a director of Panorama since July 1,
1996. He also has been a major stockholder, director and executive officer of
Gold Leaf since its formation in 1987. Prior to founding Gold Leaf, Mr. Wilson
was employed by the Ansel Adams Gallery at Yosemite National Park as a
photography teacher. Pursuant to the Asset Purchase Agreement among Panorama,
Sierra and Gold Leaf, dated June 18, 1996, Mr. Wilson and Jeffrey Nicholas (as
the founders of Gold Leaf) are entitled to designate one member to Panorama's
Board of Directors ("Board") until the earlier of the date that (a) an initial
public offering of the Common Stock has been declared effective by the
Commission, or (b) Panorama shall have been merged with another entity or
otherwise sold to another entity in a transaction in which Panorama is not the
surviving entity. Mr. Wilson is the designee of Gold Leaf to the Board for 1997.
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EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid
during fiscal years ended December 31, 1995 and 1996 to the Company's executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Award
------------------------------------- --------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options (#) Compensation($)
- --------------------------- ---- --------- -------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Resnick, Chairman 1996 60,000(1) -0- -0- -0- -0-
1995 60,000 -0- -0- -0- -0-
David K. Haspel, President 1996 135,000 -0- -0- 47,369(2) -0-
1995 135,000 15,000 -0- 47,368(3) -0-
</TABLE>
- --------------------
(1) As of January 1, 1997, Mr. Resnick's salary is $90,000 per annum. See
"MANAGEMENT - Employment Agreements."
(2) Represents non-plan options granted to Mr. Haspel in connection with his
Employment Agreement. See "MANAGEMENT -- Employment Agreements."
(3) Represents non-plan founder's option granted to Mr. Haspel in connection
with Panorama's Private Placement. See "CERTAIN TRANSACTIONS -- Haspel
Stock Options."
OPTION GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)
During the fiscal year ended December 31, 1996, the Company did not
grant any options to any of its executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL-YEAR AND
FISCAL-YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised in-the-
Shares Acquired Value Unexercised Options at Fiscal Year Money Options at Fiscal Year
Name On Exercise (#) Realized ($) End (#) Exercisable/Unexercisable End ($) Exercisable/Unexercisable(1)
- ---- --------------- ------------ ------------------------------------ -----------------------------------
<S> <C> <C> <C> <C>
David K. Haspel -0- -- 47,369 exercisable/0 unexercisable(2) $52,106 exercisable/0 unexercisable
David K. Haspel -0- -- 47,368 exercisable/0 unexercisable(3) $142,057 exercisable/0 unexercisable
</TABLE>
- --------------------
(1) There was no public trading market for the Common Stock on December 31,
1996. Accordingly, solely for purposes of this table, the values in this
column has been calculated on the basis of fifty percent (50%) of the
expected initial public offering price, less the aggregate exercise price
of the options.
(2) Represents part of 189,474 shares underlying non-plan options granted to
Mr. Haspel in fiscal year 1995 in connection with his Employment
Agreement. Of these 189,474 underlying shares, the option to purchase
47,369 shares vested on September 22, 1996. Of the remaining 142,106
shares underlying these options, the option to purchase 47,369 shares
vests on September 22, 1997, the option to purchase 47,368 shares vests on
September 22, 1998, and the option to purchase 47,368 shares vests on
September 22, 1999. See "MANAGEMENT -- Employment Agreements."
(3) Represents non-plan options granted to Mr. Haspel as a founder of Panorama
in fiscal year 1995, all of which are vested. See "CERTAIN TRANSACTIONS --
Haspel Stock Options."
COMPENSATION OF DIRECTORS
Directors are not paid a fee for, but are reimbursed for their
out-of-pocket expenses associated with, each meeting of the Board of Directors
and committees attended. Subsequent to this offering, it is expected that each
director who is not an officer of Panorama will be paid $500 for each Board
meeting attended, and $250 for each committee meeting attended. Directors are
elected by the stockholders and serve for one year terms.
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EMPLOYMENT AGREEMENTS
Edward H. Resnick. Effective January 1, 1997, Panorama entered into a
two-year employment agreement with Mr. Resnick, the Chairman of the Board and
Chief Executive Officer of Panorama. Pursuant to this agreement, Mr. Resnick
receives a base salary of $90,000 per annum. Mr. Resnick also will be eligible
to receive an annual bonus, payable at the sole discretion of the Board, based
upon, with respect to the fiscal year at issue, Panorama's achievement of
profitability (if any). Under the agreement, Mr. Resnick's employment is subject
to confidentiality restrictions and a non-competition agreement (which
non-competition agreement remains in effect during the term of the employment
agreement and for an additional two years thereafter). If Mr. Resnick is
terminated by Panorama without cause, he is entitled to severance pay equal to
his then current base salary for the remainder of the term of the agreement. Mr.
Resnick's agreement is subject to termination by Panorama for "cause," which is
defined as, among other things, Mr. Resnick's breach of any of the
confidentiality restrictions and non-competition provisions, his commission of
an act of fraud upon Panorama, his continued repeated willful failure to perform
his duties under the agreement, or his material violation of any duty of loyalty
to the Company.
David K. Haspel. Effective September 22, 1995, Panorama entered a
one-year employment agreement with Mr. Haspel, the President and Chief Operating
Officer of Panorama. Although the initial term of this agreement expired on
September 22, 1996, it automatically continues on a month-to-month basis until
terminated by either party. Pursuant to this agreement, Mr. Haspel is to receive
a base salary of $135,000 per annum. Mr. Haspel also will be eligible to receive
an annual bonus, payable at the sole discretion of the Board, based upon, with
respect to the fiscal year at issue, Panorama's achievement of profitability (if
any). Under the agreement, Mr. Haspel's employment is subject to confidentiality
restrictions and a non-competition agreement (which non-competition agreement
remains in effect during the term of the employment agreement and for so long as
Mr. Haspel is compensated by Panorama). Mr. Haspel is entitled to receive his
base salary from Panorama after the employment agreement is terminated if Mr.
Haspel has personally guarantied the debts or obligations of Panorama, until
such time as he is released from his obligations under any such personal
guaranty. At present, Mr. Haspel has not entered into any such personal
guaranties for the benefit of Panorama. Mr. Haspel's employment agreement is
subject to termination without cause by either party upon thirty (30) days'
written notice to the other party. Mr. Haspel is entitled to six months
severance pay based on his then current salary in the event he is terminated by
Panorama without cause. In addition, the agreement is subject to termination by
Panorama for "cause," which is defined as conviction of a felony, embezzlement
from Panorama, any act of willful breaching of the employment agreement or
habitually neglecting the business and affairs of Panorama, or the dissolution
of Panorama (after an appropriate period of time to wind up Panorama's affairs).
In connection with his employment by Panorama, on September 22, 1995,
Mr. Haspel and Panorama entered into an Option Agreement, pursuant to which
Panorama granted Mr. Haspel twenty-five year options to purchase 189,474 shares
of Common Stock at an exercise price of $1.90 per share. The option agreement
contains anti-dilution provisions providing for the adjustment of the number of
shares underlying the options and the exercise price under certain
circumstances. These options vest in increments as follows: (i) as to 47,369
shares, on September 22, 1996; (ii) as to 47,369 shares, on September 22, 1997;
(iii) as to 47,368 shares, on September 22, 1998; and (iv) as to 47,368 shares,
on September 22, 1999. If Mr. Haspel's employment with Panorama terminates for
any reason, any of the options not vested as of the date of termination will
simultaneously terminate with Mr. Haspel's employment.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Panorama's Certificate of Incorporation includes provisions which
limit the liability of its directors. As permitted by applicable provisions of
the Delaware General Corporation Law ("Delaware Law"), directors will not be
liable to Panorama for monetary damages arising from a breach of their fiduciary
duty as directors in certain
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<PAGE> 40
circumstances. This limitation does not affect liability for any breach of a
director's duty to Panorama or its stockholders (i) with respect to approval by
the director of any transaction from which he or she derives an improper
personal benefit, (ii) with respect to acts or omissions involving an absence of
good faith, that the director believes to be contrary to the best interests of
Panorama or its stockholders, that involve intentional misconduct or a knowing
and culpable violation of law, that constitute an unexcused pattern or
inattention that amounts to an abdication of his or her duty to Panorama or its
stockholders, or that show a reckless disregard for duty to Panorama or its
stockholders in circumstances in which he or she was, or should have been aware,
in the ordinary course of performing his or her duties, of a risk of serious
injury to Panorama or its stockholders, or (iii) based on transactions between
Panorama and its directors or another corporation with interrelated directors or
based on improper distributions, loans or guarantees under applicable sections
of Delaware Law. This limitation of directors' liability also does not affect
the availability of equitable remedies, such as injunctive relief or rescission.
Panorama's Amended and Restated Bylaws obligate Panorama to indemnify
its directors, officers and other corporate agents to the full extent permitted
by Delaware Law, in terms sufficiently broad to indemnify such persons, under
certain circumstances, for liabilities (including reimbursement of expenses
incurred) arising under the Securities Act. Panorama has been advised that it is
the position of the Commission that insofar as the foregoing provision may be
invoked for liabilities arising under the Securities Act, the provision is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
CERTAIN TRANSACTIONS
The information set forth herein briefly describes certain
transactions between the Company and certain affiliated parties.
ISSUANCE OF SHARES
Pursuant to an agreement to provide certain financial and other
information and documentation, the Company agreed to sell and issue 26,316
shares of Common Stock to the Founder and sole shareholder of Cinescope at a
purchase price of $1.90 per share. On May 29, 1997, the Company issued the
Founder 26,316 shares of Common Stock and in consideration therefor, the Founder
paid the Company $50 and executed a secured promissory note in the amount of
$49,950 to the Company. The promissory note is non-interest bearing, matures on
May 29, 1999, is non-recourse to the Founder and is secured solely by the
shares. In accordance with the agreement with the Founder, the Company is
obligated to adjust the number of shares, without additional consideration, so
that the Founder holds no less than that number of shares of Common Stock
representing an aggregate value of $250,000 at the conclusion of this Offering.
Assuming an initial offering price of $6.00 per share, the Founder is entitled
to a total of 41,667 shares. Accordingly, the Company will be required to issue
the Founder an additional 15,351 shares of Common Stock at the conclusion of
this Offering. This transaction will result in a non-cash charge to operations
of $200,000 during the three months ended June 30, 1997.
GOLD LEAF
Pursuant to that certain Asset Purchase Agreement, dated June 18,
1996, among the Company, Gold Leaf, and the stockholders of Gold Leaf, the
Company issued 177,003 shares of Common Stock to Gold Leaf as consideration for
the sale of all of Gold Leaf's assets to Sierra and Sierra's assumption of
certain of Gold Leaf's liabilities and obligations. Under that Asset Purchase
Agreement, the Company remained obligated to issue Gold Leaf, as additional
consideration for Sierra's acquisition of the assets, up to an additional
157,895 shares of Common Stock during the period commencing January 1, 1997 and
ending December 31, 1998 if Sierra achieved certain stated financial goals.
Effective as of January 2, 1997, the Company and Gold Leaf amended the Asset
Purchase
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<PAGE> 41
Agreement to provide that the Company would issue all of those additional
shares, and the Company issued the 157,895 shares to Gold Leaf. The Company
valued the 157,895 shares of common stock at $1.90 per share, and accounted for
the shares as additional purchase consideration. Accordingly, the Company
recorded the $300,000 as excess of cost over fair value of assets acquired,
which is being amortized over 25 years.
Sierra leases its facilities in Mariposa, California (consisting of
8,600 square feet at a rent equal to $3,000 per month) from Gold Leaf. See
"BUSINESS -- Properties."
James L. Wilson, Jr., Lynn Wilson (his spouse) and Jeffrey D.
Nicholas are the stockholders of Gold Leaf. James L. Wilson, Jr. also is a
director of Panorama, and Messrs. Wilson and Nicholas are directors and officers
of Sierra.
HASPEL STOCK OPTIONS
On July 27, 1995, Panorama entered into a Stock Option Agreement with
David K. Haspel, pursuant to which Panorama granted Mr. Haspel, for his services
as a "founder" of Panorama, a twenty-five year option to purchase 47,368 shares
of Common Stock, at a purchase price of $.001 per share (which is the par value
of the Common Stock and which was determined to be the fair market value of the
Common Stock by the Company). The option agreement contains anti-dilution
provisions providing for the adjustment of the number of shares underlying the
option and the exercise price under certain circumstances. As of the date of
this Prospectus, Mr. Haspel has not exercised this option. The option expires on
August 11, 2020. Mr. Haspel is a founder, director and executive officer of
Panorama.
LIFE INSURANCE ON DAVID HASPEL
On January 15, 1996, Panorama obtained a $1,500,000 life insurance
policy on the life of Mr. Haspel. The beneficiary of the policy is the Panorama
International Productions, Inc. Irrevocable Insurance Trust, dated July 17,
1995 ("Trust"), a trust which has been established by the Company for the
benefit of the holders of the Subordinated Notes. The trustee of the trust is
Richard J. Migliaccio, who is a partner of Bronson & Migliaccio, the law firm of
which a former director of Panorama (H. Bruce Bronson) also is a partner. In the
event that all of the holders of the Subordinated Notes accept the Company's
offer to repay the notes, then management intends to modify this life insurance
policy so that the Company is the beneficiary thereunder.
CERTAIN FEES
In connection with the Private Placement, the Company paid
approximately $120,000 to InterBank Communications, Inc. ("InterBank") for
consulting services, and paid approximately $80,000 to the law firm of Bronson &
Migliaccio for legal services. Simon Hershon (a director of Panorama) is the
sole shareholder of InterBank, and Richard J. Migliaccio (the trustee of the
Trust) and H. Bruce Bronson (a former director of Panorama) are partners of
Bronson & Migliaccio.
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<PAGE> 42
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock as of the date of the Prospectus
and as adjusted to reflect the sale of the Common Stock offered hereby for (i)
each director and director nominee of Panorama; (ii) each person known to
Panorama to be the beneficial owner of more than five percent (5%) of the
outstanding shares; (iii) all directors and executive officers as a group; and
(iv) the Selling Stockholders. For purposes of computing the percent of shares
outstanding after this Offering, the 15,351 shares issuable to the Founder at
the conclusion of this Offering have been added to the number of shares
outstanding after this Offering. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION" and "CERTAIN TRANSACTIONS -- Issuance of Shares." Except
pursuant to applicable community property laws or as otherwise indicated, each
stockholder has sole voting and investment power with respect to the shares
beneficially owned. As used herein, the term "beneficial ownership" with respect
to shares of the Common Stock has the meaning set forth in Rule 13d-3 of the
Exchange Act, as consisting of sole or shared voting power (including the power
to vote or direct the vote of the security) and/or shared investment power
(including the power to dispose of the security or direct the disposition of the
security) through any contract, arrangement, understanding, relationship or
otherwise, including a right to acquire such power(s) during the next sixty (60)
days. Unless otherwise noted, beneficial ownership consists of sole ownership,
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by the stockholder.
<TABLE>
<CAPTION>
BEFORE OFFERING AFTER OFFERING
------------------------- --------------------------
PERCENT OF PERCENT OF
NUMBER SHARES SHARES NUMBER SHARES
NAME OF SHARES OUTSTANDING BEING OFFERED OF SHARES OUTSTANDING
---- --------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
OFFICERS AND DIRECTORS(1)
Edward H. Resnick........................ 248,290 8.3% -0- 248,290 6.2%
David K. Haspel(2)....................... 94,737 3.2% -0- 94,737 2.4%
Simon A. Hershon(3)...................... 643,026 21.5% -0- 643,026 16.0%
James L. Wilson, Jr.(4).................. 334,898 11.2% -0- 334,898 8.4%
--------- ----- ------ --------- ----
All directors and officers as
a group (5 persons).................... 1,320,951 44.1% -0- 1,320,951 32.9%
--------- ----- ------ --------- -----
5% OR MORE BENEFICIAL OWNERS
(OTHER THAN SELLING STOCKHOLDERS)
Gold Leaf Properties, Inc.(5)............ 334,898 11.2% -0- 334,898 8.4%
InterBank Communications, Inc.(6)........ 643,026 21.5% -0- 643,026 16.0%
Nichols, Safina, Lerner & Co., Inc....... 187,970 6.3% -0- 187,970 4.7%
--------- ------ ------ --------- ------
All 5% or More Beneficial Owners
(other than Selling Stockholders)........ 1,165,894 38.9% -0- 1,165,894 29.1%
--------- ------ ------ --------- ------
SELLING STOCKHOLDERS
A. Patrick Linton........................ 26,316 * 11,084 15,232 *
Andrew G. Kader.......................... 26,316 * 11,084 15,232 *
Bruce Horwytz............................ 13,158 * 5,542 7,616 *
James Cozzetto........................... 115,132 3.8% 48,490 66,642 1.7%
John Grode............................... 26,316 * 11,084 15,232 *
Kepman Capital........................... 26,316 * 11,084 15,232 *
Lawrence Cooper.......................... 26,316 * 11,084 15,232 *
M.D. Sabbah.............................. 394,737 13.2% 166,250 228,487 5.7%
Milton & Priscilla Graham................ 26,316 * 11,084 15,232 *
</TABLE>
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<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C> <C>
Norman Stitzer........................... 26,316 * 11,084 15,232 *
Peter Gabrielli.......................... 26,316 * 11,084 15,232 *
Richard Carney Rev. Trust................ 105,263 3.5% 44,334 60,929 1.5%
Robert Feldgarden.................. 26,316 * 11,084 15,232 *
Robert Horwytz........................... 31,250 1.0% 13,162 18,088 *
Robert Mahala............................ 26,316 * 11,084 15,232 *
Steven Realbuto.......................... 13,158 * 5,542 7,616 *
William B. Warden........................ 26,316 * 11,084 15,232 *
John Murray.............................. 26,316 * 11,084 15,232 *
Melvin H. Meyer.......................... 26,316 * 11,084 15,232 *
K. King Burnett.......................... 13,158 * 5,542 7,616 *
Ronald McGee............................. 15,625 * 6,581 9,044 *
Alan Rubin............................... 26,316 * 11,084 15,232 *
---------- ------- ------- --------- -----
Total Selling Stockholders............... 1,069,905 35.7% 450,619 619,286 15.4%
--------- ----- ------- --------- -----
TOTAL(7)................................. 2,578,826 86.1% 450,619 2,128,207 53.1%
========= ===== ======= ========= =====
</TABLE>
- --------------------
* Less than 1.0%.
(1) The address of the Company's officers and directors is 2621 Empire Avenue,
Burbank, California 91504.
(2) All 94,737 shares are subject to outstanding options which are currently
exercisable. Does not include an aggregate of 142,105 shares subject to an
existing stock option which have not yet vested. See "MANAGEMENT --
Employment Agreements."
(3) These shares are beneficially owned by Mr. Hershon as the sole shareholder
of InterBank, which is the holder of record of these shares.
(4) These shares are beneficially owned by Mr. Wilson, his wife and Jeffrey
Nicholas, as the sole stockholders of Gold Leaf, the holder of record. Mr.
Wilson and his wife own approximately 67% of the outstanding shares of Gold
Leaf and, accordingly, control its business and affairs.
(5) James Wilson, a director of Panorama and Sierra, his spouse, and Jeffrey
Nicholas are stockholders of Gold Leaf and as such are the beneficial
owners of the shares owned of record by Gold Leaf.
(6) Simon Hershon, a director of Panorama, is the sole shareholder of InterBank
and as such is the beneficial owner of the shares owned of record by
InterBank.
(7) For purposes of computing these totals, the shares owned beneficially by
Simon Hershon and James L. Wilson, Jr. (and held of record by InterBank and
Gold Leaf, respectively) were only counted once.
DESCRIPTION OF SECURITIES
The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Company's Certificate of
Incorporation, as amended to date.
CAPITAL STOCK
The Company is authorized to issue two classes of shares, designated
as "Common Stock" and "Preferred Stock." The total number of shares of capital
stock that the Company is authorized to issue is 15,000,000.
COMMON STOCK
The Company is authorized to issue up to 10,000,000 shares of Common
Stock, $.001 par value per share. As of May 29, 1997, there were 5,690,527
shares of Common Stock outstanding held of record by 78 stockholders. Prior to
this offering, the Company effected a 1 for 1.9 Reverse Stock Split of the
Common Stock, pursuant to which the 5,690,527 shares of Common Stock were
converted to 2,995,014 shares. Holders of Common Stock are entitled to one vote
for each share held of record on each matter submitted to a vote of
stockholders. Holders of Common Stock are entitled to receive ratably, dividends
when, as, and if declared by the Board out of funds legally available therefor
and, upon the liquidation, dissolution, or winding up of the Company, are
entitled to share ratably in all assets remaining after payment of liabilities.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. The outstanding Common Stock is
validly authorized and issued and is fully paid and nonassessable.
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<PAGE> 44
The Company has applied to qualify the Common Stock for trading on
the Nasdaq SmallCap Market under the symbol "PNRM."
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of
Preferred Stock, $.001 par value per share. Pursuant to the Certificate of
Incorporation, as amended, the Board has the authority to issue shares of the
Preferred Stock from time to time in one or more series. The Board also is
authorized to fix the number of shares of Preferred Stock of each such series,
and to determine or alter for each such series the voting powers, designations,
preferences, privileges or other rights with respect thereto. As of the date of
this Prospectus, the Company has not issued any shares of Preferred Stock.
However, the issuance of Preferred Stock by the Company would affect the rights
of the holders of the Common Stock. Such an issuance would result in, among
other things, a class of the Company's securities outstanding that would have
liquidation rights superior to those of the Common Stock. In addition, if so
determined by the Board, the shares of Preferred Stock could have dividend
rights which are superior to those of the Common Stock and could have voting and
conversion rights which adversely affect the voting rights of the holders of the
Common Stock.
UNDERWRITERS' WARRANTS
The Company has authorized the issuance of warrants to the
Underwriters to purchase up to 100,000 shares of Common Stock at an exercise
price of one hundred thirty percent (130%) of the initial public offering price
per share of Common Stock exercisable at any time in the four-year period
commencing one year from the date of this Prospectus. The holders of the
Underwriters' Warrants will be granted certain "piggyback" and "demand"
registration rights with respect to the Common Stock underlying the
Underwriters' Warrants. See "UNDERWRITING."
TRANSFER AGENT
The Company has appointed U.S. Stock Transfer Corporation, Glendale,
California as transfer agent for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
4,010,365 shares of Common Stock (taking into account the 15,351 shares issuable
to the Founder). See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION"
and "CERTAIN TRANSACTIONS -- Issuance of Shares." All of the 1,450,619 shares of
Common Stock offered hereby will be freely tradeable without restriction or
further registration under the Securities Act, except for any shares purchased
by any person who is or thereby becomes an "affiliate" of the Company, which
shares will be subject to the resale limitations contained in Rule 144
promulgated under the Securities Act as described below. The remaining 2,559,746
shares of Common Stock currently outstanding, which are currently held by the
Company's existing stockholders, are "restricted securities" within the meaning
of Rule 144 under the Securities Act and, in general, if held for at least one
year, will be eligible for sale in the public market in reliance upon and
subject to the limitations of Rule 144. All of these shares will become eligible
for sale under Rule 144 commencing ninety (90) days from the date of the
Prospectus. However, the officers and directors of the Company have entered into
two-year Lock-Up Agreements as described below.
In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated), including a person who may be deemed to be
an "affiliate" of the Company, as that term is defined under the
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<PAGE> 45
Securities Act, is entitled to sell, within any three month period, the number
of shares beneficially owned for at least one year that does not exceed the
greater of (i) one percent (1%) of the number of the then outstanding shares of
Common Stock; or (ii) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to certain requirements as to the manner of sale, notice and the
availability of current public information about the Company. Furthermore, a
person who is deemed not to have been an affiliate of the Company during the
ninety (90) days preceding a sale by such person and who has beneficially owned
such shares for at least two years is entitled to sell such shares without
regard to the volume, manner of sale or notice requirement.
In addition, Rule 701 under the Securities Act provides an exemption
from the registration requirements of the Securities Act for offers and sales of
securities issued pursuant to certain compensatory benefit plans or written
contracts of a company not subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act. Securities issued pursuant to Rule 701 are defined
as restricted securities for purposes of Rule 144. However, ninety (90) days
after the issuer becomes subject to the reporting provisions of the Exchange
Act, which is expected to be the date of this Prospectus, the Rule 144 resale
restrictions, except for the broker's transaction requirements, are inapplicable
for nonaffiliates. Affiliates are subject to all Rule 144 restrictions after
this 90-day period, except the Rule 144 holding period requirement.
Up to 100,000 additional shares of Common Stock may be purchased by
the Underwriters through the exercise of the Underwriters' Warrants. The
Underwriters' Warrants will be exercisable at a price equal to one hundred
thirty percent (130%) of the initial public offering price and will be
exercisable at any time and from time to time during the four-year period
commencing one year from the date of this Prospectus. The holders of the
Underwriters' Warrants have been granted certain "piggyback" and "demand"
registration rights. Any and all of such shares of Common Stock will be
tradeable without restriction, provided that the Company satisfies such
registration requirements in accordance with the terms of the Underwriters'
Warrants. See "UNDERWRITING."
Prior to this Offering, no public market for the Company's securities
has existed. Following this Offering, no predictions can be made of the effect,
if any, of future public sales of restricted shares or the availability of
restricted shares for sale in the public market. Moreover, the Company cannot
predict the number of shares of Common Stock that may be sold in the future
pursuant to Rule 144 or Rule 701 because such sales will depend on, among other
factors, the market price of the Common Stock and the individual circumstances
of the holders thereof. The availability for sale of substantial amounts of
Common Stock could adversely affect prevailing market prices for the Company's
securities.
The Company and its officers and directors have agreed to enter into
Lock-Up Agreements under which they will agree not to sell, pledge, encumber or
otherwise dispose of any of their shares of Common Stock or other securities of
the Company for a period of two years commencing upon the date of the
Prospectus, without the prior written consent of the Underwriters.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement
among the Company, the Selling Stockholders and the Underwriters, (a) the
Company has agreed to sell to the Underwriters, and the Underwriters have agreed
to purchase, 1,000,000 shares of Common Stock offered by the Company; and (b)
the Selling Stockholders have agreed to sell to the Underwriters, and the
Underwriters have agreed to purchase, 450,619 shares of Common Stock offered by
the Selling Stockholders. NSL will act as the managing underwriter in connection
with this offering.
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<PAGE> 46
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to the approval of certain legal matters by counsel to
the Underwriters and various other conditions. The nature of the Underwriters'
obligations are such that the Underwriters are obligated to purchase, on a firm
commitment basis, all of the above shares of Common Stock if any are purchased.
The Company has been advised by the Underwriters that they propose to
offer the shares of Common Stock directly to the public at the public offering
price set forth on the cover page of this Prospectus and to offer part of the
shares of Common Stock to certain dealers at that price, less a concession not
exceeding $______ per share. The Underwriters may allow, and the dealers may
reallow, a discount not exceeding $______ per share of Common Stock to other
dealers. After this Offering, the offering price, concession and reallowance may
be changed by the Underwriters. The Underwriters have informed the Company that
they do not expect sales to discretionary accounts to exceed five percent (5%)
of the shares offered by the Company hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
agreed to pay to the Underwriters a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds derived from the sale of the shares of
Common Stock underwritten (including, the sale of any shares subject to the
Underwriters' over-allotment option described below).
The Underwriters have been granted an option, exercisable during the
thirty (30)-day period commencing on the date of this Prospectus, to purchase
from the Company at the offering price less underwriting discounts, up to
217,593 additional shares, for the sole purpose of covering over-allotments, if
any.
In connection with this Offering, the Company has agreed to sell to
the Underwriters, for nominal consideration, a Warrant to purchase 100,000
shares of the Common Stock. The Underwriters' Warrant is initially exercisable,
at a price of one hundred thirty percent (130%) of the per share public offering
price of the shares offered hereby, for a period of four years, commencing one
year from the date of this Prospectus. The shares of Common Stock issuable upon
exercise of the Underwriters' Warrant are the same as the shares being sold in
this Offering. The Underwriters' Warrant contains anti-dilution provisions
providing for adjustment of the number of warrants and exercise price under
certain circumstances. The Underwriters' Warrant grants to the holder thereof
certain rights of registration of the shares issuable upon exercise of the
Underwriters' Warrant.
The officers and directors of the Company have agreed not to,
directly or indirectly, sell, offer to sell, grant an option for the sale of,
pledge, encumber, transfer or assign any of their shares of Common Stock,
without the prior written consent of the Underwriters until two years from the
date of this Prospectus.
The Company has agreed with the Underwriters that, except as
described in this Prospectus, for a period of twelve (12) months from the date
of this Prospectus, it will not issue any securities or grant options or
warrants to purchase any securities of the Company without the Underwriters'
consent.
The Company has agreed to appoint NSL's designee to the Board for a
period of sixty months following the date of this Prospectus so long as such
designee meets the Company's reasonable qualifications for election as a
director. As of the date of this Prospectus, NSL has not yet submitted to the
Company the name of its designee to the Board.
The Underwriters may engage in over-allotment, stabilizing
transactions, syndicate covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act. Over-allotment involves syndicate
sales in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the securities in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriters to reclaim a selling
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<PAGE> 47
concession from a syndicate member when the securities originally sold by such
syndicate member are purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Common Stock to be
higher than it would otherwise be in the absence of such transactions. These
transactions may be affected on Nasdaq or otherwise and, if commenced, may be
discontinued at any time and will, in any event, be discontinued thirty (30)
days after settlement of this Offering.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is hereby made to a
copy of such agreement which is filed as an exhibit to the Registration
Statement (as hereinafter defined).
Prior to this Offering there has been no public market for any of the
Common Stock. Accordingly, the offering price of the shares was determined by
negotiation between the Company and the Underwriters. Factors considered in
determining such price and terms, in addition to prevailing market conditions,
include an assessment of the Company's history and prospects. The public
offering price of the shares of Common Stock does not bear any relationship to
assets, earnings, book value or other criteria of value applicable to the
Company and should not be considered an indication of the actual value of the
shares. Such price is subject to change as a result of market conditions and
other factors, and no assurance can be given that the shares can be resold at
the public offering price.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Loeb & Loeb LLP, Los Angeles, California. Lehman
& Eilen, Uniondale, New York, has acted as counsel for the Underwriters in
connection with this offering.
EXPERTS
The consolidated financial statements of the Company for the year
ended December 31, 1996 and for the period from September 22, 1995 to December
31, 1995, together with financial statements of Cinescope Enterprises, Inc.,
from January 1, 1995 to September 21, 1995, and the financial statements of The
Sierra Press, Inc., for the year ended December 31, 1995 and the six months
ended June 30, 1996, all of which are included in this Prospectus and in the
Registration Statement, have been audited by Ernst & Young LLP, independent
public accountants, as stated in their reports appearing elsewhere herein and in
the Registration Statement, and have been so included in reliance upon such
reports of such firm given upon their authority as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement
("Registration Statement"), together with exhibits thereto, under the Securities
Act with respect to the Common Stock offered by this Prospectus. As permitted by
the rules and regulations of the Commission, this Prospectus (which constitutes
a part of the Registration Statement) does not contain all of the information
set forth in the Registration Statement and the exhibits thereto. For further
information with respect to the Company and to the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits filed as a part
thereof, which may be examined without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Judiciary
47
<PAGE> 48
Plaza, Washington, D.C. 20549, or at the Regional Offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference Section of
the Commission in Washington, D.C., upon payment of the fees prescribed by the
Commission. In addition, such materials may be accessed electronically at the
Commission's site on the World Wide Web, located at http://www.sec.gov.
Statements contained in this Prospectus as to the contents of any contract or
other documents referred to herein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
The Company will, upon completion of this Offering, be subject to the
informational requirements of the Exchange Act and, in accordance therewith,
will file reports and other information with the Commission. Such reports and
other information may be inspected and copied at the public reference facilities
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. Copies of such materials can be obtained at prescribed rates from the
Commission at such address.
48
<PAGE> 49
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Audited Consolidated Financial Statements of the Company
For the year ended
December 31, 1996 and the period from
September 22, 1995 (Inception) to December 31, 1995........................... F-2
Report of Independent Auditors................................................ F-3
Consolidated Balance Sheets................................................... F-4
Consolidated Statements of Operations......................................... F-5
Consolidated Statements of Shareholders' Equity............................... F-6
Consolidated Statements of Cash Flows......................................... F-7
Notes to Consolidated Financial Statements.................................... F-8
Unaudited Consolidated Financial Statements of the Company
For the quarter ended March 31, 1997......................................... F-20
Unaudited Consolidated Balance Sheet......................................... F-21
Unaudited Consolidated Statements of Operations.............................. F-22
Unaudited Consolidated Statement of Shareholders' Equity..................... F-23
Unaudited Consolidated Statements of Cash Flows.............................. F-24
Notes to Unaudited Consolidated Financial Statements......................... F-25
Audited Financial Statements of Cinescope Enterprises, Inc.
(Predecessor to Panorama) For the period from January 1,
1995 to September 21, 1995................................................... F-27
Report of Independent Auditors............................................... F-28
Statement of Operations...................................................... F-29
Statement of Cash Flows...................................................... F-30
Notes to Financial Statements................................................ F-31
Audited Financial Statements of The Sierra Press, Inc. For the
period from January 1, 1996 to June 30, 1996 and the year
ended December 31, 1995...................................................... F-33
Report of Independent Auditors............................................... F-34
Balance Sheets............................................................... F-35
Statements of Operations..................................................... F-36
Statements of Shareholders' Equity........................................... F-37
Statements of Cash Flows..................................................... F-38
Notes to Financial Statements................................................ F-39
</TABLE>
F-1
<PAGE> 50
Audited Consolidated Financial Statements
Panorama International Productions, Inc.
For the year ended December 31, 1996
and the period from September 22, 1995 (Inception)
to December 31, 1995
with Report of Independent Auditors
F-2
<PAGE> 51
Report of Independent Auditors
The Board of Directors and Shareholders
Panorama International Productions, Inc.
We have audited the accompanying consolidated balance sheets of Panorama
International Productions, Inc. as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the year ended December 31, 1996, and the period from September 22,
1995 (inception) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Panorama
International Productions, Inc. at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for the year ended
December 31, 1996, and the period from September 22, 1995 (inception) to
December 31, 1995, in conformity with generally accepted accounting principles.
Ernst & Young LLP
March 7, 1997, except as to
Note 12, which is June 9, 1997
F-3
<PAGE> 52
Panorama International Productions, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
--------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 472,000 $ 148,000
Accounts receivable, net of provision for bad debt of
$10,000 and $0, respectively 151,000 101,000
Inventories 404,000 132,000
Prepaid expenses and other current assets 35,000 22,000
--------------------------
Total current assets 1,062,000 403,000
Property, plant and equipment, net 60,000 21,000
Trademark, film, and book libraries and excess of cost
over fair value of assets purchased, net of accumulated
amortization of $131,000 and $23,000, respectively 2,329,000 2,064,000
Deferred financing costs, net of accumulated
amortization of $39,000 and $7,000, respectively 317,000 280,000
--------------------------
Total assets $3,768,000 $2,768,000
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 87,000 $ 136,000
Accrued expenses 35,000 13,000
Income taxes payable 16,000 -
Deferred tax liability 1,000 1,000
--------------------------
Total current liabilities 139,000 150,000
Notes payable, net of discount 1,240,000 807,000
Deferred tax liabilities 14,000 4,000
Commitments
Shareholders' equity:
Common stock, $.001 par value:
Authorized shares - 3,157,895
Issued and outstanding shares - 2,810,803 and
2,505,684 at 1996 and 1995, respectively 3,000 3,000
Additional paid-in capital 2,231,000 1,790,000
Retained earnings 141,000 14,000
--------------------------
Total shareholders' equity 2,375,000 1,807,000
--------------------------
Total liabilities and shareholders' equity $3,768,000 $2,768,000
==========================
</TABLE>
See accompanying notes
F-4
<PAGE> 53
Panorama International Productions, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
SEPTEMBER 22
YEAR ENDED 1995 TO
DECEMBER 31 DECEMBER 31
1996 1995
-----------------------------
<S> <C> <C>
Sales $ 2,108,000 $ 369,000
Cost of sales 887,000 145,000
-----------------------------
Gross profit 1,221,000 224,000
Depreciation and amortization 150,000 32,000
Selling and marketing 239,000 44,000
General and administrative expense 463,000 103,000
-----------------------------
Income before interest expense and income taxes 369,000 45,000
Interest income 16,000 1,000
Interest expense (231,000) (27,000)
-----------------------------
Income before income taxes 154,000 19,000
Provision for income taxes (27,000) (5,000)
-----------------------------
Net income $ 127,000 $ 14,000
=============================
Earnings per common and common equivalent share $ 0.04 $ --
Weighted average common and common
equivalent shares outstanding 3,191,935 3,191,935
</TABLE>
See accompanying notes.
F-5
<PAGE> 54
Panorama International Productions, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Shares Stock Capital Earnings Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at September 22, 1995 1,052,632 $ 1,000 $ 1,000 $ - $ 2,000
Issuance of common stock less
issuance costs of $391,000 1,355,602 2,000 1,604,000 - 1,606,000
Issuance of common stock in
connection with notes payable 97,450 - 185,000 - 185,000
Net income - - - 14,000 14,000
--------------------------------------------------------------------------
Balance at December 31, 1995 2,505,684 3,000 1,790,000 14,000 1,807,000
Issuance of common stock for
acquisition of Sierra Press, Inc. 177,003 - 336,000 - 336,000
Issuance of common stock in
connection with notes payable 50,576 - 96,000 - 96,000
Issuance of common stock for cash 77,540 - 9,000 - 9,000
Net income - - - 127,000 127,000
--------------------------------------------------------------------------
Balance at December 31, 1996 2,810,803 $ 3,000 $2,231,000 $ 141,000 $2,375,000
==========================================================================
</TABLE>
See accompanying notes.
F-6
<PAGE> 55
Panorama International Productions, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
SEPTEMBER 22
YEAR ENDED 1995 TO
DECEMBER 31 DECEMBER 31
1996 1995
---------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 127,000 $ 14,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 150,000 32,000
Deferred income taxes 10,000 5,000
Provision for bad debts 10,000 -
Changes in operating assets and liabilities net
of effect of acquisition:
Accounts receivable 11,000 (99,000)
Inventories 19,000 (25,000)
Prepaid expenses and other current assets (13,000) (16,000)
Accounts payable (92,000) 29,000
Accrued expenses 22,000 13,000
Income tax payable 16,000 -
-------------------------------
Net cash provided by (used in) operating activities 260,000 (47,000)
INVESTING ACTIVITIES
Acquisition of business including purchase costs - (2,098,000)
Cash received in acquisition of business 36,000 -
Additions to trademark, film, and book libraries (318,000) -
Purchases of property, plant and equipment (23,000) (1,000)
-------------------------------
Net cash used in investing activities (305,000) (2,099,000)
FINANCING ACTIVITIES
Increase in notes payable 433,000 788,000
Payments on notes payable (100,000) -
Net proceeds from the issuance of common stock 105,000 1,793,000
Payments on deferred financing costs (69,000) (287,000)
-------------------------------
Net cash provided by financing activities 369,000 2,294,000
-------------------------------
Net increase in cash during the period 324,000 148,000
Cash at beginning of year 148,000 -
-------------------------------
Cash at end of year $ 472,000 $ 148,000
===============================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 231,000 $ 27,000
Income taxes $ 1,000 $ -
</TABLE>
See accompanying notes.
F-7
<PAGE> 56
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Panorama International Productions, Inc. (the Company) was incorporated in
Delaware on July 27, 1995. On September 22, 1995, the Company purchased the
operating assets (which primarily consisted of a film library of 42 titles) of
Cinescope Enterprises, Inc. On July 1, 1996, the Company acquired the operating
assets and liabilities of The Sierra Press, Inc. The consolidated financial
statements include the accounts of the Company and its wholly owned subsidiary,
Sierra Press. All significant intercompany transactions and balances have been
eliminated.
NATURE OF BUSINESS AND CONCENTRATION OF CREDIT RISK
The Company's operations primarily consist of the recording and distribution of
historical, cultural and destination video tapes and postcard books for the
tourist industry. A concentration of credit risk relating to accounts receivable
in the tourist industry exists. The Company generally does not require
collateral, and losses on uncollectible receivables have been within
management's expectations. The Company has two customers (one is a major
entertainment company and the other is a government sponsored company) for which
the revenues exceed 10% of total revenues. Individually, revenues from these
customers were 12% each of total sales for the year ended December 31, 1996. In
addition, these combined customers accounted for 15% of accounts receivable at
December 31, 1996.
REVENUE RECOGNITION
Sales are recorded when products are shipped to customers.
ESTIMATES USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates and such differences may
be material to the financial statement.
F-8
<PAGE> 57
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial statements to
conform to 1996 presentation.
CASH AND CASH EQUIVALENTS
The Company considers securities purchased within three months of their date of
maturity to be cash equivalents. Due to the short maturity of these instruments
the carrying value is stated at cost which approximates the fair market value.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets for machinery and equipment and furniture, fixtures and computer
equipment. Estimated useful lives used in the calculation of depreciation are as
follows:
Machinery and equipment 5 years
Furniture, fixtures and computer equipment 5 years
EARNINGS PER SHARE
Earnings per share is computed based upon the weighted average number of common
shares outstanding plus common stock equivalents calculated under the treasury
stock method in accordance with Accounting Principles Board No. 15, "Computing
Earnings Per Share" (APB 15). In calculating earnings per share, retroactive
effect was given to certain stock and warrant transactions that were within one
year of the estimated initial filing date of the registration statement relating
to an initial public offering. The financial statements and footnotes have been
adjusted to reflect a 1 to 1.9 reverse stock split completed subsequent to year
end.
F-9
<PAGE> 58
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123). Pursuant to SFAS No. 123, a company may elect to continue expense
recognition under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB No. 25) or to recognize compensation expense for
grants of stock, stock options, and other equity instruments to employees based
on the fair value methodology outlined in SFAS No. 123. SFAS No. 123 further
specifies that companies electing to continue expense recognition under APB No.
25 are required to disclose pro forma net income as if fair value based
accounting prescribed by SFAS No. 123 has been applied. The Company has elected
to continue expense recognition pursuant to ABP No. 25. SFAS No. 123 is
effective for fiscal years beginning after December 15, 1995.
INCOME TAXES
Income taxes are reported in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under the asset and liability
method of Statement 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income the years in which those
temporary differences are expected to be recovered or settled. Under Statement
109, the effect of deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
DEFERRED FINANCING COSTS
Costs relating to obtaining the financing for the Company have been deferred and
are being amortized on an interest method over ten years. Amortization for the
period ended December 31, 1996 and 1995, was $32,000 and $7,000, respectively.
FILM LIBRARIES
Costs directly related to the production of films for the Company have been
deferred and are being amortized using a straight-line method over 15 years.
Deferred film costs for 1996 and 1995 was $297,000 and $338,000, respectively.
Amortization for the period ended December 31, 1996 and 1995 was $32,000 and
$6,000, respectively.
F-10
<PAGE> 59
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
2. ORGANIZATION AND ACQUISITION
On September 22, 1995, the Company acquired the operating assets of Cinescope
Enterprises, Inc. for $2,000,000 and incurred costs of $98,000. Funding was
provided by the issuance of 979,441 shares of Common Stock at $1.90 per share
and the proceeds from $325,000 of promissory notes. The acquisition has been
accounted for as a purchase.
The purchase price including incurred costs exceeded the net assets acquired by
$2,087,000 which is allocated to film library and excess of cost over fair value
of assets acquired. The film library and excess of cost over fair value of
assets acquired are being amortized on a straight-line basis over 15 years and
25 years, respectively. It is the Company's policy to evaluate these costs and
recognize impairment if it is probable that the recorded amounts are not
recoverable from future cash flows.
On July 1, 1996, the Company acquired the operating assets and assumed
liabilities of The Sierra Press, Inc. Consideration was given to the former
owners of The Sierra Press, Inc. in the form of 177,003 shares at $1.90 per
share. The acquisition has been accounted for as a purchase. The purchase price
was allocated to the assets acquired and liabilities assumed based on their
preliminary estimated fair values at the date of acquisition as follows:
<TABLE>
<S> <C>
Cash $ 36,000
Accounts receivable 71,000
Inventory 291,000
Book library 55,000
Fixed assets 26,000
Accounts payable (43,000)
Notes payable (100,000)
</TABLE>
Included in the purchase agreement for The Sierra Press, Inc. are provisions to
issue additional shares to the former owners contingent on pretax income of
Sierra Press through 1998. Under this agreement, the maximum number of Company
shares obligated to be issued to the former owners is 157,895. Subsequent to
year end the purchase agreement was amended to remove the contingent nature of
the additional shares and all 157,895 shares were issued to the former owners.
The Company will account for the shares issued as additional purchase price.
F-11
<PAGE> 60
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
3. INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
--------------------------------
<S> <C> <C>
Raw materials $ 61,000 $ 41,000
Finished goods 343,000 91,000
--------------------------------
$404,000 $132,000
================================
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
Machinery and equipment $ 54,000 $ 18,000
Furniture, fixtures and computer equipment 17,000 4,000
---------------------------------
71,000 22,000
Less accumulated depreciation (11,000) (1,000)
---------------------------------
$ 60,000 $ 21,000
=================================
</TABLE>
5. TRADEMARK, FILM AND BOOK LIBRARIES AND EXCESS OF COST OVER FAIR
VALUE OF ASSETS PURCHASED
Trademark, film and book libraries and excess of cost over fair value of assets
purchased consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------
<S> <C> <C>
Trademark and book library $ 77,000 $ -
Film library 634,000 338,000
Excess of cost over fair value of assets acquired 1,749,000 1,749,000
---------------------------------------
2,460,000 2,087,000
Less accumulated amortization (131,000) (23,000)
---------------------------------------
$ 2,329,000 $ 2,064,000
=======================================
</TABLE>
F-12
<PAGE> 61
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
6. NOTES PAYABLE
Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
Subordinated promissory notes payable to various
holders bearing interest at 15% per annum, interest
payable monthly, due September 2005 through
July 2006 $1,500,000 $ 988,000
Less discount on promissory notes payable 260,000 181,000
----------------------------
$1,240,000 $ 807,000
============================
</TABLE>
The promissory notes payable are not secured by any of the Company's assets. In
addition, these notes are subordinated to any other senior debt the Company may
incur. In connection with the issuance of the promissory notes, the Company
issued 148,026 shares of Common Stock to the note holders at no extra cost. The
Common Stock issued was valued at $1.90 per share or $281,000. The $281,000 is
classified as discount on promissory notes payable and is being amortized as
interest expense on the interest method over the term of the notes payable (10
years). The accumulated amortization at December 31, 1996 and 1995 is $21,000
and $4,000, respectively.
The promissory notes payable may be prepaid by the Company on or after the third
anniversary date without any prepayment penalty. The promissory notes payable
may be accelerated on or after the fifth anniversary date by the note holders
whereby the note holders may demand prepayment of principal and interest in part
or in full.
F-13
<PAGE> 62
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
7. INCOME TAXES
The Company has accounted for income taxes using the guidance of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No.
109). Under SFAS No. 109, deferred taxes are determined based on the difference
between the financial statement basis and tax basis of assets and liabilities,
and is measured at the enacted tax rates that will be in effect when those
differences reverse. Deferred tax expense is determined by the change in the net
deferred tax asset or liability.
The provision for income tax consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Current:
Federal $10,000 $ -
State 6,000 -
----------------------
16,000 -
Deferred:
Federal 6,000 4,000
State 5,000 1,000
----------------------
11,000 5,000
----------------------
$27,000 $ 5,000
======================
</TABLE>
The provision for income taxes is at a rate different than the U.S. federal
statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
1996 1995
------------------
<S> <C> <C>
Computed federal statutory tax rate 34% 34%
State taxes, net of federal taxes 7% 5%
Lower tax rate due to size of income (21%) (13%)
Net operating loss carryforward benefit (1%) --
Other (1%) --
------------------
18% 26%
==================
</TABLE>
F-14
<PAGE> 63
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
The tax effect of temporary differences results in deferred income tax
liabilities as follows:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
--------------------------
<S> <C> <C>
1996
Deferred tax liabilities:
Depreciation and amortization $ - $14,000
Prepaid expenses 1,000 -
----------------------
Total deferred tax liabilities $ 1,000 $14,000
======================
CURRENT NON-CURRENT
--------------------------
1995
Deferred tax liabilities:
Depreciation and amortization $ - $ 4,000
Prepaid expenses 2,000 -
Net operating loss carryforwards (1,000) -
----------------------
Total deferred tax liabilities $ 1,000 $ 4,000
======================
</TABLE>
F-15
<PAGE> 64
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
The Company's effective tax rate differs with the maximum federal statutory rate
due to depreciation, amortization, certain non-deductible expenses and lower
rates applicable to the Company's level of income. For tax purposes, the Company
has an operating loss carryover of approximately $0 and $1,000 for 1996 and
1995, respectively.
8. SHAREHOLDERS' EQUITY
In July 1995 and September 1995, an officer of the Company was granted options
to purchase 47,368 shares of Common Stock at an exercise price of $.001 per
share and 189,474 shares of Common Stock at an exercise price of $1.90 per
share, respectively. The fair market value of the options issued in July 1995 is
considered to be $.001 and the fair market value of the options issued in
September 1995 is considered to be $1.90 based on negotiating the acquisition of
the operating assets of Cinescope Enterprises, Inc. on September 22, 1995. The
47,368 shares granted at $.001 per share are vested as of December 31, 1996, and
expire in August 2020. The 189,474 shares granted at $1.90 per share become
exercisable in equal annual installments over four years and expire in August
2020. As of December 31, 1996, of the options to purchase 189,474 shares of
Common Stock at $1.90 per share, 47,369 shares are vested. No options have been
exercised as of December 31, 1996.
Under the principles of APB No. 25, the Company does not recognize compensation
expense associated with the grant of stock options. SFAS No. 123 requires the
use of option valuation models to provide supplemental information regarding
options granted after 1994. Pro forma information regarding net income was
determined as if the Company had accounted for its employee stock options under
the fair value method of the Statement. The assumptions used in option valuation
models are highly subjective, and because changes in these subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not provide a reliable single measure of the
fair value of its employee stock options. The Company's pro forma information is
as follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------
<S> <C> <C>
Net income - as reported $ 127,000 $ 14,000
Net income (loss) - pro forma 59,000 (16,000)
Earnings per share - as reported $ 0.04 $ --
Earnings (loss) per share - pro forma 0.02 (0.01)
</TABLE>
F-16
<PAGE> 65
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
9. RELATED PARTY TRANSACTIONS
The Company leases the land for its Sierra Press division from a company owned
by a former owner of The Sierra Press, Inc. and current principal shareholder
and director of the Company. The lease has been properly accounted for by the
Company and rent paid by the Company approximates fair market value. Rent
expense incurred on the land during 1996 was $18,000.
In connection with the private placement of the Company's subordinated
promissory notes which was concluded in July 1996, the Company paid
approximately $120,000 to InterBank Communications, Inc. for consulting
services, and paid approximately $80,000 to Bronson & Migliaccio for legal
services. The sole shareholder of InterBank Communications, Inc. and a partner
of Bronson & Migliaccio serve as directors to the Company.
10. LEASES
The Company leases its facilities and certain other equipment under operating
lease agreements expiring through 2001. Future minimum lease payments under
noncancelable operating leases consisted of the following at December 31, 1996:
<TABLE>
<S> <C>
Year ending December 31:
1997 $ 84,000
1998 84,000
1999 77,000
2000 41,000
2001 and thereafter 18,000
---------
Total future minimum lease payments $ 304,000
=========
</TABLE>
Total rent expense incurred during 1996 and 1995 was $59,000 and $12,000,
respectively.
F-17
<PAGE> 66
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
11. PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information presents the consolidated results
of operations as if the acquisition of Sierra Press, Inc. and Cinescope
Enterprises, Inc., accounted for under the purchase method of accounting, as
noted, had occurred at the beginning of the years 1995 and 1996, after giving
effect to certain adjustments including depreciation and amortization of assets
acquired, interest expense on acquisition debt, and income taxes. This pro forma
information is presented for comparative purposes only and does not purport to
be indicative of what would have occurred had the acquisitions been made as of
those dates or results which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1996
----------------------------
<S> <C> <C>
Net sales $2,464,000 $2,357,000
Net income $ 193,000 $ 135,000
Earnings per share $ 0.06 $ 0.04
</TABLE>
12. SUBSEQUENT EVENTS
The Company issued a 1 to 1.9 reverse stock split subsequent to year end. In
accordance with SAB 83, the financial statements and footnote disclosure
reflects the reverse stock split for all reporting periods. In addition, the
calculation of earnings per share has given effect to the reverse stock split.
The Company amended its Certificate of Incorporation subsequent to year end. The
amendment increases the authorized shares of Common Stock to 10,000,000. In
addition the amendment authorized 5,000,000 shares of Preferred Stock at $.001
par value per share. The Company has not issued any shares of Preferred Stock
subsequent to year end.
The Sierra Press, Inc. purchase agreement was amended subsequent to year end to
remove the contingent nature of the additional shares and all 157,895 shares
were issued to the former owners. In accordance with Accounting Principles Board
Opinion No. 16, "Accounting for Business Combinations" the Company will account
for the shares issued as additional purchase price. The calculation of earnings
per share has given effect to the reverse stock split. The issuance will result
in an additional $300,000 in excess of cost over fair value of assets and
approximately $20,000 in additional annual amortization expense beginning in
1997.
F-18
<PAGE> 67
Panorama International Productions, Inc.
Notes to Consolidated Financial Statements (continued)
12. SUBSEQUENT EVENTS (CONTINUED)
The Company is planning to file a Form SB-2 Registration Statement with the
Securities and Exchange Commission in connection with an initial public offering
of its common stock. Management has indicated that the proceeds from the
offering will be used to repay subordinated promissory notes payable, produce
new video and book titles, update existing video and book titles and increase
working capital.
