FILM ROMAN INC, S-1, 1996-05-17

FILM ROMAN INC
S-1, 1996-05-17

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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FILM ROMAN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7812 95-4215913
(PRIMARY STANDARD (I.R.S.
(STATE OR OTHER INDUSTRIAL EMPLOYER
JURISDICTION OF CLASSIFICATION IDENTIFICATION
INCORPORATION OR CODE NUMBER) NO.)
ORGANIZATION)

12020 CHANDLER BOULEVARD, SUITE 200
NORTH HOLLYWOOD, CALIFORNIA 91607
(818) 761-2544
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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PHIL ROMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FILM ROMAN, INC.
12020 CHANDLER BOULEVARD, SUITE 200
NORTH HOLLYWOOD, CALIFORNIA 91607
(818) 761-2544
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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COPIES TO:
<TABLE>
<S> <C>
THOMAS W. DOBSON, ESQ. GARY I. HOROWITZ, ESQ.
LATHAM & WATKINS SIMPSON THACHER & BARTLETT
633 WEST FIFTH STREET, SUITE 4000 425 LEXINGTON AVENUE
LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10017
(213) 485-1234 (212) 455-2000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act") check the following box: [_]

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
under the Securities Act, please check the following box. [_]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value.................. 4,352,750 $12.00 $52,233,000 $18,012
=====================================================================================
</TABLE>
(1) Includes 567,750 shares of Common Stock subject to the Underwriters' over-
allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act based upon the high point of
the range of estimated initial public offering prices as specified in the
Preliminary Prospectus contained herein.

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 OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

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<PAGE>

CROSS-REFERENCE SHEET

PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT PROSPECTUS CAPTION
------------------------------- ------------------
<S> <C>
1. Forepart of the Registration Statement and Out- Outside Front Cover Page of
side Front Cover Page of Prospectus............ Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges...................... Prospectus Summary; Risk Factors
4. Use of Proceeds.................................. Use of Proceeds
5. Determination of Offering Price.................. Outside Front Cover Page of
Prospectus; Underwriting
6. Dilution......................................... Dilution
7. Selling Security-Holders......................... Principal and Selling Stockholders
8. Plan of Distribution............................. Outside Front Cover Page of
Prospectus; Underwriting
9. Description of Securities to be Registered....... Description of Capital Stock
10. Interests of Named Experts and Counsel........... Legal Matters; Experts
11. Information with Respect to the Registrant....... Outside and Inside Front Cover
Pages; Prospectus Summary; Risk
Factors; Use of Proceeds; Dividend
Policy; Capitalization; Dilution;
Selected Financial Information;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal and Selling Stockholders
12. Disclosure of Commission Position on Indemnifica-
tion for Securities Act Liabilities............ Not Applicable
</TABLE>
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 17, 1996

PROSPECTUS
, 1996

3,785,000 SHARES

FILM ROMAN, INC.

COMMON STOCK

Of the 3,785,000 shares of Common Stock offered hereby, 3,600,000 shares are
being sold by Film Roman, Inc. and 185,000 shares are being sold by certain
stockholders of the Company (the "Selling Stockholders"). The Company will not
receive any proceeds from the sale of shares by the Selling Stockholders. See
"Principal and Selling Stockholders."

Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $10.00 and $12.00 per share. See "Underwriting" for
information relating to the factors considered in determining the initial
public offering price.

Application has been made to include the Common Stock in the Nasdaq National
Market under the symbol "ROMN."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.

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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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS

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<S> <C> <C> <C> <C>
Per Share.......... $ $ $ $
Total(3)........... $ $ $ $
</TABLE>

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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses estimated at $ , which will be paid by
the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 567,750 additional shares at the Price to the Public less Underwriting
Discounts and Commissions, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to the Public, Underwriting
Discounts and Commissions, and Proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."

The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of shares will be made in New York, New York on or about
, 1996.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>

[Art Work to be Pasted Over]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

The Company has applications pending with the United States Patent and
Trademark Office to register several trademarks, including Film Roman, C-Bear
& Jamal and BRUNO the Kid. Pursuant to arrangements with the owners of the
programs it produces, the Company utilizes certain trademarks and copyrighted
materials, including The Simpsons, Garfield, Bobby's World, Felix the Cat, The