The Company issued 26,316 shares of Common Stock to the Founder of Cinescope
Enterprises, Inc. (Predecessor to Panorama International Productions, Inc.) in
May 1997. In consideration therefor, the Founder paid $50 and executed a non
recourse promissory note to the Company in the amount of $49,950, secured by the
shares of Common Stock. The promissory note is non-interest bearing and matures
in May 1999. In accordance with the agreement with the Founder, the Company is
obligated to adjust the number of shares so that the Founder holds that number
of shares of Common Stock with an aggregate value of $250,000 upon completion of
the public offering, based on the initial public offering price. Accordingly,
the Company will be required to issue the Founder additional shares of Common
Stock at the completion of the initial public offering. The Company will account
for this transaction in the second quarter of 1997.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosure for financial instruments:
Cash and Cash Equivalents: The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.
Notes payable: The carrying amounts of the Company's borrowings on notes payable
approximate their fair values.
F-19
<PAGE> 68
Unaudited Consolidated Financial Statements
Panorama International Productions, Inc.
For the quarter ended March 31, 1997
F-20
<PAGE> 69
Panorama International Productions, Inc.
Unaudited Consolidated Balance Sheet
March 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 276,000
Accounts receivable, net of provision
for bad debt of $10,000 340,000
Inventories 452,000
Prepaid expenses and other current assets 75,000
----------
Total current assets 1,143,000
Property, plant and equipment, net 73,000
Trademark, film, and book libraries and excess of cost
over fair value of assets purchased, net of accumulated
amortization of $162,000 2,644,000
Deferred financing costs, net of accumulated
amortization of $47,000 309,000
Deferred initial public offering costs 94,000
==========
Total assets $4,263,000
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 318,000
Accrued expenses 36,000
Deferred tax liability 1,000
----------
Total current liabilities 355,000
Notes payable, net of discount 1,247,000
Deferred tax liabilities 14,000
Commitments
Shareholders' equity:
Common stock, $.001 par value:
Authorized shares - 3,157,895
Issued and outstanding shares - 2,968,698 3,000
Additional paid-in capital 2,531,000
Retained earnings 113,000
----------
Total shareholders' equity 2,647,000
----------
Total liabilities and shareholders' equity $4,263,000
==========
</TABLE>
See accompanying notes.
F-21
<PAGE> 70
Panorama International Productions, Inc.
Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
MARCH 31 MARCH 31
1997 1996
--------------------------------
<S> <C> <C>
Sales $ 569,000 $ 439,000
Cost of sales 266,000 192,000
-------------------------------
Gross profit 303,000 247,000
Depreciation and amortization 43,000 33,000
Selling and marketing 50,000 31,000
General and administrative expense 184,000 90,000
-------------------------------
Income before interest expense and income taxes 26,000 93,000
Interest expense (63,000) (48,000)
Interest income 3,000 2,000
-------------------------------
Income (Loss) before income taxes (34,000) 47,000
Provision for income tax benefit (expense) 6,000 (8,000)
-------------------------------
Net income (Loss) $ (28,000) $ 39,000
===============================
Earnings per common and common equivalent share $ (0.01) $ 0.01
Weighted average common and common
equivalent shares outstanding 3,191,935 3,191,935
</TABLE>
See accompanying notes.
F-22
<PAGE> 71
Panorama International Productions, Inc.
Unaudited Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Shares Stock Capital Earnings Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 2,810,803 $ 3,000 $ 2,231,000 $ 141,000 $ 2,375,000
SHARES ISSUED TO COMPLETE
PURCHASE OF SIERRA PRESS, INC. 157,895 - 300,000 - 300,000
NET INCOME - - - (28,000) (28,000)
--------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1997 2,968,698 $ 3,000 $ 2,531,000 $ 113,000 $ 2,647,000
======================================================================================
</TABLE>
See accompanying notes.
F-23
<PAGE> 72
Panorama International Productions, Inc.
Unaudited Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
MARCH 31 MARCH 31
1997 1996
---------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (28,000) $ 39,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 50,000 33,000
Deferred income taxes - (1,000)
Changes in operating assets and liabilities net
of effect of acquisition:
Accounts receivable (189,000) (154,000)
Inventories (48,000) (46,000)
Prepaid expenses and other current assets (40,000) 17,000
Accounts payable 231,000 52,000
Accrued expenses 1,000 8,000
Income tax payable (16,000) 8,000
---------------------------
Net cash provided by (used in) operating activities (39,000) (44,000)
INVESTING ACTIVITIES
Additions to trademark, film, and book libraries (46,000) (63,000)
Purchases of property, plant and equipment (17,000) (14,000)
---------------------------
Net cash used in investing activities (63,000) (77,000)
FINANCING ACTIVITIES
Increase in notes payable - 237,000
Payments on notes payable - 55,000
Payments on deferred financing costs - (23,000)
Payments on deferred initial public offering costs (94,000) -
---------------------------
Net cash (used) provided by financing activities (94,000) 269,000
---------------------------
Net increase in cash during the period (196,000) 148,000
Cash at beginning of period 472,000 148,000
---------------------------
Cash at end of period $ 276,000 $ 296,000
===========================
</TABLE>
See accompanying notes.
F-24
<PAGE> 73
Panorama International Productions, Inc.
Notes to Unaudited Consolidated Financial Statements
December 31, 1996
1. GENERAL
All interim financial data is unaudited, but, in the opinion of Panorama
International Productions, Inc. (the Company), such unaudited statements include
all adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results for the interim periods. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Nevertheless, the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading.
The results of operations for current interim periods are not necessarily
indicative of results to be expected for the current year. The Company's
operations are subject to seasonality and other factors which affect the number
of visitors to national and state parks, monuments and historical sites.
These financial statements should be read in conjunction with the financial
statements and the notes thereto, included in the Company's Form SB-2, as filed
with the Securities and Exchange Commission.
Earnings (loss) per common and common equivalent share are computed based upon
the weighted average number of outstanding shares of common stock and common
stock equivalents under the treasury stock method in accordance with Accounting
Principles Board No. 15, "Computing Earnings Per Share" (APB 15). In calculating
earnings per share, retroactive effect was given to certain stock and warrant
transactions that were within one year of the estimated initial filing date of
the registration statement relating to an initial public offering. The financial
statements and footnotes have been adjusted to reflect a 1 to 1.9 reverse stock
split issued subsequent to year end.
During the first quarter 1997, the Sierra Press, Inc. purchase agreement was
amended to remove the contingent nature of the additional shares and all 157,895
shares were issued the former owners. In accordance with Accounting Principles
Board Opinion No. 16, "Accounting for Business Combinations" the Company will
account for the shares issued as additional purchase price. The calculation of
earnings per share has given effect to the reverse stock split.
F-25
<PAGE> 74
Panorama International Productions, Inc.
Notes to Unaudited Consolidated Financial Statements (continued)
December 31, 1996
2. INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
---------------------------
<S> <C> <C>
Raw materials $ 62,000 $ 61,000
Finished goods 390,000 343,000
-------- --------
$452,000 $404,000
======== ========
</TABLE>
3. SUBSEQUENT EVENTS
Subsequent to year end the Company issued a 1 to 1.9 reverse stock split. In
accordance with SAB 83, the financial statements and footnote disclosure
reflects the reverse stock split for all reporting periods. In addition, the
calculation of earnings per share has given effect to the reverse stock split.
The Company amended its Certificate of Incorporation subsequent to year end. The
amendment increases the authorized shares of Common Stock to 10,000,000. In
addition the amendment authorized 5,000,000 shares of Preferred Stock at $.001
par value per share. The Company has not issued any shares of Preferred Stock
subsequent to year end.
The Company is planning to file a Form SB-2 Registration Statement with the
Securities and Exchange Commission in connection with an initial public offering
of its common stock. Management has indicated that the proceeds from the
offering will be used to repay subordinated promissory notes payable, produce
new video and book titles, update existing video and book titles and increase
working capital.
The Company issued 26,316 shares of Common Stock to the Founder of Cinescope
Enterprises, Inc. (Predecessor to Panorama International Productions, Inc.) in
May 1997. In consideration therefor, the Founder paid $50 and executed a non
recourse promissory note to the Company in the amount of $49,950, secured by the
shares of Common Stock. The promissory note is non-interest bearing and matures
in May 1999. In accordance with the agreement with the Founder, the Company is
obligated to adjust the number of shares so that the Founder holds that number
of shares of Common Stock with an aggregate value of $250,000 upon the
completion of the public offering, based on the initial public offering price.
Accordingly, the Company will be required to issue the Founder additional shares
of Common Stock at the completion of the initial public offering. The Company
will account for this transaction in the second quarter of 1997.
F-26
<PAGE> 75
Audited Financial Statements
Cinescope Enterprises, Inc.
(Predecessor to Panorama
International Productions, Inc.)
For the period from January 1, 1995 to
September 21, 1995
with Report of Independent Auditors
F-27
<PAGE> 76
Report of Independent Auditors
The Board of Directors and Shareholders
Cinescope Enterprises, Inc.
We have audited the statements of operations and cash flows of Cinescope
Enterprises, Inc. for the period from January 1, 1995 to September 21, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Cinescope
Enterprises, Inc. for the period from January 1, 1995 to September 21, 1995, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
March 7, 1997
F-28
<PAGE> 77
Cinescope Enterprises, Inc.
(Predecessor to Panorama International Productions, Inc.)
Statement of Operations
For the period from January 1, 1995 to September 21, 1995
<TABLE>
<S> <C>
Sales $1,673,000
Cost of sales 818,000
----------
Gross profit 855,000
Depreciation and amortization 6,000
Selling and marketing expense 94,000
General and administrative expense 222,000
----------
Income before interest income and income taxes 533,000
Interest income 4,000
----------
Income before income taxes 537,000
Provision for income taxes 8,000
----------
Net income $ 529,000
==========
</TABLE>
See accompanying notes.
F-29
<PAGE> 78
Cinescope Enterprises, Inc.
(Predecessor to Panorama International Productions, Inc.)
Statement of Cash Flows
For the period from January 1, 1995 to September 21, 1995
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 529,000
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,000
Changes in operating assets and
liabilities:
Accounts receivable (41,000)
Accounts payable and accrued expenses 42,000
---------
Net cash provided by operating activities 536,000
INVESTING ACTIVITIES
Purchases of property, plant and equipment (10,000)
---------
Net cash used in investing activities (10,000)
FINANCING ACTIVITIES
Dividends paid (707,000)
---------
Net cash used in financing activities (707,000)
---------
Net decrease in cash (181,000)
Cash at beginning of period 422,000
---------
Cash at end of period $ 241,000
=========
Supplemental disclosure of cash flow information:
Cash paid during the period
for:
Interest $ -
Income taxes $ -
</TABLE>
See accompanying notes.
F-30
<PAGE> 79
Cinescope Enterprises, Inc.
(Predecessor to Panorama International Productions, Inc.)
Notes to Financial Statements
September 21, 1995
1. BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY AND CONCENTRATION OF CREDIT RISK
The Company's operations primarily consist of the recording and distribution of
historical, cultural and destination video tapes for the tourist industry. The
Company has three major customers (two of which are major entertainment
companies and the other of which is a government-sponsored company).
Individually, revenues from these customers were 19%, 12% and 11% of total sales
from January 1, 1995 to September 21, 1995.
REVENUE RECOGNITION
Sales are recorded when products are shipped to customers.
FILM COSTS
Costs related to the production of films for the Company have been expensed as
incurred. The Company did not incur significant film costs for the period from
January 1, 1995 to September 21, 1995.
INCOME TAXES
The Company and its shareholders have elected S Corporation status under the
Internal Revenue Code and related California provisions. Accordingly, the
corporate earnings are taxed at the individual shareholder level. Income tax
expense at the Corporate level consists primarily of state taxes.
ESTIMATES USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. Actual results could
differ from those estimates and such differences may be material to the
financial statements.
F-31
<PAGE> 80
Cinescope Enterprises, Inc.
(Predecessor to Panorama International Productions, Inc.)
Notes to Financial Statements (continued)
September 21, 1995
2. RELATED PARTY TRANSACTIONS
During the period ended September 21, 1995 the Company had sales of
approximately $128,000 to Gifts Limited, a company owned by the shareholders of
Cinescope Enterprises, Inc. At September 21, 1995 there was approximately
$220,000 in outstanding accounts receivable from Gifts Limited.
3. LEASES
The Company leases its facility under a noncancelable operating lease agreement
expiring through November 1996. Future minimum lease payments under
noncancelable operating leases are $12,000 and $39,000 for 1995 and 1996,
respectively. Total rent expense incurred from January 1, 1995 through September
21, 1995 was $24,000.
4. SUBSEQUENT EVENT
On September 22, 1995, the Company sold all of its operating assets (which
primarily consist of a film library of 42 titles) to Panorama International
Productions, Inc. for $2,000,000.
F-32
<PAGE> 81
Audited Financial Statements
The Sierra Press, Inc.
For the period from January 1, 1996 to June 30,
1996 and the year ended December 31, 1995
with Report of Independent Auditors
F-33
<PAGE> 82
Report of Independent Auditors
The Board of Directors and Shareholders
The Sierra Press, Inc.
We have audited the accompanying balance sheets of The Sierra Press, Inc. as of
June 30, 1996 and December 31, 1995, and the related statements of operations,
shareholders' equity and cash flows for the year ended December 31, 1995, and
the period from January 1, 1996 to June 30, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Sierra Press, Inc. at June
30, 1996 and December 31, 1995, and the results of its operations and its cash
flows for the year ended December 31, 1995, and for the period January 1, 1996
to June 30, 1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
March 7, 1997
F-34
<PAGE> 83
The Sierra Press, Inc.
Balance Sheets
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1996 1995
---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 36,000 $ 4,000
Accounts receivable 71,000 11,000
Inventories 291,000 254,000
------------------------
Total current assets 398,000 269,000
Property, plant and equipment, net 302,000 45,000
Other assets 3,000 3,000
------------------------
Total assets $703,000 $317,000
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 43,000 $ 5,000
Accrued liabilities 20,000 12,000
Current maturities of long-term debt 100,000 105,000
------------------------
Total current liabilities 163,000 122,000
Long-term debt, less current maturities 250,000 -
Commitments
Shareholders' equity:
Common stock, $1, par value:
Authorized shares - 3,000
Issued and outstanding shares - 3,000 3,000 3,000
Retained earnings 287,000 192,000
------------------------
Total shareholders' equity 290,000 195,000
------------------------
Total liabilities and shareholders' equity $703,000 $317,000
========================
</TABLE>
See accompanying notes.
F-35
<PAGE> 84
The Sierra Press, Inc.
Statements of Operations
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JANUARY 1
1996
TO YEAR ENDED
JUNE 30 DECEMBER 31
1996 1995
-------------------------------
<S> <C> <C>
Sales $ 249,000 $ 422,000
Cost of sales 84,000 135,000
---------------------------
Gross profit 165,000 287,000
Depreciation and amortization 1,000 2,000
Selling and marketing expense 45,000 40,000
General and administrative expense 88,000 171,000
---------------------------
Income before interest expense and income taxes 31,000 74,000
Gain on sale of land 89,000 -
Interest expense (6,000) (16,000)
---------------------------
Income before provision for income taxes 114,000 58,000
Provision for income taxes 1,000 1,000
---------------------------
Net income $ 113,000 $ 57,000
===========================
</TABLE>
See accompanying notes.
F-36
<PAGE> 85
The Sierra Press, Inc.
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
--------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1994 $ 3,000 $ 138,000 $ 141,000
Net income - 57,000 57,000
Dividends - (3,000) (3,000)
--------------------------------------------
Balance at December 31, 1995 3,000 192,000 195,000
Net income - 113,000 113,000
Dividends - (18,000) (18,000)
--------------------------------------------
Balance at June 30, 1996 $ 3,000 $ 287,000 $ 290,000
============================================
</TABLE>
See accompanying notes.
F-37
<PAGE> 86
The Sierra Press, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JANUARY 1
1996
TO YEAR ENDED
JUNE 30 DECEMBER 31
1996 1995
-------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 113,000 $ 57,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,000 2,000
Changes in operating assets and liabilities:
Accounts receivable (60,000) (2,000)
Inventories (37,000) (20,000)
Other assets -- 2,000
Accounts payable 38,000 (14,000)
Accrued liabilities 8,000 -
---------------------------
Net cash provided by operating activities 63,000 25,000
INVESTING ACTIVITIES
Purchases of property, plant and equipment (302,000) (1,000)
Sale of property, plant and equipment 44,000 -
---------------------------
Net cash used in investing activities (258,000) (1,000)
FINANCING ACTIVITIES
Increase in long-term debt 264,000 -
Payments on long-term debt (19,000) (23,000)
Dividends paid (18,000) (3,000)
---------------------------
Net cash (used in) provided by financing activities 227,000 (26,000)
---------------------------
Net (decrease) increase in cash during the period 32,000 (2,000)
Cash at beginning of period 4,000 6,000
---------------------------
Cash at end of period $ 36,000 $ 4,000
===========================
Supplemental disclosure of cash flow information:
Cash paid during the period
for:
Interest $ 1,000 $ 13,000
Income taxes $ 1,000 $ 1,000
</TABLE>
See accompanying notes.
F-38
<PAGE> 87
The Sierra Press, Inc.
Notes to Financial Statements
June 30, 1996
1. BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY AND CONCENTRATION OF CREDIT RISK
The Company's operations primarily consist of printing and distribution of
national park memorabilia for the tourist industry. A concentration of credit
risk relating to accounts receivable in the tourist industry exists. The Company
generally does not require collateral, and losses on uncollectible receivables
have been within management's expectations. The Company has two customers which
accounted for 36% of total revenues for the period ended June 30, 1996 and 40%
of total revenues for the year ended December 31, 1995. In addition, these
customers also accounted for 32% and 25% of accounts receivable at June 30, 1996
and December 31, 1995, respectively.
REVENUE RECOGNITION
Sales are recorded when products are shipped to customers.
ESTIMATES USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates and such differences may
be material to the financial statements.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market. At June 30, 1996 and December 31, 1995, 100% of the inventory consists
of finished goods.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost. Depreciation is
computed using a declining method over the estimated useful lives of the assets
for machinery and equipment and furniture, fixtures and computer equipment.
F-39
<PAGE> 88
The Sierra Press, Inc.
Notes to Financial Statements (continued)
1. BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company and its shareholders have elected S Corporation status under the
Internal Revenue Code and related California provisions. Accordingly, the
corporate earnings are taxed at the individual shareholder level. Income tax
expense at the corporate level consists primarily of state taxes.
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1996 1995
---------------------------
<S> <C> <C>
Machinery and equipment $ 37,000 $ 37,000
Furniture and fixtures 27,000 27,000
Land 302,000 44,000
---------------------------
366,000 108,000
Less accumulated depreciation (64,000) (63,000)
---------------------------
$ 302,000 $ 45,000
===========================
</TABLE>
3. LONG-TERM DEBT
Notes payable consist of the following:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1996 1995
----------------------------
<S> <C> <C>
Line of credit with a commercial bank, interest rate of 10.5%
at December 31, 1995. Line was paid in full and closed
subsequent to June 30, 1996. $ 100,000 $ 38,000
Term loan with a commercial bank, interest rate of 9.25%.
Term loan was paid in full in 1996 - 19,000
Term loan with a commercial bank, interest rate of
9.8% 200,000 -
Various loans from shareholders, interest rates ranging from
9.0% to 12.0% 50,000 48,000
----------------------------
350,000 105,000
Less current portion (100,000) (105,000)
----------------------------
Total long-term debt $ 250,000 $ -
============================
</TABLE>
F-40
<PAGE> 89
The Sierra Press, Inc.
Notes to Financial Statements (continued)
4. ADVERTISING COSTS
The Company expenses all advertising costs as incurred. Advertising costs for
the period from January 1, 1996 to June 30, 1996, and for the year ended
December 31, 1995, were $4,000 and $8,000, respectively, and were recorded as
part of selling, general and administrative expenses.
5. SUBSEQUENT EVENT
On July 1, 1996, the Company sold substantially all of its operating assets, net
of certain liabilities assumed (which consisted primarily of inventory, accounts
receivable and a note payable), to Panorama International Productions, Inc.
(Panorama). Consideration was given in the form of 336,000 shares of Panorama
stock (177,003 shares subsequent to the reverse split of Panorama stock) at the
purchase date and 300,000 additional shares contingent of future income of
Sierra Press. Subsequent to the purchase date, all 300,000 contingent shares
(157,895 shares subsequent to the reverse split of Panorama stock) were issued.
F-41
<PAGE> 90
No dealer, salesperson or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with the offer made by this Prospectus. If given or
made, such information or representations must not be relied upon as having been
authorized by the Company or the Underwriters. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the Company since
the date hereof. This Prospectus does not constitute an offer to, or
solicitation of, anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary...................................................... 4
Risk Factors............................................................ 8
Use of Proceeds......................................................... 14
Dividend Policy......................................................... 15
Dilution................................................................ 16
Capitalization.......................................................... 17
Management's Discussion and Analysis
or Plan of Operation.................................................. 18
Industry Overview....................................................... 26
Business................................................................ 27
Management.............................................................. 36
Certain Transactions.................................................... 40
Principal and Selling Stockholders...................................... 42
Description of Securities............................................... 43
Shares Eligible for Future Sale......................................... 44
Underwriting............................................................ 45
Legal Matters........................................................... 47
Experts................................................................. 47
Additional Information.................................................. 47
Index to Financial Statements........................................... F-1
</TABLE>
--------------------
Until __________, 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities offered hereby, whether or
not participating in this Offering, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
1,450,619 SHARES
[LOGO]
PANORAMA
INTERNATIONAL
PRODUCTIONS, INC.
Common Stock
----------
PROSPECTUS
----------
_____________, 1997
<PAGE> 91
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation includes provisions which
limit the liability of its directors. As permitted by applicable provisions of
Delaware Law, directors will not be liable to the Company for monetary damages
arising from a breach of their fiduciary duty as directors in certain
circumstances. This limitation does not affect liability for any breach of a
director's duty to the Company or its stockholders (i) with respect to approval
by the director of any transaction from which he or she derives an improper
personal benefit, (ii) with respect to acts or omissions involving an absence of
good faith, that the director believes to be contrary to the best interests of
the Company or its stockholders, that involve intentional misconduct or a
knowing and culpable violation of law, that constitute an unexcused pattern or
inattention that amounts to an abdication of his or her duty to the Company or
its stockholders, or that show a reckless disregard for duty to the Company or
its stockholders in circumstances in which he or she was, or should have been
aware, in the ordinary course of performing his or her duties, of a risk of
serious injury to the Company or its stockholders, or (iii) based on
transactions between the Company and its directors or another corporation with
interrelated directors or based on improper distributions, loans or guarantees
under applicable sections of Delaware Law. This limitation of directors'
liability also does not affect the available of equitable remedies, such as
injunctive relief or rescission.
The Company's Amended and Restated Bylaws obligate the Company to
indemnify its directors, officers and other corporate agents to the full extent
permitted by Delaware Law, in terms sufficiently broad to indemnify such
persons, under certain circumstances, for liabilities (including reimbursement
of expenses incurred) arising under the Securities Act. The Company has been
advised that it is the position of the Commission that insofar as the foregoing
provision may be invoked for liabilities arising under the Securities Act, the
provision is against public policy as expressed in the Securities Act and is
therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses for the issuance and distribution of the
shares of Common Stock registered hereby, other than underwriting commissions,
fees and Underwriters' non-accountable expense allowance are set forth in the
following table:
<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- ------
<S> <C>
SEC Registration Fee............................................ $3,269
NASD Filing Fee................................................. 1,500
Nasdaq SmallCap Market Filing Fee............................... 15,000
Blue Sky Fees and Expenses...................................... 25,000
Transfer Agent Fees............................................. 10,000
Legal Fees...................................................... 150,000
Accounting Fees................................................. 100,000
Consulting Fees................................................. 15,000
Printing and Engraving Costs.................................... 50,000
Miscellaneous................................................... 50,231
------
Total................................................ $420,000
========
</TABLE>
II-1
<PAGE> 92
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since July 25, 1995, the Company sold and issued the following
unregistered securities (the numbers of which give retroactive effect to the
Reverse Stock Split):
In July 1995, the Company Issued a total of 1,167,632 shares of
Common Stock to Edward Resnick, InterBank, Jericho State Capital Corp., Richard
Chwatt, Glenn Chwatt, Harvey J. Klaris and Triton, Inc. for an aggregate total
price of $2,219, or $.002 per share.
In September 1995, the Company commenced the Private Placement of
certain "Debt Units" and "Equity Units" to accredited investors, which it
concluded in July 1996. In the Private Placement, the Company sold thirty (30)
Debt Units and forty (40) Equity Units at a price equal to $50,000 per Unit.
Each Debt Unit consists of a Subordinated Note (ten-year promissory note for
$50,000 made by the Company bearing interest at the rate of 15% per annum,
interest payable monthly in arrears), and 4,934 shares of Common Stock. Each
Equity Unit consists of 26,316 shares of Common Stock. The placement agents for
the Private Placement offering were Meyers Pollock Robbins, Inc.; Nichols,
Safina, Lerner & Co., Inc.; Strategic Assets Inc.; and Asset Allocation
Securities Corp. (collectively, the "Placement Agents"). The Placement Agents
which sold Debt Units and/or Equity Units received a commission equal to
$280,000 (8% of the gross proceeds from the offering), together with a due
diligence fee of $35,000 (1% of such gross proceeds), a non-accountable expense
allowance of $35,000 (1% of such gross proceeds) and 263,158 shares of Common
Stock.
In July 1996, the Company issued to Gold Leaf 177,003 shares of
Common Stock in consideration of the acquisition of Gold Leaf's assets by
Sierra. In January 1997, Panorama issued to Gold Leaf an additional 157,895
shares of Common Stock as additional consideration for such asset acquisition.
Pursuant to an agreement to provide certain financial and other
information and documentation, the Company agreed to sell and issue 26,316
shares of Common Stock to the Founder of Cinescope at a purchase price of $1.90
per share. On May 29, 1997, the Company issued the Founder 26,316 shares of
Common Stock and in consideration therefor, the Founder paid the Company $50 and
executed a secured promissory note in the amount of $49,950 to the Company. The
promissory note is non-interest bearing, matures on May 29, 1999, is
non-recourse to the Founder and is secured solely by the shares. In accordance
with the agreement with the Founder, the Company is obligated to adjust the
number of shares, without additional consideration, so that the Founder holds no
less than that number of shares of Common Stock representing an aggregate value
of $250,000 at the conclusion of this Offering. Assuming an initial offering
price of $6.00 per share, the Founder is entitled to a total of 41,667 shares,
and the Company will be required to issue the Founder an additional 15,351
shares of Common Stock at the conclusion of this Offering.
The sales and issuances of securities described above were (and, in
the case of the additional shares issuable to the Founder, will be) deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2) or
Regulation D promulgated under the Securities Act. The purchasers in each case
represented (and, in the case of the Founder, will represent) their intention to
acquire the securities for investment only and not with a view to the
distribution thereof. Appropriate legends are, and will be, affixed to the
promissory notes and the stock certificates issued in such transactions.
II-2
<PAGE> 93
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Title
- ------ -----
<S> <C>
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation as filed with the Delaware Secretary of
State on July 27, 1995.
3.2 Certificate of Amendment to Certificate of Incorporation, as filed
with the Delaware Secretary of State on June 4, 1997.
3.3 Amended and Restated Bylaws
4.1 Form of Underwriters' Warrant Agreement (including form of
Underwriters' Warrants)*
4.2 Form of Common Stock Certificate
5.0 Opinion of Loeb & Loeb LLP*
10.1 Asset Purchase Agreement pertaining to Cinescope Enterprises, Inc.
10.2 Lease (Burbank -- Panorama's facilities)
10.3 Lease (Mariposa -- Sierra's facilities)
10.4 Employment Agreement with Edward H. Resnick
10.5 Employment Agreement with David K. Haspel
10.6 Founder's Option Agreement with David K. Haspel
10.7 Option Agreement with David K. Haspel
10.8 Agreement with Universal Studios Hollywood
10.9 Agreement with Universal Studios Florida
10.10 Agreement with Destiny Telecomm, Inc.
10.11 Asset Purchase Agreement pertaining to The Sierra Press, Inc. (now
Gold Leaf Properties, Inc.)
10.12 Agreement Not to Compete of Gold Leaf principals
10.13 Amendment to The Sierra Press, Inc. Asset Purchase Agreement
11.0 Statement re Computation of Per Share Earnings
21.0 Subsidiaries of Registrant
23.1 Consents of Ernst & Young LLP, Independent Public Accountants
23.2 Consent of Loeb & Loeb LLP (included in the opinion to be filed as
Exhibit 5.0)*
27.0 Financial Data Schedule
</TABLE>
- --------------------
* To be filed by amendment.
ITEM 28. UNDERTAKINGS
The undersigned registrant ("Registrant") hereby undertakes as follows:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change in the
information set forth in the Registration Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement.
II-3
<PAGE> 94
(2) To provide to the Underwriters at the closing specified in
the Underwriting Agreement (filed herewith as Exhibit 1.1) certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(3) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described above in Item 24,
or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction of the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(4) For purposes of determining any liability under the
Securities Act, to treat the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1), or (4), or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it effective.
(5) For the purpose of determining any liability under the
Securities Act, to treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
Registration Statement, and the offering of such securities at that time as the
initial bona fide offering of those securities.
II-4
<PAGE> 95
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned in
the City of Burbank, State of California, on the 19th day of June, 1997.
Panorama International Productions, Inc.
By: /s/Edward H. Resnick
----------------------------
Edward H. Resnick
Chairman and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Edward H. Resnick, as his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, grant unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Edward H. Resnick Chief Executive Officer; June 19, 1997
- -------------------- Chairman of the Board;
Edward H. Resnick Secretary and Chief
Financial Officer
(Principal Executive
Officer, Principal
Financial Officer and
Principal Accounting
Officer)
</TABLE>
II-5
<PAGE> 96
<TABLE>
<S> <C> <C>
/s/David K. Haspel President; Chief Operating June 19, 1997
- ------------------ Officer and Director
David K. Haspel
/s/Simon A. Hershon Director June 19, 1997
Simon A. Hershon
/s/James L. Wilson, Jr. Director June 19, 1997
- -----------------------
James L. Wilson, Jr.
</TABLE>
II-6
<PAGE> 97
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Title Numbered Page
- ------- ----- -------------
<S> <C> <C>
1.1 Form of Underwriting Agreement ___
3.1 Certificate of Incorporation
as filed with the Delaware Secretary
of State on July 27, 1995 ___
3.2 Certificate of Amendment of
Certificate of Incorporation, as filed
with the Delaware Secretary of State
on June 4, 1997 ___
3.3 Amended and Restated Bylaws ___
4.1 Form of Underwriters' Warrant Agreement
(including form of Underwriters' Warrants)* ___
4.2 Form of Common Stock Certificate ___
5.0 Opinion of Loeb & Loeb LLP* ___
10.1 Asset Purchase Agreement
pertaining to Cinescope Enterprises, Inc. ___
10.2 Lease (Burbank -- Panorama's facilities) ___
10.3 Lease (Mariposa -- Sierra's facilities) ___
10.4 Employment Agreement with Edward H. Resnick ___
10.5 Employment Agreement with David K. Haspel ___
10.6 Founder's Option Agreement with David K. Haspel ___
10.7 Option Agreement with David K. Haspel ___
10.8 Agreement with Universal Studios Hollywood ___
10.9 Agreement with Universal Studios Florida ___
10.10 Agreement with Destiny Telecomm, Inc. ___
10.11 Asset Purchase Agreement pertaining to
The Sierra Press, Inc. (now Gold Leaf
Properties, Inc.) ___
</TABLE>
<PAGE> 98
<TABLE>
<S> <C> <C>
10.12 Agreement Not to Compete of Gold Leaf principals ___
10.13 First Amendment to Asset Purchase Agreement
pertaining to The Sierra Press, Inc. (now
Gold Leaf Properties, Inc.) ___
11.0 Statement re Computation of Per Share Earnings ___
21.0 Subsidiaries of Registrant ___
23.1 Consents of Ernst & Young LLP
Independent Public Accountants ___
23.2 Consent of Loeb & Loeb LLP
(included in the opinion to be filed as Exhibit 5.0) ___
27.0 Financial Data Schedule ___
</TABLE>
- ------------
* To be filed by amendment
<PAGE> 1
EXHIBIT 1.1
FORM OF UNDERWRITING AGREEMENT
<PAGE> 2
UNDERWRITING AGREEMENT
June __, 1997
Nichols, Safina, Lerner & Co., Inc.
800 Third Avenue
New York, New York 10022
___________________________
___________________________
___________________________
Dear Sirs:
Panorama International Productions, Inc., a Delaware
corporation (the "Company"), proposes, subject to the terms and conditions
stated herein, to issue and sell to you, 1,000,000 shares of the common stock,
$.001 par value (the "Common Stock") of the Company, and the stockholders of
the Company named in Schedule I hereto (the "Selling Stockholders") propose,
subject to the terms and conditions stated herein, to issue and sell to you
450,619 shares of the Common Stock of the Company. The aggregate of the
1,450,619 shares to be sold by the Company and Selling Stockholders is herein
called the "Firm Shares". In addition, solely for the purpose of covering
over-allotments, the Company proposes to grant to you the option to purchase up
to 217,593 additional shares of Common Stock (the "Additional Shares"). The
Firm Shares and the Additional Shares are hereinafter collectively referred to
as the "Shares". The Shares are more fully described in the Registration
Statement and Prospectus referred to below.
The Company confirms as follows its agreement with you:
1. REGISTRATION STATEMENT AND PROSPECTUS: The Company
has prepared and filed with the Securities and
<PAGE> 3
Exchange Commission (the "Commission"), in accordance with the Securities Act
of 1933, as amended, and the rules and regulations of the Commission
promulgated thereunder (the "Rules and Regulations", and together with said
Act, the "Act"), a registration statement on Form SB-2 (File No. ___________)
and may have filed one or more amendments thereto, including in such
registration statement and in certain amendments thereto a related preliminary
prospectus for the registration under the Act of the Shares. In addition,
subject to the provisions of Section 4(e) hereof, the Company has filed or will
promptly file a further amendment to such registration statement prior to the
effectiveness of such registration statement, unless an amendment is not
required pursuant to Rule 430A of the Rules and Regulations. As used in this
Agreement, the term "Registration Statement" means such registration statement,
including the prospectus, financial statements and schedules thereto, exhibits
and other documents filed as part thereof, as amended when, and in the form in
which, it is declared effective by the Commission, and, in the event any
post-effective amendment thereto is filed thereafter and on or before the
Closing Date (as hereinafter defined), shall also mean (from and after the date
such post-effective amendment is effective under the Act) such registration
statement as so amended, provided that such Registration Statement, at the time
it becomes effective, may omit such information as is permitted to be omitted
from the Registration Statement when it becomes effective pursuant to Rule 430A
of the Rules and Regulations, which information ("Rule 430 Information") shall
be deemed to be included in such Registration Statement when a final prospectus
is filed with the Commission in accordance with Rules 430A and 424(b)(1) or (4)
of the Rules and Regulations; the term "Preliminary Prospectus" means each
prospectus included in the Registration Statement, or any amendments thereto,
before it becomes effective under the Act, the form of prospectus omitting Rule
430A Information included in the Registration Statement when it becomes
effective, if applicable (the "Rule 430A Prospectus"), and any prospectus filed
by the Company with your consent pursuant to Rule 424(a) of the Regulations;
the term "Prospectus" means the final prospectus included as part of the
Registration Statement, except that (i) if any
2
<PAGE> 4
prospectus (including any preliminary prospectus) which differs from such
prospectus included in the Registration Statement is provided to you for use in
connection with the offering of the Shares (whether or not such differing
prospectus is required to be filed by the Company pursuant to Rule 424(b) under
the Act), the term "Prospectus" as used herein shall mean such differing
prospectus from and after the date on which it shall have been first used, and
(ii) in the event any supplement to or amendment of such prospectus is made
after the date on which the Registration Statement is declared effective and on
or prior to the Closing Date, the term "Prospectus" shall also mean (with
respect to any supplement, from and after the date such supplement is first
used or, with respect to any amendment, the date such amendment is effective
under the Act) such prospectus as so supplemented or amended; and the term
"Effective Date" means (i) if the Company and you have determined not to
proceed pursuant to Rule 430A under the Act, the date on which the Registration
Statement becomes effective, or (ii) if the Company and you have determined to
proceed pursuant to Rule 430A under the Act, the date of this Agreement.
2. AGREEMENTS TO SELL AND PURCHASE: Subject to the
terms and conditions herein set forth, the Company and each of the Selling
Stockholders agree, severally and not jointly, to sell to you and each of you
agree, severally and not jointly, to purchase from the Company, and each of the
Selling Stockholders, at a purchase price of $_______ per Firm Share, the
number of Shares (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying the aggregate number of Firm Shares to be sold by the
Company and each of the Selling Stockholders as set forth opposite their
respective names in
3
<PAGE> 5
Schedule I hereto by a fraction, the numerator of which is the aggregate number
of Firm Shares to be purchased by each of you as set forth opposite your
respective names in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased from the Company and the
Selling Stockholders hereunder.
Subject to the terms and conditions herein set forth, the
Company agrees to sell to you, and you shall have the right to purchase from
the Company, up to 217,593 Additional Shares at a purchase price of $_____ per
Additional Share. Additional Shares may be purchased solely for the purpose of
covering over-allotments made in connection with the offering of the Firm
Shares. If any Additional Shares are to be purchased, each of you, severally,
agrees to purchase from the Company that proportion (subject to such
adjustments as you may both determine to avoid fractional Additional Shares) of
the number of Additional Shares to be purchased which the number of Firm Shares
set forth opposite your name in Schedule II bears to the aggregate number of
Firm Shares to be purchased from the Company and the Selling Stockholders
hereunder. Additional Shares may be purchased at any time and from time to
time on or before the thirtieth business day following the date of this
Agreement upon written notice from you to the Company specifying the number of
Additional Shares to be purchased.
You will offer the Shares for sale at the initial public
offering price set forth on the cover of the Prospectus. After the initial
public offering, you may from time to time increase or decrease the public
offering price, in your sole discretion, by reason of changes in general market
conditions or otherwise.
3. DELIVERY AND PAYMENT: Delivery of and payment for
the Firm Shares shall be made at the offices of Nichols, Safina, Lerner & Co.,
Inc. ("NSL") at 800 Third Avenue, New York, New York 10022 (or such other place
as
4
<PAGE> 6
shall be mutually agreed upon) at such time and date, not later than the third
full business day following the Effective Date (unless the time of
effectiveness is after 4:00 P.M. New York time, in which case the date of
closing shall be no later than four business days following the Effective
Date), as you shall designate by at least forty-eight hours prior notice to the
Company and the Selling Stockholders (the "Closing Date"); provided, however,
that payment for the Firm Shares to be sold by the Selling Stockholders will be
made on such later time and date, not later than the tenth full business day
following the Effective Date, as you shall designate by at least forty-eight
hours prior notice to the Selling Stockholders.
Delivery of and payment for Additional Shares shall be made at
said offices of NSL, or at such other place, and at such time(s) and date(s)
(each an "Optional Closing Date") as may be agreed upon in writing by you and
the Company; provided, however, that in no event may an Optional Closing Date
be (i) earlier than the Closing Date or (ii) later than three business days
after the date on which the related notice to purchase Additional Shares is
given.
The Closing Date and the time and place of delivery of and
payment for the Shares may be varied by agreement between you, the Company and
the Selling Stockholders. The Optional Closing Date and the time and place of
delivery of and payment for the Additional Shares may be varied by agreement
between you and the Company. Delivery of certificates for the Shares (in
definitive form, registered in such names and in such denominations as you
shall request at least two business days prior to the Closing Date by written
notice to the Company) shall be made to you against payment of the purchase
price therefor by certified or official bank check or checks payable in New
5
<PAGE> 7
York Clearing House funds to the order of the Company and each of the Selling
Stockholders, as their interests may appear. For the purpose of expediting the
checking and packaging of certificates for the Shares, the Company agrees to
make such certificates available for inspection at the offices of NSL at least
twenty-four (24) hours prior to the Closing Date and each Optional Closing
Date, as the case may be.
On the Closing Date, at the time of the delivery and payment
for the Firm Shares, (i) the Company and the Selling Stockholders shall pay to
you as a non-accountable expense allowance a sum equal to $____ per Share for
each Firm Share purchased by you hereunder (or an aggregate of $_________ in
respect of the Firm Shares), less the $25,000 heretofore paid to you in respect
thereof, by certified or official bank check or checks payable in New York
Clearing House funds payable to the order of, and in accordance with
instructions from, you except that if the time and date of the payment for the
Firm Shares to be sold by the Selling Stockholders hereunder is not the Closing
Date, such non-accountable expense allowance shall be paid to you by the
Selling Stockholders on such later date of payment and (ii) the Company shall
issue, sell and deliver to you, for an aggregate purchase price of $10, a
warrant to purchase up to an aggregate of 100,000 Shares (the "Underwriters'
Warrant") in substantially in the form filed as an exhibit to the Registration
Statement. The shares of Common Stock issuable upon exercise of the
Underwriters' Warrant are hereinafter referred to collectively as the
"Underwriters' Warrant Shares". The Underwriters' Warrant will be exercisable
at an initial exercise price of $_____ per Share at any time and from time to
time, in whole or in part, during a four-year period commencing one year
following the Effective Date. The Company has granted you certain registration
rights with respect to the Underwriters' Warrant and the
6
<PAGE> 8
securities issuable upon exercise thereof, as set forth in said Underwriters'
Warrant.
On each Additional Closing Date, at the time of the delivery
and payment for the Additional Shares, the Company shall pay to you as a
non-accountable expense allowance, a sum equal to $____ per Additional Share
for each Additional Share purchased by you on such date by certified or
official bank check or checks payable in New York Clearing House funds payable
to the order of, and in accordance with instructions from, you.
4. COVENANTS AND AGREEMENTS OF THE COMPANY AND THE
SELLING STOCKHOLDERS:
(A) The Company covenants and agrees with the
Selling Stockholders and you as follows:
(a) The Company will notify you promptly by
telephone and (if requested by you) will confirm such advice in writing, (1)
when the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, (2) if Rule 430A under the
Act is used, or the Prospectus is otherwise required to be filed with the
Commission pursuant to Rule 424(b) under the Act, when the Prospectus is filed
with the Commission pursuant to Rule 424(b) under the Act, (3) of any request
by the Commission for amendments or supplements to the Registration Statement
or the Prospectus or for additional information, (4) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement, preventing or suspending the use of the Preliminary Prospectus, the
Prospectus, the Registration Statement or any amendment or supplement thereto,
or refusing to permit the effectiveness of the Registration Statement ("Stop
Order"), or the initiation of any proceedings for any of those purposes, (5)
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<PAGE> 9
of the happening of any event during the period mentioned in paragraph (f)
below which in the reasonable judgment of the Company makes any statement made
in the Registration Statement or the Prospectus untrue or which requires the
making of any changes in the Registration Statement or the Prospectus in order
to make the statements therein not misleading, and (6) of the receipt of any
comments from the Commission or the Blue Sky or securities authorities of any
jurisdiction regarding the Registration Statement, any post-effective amendment
thereto, the Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto. The Company will use its best efforts to prevent the
issuance of any Stop Order by the Commission or any notification from the Blue
Sky or securities authorities of any jurisdiction suspending the qualification
or registration of the Shares for sale in such jurisdictions, and if at any
time the Commission shall issue any Stop Order, or if the Blue Sky or
securities authorities of any jurisdiction shall issue notification suspending
the qualification or registration of the Shares, the Company will make every
reasonable effort to obtain the withdrawal of such Stop Order or notification
at the earliest possible moment. The Company will promptly advise you of its
receipt of any notification with respect to the suspension of the qualification
or registration of the Shares for offer or sale in any jurisdiction or the
initiation or threatening of any action or proceeding for such purpose.
(b) Prior to any public offering of the Shares by
you, the Company will cooperate with you and your counsel in registering or
qualifying the Shares for offer or sale under the Blue Sky or securities laws,
rules or regulations of such jurisdictions as you may reasonably request;
provided that in no event shall the Company be obligated to register or qualify
to do business as a foreign corporation in any jurisdiction where it is not now
so registered or
8
<PAGE> 10
qualified or to take any action which would subject it to general service of
process, or to taxation as a foreign corporation doing business, in any
jurisdiction where it is not now so subject. The Company will pay all fees and
expenses relating to the registration or qualification of the Shares under such
Blue Sky or securities laws of such jurisdictions as you may designate
(including the legal fees, expenses and disbursements of counsel to you for the
registration or qualification of the Shares in such jurisdictions as you shall
determine). After registration, qualification or exemption of the Shares for
offer and sale in such jurisdictions, and for as long as any offering pursuant
to this Agreement continues, the Company, at your reasonable request, will file
and make such statements or reports, and pay the fees applicable thereto, at
such times as are or may be required by the laws, rules or regulations of such
jurisdictions in order to maintain and continue in full force and effect the
registration, qualification or exemption for offer or sale of the Shares in
such jurisdictions. After the termination of the offering contemplated hereby,
and as long as any of the Shares are outstanding, the Company will file and
make, and pay all fees applicable thereto, such statements and reports and
renewals of registration as are or may be required by the laws, rules or
regulations of such jurisdictions to maintain and continue in full force and
effect the registration, qualification or exemption for secondary market
transactions in the Shares, in the various jurisdictions in which the Shares
were originally registered, qualified or exempted for offer or sale.
(c) The Company will furnish to you, without
charge, four (4) manually-signed copies and such reasonable number of conformed
copies of the Registration Statement as originally filed on Form SB-2 and of
any amendments (including post-effective amendments thereto), including
9
<PAGE> 11
financial statements and schedules, if any, and all consents, certificates and
exhibits (including those incorporated therein by reference to the extent not
previously furnished to you), heretofore or hereafter made, signed by or on
behalf of its officers whose signatures are required thereon and a majority of
its board of directors.
(d) The Company will use its best efforts to
cause the Registration Statement to become effective under the Act. Upon such
effectiveness, if the Company and you have determined not to proceed pursuant
to Rule 430A under the Act, the Company will timely file a Prospectus pursuant
to, and in conformity with, Rule 424(b), if required, and if the Company and
you have determined to proceed pursuant to Rule 430A under the Act, the Company
will timely file a Prospectus pursuant to, and in conformity with, Rules 424(b)
and 430A under the Act.
(e) The Company will give you and your counsel
advance notice of its intention to file any amendment to the Registration
Statement or any amendment or supplement to the Prospectus, whether before or
after the effective date of the Registration Statement, and will not file any
such amendment or supplement unless the Company shall have first delivered
copies of such amendment or supplement to you and your counsel and you and your
counsel shall have given your consent to the filing of such amendment or
supplement. Any such amendment or supplement shall comply with the Act.
(f) From and after the Effective Date, the
Company will deliver to you, without charge, as many copies of the Prospectus
or any amendment or supplement thereto as you may reasonably request. The
Company consents to the use of the Prospectus or any amendment or supplement
thereto by you and by all dealers to whom the Shares may be sold, both
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<PAGE> 12
in connection with the offering or sale of the Shares and for such period of
time thereafter as the Prospectus is required by law to be delivered in
connection therewith. If during such period of time any event shall occur
which in the judgment of you or your counsel should be set forth in the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus to comply with law, the Company will
forthwith prepare and duly file with the Commission an appropriate supplement
or amendment thereto, and will deliver to each of you, without charge, such
number of copies thereof as you may reasonably request.
(g) The Company will promptly pay all expenses in
connection with (1) the preparation, printing, filing, distribution and
mailing (including, without limitation, express delivery service) of the
Registration Statement, each preliminary prospectus, the Prospectus, and the
preliminary and final forms of Blue Sky memoranda (if any); (2) the issuance
and delivery of the Shares; (3) the fees and expenses of legal counsel and
independent accountants for the Company relating to, among other things,
opinions of counsel, audits, review of unaudited financial statements and cold
comfort review; (4) the fees and expenses of a registrar or transfer agent for
the Common Stock; (5) the printing, filing, distribution and mailing
(including, without limitation, express delivery service) of this Agreement,
the Agreement Among Underwriters, if any, and the Selected Dealers Agreement;
(6) furnishing such copies of the Registration Statement, the Prospectus and
any preliminary prospectus, and all amendments and supplements thereto, as may
be requested for use in connection with the offering and sale of the Shares by
you or by dealers to whom Shares may be sold; (7) any fees and communication
expenses with respect to filings required to be made by you with the
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<PAGE> 13
National Association of Securities Dealers Regulatory, Inc. (the "NASDR"); and
(8) the quotation of the Shares on NASDR's Automated Quotation System
("NASDAQ").
(h) On the Closing Date, the Company shall sell
to you, the Underwriters' Warrant to purchase 100,000 Shares for an aggregate
purchase price of $10.
(i) If this Agreement shall be terminated
pursuant to any of the provisions hereof (otherwise than by notice given by you
pursuant to Section 8 hereof) or if for any reason the Company shall be unable
to perform its obligations hereunder, the Company will reimburse you for all of
your out-of-pocket expenses (including the fees and expenses of your counsel)
reasonably incurred by you in connection herewith; provided, however, the
Company shall not be so obligated to reimburse you if this Agreement is
terminated by reason of a failure to satisfy the condition set forth in Section
7(k) hereinbelow by reason of your unwillingness to modify the underwriting
arrangements pertaining to sale of the Shares and/or the participation by you
in the sale of the Shares, as may be requested by the NASDR.
(j) For a period of ninety (90) days after the
commencement of the public offering of the Shares by you, without your prior
written consent, the Company will not offer, issue, sell, contract to sell,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any securities of the Company, except as provided for and as
contemplated by this Agreement or for stock options granted to employees
pursuant to the option agreements attached as exhibits to the Registration
Statement.
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<PAGE> 14
(k) On or prior to the Closing Date, the Company
shall obtain from each of its officers and directors, his or her enforceable
written agreement, in form and substance satisfactory to your counsel, that for
a period of two (2) years after the Effective Date (or any longer period
required by NASDAQ or any jurisdiction in which the offer and sale of the
Shares is to be registered or qualified), he or she will not offer for sale,
sell, contract to sell, assign, pledge, transfer, grant any option for the sale
of, or otherwise dispose of, directly or indirectly, any securities of the
Company (including without limitation any shares of Common Stock), owned by him
or her as of the Closing Date, whether upon exercise of warrants, stock options
or otherwise, without NSL's prior written consent (the "Lock-up Letter").
(l) The Company has reserved and shall continue
to reserve and keep available the maximum number of shares of its authorized
but unissued Common Stock and other securities for issuance upon exercise of
the Underwriters' Warrant.
(m) For a period of five (5) years after the date
of this Agreement, the Company shall:
(1) retain Ernst & Young LLP or another
nationally recognized firm of independent public accountants, as its auditors,
and at its own expense, shall cause such independent public accountants to
review the Company's financial statements and those of its subsidiaries for
each of the first three fiscal quarters of each fiscal year prior to the
announcement of quarterly financial information, the filing of the Company's
10-Q quarterly reports and the mailing of quarterly financial information to
its stockholders;
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<PAGE> 15
(2) cause the Company's Board of
Directors to meet not less frequently than quarterly, upon proper notice, and
cause an agenda and minutes of the preceding meeting to be distributed to
directors prior to each such meeting;
(3) distribute to its security holders,
within one hundred twenty 120 days after the end of each fiscal year, an annual
report (containing certified financial statements of the Company) prepared in
accordance with those required under Rule 14a-3(b) of Regulation 14A
promulgated by the Commission under the Securities Exchange Act of 1934, as
amended; and
(4) appoint a transfer agent for the
Common Stock, in each case acceptable to you.
(n) For a period of three (3) years after the
date of this Agreement, the Company shall furnish you, free of charge, with the
following:
(1) within ninety (90) days after the
end of each fiscal year, financial statements for the Company and its
subsidiaries and its subsidiaries certified by the independent public
accountants referred to in Section 4(m)(1) above, including a balance sheet,
statement of operations, statement of stockholders' equity and statement of
cash flows, for the Company, with supporting schedules, prepared in accordance
with generally accepted accounting principles, as at the end of such fiscal
year and for the twelve months then ended, accompanied by a copy of the
certificate or report thereon of such independent public accountants;
(2) (x) for so long as the Company is a
reporting company under any of Sections 12(b), 12(g) or
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<PAGE> 16
15(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder (collectively, the
"Exchange Act"), promptly after filing with the Commission, copies of all
reports and proxy soliciting material which the Company is required to file
under the Exchange Act, or (y) at such times as the Company is not a reporting
company under the aforesaid provisions of the Exchange Act, as soon as
practicable after the end of each of the first three fiscal quarters of each
fiscal year, financial statements of the Company, including a balance sheet,
statement of operations, statement of shareholders' equity and statement of
cash flows as at the end of, or for each such fiscal quarter and the comparable
period of the preceding year, which statements need not be audited;
(3) as soon as practicable after they
have first been distributed to stockholders of the Company, copies of each
annual and interim financial or other report or communication sent by the
Company to its stockholders (except to the extent duplicative of information
furnished pursuant to any other clause of this Section 4(n));
(4) as soon as practicable following
release or other dissemination, copies of every press release and every
material news item and article in respect of the Company or its affairs
released or otherwise disseminated by the Company;
(5) promptly following receipt thereof,
copies of the Company's daily transfer sheets prepared by the Company's
transfer agent and a list of stockholders; and
(6) such additional documents and
information with respect to the Company and its affairs, if any, as you may
from time to time reasonably request.
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<PAGE> 17
(o) As soon as practicable after the date of this
Agreement, the Company shall apply for listing in Standard and Poor's Corporate
Record Service and Annual Report Service and ensure the Company's continued
listing for a period of not less than five (5) years, provided that the
Company's otherwise complies with prevailing requirements for such listing.
(p) On or prior to the Effective Date, the
Company will have accomplished the quotation of the Shares on the NASDAQ
SmallCap Market, subject only to notice of issuance and the registration of
such securities under the Exchange Act. For a period of five years from the
date of this Agreement, the Company agrees, at its sole cost and expense, to
take all necessary and appropriate action such that its securities continue to
be quoted on NASDAQ, provided that the Company otherwise complies with the
prevailing requirements of NASDAQ.
(q) For a period of one (1) year after the date
of this Agreement, the Company will not seek to amend its certificate of
incorporation or file a certificate of designation to authorize the issuance of
any other class or series of its capital stock, including, without limitation,
any preferred stock, without your prior written consent.
(r) The Company agrees, at its own cost and
expense, to deliver to you and your counsel, within a reasonable period after
the Optional Closing Date, or the expiration of the period in which you may
exercise the over-allotment option, five bound volumes containing copies of all
documents and correspondence filed with, or received from, the Commission,
NASDAQ and the NASDR relating to the offering of the Shares and the closing
thereof, including related matters. In addition, the Company shall bear the
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<PAGE> 18
costs of one (1) "tombstone" advertisement and of twelve (12) "embodiments".
(s) The Company will make generally available to
its security holders and deliver to you as soon as it is practicable to do so
(but in no event later than the 45th day after the end of the twelve-month
period beginning at end of the fiscal quarter of the Company during which the
Registration Statement becomes effective, or, if the Registration Statement
becomes effective during the Company's last fiscal quarter, the 90th day after
the end of such twelve-month period), an earnings statement of the Company and
its subsidiaries (which need not be audited) covering a period of at least
twelve consecutive months commencing after the effective date of the
Registration Statement, which shall satisfy the requirements of Section 11(a)
of the Act.
(t) The Company will, promptly upon your request,
prepare and file with the Commission any amendments or supplements to the
Registration Statement, any Preliminary Prospectus or the Prospectus and take
any other action, which in the reasonable opinion of Lehman & Eilen, counsel to
you, may be reasonably necessary or advisable in connection with the
distribution of the Shares, and will cause the same to become effective as
promptly as possible.
(u) The Company will furnish to you as early as
practicable prior to the Closing Date and any Optional Closing Date, as the
case may be, but no less than two full business days prior thereto, a copy of
the latest available unaudited interim financial statements of the Company and
its subsidiaries which have been reviewed by the Company's independent public
accountants, as stated in their letters to be furnished pursuant to Section
7(e) hereof. Such financial statements will be on a consolidated basis to the
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<PAGE> 19
extent the accounts of the Company and its subsidiaries are generally
consolidated in reports furnished to the Company's stockholders.
(v) The Company will apply the net proceeds from
the issuance and sale of the Shares for the purposes and in the manner set
forth under the caption "Use of Proceeds" in the Prospectus, and will file on a
timely basis such reports with the Commission with respect to the sale of the
Shares and the application of the proceeds therefrom as may be required
pursuant to Rule 463 under the Act. The Company will operate its business in
such a manner and, pending application of the net proceeds of the offering for
the purposes and in the manner set forth under the caption "Use of Proceeds" in
the Prospectus, will invest such net proceeds in certain types of securities so
as not to become an "investment company" as such term is defined under the
Investment Company Act of 1940, as amended (the "Investment Company Act").
(w) The Company has filed a registration
statement on Form 8-A covering the Shares pursuant to Section 12(b) of the
Exchange Act and will use its best efforts to cause said registration statement
to become effective on the Effective Date. The Company will comply with all
registration, filing and reporting requirements of the Exchange Act, which may
from time to time be applicable to the Company. The Company shall comply with
the provisions of all undertakings contained in the Registration Statement.
(x) Prior to the Closing Date or any Optional
Closing Date, as the case may be, the Company shall neither issue any press
release or other communication, directly or indirectly, nor hold any press
conference with respect to the offering of the Shares, the Company, its
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<PAGE> 20
subsidiaries or its business, results of operations, condition (financial or
otherwise), property, assets, liabilities or prospects of the Company or any of
its subsidiaries, without your prior written consent.
(y) For a period of ninety (90) days after the
date hereof, the Company will not, directly or indirectly, take any action
designed, or which will constitute or which might reasonably be expected to
cause or result in, stabilization or manipulation of the market price of the
Shares, or the facilitation of the sale or resale of the Shares.
(aa) The Company and its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to cash and cash equivalents is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for cash and cash equivalents is compared with the existing cash
and cash equivalents at reasonable intervals and appropriate action is taken
with respect to any differences.
(bb) There are no business relationships or
related party transactions of the nature described in Item 404 of Regulation
S-B of the Rules and Regulations involving the Company, any of its subsidiaries
and any person referred to in Items 401 or 404 of Regulation S-B, except as
required to be described in the Prospectus and as so described.
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<PAGE> 21
(cc) Neither the Company nor any of its
subsidiaries will grant any person or entity registration rights with respect
to any of its securities which are superior to the registration rights
contained in the Underwriters' Warrant and which are exercisable earlier than
six months after the securities to be registered upon exercise of such
registration rights have been offered for sale pursuant to an effective
registration statement under the Act and registered or qualified for sale under
the Blue Sky or state securities law, rules or regulations of the jurisdictions
in which such securities are to be offered for sale.
(dd) The Company agrees, for a period of five (5)
years after the date of this Agreement, to use its best efforts to cause the
Company's Board of Directors to nominate a designee chosen by you for election
to the Company's Board of Directors, and to solicit proxies for the election of
such designee as a director of the Company. At least sixty (60) days prior to
the earlier of any election of the Board of Directors or the commencement of
any solicitation of proxies for such election, the Company shall notify you of
the date of such election or of the commencement of such solicitation. You
shall have the right to furnish written notice to the Company of the name of
the person designated by you to serve as director no more than thirty (30) days
following your receipt of such notice from the Company. In the absence of such
notice from you, the director then serving and previously designated by you
shall be nominated and reelected. In the event you shall choose not to
designate a representative for election to the Company's Board of Directors, a
representative designated by you shall be duly authorized to attend all
meetings of the Company's Board of Directors in a nonvoting observer capacity
and, in such event, the Company shall give such representative copies of all
notices, minutes, consents, and
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<PAGE> 22
other materials that it provides its directors; provided, however, that such
representative shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so provided, and any rights so
granted to such representative shall be subordinate in all respects to the
fiduciary duties of the Company's Board of Directors to its stockholders. If
the Company maintains a liability insurance policy offering coverage for acts
or omissions of its officers and directors, it agrees to include (to the extent
possible) you and your designee as an insured under such policy.
(ee) The Company hereby agrees to retain a public
relations firm reasonably acceptable to you to provide financial public
relations advice and assistance in a manner reasonable acceptable to you and,
until the second anniversary of the Closing Date (or such earlier date of which
NSL shall cease to own any Underwriter's Warrants or shares of Common Stock
issued in respect thereof), to continue to retain such firm or another firm
reasonably acceptable to you to provide such financial public relations advice
and assistance.
(ff) The Company hereby agrees that, until the
third anniversary of the Closing (or such earlier date on which NSL shall cease
to own any Underwriter's Warrants or shares of Common Stock issued in respect
thereof), the Company will consult with NSL concerning, and furnish to it for
its review, copies of any financial information, news releases and/or other
publicity regarding the Company, its business, or any terms of any proposed
offering of the Company's securities, before disclosing such information,
releases, publicity or terms to any third party.
(B) Each of the Selling Stockholders covenants and agrees
with the Company and you that such Selling
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Stockholder will pay or cause to be paid all costs and expenses incident to the
performance of such Selling Stockholder's obligations hereunder which are not
otherwise specifically provided for in this Agreement, including, without
limitation, any fees and expenses of counsel for such Selling Stockholder and
all expenses and taxes incident to the sale and delivery of the Shares to be
sold by such Selling Stockholder to you hereunder. It is understood, however,
the Company shall bear, and the Selling Stockholders shall not be required to
pay or reimburse the Company for, the cost of any other matters not directly
relating to the sale and purchase of the Firm Shares pursuant to this Agreement
and that except as provided in this Section and Section 6 hereof, the Selling
Stockholders will pay all of their own costs and expenses, including the fees
of their respective counsel and stock transfer taxes on resale of any of the
Shares by you.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLING STOCKHOLDERS:
(A) The Company represents and warrants to you and the
Selling Stockholders that:
(a) When the Registration Statement becomes
effective, and at all times subsequent thereto to and including the Closing
Date and each Optional Closing Date, and during such longer period as the
Prospectus may be required to be delivered in connection with sales by you or
any dealer, and during such longer period until any post-effective amendment
thereto shall become effective, the Registration Statement (and any
post-effective amendment thereto) and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement to the Registration Statement or the Prospectus) will contain all
statements which are required
22
<PAGE> 24
to be stated therein in accordance with the Act, will comply with the Act, and
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and no event will have occurred which should have been
set forth in an amendment or supplement to the Registration Statement or the
Prospectus which has not then been set forth in such an amendment or
supplement; if a Rule 430A Prospectus is included in the Registration Statement
at the time it becomes effective, the Prospectus filed pursuant to Rules 430A
and 424(b) (1) or (4) will contain all Rule 430A Information and all statements
which are required to be stated therein in accordance with the Act, will comply
with the Act, and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; and each Preliminary Prospectus, as
of the date filed with the Commission, did not include any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; except that no
representation or warranty is made in this Section 5(A)(a) with respect to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company as stated in Section 6(c) with respect to
you expressly for inclusion in any Preliminary Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto.
(b) Neither the Commission nor the Blue Sky or
securities authorities of any jurisdiction has issued an order suspending the
effectiveness of the Registration Statement, preventing or suspending the use
of any Preliminary Prospectus, the Prospectus, the Registration
23
<PAGE> 25
Statement, or any amendment or supplement thereto, refusing to permit the
effectiveness of the Registration Statement, or suspending the registration or
qualification of the Shares, nor has the Commission or any of such authorities
instituted or threatened to institute any proceedings with respect to such an
order.
(c) The Company is a corporation duly
incorporated and validly existing in good standing under the laws of Delaware,
its jurisdiction of incorporation. The Company and each of its subsidiaries
have full corporate power and authority and have obtained all necessary
consents, authorizations, approvals, orders, licenses, certificates,
declarations and permits of and from, and have made all required filings with,
all federal, state, local and other governmental authorities and all courts and
other tribunals, to own, lease, license and use their properties and assets and
to carry on their respective businesses in the manner described in the
Prospectus. All such consents, authorizations, approvals, orders, licenses,
certificates, declarations, permits and filings are in full force and effect
and the Company and/or its subsidiaries are in all material respects complying
therewith. The Company and its subsidiaries are duly registered or qualified
to do business as a foreign corporation and are in good standing in each other
jurisdiction in which their ownership, leasing, licensing, or use of property
and assets or the conduct of their respective businesses requires such
registration or qualification.
(d) The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock, of which 2,995,014 shares are
outstanding, and 5,000,000 shares of Preferred Stock, no par value, of which no
shares are outstanding. The Company does not have any subsidiaries or own any
capital stock or equity interest in any other
24
<PAGE> 26
corporation, partnership, limited liability company or other entity, except as
disclosed in the Prospectus. Each outstanding share of Common Stock, including
the Firm Shares to be sold by the Selling Stockholders to you hereunder, and
each of the shares of the capital stock of each subsidiary of the Company, is
validly authorized, validly issued, fully paid, and nonassessable, without any
personal liability attaching to the ownership thereof, and has not been issued
and is not owned or held in violation of any preemptive rights of stockholders.
There is no commitment, plan or arrangement to issue, and no outstanding
option, warrant or other right calling for the issuance of, any share of
capital stock of the Company, or that of any of its subsidiaries or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of the Company or that of
any of its subsidiaries, except as disclosed in the Prospectus. There is
outstanding no security or other instrument which by its terms is convertible
into or exchangeable for capital stock of the Company, except as disclosed in
the Prospectus.
(e) The financial statements of the Company and
its subsidiaries included in the Registration Statement and the Prospectus
fairly present the financial position, the results of operations and the other
information purported to be shown therein at the respective dates and for the
respective periods to which they apply. Such financial statements have been
prepared in accordance with generally accepted accounting principles and are
prepared in accordance with the books and records of the Company. The
accountants whose reports on the audited financial statements are filed with
the Commission as a part of the Registration Statement are, and during the
periods covered by their report(s) included in the Registration Statement and
the Prospectus were, independent public accountants with respect to the Company
and its subsidiaries within the
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meaning of the Act. No other financial statements are required by Form SB-2 or
otherwise to be included in the Registration Statement or the Prospectus.
Except as disclosed in the Prospectus, there has at no time been a material
adverse change in the condition (financial or otherwise), results of
operations, business, property, assets, liabilities or prospects of the Company
or any of its subsidiaries from the latest information set forth in the
Registration Statement or the Prospectus.
(f) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation
pending, threatened, or in prospect (or any basis therefor known to the Company
or any of its subsidiaries) with respect to or affecting the Company or any of
its subsidiaries, their operation, business, property or assets, except as
disclosed in the Prospectus or such as individually or in the aggregate do not
now have and are not expected to have a material adverse effect upon the
operations, businesses, property, assets, condition (financial or otherwise) or
prospects of the Company or any of its subsidiaries. Neither the Company nor
any of its subsidiaries is in violation of, or in default with respect to, any
law, rule, regulation, order, judgment, or decree, except as disclosed in the
Prospectus or such as individually or in the aggregate do not now have and are
not expected to have a material adverse effect upon the operations, businesses,
property, assets, condition (financial or otherwise) or prospects of the
Company or any of its subsidiaries; nor is the Company or any of its
subsidiaries required to take any action in order to avoid any such violation
or default.
(g) The Company and its subsidiaries have good
and marketable title in fee simple absolute to all real properties and good
title to all other properties and assets
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which the Prospectus indicates are owned by them, free and clear of all liens,
security interests, pledges, charges, mortgages and other encumbrances (except
as may be required and are to be disclosed in the Prospectus). The properties
held under lease by the Company and its subsidiaries are held by it under valid
and enforceable leases and the interests of the Company and its subsidiaries in
such leases are free and clear of all liens, encumbrances and defects, except
as disclosed in the Prospectus, and the Company and its subsidiaries are in
full compliance with all material terms and conditions thereunder and such
leases are in full force and effect. No real property owned, leased, licensed
or used by the Company or its subsidiaries is situated in an area which is, or
to the knowledge of the Company or its subsidiaries, will be, subject to
zoning, use, or building code restrictions which would prohibit (and no state
of facts relating to the actions or inaction of another person or entity or his
or its ownership, leasing, licensing, or use of any real or personal property
exists or will exist which would prevent) the continued effective ownership,
leasing, licensing, or use of such real property in the business of the Company
or subsidiaries as presently conducted or as the Prospectus indicates any of
them contemplate conducting, except as disclosed in the Prospectus).
(h) Neither the Company, any of its subsidiaries
nor any other party is now or is expected by the Company or any of its
subsidiaries to be in violation or breach of, or in default with respect to
complying with, any material provision of any indenture, mortgage, deed of
trust, debenture, note or other evidence of indebtedness, contract, agreement,
instrument, lease or license, or arrangement or understanding which is material
to the Company or any of its subsidiaries, and each such indenture, mortgage,
deed of trust, debenture, note or other evidence of indebtedness, contract,
agreement, instrument, lease or
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<PAGE> 29
license is in full force and is the legal, valid and binding obligation of the
Company and/or its subsidiaries, and to the knowledge of the Company and its
subsidiaries, of the other contracting party and is enforceable as to them in
accordance with its terms. The Company and its subsidiaries enjoy peaceful and
undisturbed possession under all leases and licenses under which they are
operating. Neither the Company nor any of its subsidiaries is a party to or
bound by any contract, agreement, instrument, lease, license, arrangement or
understanding, or subject to any charter or other restriction, which has had or
is expected in the future to have a material adverse effect on the condition
(financial or otherwise), results of operations, businesses, property, assets
or liabilities of the Company. The Company is not in violation or breach of,
or in default with respect to, any term of its Certificate of Incorporation or
By-laws, in each case as amended to date.
(i) Neither the Company nor any of its
subsidiaries owns or has any licensed rights to, in or under any patents,
patent applications, trademarks, service marks, trademark or service mark
applications, trade names, service marks, copyrights, technology, know-how or
other intangible properties or assets (all of the foregoing being herein called
"Intangibles") that are material to the business of the Company and its
subsidiaries, except to the extent disclosed in the Prospectus. There is no
right under any Intangibles of the Company or its subsidiaries necessary to the
business of the Company and its subsidiaries as presently conducted or as
proposed to be conducted as indicated in the Prospectus, except as may be
disclosed in the Prospectus. Neither the Company nor any of its subsidiaries
have received notice of infringement with respect to asserted Intangibles of
others. To the knowledge of the Company and its subsidiaries, there is no
infringement by others of Intangibles of the Company or its
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<PAGE> 30
subsidiaries. To the knowledge of the Company and its subsidiaries, there is
no Intangible of others which has had or may in the future have a materially
adverse effect on the condition (financial or otherwise), results of
operations, businesses, property, assets, liabilities or prospects of the
Company and its subsidiaries.
(j) Neither the Company, its subsidiaries, any
director or officer of the Company or its subsidiaries, or to the best
knowledge of the Company and its subsidiaries, any agent, employee, or other
person authorized to act on behalf of the Company or its subsidiaries have,
directly or indirectly: used any corporate funds of the Company or its
subsidiaries for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds of the Company or its
subsidiaries; violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, as relates to the business of the Company and its
subsidiaries; or made any bribe, rebate, payoff, influence payment, kickback,
or other unlawful payment in connection with the business of the Company or its
subsidiaries.
(k) Any contract, agreement, instrument, lease or
license required to be described in the Registration Statement or the
Prospectus has been properly described therein. Any contract, agreement,
instrument, lease or license required to be filed as an exhibit to the
Registration Statement has been filed with the Commission as an exhibit to or
has been incorporated as an exhibit by reference into the Registration
Statement.
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<PAGE> 31
(l) The Company has all requisite corporate power
and authority to execute, deliver and perform under the terms and conditions of
this Agreement and the Underwriters' Warrant. All necessary corporate
proceedings of the Company have been duly taken to authorize the execution,
delivery and performance by the Company of this Agreement and the Underwriters'
Warrant. This Agreement has been duly authorized, executed and delivered by
the Company, is a legal, valid, and binding agreement of the Company, and is
enforceable as to the Company in accordance with its terms. The Underwriters'
Warrant has been duly authorized by the Company and, when executed and
delivered by the Company, assuming the due execution and delivery thereof by
the other parties thereto, will be a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms. No
consent, authorization, approval, order, license, certificate, declaration or
permit of or from, or filing with, any governmental or regulatory authority,
agent, board or other body is required for the issue and sale of the Shares by
the Company and the execution, delivery or performance by the Company of this
Agreement or the Underwriters' Warrant (except filings with and orders of the
Commission pursuant to the Act which have been or will be made or obtained
prior to the Closing Date, and such filings, consents or permits as are
required under Blue Sky or securities laws in connection with the transactions
contemplated by this Agreement). No consent of any party to any contract,
agreement, instrument, lease, license, arrangement or understanding to which
the Company or any of its subsidiaries are 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 Underwriters' Warrant; and the execution,
delivery and performance of this Agreement and the Underwriters' Warrant will
not violate, result in a breach of, conflict with, or (with or without the
giving of notice or the passage of time
30
<PAGE> 32
or both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement or understanding,
result in the creation or imposition of, any lien, security interest, pledge,
charge, or other encumbrance upon any of the property or assets of the Company
or its subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, loan or credit agreement, lease or other agreement or instrument to
which the Company or any of its subsidiaries are a party or by which the
Company or any of its subsidiaries are bound or to which any of the property or
assets of the Company or any of its subsidiaries are subject or violate or
result in a breach of any term of the Certificate of Incorporation or By-laws
of the Company or any of its subsidiaries, or violate, result in a breach of,
or conflict with any law, rule, regulation, order, judgment or decree binding
on the Company or any of its subsidiaries or to which any of their operations,
businesses, properties or assets are subject.
(m) The Shares are validly authorized, and when
issued, paid for and delivered in accordance with this Agreement, will be
validly issued, fully paid, and nonassessable, without any personal liability
attaching to the ownership thereof, and will not be issued in violation of any
preemptive rights of stockholders. You will receive good title to the Shares
and the Underwriters' Warrant purchased by you, upon payment of the purchase
price therefor in accordance with the provisions of this Agreement, free and
clear of all liens, security interests, pledges, charges, claims, equities,
encumbrances, stockholders' agreements and voting trusts (collectively,
"Encumbrances").
(n) The Underwriters' Warrant Shares are validly
authorized and reserved for issuance and, when
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<PAGE> 33
issued, paid for and delivered upon exercise of the Underwriters' Warrant, in
accordance with the provisions of the Underwriters' Warrant will be validly
issued, fully paid and non-assessable and will not be issued in violation of
any preemptive rights of stockholders; and the holders of the Underwriters'
Warrant Shares will receive good title to them, free and clear of all
Encumbrances.
(o) The Shares and the Underwriters' Warrant
conform to all statements relating thereto contained in the Registration
Statement and the Prospectus.
(p) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, and
except as otherwise may be stated therein, (i) the Company has not entered into
any transaction or incurred any liability or obligation, contingent or
otherwise, which is material to the Company, except in the ordinary course of
business, (ii) there has not been any change in the outstanding capital stock
of the Company, or any issuance of options, warrants or rights to purchase the
capital stock of the Company, or any material increase in the long-term debt of
the Company, or any material adverse change in the business, condition
(financial or otherwise) or results of operations of the Company, (iii) no loss
or damage (whether or not insured) to the properties of the Company has been
sustained which is material to the Company, (iv) the Company has not paid or
declared any dividend or other distribution with respect to its capital stock,
and (v) there has not been any change, contingent or otherwise, in the direct
or indirect control of the Company nor, to the best knowledge of the Company,
do there exist any circumstances which would likely result in such a change.
(q) Neither the Company nor any officers or
directors of the Company or Affiliates (as defined in Rule
32
<PAGE> 34
405 of the Rules and Regulations), have taken or will take, directly or
indirectly, prior to the termination of the offering contemplated by this
Agreement, any action designed to stabilize or manipulate the price of any
security of the Company, or which has caused or resulted in, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company, to facilitate the
sale or resale of any of the Shares.
(r) The Company has not incurred, directly or
indirectly, any liability for a fee, commission or other compensation on
account of the employment of a broker or finder in connection with the offering
of the Shares contemplated by this Agreement, except as contemplated by this
Agreement or as disclosed in the Registration Statement.
(s) The Company is not, and does not intend to
conduct its business in a manner in which it would become, an "investment
company" as defined in Section 3(a) of the Investment Company Act.
(t) The Company has obtained, or prior to the
Closing Date will obtain a Lock-up Letter, from each of its officers and
directors who owns shares of Common Stock.
(u) Other than the Selling Stockholders, no
person or entity has the right to require registration of shares of Common
Stock or other securities of the Company because of the filing or effectiveness
of the Registration Statement.
(v) The Company has and will continue to (i)
adequately insure its properties against loss or damage by fire, (ii) maintain
adequate insurance against liability for negligence and (iii) maintain such
other insurance as is
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<PAGE> 35
usually maintained by companies engaged in the same or similar businesses,
including, without limitation, product liability insurance.
(w) The Company and its subsidiaries have filed
all federal, state and local tax returns required to be filed (or have obtained
extensions therefor) and have paid all taxes shown on such returns and all
assessments received by it to the extent that payment has become due. The
Company and its subsidiaries have made adequate accruals for all taxes which
may be owed by it but has not been paid.
(B) Each of the Selling Stockholders severally represents
and warrants to the Company and you that:
(a) All consents, approvals, authorizations and
orders necessary for the execution and delivery by such Selling Stockholder of
this Agreement and the Power of Attorney (the "Power of Attorney") and the
Custody Agreement (the "Custody Agreement") hereinafter referred to, and for
the sale and delivery of the Shares to be sold by such Selling Stockholder
hereunder, have been obtained; and such Selling Stockholder has full right,
power and authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement and to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder hereunder;
(b) The sale of the Shares to be sold by such
Selling Stockholder hereunder and the performance of this Agreement, the Power
of Attorney and the Custody Agreement and the consummation of the transactions
herein and therein contemplated will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any statute, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Selling Stockholder is a party
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<PAGE> 36
or by which such Selling Stockholder is bound, the Trust Agreement of such
Selling Stockholder if such Selling Stockholder is a trust, or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over such Selling Stockholder or the property of such Selling Stockholder;
(c) Such Selling Stockholder has, and immediately
prior to the Closing Date such Selling Stockholder will have, good and valid
title to the Shares to be sold by such Selling Stockholder hereunder, free and
clear of all Encumbrances; and, upon delivery of such Shares and payment
therefor pursuant hereto, good and valid title to such Shares, free and clear
of all Encumbrances will pass to you;
(d) No offering, sale or other disposition of any
shares of capital stock of the Company will be made within ninety (90) days
after the date of the Prospectus, directly or indirectly, by such Selling
Stockholder, otherwise than hereunder or with your written consent or pursuant
to bona fide gifts to persons who agree in writing with you to be bound by the
provisions of this clause;
(e) Such Selling Stockholder has not taken and
will not take, directly or indirectly, any action which is designed to or which
has constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares; and
(f) To the extent that any statements or
omissions made in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto are made in reliance upon and
in conformity with written information furnished to the Company
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<PAGE> 37
by such Selling Stockholder expressly for use therein, such Preliminary
Prospectus did, and the Registration Statement and the Prospectus and any
amendments or supplements thereto will, when they become effective or are filed
with the Commission, as the case may be, conform in all material respects to
the requirements of the Act and the rules and regulations of the Commission
thereunder and not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(g) Certificates in negotiable form representing
all of the Shares to be sold by such Selling Stockholder hereunder have been
placed in custody under a Custody Agreement, in the form heretofore furnished
to you, duly executed and delivered by such Selling Stockholder to Joseph
Safina and Thomas G. Mahala, as custodians (the "Custodians"), and that such
Selling Stockholder has duly executed and delivered a Power of Attorney, in the
form heretofore furnished to you, appointing Messrs. Safina and Mahala, as such
Selling Stockholder's attorney-in-fact (the "Attorney-in-Fact") with authority
to execute and deliver this Agreement on behalf of such Selling Stockholder, to
authorize the delivery of the Shares to be sold by such Selling Stockholder
hereunder and otherwise to act on behalf of such Selling Stockholder in
connection with the transactions contemplated by this Agreement and the Custody
Agreement.
Each of the Selling Stockholders specifically agrees that the
Shares represented by the certificates held in custody for such Selling
Stockholder under the Custody Agreement are subject to the interest of you
hereunder, and that the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of the
Attorney-in-Fact by the Power of
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<PAGE> 38
Attorney, are to that extent irrevocable. Each of the Selling Stockholders
specifically agrees that the obligations of the Selling Stockholders hereunder
shall not be terminated by operation of law, whether by the death or incapacity
of any individual Selling Stockholder or, in the case of an estate or trust, by
the death or incapacity of any executor or trustee or the termination of such
estate or trust, or in the case of a partnership or corporation, by the
dissolution of such partnership or corporation, or by the occurrence of any
other event. If any individual Selling Stockholder or any such executor or
trustee should die or become incapacitated, or if any such estate or trust
should be terminated, or if any such partnership or corporation should be
dissolved, or if any other such event should occur, before the delivery of the
Shares hereunder, certificates representing the Shares shall be delivered by or
on behalf of the Selling Stockholders in accordance with the terms and
conditions of this Agreement and of the Custody Agreements, and actions taken
by the Attorney-in-Fact pursuant to the Powers of Attorney shall be as valid as
if such death, incapacity, termination, dissolution or other event had not
occurred, regardless of whether or not the Custodian, the Attorney-in-Fact, or
any of them, shall have received notice of such death, incapacity, termination,
dissolution or other event.
6. INDEMNIFICATION AND CONTRIBUTION:
(a) The Company agrees to indemnify and hold
harmless you, your officers, directors, partners, employees, agents and
counsel, and each person, if any, who controls you within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
loss, liability, claim, damage, and expense whatsoever (which shall include,
for all purposes of this Section 6, but not be limited to, attorneys' fees and
any and all expense
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whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained (1) in any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, or the
Prospectus (as from time to time amended and supplemented), or any amendment or
supplement thereto, or (2) in any application or other document or
communication (in this Section 6 collectively called an "application") executed
by or on behalf of the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Shares under the Blue Sky or securities laws thereof (or the rules and
regulations promulgated thereunder) or filed with the Commission or any
securities exchange or automated quotation system; or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company as stated in Section 6(c) by you for inclusion in any
Preliminary Prospectus, the Rule 430A Prospectus, the Registration Statement,
of the Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be, or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement.
The foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Agreement.
If any action is brought against you or any of your officers,
directors, partners, employees, agents or counsel, or any of your controlling
persons (each, an
38
<PAGE> 40
"indemnified party") in respect of which indemnity may be sought against the
Company pursuant to the foregoing paragraph, such indemnified party or parties
shall promptly notify the Company in writing of the institution of such action
(but the failure so to notify shall not relieve the Company from any liability
it may have pursuant to this Section 6(a)) and the Company shall promptly
assume the defense of such action, including the employment of counsel
(satisfactory to such indemnified party or parties) and payment of expenses.
Such indemnified party or parties shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall
be at the expense of such indemnified party or parties, unless the employment
of such counsel shall have been authorized in writing by the Company in
connection with the defense of such action or the Company shall not have
promptly employed counsel satisfactory to such indemnified party or parties to
have charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be one or more legal defenses
available to it or them or to other indemnified parties which are different
from or additional to those available to the Company, in any of which events
such fees and expenses shall be borne by the Company and the Company shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent. The Company agrees
promptly to notify you of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection with the
sale of the Shares, any Preliminary Prospectus, the Rule 430A Prospectus, the
Registration Statement, or the Prospectus, or any amendment or supplement
thereto, or any application.
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<PAGE> 41
(b) Each of the Selling Stockholders severally
agrees to indemnify and hold harmless you, your officers, directors, partners,
employees, agents and counsel, and each person, if any, who controls you within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, the
Company, each director of the Company, each officer of the Company who shall
have signed the Registration Statement, and each other person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, to the same extent as the foregoing indemnity from
the Company to you in Section 6(a), but only with respect to statements or
omissions, if any, made in any Preliminary Prospectus, the Rule 430A
Prospectus, the Registration Statement, or the Prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written information
furnished to the Company by such Selling Stockholder expressly for inclusion in
any Preliminary Prospectus, the Rule 430A Prospectus, the Registration
Statement, or the Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be. If any action shall be brought against you,
the Company or any other person so indemnified based upon any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto, or any application, and in
respect of which indemnity may be sought against the Selling Stockholders
pursuant to this Section 6(b), the Selling Stockholders shall have the rights
and duties given to the Company, and you, the Company and each other person so
indemnified shall have the rights and duties given to the indemnified parties,
by the provisions of Section 6(a).
(c) You agree to indemnify and hold harmless the
Company, each director of the Company, each officer of
40
<PAGE> 42
the Company who shall have signed the Registration Statement, and each other
person, if any, who controls the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to you in Section 6(a), but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Rule 430A Prospectus, the Registration Statement, or the Prospectus (as
from time to time amended and supplemented), or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information furnished to the Company by you expressly for inclusion in any
Preliminary Prospectus, the Rule 430A Prospectus, the Registration Statement,
or the Prospectus, or any amendment or supplement thereto, or in any
application, as the case may be. For all purposes of this Agreement, the
public offering price, the amounts of the selling concession and reallowance
set forth in the Prospectus and the information in the third paragraph under
"Underwriting" constitute the only information furnished in writing by or on
your behalf expressly for inclusion in any Preliminary Prospectus, the Rule
430A Prospectus, the Registration Statement or the Prospectus (as from time to
time amended or supplemented), or any amendment or supplement thereto, or in
any application, as the case may be. If any action shall be brought against
the Company or any other person so indemnified based upon any Preliminary
Prospectus, the Rule 430A Prospectus, the Registration Statement, or the
Prospectus, or any amendment or supplement thereto, or any application, and in
respect of which indemnity may be sought against you pursuant to this Section
6(c), you shall have the rights and duties given to the Company, and the
Company and each other person so indemnified shall have the rights and duties
given to the indemnified parties, by the provisions of Section 6(a).
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<PAGE> 43
(d) To provide for just and equitable
contribution, if (i) an indemnified party makes a claim for indemnification
pursuant to Section 6(a), 6(b) or 6(c) (subject to the limitations thereof) but
it is found in a final judicial determination, not subject to further appeal,
that such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any director of the Company, any officer
of the Company who signed the Registration Statement, and any controlling
person of the Company), as one entity, and you, as a second entity, shall
contribute to the losses, liabilities, claims, damages and expenses whatsoever
to which any of them may be subject, so that you are responsible for the
proportion thereof equal to the percentage which the aggregate underwriting
discount set forth on the cover page of the Prospectus represents of the
initial public offering price of the Shares set forth on the cover page of the
Prospectus and the Company is responsible for the remaining portion, in
proportion to the net proceeds from the offering received by them; provided,
however, that if applicable law does not permit such allocation, then other
relevant equitable considerations such as the relative fault of the Company
and you in the aggregate in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses shall also be considered.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement,
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<PAGE> 44
omission, or alleged omission relates to information supplied by the Company or
by you, and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement, alleged statement, omission
or alleged omission. The Company and you agree that it would be unjust and
inequitable if the respective obligations of the Company and you for
contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses or by any other
method of allocation that does not reflect the equitable considerations
referred to in this Section 6(d). No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6(d), each person, if any, who
controls you within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company, shall have the same
rights to contribution as the Company, subject in each case to the provisions
of this Section 6(d). Anything in this Section 6(d) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 6(d) is intended to supersede any right to contribution under the Act,
the Exchange Act, or otherwise.
7. CONDITIONS OF YOUR OBLIGATIONS: Your obligations
hereunder are subject to the continuing accuracy of the representations and
warranties of the Company and the Selling Stockholders contained herein and in
each certificate and document contemplated under this Agreement to be delivered
to you, as of the date hereof, as of the Closing Date, and each Optional
Closing Date, as the case may be, to the performance by the Company and the
Selling Stockholders of their respective obligations hereunder, and to the
following additional conditions:
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(a) Notification that the Registration Statement
has become effective shall be received by you not later than 6:30 p.m., New
York City time, on the date of this Agreement or at such later date and time as
shall be consented to in writing by you. If the Company has elected to rely
upon Rule 430A of the Rules and Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to you of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
of the Rules and Regulations.
(b) The Commission shall not have issued a Stop
Order and no Blue Sky or securities authority of any jurisdiction shall have
issued an order suspending the registration or qualification of the Shares, and
no proceedings for such purpose shall have been instituted or shall be pending,
or to the knowledge of the Company, be threatened or contemplated by the
Commission or the Blue Sky or securities authorities of any such jurisdiction.
(c) You shall have received an opinion, dated the
Closing Date and satisfactory in form and substance to your counsel from Loeb &
Loeb LLP, with respect to the Company, the Shares, the Underwriters' Warrant
Shares and the Registration Statement. In rendering such opinion, counsel for
the Company may rely (i) as to matters involving the application of laws other
than the laws of the United States and laws of the State of Delaware, to the
extent counsel for the Company deems proper and to the extent specified in such
opinion, upon an opinion or opinions of
44
<PAGE> 46
local counsel (in form and substance satisfactory to your counsel) acceptable
to your counsel, familiar with the applicable laws, in which case the opinion
of counsel for the Company shall state that the opinion or opinions of such
other counsel are satisfactory in scope, form and substance to counsel for the
Company and that reliance thereon by counsel for the Company is reasonable;
(ii) as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company; and (iii) to the extent they deem proper,
upon written statements or certificates of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company, provided that copies of any such statements or
certificates shall be delivered to your counsel.
(d) The respective counsel for each of the
Selling Stockholders, as indicated in Schedule II hereto, each shall have
furnished to you their written opinion with respect to each of the Selling
Stockholders for whom they are acting as counsel, dated the Closing Date, in
form and substance satisfactory to you to the effect that:
(1) A Power of Attorney and a Custody
Agreement have been duly executed and delivered by such Selling Stockholder and
constitute valid and binding agreements of such Selling Stockholder in
accordance with their terms;
(2) This Agreement has been duly executed
and delivered by or on behalf of such Selling Stockholder and constitutes a
valid and binding agreement of such Selling Stockholder in accordance with its
terms; and the sale of the Shares to be sold by such Selling Stockholder
hereunder and the performance of this Agreement, the Power of Attorney and the
Custody Agreement and the consummation of the transactions herein and therein
contemplated will not result in a breach or violation of any terms or provisions
of, or constitute a default under, any statute, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such counsel to
which such Selling Stockholder is a party or by which such Selling Stockholder
is bound, the Trust Agreement of such Selling Stockholder if such Selling
Stockholder is a trust, or any order, rule or regulation known to such counsel
of any court or governmental agency or body having jurisdiction over such
Selling Stockholder or the property of such Selling Stockholder;
(3) No consent, approval, authorization or
order of any court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement in connection
with the Shares to be sold by this Agreement in connection with the Shares to be
sold by such Selling Stockholder hereunder, except such as have been obtained
under the Act and such as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of such Shares by you;
(4) Immediately prior to the Closing Date
such Selling Stockholder had good and valid title to the Shares to be sold by
such Selling Stockholder under this Agreement, free and clear of all
Encumbrances, and full right, power and authority to sell, assign, transfer and
deliver the Shares to be sold by such Selling Stockholder hereunder; and
(5) Good and valid title to such Shares,
free and clear of all Encumbrances, has been transferred to you who has
purchased such Shares in good faith and without notice of any Encumbrance or
any other adverse claim within the meaning of the Uniform Commercial Code.
In rendering the opinion in subparagraph (4) such counsel may rely upon
a certificate of such Selling Stockholder in respect of matters of fact as to
ownership of and Encumbrances on the Shares sold by such Selling Stockholder,
provided that such counsel shall state that they believe that both you and they
are justified in relying upon such certificate.
(e) You shall have received letters addressed to
you and dated the date hereof and the Closing Date from Ernst & Young LLP,
independent public accountants
45
<PAGE> 47
for the Company, addressed to you, and in form and substance satisfactory to
you, substantially to the effect that:
(1) Such accountants are independent
public accountants as required by the Act and the rules and regulations of the
Commission thereunder and no information need be supplied with respect to them
in answer to Item 13 of Form SB-2.
(2) In their opinion, the financial
statements and related notes and schedules of the Company and its subsidiaries
examined by them, at all dates and for all periods referred to in their report
therein, and included in the Registration Statement and the Prospectus on their
authority as experts comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations of
the Commission promulgated thereunder.
(3) On the basis of limited procedures
not constituting an audit, including a reading of the latest available
unaudited interim financial statements of the Company and its subsidiaries and
the financial data and accounting records of the Company and its subsidiaries,
inquiries of officials of the Company and its subsidiaries and others
responsible for financial and accounting matters, a reading of the minute books
of the Company and its subsidiaries, including, without limitation, the minutes
(if any) of meetings or consents in lieu of meetings of the stockholders and of
the Board of Directors (and any executive committee, audit committee or other
committees thereof) of the Company and its subsidiaries, and other specified
procedures and inquiries requested by you, if any, nothing has come to their
attention which causes them to believe that:
(i) the unaudited financial statements
of the Company and its subsidiaries contained in the Registration Statement and
the Prospectus (if any) do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and Regulations
of the Commission promulgated thereunder or were not prepared in conformity
with generally accepted accounting principles applied on a basis consistent, in
all material respects, with those followed in the preparation of the audited
financial statements therein;
(ii) except as disclosed in or
contemplated by the Registration Statement and the Prospectus, during the
period from the date of the last audited balance sheet of the Company included
in the Registration Statement and Prospectus to a specified date not more than
five (5) days prior to the date of such letter, there were any decreases, as
compared with the corresponding period of the preceding year, in earnings
from operations, or the total or per share amounts of net earnings;
(iii) except as disclosed in or
contemplated by the Registration Statement and the Prospectus, during the
period from the date of the last audited balance sheet of the Company and its
subsidiaries included in the Registration Statement and Prospectus to a
specified date not more than five (5) days prior to the date of such letter,
there has been any change in the capital stock or other securities of the
Company or any payment or declaration of any dividend or other distribution in
respect thereof or in exchange therefor, or any increase in the long-term debt
of the Company and its subsidiaries or any decrease in the net current assets
or net assets of the Company and its subsidiaries, as compared with the amounts
shown on the last audited balance sheet of the Company, included in the
Registration Statement and the Prospectus (other than in the ordinary course of
business); and
(iv) On the basis of their
examinations referred to in their report and consent included in the
Registration Statement and Prospectus and the indicated procedures and
inquiries referred to above, nothing has come to their attention which, in
their judgment, would cause them to believe or indicate that the financial
statements and related notes and schedules of the Company and its subsidiaries
included in the Registration Statement and Prospectus do not present fairly
the financial position and results of operations of the Company and its
subsidiaries, as at the dates and for the periods indicated, in conformity with
generally accepted accounting principles applied on a consistent basis, and are
not in all material respects a fair presentation of the information purported
to be shown.
(4) In addition to their examination
referred to in their report included in the Registrations Statement and the
Prospectus and the inquiries and limited procedures referred to in clause (iv)
of this Section 7(e), they have performed other procedures, not constituting an
audit, with respect to certain numerical data, percentages, dollar amounts and
other financial information appearing in the Registration Statement and the
Prospectus, which are derived from the general accounting records of the
Company and its subsidiaries, and have compared certain of such data and
information with the accounting records of the Company and its subsidiaries and
found them to be in agreement.
(5) Such other matters as you may have
reasonably requested.
(f) The representations and warranties of the
Company and the Selling Stockholders in this Agreement shall be true and
correct with the same effect as if made on and as of the Closing Date and the
Company and the Selling Stockholders shall have complied with all agreements
and satisfied all conditions on its part to be performed or satisfied at or
prior to the Closing Date.
(g) The Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all statements which
are required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto shall contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(h) There shall have been, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, no material adverse change in the business, property, condition
(financial or otherwise), results of operations, capital stock, long-term or
short-term debt or general affairs of the Company and its subsidiaries, except
changes which the Registration Statement and the Prospectus indicate might
occur after the effective date of the Registration Statement, and neither the
Company nor its subsidiaries shall have incurred any material liabilities or
entered into any agreements not in the ordinary course of business,
46
<PAGE> 48
except as disclosed in the Registration Statement and the Prospectus.
(i) No action, suit or proceeding, at law or in
equity, shall be pending or threatened against the Company or its subsidiaries
which would be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against the Company or its
subsidiaries before or by any commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable decision, ruling or finding
would have a materially adverse affect on the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company or its subsidiaries.
(j) The Company and Selling Stockholders shall
have furnished to you or caused to be furnished to you at the Closing Date,
certificates of the President and Chief Financial Officer of the Company and of
the Selling Stockholders (if any), respectively, in form and substance
satisfactory to you, as to the accuracy of the representations and warranties
of the Company and the Selling Stockholders, respectively, herein at and as of
the Closing Date and as to the performance by the Company and the Selling
Stockholders and of all of their respective obligations hereunder to be
performed at or prior to the Closing Date and the Company shall have furnished
to you a certificate of the President and Chief Financial Officer of the
Company satisfactory to you as to the matters set forth in Sections 7(a) and
(b) above.
(k) The NASDR, upon review of the terms of the
public offering of the Shares, shall have indicated that it has no objections
to the underwriting arrangements pertaining to the sale of the Shares and the
participation by you in the sale of the Shares.
47
<PAGE> 49
(l) Prior to or on the Closing Date, the Company
shall have executed and delivered the Underwriters' Warrant to you.
(m) Prior to or on the Closing Date, the Company
shall have delivered to you executed copies of the Lock-up Letters.
(n) Subsequent to the date hereof, there shall
not have occurred any change, or any development involving a prospective
change, in or affecting particularly the business or financial affairs of the
Company which would materially and adversely affect the market for the Shares.
(o) Subsequent to the date hereof, no executive
officer of the Company listed as such in the Prospectus shall have died, become
physically or mentally disabled, resigned or have been removed or discharged.
(p) The Company shall furnish you with such
further certificates and documents as you or your counsel shall have reasonably
requested.
All opinions, certificates, letters and other documents
required by this Section 7 to be delivered to you by the Company and the
Selling Stockholders will be in compliance with the provisions hereof only if
they are satisfactory in form and substance to you and your counsel. The
Company will furnish you with such conformed copies of such opinions,
certificates, letters and other documents as you shall reasonably request.
(q) Upon the exercise, in whole or in part, by
you of the option to purchase the Additional Shares, referred to in Section 2
hereof, your obligations to purchase and pay for the Additional Shares will be
subject
48
<PAGE> 50
to the continuing accuracy of the representations and warranties of the Company
contained herein and in each certificate and document contemplated under this
Agreement to be delivered to you, as of the date hereof and as of each Optional
Closing Date, to the performance by the Company of its obligations hereunder,
and the following additional conditions:
(1) The Registration Statement shall
remain effective at the Optional Closing Date, and no Stop Order shall have
been issued by the Commission and no proceedings for that purpose shall have
been instituted or shall be pending, or to your knowledge or the knowledge of
the Company, shall be contemplated by the Commission, and any reasonable
request on the part of the Commission for additional information shall have
been complied with to the satisfaction of Lehman & Eilen, your counsel.
(2) You shall have received an opinion,
dated the Optional Closing Date and satisfactory in form and substance to
counsel to you, from Loeb & Loeb LLP, counsel to the Company, which opinion
shall be substantially the same in scope and substance as the opinion furnished
to you on the Closing Date pursuant to Section 7(c) hereof, except that such
opinion, where appropriate, shall cover the Additional Shares.
(3) You shall have received a letter in
form and substance satisfactory to you from Ernst & Young LLP, independent
certified public accountants for the Company, dated the Optional Closing Date
and addressed to you confirming the information in their letter referred to in
Section 7(e) hereof and stating that nothing has come to their attention during
the period from the ending date of their review referred to in said letter to a
date not more than five (5) days prior to the Optional Closing Date, which
49
<PAGE> 51
would require any change in said letter if it were required to be dated the
Optional Closing Date.
(4) You shall have received a
certificate of the President and Chief Financial Officer of the Company, dated
the Optional Closing Date, in form and substance satisfactory to you,
substantially the same in scope and substance as the certificate furnished to
you on the Closing Date pursuant to Section 7(j) hereof.
8. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective at 9:30
A.M., New York City time, on the first full business day following the day on
which the Registration Statement becomes effective or at the time of the
initial public offering by you of the Shares, whichever is earlier. The time
of the initial public offering shall mean the time, after the Registration
Statement becomes effective, of the release by you for publication of the first
newspaper advertisement which is subsequently published relating to the Shares
or the time, after the Registration Statement becomes effective, when the
Shares are first released by you for offering by you or dealers by letter or
telegram, whichever shall first occur. You, the Company or a
majority-in-interest of the Selling Stockholders may prevent this Agreement
from becoming effective without liability of any party to any other party,
except as noted below in this Section 8, by giving the notice indicated in
Section 8(c) before the time this Agreement becomes effective.
(b) In addition to the right to terminate this
Agreement pursuant to Section 7 hereof by reason of the Company's or Selling
Stockholders' failure, refusal or inability to perform all obligations and
satisfy all
50
<PAGE> 52
conditions on their part to be performed or satisfied hereunder prior to the
Closing Date or Optional Closing Date, as the case may be, you shall have the
right to terminate this Agreement at any time prior to the Closing Date or any
Optional Closing Date, as the case may be, by giving notice to the Company and
the Selling Stockholders, if the Company or any of its subsidiaries shall have
sustained a material loss or material adverse interference with its business or
properties from fire, flood, accident, hurricane, earthquake, theft, sabotage,
or other calamity or malicious act, including the death or disability of senior
management, whether or not covered by insurance, or from any labor dispute or
any court or governmental action, order or decree, of such a character as to
have a material adverse effect with the conduct of the business and operations
of the Company and its subsidiaries; or if there shall have been a general
suspension of, or a general limitation on prices for, trading in securities on
the New York Stock Exchange, the American Stock Exchange or in the
over-the-counter market; or if a banking moratorium has been declared by a
state or federal authority; or if there shall have been an outbreak of major
hostilities between the United States and any foreign power, or any other
insurrection, armed conflict or national calamity, which in your judgment makes
it impracticable or inadvisable to proceed with the offering, sale or delivery
of the Firm Shares or the Additional Shares, as the case may be.
(c) If you elect to prevent this Agreement from
becoming effective as provided in this Section 8, or to terminate this
Agreement pursuant to Section 7 or this Section 8, you shall notify the Company
and the Selling Stockholders promptly by telephone, telecopier, telex, or
telegram, confirmed by letter. If, as so provided in this Section 8, the
Company elects to prevent this Agreement from becoming effective, the Company
shall notify you promptly by
51
<PAGE> 53
telephone, telecopier, telex, or telegram, confirmed by letter. If, as so
provided in this Section 8, a majority-in-interest of the Selling Stockholders
elect to prevent this Agreement from becoming effective, the Selling
Stockholders shall notify you promptly by telephone, telecopier, telex, or
telegram, confirmed by letter.
(d) Anything in this Agreement to the contrary
notwithstanding other than Section 8(e), if this Agreement shall not become
effective by reason of an election by the Company pursuant to this Section 8 or
if this Agreement shall terminate or shall otherwise not be carried out within
the time specified herein by reason of any failure on the part of the Company
to perform any covenant or agreement or satisfy any condition of this Agreement
by it to be performed or satisfied, the sole liability of the Company to you,
in addition to the obligations the Company assumed pursuant to Section 4(g),
will be to reimburse you for such out-of-pocket expenses (including the fees
and disbursements of their counsel) as shall have been incurred by them in
connection with this Agreement or the proposed offer, sale, and delivery of the
Shares, and upon demand the Company agrees to pay promptly the full amount
thereof to you. Anything in this Agreement to the contrary notwithstanding
other than Section 8(e), if this Agreement shall not become effective by reason
of any failure of the part of any of the Selling Stockholders to perform any
covenant or agreement or satisfy any condition of this Agreement by such
Selling Stockholders to be performed or satisfied, the sole liability of such
Selling Stockholders to you will be to reimburse you for such out-of-pocket
expenses (including the fees and disbursements of their counsel) as shall have
been incurred by them in connection with this Agreement or the proposed offer,
sale, and delivery of the Shares, and upon demand such Selling
52
<PAGE> 54
Stockholders agrees to pay promptly the full amount thereof to you.
(e) Notwithstanding any election hereunder or any
termination of this Agreement, and whether or not this Agreement is otherwise
carried out, the provisions of Sections 4(b), 4(g), 6, 10(b) and 10(c) shall
not be in any way affected by such election or termination or failure to carry
out the terms of this Agreement or any part hereof.
9. SUBSTITUTION OF UNDERWRITERS.
If any one or more of the Underwriters shall fail or refuse to
purchase any of Shares which it or they have agreed to purchase hereunder, and
the number of Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
number of Shares, the other Underwriters shall be obligated, severally, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase, in the proportions which the number of
Shares which they have respectively agreed to purchase pursuant to Section 2
hereof bears to the aggregate number of Shares which all such non-defaulting
Underwriters have so agreed to purchase or in such other proportions as you may
specify, provided that in no event shall the maximum number of Shares which any
Underwriter has become obligated to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 9 by more than one-ninth of such number of
Shares, without the written consent of such Underwriter. If any Underwriter or
Underwriters shall fail or refuse to purchase any Shares and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase exceeds one-tenth of the aggregate number of
Shares and arrangements satisfactory to you and the Company for the purchase of
such Shares are not
53
<PAGE> 55
made within forty-eight (48) hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Company for the purchase or sale of any Shares under this Agreement. In
any such case either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than five business days, in order that
the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any default of such Underwriter under this
Agreement.
10. MISCELLANEOUS:
(a) Notices required to be in writing shall be
mailed or delivered (i) to the Company at the Company's office at 2621 Empire
Avenue, Burbank, California 91504, Attention: Edward H. Resnick, with copies to
Loeb & Loeb LLP, 1000 Wilshire Boulevard, Suite 1800, Los Angeles, California
90017, Attention: David L. Ficksman, Esq. (ii) to the Selling Stockholders, c/o
Joseph Safina and Thomas G. Mahala, as Custodians, at Nichols, Safina, Lerner
& Co., Inc.'s office at 800 Third Avenue, New York, New York 10022, or (iii) to
you, at the office of Nichols, Safina, Lerner & Co., Inc., 800 Third Avenue,
New York, New York 10022, Attention: Joseph Safina, with copies to:
______________ ____________________________________________________________ and
Lehman & Eilen, 50 Charles Lindbergh Boulevard, Suite 505, Uniondale, New York
11553, Attention: Hank Gracin, Esq., and shall be deemed given when received.
Any notice not required to be in writing, including but not limited to notices
under Section 7(a) or 8 hereof, may be made by telex, telecopier or telephone
and shall be deemed given at the time the telex, or telecopied communication is
received
54
<PAGE> 56
or the telephone call is made, but if so made shall be subsequently confirmed
in writing.
(b) The representations, warranties, covenants
and agreements of the Company and the Selling Stockholders and the indemnity
and contribution agreements, contained in Sections 4, 5 and 6 of this Agreement
will remain in full force and effect, regardless of any investigation made by
or on behalf of you, the Selling Stockholders, the Company or any of its
officers or directors or any controlling persons of you, the Selling
Stockholders or the Company and will survive acceptance of and payment for any
of the Shares and the termination of this Agreement.
(c) This Agreement has been and is made solely
for the benefit of you, the Selling Stockholders and the Company and the
controlling persons, directors and officers referred to in Section 6 hereof and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" as used in this Agreement shall not include a purchaser, as such
purchaser, of Shares from you.
(d) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, applicable to
contracts made and to be performed entirely with such State, without regard to
conflict of laws provisions thereof.
55
<PAGE> 57
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Selling Stockholders and you.
Very truly yours,
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
By:________________________________
Edward M. Resnick,
Chairman and Chief
Executive Officer
SELLING STOCKHOLDERS:
___________________________________
A. Patrick Linton
___________________________________
Andrew G. Kader
___________________________________
Bruce Horwytz
___________________________________
James Cozzetto
___________________________________
John Grode
___________________________________
Kepman Capital
___________________________________
Lawrence Cooper
56
<PAGE> 58
___________________________________
M.D. Sabbah
___________________________________
Milton & Priscilla Graham
___________________________________
Norman Stizer
___________________________________
Peter Gabrielli
___________________________________
Richard Carney Rev. Trust
___________________________________
Robert Feldgarden
___________________________________
Robert Horwytz
___________________________________
Robert Mahala
___________________________________
Steven Realbuto
___________________________________
William B. Warden
___________________________________
John Murray
___________________________________
Melvin H. Meyer
___________________________________
K. King Burnett
57
<PAGE> 59
___________________________________
Ronald McGee
___________________________________
Alan Rubin
Confirmed, as of the date first above mentioned.
NICHOLS, SAFINA, LERNER & CO. INC.
{FIRM NAME},
AS REPRESENTATIVES OF THE SEVERAL UNDERWRITERS
By: NICHOLS, SAFINA, LERNER & CO. INC.
By:___________________________
Joseph Safina
Its:______________________
58
<PAGE> 60
SCHEDULE I
Underwriting Agreement, dated ________, 1997
<TABLE>
<CAPTION>
Number
Selling Stockholder of Shares
- ------------------- ---------
<S> <C>
A. Patrick Linton . . . . . . . . . . . . . . . . . . . . . . . . . .
Andrew G. Kader . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bruce Horwytz . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James Cozzetto . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Grode . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kepman Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lawrence Cooper . . . . . . . . . . . . . . . . . . . . . . . . . . . .
M.D. Sabbah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Milton & Priscilla Graham . . . . . . . . . . . . . . . . . . . . . . .
Norman Stizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Peter Gabrielli . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard Carney Rev. Trust . . . . . . . . . . . . . . . . . . . . . . .
Robert Feldgarden . . . . . . . . . . . . . . . . . . . . . . . . . . .
Robert Horwytz . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Robert Mahala . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Steven Realbuto . . . . . . . . . . . . . . . . . . . . . . . . . . . .
William B. Warden . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Murray . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Melvin H. Meyer . . . . . . . . . . . . . . . . . . . . . . . . . . . .
K. King Burnett . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ronald McGee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alan Rubin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
59
<PAGE> 61
SCHEDULE II
Underwriting Agreement, dated ________, 1997
<TABLE>
<CAPTION>
Underwriter Number of Firm Shares
- ----------- ---------------------
<S> <C>
Nichols, Safina, Lerner & Co., Inc .........................
Total .................. _________________ shares
</TABLE>
60
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
<PAGE> 2
CERTIFICATE OF INCORPORATION
OF
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
-----------------------------------
FIRST. The name of this corporation shall be:
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
SECOND. Its registered office in the State of Delaware is to be located
at 1013 Centre Road, in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of common stock which this
corporation is authorized to issue is: Six Million (6,000,000) shares with a par
value of $.001 per share.
FIFTH. The name and address of the incorporator is as follows:
Terry Vidal
c/o Bronson & Migliaccio
287 Bowman Avenue
Purchase, NY 10577
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
SEVENTH. No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this Certificate of
Incorporation this 26th day of July, 1995.
/s/ Terry Vidal
---------------------------
Terry Vidal
287 Bowman Avenue
Purchase, NY 10577
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
CERTIFICATE OF INCORPORATION
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
The undersigned certifies that:
1. He is the Chairman of the Board and Secretary of
Panorama International Productions, Inc., a Delaware corporation (the
"Corporation").
2. The Fourth Article of the Certificate of
Incorporation of the Corporation is amended to read in its entirety as follows:
"FOURTH. This Corporation is authorized to issue two
classes of shares to be designated, respectively,
Common Stock ("Common Stock") and Preferred Stock
("Preferred Stock"). The total number of shares of
capital stock that this Corporation shall have
authority to issue is Fifteen Million (15,000,000).
The total number of shares of Common Stock this
Corporation shall have authority to issue is Ten
Million (10,000,000). The total number of shares of
Preferred Stock this Corporation shall have authority
to issue is Five Million (5,000,000). The Common
Stock shall have a par value of $.001 per share and
the Preferred Stock shall have a par value of $.001
per share.
The shares of Preferred Stock may be issued from time
to time in one or more series. The Board of
Directors of the Corporation (the "Board of
Directors") is expressly authorized to provide for
the issue of all or any of the shares of the
Preferred Stock in one or more series, and to fix the
number of shares and to determine or alter for each
such series, such voting powers, full or limited, or
no voting powers, and such designations, preferences,
and relative, participating, optional, or other
rights and such qualifications, limitations, or
restrictions thereof, as shall be stated and
expressed in the resolution
<PAGE> 3
or resolutions adopted by the Board of Directors
providing for the issue of such shares (a "Preferred
Stock Designation") and as may be permitted by the
General Corporation Law of the State of Delaware.
The Board of Directors is also expressly authorized
to increase or decrease (but not below the number of
shares of such series then outstanding) the number of
shares of any series. In case the number of shares
of any such series shall be so decreased, the shares
constituting such decrease shall resume the status
that they had prior to the adoption of the resolution
originally fixing the number of shares of such
series.
Effective as of 5:00 p.m. Eastern time on May 30,
1997, each outstanding one and nine-tenths (1.9)
shares of common stock shall be automatically
converted into one (1) share of common stock. Any
fractional shares resulting from such automatic
conversion shall be rounded upward to the nearest
whole share.";
3. The foregoing amendment to the Certificate of
Incorporation of the Corporation was duly adopted by the Board of Directors of
the Corporation in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware, and approved by the holders of a
majority of the shares of the Corporation's common stock, in accordance with
the provisions of Section 228 of the General Corporation Law of the State of
Delaware.
The undersigned further declares under penalty of perjury
under the laws of the State of Delaware, that the matters set forth in this
Certificate are true and correct of his own knowledge.
Dated: May 31, 1997
/s/Edward H. Resnick
-----------------------------------
Edward H. Resnick,
Chairman of the Board and Secretary
2
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED BYLAWS
<PAGE> 2
AMENDED AND RESTATED BYLAWS
OF
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the
stockholders of the Corporation, for the election of directors to succeed those
whose terms expire and for the transaction of such other business as may
properly come before the meeting, shall be held at such place, on such date,
and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months of the last annual meeting of stockholders
or, if no such meeting has been held, the date of incorporation.
Section 2. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes prescribed in the notice of the
meeting, may be called by the Board of Directors, the Chairman of the Board or
the President and shall be held at such place, on such date, and at such time
as they or he or she shall fix.
Section 3. Notice of Meetings. Written notice of the
place, date, and time of all meetings of the stockholders shall be given, not
less than ten (10) nor more than sixty (60) days before the date on which the
meeting is to be held, to each stockholder entitled to vote at such meeting,
except as otherwise provided herein or required by law (meaning, here and
hereinafter, as required from time to time by the Delaware General Corporation
Law or the Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time,
written notice need not be given of the adjourned meeting if the place, date
and time thereof are announced at the meeting at which the adjournment is
taken; provided, however, that if the date of any adjourned meeting is more
than thirty (30) days after the date for which the meeting was originally
noticed, or if a new record date is fixed for the adjourned meeting, written
notice of the place, date, and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
Section 4. Quorum. At any meeting of the stockholders,
the holders of a majority of all of the shares of the stock entitled to vote at
the meeting, present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law. Where a separate vote by a class or classes is
required, a majority of the shares of such class or classes present in person
or represented by proxy shall constitute a quorum entitled to take action with
respect to that vote on that matter.
<PAGE> 3
If a quorum shall fail to attend any meeting, the chairman of
the meeting or the holders of a majority of the shares of stock entitled to
vote who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
Section 5. Organization. The Board of Directors shall
designate the person to act as the chairman of any stockholders' meeting. In
the event the Board fails to designate such a person or, in the absence of such
a person, the Chairman of the Board or, in his or her absence, the holders of a
majority of the shares entitled to vote who are present, in person or by proxy,
shall designate such a person. Such person shall call to order any meeting of
the stockholders and act as chairman of the meeting. The Secretary of the
Corporation shall act as the secretary of any stockholders' meeting. In the
absence of the Secretary of the Corporation, the secretary of the meeting shall
be such person as the chairman appoints.
Section 6. Conduct of Business. The chairman of any
meeting of stockholders shall determine the order of business and the procedure
at the meeting, including such regulation of the manner of voting and the
conduct of discussion as seem to him or her to be in order. The date and time
of the opening and closing of the polls for each matter upon which the
stockholders will vote at the meeting shall be announced at the meeting.
Section 7. Proxies and Voting. At any meeting of the
stockholders, every stockholder entitled to vote may vote in person or by proxy
authorized by an instrument in writing or by a transmission permitted by law
filed in accordance with the procedure established for the meeting. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this Section 7 may be substituted or used in
lieu of the original writing or transmission for any and all purposes for which
the original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission. Notwithstanding
the foregoing, however, no proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock
itself or an interest in the Corporation generally. All proxies shall be filed
with the Secretary of the meeting before being voted upon.
All voting, including voting on the election of directors but
excepting where otherwise required by law, may be by a voice vote; provided,
however, that upon demand therefor by a stockholder entitled to vote or by his
or her proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballots, each of which shall
2
<PAGE> 4
state the name of the stockholder or proxy voting and such other information as
may be required under the procedure established for the meeting. The
Corporation may, and to the extent required by law, shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes
cast, and except as otherwise required by law, all other matters shall be
determined by a majority of the votes cast affirmatively or negatively.
Section 8. Stock List. A complete list of stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
for each class of stock and showing the address of each such stockholder and
the number of shares registered in his or her name, shall be open to the
examination of any such stockholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held.
The stock list also shall be kept at the place of the meeting
during the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in Delaware, its principal place of business,
or to an officer or agent of the Corporation having custody of the book in
which proceedings of meetings of stockholders are recorded. Delivery made to
the
3
<PAGE> 5
Corporation's registered office shall be made by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the date the earliest dated consent is delivered to the Corporation, a written
consent or consents signed by a sufficient number of holders to take action are
delivered to the Corporation in the manner prescribed in the first paragraph of
this Section 9. Prompt notice of the taking of the action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing and who, if the action had been taken at a
meeting, would have been entitled to notice of the meeting if the record date
for such meeting had been the date that written consents signed by a sufficient
number of stockholders to take the action were delivered to the Corporation in
the manner prescribed in the first paragraph of this Section 9.
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number and Term of Office. The number of
directors who shall constitute the whole Board of the Directors shall be not
less than five (5) directors and not more than nine (9) directors. As of the
date of adoption of these Bylaws, the authorized number of directors shall be
six (6). The directors need not be residents of the State of Delaware or
stockholders in the Corporation. Each director shall be elected for a term of
one year and until his or her successor is elected and qualified, except as
otherwise provided herein or required by law.
Whenever the authorized number of directors is increased
between annual meetings of the stockholders, a majority of the directors then
in office shall have the power to elect such new directors for the balance of a
term and until their successors are elected and qualified. Any decrease in the
authorized number of directors shall not become effective until the expiration
of the term of the directors then in office unless, at the time of such
decrease, there shall be vacancies on the Board which are being eliminated by
the decrease.
Section 2. Vacancies. If the office of any director
becomes vacant by reason of death, resignation, disqualification, removal or
other cause, a majority of the directors remaining in office, although less
than a quorum, may elect a successor for the unexpired term and until his or
her successor is elected and qualified.
Section 3. Regular Meetings. Regular meetings of the
Board of Directors shall be held at such place or places, on such date or
dates, and at such time or times as shall have been established by the Board of
Directors and publicized among all directors. A notice of each regular meeting
shall not be required.
4
<PAGE> 6
Section 4. Special Meetings. Special meetings of the
Board of Directors may be called by one-third (1/3) of the directors then in
office (rounded up to the nearest whole number), by the Chairman of the Board
or by the President and shall be held at such place, on such date, and at such
time as they or he or she shall fix. Notice of the place, date, and time of
each such special meeting shall be given to each director by mailing written
notice not less than five (5) days before the meeting or by telegraphing or
telexing or by facsimile transmission of the same not less than twenty-four
(24) hours before the meeting unless such director has waived the notice
requirements set forth in this Section 4. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum. At any meeting of the Board of
Directors, a majority of the total number of the whole Board shall constitute a
quorum for all purposes. If a quorum shall fail to attend any meeting, a
majority of those present may adjourn the meeting to another place, date, or
time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference
Telephone. Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business; Act of Board; Action
Without a Meeting. At any meeting of the Board of Directors, business shall be
transacted in such order and manner as the Board may from time to time
determine. The vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board, except as otherwise
provided herein or required by law. The Board may take any action without a
meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors.
Section 8. Powers. The Board of Directors may, except
as otherwise required by law, exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, including, without
limiting the generality of the foregoing, the unqualified power:
(a) To declare dividends from time to time in
accordance with law;
(b) To purchase or otherwise acquire any property,
rights or privileges on such terms as it shall determine;
5
<PAGE> 7
(c) To authorize the creation, making and
issuance, in such form as it may determine, of written obligations of
every kind, negotiable or non- negotiable, secured or unsecured, and
to do all things necessary in connection therewith;
(d) Without prejudice to an officer's rights
under any contract of employment, to remove any officer of the
Corporation with or without cause, and from time to time to devolve
the powers and duties of any officer upon any other person for the
time being;
(e) To confer upon any officer of the Corporation
the power to appoint, remove and suspend subordinate officers,
employees and agents;
(f) To adopt from time to time such stock,
option, stock purchase, bonus or other compensation plans for
directors, officers, employees and agents of the Corporation and its
subsidiaries as it may determine;
(g) To adopt from time to time such insurance,
retirement, and other benefit plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may
determine; and
(h) To adopt from time to time regulations, not
inconsistent with these Bylaws, for the management of the
Corporation's business and affairs.
Section 9. Compensation of Directors. Directors, as
such, may receive, pursuant to resolution of the Board of Directors, fixed fees
and other compensation for their services as directors, including, without
limitation, their services as members of committees of the Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors. The
Board of Directors, by a vote of a majority of the whole Board, may from time
to time designate committees of the Board, with such lawfully delegable powers
and duties as it thereby confers, to serve at the pleasure of the Board and
shall, for those committees and any others provided for herein, elect a
director or directors to serve as the member or members, designating, if it
desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law if the resolution which designates the committee or a
supplemental
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<PAGE> 8
resolution of the Board of Directors shall so provide. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members of the committee present at the meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.
Section 2. Conduct of Business. Each committee may
determine the procedural rules for meeting and conducting its business and
shall act in accordance therewith, except as otherwise provided herein or
required by law. Adequate provision shall be made for notice to members of all
committee meetings. One-third (1/3) of the members of a committee shall
constitute a quorum of that committee unless the committee shall consist of one
or two members, in which event one member shall constitute a quorum. All
matters shall be determined by a majority vote of the committee members present
at a meeting at which a quorum is present. Any committee may take any action
without a meeting if all members thereof consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of such
committee.
ARTICLE IV - OFFICERS
Section 1. Generally. The officers of the Corporation
shall consist of a Chairman of the Board, a President, a Secretary, a Chief
Financial Officer and such other officers as may from time to time be appointed
by the Board of Directors. Officers shall be elected by the Board of
Directors, at its first meeting after every annual meeting of stockholders.
Each officer shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any number of
offices may be held by the same person.
Section 2. Chairman. The Chairman of the Board shall be
the chief executive officer of the Corporation. The Chairman shall be the
highest ranking officer of the Corporation and shall have all the power and
authority vested in the President as set forth below in conjunction with the
President and shall perform all duties and have all powers which are commonly
incident to the office of chief executive officer or which are delegated to him
or her by the Board of Directors. The Chairman shall be an ex officio voting
member of all committees of the Board of Directors.
Section 3. President. Subject to the provisions of
these Bylaws pertaining to the Chairman of the Board and to the direction of
the Board of Directors, the President shall be the chief operating officer of
the Corporation and shall have the responsibility for the general management
and control of the business and affairs of the Corporation. He or she shall
have power to sign all stock certificates, contracts and
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<PAGE> 9
other instruments of the Corporation which are authorized and shall have
general supervision and direction of all of the other officers (other than the
Chairman), employees and agents of the Corporation. The President shall be an
ex officio voting member of all committees of the Board, and shall have the
general power and duties of supervision and management usually vested in the
office of President of a corporation. The President shall report to the
Chairman of the Board.
Section 4. Chief Financial Officer. The Chief Financial
Officer of the Corporation shall have the responsibility for maintaining the
financial records of the Corporation. He or she shall make such disbursements
of the funds of the Corporation as are authorized by the Board, taking proper
vouchers or receipts for such disbursements, and shall render to the Chairman,
the President and the Board from time to time an account of all such
transactions and of the financial condition of the Corporation. The Chief
Financial Officer shall also perform such other duties as the Board of
Directors may from time to time prescribe.
Section 5. Secretary. The Secretary of the Corporation
shall issue all authorized notices for, and shall attend and keep minutes of,
all meetings of the stockholders and the Board of Directors. He or she shall
have charge of the corporate books of the minutes and consents, and shall
perform such other duties as the Board of Directors may from time to time
prescribe.
Section 6. Delegation of Authority. The Board of
Directors may from time to time delegate the powers or duties of any officer to
any other officers or agents, notwithstanding any provision hereof.
Section 7. Removal. Without prejudice to an officer's
rights under any contract of employment, any officer of the Corporation may be
removed at any time, with or without cause, by the Board of Directors.
Section 8. Action with Respect to Securities of Other
Corporations. Unless otherwise directed by the Board of Directors, the Chairman
of the Board, the President or any officer of the Corporation authorized by the
Chairman of the Board or the President shall have power to vote and otherwise
act on behalf of the Corporation, in person or by proxy, at any meeting of
stockholders of or with respect to any action of stockholders of any other
corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
8
<PAGE> 10
ARTICLE V - STOCK
Section 1. Certificates of Stock. Each stockholder
shall be entitled to a certificate signed by, or in the name of the Corporation
by, the Chairman of the Board or the President, and by the Secretary or an
assistant secretary, or the Chief Financial Officer or an assistant chief
financial officer, certifying the number of shares owned by him or her. Any or
all of the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock. Transfers of stock shall
be made only upon the transfer books of the Corporation kept at an office of
the Corporation or by transfer agents designated to transfer shares of the
stock of the Corporation. Except where a certificate is issued in accordance
with Section 4 of this Article V, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
Section 3. Record Date. In order that the Corporation
may determine the stockholders entitled to notice of, or to vote at, any
meeting of stockholders, or to receive payment of any dividend or other
distribution or allotment of any rights or to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date on which the resolution fixing the record date is
adopted and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of any meeting of stockholders, nor more than
sixty (60) days prior to the time for such other action as hereinbefore
described; provided, however, that if no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of,
or to vote at, a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held, and, for determining stockholders entitled to receive payment
of any dividend or other distribution or allotment of rights or to exercise any
rights of change, conversion or exchange of stock or for any other purpose, the
record date shall be at the close of business on the day on which the Board of
Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice
of, or to vote at, a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may
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fix a record date, which shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall be not more than ten (10) days after the date upon which the
resolution fixing the record date is adopted. If no record date has been fixed
by the Board of Directors and no prior action by the Board of Directors is
required by the Delaware General Corporation Law, the record date shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation in the manner prescribed
by Section 9 of Article I of these Bylaws. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required
by the Delaware General Corporation Law with respect to the proposed action by
written consent of the stockholders, the record date for determining
stockholders entitled to consent to corporate action in writing shall be at the
close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
Section 4. Lost, Stolen or Destroyed Certificates. In
the event of the loss, theft or destruction of any certificate of stock,
another certificate may be issued in its place pursuant to such regulations as
the Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or agreement of
indemnity.
Section 5. Regulations. The issue, transfer, conversion
and registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VI - NOTICES
Section 1. Notices. Except as otherwise specifically
provided herein or required by law, all notices required to be given to any
stockholder, director, officer, employee or agent shall be in writing and may
in every instance be effectively given by hand delivery to the recipient
thereof, by depositing such notice in the mails, postage paid, or by sending
such notice by telecopy, prepaid telegram or mailgram. Any such notice shall
be addressed to such stockholder, director, officer, employee or agent at his
or her last known address as the same appears on the books of the Corporation.
The time when such notice is received, if hand delivered, or dispatched, if
delivered through the mails or by telecopy, telegram or mailgram, shall be the
time of the giving of the notice. An affidavit of the Secretary or an
assistant secretary or of the transfer agent of the Corporation that notice has
been given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
Section 2. Waivers. A written waiver of any notice,
signed by a stockholder, director, officer, employee or agent, whether before
or after the time of the event for which notice is to be given, shall be deemed
equivalent to the notice
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required to be given to such stockholder, director, officer, employee or agent.
Neither the business nor the purpose of any meeting need be specified in such a
waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures. In addition to the
provisions for use of facsimile signatures elsewhere specifically authorized in
these Bylaws, facsimile signatures of any officer or officers of the
Corporation may be used whenever and as authorized by the Board of Directors or
a committee thereof.
Section 2. Corporate Seal. The Board of Directors may
provide a suitable seal, containing the name of the Corporation, which seal
shall be in the charge of the Secretary. If and when so directed by the Board
of Directors or a committee thereof, duplicates of the seal may be kept and
used by the Chief Financial Officer or by an assistant secretary or assistant
chief financial officer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or committees of the Board of Directors so designated,
or by any other person as to matters which such director or committee member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Corporation.
Section 4. Fiscal Year. The fiscal year of the
Corporation shall be as fixed by the Board of Directors.
Section 5. Time Periods. In applying any provision of
these Bylaws which requires that an act be done or not be done a specified
number of days prior to an event or that an act be done during a period of a
specified number of days prior to an event, calendar days shall be used, the
day of the doing of the act shall be excluded, and the day of the event shall
be included.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification. Each person who
was or is made a party or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director or an officer of the Corporation or is
or was serving at the request of the Corporation as
11
<PAGE> 13
a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
a director, officer, employee or agent, shall be indemnified, defended and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred
or suffered by such indemnitee in connection therewith; provided, however,
that, except as provided in Section 3 of this Article VIII with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
Section 2. Right to Advancement of Expenses. The right
to indemnification conferred in Section 1 of this Article VIII shall include
the right to be paid by the Corporation the expenses (including attorney's
fees) incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay
all amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 2 or otherwise. The rights to indemnification and
to the advancement of expenses conferred in Sections 1 and 2 of this Article
VIII shall be contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators.
Section 3. Right of Indemnitee to Bring Suit. If a
claim under Section 1 or 2 of this Article VIII is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be twenty (20) days, the indemnitee
may at any time thereafter bring suit against
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<PAGE> 14
the Corporation to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit, or in a suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (a) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that,
and (b) in any suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee
to enforce a right to indemnification or to an advancement of expenses
hereunder, or brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article VIII or otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights. The rights to
indemnification and to the advancement of expenses conferred in this Article
VIII shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, the Corporation's Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 5. Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General Corporation
Law.
Section 6. Indemnification of Employees and Agents of
the Corporation. The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of
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<PAGE> 15
this Article VIII with respect to the indemnification and advancement of
expenses of directors and officers of the Corporation.
ARTICLE IX - AMENDMENTS
These Bylaws may be amended or repealed by the Board of
Directors at any meeting or by the stockholders at any meeting.
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<PAGE> 16
CERTIFICATE OF SECRETARY
The undersigned, Edward H. Resnick, does hereby certify that:
1. He is the duly elected and acting Secretary of
Panorama International Productions, Inc., a Delaware corporation (the
"Corporation"); and
2. The foregoing Amended and Restated Bylaws, comprising
fourteen (14) pages, constitute the amended and restated bylaws of the
Corporation as duly adopted by written consent of the Board of Directors of the
Corporation on May 19, 1997.
IN WITNESS WHEREOF, the undersigned has hereunder subscribed
his name this 19th day of May, 1997.
/s/Edward H. Resnick
-------------------------------------
Edward H. Resnick, Secretary
15
<PAGE> 1
EXHIBIT 4.2
Incorporated under the Laws of the State of Delaware
NUMBER SHARES
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
Authorized Capital Stock: 15,000,000
10,000,000 Shares Common Stock; 5,000,000 Shares Preferred Stock
SPECIMEN
This Certifies that _____________________________________ is the registered
holder of _______________________________________________ Shares of Common Stock
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate propertly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal hereunto affixed
this _____ day of _________ A.D. 19____.
____________________________________ ______________________________________
Secretary President
<PAGE> 2
FOR VALUE RECEIVED ________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
[ ] __________________________________
PLEASE INSERT SOCIAL SECURITY OF OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_________________________________________________________________________
______________________________________________________ SHARES REPRESENTED
BY THE WITHIN CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND
APPOINT _______________________________________________________ ATTORNEY
TO TRANSFER THE SAID SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED
CORPORATION, WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ___________________ 19 _____
IN THE PRESENCE OF _______________ ____________________________________
__________________________________ ____________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
(PERTAINING TO CINESCOPE ENTERPRISES, INC.)
<PAGE> 2
ASSETS PURCHASE AGREEMENT
ASSETS PURCHASE AGREEMENT is entered into as of August 15,
1995, by and between PANORAMA INTERNATIONAL PRODUCTIONS, INC., a Delaware
corporation, or its assigns (the "Buyer") and CINESCOPE ENTERPRISES, INC. D/B/A
PANORAMA INTERNATIONAL PRODUCTIONS, a California corporation (the "Seller").
Seller wishes to sell to Buyer, and Buyer wishes to purchase
from Seller, all of the assets of Seller as set forth on Schedule 1.1,
including but not limited to Seller's entire video tape and film library
excluding Excluded Assets as defined below in Section 1.1.2 (the "Assets").
Accordingly, in consideration of the premises and in reliance
upon the mutual representations, warranties, covenants and agreements
hereinafter set forth, and upon the terms and subject to the conditions
hereinafter set forth, the parties agree as follows:
1.1 Transfer of Assets and Assumption of Liabilities
1.1.1 Assets to be Transferred. Subject to the
terms and conditions of this Agreement, Seller on the Closing Date shall sell,
assign, transfer and convey to Buyer and Buyer on the Closing Date shall
purchase from Seller all of the Assets of Seller wherever such Assets may be
situated, except for Excluded Assets, including, but not limited to, (a) all
video tapes and films (including masters, dubbing copies of masters, scripts
and production elements), (b) books and records applicable to the operation of
the business of Seller, (c) licenses, (d) all patents, patent rights,
copyrights, trademarks, servicemarks and patent, copyright, trademark or
servicemark applications, including the corporate name Cinescope Enterprises,
Inc. and the trade
<PAGE> 3
name Panorama International Productions and any derivatives thereof, and all
ideas, knowhow, trade secrets, inventions, technology, designs and any other
proprietary rights which Seller owns pertaining to its video tape and film
library (collectively, the "Proprietary Rights"), (e) leases, (f) all telephone
numbers and post office boxes of Seller, and (g) all other agreements as set
forth on Schedule 3.9. The Assets shall be delivered on the Closing Date, free
and clear of and expressly excluding all debts, liabilities, obligations,
taxes, liens and encumbrances of any kind, character or description, whether
accrued, absolute, contingent or otherwise (and whether or not reflected or
reserved against in the balance sheets, books of account and records of
Seller), except as expressly described in Schedule 1.1.2 attached hereto.
1.1.2 Excluded Assets. There shall be excluded
from the Assets: (a) copies of Seller's tax returns and other documents which
Seller is required by law to keep in its possession; and (b) Seller's cash on
hand as of the Closing Date and all other cash in any of Seller's bank deposits
or savings accounts as well as certificates of deposit with various banking
institutions; (c) receivables generated prior to the Closing Date in the normal
course of business from non-affiliated parties; (d) tax refunds; and (e)
receivables generated in the normal course of business from affiliates of
Seller as set forth on Schedule 1.1.2. All other excluded Assets, if any,
shall be set forth on Schedule 1.1.2.
1.1.3 Instruments of Transfer, Etc. On the Closing
Date, Seller shall deliver to Buyer: (i) a Bill of Sale and such deeds,
assignments, and other good and sufficient instruments of sale, transfer and
conveyance (the Bill of Sale to be
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<PAGE> 4
substantially in the form of Schedule 1.1.3 attached hereto) as shall be
effective to vest in Buyer all right, title, interest and benefit, including
all of Seller's right and title, interests and benefits in and to the Assets,
including all required consents to assignment of the Assets; (ii) all
instruments, books, records (except the books and records described in Section
1.1.2 hereof); and (iii) other data relating to the Assets, business and
operations of the Seller. Seller, upon execution of this Agreement, shall
proceed to obtain all necessary consents and transfers and Buyer will cooperate
with such efforts.
1.2 No Assumption of Liabilities. Except as specifically
set forth on Schedule 1.2 attached hereto, Buyer will assume no liabilities of
the Seller. Without limiting the foregoing, it is agreed that the liabilities
of Seller, which will not be assumed by Buyer, include but are not limited to
the following:
1.2.1 All liabilities existing as of the Closing
Date whether or not known to Seller:
1.2.2 All liabilities for federal, state, local and
foreign taxes, including any transfer taxes in respect of any period or periods
ending, or any transactions or events occurring, on or before the Closing Date
hereof;
1.2.3 Liabilities for expenses incurred by Seller
or any of Seller's agents or employees, or for claims of any kind made against
Seller in connection with or by reason of the transactions contemplated by this
Agreement;
1.2.4 Except as otherwise provided in this
Agreement, liabilities for any brokerage or similar charge or commission for
financial, legal or
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<PAGE> 5
other advice or services in connection with this Agreement or the transactions
contemplated hereby;
1.2.5 Liabilities for copyright fees, penalties or
other charges imposed by the Federal Communications Commission or other
federal, state or local governmental authorities incurred prior to the Closing
Date or allocable to a period of time prior to the Closing Date;
1.2.6 Liabilities for any licensing fees, ASCAP
fees or residuals of any kind or nature for talent, music or film clips except
as set forth in Schedule 1.2;
1.2.7 Liabilities incurred in connection with or by
reason of the execution of this Agreement or the consummation of the
transaction contemplated hereby, including, without limitation, tax liabilities
except for sales tax as a result of sale of the Assets; and
1.2.8 Liabilities of Seller incurred after the
Closing Date hereof.
1.3 Indemnity for Liabilities not Assumed. Seller agrees
to indemnify, defend and hold harmless, Buyer from and against any and all
liabilities of Seller not assumed by Buyer, including interest, penalties and
reasonable attorneys' fees and disbursements, arising out of any liabilities.
1.4 Purchase Price. The aggregate purchase price for the
Assets is Two Million Dollars ($2,000,000) (the "Purchase Price") payable
$100,000 upon execution of this Agreement as a deposit (the "Deposit") and
$1,900,000 on the
4
<PAGE> 6
Closing Date in cash by wire transfer, certified check or otherwise by
presentation of good funds on the Closing Date. Buyer shall also acquire
current and merchantable inventory of viewmaster, video tapes and related
packaging for value which shall be determined based upon generally acceptable
accounting principles at the lower of cost or market and paid 50% on the
Closing Date with the balance due 60 days thereafter. The Deposit shall be
held in escrow by Leslie Klinger, Esq. [or Kopple & Klinger] ("Escrow Agent")
in an attorney escrow account (the "Escrow Account").
The Escrow Account shall only be released upon the following
terms and conditions: (1) the sale of Assets is successfully closed and
concluded and Buyer acquires the Assets from Seller in which event the Escrow
Account will be released to Seller as a portion of the purchase price; (2) both
Buyer and Seller in writing direct Escrow Agent to release the Escrow Funds;
(3) a court of competent jurisdiction directs Escrow Agent to release the
Escrow Funds; (4) the Escrow Funds may be released to Seller five (5) business
days after written request of Seller, a copy of which must be delivered to
Buyer, if Buyer fails to close and acquire the Assets in accordance with the
Assets Purchase Agreement and applicable law; provided, that Seller has
complied with all conditions of closing as set forth in the Assets Purchase
Agreement; and (5) the Escrow Funds shall be released to Buyer in the event
Seller fails to comply with the conditions of closing set forth in the Assets
Purchase Agreement; provided, that Buyer shall make such request in writing and
provide five (5) business days notice to Seller. In the event of any dispute
under the Escrow
5
<PAGE> 7
Agreement which cannot be resolved, Escrow Agent may continue to hold the
Escrow Funds until such dispute is resolved.
In the event Buyer fails to close due to lack of funds by the
Closing Date, the Deposit shall be forfeited to Seller as liquidated damages.
1.5 Allocation of Purchase Price. It is hereby agreed
that the aggregate purchase will be allocated in accordance with Internal
Revenue Code Section 1060 as attached hereto as Schedule 1.5 and Seller and
Buyer shall for tax purposes consistently treat the sale of Assets. Seller and
Buyer agree to file the forms required by IRC Section 1060 and regulations
promulgated thereunder.
2. Execution of Agreement and Closing Date
2.1 Execution of Agreement. The parties have executed
this Agreement on the date first set forth above and shall close not later than
September 20, 1995, subject to extension to October 15, 1995 upon the payment
of an additional deposit of $50,000 which shall also be held in the attorney
escrow account (the "Closing Date"); provided, however, that in the event
either party has not fulfilled the conditions of this Agreement by the Closing
Date (including any extension thereto), the other party may elect to revoke
this Agreement without incurring any liability. Neither party's remedies at
law or equity will be deemed waived by any extension or election made
hereunder.
2.2 Closing Date. The Closing Date shall occur at the
office of Kopple & Klinger, 2029 Century Park East, Suite 1040, Los Angeles, CA
90067 at 10:00 AM local time. On the Closing Date the parties of this
Agreement shall deliver
6
<PAGE> 8
all funds, schedules, and appendices as required herein. Buyer may require
Seller to confirm this Agreement on the Closing Date by executing additional
counterpart signature pages or reconfirmations on such Closing Date which
Seller hereby agrees to execute.
3. Representations and Warranties of Seller. Seller hereby
covenants, represents and warrants to Buyer as follows:
3.1 Good Title. Except for the liens on the Assets set
forth in Schedule 3.1 attached hereto, Seller lawfully owns and has good and
marketable title, in and to, and has the full and absolute right to sell to
Buyer, all of the properties comprising the Assets, free and clear of all
liens, mortgages, pledges, claims or other encumbrances of every nature and
description except current ad valorem taxes, if any, which are to be ratably
divided between Buyer and Seller based upon the number of days Buyer and Seller
own the Assets during the current taxable period.
To the best knowledge of Seller, none of the Assets,
or the use thereof: (i) encroaches or infringes on the property or rights of
another or (ii) contravenes any applicable law or ordinance or any other
administrative regulation or violates any restrictive covenant or any provision
of law. There are no agreements or arrangements between Seller and any third
person which have any effect upon Seller's title to or other rights respecting
the Assets, except as described on Schedule 3.9 attached hereto;
(a) Seller has the sole and exclusive right to
produce and market its video tape and film library as st forth on Schedule 1.1
and conduct its
7
<PAGE> 9
business with respect thereto as heretofore conducted and has the full right
and power to transfer the Assets;
(b) Seller has the right to bring actions for the
infringement of relevant Federal, state and local law required to protect its
interest and proprietary rights in all of the Assets;
(c) Other than as set forth in the contracts
listed on Schedule 3.9, Seller has no present or future obligation or
requirement to compensate any person with respect to any of the Assets, whether
by the payment of royalties or not, or whether by reason of the ownership, use,
license, lease, sale or any commercial use or any disposition whatsoever of any
of the Assets;
(d) None of the present or former employees of
Seller own directly or indirectly, or has any other right or interest in, in
whole or in part, any of the Assets; and
(e) The Assets constitute all such rights
necessary for Seller to conduct its business related to its video tape and film
library as now conducted and as proposed to be conducted by Buyer.
3.1.1 Patents, Trademarks, Etc. Except as
described on Schedule 1.1 annexed hereto, there are no inventions, licenses,
patents, patent applications, trademarks, copyrights, trademark or copyright
applications or registrations, pending or existing, relating to Seller's video
tape or film library owned by or registered in the name of Seller or, to the
best of Seller's knowledge, any other person; and the inventions, patents,
licenses, trademarks, trade names and copyrights,
8
<PAGE> 10
existing or pending, listed on Schedule 1.1 hereto are all such items necessary
for the present conduct of Seller's business relating to the Assets, none of
which is being contested or infringed upon; and to the best knowledge of
Seller, the present conduct of the business of Seller relating to the Assets
does not infringe upon or violate the patent, patent rights, trademarks, trade
names, trade secrets or copyrights of anyone nor has Seller received any notice
of any infringement thereof.
3.2 Organization, Good Standing and Compliance. Seller
is a duly organized, validly existing corporation and in good standing under
the laws of the State of California, with full power and lawful authority to
execute and deliver this Agreement and to consummate and perform the
transactions contemplated hereby. The execution and delivery of this Agreement
by Seller and the consummation and performance by it of the transactions
contemplated hereby have been duly and validly authorized and approved by its
Board of Directors, and this Agreement constitutes the valid obligation of
Seller legally binding upon and enforceable against it in accordance with its
terms. Attached hereto as Schedule 3.2 are copies of Seller's Certificate of
Incorporation, with amendments, By-laws and Board of Directors resolutions
authorizing this transaction certified by the Secretary of Seller as true,
correct and accurate.
3.3 Approvals and Consents. Except to the extent that
consent is needed to assign any of the contracts listed on Schedule 3.9, no
approval or consent of any state, county or local governmental agency or body
or private person or entity is required in connection with the execution,
delivery, consummation and performance by
9
<PAGE> 11
Seller of the terms of this Agreement and the transfer of Assets. The
execution, delivery, consummation and performance by Seller of this Agreement
and the transfer of Assets will not materially conflict with or result in the
material breach or violation of any term or provision of, any indenture,
mortgage, deed of trust, note agreement or other agreement or instrument to
which Seller is a party or by which Seller is bound, or any order, writ,
injunction or decree, of any court or rule or regulation or any governmental
agency or body.
3.4 Financial Statements. Attached as Schedule 3.4 is
the balance sheet of Seller and the related statements of income for the years
ended December 31, 1994, December 31, 1993 and December 31, 1992 (the
"Financial Statements"), and the unaudited financial statement prepared by the
Seller dated the last full month prior to the Closing Date (hereinafter
referred to as the "Balance Sheet Date") which present fairly the financial
condition of Seller as at such date and results of operations for the period
covered and were prepared in accordance with customary and regular accounting
procedures consistently applied by the Company.
3.5 Adverse Developments. Seller using due diligence
warrants that since the Balance Sheet Date, there as been no material change in
the financial condition of the Seller which in any one case or in the aggregate
have had or will have a materially adverse effect on its present or future
business, and Seller does not know of any development or threatened development
of a nature that is or may materially effects its present or future business,
and Seller does not know of any development or threatened development of a
nature that is or may be materially adverse to its business.
10
<PAGE> 12
3.6 Assets and Properties. Schedule 1.1 attached hereto
contains a true and complete schedule, as of the date hereof, of all of the
Seller's Assets. On the date hereof Seller's operating Assets are in good
operating condition and repair and are useful, appropriate and adequately
adapted to the operation of Seller as now conducted, and to the best of
Seller's knowledge the operation thereof in the manner presently conducted by
Seller are not in violation of any local or state law, ordinance, code or
regulation, or zoning or building laws.
3.7 Employees and Consultants. Schedule 3.7 contains (i)
the names, job designations and compensation of all employees of the Company
and (ii) the name of each consultant, consulting firm, agent or other similar
person or company and a statement of the financial arrangement with such
consultants. Seller represents that there are no employee benefit plans
including stock option plans or profit sharing plans except as set forth in
Schedule 3.7.
3.8 Legal Proceedings, Etc. Except as provided on
Schedule 3.8, there are no material disputes, claims, actions, suits or
proceedings, arbitration, or investigations, either administrative or judicial,
pending, or, to the best knowledge of Seller, threatened or contemplated, by,
against or affect or relating to Seller, the business of Seller or any of the
Assets, at law or in equity or otherwise before or by any court or governmental
agency or body, domestic or foreign, or before an arbitration of any kind.
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<PAGE> 13
3.9 Material Contracts. Schedule 3.9 lists all of the
following contracts, obligations or commitments to which the Seller or any of
its subsidiaries is a party or by which the Seller or any of its subsidiaries
may be bound:
(a) Material contracts, other than contracts for
the sale of inventory or contracts having a term of less than 30 days for the
supply of raw materials in each case made in the ordinary course of business.
(b) Employment contracts which are not terminable
by their terms without cost or other liability to Seller or its subsidiaries,
or any successor thereof, upon notice of 30 days or less.
(c) Contracts with any labor union or other
collective bargaining group or settlement or conciliation agreement with any
governmental agency administering fair employment practice laws or orders.
(d) Other than as set forth in Section 3.7 or
Schedule 3.7 there are no bonus, pension, profit sharing, annuity, deferred
compensation, retirement, stock purchase, stock option, stock ownership, or
similar plan or trust providing for employment benefits or any currently
outstanding loan or advance made by Seller or its subsidiaries to any
affiliate, officer, agent or employee of Seller or its subsidiaries.
(e) Leases with respect to any material item of
property, real or personal, to which the Seller or any of its subsidiaries is a
party whether as lessor or lessee.
(f) Mortgages, pledges, deeds of trust, loan or
credit agreements, contracts for borrowed money, guaranties or similar
instruments.
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<PAGE> 14
(g) Contracts with talent.
(h) Supply or requirements contracts with
customers.
(i) Contracts for music.
No material default or alleged material default
exists under any of the foregoing contracts, obligations or commitments.
[Balance of Page Intentionally Left Blank.]
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<PAGE> 15
3.9A Universal-Florida Account. Buyer is advised
that Universal Studios - Florida ("Universal") is under no obligation, whether
written or oral, express or implied, to purchase from Seller any goods, except
to the extent that Universal has placed an order with Seller to purchase goods.
Likewise, Seller is under no obligation, whether written or oral, express or
implied, to sell goods to Universal, except to the extent that Seller has
received an order from Universal to purchase goods. To the best of Seller's
knowledge, (a) Universal is not now, nor has it every been, in material breach
of its obligation to purchase from Seller goods Universal has ordered; (b)
Seller is not now, nor has it ever been, in material breach of its obligation
to sell to Universal goods Universal has ordered; and (c) Universal has never
notified Seller of any material problem with respect to any goods that Seller
has sold to Universal or with respect to any aspect of Seller's relationship
with Universal.
3.10 Brokerage. No broker, finder or similar agent has
been employed by or on behalf of Seller, and no person or entity with which
Seller has had any dealings or communications of any kind is entitled to any
brokerage commission, finder's fee or any similar compensation, in connection
with this Agreement or the transactions contemplated hereby except as set forth
on Schedule 3.10.
3.11 Delivery of Copies of Documents. Copies of all
documents described in the Schedules and Appendices of this Agreement, and not
otherwise attached, are listed on Schedule 3.11, and all such documents are
true, correct and complete copies thereof and include all amendments,
supplements or modifications
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<PAGE> 16
thereof or waivers currently in effect thereunder. The above documents will be
furnished both prior to the execution of this Agreement and prior to Closing.
3.12 Environmental Standards. (a) Except as set forth in
Schedule 3.12, Seller has obtained all permits, licenses, approvals, consents,
certificates and authorizations except those which are not material to the
conduct of the business of Seller ("Environmental Permits") required under any
Federal, state or local law, rule, ordinance, code, regulation or order
currently existing and in effect regulating air quality, water quality or any
hazardous, solid or toxic waste or substance ("Environmental Laws") from all
governmental entities having jurisdiction over Seller or its subsidiaries and
the properties owned or used in connection with their operations and each such
Environmental Permit is in full force and effect.
(b) Except as set forth in Schedule 3.12. (i)
Seller has not generated, manufactured, refined, transported, treated, stored,
handled, disposed of, transferred, produced or processed any hazardous, solid
or toxic waste or substance in violation of any then applicable Environmental
Law and (ii) has not violated in any material respect any Environmental Laws or
received any notice from any governmental entity or other party alleging any
such violation.
4. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
4.1 Organization, Good Standing and Authority. Buyer is
a duly organized, validly existing corporation and in good standard under the
laws of the State of Delaware, with full power and lawful authority to execute
and deliver this
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<PAGE> 17
Agreement and to consummate and perform the transactions contemplated hereby.
The execution and delivery of this Agreement by Buyer and the consummation and
performance by it of the transactions contemplated hereby have been duly and
validly authorized and approved by its Board of Directors, and this Agreement
constitutes the valid obligation of Buyer legally binding upon and enforceable
against it in accordance with its terms. Attached hereto as Schedule 4.1 are
copies of the Articles of Incorporation, with amendments, by-laws and Board of
Directors Resolutions of Buyer, certified by Buyer.
4.2 Brokerage. No broker, finder or similar agent has
been employed by or on behalf of Buyer, and no person or entity with which
Buyer has had any dealings or communications of any kind is entitled to any
broker commission, finder's fee or any similar compensation, in connection with
this Agreement or the transactions contemplated hereby, except as set forth on
Schedule 4.2.
4.3 Disclosure. No representation or warranty by Buyer
contained in this Agreement, and no statement or information contained in any
writing delivered to Seller pursuant hereto, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements or information contained herein or therein not misleading.
4.4 Approval and Consents. No approval or consent of any
state, county or local governmental agency or body or private person or entity
is required in connection with the execution, delivery, consummation and
performance by Buyer of the terms of this Agreement and the transfer of Assets.
The execution, delivery,
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consummation and performance by Buyer of this Agreement and the transfer of
Assets will not conflict with or result in the material breach or violation of
any term or provision of, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which Buyer is a party or by
which Buyer is bound, or any order, writ, injunction or decree, of any court or
rule or regulation or any governmental agency or body.
4.5 Buyer's Opinion of Counsel. As a condition of
Closing, Seller shall have received the written opinion, dated the Closing Date
and addressed to it from its counsel, in form and substance as set forth on
Schedule 4.5.
4.6 Collection of Receivables. Buyer agrees to use its
best efforts to collect receivables of Seller which relate to periods prior to
the Closing Date. Buyer will remit to Seller checks related to such
receivables as checks are collected.
4.7 Sales Tax Resale Certificate. Buyer shall furnish
Seller with a sales tax resale certificate by the Closing Date.
4.8 Sales Tax. Buyer agrees to be liable for all sales
tax payments due and owing solely as a result of the sale of Assets as set
forth herein.
5. Seller's Opinion of Counsel. As a condition of Closing, Buyer
shall have received the written opinion, dated the Closing Date and addressed
to it (and specifically confirmed to the senior lender for its reliance), from
counsel for Seller, in form and substance as set forth on Schedule 5.
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6. Miscellaneous.
6.1 Survival of Representations and Warranties. The
representations, warranties, covenants and agreements made in this Agreement,
or in any writing delivered pursuant hereto to the extent that it relates to
any such representations, warranty, covenant or agreement, shall survive the
execution and delivery hereof.
6.2 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, successors and assigns.
6.3 Notices. Any notice or communication given pursuant
hereto shall be in writing and deemed given when delivered personally or when
mailed by certified mail, postage prepaid, as follows:
6.3.1 If to Seller, as follows:
Cinescope Enterprises, Inc.
d/b/a Panorama International Productions
2621 Empire Avenue
Burbank, CA 91504
Attention: Mr. Dion Recachina
with a copy to:
Leslie S. Klinger, Esq.
Kopple & Klinger
2029 Century Park East, Suite 1040
Los Angeles, CA 90067
6.3.2 If to Buyer, as follows:
Panorama International Productions, Inc.
c/o InterBank Communications, Inc.
630 Fifth Avenue, Suite 820
New York, NY 10111
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with a copy to:
H. Bruce Bronson, Jr., Esq.
Bronson & Migilaccio
287 Bowman Avenue, Suite 305
Purchase, NY 10577
or to such other address or addresses as hereinafter shall be furnished by any
of the parties hereto to any of the other parties hereto.
6.4 Waiver; Remedies. No delays on the part of any party
hereto in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any such party or any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. The
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which any part hereto may otherwise have at law or in
equity.
6.5 Entire Agreement. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof,
supersedes all prior agreements or understandings of the parties relating
thereto and shall not be modified or amended in any fashion except by
instrument in writing signed by the party charged with such modification or
amendment.
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6.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute a single instrument.
6.7 Governing Law. this Agreement shall be construed in
accordance with the laws of the State of California applicable to contracts
made and to be performed entirely within such State.
6.8 Variations in Pronouns. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine or
neuter, singular or plural, as the identity of the person or persons or entity
may require.
6.9 Exhibits, Appendices and Schedules. All exhibits,
appendices and schedules appended hereto are incorporated in and made a part of
this Agreement. All such exhibits, appendices and schedules have been
initialled for identification by the parties hereto. All such exhibits,
appendices and schedules will be updated to the extent of any changes at
Closing.
6.10 Captions. All sections, title or captions contained
in this Agreement, in any Exhibit annexed hereto or in any Schedule referred to
herein and the table of contents, if any, to this Agreement are for convenience
only, shall not be deemed a part of this Agreement and shall not affect the
meaning or interpretation of this Agreement.
6.11 Covenant Not to Compete. As a condition of Closing,
Seller agrees to provided non-competition agreements in the form as attached
hereto as
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Schedule 6.11 for Seller and Dion Recachina and Laura Recachina, husband and
wife, who are the sole owners of the stock of Seller.
6.12 Further Assurances. Each of the parties hereto
shall, subject to the fulfillment at or before the Closing Date of each of the
conditions to its performance set forth herein or the waiver thereof, perform
such further acts and execute such documents as reasonably may be required to
effectuate the transactions contemplated hereby. Each of the parties hereto
shall use all reasonable efforts expeditiously to fulfill or to obtain the
fulfillment of the conditions set forth in this Agreement.
As a condition of Buyer's obligation to purchase the Assets
Seller (i) shall deliver all schedules and appendices and perform all acts
required by this Agreement in a form and manner consistent with this Agreement;
(ii) cooperate with Buyer's efforts to obtain a loan from a bank or other
financial institution including Seller's providing of all information or
documents (including consents to transfer) as may be required; (iii) will have
received all material consents and approvals necessary to transfer the Assets;
(iv) will have caused Dion Recachina to have entered into a Production
Agreement for the future performance of production of films as needed by Buyer
for an eighteen (18) month period pursuant to the contract attached hereto as
Schedule 6.12; and (v) Buyer and Gifts Limited, Inc., a Nevada corporation will
have executed a 5 year requirements contract covering the purchase of Gifts
Limited, Inc. of
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Seller's video tapes and viewmaster products pursuant to the contract as set
forth as Schedule 6.12(A).
6.13 Effect of Invalidity. Should any part of this
Agreement, for any reason, be declared invalid, such decision shall not affect
the validity of any remaining portion, which remaining portion shall remain in
force and effect as if this Agreement had been executed with the invalid
portion thereof eliminated.
6.14 Escrow. Upon closing either (a) $150,000 will be
placed in an interest bearing attorney escrow account with Leslie S. Klinger,
Esq. pursuant to an Escrow Agreement or (b) Dion and Laura Recachina will
indemnify Buyer for up to $150,000 for any breach of representation, warranty
or covenants contained herein for a period of 18 months. If the funds are
escrowed, they will be released 50% after one year and 50% after eighteen
months; provided, however, that Buyer has incurred no expenses or liabilities
for Seller's undisclosed liabilities or misrepresentations or for which Seller
has given its warranty. All interest accrued on the escrow account shall be
payable to Seller upon the termination of the Escrow Agreement, provided that
such interest has not been invaded to make payments to or for the benefit of
Buyer as provided herein. Buyer shall have the right, subject to the terms of
the Escrow Agreement, to offset liabilities or expenses incurred by it which
are the result of an undisclosed liability, misrepresentation or related to a
warranty of Seller or failure of covenants or conditions of Seller or due to
such other adjustment as is contemplated by this Agreement. The parties to
this Agreement will indemnify and hold Escrow Agent harmless for any of his
acts as escrow agent except wilful misconduct.
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7. Indemnification Provisions
7.1 Indemnification by Buyer. Subject to the limitations
set forth in Section 7.5 hereof, Buyer shall defend, indemnify and hold
harmless Seller, and its employees, officers, directors and shareholders, and
its transferees, successors and assigns (individually, a "Seller Indemnitee"
and collectively the "Seller Indemnities"), from and against any and all
claims, losses, deficiencies, damages, costs and expenses (including fees and
disbursements of counsel) (together, "Losses") arising out of, related to, or
resulting from (i) any breach by Buyer of any of Buyer's representations and
warranties hereunder or in any certificate, agreement or instrument delivered
by Buyer to Seller in connection with the transactions contemplated hereby and
(ii) any failure by Buyer to perform any covenant or agreement made or to be
performed by Buyer pursuant to this Agreement (iii) any liabilities of Seller
assumed by Buyer pursuant to the terms hereof, and (iv) any liabilities arising
after the Closing Date and relating to the Assets.
7.2 Indemnification by Seller. Subject to the
limitations set forth in Section 7.5 hereof, Seller shall defend, indemnify and
hold harmless Buyer, and its employees, officers, directors and shareholders,
and its transferees, successors and assigns (individually, a "Buyer Indemnitee"
and collectively the "Buyer Indemnities"), from and against any and all Losses
arising out of, related to, or resulting from (i) any breach by Seller of any
of its representations and warranties hereunder or in any certificate,
agreement or instrument delivered to Buyer in connection with the transactions
contemplated hereby; (ii) any failure by Seller or its shareholders to
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perform any covenant or agreement made or to be performed by Seller or its
shareholders pursuant to this Agreement; or (iii) any taxes or other
liabilities arising from the operations of Seller or its subsidiaries prior to
the Closing Date.
7.3 Procedure in Event of Indemnity.
(a) Notice to the indemnifying party shall be
given promptly after receipt by any Seller Indemnitee or Buyer Indemnitee of
actual knowledge of the commencement of any action or the assertion of any
claim that will likely result in a claim by it for indemnity pursuant to this
Agreement. Such notice shall set forth in reasonable detail the nature of such
action or claim to the extent known, and include copies of any written
correspondence from the party asserting such claim or initiating such action.
The indemnifying party shall be entitled, at its own expense, to participate in
the defense of such action or claim or, if (a) the action or claim involved
seeks (and continues to seek) solely monetary damages, (b) the indemnifying
party is obligated to indemnify and hold harmless the other party with respect
to such damages in their entirety pursuant to Sections 7.1 or 7.2, and (c) the
indemnifying party shall admit in writing its obligations to indemnify in
connection therewith, then such party shall be entitled to assume and control
such defense with counsel chosen by such party; provided, that a decision or
judgment with respect to such action or claim will not have any direct or
indirect material adverse effect upon the person seeking indemnification. The
person seeking indemnification shall be entitled to participation therein after
such assumption, the costs of such participation following assumption to be at
its own expense. Upon assuming such defense, the indemnifying party shall
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agree to be fully responsible for, and to pay, the entire amount of any
monetary judgment or settlement, and shall have full rights to enter into any
monetary compromise or settlement which is dispositive of the matters involved;
provided, that such settlement will not have any direct or indirect material
adverse effect upon the person seeking indemnification. In the event that the
indemnifying party assumes the defense of such action or claim, it shall be
conducted by counsel chosen by such party and approved by the party seeking
indemnification, which approval shall not be unreasonably withheld.
(b) With respect to actions as to which (i) the
indemnifying party does not have the right to assume the defense, or (ii) it
shall not have exercised its right to assume the defense, the party seeking
indemnification shall assume and control the defense of and contest such action
with counsel chosen by it and approved by the indemnifying party, which
approval shall not be unreasonably withheld. The indemnifying party shall be
entitled to participate in the defense of such action, the cost of such
participation to be at its own expense. The indemnifying party shall be
obligated to pay the attorneys' fees and expenses of the party seeking
indemnification to the extent that such fees and expenses related to claims as
to which indemnification is payable under Sections 7.1 or 7.2. The party
seeking indemnification shall have full rights to dispose of such action and
enter into any monetary compromise or settlement; provided, however, that in
settling any action in respect of which indemnification is payable under
Sections 7.1 or 7.2, it shall act reasonably and in good faith.
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(c) Both the indemnifying party and the
indemnified party shall cooperate fully with one another in connection with the
defense, compromise or settlement of any such claim or action, including
without limitation, by making available to the other all pertinent information
and witnesses within its control.
7.4 Survival of Representations and Warranties and
Covenants. The representations and warranties of Buyer and of Seller set forth
in this Agreement and in any certificate, agreement or instrument delivered in
connection with the transactions contemplated hereby, shall survive the
Closing.
8. Conduct Pending Closing.
8.1 Access to Premises and Records. Between the date of
execution and delivery of this Agreement and the Closing Date, Seller shall
allow Buyer, its accountants, auditors, engineers and representatives access to
the books and records of Seller.
8.2 Continuity and Maintenance of Operations. Seller
shall continue to operate its business, shall maintain the Assets (including
maintenance and replenishment of all inventories) and shall keep all of its
business books, records, and files all in the ordinary course of business in
accordance with past practices, consistently applied. Seller shall bear the
risk of loss on or prior to Closing with respect to the Assets as a result of
any loss, claim, casualty, or calamity. Seller shall not, without prior
written consent of Buyer, which consent shall not be unreasonably withheld (i)
change the rate charged for its products or (ii) sell more product than is
normally and usual to any customer or Seller. Seller shall not sell, transfer,
assign, or
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permit the creation of any Security Interest on any of the Assets without the
prior written consent of Buyer. Except as otherwise required under the terms
of this Agreement, Seller may not amend or cancel any contract or agreement
which is necessary or appropriate for the maintenance of the Assets or the
operation of the business in the ordinary course of business.
8.3 Existing Relationships. Except as otherwise required
by this Agreement, Seller shall use its best efforts to preserve the business
as a going concern and to preserve existing relationships with suppliers,
customers, and others having business dealings with Seller, all in accordance
with Seller's ordinary course of business consistent with past practices.
8.4 Employees; Employment Relationship. All of Seller's
employees shall be and remain Seller's employees, with Seller having full
authority and control over their actions, and Buyer shall not assume the status
of an employer or a joint employer of, or incur or be subject to any liability
or obligation of an employer with respect to, any such employees unless and
until actually hired by Buyer. Seller shall be solely responsible for any and
all liabilities and obligations Seller may have to its employees, including
without limitation compensation, severance pay, and accrued vacation time and
long-term disability, if applicable. Seller shall comply with the provisions
of any laws relating to workers and shall be solely responsible for any and all
liabilities, penalties, fines, or other sanctions that may be assessed or
otherwise due under such laws on account of the closing of the transaction
contemplated by this Agreement and the dismissal or termination of any of
Seller's employees by Seller at
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or prior to Closing. Seller shall use its best efforts to preserve Seller's
relationship with its employees and shall pay to those employees all salaries,
commissions, benefits and other compensation to which they are entitled for
services rendered prior to Closing. Seller shall not, without the prior
written consent of Buyer, which consent shall not be withheld unreasonably,
change the compensation of any employees of Seller were such changes would be
inconsistent with Seller's past practices consistently applied.
8.5 Buyer's Rights to Employ. Seller agrees to arrange
private meetings with key employees immediately prior to the Closing Date in
order for Buyer to discuss the hiring of Seller's employees after the Closing
Date. Seller agrees and acknowledges, however, that Buyer is under no
obligation to offer employment to any of these employees. Current employees of
Seller which are hired by Buyer, if any, shall not be considered to be in the
employ of Buyer until such time as they have been formally hired by Buyer and
satisfy the active work requirement of completing one full hour of active
service for Buyer.
8.6 News Releases and Media Notification. Prior to
Closing any and all news releases or other notification of the local media with
respect to the
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transactions contemplated in this Agreement shall be subject to the prior
consent of both Seller and Buyer, which consent shall not be unreasonably
withheld.
IN WITNESS WHEREOF, Seller and Buyer have caused the Assets Purchase
Agreement to be duly executed and delivered and their corporate seals to be
hereunder affixed as of the day and year first above written.
SELLER
CINESCOPE ENTERPRISES INC. D/B/A
PANORAMA INTERNATIONAL
PRODUCTIONS
Attest:
By: /s/Dion Recachina
----------------------------
Title: President
- ------------------------------------ ----------------------------
BUYER:
PANORAMA INTERNATIONAL
PRODUCTIONS, INC.
Attest:
By: /s/David K. Haspel
----------------------------
/s/Edward H. Resnick Title: President
- ------------------------------------ ----------------------------
Secretary
As to paragraph 6.14 only, the undersigned have executed this Agreement.
/s/Dion Recachina
--------------------------------------
Dion Recachina
/s/Laura Recachina
--------------------------------------
Laura Recachina
29
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EXHIBIT 10.2
LEASE (BURBANK - PANORAMA'S FACILITIES)
<PAGE> 2
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-GROSS
(Do not use this form for Multi-Tenant Property)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
October 22, 1991 is made by and between Norman Enterprises and Panorama
International Productions and Dion A. Recachina, jointly and severally
("LESSEE") (collectively the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known by the street address of 2621 Empire Avenue, Burbank located in the County
of Los Angeles State of California 91510-7748 and generally described as
(describe briefly the nature of the property) a commercial complex of
approximately 4,352 square feet. ("PREMISES"). (See Paragraph 2 for further
provisions.)
* 1.3 TERM: five (5) years and -0- months ("ORIGINAL TERM") commencing
November 14, 1996 ("COMMENCEMENT DATE") and ending November 14, 1996
("EXPIRATION DATE"). (See Paragraph 3 for further provisions.)
* 1.4 EARLY POSSESSION: November 15, 1991 ("EARLY POSSESSION DATE"). (See
Paragraphs 3.2 and 3.3 for further provisions.)
* 1.5 BASE RENT: $ 2,650.00 per month ("BASE RENT"), payable on the 1st day of
each month commencing November 15, 1991 (See Paragraph 4 for further
provisions.)
* /X/ If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.
* 1.6 BASE RENT PAID UPON EXECUTION: $ 2,650.00
as Base Rent for the period November 15, 1991 through December 4, 1991.
1.7 SECURITY DEPOSIT: $ 2,650.00 ("SECURITY DEPOSIT"). (See Paragraph 5
for further provisions.)
1.8 PERMITTED USE: storage and distribution of motion picture films and
associated office uses. (See Paragraph 6 for further provisions.)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY." $______________ is the
"BASE PREMIUM." (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers (collectively,
the "BROKERS") and brokerage relationships exist in this transaction and are
consented to by the Parties (check applicable boxes): The Prudential Stevenson
Commercial Real Estate represents
/ / Lessor exclusively ("LESSOR'S BROKER"); / / both Lessor and Lessee, and
- --------
* All dates referenced by November 15, 1991 shall be modified to December 1,
1991. Therefore, possession shall be December 1, 1991.
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Pacific West Business Properties represents
/ / Lessee exclusively ("LESSEE'S BROKER"); / / both Lessee and Lessor. (See
Paragraph 15 for further provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by Dion A. Recachina and Laura A. Reacachina ("GUARANTOR"). (See
Paragraph 37 for further provisions.
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs ___ through ___ and Exhibits ____________ all of which constitute a
part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental, is an approximation which Lessor and
Lessee agree is reasonable and the rental based thereon is not subject revision
whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, fire sprinkler system, lighting, air conditioning, heating, and
loading doors, if any, in the Premises, other than those constructed by Lessee,
shall be in good operating condition on the Commencement Date. If a
non-compliance with said warranty exists as of the Commencement Date, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to
be made by Lessee. If the Premises do not comply with said warranty, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specificity the nature and extent
of such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within six (6)
months following the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, compliance with Applicable Law, as
defined in Paragraph 6.3) and the present and future suitability of the Premises
for Lessee's intended use, (b) that Lessee has made such investigation as it
deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to Lessee's occupancy of the Premises and/or the
term of this Lease, and (c) that neither Lessor, nor any of Lessor's agents, has
made any oral or written representations or warranties with respect to the said
matters other than as set forth in this Lease.
2.5 LESSEE PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date set
forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such
event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
3. TERM
3.1 TERM. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. It Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease, however,
(including but not limited to the obligations to pay Real Property Taxes and
Insurance premiums and to maintain the Premises) shall be in effect during such
period. Any such early possession shall not affect nor advance the Expiration
Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease, or
the obligations of Lessee hereunder, or extend the term hereof, but in such
case, Lessee shall not, except as otherwise provided herein, be obligated to pay
rent or perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however, that if
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such written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no further
force or effect. Except as may be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when required
by this Lease and Lessee does not terminate this Lease, as aforesaid, the period
free of the obligation to pay Base Rent, if any, that Lessee would otherwise
have enjoyed shall run from the date of delivery of possession and continue for
a period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts, changes or omissions of
Lessee.
4. RENT
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other rent or
charges as the same may be adjusted from time to time, to be received by Lessor
in lawful money of the United States, without offset or deduction, on or before
the day on which it is due under the terms of this Lease. Base Rent and all
other rent and charges for any period during the term hereof which is for less
than one (1) full calendar month shall be prorated based upon the actual number
of days of the calendar month involved. Payment of Base Rent and other charges
shall be made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in writing to
Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit set forth in Paragraph 1.7 as security for Lessee's faithful
performance of Lessee's obligations under this Lease. If Lessee fails to pay
Base Rent or other rent or charges due hereunder, or otherwise Defaults under
the Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain all or
any portion of said Security Deposit for the payment of any amount due Lessor or
to reimburse or compensate Lessor for any liability, cost, expense, loss or
damage (including attorneys' fees) which Lessor may suffer or incur by reason
thereof. It Lessor uses or applies all or any portion of said Security Deposit,
Lessee shall within ten (10) days after written request therefor deposit moneys
with Lessor sufficient to restore said Security Deposit to the full amount
required by this Lease. Any time the Base Rent increases during the term of this
Lease, Lessee shall, upon written request from Lessor, deposit additional moneys
with Lessor sufficient to maintain the same ratio between the Security Deposit
and the Base Rent as those amounts are specified in the Basic Provisions. Lessor
shall not be required to keep all or any part of the Security Deposit separate
from its general accounts. Lessor shall, at the expiration or earlier
termination of the term hereof and after Lessee has vacated the Premises, return
to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest herein), that portion of the Deposit not used or applied by Lessor.
Unless otherwise expressly agreed in writing by Lessor, no part of the Security
Deposit shall be considered to be held in trust, to bear interest or other
increment for its use, or to be prepayment for any moneys to be paid by Lessee
under this Lease. Personal Property covered in deposit are L.A. View Map ($300)
and Bookcase ($300), if damaged.
6. USE
6.1 USE. Lessee shall use and occupy the Premises only for the purposes
set forth in Paragraph 1.8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that creates waste or a nuisance, or that disturbs owners and/or
Occupants of, or causes damage to, neighboring premises or properties.
6.2 HAZARDOUS SUBSTANCES
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS SUBSTANCE"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for liability of Lessor to any governmental agency
or third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil or any products, by-products or fractions thereof. Lessee
shall not engage in any activity in, on or about the Premises which constitutes
a Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Law (as defined in Paragraph
6.3). "Reportable Use" shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority. Reportable Use shall
also include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may, without
Lessor's prior consent, but in compliance with all Applicable Law, use any
ordinary and customary materials reasonably required to be used by Lessee in the
normal course of Lessee's business permitted on the Premises, so long as such
use is not a Reportable Use and does not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor. In addition, Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefrom or therefor, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
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(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance, or a condition involving or resulting
from same, has come to be located in , on, under or about the Premises, other
than as previously consented to by Lessor, Lessee shall immediately give written
notice of such fact to Lessor. Lessee shall also immediately give Lessor a copy
of any statement, report, notice, registration, application, permit, business
plan, license, claim, action or proceeding given to, or received from, any
governmental authority or private party, or persons entering or occupying the
Premises, concerning the presence, spill, release, discharge of, or exposure to,
any Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in any
Reportable Uses involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnity, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments. Costs, claims, liens, expenses, penalties, permits and
attorney's and consultant's fees arising out of or involving any Hazardous
Substance or storage tank brought onto the Premises by or for Lessee or under
Lessee's control. Lessee's obligations under this Paragraph 6 shall include, but
not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of
investigation (including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive the expiration or earlier termination of
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances or storage tanks, unless specifically so
agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently and
in a timely manner, comply with all "Applicable Law," which term is used in this
Lease to include all laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, permits, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance or storage
tank), now in effect or which may hereafter come into effect and whether or not
reflecting a change in policy from any previously existing policy, Lessee shall
within five (5) days after receipt of Lessor's written request, provide Lessor
with copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as defined in
Paragraph 8.3(a)) shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as defined in Paragraph 6.3), and to
employ experts and/or consultants in connection therewith and/or to advise
Lessor with respect to Lessee's activities, including but not limited to the
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance or storage tank on or from the Premises. The costs and
expenses of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or a
contamination, caused or materially contributed to by Lessee is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In any such case, Lessee shall upon request reimburse Lessor
or Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's warranty
as to condition), 2.3 (Lessor's warranty as to compliance with covenants, etc),
7.2 (Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair, (whether or not such portion of the Premises requiring repair, or the
means of repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use, any
prior use, the elements or the age of such portion of the Premises), including,
without limiting the generality of the foregoing, all equipment or facilities
serving the Premises, such as plumbing, heating, air conditioning, ventilating,
electrical, lighting facilities, boilers, fired or unfired pressure vessels,
fire sprinklers and/or standpipe and hose or other automatic fire extinguishing
system, including fire alarm and/or smoke detection systems and equipment, fire
hydrants, fixtures, walls (interior and exterior), ceilings, floors, windows,
doors, plate glass, skylights, landscaping, driveways, parking lots, fences,
retaining walls, signs, sidewalks and parkways located in, on, about, or
adjacent to the Premises, but excluding foundations, the exterior roof and the
structural aspects of the Premises. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of, the Premises, the elements surrounding same, or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance and/or storage tank brought
onto the Premises by or for Lessee or under its control. Lessee, in keeping the
Premises in good order, condition and repair, shall exercise and perform good
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maintenance practices. Lessee's obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in, the inspection,
maintenance and service of the following equipment and improvements, if any,
located on the Premises: (i) heating, air conditioning and ventilation
equipment, (ii) boiler, fired or unfired pressure vessels, (iii) fire sprinkler
and/or standpipe and hose or other automatic fire extinguishing systems,
including fire alarm and/or smoke detection, (iv) landscaping and irrigation
systems, (v) roof covering and drain maintenance and (vi) asphalt and parking
lot maintenance.
7.2 LESSOR'S OBLIGATIONS. Upon receipt of written notice of the need for
such repairs and subject to Paragraph 13.5, Lessor shall, at Lessor's expense,
keep the foundations, exterior roof and structural aspects of the Premises in
good order, condition and repair. Lessor shall not, however, be obligated to
paint the exterior surface of the exterior walls or to maintain the windows,
doors or plate glass or the interior surface of exterior walls. Lessor shall not
in any event have any obligation to make any repairs until Lessor receives
written notice of the need for such repairs. It is the intention of the Parties
that the terms of this Lease govern the respective obligations of the Parties as
to maintenance and repair of the Premises. Lessee and Lessor expressly waive the
benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease with respect to, or which affords
Lessee the right to make repairs at the expense of Lessor or to terminate this
Lease by reason of any needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility Installations"
is used in this Lease to refer to all carpeting, window coverings, air lines,
power panels, electrical distribution, security, fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on or about the Premises. The
term "Trade Fixtures" shall mean Lessee's machinery and equipment that can be
removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification of the improvements on the Premises from that which
are provided by Lessor under the terms of this Lease, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor as defined
in Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior written
consent. Lessee may, however, make non-structural Utility Installations to the
interior of the Premises (excluding the roof), as long as they are not visible
from the outside, do not involve puncturing, relocating or removing the roof or
any existing walls, and the cumulative cost thereof during the term of this
Lease as extended does not exceed $25,000.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All consents
given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent shall be deemed conditioned upon: (i) Lessee's acquiring all applicable
permits required by governmental authorities, (ii) the furnishing of copies of
such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work
thereon, and (iii) the compliance by Lessee with all conditions of said permits
in a prompt and expeditious manner. Any Alterations or Utility Installations by
Lessee during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and in compliance with all
Applicable Law. Lessee shall promptly upon completion thereof furnish Lessor
with as-built plans and specifications therefor. Lessor may (but without
obligation to do so) condition its consent to any requested Alteration or
Utility Installation that costs $10,000 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor under Paragraph 36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanics' or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as provided by
law. If Lessee shall, in good faith, contest the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises. If Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal
to one and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorney's fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) Ownership. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises. Lessor
may, at any time and at its option, elect in writing to Lessee to be the owner
of all or any specified part of the Lessee Owned Alterations, and Utility
Installations. Unless otherwise instructed per subparagraph 7.4(b) hereof, all
Lessee Owned
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Alterations and Utility Installations shall, at the expiration or earlier
termination of this Lease, become the property of Lessor and remain upon and be
surrendered by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Lessee Owned Alterations or
Utility Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, with
all of the improvements, parts and surfaces thereof clean and free of debris and
in good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have b been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease. Except as otherwise agreed
or specified in writing by Lessor, the Premises, as surrendered, shall include
the Utility Installations. The obligation of Lessee shall include the repair of
any damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES.
(a) Lessee shall pay to Lessor any insurance cost increase
("Insurance Cost Increase") occurring during the term of this Lease. "Insurance
Cost Increase" is defined as any increase in the actual cost of the insurance
required under Paragraphs 8.2(b), 8.3(a) and 8.3(b) ("Required Insurance"), over
and above the Base Premium, as hereinafter defined, calculated on an annual
basis. "INSURANCE COST INCREASES" shall include, but not be limited to,
increases resulting from the nature of Lessee's occupancy, any act or omission
of Lessee, requirements of the holder of a mortgage or deed of trust covering
the Premises, increased valuation of the Premises, and/or a premium rate
increase. If the parties insert a dollar amount in Paragraph 1.9. such amount
shall be considered the "Base Premium." In lieu thereof, if the Premises have
been previously occupied, the "Base Premium" shall be the annual premium
applicable to the most recent occupancy. If the Premises have never been
occupied, the "Base Premium" shall be the lowest annual premium reasonably
obtainable for the Required Insurance as of the commencement of the Original
Term, assuming the most nominal use possible of the Premises. In no event
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000 procured
under Paragraph 8.2(b) (Liability Insurance Carried By Lessor).
(b) Lessee shall pay any such Insurance Cost increase to Lessor
within thirty (30) days after receipt by Lessee of a copy of the premium
statement or other reasonable evidence of the amount due. If the insurance
policies maintained hereunder cover other property besides the Premises, Lessor
shall also deliver to Lessee a statement of the amount of such Insurance Cost
Increase attributable only to the Premises showing in reasonable detail the
manner in which such amount was computed. Premiums for policy periods commencing
prior to, or extending beyond, the term of this Lease shall be prorated to
coincide with the corresponding Commencement or Expiration of the Lease term.
* 8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injury, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy, or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less than $1,000.000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "Insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) CARRIED BY LESSOR. In the event Lessor is the insuring Party,
Lessor shall also maintain liability insurance described in Paragraph 8.2(a),
above, in addition to, and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
- --------
* Lessee shall carry its own content and product liability insurance as
specified herein.
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8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and
keep in force during the term of this Lease, a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages, deeds
of trust or ground leases on the Premises ("Lender(s)"), insuring loss for
damage to the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. Lessee Owned Alterations and Utility Installations shall be
insured by Lessee under Paragraph 8.4. If the coverage is available and
commercially appropriate, such policy or policies shall insure against all risks
of direct physical loss or damage (except the perils of flood and/or earthquake
unless required by a Lender), including coverage for all additional costs
resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or replacement
of any undamaged sections of the Premises required to be demolished or removed
by reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss, but not including plate glass insurance.
Said policy or policies shall also contain agreed valuation provision in lieu of
any coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers in the city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall, in addition, obtain and keep in
force during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and Lender(s), insuring the loss of the full rental
and other charges payable by Lessee to Lessor under this Lease for one (1) year
(including all real estate taxes, insurance costs, and any scheduled rental
increases). Said insurance shall provide that in the event the Lease is
terminated by reason of an insured loss, the period of indemnity for such
coverage shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of rental
revenues from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any, otherwise
payable by Lessee, for the next twelve (12) month period.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) TENANT'S IMPROVEMENTS. Since Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Lessee Owned Alterations and Utility
Installations in, on, or about the Premises similar in coverage to that carried
by the Insuring Party under Paragraph 8.3. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property or the restoration of Lessee Owned Alterations
and Utility Installations. Lessee shall be the Insuring Party with respect to
the insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender having a lien
on the Premises, as set forth in the most current issue of "Best's Insurance
Guide". Lessee shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in this Paragraph 8. Lessee shall cause to be
delivered to Lessor certified copies of, or certificates evidencing the
existence and amounts of, the insurance, and with the additional insureds,
required under Paragraphs 8.2(a) and 8.4. No such policy shall be cancellable or
subject to modification except after thirty (30) days prior written notice to
Lessor. Lessee shall at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or "insurance binders"
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or remedies,
Lessee and Lessor ("Waiving Party") each hereby release and relieve the other,
and waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss of or damage to the Waiving Party's property arising
out of or incident to the perils required to be insured against under Paragraph
8. The effect of such releases and waivers of the right to recover damages shall
not be limited by the amount of insurance carried or required, or by any
deductibles applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any
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obligation on Lessee's part to be performed under this Lease. The foregoing
shall include, but not be limited to, the defense or pursuit of any claim or any
action or proceeding involved therein, and whether or not (in the case of claims
made against Lessor) litigated and/or reduced to judgment, and whether well
founded or not. In case any action or proceeding be brought against Lessor by
reason of any of the foregoing matters, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor
and Lessor shall cooperate with Lessee in such defense. Lessor need not have
first paid any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease. Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility installations, the repair cost of which damage or destruction is less
than 50% of the then Replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations the
repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations,
which was caused by an event required to be covered by the insurance described
in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits
involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for deprecation
(e) HAZARDOUS SUBSTANCE CONDITION" shall mean tho occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that is an
insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect. Notwithstanding the foregoing, if the required insurance
was not in force or the insurance proceeds are not sufficient to effect such
repair, the Insuring Party shall promptly contribute the shortage in proceeds as
and when required to complete said repairs. In the event, however, the shortage
in proceeds was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially
reasonable and available, Lessee shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice of
such shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said ten (10) day period, the party responsible for
making the repairs shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If Lessor does not receive such
funds or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If in
such case Lessor does not so elect, then this Lease shall terminate sixty (60)
days following the occurrence of the damage or destruction. Unless otherwise
agreed, Lessee shall in no event have any right to reimbursement from Lessor for
any funds contributed by Lessee to repair any such damage or destruction.
Premises Partial Damage due to flood or earthquake shall be subject to Paragraph
9.3 rather than Paragraph 9.2, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available for
the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as
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reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty (60) days
following the giving of such notice. In the event Lessor elects to give such
notice of Lessor's intention to terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's commitment to pay for the repair of such damage
totally at Lessee's expense and without reimbursement from Lessor. Lessee shall
provide Lessor with the required funds or satisfactory assurance thereof within
thirty (30) days following Lessee's said commitment. In such event this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
repairs as soon as reasonably possible and the required funds are available. If
Lessee does not give such notice and provide funds or assurance thereof within
the times specified above, this Lease shall terminate as of the date specified
in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one (1) month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its exercise,
whichever is earlier ("EXERCISE PERIOD"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option during
said Exercise Period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the expiration
of the Exercise Period, notwithstanding any term or provision in the grant of
option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage-Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b)), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration. give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "COMMENCE" as used in this Paragraph shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable Law
and this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option either (i) investigate
and remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly Base
Rent or $100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the giving of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of such
notice to give written notice to Lessor of Lessee's commitment to pay for the
investigation and remediation of such Hazardous Substance Condition totally at
Lessee's expense and without reimbursement from Lessor except to the extent of
an amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required of
Lessee or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue
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in full force and effect, and Lessor shall proceed to make such investigation
and remediation as soon as reasonably possible and the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the times specified above, this Lease shall terminate
as of the date specified in Lessor's notice of termination. If a Hazardous
Substance Condition occurs for which Lessee is not legally responsible, there
shall be abatement of Lessee's obligations under this Lease to the same extent
as provided in Paragraph 9.6(a) for a period of not to exceed twelve months.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit
as has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1
(a) PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises.*
(b) ADDITIONAL IMPROVEMENTS. Notwithstanding paragraph 10.1(a)
hereof, Lessee shall pay to Lessor upon demand therefor the entirety of any
increase in Real Property Taxes assessed by reason of Alterations or Utility
Installations placed upon the Premises by Lessee or at Lessee's request.
10.2 DEFINITION OF "REAL PROPERTY TAXES". As used herein, the term "REAL
PROPERTY TAXES" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "REAL PROPERTY TAXES" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Premises or in the improvements thereon, the execution of
this Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or elsewhere. When possible, Lessee shall
cause its Trade Fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor. If any of
Lessee's said personal property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee within ten (10) days
after receipt of a written statement settling forth the taxes applicable to
Lessee's property or, at Lessor's option, as provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
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* Lessee shall not be responsible for any tax increase as a result of the
sale or transfer of property.
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(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of the execution
by Lessor of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Lessee was or is greater, shall be considered an assignment of this Lease by
Lessee to which Lessor may reasonably withhold its consent. "NET WORTH OF
LESSEE" for purposes of this Lease shall be the net worth of Lessee (excluding
any guarantors) established under generally accepted accounting principles
consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unconsented to assignment or subletting as a noncurable Breach, Lessor
shall have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice ("Lessor's Notice"), Increase the monthly Base Rent to
fair market rental value or one hundred ten percent (110%) of the Base Rent then
in effect, whichever is greater. Pending determination of the new fair market
rental value, if disputed by Lessee, Lessee shall pay the amount set forth in
Lessor's Notice, with any overpayment credited against the next installment(s)
of Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and market value
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
(without the Lease being considered an encumbrance or any deduction for
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition), or one hundred ten percent (110%) of the price
previously in effect, whichever is greater, (ii) any index-oriented rental or
price adjustment formulas contained in this Lease shall be adjusted to require
that the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased in the same ratio as the new
market rental bears to the Base Rent in effect immediately prior to the market
value adjustment.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this LEASE.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee. However,
Lessor may consent to subsequent sublettings and assignments of the sublease or
any amendments or modifications thereto without notifying Lessee or anyone else
liable on the Lease or sublease and without obtaining their consent, and such
action shall not relieve such persons from liability under this Lease or
sublease.
(d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
any one else responsible for the performance of the Lessee's obligations under
this Lease, including the sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the current monthly Base Rent,
whichever is greater, as reasonable consideration for Lessor's considering and
processing the request for consent. Lessee agrees to provide Lessor with such
other or additional information and/or documentation as may be reasonably
requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
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(g) The occurrence of a transaction described in Paragraph 12.1(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
amount required to establish such Security Deposit a condition to Lessor's
consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment
or subletting, may require that the amount and adjustment structure of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment structure for property similar to the Premises as then constituted.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
Interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease. Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor, nor by reason of the collection of
the rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
Sublessee shall rely upon any such statement and request from Lessor and shall
pay such rents and other charges to Lessor without any obligation or right to
inquire as to whether such Breach exists and notwithstanding any notice from or
claim from Lessee to the contrary, Lessee shall have no claim against said
sublessee or, until the Breach has been cured, against Lessor, for any such
rents and other charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior Defaults
or Breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lease within the grace period, if any, specified in such notice. The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said Default. A "DEFAULT" is defined as a
failure by the Lessee to observe, comply with or perform any of the terms,
covenants, conditions or rules applicable to Lessee under this Lease. A "BREACH"
is defined as the occurrence of any one or more of the following Defaults, and,
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, and shall entitle Lessor to pursue the remedies set forth in Paragraph
13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third party,
as an when due, the failure by Lessee to provide Lessor with reasonable evidence
of insurance or surety bond required under this Lease, or the failure of Lessee
to fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of three (3) days following
written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with applicable law per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the recision of an unauthorized assignment or
subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per Paragraphs 16 or
37, (v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the
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guaranty of the performance of Lessee's obligations under this Lease if required
under Paragraphs 1.11 and 37, (vii) the execution of any document requested
under Paragraph 42 (easements), or (viii) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this Lease,
where any such failure continues for a period of ten (10) days following written
notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, compiled with or performed by Lessee, other than those
described in subparagraphs (a), (b) or (c), above, where such Default continues
for a period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Lessee if Lessee
commences such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. Section101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's Interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the validity
of the remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor, (ii) the termination of a guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a guarantor's refusal to honor the guaranty, or (v) a
guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event to provide Lessor with written
alternative assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the guarantors that existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier's check. In the event of a Breach of this Lease by Lessee, as
defined in Paragraph 13.1, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonable avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of the leasing commission paid by Lessor applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent. Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve therein the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under subparagraphs 13.1(b), (c) or (d) was not previously
given, a notice to pay rent or quit, or to perform or quit, as the case may be,
given to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for grace period
purposes required by subparagraphs 13.1(b), (c) or (d). In such case, the
applicable grace period under subparagraphs 13.1(b), (c) or (d) and under the
unlawful detainer statute shall run concurrently after the one such statutory
notice, and the failure of Lessee to cure the Default within the greater of the
two such grace periods shall constitute both an unlawful detainer and a Breach
of this Lease entitling Lessor to the remedies provided for in this Lease and/or
by said statute.
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(b) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's Interest under the Lease, shall not constitute a
termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS," shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within five (5) days after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the cost Lessor will incur by reason of late payment by
lessee. Acceptance of such late charge by lessor shall in no event constitute a
waiver of Lessee's Default Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance. $100 for r___________________________.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by the holders of any ground lease, mortgage or deed of trust covering the
Premises whose name and address shall have been furnished to Lessee in writing
for such purpose, of written notice specifying wherein such obligation of Lessor
has not been performed; provided, however, that if the nature of Lessor's
obligation is such that more than thirty (30) days after such notice are
reasonably required for its performance, then Lessor shall not be in breach of
this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein "CONDEMNATION"), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of the floor area of the
Premises, or more than twenty-five percent (25%) of the land area not occupied
by any building, is taken by condemnation, Lessee may, at Lessor's option, to be
exercised in writing within ten (10) days after Lessor shall have given Lessee
written notice of such taking (or in the absence of such notice, within ten (10)
days after the condemning authority shall have taken possession) terminate this
Lease as of the date the condemning authority takes such possession. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the Base Rent shall be reduced in the same proportion as the
rentable floor area of the Premises taken bears to the total rentable floor area
of the building located on the Premises. No reduction of Base Rent shall occur
if the only portion of the Premises taken is land on which there is no building.
Any award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above the legal and other expenses
incurred by Lessor in the condemnation matter, repair any damage to the Premises
caused by such condemnation, except to the extent that Lessee has been
reimbursed therefor by the condemning authority, Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
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15. BROKER'S FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of this
Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually designate
in writing, a fee as set forth in a separate written agreement between Lessor
and said Brokers (or in the event there is no separate written agreement between
Lessor and said Brokers, the sum of $per agreement) for brokerage services
rendered by said Brokers to Lessor in this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that: (a) if Lessee exercises any Option (as defined in Paragraph
39.1) or any Option subsequently granted which is substantially similar to an
Option granted to Lessee in this Lease, or (b) if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or (c) if Lessee remains in possession of the Premises,
with the consent of Lessor, after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) if said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Brokers a fee in accordance with the schedule of said Brokers in effect at
the time of the execution of this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent of
its interest in any commission arising from this Lease and may enforce that
right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it has
had no dealings with any person, firm, broker or finder (other than the Brokers,
if any named in Paragraph 1.10) in connection with the negotiation of this Lease
and/or the consummation of the transaction contemplated hereby, and that no
broker or other person, firm or entity other than said named Brokers is entitled
to any commission or finder's fee in connection with said transaction, Lessee
and Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10) days after
written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and all
Guarantors of Lessee's performance hereunder shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and
such Guarantors as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's financial statements for the past three
(3) years. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises, or, if this is
a sublease, of the lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or in this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor at the time of such transfer or assignment.
Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within thirty (30) days
following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but not
exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
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20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for the purpose of mailing or delivering notices to
Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given forty-eight (48) hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier, if any notice is transmitted by
facsimile transmission or similar means the same shall be deemed served or
delivered upon telephone confirmation of receipt of the transmission thereof,
provided a copy is also delivered via delivery or mail. If notice is received on
a Sunday or legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any preceding Default or Breach by
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted. Any payment given Lessor by Lessee may be accepted
by Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications,
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consolidations, replacements and extensions thereof. Lessee agrees that the
Lenders holding any such Security Device shall have no duty, liability or
obligation to perform any of the obligations of Lessor under this Lease, but
that in the event of Lessor's default with respect to any such obligation,
Lessee will give any Lender whose name and address have been furnished Lessee in
writing for such purpose notice of Lessor's default and allow such Lender thirty
(30) days following receipt of such notice for the cure of said default before
invoking any remedies Lessee may have by reason thereof. If any Lender shall
elect to have this Lease and/or any Option granted hereby superior to the lien
of its Security Device and shall give written notice thereof to Lessee, this
Lease and such Options shall be deemed prior to such Security Device,
notwithstanding the relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "NON-DISTURBANCE AGREEMENT") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) or Broker in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorney's fees. Such fees may be awarded in the
same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term, "PREVAILING PARTY"
shall include, without limitation, a Party or Broker who substantially obtains
or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorney's fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to attorney's
fees, costs and expenses incurred in the preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal
actions is subsequently commenced in connection with such Default or resulting
Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
or to gain access to electrical panel and otherwise at reasonable times for the
purpose of showing the same to prospective purchasers, lenders, or lessees, and
making such alterations, repairs, improvements or additions to the Premises or
to the building of which they are a part, as Lessor may reasonably deem
necessary. Lessor may at any time place on or about the Premises or building any
ordinary "For Sale" signs and Lessor may at any time during the last one hundred
twenty (120) days of the term hereof place on or about the Premises any ordinary
"For Lease" signs. All such activities of Lessor shall be without abatement of
rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that Lessee
may, with Lessor's prior written consent, install (but not on the roof) such
signs as are reasonably required to advertise Lessee's own business. The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof and the right to install, and
all revenues from the installation of, such advertising signs on the Premises,
including the roof, as do not unreasonably interfere with the conduct of
Lessee's business.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable
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costs and expenses (including but not limited to architects', attorneys',
engineers' or other consultants' fees) incurred in the consideration of, or
response to, a request by Lessee for any Lessor consent pertaining to this Lease
or the Premises, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, practice or storage
tank, shall be paid by Lessee to Lessor upon receipt of an invoice and
supporting documentation therefor. Subject to Paragraph 12.2(e) (applicable to
assignment or subletting), Lessor may, as a condition to considering any such
request by Lessee, require that Lessee deposit with Lessor an amount of money
(in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Except as otherwise provided, any unused portion
of said deposit shall be refunded to Lessee without interest. Lessor's consent
to any act, assignment of this Lease or subletting of the Premises by Lessee
shall not constitute an acknowledgment that no Default or Breach by Lessee of
this Lease exists, nor shall such consent be deemed a waiver of any then
existing Default or Breach, except as may be otherwise specifically stated in
writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease
are acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the imposition
by Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 It there are to be any Guarantors of this Lease per Paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be in the
form most recently published by the American Industrial Real Estate Association,
and each said Guarantor shall have the same obligations as Lessee, under this
Lease, including but not limited to the obligation to provide the Tenancy
Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease it any
such Guarantor fails or refuses, upon reasonable request by Lessor to give (a)
evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and including
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, together with a
certificate of incumbency showing the signatures of the persons authorized to
sign on its behalf, (b) current financial statements of Guarantor as may from
time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease any manner, by
reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless prior
Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of Default under Paragraph 13.1, whether or not
the Defaults are cured, during the twelve (12) month period immediately
preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
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<PAGE> 20
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three or more notices of Default under Paragraph 13.1 during any twelve
month period, whether or not the Defaults are cured, or (iii) if Lessee commits
a Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and observe all
reasonable rules and regulations which Lessor may make from time to time for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duty authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by Lessor or Lessor's agent and submission
of same to Lessee shall not be deemed an offer to lease to Lessee. This Lease is
not intended to be binding until executed by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder. Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE
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<PAGE> 21
BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT
PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE
STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
<TABLE>
<S> <C>
Executed at Burbank Executed at 10700 Burbank Blvd.
- ------------------------------------------------ ----------------------------------------------------
on October 29, 1991 on October 28, 1991
--------------------------------------------- -------------------------------------------------
by LESSOR: by LESSEE:
NORMAN ENTERPRISES, INC. /s/ Dion A. Recachina
--------------------------------------------- -------------------------------------------------
By /s/ William L. Norman By
--------------------------------------------- ------------------------------------------------
Name Printed: William L. Norman Name Printed: Dion A. Recachina
----------------------------------- ---------------------------------------
Title: President Title: President
------------------------------------------ ---------------------------------------------
By By
--------------------------------------------- ------------------------------------------------
Name Printed: Name Printed:
----------------------------------- ---------------------------------------
Title: Title:
------------------------------------------ ---------------------------------------------
Address: Address:
---------------------------------------- --------------------------------------------
Tel. No. ( ) Fax No. ( ) Tel. No. (818) 508-9972 Fax No. (818) 508-0596
--------------- ---------------- --------------------- --------------
</TABLE>
GROSS
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: American Industrial Real Estate Association, 345
South Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213)
687-8777. Fax No. (213) 687-8616.
PAGE 20
<PAGE> 22
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE-GROSS
BY AND BETWEEN
NORMAN ENTERPRISES ("LESSOR")
AND
PANORAMA INTERNATIONAL PRODUCTIONS AND
DION A. RECACHINA, JOINTLY AND SEVERALLY ("LESSEE")
DATED
OCTOBER 22, 1991
FOR THE PROPERTY LOCATED AT
2621 EMPIRE AVENUE, BURBANK
49. It is hereby understood that Lessee's electrical services provides
power to a portion of the adjoining unit and that Lessor shall install
a tenant meter in order to determine the power usage of Panorama
International Productions.
50. Lessee agrees to pay his proportionate share of landscaping and HVAC
maintenance and repair provided to the entire complex. This fee shall
be $50 for landscaping and $35 for HVAC per month for the term of this
lease.
51. Lessee shall be provided with eight (8) car parking in the parking lot
to the rear of subject property. The parking stalls are numbered 23
through 30 inclusive. No double parking shall be permitted as it may
disrupt current delivery requirements.
52. Lessor shall provide an area immediately behind building for a trash
dumpster which Lessee shall provide.
53. It is hereby understood that Lessee shall make some interior
improvements to said suite subject to the provisions of 7.3 of this
lease which shall not be unreasonably withheld. (See attached floor
plan).
54. Lessor agrees to make the following repairs or improvements prior to
Lessee's occupancy:
1. Repair crack in wall and ceiling in southwest corner of first
floor;
2. Replace stained or damaged ceiling tiles;
3. Repair any non-operable lighting fixtures;
4. Paint and repair second floor office including concrete block
interior;
5. Replace glass in reception area (missing panel);
<PAGE> 23
6. Secure doors to adjoining space to eliminate access, dead bolt
and drywall;
7. Remove previous tenants' signage;
8. Install new 6'x 6'x 8' double door with peephole, in west wall
and ramp area along wall and sidewalk;
9. Space to be delivered clean and free of all debris.
55. RENT ADJUSTMENT(S): See attached.
56. OPTION(S) TO EXTEND: See attached.
<PAGE> 24
Addendum to Standard Industrial/Commercial
Single-Tenant Lease-Gross
By and Between
Norman Enterprises ("Lessor")
and
Panorama International Productions and
Dion A. Recachina, Jointly and Severally ("Lessee")
Dated
October 22, 1991
For The Property Located at
2621 Empire Avenue, Burbank
Page Two
57. GUARANTY OF LEASE: See attached.
AGREED AND ACCEPTED:
LESSOR: Norman Enterprises, Inc.
By: /s/ William L. Norman 10/29/91
------------------------------------ -------------------
Date
By: Date
------------------------------------ --------------
LESSEE:
By: /s/ Dion A. Recachina October 28, 1991
------------------------------------ -------------------
Date
By:
------------------------------------ -------------------
Date
<PAGE> 25
OPTION(S) TO EXTEND
ADDENDUM TO
STANDARD LEASE
DATED October 22, 1991
BY AND BETWEEN (LESSOR) Norman Enterprises
(LESSEE) Panorama International Properties and
Dion A. Recachina, jointly and severally
PROPERTY ADDRESS: 2621 Empire Avenue, Burbank
PARAGRAPH 56.
A. OPTION(S) TO EXTEND:
Lessor hereby grants to Lessee the option to extend the term of this Lease
for 1 additional 36 month period(s) commencing when the prior term expires upon
each and all of the following terms and conditions:
(i) Lessee gives to Lessor, and Lessor actually receives on a date which is
prior to the date that the option period would commence (if exercised) by at
least 6 and not more than 9 months, a written notice of the exercise of the
option(s) to extend this Lease for said additional term(s), time being of
essence. If said notification of the exercise of said option(s) is (are) not so
given and received, the option(s) shall automatically expire; said option(s) may
(if more than one) only be exercised consecutively;
(ii) The provisions of paragraph 39, including the provision relating to
default of Lessee set forth in paragraph 39.4 of this Lease are conditions of
this Option;
(iii) All of the terms and conditions of this Lease except where specifically
modified by this option shall apply;
(iv) The monthly rent for each month of the option period shall be calculated
as follows, using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
[ ] I. COST OF LIVING ADJUSTMENT(S) (COL)
(a) On (Fill in COL Adjustment Date(s): ______________ the monthly rent
payable under paragraph 1.5 ("Base Rent") of the attached Lease shall be
adjusted by the change, if any, from the Base Month specified below, in the
Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of
Labor for (select one): [ ] CPI W (Urban Wage Earners and Clerical Workers) or
[ ] CPI U (All Urban Consumers), for (Fill in Urban Area): ________________. All
Items (1982-1984 = 100), herein referred to as "C.P.I."
Initials: /i/WN Initials: /i/DR
----- -----
----- -----
OPTION(S) TO EXTEND
PAGE 1 OF 3
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: American Industrial Real Estate Association, 345
South Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213)
687-8777. Fax No. (213) 687-8616.
991 AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION.
<PAGE> 26
(b) The monthly rent payable in accordance with paragraph AI(a) of this
Addendum shall be calculated as follows: the Base Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the C.P.I. of the calendar month 2 (two) months prior to the
month(s) specified in paragraph AI(a) above during which the adjustment is to
take effect, and the denominator of which shall be the C.P.I. of the calendar
month which is two (2) months prior to (select one): [ ] the first month of the
term of this Lease as set forth in paragraph 1.3 ("Base Month") or [ ] (Fill in
Other "Base Month"): ____________________. The sum so calculated shall
constitute the new monthly rent hereunder, but in no event, shall any such new
monthly rent be less than the rent payable for the month immediately preceding
the date for rent adjustment.
(c) In the event the compilation and/or publication of the C.P.I. shall
be transferred to any other governmental department or bureau or agency or shall
be discontinued, then the index most nearly the same as the C.P.I. shall be used
to make such calculation. In the event that Lessor and Lessee cannot agree on
such alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
[X] II. MARKET RENTAL VALUE ADJUSTMENT(S) (MRV)
(a) On (Fill in MRV Adjustment Date(s): November 15, 1996 and shall be
adjusted annually on each year per CPIW (Urban Wage Earners and Clerical
Workers) the monthly rent payable under paragraph 1.5 ("Base Rent") of the
attached Lease shall be adjusted to the "Market Rental Value" of the property as
follows:
1) Four months prior to the Market Rental Value (MRV) Adjustment
Date(s) described above, Lessor and Lessee shall meet to establish an agreed
upon new MRV for the specified term. If agreement cannot be reached, then:
i) Lessor and Lessee shall immediately appoint a mutually
acceptable appraiser or broker to establish the new MRV within the next 30 days.
Any associated costs will be split equally between the parties, or
ii) Both Lessor and Lessee shall each immediately select and pay
the appraiser or broker of their choice to establish a MRV within the next 30
days. If, for any reason, either one of the appraisals is not completed within
the next 30 days, as stipulated, then the appraisal that is completed at that
time shall automatically become the new MRV. If both appraisals are completed
and the two appraisers/brokers cannot agree on a reasonable average MRV then
they shall immediately select a third mutually acceptable appraiser/broker to
establish a third MRV within the next 30 days. The average of the two appraisals
closest in value shall then become the new MRV. The costs of the third appraisal
will be split equally between the parties.
2) In any event, the new MRV shall not be less than the rent
payable for the month immediately preceding the date for rent adjustment.
(b) Upon the establishment of each New Market Rental Value as described
in paragraph AII:
1) the monthly rental sum so calculated for each term as
specified in paragraph AII(a) will become the new "Base Rent" for the purpose of
calculating any further Cost of Living Adjustments as specified in paragraph
AI(a) above and
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OPTION(S) TO EXTEND
PAGE 2 OF 3
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: American Industrial Real Estate Association, 345
South Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213)
687-8777. Fax No. (213) 687-8616.
991 AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION.
<PAGE> 27
2) the first month of each Market Rental Value term as specified
in paragraph AII(a) shall become the new "Base Month" for the purpose of
calculating any further Cost of Living Adjustments as specified in paragraph
AI(b).
[ ] III. FIXED RENTAL ADJUSTMENT(S) (FRA)
The monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be increased to the following amount on the dates set forth below:
<TABLE>
<CAPTION>
On (Fill in FRA Adjustment Date(s)): The New Base Rental shall be:
<S> <C>
---------------------------------------- $ ---------------------------
---------------------------------------- $ ---------------------------
---------------------------------------- $ ---------------------------
---------------------------------------- $ ---------------------------
</TABLE>
B. NOTICE: Unless specified otherwise herein, notice of any escalations other
than Fixed Rental Adjustments shall be made as specified in paragraph 23 of the
attached Lease.
C. BROKER'S FEE:
The Real Estate Brokers specified in paragraph 1.10 of the attached Lease
shall be paid a Brokerage Fee for each adjustment specified above in
accordance with paragraph 15 of the attached Lease.
Initials: /i/WN Initials: /i/DR
----- -----
----- -----
OPTION(S) TO EXTEND
PAGE 3 OF 3
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: American Industrial Real Estate Association, 345
South Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213)
687-8777. Fax No. (213) 687-8616.
991 AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION.
<PAGE> 28
RENT ADJUSTMENT(S)
ADDENDUM TO
STANDARD LEASE
DATED October 22, 1991
BY AND BETWEEN (LESSOR) Norman Enterprises
(LESSEE) Panorama International Properties and
Dion A. Recachina, jointly and severally
PROPERTY ADDRESS: 2621 Empire Avenue, Burbank
PARAGRAPH 55
A. RENT ADJUSTMENT(S):
The monthly rent for each month of the adjustment period(s) specified below
shall be increased using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
[X] I. COST OF LIVING ADJUSTMENT(S) (COL)
(a) On (Fill in COL Adjustment Date(s): November 15, 1992; 1993; 1994
and 1995; and November 15, 1996; 1997; and 1998 of option periods, if exercised,
the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be adjusted by the change, if any, from the Base Month specified below, in
the Consumer Price Index of the Bureau of Labor Statistics of the U.S.
Department of Labor for (select one): [X] CPI W (Urban Wage Earners and Clerical
Workers) or [ ] CPI U (All Urban Consumers), for (Fill in Urban Area): Los
Angeles, Riverside . All Items (1982-1984 = 100), herein referred to as "C.P.I."
(b) The monthly rent payable in accordance with paragraph AI(a) of this
Addendum shall be calculated as follows: the Base Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the C.P.I. of the calendar month 2 (two) months prior to the
month(s) specified in paragraph AI(a) above during which the adjustment is to
take effect, and the denominator of which shall be the C.P.I. of the calendar
month which is two (2) months prior to (select one): [X] the first month of the
term of this Lease as set forth in paragraph 1.3 ("Base Month") or [ ] (Fill in
Other "Base Month"): ____________________. The sum so calculated shall
constitute the new monthly rent hereunder, but in no event, shall any such new
monthly rent be less than the rent payable for the month immediately preceding
the date for rent adjustment.
(c) In the event the compilation and/or publication of the C.P.I. shall
be transferred to any other governmental department or bureau or agency or shall
be discontinued, then the index most nearly the same as the C.P.I. shall be used
to make such calculation. In the event that Lessor and Lessee cannot agree on
such alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with
Initials: Initials: /i/DR
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/i/WN
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RENT ADJUSTMENT(S)
PAGE 1 OF 2
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: American Industrial Real Estate Association, 345
South Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213)
687-8777. Fax No. (213) 687-8616.
991 AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION.
<PAGE> 29
the then rules of said association and the decision of the arbitrators shall be
binding upon the parties. The cost of said Arbitrators shall be paid equally by
Lessor and Lessee.
[ ] II. MARKET RENTAL VALUE ADJUSTMENT(S) (MRV)
(a) On (Fill in MRV Adjustment Date(s): ___________________ the monthly
rent payable under paragraph 1.5 ("Base Rent") of the attached Lease shall be
adjusted to the "Market Rental Value" of the property as follows:
1) Four months prior to the Market Rental Value (MRV) Adjustment
Date(s) described above, Lessor and Lessee shall meet to establish an agreed
upon new MRV for the specified term. If agreement cannot be reached, then:
i) Lessor and Lessee shall immediately appoint a mutually
acceptable appraiser or broker to establish the new MRV within the next 30 days.
Any associated costs will be split equally between the parties, or
ii) Both Lessor and Lessee shall each immediately select and pay
the appraiser or broker of their choice to establish a MRV within the next 30
days. If, for any reason, either one of the appraisals is not completed within
the next 30 days, as stipulated, then the appraisal that is completed at that
time shall automatically become the new MRV. If both appraisals are completed
and the two appraisers/brokers cannot agree on a reasonable average MRV then
they shall immediately select a third mutually acceptable appraiser/broker to
establish a third MRV within the next 30 days. The average of the two appraisals
closest in value shall then become the new MRV. The costs of the third appraisal
will be split equally between the parties.
Initials: Initials: /i/DR
----- -----
/i/WN
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RENT ADJUSTMENT(S)
PAGE 2 OF 2
NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the
most current form: American Industrial Real Estate Association, 345
South Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213)
687-8777. Fax No. (213) 687-8616.
991 AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION.
<PAGE> 30
[DIAGRAM]
<PAGE> 31
[DIAGRAM]
<PAGE> 32
[DIAGRAM]
<PAGE> 33
[DIAGRAM]
<PAGE> 34
GUARANTY OF LEASE [AIR LOGO]
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
WHEREAS, Norman Enterprises hereinafter referred to as "Lessor", and
Panorama International Productions hereinafter referred to as "Lessee" are
about to execute a document entitled "Lease" dated October 22, 1991 concerning
the premises commonly known as 2621 Empire Avenue, Burbank wherein Lessor will
lease the premises to Lessee, and
WHEREAS, Dion A. Recachina and Laura A. Recachina hereinafter referred
to as "Guarantors" have a financial interest in Lessee, and
WHEREAS, Lessor would not execute the Lease if Guarantors did not
execute and deliver to Lessor this Guarantee of Lease.
NOW THEREFORE, for and in consideration of the execution of the
foregoing Lease by Lessor and as a material inducement to Lessor to execute
said Lease, Guarantors hereby jointly, severally, unconditionally and
irrevocably guarantee the prompt payment by Lessee of all rentals and all other
sums payable by Lessee under said Lease and the faithful and prompt performance
by Lessee of each and every one of the terms, conditions and covenants of said
Lease to be kept and performed by Lessee.
It is specifically agreed and understood that the terms of the
foregoing Lease may be altered, affected, modified or changed by agreement
between Lessor and Lessee, or by a course of conduct, and said Lease may be
assigned by Lessor or any assignee of Lessor without consent or notice to
Guarantors and that this Guaranty shall thereupon and thereafter guarantee the
performance of said Lease as so changed, modified, altered or assigned.
This Guaranty shall not be released, modified or affected by failure or
delay on the part of Lessor to enforce any of the rights or remedies of the
Lessor under said Lease, whether pursuant to the terms thereof or at law or in
equity.
No notice of default need be given to Guarantors, it being specifically
agreed and understood that the guarantee of the undersigned is a continuing
guarantee under which Lessor may proceed forthwith and immediately against
Lessee or against Guarantors following any breach or default by Lessee or for
the enforcement of any rights which Lessor may have as against Lessee pursuant
to or under the terms of the within Lease or at law or in equity.
Lessor shall have the right to proceed against Guarantors hereunder
following any breach or default by Lessee without first proceeding against
Lessee and without previous notice to or demand upon either Lessee or
Guarantors.
Guarantors hereby waive (a) notice of acceptance of this Guaranty, (b)
demand of payment, presentation and protest, (c) all right to assert or plead
any statute of limitations as to or relating to this Guaranty and the Lease,
(d) any right to require the Lessor to proceed against the Lessee or any other
Guarantor or any other person or entity liable to Lessor, (e) any right to
require Lessor to apply to any default any security deposit or other security
it may hold under the Lease, (f) any right to require Lessor to proceed under
any other remedy Lessor may have before proceeding against Guarantors, (g) any
right of subrogation.
Guarantors do hereby subrogate all existing or future indebtedness of
Lessee to Guarantors to the obligations owed to Lessor under the Lease and this
Guaranty.
Any married woman who signs this Guaranty expressly agrees that
recourse may be had against her separate property for all of her obligations
hereunder.
This obligations of Lessee under the Lease to execute and deliver
estoppel statements and financial statements, as therein provided, shall be
deemed to also require the Guarantors hereunder to do and provide the same
relative to Guarantors.
The term "Lessor" whenever hereinabove used refers to and means the
Lessor in the foregoing Lease specifically named and also any assignee of said
Lessor, whether by outright assignment or by assignment for security, and also
any successor to the interest of said Lessor or of any assignee in such Lease
or any part thereof, whether by assignment or otherwise. So long as the
Lessor's interest in or to the leased premises or the rents, issues and profits
therefrom, or in, to or under said Lease, are subject to any mortgage or deed
of trust or assignment for security, no acquisition by Guarantors of the
Lessor's interest in the leased premises or under said Lease shall affect the
continuing obligation of Guarantors under the Guaranty which shall nevertheless
continue in full force and effect for the benefit of the mortgagee,
beneficiary, trustee or assignee under such mortgage, deed of trust or
assignment, of any purchase at sale by judicial foreclosure or under private
power of sale, and of the successors and assigns of any such mortgagee,
beneficiary, trustee, assignee or purchaser.
The term "Lessee" whenever hereinabove used refers to and means the
Lessee in the foregoing Lease specifically named and also any assignee or
sublessee of said Lease and also any successor to the interests of said Lessee,
assignee or sublessee of such Lease or any part thereof, whether by assignment,
sublease or otherwise.
In the event any action be brought by said Lessor against Guarantors
hereunder to enforce the obligation of Guarantors hereunder, the unsuccessful
party in such action shall pay to the prevailing party therein a reasonable
attorney's fee which shall be fixed by the court.
If this Form has been filled in it has been prepared for
submission to your attorney for his approval. No representation
or recommendation is made by the real estate broker or its
agents or employees as to the legal sufficiency, legal effect,
or tax consequences of this Form or the transaction relating
thereto.
<TABLE>
<S> <C>
Executed at 10700 Burbank Boulevard, North Hollywood, CA 91601 /s/ Dion A. Recachina
-------------------------------------------------- --------------------------------------
on October 28, 1991
------------------------------------------------ ------------------------------------------------------
Address
----------------------------------------------------- ------------------------------------------------------
"GUARANTORS"
- -------------------------------------------------------------
</TABLE>
(C)1977 -- American Industrial Real Estate Association.
All rights reserved. No part of these works may be reproduced in any form
without permission in writing.
For these forms write the American Industrial Real Estate Association,
350 S. Figueroa Street, Los Angeles, California 90071 Form 6003
<PAGE> 35
[THE PRUDENTIAL LETTERHEAD]
February 10, 1992
Dion Recachina
PANORAMA
INTERNATIONAL PRODUCTIONS
2621 Empire Avenue
Burbank, California 91502
RE: Lessors Right to Access Premises as 2621 Empire Avenue, Burbank
Dear Dion:
This letter will serve as a mutual understanding between your company and Norman
Enterprises regarding Lessors' Right to Access the above referenced property. It
is hereby understood that in the event it is necessary for Lessor to access the
premises referenced herein, either in case of emergency or as reflected in the
Lease, Lessor shall be responsible for any loss or damage to Lessee's business
or equipment caused by Lessors' negligent or willful misconduct.
Per the Lease Agreement, Lessee was to maintain possession of an aerial
photograph of the valley, which was not delivered to Lessee. All references of
this photograph, including those found in the security deposit section, shall
be deleted from the Lease.
Should the below meet with your satisfaction please acknowledge with your
signature as indicated below.
Thank you,
THE PRUDENTIAL STEVENSON
COMMERCIAL REAL ESTATE
/s/ Brett Warner
- -----------------------------
Brett Warner
Acknowledged and Agreed.
Lessee /s/ Dion A. Recachina Dated: March 19, 1992
------------------------------------ ---------------
Panorama International Productions
Lessor /s/ William L. Norman Dated: 2-20-92
------------------------------------ ---------------
Norman Enterprises
<PAGE> 1
EXHIBIT 10.3
LEASE (MARIPOSA - SIERRA'S FACILITIES)
<PAGE> 2
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into on the date or dates last
below written by and between Sierra Press, Inc. hereinafter referred to as
"LESSOR" and Tellurian Press, Inc., hereinafter referred to as "LESSEE."
WITNESSETH
Lessor, for and in consideration of the terms, provisions, and conditions and
covenants to be performed by Lessee, does hereby lease to Lessee and Lessee
does hereby hire and take hereinafter set forth, those certain premises located
in Mariposa, County of Mariposa, State of California, hereinafter particularly
described: (see Exhibit "A")
In consideration of said demise and the terms, provisions, conditions and
covenants herein contained, it is agreed by and between Lessor and Lessees as
follows:
DESCRIPTION OF PREMISES: The premises are described as follows: Commercial
improvements known as: 4988 Gold Leaf Drive, Mariposa, California 95338.
USE OF RENTAL AREA: The rental area shall be used for all activities in the
normal course of business. No other use of said area shall be made without
prior written approval of Lessor.
TERM, RENT OPTION TO RENEW: The term of this Lease shall be for a period of
five (5) years. The initial term of this Lease shall commence July 1, 1996 and
shall terminate June 30, 2001. Monthly rental from the commencement of this
Lease until July 1, 1998 shall be the sum of Three Thousand Dollars and no
cents ($3,000.00) per month for 8,600 square feet consisting of 4,000 square
feet of office, break room, two bathrooms, and warehouse space @.4375 cents a
sq. ft., 3,000 square feet of second story warehouse @.15 cents a sq. ft.,
1,600 square feet of office space @.50 cents a sq. ft. Thereafter, rental
shall be adjusted annually on July 1st of each year and shall be increased, but
not decreased, by a percentage equal to the prior year's percentage increase in
the San Francisco/Oakland Consumer Price Index for All Urban Wage Earners
(1982-1984=100) as subject to a maximum annual increase of 5.00%. For purposes
of computing such increases, the prior year's percentage increase in the Index
shall be calculated by dividing the Index for the January prior to the date of
the increase by the Index for the previous January. If this calculation shows
that the Index has remained unchanged or has declined, the lease rate shall
remain unchanged.
If the described index shall no longer be published or is no longer applicable,
another generally recognized as authoritative shall be subsisted by agreement
of the parties. If they are unable to agree within thirty (30) days after
demand by either party, the substitute index shall, on application of either
party, be selected by the chief officer of the San Francisco regional office of
the Bureau of Labor Statistics or its successor. In no event shall the amount
of minimum monthly rent be reduced below the amount paid in the month
immediately preceding the applicable rental adjustment date.
Rent shall be paid monthly in advance upon the first business day of the month.
In the event any rent payment is not paid within ten (10) days of the date when
it was due, Lessee shall pay to Lessor a late charge in the sum of 5% of
Monthly Rent in addition to all other amounts owing.
Upon the timely and faithful performance by Lessee of each and every term,
covenant and condition as herein contained, Lessor hereby grants to Lessee an
option to renew this Lease of all the provisions contained herein to a period
of five (5) years following the expiration of the initial term, by giving the
<PAGE> 3
Lessor written notice of intention to exercise said option not less than ninety
(90) days prior to the expiration of the initial term of this Lease. Rent for
the five (5) year option period, if exercised, shall be adjusted on July 1st of
each year in the same manner as described above with respect to the initial
lease term.
In the event Lessee is in default on the date of giving notice of intention to
exercise any option herein, said notice shall be totally ineffective and if
Lessee is in default on the date that any extended term is to commence, the
extended term shall not commence and this Lease shall expire at the end of the
initial term or the previous option renewal term.
Lessor shall pay, during the initial term of this Lease, and during extended
terms, costs to Lessor for real property taxes and assessments, building
insurance, and costs of exterior maintenance as hereinafter provided.
FIRE INSURANCE: During the term of this lease, Lessor shall be responsible for
insuring the building against fire loss. Lessor shall have no responsibility
for insuring Lessee's leasehold improvements, furniture, fixtures or other
contents of the building. Lessee agrees to insure the same and hold Lessor
harmless for or on account of any loss, injury or damage to any person or
persons or their property, including that of Lessee, resulting from fire.
LIABILITY INSURANCE AND INDEMNIFICATION OF LESSOR: Lessor shall not be
responsible or liable for any loss or injury, or damage occurring to Lessee or
to third persons, or the property of third persons, in, about or on said leased
premises, no matter how occurring, other than loss or injury resulting from
acts or omissions of Lessor, and Lessee will save Lessor harmless for or on
account of any loss, injury or damage to any person or persons or their
property occurring therein, or resulting from Lessee's operation thereof. In
that connection, Lessee agrees at their cost to maintain, during the term of
this Lease, a public liability and property damage policy of insurance naming
Lessor as an insured therein with limits of not less than One Million Dollars
combined single limit bodily injury and/or property damage in one accident and
will furnish Lessor with a certificate of such insurance. If Lessee fails to
maintain such insurance, Lessor may obtain the same and Lessee will reimburse
him therefore.
REPAIRS:
a. Lessor shall, prior to commencement of this LEASE
AGREEMENT, place the heating, air conditioning, and the roof of the PREMISES in
good working order.
b. During the term hereof, in the event of needed
repairs of the heating or air conditioning equipment, or the roof, LESSOR and
LESSEE shall share the costs equally.
c. LESSOR shall inspect the heating, air conditioning
and roof annually during the term hereof.
d. LESSEE shall be responsible for all interior
maintenance.
e. LESSEE shall be responsible for maintaining the
exterior grounds.
f. LESSOR shall be responsible for maintaining all major
electrical and plumbing located on the PREMISES except for negligence of
LESSEE.
g. LESSEE shall be responsible for replacement of all
light bulbs, interior lighting fixtures, receptacles, and switches during the
term hereof.
2
<PAGE> 4
h. By entry hereunder, Lessee accepts the premises as
being in good and sanitary order, condition and repair and agrees on the last
day of said term, or sooner termination of this Lease, to surrender unto Lessor
all and singular said premises with said appurtenances in the same condition as
when received, reasonable use and wear thereof, damage by fire, and acts of God
excepted, and to remove all of Lessee's signs from said premises.
ASSIGNMENT AND SUBLETTING: Lessee shall not assign this Lease, or any interest
therein, and shall not sublet the said premises or any part thereof or any
right or privilege appurtenant thereto, or suffer any other person (the agents
and servants of lessee excepted) to occupy or use the said premises, or any
portion thereof, without the written consent of Lessor first had and obtained,
and a consent to one assignment, subletting, occupation or use by any other
person, shall not be deemed to be a consent to any subsequent assignment,
subletting, occupation or use by another person. Any such assignment or
subletting without such consent shall be void and shall, at the option of
Lessor, terminate this Lease. This Lease shall not, nor shall any interest
therein, be assignable, as to the interest of Lessee, by operation of law,
without the written consent of Lessor. Lessor, however shall not withhold
their consent to assignment unreasonably. Lessor's consent to subletting or
assignment of this Lease shall not relieve Lessee from their obligations
hereon.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Lessee shall at their sole cost and
expense, comply with all of the requirements of all municipal, county, state
and federal authorities now in force, or which may hereafter be in force,
pertaining to the said premises, and shall faithfully observe in the use of the
premises all municipal and county ordinances and state and federal statutes now
in force or which may hereafter be in force. The judgment of any court of
competent jurisdiction, or the admission of Lessee in any action or proceeding
against Lessee, whether Lessor be a party thereto or not, that Lessee has
violated any such ordinance or statutes in the use of the premises, shall be
conclusive of that fact as between Lessor and Lessee.
ATTORNEY'S FEES: Any action which shall be brought by Lessor for the recovery
of any rent due under the terms of this Lease, or by either the Lessor or
Lessee for the breach or enforcement of any of the conditions, covenants, or
agreements herein set forth on the part of Lessor or Lessee to be kept and
performed, or for the recovery of said premises, the party losing the action
agrees to pay to the prevailing party on demand, reasonable attorney's fees as
fixed by the court, and further agrees that the said attorney's fees shall
become a part of the judgment of the prevailing party in such action.
TIME: Time is of the essence of this Lease.
DEFAULT: In the event of any breach of this LEASE AGREEMENT by LESSEE, that
continues for a period of thirty (30) days after LESSOR has given written
notice to LESSEE to cure said breach, LESSOR shall be entitled to all legal
remedies pursuant to the laws of the State of California.
WAIVER: The waiver by Lessor or Lessee, of any breach of any terms, covenant
or condition herein contained shall not be deemed to waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition therein contained. The subsequent acceptance of rent
hereunder by Lessor shall not be deemed to be a waiver of any preceding breach
by Lessee of any term, covenant or condition of this Lease other than the
failure of Lessee to pay the particular rental so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.
ENTRY OF LESSOR: Lessee shall permit Lessor and their agents to enter into and
upon said premises at all reasonable times for the purpose of inspecting the
same or for the purpose of maintaining the building in which said premises are
situated, or for the purpose of making repairs, alterations or additions to any
other portion of said building, including the erection and maintenance of such
3
<PAGE> 5
scaffolding, canopies, fences and props as may be required, or for the purpose
of posting notices of non-responsibility for alterations, additions, or
repairs, without any rebate of rent and without any liability to Lessee for any
loss of occupation or quiet enjoyment of the premises thereby occasioned; and
shall permit Lessor and their agents, at any time within thirty (30) days prior
to the expiration of this Lease, to place upon said premises any usual or
ordinary "to let" or "to lease" signs and exhibit the premises to prospective
tenants at reasonable hours.
ALTERATIONS BY LESSEE: Lessee shall not make or construct any alterations,
additions, or improvements in, on or to the premises without written consent of
Lessor first had and obtained and unless otherwise agreed in writing, all
alternations, additions or improvements permitted to be made or constructed by
Lessee in, on or to the premises shall be at the sole cost and expense of
Lessee and shall immediately be and become a part of the premises and the
property of Lessor and shall remain upon, and be surrendered with, the premises
as a part thereof at the expiration of the term of this Lease, whether by lapse
of time or otherwise. This paragraph is subject to the provisions for trade
fixtures set forth below. Lessee hereby acknowledges that said premises are
taken as is and that Lessor does represent that said premises comply with all
federal, state, municipal or local ordinances relative to the purposes for
which Lessee shall use said premises and that any modification, change or the
like necessary to comply with laws or ordinances shall be at the sole cost and
expense of Lessor.
ASSIGNMENT BY OPERATION OF LAW: This Lease shall not be assignable by
operation of law or otherwise, except through the laws of succession or
probate, and in the event that a proceeding of insolvency be instituted against
Lessee, whether such proceeding be voluntary or involuntary or should Lessee
become a party to any proceeding under "An Act to Establish a Uniform System of
Bankruptcy Throughout the United States" as it now is or as it may be amended
in the future, other than as a creditor, or if Lessee makes an assignment for
the benefit of creditor then Lessor may at their option enter upon said
premises, remove all persons therefrom and terminate this Lease without any
previous notice or demand.
TRADE FIXTURES: Lessee may install upon the premises trade fixtures to be used
by them in the conduct of their business upon the premises, and such trade
fixtures shall at all times remain the property of Lessee, provided, however,
upon the expiration of the term of this Lease, Lessee shall be responsible for
and shall pay Lessor for any damage or injury done to the premises as a result
of the installation or removal of any such trade fixtures. All trade fixtures
shall be removed on or before the last day of this Lease.
NON-RESPONSIBILITY NOTICE: Lessor may, if they deem fit, post such notice of
non-responsibility under the mechanic's or materialmen's lien laws of the State
of California as Lessor may deem proper to relieve themselves from liability or
responsibility for mechanic's or materialmen's liens for any repairs or other
improvements made by Lessee upon the premises, and Lessee shall indemnify
Lessor and save them harmless from any and all claims of mechanics,
materialmen, artisans or laborers furnishing materials or performing labor upon
the premises at Lessee's request, and in any event, whether or not Lessor may
have posted a notice of non-responsibility upon the premises, Lessee shall not
permit any liens or other claims of any nature caused or authorized by Lessee
to be reduced to final judgment as against said demised premises. Lessor shall
at its expense maintain the parking lot and other common areas of the real
property surrounding the building herein above described.
SIGNS: Lessee shall have the right to erect upon the exterior of the leased
premises a sign which shall be appropriate to designate the business of Lessee
located on the premises. No sign shall be painted upon the exterior wall of
any such building except with the consent of Lessor. Should the erection of
any sign upon the building require the attaching of said sign to such building,
then at the end of the term of this Lease, or any renewal thereof, Lessee shall
at its expense remove said sign and at its
4
<PAGE> 6
expense shall make any repairs to said building necessitated because of the
attaching of the sign thereto or the removal of said sign.
UTILITIES: LESSEE shall be responsible for all utilities servicing the LEASED
PREMISES during the term hereof, including but not limited to gas, water,
electrical, and telephone.
CONDEMNATION: If any portion of the building or buildings located on the
premises be condemned for a public or quasi-public use by right of eminent
domain, with or without litigation, or transferred by agreement in connection
with such public or quasi-public use, this Lease, as to the part so taken,
shall terminate as of the date title shall vest in the condemned and the rent
payable hereunder shall be adjusted so that the Lessee shall be required to pay
for the remainder of the term only such portion of such rent as the value of
the part remaining after condemnation bears to the value of the entire premises
at the date of condemnation; but in either of such events, Lessor shall have
the option to terminate this compensation awarded upon such condemnation or
taking shall belong and be paid to the Lessor and Lessee shall have no claim
thereto, except for any award separately stated for Lessee's fixtures, moving
cost and expenses and Lessee hereby irrevocable assigns and transfers to Lessor
any right to compensation or damages to which Lessee may become entitled during
the term thereof by reason of the condemnation of all or a part of the expense,
any claims Lessee may have against the condemning party for Lessee's moving
and/or relocation expenses and for any of Lessee's business losses for which
compensation is permitted by law.
DESTRUCTION OF PREMISES: In the event of a partial destruction of the said
premises during the said term, from any cause, Lessor shall forthwith repair
the same, provided such repairs can be made within one hundred and twenty (120)
days under the laws and regulations of state, federal, county or municipal
authorities, but such partial destruction shall in no way annul or void this
Lease, except that Lessee shall be entitled to a proportionate reduction of
rent while such repairs shall interfere with the business carried on by Lessee
in the said premises. If such repairs shall interfere with the business
carried on by Lessee in the said premises. If such repairs cannot be made in
one hundred and twenty (120) days, Lessor may, at their option, make same
within a reasonable time, this Lease continuing in full force and effect and
the rent to be proportionally reduced as aforesaid in this paragraph provided.
In the event that Lessor does not so elect to make such repairs which cannot be
made in one hundred and twenty (120) days, or such repairs cannot be made under
such laws and regulations, this Lease may be terminated at the option of either
party. In respect to any partial destruction which Lessor is obligated to
repair or may elect to repair under the terms of this paragraph, the provisions
of Section 1932, Subdivision 2, and of Section 1933, Subdivision 4, of the
Civil Code of the State of California are waived by Lessee. In the event that
the building in which the demised premises may be situated be destroyed to the
extent of not less than 33 1/3% of the replacement cost thereof Lessor may
elect to terminate this Lease, whether the demised premises be damaged or not.
A total destruction of the building in which the said premises may be situated
shall terminate this Lease. In the event of any dispute between Lessor and
Lessee relative to the provisions of this paragraph, they shall each select an
arbitrator; the two arbitrators so selected shall select a third arbitrator and
the three arbitrators so selected shall hear and determine the controversy and
their decision thereon shall be final and binding upon both Lessor and Lessee,
who shall bear the cost of such arbitration equally between them.
COMPLIANCE WITH LAWS: Lessee shall, at Lessee's own expense, comply with all
of the laws, rules, regulations, statutes, ordinances and requirements of all
government authorities, pertaining to the use of the premises.
MODIFICATION: This Lease contains all of the agreements of the parties and
cannot be amended or modified except by a written agreement.
5
<PAGE> 7
REASONABLE CONSENT: Wherever in the Lease Lessor or Lessee is required to give
its consent or approval to any action on the part of the other, such consent or
approval shall not be unreasonably withheld. In the event of failure to give
any such consent, the other party shall be entitled to specific performance at
law and shall have such other responsible in monetary damages for failure to
give consent unless said consent is withheld maliciously or in bad faith.
BINDING ON SUCCESSORS AND ASSIGNS: Except as herein expressly prohibited, this
Lease is binding upon and will inure to the benefit of the successors and
assigns, executors and administrators of the parties to this agreement.
NOTICES: All notices to be given by LESSOR to LESSEE shall be made by sending
the same by registered mail, postage prepaid, addressed to LESSEE as follows:
Panorama International
DBA: Tellurian Press, Inc.
2621 Empire Avenue
Burbank, CA 91504
All notices to be given by LESSEE to LESSOR shall be given by sending the same
by registered mail, postage prepaid, addressed to LESSOR as follows:
Sierra Press, Inc.
P.O. Box 430
El Portal, CA 95318
EXECUTION OF LEASE AGREEMENT: This LEASE AGREEMENT shall be valid and binding
upon the Parties hereto if executed by the Parties in counterparts.
LESSOR:
/s/Jim Wilson Date: July 1, 1996
- -------------------- ------------
Sierra Press, Inc.
LESSEE:
/s/Edward H. Resnick Date: July 1, 1996
- ----------------------- ------------
Tellurian Press, Inc.
6
<PAGE> 8
That certain property situated in the unincorporated area of the County of
Mariposa, State of California, described as follows:
EXHIBIT "A"
A portion of Parcel number 013-06-1-006-0, more particularly described as
follows: Mariposa Industrial Park, Mariposa, California 95338-8,600 Square
feet.
7
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EDWARD H. RESNICK
<PAGE> 2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of January 1, 1997, by and between PANORAMA INTERNATIONAL PRODUCTIONS, INC.,
a Delaware corporation (the "Company"), and Edward H. Resnick, an individual
("Employee"), with reference to the following:
A. The Company is in the business of producing and
distributing video tapes and publishing printed materials and color photography
books for sale to the tourist industry ("Business"). The Company's products
feature destination, historical and cultural topics such as national and state
parks, national monuments and historical sites.
B. Pursuant to that certain Employment Agreement, dated
as of September 25, 1995, between the Company and Employee ("Existing
Agreement"), Employee is employed as the Chairman of the Board and Secretary of
the Company.
C. Under the terms of the Existing Agreement, Employee's
employment by the Company has been on a month-to-month basis since September
25, 1996.
D. In order to provide greater stability to the
Company's management, the Company desires to enter into this Agreement in order
to replace and supersede the terms of the Existing Agreement.
E. Employee desires to remain in the employ of the
Company, and has agreed to continue his employment with the Company, subject to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the various covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. Employment; Duties; Exclusive Services.
1.1 Employment. Subject to the terms and
conditions hereof, the Company hereby employs Employee as the Chairman of the
Board of Directors and Chief Executive Officer of the Company and such other
position or title consistent with Employee's employment as the Chief Executive
Officer as may be designated by the Company's Board of Directors ("Board") from
time to time, and Employee hereby accepts such employment.
<PAGE> 3
1.2 Duties. Employee agrees that, as the
Chairman of the Board and Chief Executive Officer of the Company, he shall (a)
be responsible for the supervision and/or implementation of the Board's
policies and decisions in connection with the Business; (b) cooperate with the
Board and the Company's management in the formulation of the Company's programs
for strategic planning, operations, financing, services and marketing; and (c)
conduct such other executive level duties as may be assigned to him from time
to time by the Board.
1.3 Non-Exclusive Services. It is not intended
that Employee's employment hereunder be full time. Employee shall devote such
time and attention to the Company's Business as shall be necessary to perform
his duties hereunder, it being understood that Employee may and will engage in
other non-competitive business activities.
2. Effect on Existing Agreement. The parties hereby
acknowledge and agree that the Existing Agreement is hereby terminated and
superseded by this Agreement, and the Existing Agreement shall have no further
force or effect.
3. Term. Unless sooner terminated as hereinafter
provided, this Agreement shall be effective for a term ("Term") commencing as
of the date hereof and ending on December 31, 1999.
4. Compensation and Benefits. The Company shall pay the
following compensation and benefits to Employee during the Term hereof, and
Employee shall accept the same as payment in full for all services rendered by
Employee to or for the benefit of the Company:
4.1 Salary. A salary ("Base Salary") of $90,000
per annum, which shall accrue in equal monthly installments in arrears and
shall be payable in accordance with the payroll practices of the Company in
effect from time to time.
4.2 Bonus. In addition to the Base Salary, the
Company may grant to Employee a bonus or bonuses as further compensation and in
special recognition of his services to the Company. Any such bonus or bonuses
may be granted at the sole discretion of the Board and at such times and in
such manner as the Board may determine. It is currently anticipated that any
such bonus or bonuses shall be based, in part, upon the profitability of the
Company.
4.3 Fringe Benefits. Employee shall be entitled
to participate in health insurance and other benefits under the Company's
benefit plans and arrangements, including, without limitation, any employee
benefit plan or arrangement made available in the future by the Company to its
senior executives, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans
2
<PAGE> 4
and arrangements. The Company shall have the right to amend or delete any such
benefit plan or arrangement made available by the Company to its senior
executives and not otherwise specifically provided for herein.
4.4 Expenses. The Company shall reimburse
Employee for reasonable out-of-pocket expenses incurred in connection with the
Company Business and the performance of his duties hereunder, subject to (a)
such policies as the Board may from time to time establish, and (b) Employee
furnishing the Company with evidence in the form of receipts satisfactory to
the Company substantiating the claimed expenditures.
4.5 Vacation. Employee shall be entitled to the
number of paid vacation days in each calendar year determined by the Company
from time to time for its senior executive officers, but not less than fifteen
(15) days in any calendar year. Employee shall also be entitled to all paid
holidays given to the Company's senior executive officers.
4.6 Withholding and other Deductions. All
compensation payable to Employee hereunder shall be subject to such deductions
as the Company is from time to time required to make pursuant to law,
governmental regulation or order.
5. Representations and Warranties of Employee. Employee
represents and warrants to the Company that (a) he is under no contractual or
other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights of
the Company hereunder, and (b) he is under no physical or mental disability
that would hinder the performance of his duties under this Agreement.
6. Certain Covenants.
6.1 Noncompetition. The parties hereto
acknowledge that if Employee were to compete with the Company upon the
termination of his employment with the Company, Employee would necessarily use
Confidential Information (as defined below) in doing so. During the term of
this Agreement and for a period of two years thereafter, or, if Employee is
terminated for good cause or voluntarily terminates his employment hereunder,
then for the remainder of the term of this Agreement after such termination and
for a period of two years thereafter, ("Restricted Period") Employee shall not
have any ownership interest (of record or beneficial) in, or have any interest
as an employee, salesman, consultant, officer or director in, or otherwise aid
or assist in any manner, any firm, corporation, partnership, proprietorship or
other business that engages in any county or city in the United States and/or
any foreign country in a business which is similar to that in which the Company
is engaged in such county, city or part thereof at the commencement of the
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Restricted Period, so long as the Company, or any successor in interest of the
Company to the business and goodwill of the Company, remains engaged in such
business in such county or city to solicit customers or potential customers
therein; provided, however, that Employee may own, directly or indirectly,
solely as an investment, securities of any entity which are traded on any
national securities exchange or quoted on NASDAQ if Employee is not a
controlling shareholder of such entity.
6.2 Non-solicitation of Business, Employees, and
Consultants. During the Restricted Period, Employee shall not, directly or
indirectly:
(a) Solicit or assist any other person
to solicit any business (other than for the Company) from any present or past
customer of the Company; or request or advise any present or future customer of
the Company to withdraw, curtail or cancel its business dealings with the
Company; or commit any other act or assist others to commit any other act which
might injure the business of the Company;
(b) Hire, solicit or encourage any
employee of the Company to leave the employment of the Company or any of its
affiliates, or hire any such employee who has left the employment of the
Company or any of its affiliates within one (1) year of the termination of such
employee's employment with the Company or any of its affiliates; or
(c) Hire, solicit or encourage any
consultant then under contract with the Company or any of its affiliates to
cease work with the Company or any of its affiliates within one (1) year of the
termination of such consultant's engagement by the Company or any of its
affiliates.
6.3 Confidential Information and Trade Secrets.
Employee acknowledges that the nature of Employee's engagement by the Company
is such that Employee will have access to Confidential Information which has
great value to the Company and that except for Employee's engagement by the
Company, Employee would not otherwise have access to the Confidential
Information. Employee further agrees, during the term of this Agreement and at
all times thereafter, that he shall:
(a) Hold all Confidential Information in
strict confidence and not discuss, communicate or transmit to others, or make
any unauthorized copy of or use the Confidential Information in any capacity,
position or business as it directly relates to Employee's employment by the
Company;
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(b) Use the Confidential Information
only in furtherance of proper employment-related reasons of the Company to
further the interests and Business of the Company; and
(c) Take all reasonable actions that the
Board deems necessary or appropriate, to prevent unauthorized use or disclosure
of or to protect the interest of the Company in the Confidential Information.
6.4 Ownership and Return of Documents. Employee
agrees that all memoranda, notes, records, papers or other documents and all
copies thereof relating to Confidential Information, the operations of the
Company or the Business, some of which may be prepared by Employee, and all
objects associated therewith in any way obtained by Employee in connection with
his employment shall be the Company's sole and exclusive property. Employee
shall not, except for the Company's use, copy or duplicate any of the
aforementioned documents or objects, nor remove them from the Company's
facilities nor use any information concerning them except for the Company's
benefit, either during the Employee's employment or thereafter. Employee
agrees that he will deliver all of the aforementioned documents and objects
that may be in his possession to the Company upon termination of the Employee's
employment, or at any other time upon the Company's request, together with the
Employee's written certification of compliance with the provision of this
Section 6.4.
6.5 Rights and Remedies Upon Breach. If Employee
breaches or threatens to commit a breach of any of the provisions of Sections
6.1 through 6.4 hereof, inclusive (the "Restrictive Covenants"), the Company
shall have the following rights and remedies, each of which rights and remedies
shall be independent of the other and severally enforceable, and all of which
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity:
(a) Specific Performance. The right and
remedy to have the Restrictive Covenants specifically enforced by any court
having equity jurisdiction, all without the need to post a bond or any other
security or to prove any amount of actual damage or that money damages would
not provide an adequate remedy, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the Company and
that money damages will not provide adequate remedy to the Company; and
(b) Accounting and Indemnification. The
right and remedy to require Employee (i) to account for and pay over to the
Company all compensation, profits, monies, accruals, increments or other
benefits derived or received by Employee or any associated party deriving such
benefits as a result of any
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<PAGE> 7
such breach of the Restrictive Covenants; and (ii) to indemnify the Company
against any other losses, damages (including special and consequential
damages), costs and expenses, including actual attorneys' fees and court costs,
which may be incurred by them and which result from or arise out of any such
breach or threatened breach of the Restrictive Covenants.
6.6 Severability of Covenants/Blue Pencilling.
If any court determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect, without
regard to the invalid portions. If any court determines that any of the
Restrictive Covenants, or any part thereof, are unenforceable because of the
duration of such provision or the area covered thereby, such court shall have
the power to reduce the duration or area of such provision and, in its reduced
form, such provision shall then be enforceable and shall be enforced. Employee
hereby waives any and all right to attack the validity of the Restrictive
Covenants on the grounds of the breadth of their geographic scope or the length
of their term.
6.7 Enforceability in Jurisdictions. The Company
and Employee intend to and do hereby confer jurisdiction to enforce the
Restrictive Covenants upon the courts of any jurisdiction within the
geographical scope of such covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of the Company and
Employee that such determination not bar or in any way affect the right of the
Company to the relief provided above in the courts of any other jurisdiction
within the geographical scope of such covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
6.8 Certain Definitions. As used in this Section
6, the following terms shall have the meanings set forth below:
(a) The term "Company" shall mean (i)
Panorama International Productions, Inc., a Delaware corporation ("Panorama");
(ii) Tellurian Press, Inc., a California corporation d/b/a Sierra Press, Inc.
("Sierra"); and (iii) any company which either Panorama or Sierra may acquire
and into which either Panorama or Sierra may be merged and any present or
future subsidiary of either of them.
(b) The term "Confidential Information"
means all information or material not generally known by non- Company personnel
which (i) gives the Company some competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the
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<PAGE> 8
interests of the Company; (ii) which is owned by the Company or in which the
Company has an interest and (iii) which is either (A) marked "Confidential
Information," "Proprietary Information" or other similar marking, (B) known by
Employee to be considered confidential and proprietary by the Company or (C)
from all the relevant circumstances should reasonably be assumed by Employee to
be confidential and proprietary to the Company.
Confidential Information includes, but is not
limited to, the following types of information and other information of a
similar nature (whether or not reduced to writing): (1) financial information
(including, but not limited to, information relating to earnings, assets,
debts, prices, pricing structure, volume of purchases or sales or other
financial data whether related to the Company generally, or to particular
products, services, geographic areas, or time periods); (2) supply and service
information (including, but not limited to, information relating to goods and
services, suppliers' names or addresses, terms of supply or service contracts
or of particular transactions, or related information about potential
suppliers, and the extent that the combination of suppliers or use of a
particular supplier, though generally known or available, yields advantages to
the Company, details of which are not generally known); (3) marketing
information (including, but not limited to, information relating to details
about ongoing or proposed marketing programs or agreements by or on behalf of
the Company, sales forecasts, advertising formats and methods or results of
marketing efforts or information about impending transactions); (4) personnel
information (including, but not limited to, information relating to employees'
personal or medical histories, compensation or other terms of employment,
actual or proposed promotions, hirings, resignations, disciplinary actions,
terminations or reasons therefor, training methods, performance, or other
information pertaining to the Company's employees); and (5) customer
information (including, but not limited to, information relating to past,
existing or prospective customers, addresses or backgrounds, records of
agreements and prices, proposals or agreements between customers and the
Company, status of customers' accounts or credit, or related information about
actual or prospective customers as well as customer lists). Confidential
Information also includes any information described above which the Company
obtains from another party and which the Company treats as proprietary or
designates as Confidential Information, whether or not owned or developed by
the Company.
NOTWITHSTANDING THE FOREGOING, HOWEVER, NO
INFORMATION CONSTITUTES CONFIDENTIAL INFORMATION IF (A) IT IS GENERIC
INFORMATION OR GENERAL KNOWLEDGE WHICH EMPLOYEE WOULD HAVE LEARNED IN THE
COURSE OF SIMILAR EMPLOYMENT ELSEWHERE IN THE TRADE; (B) IT IS INFORMATION THE
DISCLOSURE OF WHICH IS COMPELLED BY JUDICIAL OR ADMINISTRATIVE PROCEEDINGS
AFTER EMPLOYEE DILIGENTLY ATTEMPTS TO AVOID DISCLOSURE (WITHOUT EXPENDING HIS
OWN
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PERSONAL FUNDS) AND AFFORDS THE COMPANY THE OPPORTUNITY TO OBTAIN ASSURANCE
THAT SUCH DISCLOSURE WILL ATTEMPT CONFIDENTIAL TREATMENT; OR (C) IF IT IS
OTHERWISE PUBLICLY KNOWN OR IN THE PUBLIC DOMAIN.
7. Definitive Non-Competition Agreement. Upon
termination of this Agreement, Employee shall deliver to the Company a
definitive Non-Competition and Confidentiality Agreement to give effect to the
provisions of Section 6 hereof. However, neither the failure of Employee to
deliver either of such agreements nor the failure of the Company to require the
same shall otherwise affect the enforceability of the Restrictive Covenants.
8. Insurance. The Company shall have the right to take
out life, health, accident, "key-man" or other insurance covering Employee, in
the name of the Company and at the Company's expense in any amount deemed
appropriate by the Company. Employee shall assist the Company in obtaining
such insurance, including, without limitation, submitting to any required
examinations and providing information and data required by insurance
companies.
9. Termination.
9.1 Death or Total Disability of Employee. If
Employee dies or becomes totally disabled during the term of this Agreement,
Employee's employment hereunder shall automatically terminate. For these
purposes Employee shall be deemed totally disabled if Employee shall become
physically or mentally incapacitated or disabled or otherwise unable fully to
discharge Employee's duties hereunder for a period of 120 consecutive calendar
days or for 120 calendar days in any 270 calendar-day period. In making a
determination of disability, the Board shall utilize such medical and other
advice and consultation as the Board deems appropriate, but there is no
requirement of procedure or formality associated with the making of such
determination. During any period of disability in which Employee is unable to
perform his duties hereunder, Employee's Base Salary shall be payable to the
extent of, and subject to, the Company's policies and practices then in effect
with respect to sick leave and disability benefits.
9.2 Termination for Good Cause. Employee's
employment hereunder may be terminated by the Company for "good cause." The
term "good cause" is defined as any one or more of the following occurrences:
(a) Employee's breach of any of the
Restrictive Covenants contained in Section 6 hereof;
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(b) Employee's conviction by, or entry
of a plea of guilty or nolo contendere in, a court of competent and final
jurisdiction for any crime involving moral turpitude or punishable by
imprisonment in the jurisdiction involved;
(c) Employee's commission of an act of
fraud, whether prior to or subsequent to the date hereof upon the Company;
(d) Employee's continuing repeated
willful failure or refusal to perform Employee's duties as required by this
Agreement (including, without limitation, Employee's inability to perform
Employee's duties hereunder as a result of chronic alcoholism or drug addiction
and/or as a result of any failure to comply with any laws, rules or regulations
of any governmental entity with respect to Employee's employment by the
Company);
(e) Employee's material violation of any
duty of loyalty to the Company;
(f) Employee's commission of any act
which is detrimental to the Company's Business or goodwill; or
(g) Employee's breach of any other
provision of this Agreement, provided that termination of Employee's employment
pursuant to this subsection (g) shall not constitute valid termination for good
cause unless Employee shall have first received written notice from the Board
stating with specificity the nature of such breach and affording Employee at
least fifteen (15) days to correct the breach alleged.
9.3 Termination Without Cause. The Company may
terminate Employee's employment at any time and without cause at the sole
discretion of the Board, effective thirty (30) days after written notice to
Employee.
9.4 Severance Compensation. Upon the occurrence
of any of the events referred to in Sections 9.1 and 9.2 hereof, Employee (or
Employee's heirs or representatives) shall be entitled to receive only such
portion (if any) of the Base Salary as may theretofore have accrued but be
unpaid on the date on which the termination shall take effect. Upon the
termination of Employee's employment pursuant to Section 9.3 hereof, the
Company shall continue to pay to Employee, as severance pay, Employee's full
Base Salary as provided in Section 4.1 above for the remainder of the Term,
less any amounts Employee actually earns in respect of such period as a result
of his employment by any other employer. All payments required to be made by
the Company pursuant to this Section 9.4 shall be paid in the same manner and
at the times specified in Section 4 hereof.
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9.5 Return of the Company's Property. If this
Agreement is terminated for any of the foregoing reasons, the Company shall
have the right, at its option, to require Employee to vacate his offices prior
to the effective date of termination and to cease all activities on the
Company's behalf. Upon the termination of his employment in any manner,
Employee shall immediately surrender to the Company all lists, books and
records of, or in connection with, the Company's business, and all other
property belonging to the Company, it being distinctly understood that all such
lists, books and records, and other documents, are the property of the Company.
Notwithstanding the foregoing, however, the parties hereby agree that, upon the
termination of this Agreement, Employee shall have the right to keep his
personal laptop computer, docking platform and other peripheral equipment
attached or pertaining thereto.
10. Arbitration.
10.1 In General. Any claim, dispute or
controversy between the parties arising out of or relating to the employment of
Employee by the Company or the termination of Employee's employment by the
Company (including, without limitation, any claim relating to the purported
meaning, validity, interpretation, effect, enforceability, performance,
enforcement or breach of any provision of this Agreement, any wrongful
termination or discrimination claim, including state and federal statutory
claims), whether in contract or tort (collectively, "Dispute") shall be
resolved by final and binding arbitration conducted by the American Arbitration
Association ("AAA") in accordance with its commercial rules in Los Angeles,
California. The arbitrability of any such Dispute shall likewise be determined
in such arbitration. This agreement to arbitrate shall apply to any and all
claims asserted by Employee against the Company and/or any employee, officer,
alleged agent, director or affiliate of the Company, and any and all such
claims shall be deemed "Disputes" hereunder. Arbitration shall be conducted in
as expedited manner as is then permitted by AAA. The determinations, findings,
judgments and/or awards rendered through any such arbitration shall be final
and binding on the parties hereto and judgment thereon may be entered in any
court of competent jurisdiction.
10.2 Procedure. Any such arbitration proceeding
may be initiated by written notice from either party to the other which shall
be a compulsory and binding proceeding on each party. The arbitration shall be
conducted before one arbitrator selected in accordance with the rules
pertaining to expedited arbitration. The costs of said arbitrator and the
arbitration shall be borne equally by the parties hereto. Each party shall
bear separately the cost of their respective attorneys, witnesses and experts
in connection with such arbitration. Other costs of the arbitration, including
the cost of any record or transcripts of the arbitration, administrative fees,
and other fees and costs, shall be borne equally by the parties. Time is of
the essence of this arbitration procedure, and the arbitrator shall be
instructed and required to render his
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decision within ten (10) days following completion of the arbitration. The
arbitrator shall have the authority to grant any damages available under state
and federal law. The arbitrator shall not have the right to add to, subtract
from, or modify any of the terms of this Agreement, nor shall the arbitrator
have the power to decide the justice or propriety of any specific provision of
this Agreement or any matter reserved solely to the discretion of the Company.
10.3 Applicable Law, Etc. The arbitrator shall
follow any applicable federal law and California state law in rendering an
award. Any and all legal proceedings to enforce this Agreement, (including any
action to compel arbitration hereunder or to enforce any award or judgment
rendered thereby), shall be governed in accordance with Section 10.8 hereunder.
10.4 Exclusive Remedy; Survivability. This
agreement to arbitrate shall provide the exclusive remedy of the parties with
respect to any Dispute, and each party expressly waives any right he, she or it
may have to seek redress in any other forum. This agreement to arbitrate shall
survive the termination of this Agreement.
11. General Relationship. Employee shall be considered
an employee of the Company within the meaning of all federal, state and local
laws and regulations including, but not limited to, laws and regulations
governing unemployment insurance, workers' compensation, industrial accident,
labor and taxes.
12. Miscellaneous.
12.1 Modification; Prior Claims. This Agreement
sets forth the entire understanding of the parties with respect to the subject
matter hereof, supersedes all existing agreements between them concerning such
subject matter (including, but not limited to, the Existing Agreement), and may
be modified only by a written instrument duly executed by each party. Employee
hereby waives any claims that may exist on the date hereof arising from his
prior employment, if any, with the Company, other than for compensation payable
or reimbursement of reasonable expenses, all as incurred in the ordinary course
of business.
12.2 Assignment. The rights of the Company under
this Agreement may not be assigned by the Company without the prior written
consent of Employee. Further, this Agreement is an agreement for the personal
services of Employee and is not assignable or transferable by Employee. None
of the rights of Employee to receive any form of compensation payable pursuant
to this Agreement shall be assignable or transferable except through a
testamentary disposition or by the laws of descent and distribution upon the
death of Employee. Any attempted assignment, transfer, conveyance, or other
disposition (other than as aforesaid) of any
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interest in the rights of Employee to receive any form of compensation to be
made by the Company pursuant to this Agreement shall be void.
12.3 Survival. The covenants, agreements,
representations and warranties contained in or made pursuant to this Agreement
shall survive Employee's termination of employment.
12.4 Waiver. The failure of either party hereto
at any time to enforce performance by the other party of any provision of this
Agreement shall in no way affect such party's rights thereafter to enforce the
same, nor shall the waiver by either party of any breach of any provision
hereof be deemed to be a waiver by such party of any other breach of the same
or any other provision hereof.
12.5 Hiring At Will. Any continuance of
Employee's employment by the Company after the Term hereof shall be deemed a
hiring at will (unless such continuance is the subject of a new written
agreement) and shall be subject to termination with or without cause by either
party upon delivery of notice thereof.
12.6 Section Headings. The headings of the
several sections in this Agreement are inserted solely for the convenience of
the parties and are not a part of and are not intended to govern, limit or aid
in the construction of any term or provision hereof.
12.7 Notices. All notices, requests and other
communications hereunder shall be in writing and shall be delivered by courier
or other means of personal service (including by means of a nationally
recognized courier service or professional messenger service), or sent by telex
or telecopy or mailed first class, postage prepaid, by certified mail, return
receipt requested, in all cases, addressed to:
Company:
Panorama International Productions, Inc.
2621 Empire Avenue
Burbank, California 91504
Attention: Board of Directors
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With a copy to:
Loeb & Loeb, LLP
1000 Wilshire Boulevard, Suite 1800
Los Angeles, California 90017
Attention: David L. Ficksman, Esq.
Employee:
Edward H. Resnick
3350 Coy Drive
Sherman Oaks, California 91423
All notices, requests and other communications shall be deemed given on the
date of actual receipt or delivery as evidenced by written receipt,
acknowledgement or other evidence of actual receipt or delivery to the address.
In case of service by telecopy, a copy of such notice shall be personally
delivered or sent by registered or certified mail, in the manner set forth
above, within three (3) business days thereafter. Any party hereto may from
time to time by notice in writing served as set forth above designate a
different address or a different or additional person to which all such notices
or communications thereafter are to be given.
12.8 Governing Law and Venue. This Agreement is
to be governed by and construed in accordance with the laws of the State of
California applicable to contracts made and to be performed wholly within such
State, and without regard to the conflicts of laws principles thereof. Subject
to the provisions of Section 10 hereof requiring arbitration of Disputes, any
and all legal proceedings to enforce this Agreement, including any action to
compel arbitration pursuant to Section 10 or to enforce or vacate any judgment
or award rendered therein, shall be brought in the state or federal courts
sitting in Los Angeles, California, the parties hereto hereby waiving any claim
or defense that such forum is not convenient or proper. Each party hereby
agrees that any such court shall have in personam jurisdiction over it and
consents to service of process by certified or registered mail, prepaid to the
address specified in Section 12.7 or in any manner authorized by California
law, and agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner specified by law.
12.9 Attorneys' Fees. Subject to the provisions
of Section 10 hereof with respect to arbitration, if any legal action,
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of any alleged dispute, breach, default or
misrepresentation in connection with this Agreement, the successful or
prevailing party shall be entitled to recover reasonable attorneys' fees and
other
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costs it incurred in that action or proceeding, in addition to any other relief
to which it may be entitled.
12.10 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same Agreement.
12.11 Construction. The language in all parts of
this Agreement shall in all cases be construed simply, according to its fair
meaning, and not strictly for or against any of the parties hereto. Without
limitation, there shall be no presumption against any party on the ground that
such party was responsible for drafting this Agreement or any part thereof. As
used herein, the word "person" shall include any corporation, firm, limited
liability company, partnership or other form of association.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date hereinabove set forth.
"THE COMPANY":
PANORAMA INTERNATIONAL
PRODUCTIONS, INC., a Delaware
corporation
By:/s/David K. Haspel
---------------------------------
David K. Haspel, President
"EMPLOYEE":
/s/Edward H. Resnick
------------------------------------
Edward H. Resnick
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<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
DAVID HASPEL
<PAGE> 2
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the
22 day of September, 1995, by and between PANORAMA INTERNATIONAL PRODUCTIONS,
INC., a Delaware corporation (referred to as the "Employer" or "Company") and
David K. Haspel (the "Employee").
WHEREAS, Employer is a newly formed entity which is in the
process of acquiring all of the assets of Cinescope Enterprises, Inc. d/b/a
Panorama International Productions, a 25-year-old production and distribution
company specializing in destination, historical and cultural video tapes for
sale to the tourist industry; and
WHEREAS, the Company wishes to employ Employee, and Employee
wishes to accept such employment, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual agreements herein contained, as well as the agreement to employ the
Employee or to continue to employ the Employee under the terms and conditions
contained herein, and intending to be legally bound hereby, it is agreed
between the parties hereto as follows:
1. Employment. The Company hereby employs the Employee
and Employee hereby accepts such employment, as President of the Company or,
upon Employee's consent, such other position or title as may be designated by
the Company from time to time. In such capacity, the Employee shall be
responsible for supervision of the implementation of the policies and decisions
of the Company's Board of Directors, and shall further cooperate with the
management of the Company in formulating the Company's programs for strategic
planning, operations, management, services and marketing. The Employee shall
conduct such other executive level duties as may be assigned to him from time
to time or in substitution therefor by the Board of Directors of the Company.
During the continuation of the Employee's employment by the
Company hereunder, the Employee will, unless the Employee has first received
the prior written consent of the Company, devote to the Company his full time
and attention and will not engage in any other business.
2. Salary and Benefits. In consideration for the services
rendered herein, Employee agrees to accept and Employer agrees to pay the
following compensation as Employee's sole compensation, remuneration,
consideration, salary and payment.
<PAGE> 3
(a) $135,000 per year, payable money (or
otherwise as agreed upon) for the period, commencing upon initial closing of
the Company's Private Placement Memorandum ("Closing") and continuing
thereafter for the term of this Agreement; provided, however that Employee
shall receive an additional $15,000 in deferred salary upon Closing;
(b) Reimbursement for reasonable
out-of-pocket expenses incurred in connection with the business of the Company,
(c) Bonus compensation at the discretion
of the Company if the Company is profitable; and
(d) Such health insurance arrangements
or other benefits as granted by the Board of Directors from time to time, if
any.
3. Term. Unless sooner terminated pursuant to paragraph
4 below, this Agreement shall be effective for a term commencing as of the date
hereof and terminating in one year. Thereafter this Agreement shall continue
month to month unless otherwise terminated.
4. Termination.
(a) With Cause. The Employer shall have
the right to immediately terminate the Employee's services hereunder in the
event of Employee's conviction of a felony, embezzlement from the Company, act
of willfully breaching or habitually neglecting the Company, or the dissolution
of the Employer after an appropriate period of time to wind up the affairs of
Employer in dissolution. Upon termination with cause all of Employee's
benefits, including salary, shall cease.
(b) Voluntary Termination. Employee
shall have the right to terminate his services at any time upon (30) days
written notice to the Employer.
(c) Without Cause. Employee may be
terminated on thirty day written notice without cause and in such event
Employer shall pay Employee his then current salary for an additional six
months subsequent to in complete satisfaction of any obligations that may be
owed by the Company to Employee; provided Employee complies with the terms of
this Agreement for such six month period. In the event of termination,
Employee agrees to cooperate with the Company to ensure an orderly transaction.
(d) Continued Salary. Employee shall
continue to receive his salary after termination, whether voluntary or
otherwise, if Employee has acted as a guarantor of debts of the Company until
Employee has been removed from liability on such guarantee agreement.
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5. Prohibition of Employee Assignment. This is an
Agreement for the personal services of Employee and is not transferable. The
Employee agrees on behalf of the Employee and the Employee's heirs and
executors, personal representation, and any other person or persons claiming
any benefit under the Employee by virtue of this Agreement, that this Agreement
and the rights, interests, and benefits hereunder shall not be assigned,
transferred, pledged or hypothecated in any way by the Employee or the
Employee's heirs, executors and personal representatives, and shall not be
subject to execution, attachment or similar process. Any attempt to assign,
transfer, pledge, hypothecate or otherwise dispose of this Agreement or any
such rights, interests and benefits thereunder shall be null and void and
without effect and shall relieve the Employer of any and all liability
hereunder.
6. Covenants of the Employee.
6.1 Ownership and Return of Documents. The
Employee agrees that all memoranda, notes, records, papers or other documents
and all copies thereof relating to the operations or business of the Company,
some of which may be prepared by the Employee, and all objects associated
therewith in any way obtained by the Employee in connection with his employment
shall be the Company's property. The Employee shall not, except for the
Company's use, copy or duplicate any of the aforementioned documents or
objects, nor remove them from the Company's facilities nor use any information
concerning them except for the Company's benefit, either during the Employee's
employment or thereafter. The Employee agrees that the Employee will deliver
all of the aforementioned documents and objects that may be in his possession
to the Company upon termination of the Employee's employment, or at any other
time upon the Company's request, together with the Employee's written
certification of compliance with the provision of this Section 6.1.
6.2 Confidential Information. In connection with
his employment at the Company, Employee will have access to confidential
information consisting of some or all of the following categories of
information with respect to the Company. Company and Employee consider their
relation one of confidence with respect to such information:
(a) Financial Information, including,
but not limited to, information relating to earnings, assets, debts, prices,
pricing structure, volume of purchases or sales or other financial data whether
related to the Company generally, or to particular products, services,
geographic areas, or time periods;
(b) Supply and Service Information,
including, but not limited to, information relating to goods and services,
suppliers' names or addresses, terms of supply or service contracts or of
particular transactions, or related information about potential suppliers, and
the extent that the combination of suppliers or use of a particular
3
<PAGE> 5
supplier, though generally known or available, yields advantages to the
Company, details of which are not generally known;
(c) Marketing Information, including,
but not limited to, information relating to details about ongoing or proposed
marketing programs or agreements by or on behalf of the Company, sales
forecasts, advertising formats and methods or results of marketing efforts or
information about impending transactions;
(d) Personal Information, including, but
not limited to, information relating to Employee's personal or medical
histories, compensation or other terms of employment, actual or proposed
promotions, hirings, resignations, disciplinary actions, terminations or
reasons therefor, training methods, performance, or other Employee information;
and
(e) Customer Information, including, but
not limited to, information relating to past, existing or prospective
customers, addresses or backgrounds, records of agreements and prices,
proposals or agreements between customers and the Company, status of customers'
accounts or credit, or related information about actual or prospective
customers as well as customer lists.
All of the foregoing are hereinafter referred to as "Trade
Secrets." During and after the employment by the Company, regardless of the
reasons that such employment ends, Employee agrees:
(aa) To hold all Trade Secrets in
confidence and not discuss, communicate or transmit to others, or make any
unauthorized copy of or use the Trade Secrets in any capacity, position or
business except as it directly relates to Employee's employment by the Company;
(bb) To use the Trade Secrets only in
furtherance of proper employment-related reasons of the Company to further the
interests of the Company;
(cc) To take all reasonable actions that
Company deems necessary or appropriate, to prevent unauthorized use or
disclosure of or to protect the interest of the Company in the Trade Secrets;
and
(dd) That any of the Trade Secrets,
whether prepared by Employee or which may come into Employee's possession
during Employee's employment hereunder, are and remain the property of the
Company, and all such Trade Secrets, including copies thereof, together with
all other property belonging to either the Company or its affiliates, or used
in their respective businesses, shall be delivered to or left with the Company.
4
<PAGE> 6
This Agreement does not apply to (i) information that by means
other than Employee's deliberate or inadvertent disclosure becomes known to the
public; or (ii) disclosure compelled by judicial or administrative proceedings
after Employee diligently tries to avoid each disclosure without out-of-pocket
expenses to himself and affords the Company the opportunity to obtain assurance
that compelled disclosures will receive confident treatment; or (iii) known to
Employee prior to entering into this Agreement.
The Employee specifically waives any rights to customer names,
customer lists, customer files or parts thereof or information Employee might
otherwise be entitled to by virtue of any applicable state or federal law or
regulation.
7. Covenant Not To Compete. Employee agrees not to
compete with the Company by taking employment or owning directly or indirectly
any interest in a competing entity during the term of this Agreement during his
employment by Company and for any subsequent period for which he is being
compensated, in the counties of states in which the Company has operations or
sales; provided, that Employee may own an interest in any public company
without violating this provision as long as such interest is not a controlling
interest.
8. Governing Law. This Agreement shall be subject to
and governed by the laws of the State of California.
9. Entire Agreement. This Agreement constitutes the
entire Agreement between the parties and contains all of the agreements between
the parties with respect to the subject manner hereof; this Agreement
supersedes any and all other agreements, either oral or in writing, between the
parties hereto with respect to the subject hereof. No change or modification
of this Agreement shall be valid unless the same be in writing and signed by
both parties hereto. No waiver of any provisions of this Agreement shall be
valid unless in writing and signed by the person or party to be charged.
10. Severability. If any portion of this Agreement shall
be for any reason, invalid or unenforceable, the remaining portion or portions
shall nevertheless be valid, enforceable and carried into effect, unless to do
so would clearly violate the present legal and valid intention of the parties
hereto.
11. Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted hereunder shall be in
writing and shall be delivered by hand, registered or certified mail with
return receipt requested or by a nationally recognized overnight delivery
service, in each case with all postage or other delivery charges prepaid, and
to the last known of the party to whom it is directed, or to such other address
as such party may specify by giving notice to the other in accordance with the
terms hereof. Any such notice shall be deemed to be received (i) when
delivered, if by hand, (ii) on the next business day following timely deposit
with a
5
<PAGE> 7
nationally recognized overnight delivery service, or (iii) on the date shown on
the return receipt as received or refused or on the date the postal authorities
state that delivery cannot be accomplished, if sent by registered or certified
mail, return receipt requested.
12. Attorneys Fees. In the event of litigation
concerning this Agreement, the prevailing party shall be entitled to collect
from the losing party reasonable attorney's fees and costs, including those on
appeal.
13. Arbitration. Any dispute between the Parties shall
be determined by Arbitration in the manner provided under the Commercial
Arbitration Rules of the American Arbitration Association then in effect in the
State of California; such arbitration shall be conducted before one arbitrator,
chosen in accordance with such rules and shall be binding on all parties to the
dispute; judgment on the award of such arbitrator may be rendered by any court
having jurisdiction of such parties and the subject matter. The expense of
such Arbitration shall be borne equally by the parties thereto, except that
each party shall bear the cost of its legal counsel.
IN WITNESS WHEREOF, the Employer has caused this Agreement to be
signed by its duly authorized officer and its corporate seal to be hereunto
affixed, and the Employee has hereunto set Employee's hand on the day and year
first above written.
EMPLOYEE:
/s/ David K. Haspel
--------------------------------------
David K. Haspel
1111 Somera Road
Los Angeles, CA 90077
EMPLOYER:
PANORAMA INTERNATIONAL
PRODUCTIONS, INC.
By: /s/ Edward H. Resnick
---------------------------------
Its: Chairman
---------------------------------
6
<PAGE> 1
EXHIBIT 10.6
FOUNDERS OPTION
AGREEMENT
By and Between:
David K. Haspel and Panorama
<PAGE> 2
FOUNDERS
OPTION AGREEMENT
THIS FOUNDERS OPTION AGREEMENT, is made as of this 27th day of July,
1995 by and between David K. Haspel, residing at 1111 Somera Road, Los Angeles,
California 90077 (the "Optionee"), and Panorama International Productions,
Inc., with an address at 2621 Empire Avenue, Burbank, California 91504 (the
"Optionor" or "Company").
W I T N E S S E T H:
That for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
This Option is subject to the following terms and conditions:
1. Grant of Option. Optionor hereby irrevocably grants to the
Optionee the right and option (the "Option") to purchase from the Optionor
90,000 shares of stock, $.001 par value per share, of Panorama International
Productions, Inc., a Delaware corporation (the "Company"). The shares covered
by the Option are hereinafter referred to as the "Option Shares."
2. Purchase Price. The total purchase price of the Option Shares
shall be $.001 per share.
3. Term of Option. The term of the Option shall commence as of
the date hereof and shall expire at 5:00 p.m., New York time, on August 11,
2020.
4. Exercise of Option. The Option may be exercised as set forth
in the section "Grant of Option" above by written notice sent to Optionor at
its address set forth above. Such notice shall (i) state the election to
exercise the Option and the number of shares to be purchased, (ii) fix a date
not less than ten nor more than thirty business days after the date such notice
is received by the Optionor for the payment of the full purchase price for such
shares against delivery of a certificate representing such shares, and (iii) be
signed by the Optionee. Payment of the purchase price shall be by cash.
5. Investment Representation. Optionee hereby represents and
warrants to Optionor that this Option and the Option Shares are being, and will
be, acquired by Optionee for his own account and for investment only and not
with a view to distribution or resale thereof within the meaning of such phrase
as defined under the Securities Act of 1933, as amended. Optionee will not
dispose of any part or all of the Option Shares in violation of the provisions
of such Act and the rules and regulations promulgated thereby by the Securities
and Exchange Commission and all applicable provisions of state securities laws
and regulations.
<PAGE> 3
6. Termination. If Optionor's employment with the Company
terminates for any reason, the rights to acquire shares of stock hereunder
cease for any Option Shares not vested as of the date of termination.
7. Stock Reserved. The Company represents and covenants that it
has sufficient shares of authorized stock reserved and will, for as long as
this option is effective as to shares for which the option has not been
exercised, continue to reserve such shares.
8. Antidilution. The number (including without limitation the
maximum number) and class of shares specified in paragraph 1, above, and/or the
price per share specified in paragraph 2, above, shall be appropriately
adjusted on an equitable basis in the event of any change in the number of
issued shares of common stock resulting from the subdivision or combination of
shares of common stock or other capital adjustments, or the payment of a stock
dividend after the date of this Agreement or other change in such shares of
common stock effected without receipt of consideration by the Company. In the
event that the Company shall, at any time prior to the exercise of this Option:
(i) declare or pay to the holders of the common stock of the Company a dividend
payable in any kind of shares of stock of the Company; or (ii) change or divide
or otherwise reclassify the Company's common stock into the same or a different
number of shares with or without par value, or in shares of any class or
classes; or (iii) transfer its property as an entirety or substantially as an
entirety to any other company; or (iv) make any distribution of its assets to
holders of the Company's common stock as a liquidation or partial liquidation
dividend or by way of return of capital; or (v) merge or consolidate with or
into any other corporation in a transaction in which the Company is not the
surviving entity; then, upon the subsequent exercise of this Option, the
Optionee shall receive, in addition to or in substitution for the shares of the
Company's common stock to which he would otherwise be entitled upon such
exercise, such additional shares of stock or scrip of the Company, or such
reclassified shares of stock of the Company, or such shares of the securities
or property of the Company resulting from such transfer, or such assets of the
Company, or such shares of the surviving corporation which Optionee would have
been entitled to receive had it exercised this Option prior to the happening of
any of the foregoing events.
If, at any time while this Option is outstanding, the Company
shall pay any dividend payable in cash or in common stock, shall offer to the
holders of its common stock for subscription or purchase by them any shares of
stock of any class or any other rights, or shall enter into an agreement to
merge or consolidate with another corporation, the Company shall cause notice
thereof to be mailed to the registered holder of this Option at its address
appearing on the registration books of the Company, at least 30 days prior to
the record date as of which holders of common stock shall participate in such
dividend, distribution or subscription or other rights or at least 30 days
prior to the effective date of the merger or consolidation. Failure to give
notice as required by this Section, or any defect therein, shall not affect the
legality or validity of any dividend, distribution or subscription or other
right.
9. Assignments. The Option may not be assigned, transferred,
pledged, or hypothecated in any way by Optionee, except that Optionee may
assign or transfer this Option to his heirs, successors or assigns.
2
<PAGE> 4
10. Liquidation of the Company. If at any time during the term of
the Option the Company determines to dissolve or to make a distribution with
respect to its stock in liquidation of all or substantially all of its assets,
Optionor shall give notice of such proposed action to Optionee at least fifteen
days prior to the effective date of the proposed action to Optionee or the
record date of the proposed liquidating distribution as the case may be.
11. Legend. The certificate or certificates representing any Option
Shares shall bear a legend in substantially the following form:
"The shares represented hereby have not been registered under
the Securities Act of 1933, as amended, and may not be sold, pledged,
or otherwise transferred except in compliance with the Securities Act
of 1933."
12. Closing. The closing on the purchase of any Option Shares
pursuant to the exercise by Optionee of his right to purchase under Paragraph 4
hereof shall be held at the principal office of the Company or at such other
location as the parties to such closing may mutually agree.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.
14. Arbitration. Any dispute between the parties shall be determined
by Arbitration in the manner provided under the Commercial Arbitration Rules of
the American Arbitration Association then in effect in the State of California;
such arbitration shall be conducted before one arbitrator, chosen in accordance
with such rules and shall be binding on all parties to the dispute; judgment on
the award of such arbitrator may be rendered by any court having jurisdiction
of such parties and the subject matter. The expense of such Arbitration shall
be borne equally by the parties thereto, except that each party shall bear the
cost of its legal counsel.
15. Notices. Any notice hereunder shall be in writing and shall be
deemed given when delivered personally or five days after being mailed by
certified mail, return receipt requested, to the address of the appropriate
party as set forth at the beginning of this Agreement.
3
<PAGE> 5
16. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes and cancels any and all prior agreements, promises, or
understandings between the parties relating to the grant, transfer, or payment
of any shares, options, property, or cash to Optionee.
IN WITNESS WHEREOF, the parties have executed this Option Agreement on
the date first above written.
OPTIONEE:
By: /s/ David K. Haspel
------------------------------------
David K. Haspel
OPTIONOR:
Panorama International Productions, Inc.
By: /s/ Edward H. Resnick
--------------------------------
Title: Chairman
4
<PAGE> 1
EXHIBIT 10.7
OPTION
AGREEMENT
By and Between:
David K. Haspel and Panorama
<PAGE> 2
OPTION AGREEMENT
THIS OPTION AGREEMENT, is made as of this 22nd day of September, 1995
by and between David K. Haspel, residing at 1111 Somera Road, Los Angeles,
California 90077 (the "Optionee"), and Panorama International Productions,
Inc., with an address at 2621 Empire Avenue, Burbank, California 91504 (the
"Optionor" or "Company").
W I T N E S S E T H:
That for good valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
This Option is subject to the following terms and conditions:
1. Grant of Option. Optionor hereby irrevocably grants to the
Optionee the right and option (the "Option") to purchase from the Optionor
360,000 shares of stock, $.001 par value per share, of Panorama International
Productions, Inc., a Delaware corporation (the "Company"). This Option shall
be first exercisable as follows: 90,000 shares on each of September 22, 1996,
September 22, 1997, September 22, 1998 and September 22, 1999 over a period of
four years. The shares covered by the Option are hereinafter referred to as
the "Option Shares."
2. Purchase Price. The total purchase price of the Option Shares
shall be $1.00 per share.
3. Term of Option. The term of the Option shall commence as of
the date hereof and shall expire at 5:00 p.m., New York time, on August 11,
2020.
4. Exercise of Option. The Option may be exercised as set forth
in the section "Grant of Option" above by written notice sent to Optionor at
its address set forth above. Such notice shall (i) state the election to
exercise the Option and the number of shares to be purchased, (ii) fix a date
not less than ten nor more than thirty business days after the date such notice
is received by the Optionor for the payment of the full purchase price for such
shares against delivery of a certificate representing such shares, and (iii) be
signed by the Optionee. Payment of the purchase price shall be by cash.
5. Investment Representation. Optionee hereby represents and
warrants to Optionor that this Option and the Option Shares are being, and will
be, acquired by Optionee for his own account and for investment only and not
with a view to distribution or resale thereof within the meaning of such phrase
as defined under the Securities Act of 1933, as amended. Optionee will not
dispose of any part or all of the Option Shares in violation of the provisions
of such Act and the rules and regulations promulgated thereby by the Securities
and Exchange Commission and all applicable provisions of state securities laws
and regulations.
<PAGE> 3
6. Termination. If Optionor's employment with the Company
terminates for any reason, the rights to acquire shares of stock hereunder
cease for any Option Shares not vested as of the date of termination.
7. Stock Reserved. The Company represents and covenants that it
has sufficient shares of authorized stock reserved and will, for as long as
this option is effective as to shares for which the option has not been
exercised, continue to reserve such shares.
8. Antidilution. The number (including without limitation the
maximum number) and class of shares specified in paragraph 1, above, and/or the
price per share specified in paragraph 2, above, shall be appropriately
adjusted on an equitable basis in the event of any change in the number of
issued shares of common stock resulting from the subdivision or combination of
shares of common stock or other capital adjustments, or the payment of a stock
dividend after the date of this Agreement or other change in such shares of
common stock effected without receipt of consideration by the Company. In the
event that the Company shall, at any time prior to the exercise of this Option:
(i) declare or pay to the holders of the common stock of the Company a dividend
payable in any kind of shares of stock of the Company; or (ii) change or divide
or otherwise reclassify the Company's common stock into the same or a different
number of shares with or without par value, or in shares of any class or
classes; or (iii) transfer its property as an entirety or substantially as an
entirety to any other company; or (iv) make any distribution of its assets to
holders of the Company's common stock as a liquidation or partial liquidation
dividend or by way of return of capital; or (v) merge or consolidate with or
into any other corporation in a transaction in which the Company is not the
surviving entity; then, upon the subsequent exercise of this Option, the
Optionee shall receive, in addition to or in substitution for the shares of the
Company's common stock to which he would otherwise be entitled upon such
exercise, such additional shares of stock or scrip of the Company, or such
reclassified shares of stock of the Company, or such shares of the securities
or property of the Company resulting from such transfer, or such assets of the
Company, or such shares of the surviving corporation which Optionee would have
been entitled to receive had it exercised this Option prior to the happening of
any of the foregoing events.
If, at any time while this Option is outstanding, the Company
shall pay any dividend payable in cash or in common stock, shall offer to the
holders of its common stock for subscription or purchase by them any shares of
stock of any class or any other rights, or shall enter into an agreement to
merge or consolidate with another corporation, the Company shall cause notice
thereof to be mailed to the registered holder of this Option at its address
appearing on the registration books of the Company, at least 30 days prior to
the record date as of which holders of common stock shall participate in such
dividend, distribution or subscription or other rights or at least 30 days
prior to the effective date of the merger or consolidation. Failure to give
notice as required by this Section, or any defect therein, shall not affect the
legality or validity of any dividend, distribution or subscription or other
right.
9. Assignments. The Option may not be assigned, transferred,
pledged, or hypothecated in any way by Optionee, except that Optionee may
assign or transfer this Option to his heirs, successors or assigns.
2
<PAGE> 4
10. Liquidation of the Company. If at any time during the term of
the Option the Company determines to dissolve or to make a distribution with
respect to its stock in liquidation of all or substantially all of its assets,
Optionor shall give notice of such proposed action to Optionee at least fifteen
days prior to the effective date of the proposed action to Optionee or the
record date of the proposed liquidating distribution as the case may be.
11. Legend. The certificate or certificates representing any Option
Shares shall bear a legend in substantially the following form:
"The shares represented hereby have not been registered under
the Securities Act of 1933, as amended, and may not be sold, pledged,
or otherwise transferred except in compliance with the Securities Act
of 1933."
12. Closing. The closing on the purchase of any Option Shares
pursuant to the exercise by Optionee of his right to purchase under Paragraph 4
hereof shall be held at the principal office of the Company or at such other
location as the parties to such closing may mutually agree.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.
14. Arbitration. Any dispute between the parties shall be determined
by Arbitration in the manner provided under the Commercial Arbitration Rules of
the American Arbitration Association then in effect in the State of California;
such arbitration shall be conducted before one arbitrator, chosen in accordance
with such rules and shall be binding on all parties to the dispute; judgment on
the award of such arbitrator may be rendered by any court having jurisdiction
of such parties and the subject matter. The expense of such Arbitration shall
be borne equally by the parties thereto, except that each party shall bear the
cost of its legal counsel.
15. Notices. Any notice hereunder shall be in writing and shall be
deemed given when delivered personally or five days after being mailed by
certified mail, return receipt requested, to the address of the appropriate
party as set forth at the beginning of this Agreement.
3
<PAGE> 5
16. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes and cancels any and all prior agreements, promises, or
understandings between the parties relating to the grant, transfer, or payment
of any shares, options, property, or cash to Optionee.
IN WITNESS WHEREOF, the parties have executed this Option Agreement on
the date first above written.
OPTIONEE:
/s/ David K. Haspel
-------------------------------------
David K. Haspel
OPTIONOR:
Panorama International
Productions, Inc.
By: /s/ Edward H. Resnick
----------------------------------
Title: Chairman
-------------------------------
4
<PAGE> 1
EXHIBIT 10.8
UNIVERSAL STUDIOS
HOLLYWOOD
CONTRACT
<PAGE> 2
UNIVERSAL STUDIOS
HOLLYWOOD
CONTRACT
<PAGE> 3
ASSIGNMENT AND CONSENT AGREEMENT
This Assignment and Consent Agreement ("Assignment") is
entered into this 22nd day of September, 1995, by and between Universal City
Studios, Inc., dba Universal Studios Hollywood ("Universal") and Panorama
Productions, Inc., a Delaware corporation ("Assignee"), and is made in
reference to that certain Development and Marketing Agreement ("Agreement")
dated as of January 1, 1992, and executed by Universal and Panorama
International Productions ("Assignor").
Whereas in consideration of the terms and premises contained
hereinbelow, the value and sufficiency of which is hereby acknowledged, the
parties agree as follows.
1. Assignor hereby desires to assign all of its rights,
interest and title under the Agreement and to delegate all its duties,
liabilities and obligations thereunder to Assignee.
2. Assignee hereby desires to assume the assignment and
delegation of all of Assignor's rights, title, interest, duties and obligations
under the Agreement.
3. Universal hereby consents to this Assignment, and
agrees to accept Assignee under the Agreement as if Assignee were originally
named therein, conditioned upon Assignee's agreement to assume, perform and
discharge all terms, duties and obligations identified in the Agreement to be
performed and discharged by Assignor.
This Assignment shall be effective as of the date fully
executed by all parties.
"Assignor" "Assignee"
PANORAMA INTERNATIONAL PANORAMA INTERNATIONAL
PRODUCTIONS PRODUCTIONS, INC.
By: /s/Dion A. Recachina By: /s/David K. Haspel
---------------------- ---------------------
Title: President Title: President
------------------- ------------------
"Owner"
UNIVERSAL CITY STUDIOS, INC.
dba UNIVERSAL STUDIOS HOLLYWOOD
By: /s/ Marcie Kay
-------------------------
Marcie Kay
Vice President, Merchandise
<PAGE> 4
DEVELOPMENT AND MARKETING AGREEMENT
THIS AGREEMENT is made as of this lst day of January, 1992, by and
between UNIVERSAL CITY STUDIOS, INC., dba Universal Studios Hollywood
("Universal"), whose location is 100 Universal City Plaza, Universal City,
California 91608, and PANORAMA INTERNATIONAL PRODUCTIONS ("Panorama"), whose
location is 2621 Empire Avenue, Burbank, California 91510-9748, Attention: Mr.
Dion A. Recachina.
Universal hereby engages Panorama and Panorama accepts such engagement
to produce a Videocassette ("Video") covering the history of Universal Studios
Hollywood ("USH"), the entertainment and adventure of each show and ride, and a
behind the scenes look at USH based on the terms and conditions as set forth
herein. The Video will be for sale exclusively at USH souvenir shops.
Accordingly, Universal and Panorama hereby agree as follows:
ARTICLE 1
SCOPE OF SERVICES
1.1 Universal hereby grants Panorama the right to produce a Video
of approximately sixty (60) minutes in length. Panorama guarantees that the
Video will be ready for sale by June, 1992.
1.2 Panorama shall employ the services of Mr. John Forsythe to
host and narrate the Video at no cost to Universal.
1.3 All aspects of the production and post-production processes
(i.e., script, rough cut, final cut, packaging, etc.) shall be subject to
Universal's final written approval. Failure to respond within ten (10) days of
receipt of request shall constitute approval. Notwithstanding Universal's
right of approval, unless Universal offers to pay the clip license fees for
each film and television clip it approves, Panorama shall be required to
include in the final production only those film and television clips as
Panorama shall approve.
1.4 Panorama will make the Video available to Universal in the PAL
format and in other languages (i.e., Japanese, German, Spanish, and other
languages, as required) at no additional cost to Universal.
1.5 Panorama will make custom video displays, monitors, and an
abbreviated version of the Video for display on the monitors available to
Universal at no additional cost.
3
<PAGE> 5
1.6 Panorama shall sell the Video to Universal at a wholesale cost
of Eight Dollars and Seventy-Five Cents ($8.75) each.
1.7 Universal shall have the exclusive right to sell or otherwise
distribute the Video at USH or elsewhere, including, without limitation,
Universal Studios Florida and Universal Studios Distributing Company.
1.8 The retail price of the Video shall be determined by Universal
in its sole discretion.
1.9 Universal may order additional Videos at any time, on an as
needed basis, with no restrictions as to minimum orders.
1.10 Universal shall provide the following for production of the
Video: (i) access to USH on mutually agreeable dates for Panorama's personnel
and equipment; (ii) talent, personnel and others who perform or work at USH.
Provided that Panorama films or tapes such personnel in performance of their
normal duties, their services shall be at no charge to Panorama either now or
in the future; (iii) film clips and television clips from Universal's feature
films and television programs as reasonably requested by Panorama; (iv) rights
and licenses to the aforesaid clips, including necessary music rights, shall be
memorialized in separate agreements with MCA or any of its related licensing
entities, pursuant to such entity's respective standard policies covering such
clip use. Such grant of clips will be subject to MCA's (or its related
entities') standard clip license agreement. All license fees with respect to
the foregoing clips shall be the responsibility of Panorama; and (v) existing
footage of USH.
1.11 The Video shall be formatted so that footage of major new or
replacement attractions at USH may be readily edited into the Video (i.e., any
new or replacement attraction which is advertised by Universal). Panorama
agrees to provide this service at no additional cost to Universal.
1.12 Universal shall provide maximum exposure for the Video in all
souvenir shops at USH, including display on equipment provided to Universal
under Section 1.5. hereof, throughout the term of this Agreement.
ARTICLE 2
PRODUCTION COSTS
Except as otherwise provided in Section 1.3., Panorama shall be solely
responsible for all production and post-production costs of the Video,
including, without limitation, talent, clip license fees or other production
costs that may
4
<PAGE> 6
arise. Panorama shall be solely responsible for the development of packaging
of the Video, subject to Universal's approval, which shall not be unreasonably
withheld.
ARTICLE 3
TERMINATION
The term of this Agreement shall be perpetual, unless terminated by
Universal as hereinafter provided. If, for any calendar year, sales of Videos
shall be less than one hundred (100) units, then within ninety (90) days after
the close of such calendar year, Universal shall have the right, in its sole
discretion, to terminate this Agreement upon written notice to Panorama.
Notwithstanding the preceding sentence, Universal shall have no right to
terminate this Agreement prior to January 1, 1998. In such event Universal
will pay Panorama for any outstanding orders of Videos authorized hereunder
prior to the date of termination.
ARTICLE 4
REPRESENTATION AND WARRANTY
Panorama represents and warrants that the ideas and materials to be
delivered by Panorama hereunder shall be original, furnished under a valid
license authorizing the use hereunder or in the public domain and will not
infringe any rights of others, and that the Video may be sold, exhibited or
distributed in any media, with the exception of free and pay television (other
than closed-circuit exhibition on USH premises) and in any manner without
incurring any liability to Panorama or any third parties.
ARTICLE 5
INDEMNIFICATION
Panorama hereby shall indemnify, defend and hold Universal, together
with Universal's partners and/or joint venturers, the respective parent and
affiliated companies of Universal and/or any such partner and/or joint venturer
and any licensee or lessee of Universal's premises and all of the foregoing
persons and/or entities' respective officers, directors, employees and agents,
free and harmless from any and all claims, damages, liabilities, losses, costs
and expenses (including attorneys' fees) for its negligent errors, omissions or
acts arising out of or relating to this Agreement or Panorama's performance of
its professional services on the Project. The aforementioned indemnification
shall apply to all such claims, demands and causes of action except for those
instances where Universal is solely at fault.
5
<PAGE> 7
ARTICLE 6
INSURANCE
6.1 Panorama shall provide during the term of this Agreement the
following insurance coverages on the forms and in the amounts not less than
specified:
(a) Statutory Workers' Compensation and Employer's
Liability Insurance with a limit of liability on the latter of not less than
One Hundred Thousand Dollars ($100,000.00). Panorama shall cause its Workers
Compensation carrier to waive insurers right of subrogation with respect to
"Universal City Studios, Inc., MCA, Inc. and affiliated companies".
(b) Comprehensive or Commercial General Liability and/or
Excess Umbrella Liability Insurance written on an occurrence basis with a
combined single limit of not less than One Million Dollars ($1,000,000.00) per
occurrence. Said policy shall include coverage parts for Contractual
Liability, Products/Completed Operations, Broad Form Property Damage, third
party property damage and shall be primary, not contributing coverage.
(c) Business Automobile Liability Coverage and/or Excess
Umbrella Liability Insurance for all owned, hired or non-owned vehicles
utilized by Panorama on USH premises with a combined single limit of not less
than One Million Dollars ($1,000,000.00).
(d) Producer's Errors and Omissions Insurance policy with
a limit of liability of $1,000,000 each occurrence. Said coverage shall be
primary and not contributing.
(e) An "All Risk" property policy covering Panorama's
property, including but not limited to camera equipment and miscellaneous
equipment, whether owned, leased or rented by Panorama. Said policy shall
evidence a Waiver of Subrogation against "Universal City Studios, Inc., MCA,
Inc. and affiliated companies".
6.2 Panorama shall cause its General and Automobile Liability
Insurance carrier(s) to add "Universal City Studios, Inc., MCA, Inc. and
affiliated companies" as additional insureds. All coverages must be primary
and non-contributing with any insurance maintained by Universal.
6.3 Panorama shall deliver to Universal, upon execution of this
Agreement, satisfactory evidence of such insurance coverage on a standard ACORD
form (or copies of policies, if required). All required insurance shall be
placed with A.M. Best rated carriers satisfactory to the Universal and shall
6
<PAGE> 8
provide thirty (30) days written notice of cancellation, non-renewal or
coverage reductions. All insurance furnished by Panorama or its subcontractors
hereunder shall be in full force and effect during Panorama's performance of
this Agreement. If Panorama fails to deliver said insurance certificates,
Universal's failure to request delivery shall in no way be construed as a
waiver of Panorama's obligation to provide the insurance coverage specified in
this Article. Such evidence should be sent to the attention of Universal's
Contract Administrator at the address set forth in the preamble above.
6.4 The stipulated limits of coverage in paragraph, 7.1" above
shall not be construed as a limitation of any potential liability Panorama may
have to Universal under the provisions of this Agreement or otherwise.
ARTICLE 7
OWNERSHIP OF MATERIALS
All materials furnished by Panorama hereunder shall be the property of
Universal; however, upon termination of this Agreement, neither Universal nor
Panorama shall make any use of any part of said materials without the express
written consent of the other. Universal hereby agrees to indemnify, defend and
hold Panorama harmless from any liability, losses, costs and expenses arising
out of or relating to the use of elements contributed to the Video by Universal
ARTICLE 8
COPYRIGHTS AND TRADEMARKS
8.1 Universal shall own all rights in the Project and in all of
the results and proceeds of Panorama's services with respect thereto.
Universal shall have the right to obtain in its name copyright and renewals of
copyright and other protection of the Project and all elements thereof.
Panorama hereby sells, assigns and transfers unto Universal all rights of every
kind and nature including copyright in and to the materials to be furnished by
Panorama hereunder. At all times during its engagement by Universal and after
the termination of said engagement for any reason, Panorama shall assist
Universal to obtain and maintain for Universal-*s benefit copyrights in the
material and Panorama shall execute such further instruments as Universal may
reasonable require as evidence of ownership of such rights.
8.2 All materials released by Panorama will bear Universal's
appropriate trademark and copyright notices. Panorama shall cooperate with
Universal in taking all
7
<PAGE> 9
requested actions to protect Universal's copyrights as well as its other rights
in trademarks and service marks.
ARTICLE 9
CONFIDENTIALITY
The Project and all matters relating thereto, including any
discussions between Universal and Panorama shall be treated as confidential by
Panorama. Without prior written approval of Universal, except in the ordinary
course of solicitation of business by Panorama, Panorama shall not discuss the
Project or their relationship thereto with any branch of the media or with any
third .party nor shall Panorama furnish any written materials, photographs or
videotape relating to the Project to any such media entity or third party.
ARTICLE 10
DISCLOSURE OBLIGATION
Notwithstanding and in addition to anything else set forth herein,
Panorama shall notify Universal in writing prior to entering into each and
every agreement between Panorama and any Competitor of Universal ("Competitor"
is herein defined to include any company in the leisure time or guest
attraction industries) of Panorama's imminent plans to enter therein. This
information is vital to Universal's preservation and protection of proprietary
information and other information which could give an undue advantage to
Universal's Competitors. Nothing in this Article shall be construed as
requiring Panorama to obtain the approval of Universal prior to Panorama
entering into any such agreement.
ARTICLE 11
INDEPENDENT CONTRACTOR
It is understood and agreed that Panorama is acting as an independent
contractor in performance of Panorama's obligations hereunder. Nothing herein
contained shall be construed as creating the relationship of joint venturers,
principal and agent or employer and employee between Universal and Panorama.
ARTICLE 12
FAIR EMPLOYMENT
Neither Panorama nor its subcontractors shall discriminate against any
employee or applicant for employment
8
<PAGE> 10
because of race, religion, color, sex, age, physical handicap or national
origin, except where sex or absence of physical handicap is a bona fide
occupational qualification, and that Panorama shall execute and cause each of
its subcontractors to execute any such certificates and covenants not to
discriminate, as may be required by any governmental authority. Panorama
shall, in all solicitation or advertisements for employees placed by them or on
their behalf, state that all qualified applicants will receive consideration
for employment without regard to their race, religion, color, sex or national
origin.
ARTICLE 13
LABOR RELATIONS
Panorama shall conduct its operations and its relations with all of
its employees and all of the employees of subcontractors so as not to interfere
with, or cause labor or union friction with, any persons working on the
Project, bringing materials to the Project, in any way connected with the
Project, or with any labor unions or personnel working at Universal's studios
in Universal City. Notwithstanding the generality of the foregoing, Panorama
shall immediately take any action in the event of any jurisdictional labor
dispute or jurisdictional strike as instructed by Universal. In the event that
Panorama shall become involved in a labor dispute which causes injury or
inconvenience to Universal (in Universal's sole discretion), Universal shall
have the right to terminate this Agreement. All personnel used in connection
with the Project shall be experienced and competent.
ARTICLE 14
NOTICES
All notices or matters which Panorama is required or may desire to
give Universal hereunder shall be in writing and sent by registered or
certified mail, addressed to the attention of Universal's Vice President,
Merchandise, at the address set forth above in the preamble to this Agreement.
Notices or matters that Universal is required, or may desire to give Panorama
hereunder, shall be in writing and sent by mail or facsimiled addressed to
Panorama at the address set forth above in the preamble to this Agreement or
such other location as agreed to in writing by Universal and Panorama, or
facsimiled, with a copy similarly transmitted to Leslie S. Klinger, Esq., 2029
Century Park East, Suite 2600, Los Angeles, California 90067. All notices shall
be deemed delivered five (5) days after the date mailed or the date facsimiled.
9
<PAGE> 11
ARTICLE 15
ASSIGNMENT
Universal may assign this Agreement to any party. In such event,
Universal shall be released from its remaining obligations thereunder if the
assignee expressly assumes such remaining obligations and has the financial
capability to perform. Panorama shall not assign this Agreement.
ARTICLE 16
LEGAL PROCEEDINGS
Any legal proceeding of any nature brought by either party hereto
against the other party to enforce any right or obligation under the Agreement,
or arising out of any matter pertaining to this Agreement or the services to be
rendered hereunder, shall be submitted for trial before any court of competent
jurisdiction in the State of California. The parties hereto consent and submit
to the jurisdiction of any such court and agree to accept service of process
outside the State of California in any matter to be submitted to any such court
pursuant hereto.
ARTICLE 17
ENTIRE AGREEMENT
This Agreement shall be construed in accordance with the laws of the
State of California. No provision hereof may be waived or modified except by a
writing signed by both parties. This Agreement represents the entire
understanding of the parties and supersedes all prior written or oral
agreements between them with respect to the subject matter.
10
<PAGE> 12
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed the day and year first above written.
UNIVERSAL CITY STUDIOS, INC. PANORAMA INTERNATIONAL
dba Universal Studios Hollywood PRODUCTIONS
("Universal") ("Panorama")
By: /s/John Poorman By: /s/ Dion A. Recachina
--------------------------- ----------------------
John Poorman (Authorized Signature)
Vice President
Merchandise Title: President
-------------------
Date: 1-27-92 Date: January 24, 1992
------------------------- -------------------
11
<PAGE> 1
EXHIBIT 10.9
UNIVERSAL STUDIOS
FLORIDA
CONTRACT
<PAGE> 2
[Universal Studios Florida logo]
August 24, 1990
Panorama International Productions
10700 Burbank Boulevard
North Hollywood, California 91601
RE: Photography/Filming of Universal Studios Florida
Dear Sir or Madam:
It is my understanding that you have requested access to the Universal
Studios Florida site for the purpose of taking still photography and film or
videotaped motion pictures to be used in connection with the proposed Universal
Studios Florida Souvenir Videotape (collectively, the "Tape"). We appreciate
your interest in Universal Studios Florida and look forward to seeing the
product of your labors and finalizing an agreement which will comprehensively
state the terms on which you may produce and sell the Tape. Our granting of
access to you for this purpose must, however, be based upon the following
conditions:
1. Many of the areas you will be granted access to are guest
areas and may include scenes which we do not, in our sole discretion, want to
be photographed, filmed or taped. Accordingly, you and each of your employees
and vendors and their employees must at all times be escorted by an appropriate
Universal Studios Florida representative and must strictly follow his or her
directions with regard to your activities on the site.
2. All photography, film or videotape, including negatives,
prints, slides and other means of recordation, (collectively, the "Product")
will be the sole and exclusive property of Universal Studios Florida and will
not be released by you to any person, firm, company or other entity without the
prior express written consent and approval of Universal Studios Florida. You
and we each agree that neither of us nor our respective assigns will
commercially exploit the Product absent a signed written agreement providing
the terms on which such exploitation. Absent such an agreement, all Product
must be delivered by you to Universal Studios Florida upon demand.
1000 Universal Studios Plaza Orlando, FL 32819-7610 (407) 363-8000
AN MCA/RANK ORGANIZATION JOINT VENTURE
<PAGE> 3
3. Any and all expenses which you incur in connection with your
travel to and from Universal Studios Florida, the cost of tape, film,
equipment, developing or any other expenses whatsoever incurred in connection
with this project will be for your account only.
4. You are performing your services as an independent contractor
and not as an employee, agent or other representative of Universal Studios
Florida.
5. Prior to commencing your on-site activities, you will provide
Universal Studios Florida with a current insurance certificate in a form
acceptable to us and naming us and our assigns as an additional insured. Said
certificate shall include at least the minimum coverages described in Exhibit
"A" hereto.
6. You agree to release Universal Studios Florida, its parent,
related and affiliated entities as well as its officers, agents, directors and
employees of and from any and all loss, liability, cost or expense you may
incur in connection with your activities at or in connection with Universal
Studios Florida, including without limitation, damages, costs, losses and
expense relating to personal injury and or property damage while on our site.
You further agree to indemnify and to hold us harmless of and from any loss or
liability, cost or expense which may be incurred as a result of your actions
while at Universal Studios Florida or in connection with the Product.
Please indicate your agreement to be bound by the terms set forth
above by signing the enclosed copy of this letter at the place indicated and
returning the same to my office.
Very truly yours,
/s/ Ronald W. Sikes
Ronald W. Sikes
Vice President
Legal & Business Affairs
:kdw
Enclosure
The foregoing terms are agreed to and accepted this 24th Day of August, 1990.
PANORAMA INTERNATIONAL PRODUCTIONS
By: /s/ Dion A. Recachina
---------------------------
Its:
<PAGE> 1
EXHIBIT 10.10
DISTRIBUTION
AGREEMENT
By and Between:
Destiny Telecomm
&
Panorama
1/31/97
<PAGE> 2
DISTRIBUTION
AGREEMENT
By and Between:
Destiny Telecomm
&
Panorama
1/31/97
<PAGE> 3
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (the "Agreement") is entered into
by and between Destiny Telecomm International, Inc., a California corporation
("Destiny"), and Panorama International Productions, Inc., a Delaware
corporation ("Panorama").
WHEREAS, Panorama owns all right, title, and interest in an
original video production entitled "Our Country"; and
WHEREAS, Panorama wishes to appoint Destiny to distribute the
"Our Country" video, as modified with film provided by Destiny (the "Video"),
and Destiny wishes to distribute the Video.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and of other good and valuable consideration, the parties hereto
agree as follows:
1. EFFECTIVE DATE
The effective date of this Agreement is December 12, 1996 (the
"Effective Date").
2. APPOINTMENT AS EXCLUSIVE DISTRIBUTOR
Panorama hereby grants Destiny, and Destiny accepts, an
exclusive right to sell and distribute the Video world-wide by means of
multi-level marketing and network marketing and through retail stores;
provided, however, that if Destiny does not order at least Three Hundred Fifty
Thousand (350,000) copies of the Video within twelve (12) months and an
aggregate of one million (1,000,000) copies of the Video within twenty-four
(24) months after this Agreement has been executed by the parties, then the
foregoing distribution right of Destiny shall cease to be an exclusive right
and shall become a nonexclusive distribution right for the balance of the
original term of this Agreement. Panorama shall not distribute the Video
through such channels, but retains the rights to distribute the video to
concessionaires and cooperating associations at national parks, national
monuments and national historic places and the Discovery Channel. Destiny
shall have the right, at its option, to appoint any other person or entity to
sell and distribute the Video, subject to the terms and conditions of this
Agreement.
1
<PAGE> 4
3. PRODUCT
The Video will be provided to Destiny in the VHS NTSC or PAL
format with labels and warranty, packaged in a clam-shell plastic package, with
video jacket. Panorama shall customize the packaging for the Video to include
Destiny's logo and message, in accordance with Destiny's specifications, and
will modify the film at Panorama's expense by adding film clips provided by
Destiny and approved by Panorama. Panorama agrees that the film clips, logos
and messages provided by Destiny shall be used by Panorama only in copies of
the Video produced for and provided to Destiny and the same shall not be used
by Panorama for any other purpose. Panorama warrants that the copies of the
Video produced and its packaging will be of the highest marketable quality for
videos. Destiny shall have the right to review and approve samples of the
Video prior to the first shipment, and shall have the right to continuing
review periodically during the term hereof.
4. TERMS OF PURCHASE AND PAYMENT
4.1 TERMS. Panorama agrees to make available for
sale to Destiny and Destiny agrees to purchase at least Three Hundred Fifty
Thousand (350,000) copies of the Video within twelve (12) months and an
aggregate of one million (1,000,000) copies of the Video within twenty-four
(24) months after this Agreement has been executed by the parties. The total,
all-inclusive price Destiny will pay is $3.60 per copy. It is understood and
agreed that the initial order shall be 20,000 copies, which shall be delivered
to Destiny by a date to be specified by Destiny not later than ten (10) days
after the execution of this Agreement.
4.2 PAYMENT. For the initial order, Destiny
shall pay half of the total amount of the order immediately upon placing of the
order. The remaining half shall be paid immediately upon delivery of the
20,000 copies. After this first delivery, any subsequent invoice shall be paid
within fifteen (15) days of receipt of the invoice by Destiny. For any
invoices paid within five (5) days of receipt, however, Destiny shall receive a
two percent (2%) discount. Destiny will receive a three percent (3%) discount
for any purchase order accompanied by payment in full. Destiny agrees that if
any order exceeds $100,000, Destiny will pay the amount exceeding $100,000
immediately upon receipt of the product shipment.
4.3 FREIGHT AND INSURANCE. Destiny agrees to
reimburse Panorama at Panorama's cost for all freight charges and insurance
covering shipments to Destiny. Risk of loss shall pass to Destiny upon
delivery of the product to Destiny. All shipments shall be delivered to
Destiny at 100 Hegenberger Road, Suite 115, Oakland, California 94621, or such
other address as may be specified by Destiny.
2
<PAGE> 5
4.4 PRODUCT SUPPLY. The parties understand that
Destiny intends to purchase product monthly. Panorama agrees to produce and
deliver the product no later than two (2) weeks after the receipt of an order
from Destiny.
4.5 ADVERTISING AND PUBLICITY. Panorama agrees
that in any external publicity or advertising of "Our Country" video after the
date of execution of this Agreement, other than Panorama's direct retail sales
and marketing activities to concessionaires and cooperating associations of the
national parks, national monuments and national historic places and the
Discovery Channel, a statement will be included that "Our Country" video is
distributed by Destiny, with Destiny's toll free number provided.
5. TERM AND TERMINATION
5.1 TERM OF AGREEMENT; EXCLUSIVE DISTRIBUTION
RIGHTS; OPTION. Unless terminated sooner pursuant to this Section, this
Agreement shall commence on the Effective Date and continue for a period of two
(2) years subject to the termination provisions set forth in Section 5.2.
Destiny shall have an option to extend this Agreement for an additional three
(3) year term (the "Extended Term") by notifying Panorama of its exercise of
such option prior to the end of the original term of this Agreement; provided,
however, that if Destiny fails to order at least five hundred thousand
(500,000) copies of the Video during any year (measured from the first day of
the Extended Term and each anniversary thereof) during the Extended Term, the
distribution right of Destiny for the ensuing year, if any, of the Extended
Term shall be a non-exclusive distribution right.
5.2 TERMINATION RIGHTS. Either party shall have
the right to terminate this Agreement at any time if the other party violates,
breaches or fails to observe any of its obligations pursuant to this Agreement
and such violation, breach or failure is not cured within ten (10) days after
written notice thereof from the non-breaching party. Either party shall also
have the right to terminate this Agreement in the event that the other party
(a) terminates or suspends its business; (b) becomes subject to any bankruptcy
or insolvency proceeding under federal or state or similar statute; or (c)
becomes insolvent or becomes subject to direct control by a trustee, receiver
or similar authority.
5.3 SURVIVAL OF CERTAIN TERMS. The terms and
conditions of this Agreement which by their very nature should survive, shall
survive and continue after any termination of this Agreement.
6. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
3
<PAGE> 6
6.1 WARRANTY OF TITLE. Panorama warrants to
Destiny that it is the owner of the Video, or that it has otherwise secured the
right to produce and distribute the Video, including all rights to the content
thereof, and that it has the authority to grant the rights granted hereunder to
Destiny and to otherwise perform its obligations under this Agreement. At the
request of Destiny, Panorama shall provide Destiny with all documentation
necessary to reasonably demonstrate that Panorama holds the aforementioned
rights.
6.2 NON-INFRINGEMENT. Panorama warrants to
Destiny that the distribution of the Video in accordance with the terms of this
Agreement will not infringe upon or misappropriate the proprietary rights or
rights of privacy or publicity of any third party.
6.3 VIDEO WARRANTY. Panorama warrants that the
copies of the Video which are delivered pursuant to this Agreement shall be
free from defects in materials and workmanship for a period of one (1) year
following the date of sale to the retail customer, or if no sale has occurred
to a retail customer one (1) year following the date of sale to a wholesale
customer, or if no sale has occurred one (1) year following Destiny's receipt
of the Video. Panorama further agrees to immediately replace at its cost any
defective copies of the Video upon return of the Video by Destiny or by the
retail customer or by the wholesale customer.
6.4 INTELLECTUAL PROPERTY INDEMNIFICATION.
Panorama shall defend, indemnify and hold Destiny harmless against any and all
claims by any person or entity that the Video infringes any copyright, patent,
trademark, trade secret or right of privacy or publicity of any third party,
and Panorama will pay the costs, including all attorneys' fees, and damages
finally awarded in any suit or proceeding. Destiny shall have the right to
participate in such defense. Counsel selected by Panorama shall be subject to
the reasonable approval of Destiny. Panorama shall not be obligated to defend
or be liable for costs or damages under this Section if the alleged
infringement solely arises out of or is solely attributable to film clips
provided by Destiny to be included in the Video. Destiny agrees to provide
notice to Panorama of the existence of any such claim within thirty (30) days
of Destiny's notice of such claim. Destiny shall defend, indemnify and hold
Panorama harmless against any and all claim that the film clips provided by
Destiny to be included in the Video infringe any copyright, patent, trademark,
trade secret or right of privacy or publicity of any third party. Panorama
agrees to provide notice to Destiny of the existence of any such claim within
thirty (30) days of Panorama's notice of such claim.
7. COPYRIGHTS AND TRADEMARKS
7.1 COPYRIGHTS. It is understood and agreed that
as between Panorama and Destiny, Panorama owns all title, copyright and other
proprietary rights
4
<PAGE> 7
to all portions of the Video with the exception of the portions of film clip
provided by Destiny and any other information, documents or material provided
by Destiny. It is understood and agreed that Destiny shall retain all title,
copyright and other proprietary rights to the film clips and any other
information, documents or material provided by Destiny to Panorama to include
in the Video.
7.2 TRADEMARKS. Panorama shall retain any
trademark rights it may have to "Our Country." The Destiny trademark and logos
provided by Destiny shall remain exclusively the property of Destiny. Panorama
agrees that in using each and every Destiny trademark and logo, Panorama shall
include the symbol "TM," or "R," as instructed by Destiny, as heretofore
provided to Panorama by Destiny, and the following statement: [identify
trademark] is a trademark of Destiny Telecomm International, Inc., Oakland,
California.
8. NOTICES
Any notice or payment required by this Agreement or given in
connection with it, shall be in writing and shall be sent to the appropriate
party by certified or registered mail postage pre-paid, return receipt
requested, or by recognized overnight delivery services at the parties'
respective addresses set forth below, or at such other address as any party may
provide by written notice to the other party from time to time:
If to Destiny: Destiny Telecomm International, Inc.
Attn: Randy Jeffers
100 Hegenberger Road, Suite 115
Oakland, CA 94621
If to Panorama: Panorama International Productions, Inc.
Attn: Edward H. Resnick
2621 Empire Avenue
Burbank, CA 91504
If sent by registered or certified mail, such notice shall be deemed to have
been received on the earlier of the date actually received or the date ten (10)
days after same was posted.
9. MISCELLANEOUS TERMS
9.1 RELATIONSHIP OF THE PARTIES. It is expressly
understood and agreed that in all matters relating to this Agreement each party
is acting as an independent contractor, and not as an agent, joint venturer, or
partner for any purpose.
5
<PAGE> 8
Neither party has the authority, nor will represent that it has any authority,
to assume or create any obligation, express or implied, on behalf of the other
party.
9.2 GOVERNING LAW. This Agreement shall be
construed and enforced in accordance with the laws of the State of California.
The parties hereby stipulate and agree to the jurisdiction of the Superior
Court of the State of California, County of Alameda, and to the United States
District Court for the Northern District of California. Venue in any action
shall be in the County of Alameda, or in the United States District Court for
the Northern District of California.
9.3 ENTIRE AGREEMENT. This Agreement represents
the entire agreement between the parties and supersedes all prior proposals,
memoranda of understanding, drafts of this Agreement, or any other agreements
or representations regarding the subject matter hereof. This Agreement may be
modified only by a further writing duly executed by both parties. In
construing and interpreting this Agreement, no provision shall be construed or
interpreted against any party because such provision, or the Agreement as a
whole, was purportedly prepared or requested, by such party. The parties
hereto have been represented by counsel and have cooperated in the preparation
of this Agreement.
9.4 HEADINGS. Headings used in this Agreement
are provided for convenience only and shall not be used to construe meaning or
intent.
9.5 WAIVER. The waiver of one breach or default
hereunder shall not constitute the waiver of any subsequent breach or default.
9.6 SEVERABILITY. Any term or provision of this
Agreement held to be illegal or unenforceable shall be deemed amended to
conform to applicable laws or regulations, or if it cannot be so amended
without materially altering the intention of the parties, Destiny shall have
the option to terminate the Agreement.
9.7 COUNTERPARTS. This Agreement may be executed
in counterparts, each of which shall be an original and both of which shall
constitute together but one and the same document.
9.8 BINDING AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of each of the parties hereto, including
their respective successors and assigns.
The undersigned hereby acknowledge that they have read and
that they fully understand the terms of this Agreement, and that by signing
this document they become parties to the Agreement and agree to be bound by all
terms, conditions, and obligations contained herein.
6
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement.
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
/s/David Haspel Date: 1/31/97
- --------------------------------------------- --------------------
David K. Haspel
President
DESTINY TELECOMM INTERNATIONAL, INC.
/s/Randy Jeffers Date: 1/31/97
- --------------------------------------------- --------------------
Randy Jeffers
President
7
<PAGE> 1
EXHIBIT 10.11
ASSET PURCHASE
AGREEMENT
By and Among:
Sierra Press
&
Panorama
<PAGE> 2
ASSET PURCHASE AGREEMENT
BY AND AMONG
PANORAMA INTERNATIONAL PRODUCTIONS, INC.,
SIERRA PRESS, INC.,
TELLURIAN PRESS, INC.,
JAMES WILSON,
LYNN WILSON
AND
JEFFREY D. NICHOLAS
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Stock Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
Merger or Sale of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
Tax Treatment of the Sale of the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
REPRESENTATIONS AND WARRANTIES OF
SIERRA AND THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
Financial Statements and No Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
Tax Audits and Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
Restrictive Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
Authorization for Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
No Misleading Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
Existence and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
Capital Stock of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
Financial Statements and No Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Tax Audits and Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Restrictive Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Authorization for Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
No Misleading Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
FURTHER AGREEMENTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
Commitments and Changes Prior to the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
Consent to Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
By the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
By the Buyer and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
Claims for Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
Right to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
CONDITIONS TO OBLIGATIONS OF THE BUYER
AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
Good Standing and Tax Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
Truth of Representations, Warranties and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
Performance of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Amendment of Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
CONDITIONS TO OBLIGATIONS OF THE
SHAREHOLDERS AND SIERRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Good Standing and Tax Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Truth of Representations, Warranties and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
Performance of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
EXHIBITS
Description of Exhibit
Form of Non-Competition Agreement Exhibit A
Form of Employment Agreements Exhibit B
Form of Lease Agreement Exhibit C
SCHEDULES
Description of Schedules
Excluded Receivables Schedule 1(A)(ii)
Additional Fixed Assets Schedule 1(A)(v)
Leasehold Rights Schedule 1(A)(x)
Excluded Assets Schedule 1(B)(ii)
Immaterial Excluded Assets Schedule 1(B)(iv)
List of Jurisdiction where Sierra Conducts Business Schedule 4(A)
Description of Sierra Shareholders Debts/Loans Schedule 4(B)
Excluede Personal Property Schedule 4(C)
Description of Real Property Schedule 4(D)
List of Material Contracts of Sierra Schedule 4(E)
List of Employee Benefit Plans of Sierra Schedule 4(F)
Filing/Payment of Taxes due of Sierra Schedule 4(G)
List of Liabilities of Sierra Schedule 4(H)
Legal Proceedings of Sierra Schedule 4(J)
Accounts Receivable of Sierra Schedule 4(K)
Audited Financial Statements of the Company Schedule 5(C)
Description of Real Property of the Company Schedule 5(E)
Filing/Payment of Taxes due of the Company Schedule 5(F)
List of Liabilities of the Company Schedule 5(G)
Legal Proceedings of the Company Schedule 5(I)
</TABLE>
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<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement"), is made and entered into
this 18th day of June, 1996, by and between PANORAMA INTERNATIONAL PRODUCTIONS,
INC., a Delaware corporation (the "Company"); TELLURIAN PRESS, INC., a
California corporation ("Buyer"), SIERRA PRESS, INC., a Delaware corporation
("Sierra"); and JAMES WILSON, LYNN WILSON AND JEFFREY D. NICHOLAS
(collectively, the "Shareholders").
WHEREAS, the parties hereto propose to enter into this Agreement to
provide for the acquisition of substantially all of the assets of Sierra by the
Company through its wholly-owned subsidiary; and
WHEREAS, the Company is authorized to issue 6,000,000 shares of common
stock, $.001 par value per share, of which an aggregate of 4,760,799 will be
issued and outstanding on the Closing Date (as hereinafter defined); and
WHEREAS, the Buyer desires to acquire the assets of Sierra in exchange
for shares of Company common stock in a transaction that will not qualify as a
"tax free reorganization" pursuant to the provisions of Section 368(a)(1)(C) of
the Internal Revenue Code of 1986 (the "Code"); and
WHEREAS, the parties contemplate that the Company will be positioned
to make a public offering of its common stock at an early time, subject to
uncontrollable conditions, including the vagaries of the market for new issues,
the availability of an underwriter and the ability to achieve or exceed
business plans; and
WHEREAS, the parties desire to set forth in this Agreement certain
representations, warranties, agreements, and conditions with respect to the
acquisition of the Sierra assets;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
1. THE ASSETS.
A. ACQUIRED ASSETS.
Subject to the terms and conditions of this Agreement, on and
as of the "Closing Date" (as hereinafter defined), Sierra shall sell to the
Buyer, and the Buyer shall purchase from Sierra, all, and not less than all, of
the assets and properties of Sierra (other than the "Excluded Assets"
hereinafter defined) as set forth herein, and as same are constituted on the
Closing Date (collectively, the "Assets"). Without limiting the generality of
the foregoing, the Assets shall be comprised of all of the following:
(I) All (i) cash on hand, cash and cash
equivalent items held by or on behalf of Sierra, including without limitation
checking accounts, marketable securities, bank
<PAGE> 7
accounts and other cash items, (ii) the proceeds of accounts receivable
including uncashed checks in payment thereof received by Sierra on or prior to
the Closing Date, and (iii) related investments readily convertible into cash
of Sierra (collectively, the "Cash Items");
(II) All trade accounts receivable, notes
receivable and other rights to receive payment from customers of Sierra,
including therein all accrued accounts receivable representing amounts payable
in respect of products and services sold or otherwise provided to customers of
Sierra which have not been invoiced or billed as at the Closing Date
(collectively, the "Receivables"); provided, that the term Receivables shall
not include those specific accounts receivable, if any, which are set forth on
Schedule 1(A)(ii) annexed hereto;
(III) All inventories of raw materials,
work-in-process, finished goods, operating supplies and materials, factory and
maintenance supplies and related inventory items, which are owned by Sierra and
used in connection with its business (collectively, the "Inventories");
(IV) All assumable prepaid items of Sierra for
which the Company would receive an economic benefit following the Closing Date,
and appropriately pro-rated through the Closing Date (collectively, the
"Prepaid Items");
(V) All (i) machinery, equipment, molds, tooling,
jigs, dies, measuring and calibrating devices, automobiles and other vehicles,
files, systems, furniture, fixtures, office equipment and (subject to the terms
and conditions respecting ownership thereof as provided by the terms and
conditions of any lease and/or agreements with respect to the occupancy of Real
Property referred to in Section 1(A)(x) hereof) leasehold improvements of
Sierra which are owned by Sierra (collectively, the "Fixed Assets"); (ii) those
additional Fixed Assets listed on Schedule 1(A)(v) annexed hereto which have
been ordered for Sierra prior to the Closing Date, whether or not received as
at the Closing Date; and (iii) those leases of personal property listed on
Schedule 1(A)(v) annexed hereto;
(VI) All letters patent, patent applications,
trademarks, copyrights and trade names, trademarks, computers, computer
equipment, computer programs, computer software, and computer systems (other
than those listed on Schedule 1(B)(ii)), library of books, records, know-how,
trade secrets, technical information, brochures and other related assets of
Sierra pertaining to its business and owned by Sierra (collectively, the
"Intellectual Property");
(VII) All customer lists, trade secrets, licenses,
permits, franchises, whether or not listed on Schedules to this Agreement, and
related contract rights and other proprietary intangible assets of Sierra,
whether or not confidential, and all books, records, printouts, drawings, data,
files, notes, notebooks, accounts, invoices, correspondence and memoranda which
are owned or possessed by Sierra (collectively, the "Documents and Records");
(VIII) All tools categorized as small hand tools and
packaging and office supplies owned by Sierra, whether or not expensed
(collectively, the "Supplies");
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<PAGE> 8
(IX) All rights and benefits of Sierra under all:
(i) purchase orders on hand and customer bids and quotations; and all other
contract rights, commitments and claims of Sierra which are specified under or
pursuant to all manufacturers' warranties and any licenses or license
agreements relating to any Intellectual Property used by Sierra for its
business; (ii) contracts and agreements, including orders and commitments
covering the purchase of Inventories and/or Supplies, the providing of services
and/or products to customers, and agency, consultant and distributorship
agreements; and (iii) all other contracts, orders and commitments which are not
required to be scheduled pursuant to this Agreement and (in the case of such
unscheduled contracts, orders and commitments) which have been entered into by
Sierra in the normal and ordinary course of its business prior to the Closing
Date and not in violation of the covenants contained in this Agreement
(collectively, the "Contract Rights");
(X) All leasehold rights, as lessee, in and to
those leases of real properties and improvements occupied by Sierra in
connection with its business as are set forth of Schedule 1(A)(x) annexed
hereto (the "Leased Real Estate");
(XI) The exclusive rights in and to the name
"Sierra Press", and all trade names and trademarks associated therewith,
whether alone or in conjunction with any other name or word, and all other
names used by Sierra in connection with the operation of its business as a
going concern;
(XII) Except as it may relate to Excluded Assets
and Excluded Liabilities, all rights, benefits and claims, including rights of
indemnification, monetary relief and/or replacement of Inventories, products or
supplies, which may be asserted against any vendor, manufacturer or supplier of
Inventories, Fixed Assets or Supplies included in the Assets;
(XIII) Except for the Excluded Assets referred to in
Section 1.2 hereof, all other rights and assets tangible or intangible, of
Sierra used by Sierra in connection with its business, except for such assets
which have been disposed of in the normal and ordinary course of the business
of Sierra and pursuant to this Agreement between the date hereof and the
Closing Date;
(XIV) All claims, recoveries, causes of action,
documents and records relating to pending proceedings, lawsuits and claims to
which Sierra is a party as of the Closing Date and relating to Sierra, the
Assets and/or to its business; and
(XV) All rights incident, directly or indirectly,
to insurance policies, proceeds, loss funds, claims, litigation and insurance
accounts in connection with the Assets, Sierra and the operation of the
business prior to the Closing Date.
B. Excluded Assets.
On the Closing Date, Sierra shall retain all right, title and
interest in and to, and the Buyer shall not purchase or acquire, any of the
following assets and properties of Sierra (hereinafter, the "Excluded Assets"):
-3-
<PAGE> 9
(I) all shares of capital stock and other
securities, the stock books and minute books of Sierra;
(II) All photographic equipment, light tables and
transparencies which are the personal property of the shareholders of Sierra,
which are specifically identified on Schedule 1(B)(ii) annexed hereto;
(III) The real estate owned by Sierra in Mariposa,
California; and
(IV) Those immaterial assets, if any, whether or
not used or held for use in connection with the conduct of the business of
Sierra, as agreed upon by the Buyer and Sierra, which are specifically
identified on Schedule 1(B)(iv) annexed hereto;
2. ASSUMED LIABILITIES
Subject to the terms and conditions of this Agreement, on and
as of the "Closing Date" (as hereinafter defined), except for the Excluded
Liabilities listed on Schedule 2, the Buyer shall assume and pay, perform and
discharge, as the case may be, all, and not less than all, of the liabilities
and obligations of Sierra, whether fixed or contingent, as disclosed on
Sierra's March 31, 1996 balance sheet or incurred by Sierra from the date
thereof to the Closing Date in the ordinary course of business. The Buyer
shall not assume any of Sierra's tax liabilities except those disclosed on
Sierra's March 31, 1996 balance sheet or incurred by Sierra from the date
thereof to the Closing Date in the ordinary course of business.
3. PURCHASE PRICE.
A. STOCK CONSIDERATION. In consideration for its
purchase of the Assets and in addition to its assumption or retention of the
Assumed Liabilities (as applicable), the Company shall issue to Sierra or its
designees an aggregate of 636,306 shares of Company Common Stock (the "Purchase
Price"), payable as follows:
(i) 336,306 upon Closing; and
(ii) the Company hereby agrees to issue to Sierra or
its designees, up to 300,000 additional shares of Company Common Stock as
follows:
(a) Calculation of Additional Shares.
Commencing with the Company's fiscal year January 1, 1996 and ending December
31, 1998 (each a "Fiscal Year" and collectively, the "Fiscal Years"), Sierra,
or its designees, shall be entitled to receive, on a pro rata basis, (i) an
aggregate of one (1) share of Company Common Stock for every $1.00 of pre-tax
net income of the Buyer for the 1996 Fiscal Year; an aggregate of one (1) share
of Company Common Stock for every $1.00 of pre-tax net income of the Buyer in
excess of $75,000 of pre-tax net income for the 1997 Fiscal Year; and an
aggregate of one (1) share for Company Common Stock for every $1.00 of pre-tax
net income of the Buyer in excess of $125,000 of pre-tax net income for the
1998 Fiscal Year and (ii) an aggregate of one (1) share of Company Common Stock
for every $1.00 of pre-tax net income of the Buyer in excess of the following:
$80,000 of pre-tax net income for the 1996 Fiscal Year; $145,000 of pre-tax net
income for the
-4-
<PAGE> 10
1997 Fiscal Year; and $280,000 of pre-tax net income for the 1998 Fiscal Year.
Such shares shall be issued to the Sierra, or its designess, within 120 days of
the end of the applicable Fiscal Year based upon the audited financial
statements of the Company for such year.
(b) Cumulative Adjustments.
(1) Notwithstanding the foregoing
formula, in no event shall the Company be obligated to issue in excess of Three
Hundred Thousand (300,000) Shares (the "Maximum Additional Shares).
(2) In the event that Sierra, or
its designees, shall not, pursuant to the above formula, have received the
Maximum Additional Shares in respect of any one Fiscal Year, the difference
between 100,000 shares and the actual aggregate amount of shares received in
earn-out payments in respect of such Fiscal Year shall be added to the Maximum
Additional Shares in the next succeeding Fiscal Year, on a cumulative basis,
and Sierra, or its designess, shall be entitled to receive such Maximum
Additional Shares, as so adjusted in the next immediately succeeding Fiscal
Year(s) until such time as the cumulative Maximum Additional Shares received in
respect of all such Fiscal Years shall have aggregated Three Hundred Thousand
(300,000) shares of Company Common Stock.
By way of example of the application of the foregoing, in the
event that the Sierra, or its designess, shall have been entitled to receive,
pursuant to the formula set forth above, an aggregate of 80,000 shares in
respect of Fiscal Year 1996, the Maximum Additional Shares which it shall be
entitled to receive pursuant to such formula in Fiscal Year 1997 shall be
adjusted to 120,000 shares, and if only 80,000 shares of the 120,000 Maximum
Additional Shares shall have been received by it pursuant to such formula in
Fiscal Year 1997, the Maximum Additional Shares which it shall be entitled to
receive in Fiscal 1998 shall be increased to 140,000 shares, so that, if
earned, the aggregate Maximum Additional Shares issued over the three Fiscal
Years ending 1998 shall have aggregated Three Hundred Thousand (300,000)
shares.
B. FURTHER ASSURANCES. From time to time from and after
the Closing, the parties shall execute and deliver, or cause to be executed and
delivered, any and all such further agreements, certificates and other
instruments, and shall take or cause to be taken any and all such further
action, as any of the parties may reasonably deem necessary or desirable in
order to carry out the intent and purposes of this Agreement.
-5-
<PAGE> 11
C. MERGER OR SALE OF THE COMPANY. In the event that the
Company shall be merged with or sold to another entity in a transaction in
which the Company is not the surviving entity, and the consideration to be
received by the Shareholders in such transaction is less than the consideration
paid them by the Company at that point in time ($1.00 multiplied by the number
of shares of Company Common Stock issued to them), the Shareholders shall have
the option, exercisable by written notice given to the Company within fifteen
(15) days, of repurchasing Sierra at a price equal to the value paid by the
Company for the Assets, the payment of any inter-company advances and the
assumption of or provision for any liabilities of Sierra for which the Company
may be liable. The closing of such transaction shall take place in a
commercially reasonable manner, at such time and place as shall be agreed upon
by the parties.
D. TAX TREATMENT OF THE SALE OF THE ASSETS. It is the
intention of the parties hereto that the sale by Sierra of the Assets to the
Buyer shall be treatable as a taxable event as to Sierra and Sierra has no
present intention of liquidating, dissolving or otherwise winding up its
affairs.
E. OFFICERS AND DIRECTORS. Upon the effectiveness of
this Agreement, Messrs. Wilson and Nicholas shall enter into employment
agreements with the Buyer, substantially in the form annexed hereto as Exhibit
B, and shall have the right to designate one (1) member of the Company's Board
of Directors until the earlier of (i) an initial public offering of the
Company's Common Stock has been declared effective by the Securities and
Exchange Commission or (ii) the Company shall have been merged with or
otherwise sold in a transaction in which the Company is not the surviving
entity.
Upon the effectiveness of this Agreement, Messrs. Wilson and
Nicholas shall become as officers and directors of the Buyer and the officers
and directors of Buyer shall be as follows:
<TABLE>
<CAPTION>
Name Office
<S> <C>
Edward H. Resnick Chairman of the Board and Director
Jeffrey D. Nicholas President and Director
James Wilson General Manager and Director
Lynn Wilson Director
</TABLE>
4. REPRESENTATIONS AND WARRANTIES OF SIERRA AND THE SHAREHOLDERS.
Sierra and the Shareholders do hereby jointly and severally represent and
warrant to the Company as follows:
A. EXISTENCE AND GOOD STANDING. Sierra is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware; has the requisite corporate power and authority to own
property and to conduct business as now being conducted; and is duly qualified
to carry on its business and is in good standing in the jurisdictions indicated
on Schedule 4(A) attached hereto, which Schedule 4(A) lists all of the
jurisdictions in which Sierra conducts business, and the nature of the business
conducted.
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<PAGE> 12
B. FINANCIAL STATEMENTS AND NO MATERIAL CHANGES. Sierra
has heretofore furnished the Buyer with a balance sheet of Sierra as of
December 31, 1995 and related statements of income and cash flows for the three
fiscal years then ended, all prepared by the accountants for Sierra (the
"Financial Statements"). Such Financial Statements, including the footnotes
thereto, have been prepared in accordance with principles consistently followed
throughout the periods indicated. Such balance sheet fairly presents the
financial condition of Sierra as of the date thereof and reflects all claims
against, and all debts and liabilities of Sierra, whether fixed, contingent, or
otherwise, as of the date thereof, and such statements of income fairly present
the results of the operations of Sierra for the period indicated. Such
Financial Statements, including the footnotes thereto, do not contain any
untrue statements of a material fact or omit any material fact necessary in
order to make the statements contained in this paragraph or therein not
misleading. Since January 1, 1996, there has been no material adverse change
in the assets or liabilities or in the business or condition, financial or
otherwise, of Sierra, except for the contribution to the capital of Sierra of
all Shareholder loans or other Shareholder debt, as described in Schedule 4(B),
or except as provided below, and to the knowledge of Sierra, no fact or
condition exists or is contemplated or threatened which might cause such a
material adverse change in the future.
C. PERSONAL PROPERTY. Sierra has and will have on the
Closing Date, good and marketable title to all personal and intangible property
reflected on Schedule 4(C) attached hereto, or as set forth in the unaudited
balance sheet of Sierra as of December 31, 1995, except as to changes made in
the ordinary course of business and except those excluded personal assets of
the Shareholders listed on Schedule 4(C).
D. REAL PROPERTY. Sierra owns the real property listed
on Schedule 4(D). Title to such real property is not an asset to be acquired
by Buyer in this transaction.
E. MATERIAL CONTRACTS. Set forth in Schedule 4(E),
attached hereto, is a list identifying all material outstanding contracts,
agreements, leases, and undertakings to which Sierra is a party or to which any
of its properties are subject, except those referred to in other exhibits
delivered pursuant to this Agreement; Sierra is not in default under any such
contract, agreement, lease, or undertaking and it does not know of any default
by any other party thereto, and no contract, agreement, lease, or undertaking
referred to therein or in the exhibits delivered pursuant to this Agreement
will be modified or changed prior to the Closing Date, without the prior
written consent of the Buyer. Except to the extent indicated in Schedule 4(E),
no consent or approval of other parties is required for the Buyer to succeed to
such material contracts, agreements, leases, and undertakings pursuant to the
sale of the Assets. Except for the contracts listed in Schedule 4(E) or
otherwise accepted hereunder, Sierra does not have any outstanding agreement or
arrangement with distributors, dealers, or other sales representatives in
connection with the distribution of any of its products; and Sierra will not
incur any further obligations or commitments, or make any further additions to
its property or further purchases of equipment, or inventory, unless in the
ordinary course of business or with the written consent of the Buyer.
F. EMPLOYMENT AGREEMENTS. Except for the contracts,
agreements, or plans referred to in Schedule 4(F), attached hereto, Sierra does
not have any obligation, contingent or otherwise, under any employment
contract, collective bargaining agreement, executive
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<PAGE> 13
compensation agreement, pension plan, retirement plan, profit sharing plan,
stock purchase plan, stock option plan, or any other similar agreement or
employee benefit plan. Except as set forth in Schedule 4(F), prior to the
Closing Date, Sierra will not, without the prior written consent of the Buyer
and the Company, make or agree to make any increase in the rate of wages,
salaries, bonuses, or other remuneration of any of its officers or salaried
employees or become a party to any employment contract or arrangement with any
of its officers or employees providing for bonuses, profit sharing payments,
severance pay, or retirement benefits.
G. TAX AUDITS AND PAYMENT OF TAXES. Except as set forth
in Schedule 4(G), Sierra has properly completed and filed in correct form all
federal, state, information, and other tax returns of every nature required to
be filed by it, and no extensions of time in which to file any such returns are
in effect. Sierra has paid all taxes (whether or not requiring the filing of
returns), including all deficiency assessments, additions to tax, penalties,
and interest of which notice has been received, to the extent that such amounts
have become due. To the extent that tax liabilities have accrued but have not
become payable, such amounts have been adequately reflected as liabilities on
the balance sheet as at December 31, 1995.
H. LIABILITIES. Except as set forth on Schedule 4(H)
annexed hereto, Sierra has no outstanding material claims, liabilities, or
indebtedness, fixed, contingent, or otherwise, except as set forth in the
financial information referred to in Section 4(B) above, other than (i)
liabilities incurred in connection with this transaction; and (ii) liabilities
incurred in the ordinary course of business. Sierra is not in default in
respect to the terms or conditions of any indebtedness.
I. RESTRICTIVE DOCUMENTS. None of the Shareholders or
Sierra is subject to, or a party to, any charter, bylaw, mortgage, lien, lease,
agreement, contract, instrument, law, rule, regulation, order, judgment, or
decree, or any other restriction of any kind or character which materially and
adversely affects the business or financial condition of Sierra, or which would
prevent (i) the consummation of the transactions contemplated by this
Agreement; (ii) compliance by any of them with the terms, conditions, and
provisions hereof; or (iii) the continued operation of the businesses of Sierra
after the Closing Date on substantially the same basis as theretofore operated.
The performance of the obligations of the Shareholders and Sierra under this
Agreement do not on the date hereof, and will not hereafter, violate any of the
terms or provisions of any such leases, instruments, agreements, or other
documents binding upon the Shareholders or Sierra.
J. LITIGATION. Except as disclosed on Schedule 4(J)
attached hereto, Sierra is not engaged in or a party to, or, to the knowledge
of Sierra, threatened with, any legal action or other proceeding before any
court or administrative agency.
K. ACCOUNTS RECEIVABLE. Set forth in Schedule 4(K)
attached hereto are all accounts receivable and notes receivable of Sierra as
at the end of the month immediately preceding the date of execution of this
Agreement. All of such accounts receivable and notes receivable have arisen in
the ordinary and usual course of the business of Sierra. None of such accounts
and notes receivable are subject to any counterclaims or set-offs, except such
as arise
-8-
<PAGE> 14
in the ordinary course of business and in the aggregate are not material to the
business of Sierra.
L. INVENTORIES. All inventories held by Sierra are
owned by it, and consist solely of inventories of the kind and quality
regularly used and produced in its business, and such inventories, as of the
Closing Date, will be in amounts reasonably related to the normal requirements
of the business of Sierra, and will be good and merchantable and fit for the
purposes intended.
M. AUTHORIZATION FOR AGREEMENT. The execution,
delivery, and performance of this Agreement has been duly and validly approved
by the Board of Directors of Sierra and the Shareholders. This Agreement is
valid and binding on Sierra and the Shareholders in accordance with its terms.
N. NO MISLEADING STATEMENTS. The representations and
warranties of the Shareholders and Sierra contained in this Agreement, or any
Exhibit, list, or other document delivered to the Company pursuant hereto do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein or herein not
misleading. No information material to this transaction necessary to make any
of the representations and warranties herein contained not misleading has been
withheld from, or has not been disclosed in writing to the Company.
O. BROKERAGE. No brokers, finders or similar agents
acting on behalf of the Shareholders or Sierra are entitled to any brokerage
commission, finder's fee or any similar compensation, in connection with this
Agreement or the transactions contemplated by this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents, warrants, and agrees as follows:
A. EXISTENCE AND GOOD STANDING. The Company is duly
organized, validly existing, and in good standing under the laws of the State
of Delaware and it has the requisite corporate power and authority to own
property and to conduct business as now being conducted.
B. CAPITAL STOCK OF THE COMPANY. The Company has an
authorized capitalization consisting of Six Million (6,000,000) shares of
common stock, $.001 par value, of which Four Million Seven Hundred Sixty
Thousand Seven Hundred Ninety-Nine (4,760,799) shares are issued and
outstanding as of this date. All of the Company's outstanding shares of
capital stock have been duly authorized and validly issued and are fully paid
and non-assessable. When issued in accordance with the terms of this
Agreement, the shares of Company Common Stock issuable hereby, including the
shares comprising the Additional Consideration, will be duly authorized and
validly issued and fully paid and non-assessable shares of Company Common
Stock.
C. FINANCIAL STATEMENTS AND NO MATERIAL CHANGES.
Schedule 5(C) annexed hereto sets forth (i) the audited balance sheets of the
Company as of December 31, 1995, and statements of operations, changes in
stockholders' equity (deficit) and cash flow for the fiscal
-9-
<PAGE> 15
year ended December 31, 1995, certified by Ernst & Young, LLP, independent
certified public accountants (the "Audited Company Financial Statements").
Such Audited Company Financial Statements, including the footnotes thereto,
have been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods indicated. Also included in
Schedule 5(C) are the unaudited financial statements of the Company for the
three months ended March 31, 1996. The balance sheets included in the
foregoing financial statements fairly present the financial condition of the
Company as of the dates thereof and reflect all claims against, and all debts
and liabilities of the Company, whether fixed, contingent, or otherwise, as of
the dates thereof, and such statements of operations fairly present the results
of the operations of the Company for the periods indicated. Neither such
balance sheets nor such income statements, including the footnotes thereto,
contain any untrue statements of a material fact or omit any material fact
necessary in order to make the statements contained in this paragraph or
therein not misleading. Since March 31, 1996, there has been no material
adverse change in the assets or liabilities or in the business or condition,
financial or otherwise, of the Company, except in the ordinary course of
business, and to the Company's knowledge, no fact or condition exists or is
contemplated or threatened which might cause such a material adverse change in
the future.
D. PERSONAL PROPERTY. The Company has and will have on
the Closing Date good and marketable title to all its personal and intangible
property, except as to such changes in personal and intangible property as have
been made in the ordinary course of business.
E. REAL PROPERTY. The Company owns no real property,
except as listed on Schedule 5(E).
F. TAX AUDITS AND PAYMENT OF TAXES. Except as set forth
on Schedule 5(F) annexed hereto: (i) the Company has properly completed and
filed in correct form all federal, state, information, and other tax returns of
every nature required to be filed by it, and no extensions of time in which to
file any such returns are in effect; (ii) the Company has paid all taxes
(whether or not requiring the filing of returns), including all deficiency
assessments, additions to tax, penalties, and interest of which notice has been
received, to the extent that such amounts have become due; and (iii) to the
extent that tax liabilities have accrued but have not become payable, such
amounts have been adequately reflected as liabilities on the balance sheet as
of that date referred to in Section 5(C) above.
G. LIABILITIES. The Company has no outstanding claims,
liabilities, or indebtedness, fixed, contingent, or otherwise, except (i) as
set forth in the financial statements referred to in Section 5(C); (ii)
liabilities incurred in connection with this transaction; (iii) liabilities
incurred in the ordinary course of business; and (iv) liabilities listed on
Schedule 5(G) hereto. The Company is not in default in respect to the terms or
conditions of any indebtedness.
H. RESTRICTIVE DOCUMENTS. The Company is not subject
to, or a party to, any charter, bylaw, mortgage, lien, lease, agreement,
contract, instrument, law, rule, regulation, order, judgment, or decree, or any
other restriction of any kind or character which materially and adversely
affects the business or condition of the Company, or which would prevent (i)
the consummation of the transactions contemplated by this Agreement; (ii)
compliance by it with the terms, conditions, and provisions hereof; or (iii)
the continued operation of the business of the
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<PAGE> 16
Company after the Closing Date on substantially the same basis as theretofore
operated. The performance of the obligations of the Company under this
Agreement does not on the date hereof, and will not hereafter, violate any of
the terms or provisions of any such leases, instruments, agreements, or other
documents of the Company.
I. LITIGATION. Except as disclosed on Schedule 5(I)
attached hereto, the Company is not engaged in or a party to, or, to the
knowledge of the Company, threatened with, any legal action or other proceeding
before any court or administrative agency.
J. AUTHORIZATION FOR AGREEMENT. The execution,
delivery, and performance of this Agreement has been duly and validly approved
by the Board of Directors of the Company. No authorization of the stockholders
of the Company is required to consummate the transactions contemplated by this
Agreement. This Agreement is valid and binding on the Company in accordance
with its terms.
K. NO MISLEADING STATEMENTS. The representations of the
Company in this Agreement, or any Exhibit, Schedule, list, or other document
delivered by the Company pursuant hereto do not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements contained therein or herein not misleading. No information material
to this transaction necessary to make any of the representations and warranties
herein contained not misleading has been withheld from, or has not been
disclosed in writing to Sierra.
L. BROKERAGE. No brokers, finders or similar agents
acting on behalf of the Company are entitled to any brokerage commission,
finder's fee or any similar compensation, in connection with this Agreement or
the transactions contemplated by this Agreement.
6. FURTHER AGREEMENTS OF THE PARTIES. The Shareholders, Sierra,
Buyer and the Company further covenant and agree as follows:
A. ACCESS TO INFORMATION. The Company and Sierra may,
prior to a period ending thirty (30) days after the signing of this Agreement,
through its representatives, make such investigation of the properties, books,
and records regarding the financial and legal condition as each of the Company
and Sierra deems necessary or advisable to familiarize itself with such
properties and other matters; any officers of Sierra and the Company will
furnish the other party with such financial and operating data and other
information with respect to the respective business and properties of Sierra
and the Company, as may be legally disclosed, as Sierra and the Company shall
from time to time reasonably request. Each party shall respond to a request
for information within one week of such request for information. In the event
that a party does not so respond, the due diligence period and the Closing Date
shall be extended one day for each day of delay.
B. COMMITMENTS AND CHANGES PRIOR TO THE CLOSING DATE.
Prior to the Closing Date and except as may be first approved by the Company or
Sierra or as is otherwise permitted or required by this Agreement, (i) the
business of Sierra and the Company shall be conducted only in the ordinary and
usual course; (ii) no change shall be made in the Company's
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<PAGE> 17
or Sierra's Certificate of Incorporation or Bylaws, other than to change its
name; (iii) no contract or commitment shall be entered into by or on behalf of
the Company or Sierra, except contracts in the ordinary course of business or
contracts to maintain their properties; and (iv) no change shall be made
affecting any bank, safe deposit, or power of attorney arrangements of the
Company or Sierra.
C. CONSENT TO ASSIGNMENT. The Shareholders and Sierra
agree that with respect to any contracts and agreements which may not be
assignable pursuant to the sale of the Assets, they will use their collective
best efforts to obtain from the other parties thereto either consents to the
assignment thereof or new contracts running to the Buyer, containing
substantially the same terms and conditions. To the extent, despite such best
efforts, that any such contract is not so assigned, the Buyer shall, from and
after the Closing Date, perform all of the obligations under such contract and
agreement in the name of Sierra and shall be entitled to all of the privileges
and benefits of such contract and agreement; provided, that the Buyer shall
indemnify, defend and hold harmless the Shareholders from and against any
personal liability, cost or expenses which may arise under any such contract or
agreement, but only to the extent of actions taken or omitted to be taken by
the Buyer from and after the Closing Date.
D. FINANCIAL STATEMENTS. Sierra shall deliver to the
Company, as soon as they become available after the Closing Date, a balance
sheet as of December 31, 1995 together with statements of income, cash flows
and changes for the year then ended, accompanied by the unqualified opinion of
Sierra's certified public accountants.
E. INDEMNIFICATION.
(i) By the Shareholders. The Shareholders hereby
agree to indemnify, defend and hold harmless the Company, including interest,
penalties and reasonable attorneys' fees and disbursements, from and against:
(a) any and all liabilities of the Shareholders and Sierra arising by virtue of
the operation of Sierra prior to the Closing Date and not disclosed to the
Buyer and the Company prior to the Closing Date, including but not limited to,
any and all liabilities arising by virtue of failure of the Shareholders to
fully comply with all federal and state laws and regulations; and (b) any
material inaccuracy of any representation or any breach of any warranty,
covenant or agreement of Sierra or the Shareholders contained in this Agreement
or in any document, certificate or agreement of the Shareholders or Sierra
delivered pursuant to this Agreement.
(ii) By the Buyer and the Company. The Buyer and
the Company agree to indemnify, defend and hold harmless the Shareholders from
and against any and all liabilities, including, without limitation, interest,
penalties and reasonable attorneys' fees and disbursements, arising out of due
to or otherwise in respect of any inaccuracy of any representation or any
breach of any warranty, covenant or agreement of the Buyer or Company contained
in this Agreement or in any document, certificate or agreement delivered
thereby pursuant hereto.
(iii) Claims for Indemnity. Whenever a claim shall
arise for which any party shall be entitled to indemnification hereunder, the
indemnified party shall notify the indemnifying party in writing within thirty
(30) days after the earlier of (A) the indemnified
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<PAGE> 18
party's first receipt of notice of, or (B) the indemnified party's obtaining
actual knowledge of, such claim, and in any event within such shorter period as
may be necessary for the indemnifying party or parties to take appropriate
action to resist such claim. Such notice shall specify all facts known to the
indemnified party giving rise to such indemnity rights and shall estimate (to
the extent reasonably possible) the amount of potential liability arising
therefrom.
(iv) Right to Defend. The indemnifying party shall
have the right, at its own expense and by its own counsel, to undertake to
compromise, settle or defend any such matter involving the asserted liability
of the party seeking such indemnification. If any indemnifying party shall
undertake to compromise, settle or defend any such asserted liability, it shall
within seven (7) days notify the indemnified party of its intention to do so.
In any event, the indemnified party shall have the right, at its own expense,
to participate in the defense of such asserted liability. If the indemnifying
party shall fail to compromise, settle or defend any such asserted liability
within a reasonable time after notice, the indemnified party shall have the
right, but not the obligation, to undertake the compromise, settlement or
defense thereof on behalf of, for the account of, and at the risk of the
indemnifying party.
F. EXPENSES. The Company and Sierra shall each pay all
of their respective legal fees and any accounting expenses in connection with
the transactions contemplated by this Agreement.
7. CONDITIONS TO OBLIGATIONS OF THE BUYER AND THE COMPANY. The
obligations of the Buyer and the Company to cause the sale of the Assets to
become effective are subject to the satisfaction on or prior to the Closing
Date of the following conditions, each of which may be waived in writing by the
Buyer and/or the Company:
A. CORPORATE ACTION. The Shareholders and Sierra shall
have furnished the Company with (i) certified copies of resolutions, duly
adopted by the holders of all outstanding shares of Sierra Stock approving this
Agreement, and authorizing the transactions provided for herein in accordance
with the terms hereof; (ii) certified copies of resolutions duly adopted by the
Board of Directors of Sierra, to the same effect and (iii) certificates
executed by the Shareholders to the effect that: (x) the Shareholders and
Sierra have full power and authority to make, execute, deliver, and perform
this Agreement; (y) such Agreement has been duly authorized and approved by
proper action of Sierra; (z) this Agreement constitutes valid and legally
binding obligations of the Shareholders and Sierra (as relevant) in accordance
with its terms; (aa) all actions and proceedings required by law, this
Agreement, or required to be taken by the Shareholders and Sierra and Sierra's
Board of Directors at or prior to the Closing Date in order to make the sale of
the Assets effective (as relevant), have been duly and validly taken; and (bb)
the consummation of this Agreement will not result in a breach of the
Certificate of Incorporation or the Bylaws of Sierra, or a default under the
terms of any material agreements, leases or other obligations to which Sierra
or any of the Shareholders is a party.
B. GOOD STANDING AND TAX CERTIFICATES. The Company
shall have received: (i) a copy of the Certificate of Incorporation of Sierra,
certified by the Delaware Corporations Department; and (ii) a good standing
certificate from the Delaware Secretary of State, to the effect that Sierra is
in good standing in such state.
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<PAGE> 19
C. TRUTH OF REPRESENTATIONS, WARRANTIES AND SCHEDULES.
The representations and warranties of the Shareholders and Sierra contained in
this Agreement and all schedules, exhibits, instruments, agreements, or other
documents that may have been delivered to the Buyer and the Company pursuant to
this Agreement, shall be true and correct in all material respects on and as of
the Closing Date with the same effect as those such representations and
warranties had been made on and as of such date, or such schedules and
instruments had been delivered on such date, and the Buyer and the Company
shall have received on the Closing Date a certificate to that effect, dated the
Closing Date and executed by the Shareholders and by the President or Vice
President of Sierra.
D. PERFORMANCE OF AGREEMENTS. Each and all of the
agreements of the Shareholders and Sierra to be performed on or before the
Closing Date pursuant to the terms hereof shall have been substantially
performed, and the Buyer and the Company shall have received on the Closing
Date a certificate to that effect executed by the Shareholders and by the
President of Sierra.
E. NON-COMPETITION AGREEMENT. On the Closing Date, each
of the Shareholders shall have executed and delivered to the Company a
non-competition agreement in substantially the form of Exhibit A annexed hereto
and made a part hereof (the "Non-Competition Agreement").
F. EMPLOYMENT AGREEMENTS. On the Closing Date, Messrs.
Wilson and Nicholas shall each enter into an employment agreement with the
Buyer, substantially in the form of Exhibit B annexed hereto and made a part
hereof (the "Employment Agreements").
G. AMENDMENT OF CHARTER. On the Closing Date, Sierra
shall deliver to the Company a Certificate of Amendment to its Certificate of
Incorporation and, if necessary, an Amended Certificate of Authority, for
filing with the Delaware and California Secretaries of State, respectively, in
order to change the corporate name of Sierra to a name which does not contain
the words "Sierra Press."
8. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS AND SIERRA. The
obligations of the Shareholders and Sierra to cause the sale of the Assets to
become effective are subject to the satisfaction on or prior to the Closing
Date of the following conditions of this Section 8, any one or more of which
may be waived in writing by the Shareholders:
A. CORPORATE ACTION. The Company shall have furnished
certified copies of resolutions duly adopted by the Board of Directors of the
Company, approving this Agreement and authorizing the transaction provided for
herein in accordance with the terms hereof.
B. [INTENTIONALLY OMITTED]
C. TRUTH OF REPRESENTATIONS, WARRANTIES AND SCHEDULES.
The representations and warranties of the Company contained in this Agreement
and all schedules, exhibits, instruments, agreements, or other documents that
have been delivered to the
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<PAGE> 20
Shareholders and Sierra pursuant to this Agreement, shall be true and correct
in all material respects on and as of the Closing Date with the same effect as
though such representations and warranties have been made on and as of such
date or such schedules and instruments have been delivered on such date and the
Shareholders and Sierra shall have received on the Closing Date a certificate
to that effect, dated the Closing Date and executed by the President of the
Company.
D. PERFORMANCE OF AGREEMENTS. Each and all of the
agreements of the Company to be performed on or before the Closing Date
pursuant to the terms hereof, shall have been substantially performed, and the
Shareholders and Sierra shall have received on the Closing Date a certificate
to the effect and executed by the President of the Company.
E. EMPLOYMENT AGREEMENTS. On the Closing Date, the
Buyer shall enter into the Employment Agreements.
F. LEASE AGREEMENT. On the Closing Date, the Buyer
shall enter into a Lease Agreement (the "Lease") with the Shareholders,
substantially in the form as annexed hereto as Exhibit C.
9. CLOSING. Subject to the terms and conditions of this
Agreement, unless this Agreement shall have been previously terminated as
herein provided, the closing of the transactions contemplated hereby (the
"Closing Date") shall take place at a location to be mutually agreed upon, not
later than thirty-five (35) days following execution of this Agreement.
Subject to the terms and conditions of this Agreement, each party agrees to use
best efforts to take or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable, to cause the Closing to be
consummated and to make effective the transactions herein contemplated prior to
June 30, 1996.
Notwithstanding the foregoing, in the event and to the extent
that (i) any party fails to perform its covenants and agreements as provided in
this Agreement, or (ii) any Exhibit, Schedule or other attachment hereto, or
this Agreement itself, contains a misrepresentation or inaccuracy or omits to
state information the absence of which makes this Agreement or any Exhibit,
Schedule or other attachment hereto misleading or inaccurate at any time on or
prior to the Closing Date, then either the other party may terminate this
Agreement upon giving written notice to that effect to the other parties
hereto.
10. MISCELLANEOUS.
A. NOTICES. Except as herein provided, any notice,
request, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by overnight courier, or three (3) days after having been mailed by
certified mail, return receipt requested, addressed to a party as follows:
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<PAGE> 21
If to Sierra or the Shareholders:
Sierra Press, Inc.
4988 Gold Leaf Drive
Maripose, California 95338
And if to the Buyer or the Company:
Panorama International Productions, Inc.
2621 Empire Avenue
Burbank, California 91504
Attn: Edward H. Resnick, Chairman
with a copy to its counsel:
Bronson & Migliaccio
287 Bowman Avenue
Purchase, New York 10577
Attn: H. Bruce Bronson, Jr., Esq.
or such other address as shall be furnished in writing by the parties, and such
notice or communication shall be deemed to have been given as of the date so
mailed.
B. PARTIES IN INTEREST. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and there respective
successors and assigns.
C. ENTIRE AGREEMENT. It is understood and agreed that
all understandings and agreements heretofore had between the parties hereto,
are superseded in their entirety and are merged into this Agreement, which,
together with the Exhibits and Schedules hereto, fully and completely express
the parties' agreement.
D. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, all of which taken together shall constitute one
instrument.
E. GOVERNING LAW. This Agreement shall be governed by
the laws of the State of California.
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<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date and year first above written.
PANORAMA INTERNATIONAL
PRODUCTIONS, INC.
BY:/S/ EDWARD H. RESNICK
------------------------------------------
EDWARD H. RESNICK, CHAIRMAN
TELLURIAN PRESS, INC.
BY:/S/ EDWARD H. RESNICK
------------------------------------------
NAME: EDWARD H. RESNICK
TITLE: CHAIRMAN
SIERRA PRESS, INC.
BY:/S/ JAMES WILSON
------------------------------------------
NAME: JAMES WILSON
TITLE: SECRETARY/TREASURER
THE SHAREHOLDERS:
/S/ JEFFREY D. NICHOLAS
---------------------------------------------
JEFFREY D. NICHOLAS
/S/ JAMES WILSON
---------------------------------------------
JAMES WILSON
/S/ LYNN WILSON
---------------------------------------------
LYNN WILSON
-17-
<PAGE> 1
EXHIBIT 10.12
AGREEMENT
NOT TO COMPETE
BY AND AMONG:
SIERRA PRESS
&
PANORAMA
7/10/96
<PAGE> 2
AGREEMENT
NOT TO COMPETE
BY AND AMONG:
SIERRA PRESS
&
PANORAMA
7/10/96
<PAGE> 3
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE (this "Agreement") is entered into as of
this 10th day of July 1996, to be effective as of July 1, 1996 by and between
PANORAMA INTERNATIONAL PRODUCTIONS, INC., a Delaware corporation ("Buyer"), and
SIERRA PRESS, INC., a Delaware corporation ("Seller") and JAMES WILSON, JEFFREY
D. NICHOLAS and LYNN WILSON, individuals (collectively "Owners").
A. Owners owns all of the capital stock of Seller.
B. Seller is engaged in the publishing business (the "Business").
C. Owners and Seller wish to induce Buyer or its designee to
acquire all of Seller's assets and Buyer or its designee is willing to acquire
all of the Seller's assets pursuant to an Asset Purchase Agreement dated as of
June 18, 1996 (the "Asset Purchase Agreement"), provided that Buyer has
received, among other consideration, the assurances of the Owners contained in
this Agreement.
NOW, THEREFORE, in consideration of these premises and the covenants
contained herein, the parties hereto hereby agree as follows:
1. Covenant Not To Compete.
For a period of five (5) years from and after the date hereof,
the Owners, nor any person, firm or corporation controlling, controlled by, or
under common control of the Owners shall, directly or indirectly, engage in the
Business in the Territory, whether as a shareholder (other than as a
shareholder of up to five percent (5%) of the total shares of all classes of
stock outstanding of any corporation with publicly-traded securities), partner,
proprietor, associate, representative, or otherwise; provided, however, that
such covenant not to compete shall not preclude the submission by Owners of
photograph work to other publishers, not competitive with the publications of
Buyer or its subsidiaries.
2. Injunction.
Owners acknowledge that the remedy at law for any breach of
Section 1 hereof will be inadequate and, accordingly, they covenant and agree
that Buyer shall, in addition to any other rights or remedies which it may
have, be entitled to seek such equitable and injunctive relief as may be
available from any court of competent jurisdiction to restrain them from any
violation of such provisions. Such right to obtain injunctive relief may be
exercised, at the option of Buyer, concurrently with, prior to, after, or in
lieu of, the exercise of any other rights or remedies Buyer may have as a
result of any such breach or threatened breach.
<PAGE> 4
3. Geographic and Time Scope.
Owners acknowledge that the provisions of this Agreement, both
as to time and area covered, are necessary to protect the rights of Buyer and
the goodwill that is part of the Business. It is Owners' intention that this
Agreement be enforced to the greatest extent (but to no greater extent) in
time, area and degree of participation as is permitted by law. If any portion
of this Agreement is held to be unreasonable, arbitrary or against public
policy, the provisions of this Agreement shall be considered divisible both as
to time and as to geographic areas; and each month of each year of the
specified period shall be deemed to be a separate period of time. In the event
any court or arbitrator determines the specified time period or geographic area
to be unreasonable, arbitrary or against public policy, such court or
arbitrator shall have the authority to limit such time period or geographical
area to the extent necessary so as to make this Agreement enforceable.
4. General Provisions.
4.1 Complete Agreement; Modifications. This Agreement
and any documents referred to herein or executed contemporaneously herewith
constitute the parties entire agreement with respect to the subject matter
hereof and supersede all agreements, representations, warranties, statements,
promises and understandings, whether oral or written, with respect to the
subject matter hereof. This Agreement may not be amended, altered or modified
except by a writing signed by the parties.
4.2 No Third-Party Benefits; No Assignment. None of the
provisions of this Agreement shall be for the benefit of, or enforceable by,
any third-party beneficiary. Buyer shall not assign any of its rights under
this Agreement without the prior written consent of the other parties hereto.
4.3 Governing Law. All questions with respect to this
Agreement and the rights and liabilities of the parties will be governed by the
laws of the State of California, regardless of the choice of law provisions of
California or any other jurisdiction.
4.4 Arbitration. Except for actions seeking injunctive
relief, which may be brought before any court having jurisdiction, any claims
arising out of or relating to this Agreement which are not settled by agreement
between the parties, shall be settled by arbitration in accordance with the
procedures set forth in the Share Exchange Agreement.
4.5 Headings. The Article and Section headings in this
Agreement are inserted only as a matter of convenience, and in no way define,
limit, or interpret the scope of this Agreement or of any particular Article or
Section.
2
<PAGE> 5
4.6 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have signed this Agreement as
of the date first set forth above.
PANORAMA INTERNATIONAL PRODUCTIONS,
INC., a Delaware corporation
By: /s/ Edward H. Resnick
---------------------------
Name: Edward H. Resnick
Title: Chairman
SIERRA PRESS, INC.,
a Delaware corporation
By: /s/ James Wilson
---------------------------
Name: James Wilson
Title: Secretary/Treasurer
/s/ Jeffrey D. Nicholas
--------------------------------------
JEFFREY D. NICHOLAS
/s/ James Wilson
--------------------------------------
JAMES WILSON
/s/ Lynn Wilson
--------------------------------------
LYNN WILSON
3
<PAGE> 1
EXHIBIT 10.13
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
(PERTAINING TO THE SIERRA PRESS, INC.)
<PAGE> 2
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the
"Agreement") is entered into and shall be effective as of the 2nd day of
January, 1997, by and among PANORAMA INTERNATIONAL PRODUCTIONS, INC., a
Delaware corporation, TELLURIAN PRESS, INC., a California corporation doing
business as Sierra Press, Inc., GOLD LEAF PROPERTIES, INC., a Delaware
corporation, formerly known as Sierra Press, Inc., and JAMES L. WILSON, JR.,
LYNN WILSON AND JEFFREY D. NICHOLAS.
WHEREAS, the parties hereto entered into an Asset Purchase
Agreement, dated as of June 18, 1995 (the "Purchase Agreement");
WHEREAS, the parties hereto wish to change the terms of the
payment of the Purchase Price.
NOW, THEREFORE, in consideration of the foregoing premises,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Except as otherwise provided herein,
all defined terms used herein shall have the respective meanings described to
them in the Purchase Agreement.
2. Amendment to Purchase Agreement. Section 3(A) of the
Purchase Agreement is hereby amended to read in its entirety as follows:
"A. Stock Consideration. In consideration for its
purchase of the Assets and in addition to its assumption or retention
of the Assumed Liabilities (as applicable), the Company shall issue to
Sierra or its designees an aggregate of 636,306 shares of Company
Common Stock (the "Purchase Price"), payable as follows:
(i) 336,306 upon Closing; and
(ii) 300,000 on January 2, 1997."
3. Miscellaneous.
(a) This Agreement shall be binding and inure to
the benefit of each of the parties hereto and their respective heirs,
successors and assigns.
<PAGE> 3
(b) This Agreement may be executed in one or more
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
(c) In the event that any provision of this
Agreement or the Purchase Agreement shall be held to be invalid or
unenforceable, the same shall not affect in any respect whatsoever the validity
or unenforceability of the remainder of this Agreement or the Purchase
Agreement.
(d) The headings in this Agreement are for
reference purposes only and shall not constitute a part hereof.
4. Effective Agreement. Except as amended herein, the
Purchase Agreement and its terms shall continue to be effective binding and
shall not otherwise be amended or superseded by the terms hereof.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date set forth above.
PANORAMA INTERNATIONAL PRODUCTIONS, INC.
By: /s/ Edward H. Resnick
---------------------------------
Edward H. Resnick, Chairman
TELLURIAN PRESS, INC.
By: /s/ Edward H. Resnick
---------------------------------
Name: Edward H. Resnick
Title: Chairman
GOLD LEAF PROPERTIES, INC.
By: /s/ James L. Wilson, Jr.
---------------------------------
Names: James L. Wilson, Jr.
Title:
2
<PAGE> 4
/s/ Jeffrey D. Nicholas
--------------------------------------
JEFFREY D. NICHOLAS
/s/ James L. Wilson, Jr.
--------------------------------------
JAMES L. WILSON, JR.
/s/ Lynn Wilson
--------------------------------------
LYNN WILSON
3
<PAGE> 1
Exhibit 11.0
Panorama International Productions, Inc.
Computation of Earnings per Share
<TABLE>
<CAPTION>
For the period
from
September 22,
Year Ended 1995 to
December 31, December 31,
1996 1995
------------ --------------
<S> <C> <C>
Common shares outstanding at the end of the period ....................................... 2,810,803 2,505,684
Net effect of dilutive stock issued to the former owner or Cinescope Enterprises, Inc. ... 17,982 17,982
Net effect of dilutive stock options to the founder of the Company ....................... 205,255 205,255
Stock issued in 1996 below initial public offering price ................................. -- 305,119
Additional shares issued to the former owners of The Sierra Press, Inc. .................. 157,895 157,895
---------- ----------
Weighted average shares outstanding ...................................................... 3,191,935 3,191,935
========== ==========
Net income ............................................................................... $ 127,000 $ 14,000
========== ==========
Earnings per share ....................................................................... $ 0.04 $ 0.00
========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 21.0 - SUBSIDIARIES OF REGISTRANT
The Registrant only has one subsidiary, as follows, which is
wholly owned by the Registrant:
Tellurian Press, Inc., a California corporation, which was
incorporated on July 2, 1996, and conducts business under the trade name
"Sierra Press, Inc." pursuant to a Fictitious Business Name Statement filed on
July 9, 1996 with the County Clerk of the County of Mariposa, State of
California. The Fictitious Business Name Statement expires on July 9, 2001,
but may be renewed for another five year term immediately prior to that date.
<PAGE> 1
EXHIBIT 23.1
CONSENTS OF ERNST & YOUNG LLP
<PAGE> 2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated March 7, 1997 (except as to Note
12, as to which the date is June 9, 1997), with respect to the consolidated
financial statements of Panorama International Productions, Inc. for the year
ended December 31, 1996 and the period from September 22, 1995 to December 31,
1995 in the Registration Statement (Form SB-2 No. _________________) and the
related Prospectus of Panorama International Productions, Inc. for the
registration of 1,768,212 shares of its common stock.
/s/ Ernst & Young LLP
Los Angeles, California
June 19, 1997
<PAGE> 3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated March 7, 1997, with respect to the
financial statements of Cinescope Enterprises, Inc. (Predecessor to Panorama
International Productions, Inc.) for the period from January 1, 1995 to
September 21, 1995 in the Registration Statement (Form SB-2 No. ______________)
and the related Prospectus of Panorama International Productions, Inc. for the
registration of 1,768,212 shares of its common stock.
/s/ Ernst & Young LLP
Los Angeles, California
June 19, 1997
<PAGE> 4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated March 7, 1997, with respect to the
financial statements of The Sierra Press, Inc. for the period from January 1,
1996 to June 30, 1996 and the year ended December 31, 1995 in the Registration
Statement (Form SB-2 No. __________) and the related Prospectus of Panorama
International Productions, Inc. for the registration of 1,768,212 shares of its
common stock.
/s/ Ernst & Young LLP
Los Angeles, California
June 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) AUDITED
CONSOLIDATED FINANCIAL STATEMENTS, PANORAMA INTERNATIONAL PRODUCTIONS, INC. FOR
THE YEAR ENDED DECEMBER 31, 1996 AND THE PERIOD FROM SEPTEMBER 27, 1995 TO
DECEMBER 31, 1995: UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, PANORAMA
INTERNATIONAL, INC. FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FORM SB-2 NO._________________.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 472 276
<SECURITIES> 0 0
<RECEIVABLES> 161 350
<ALLOWANCES> 10 10
<INVENTORY> 404 452
<CURRENT-ASSETS> 1,062 1,143
<PP&E> 71 88
<DEPRECIATION> 11 15
<TOTAL-ASSETS> 3,768 4,263
<CURRENT-LIABILITIES> 139 355
<BONDS> 1,240 1,247
0 0
0 0
<COMMON> 2,234 2,534
<OTHER-SE> 141 113
<TOTAL-LIABILITY-AND-EQUITY> 3,768 4,263
<SALES> 2,108 569
<TOTAL-REVENUES> 2,124 572
<CGS> 887 266
<TOTAL-COSTS> 887 266
<OTHER-EXPENSES> 842 277
<LOSS-PROVISION> 10 0
<INTEREST-EXPENSE> 231 63
<INCOME-PRETAX> 154 (34)
<INCOME-TAX> 27 (6)
<INCOME-CONTINUING> 127 (28)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 127 (28)
<EPS-PRIMARY> .04 (.01)
<EPS-DILUTED> .04 (.01)
</TABLE>
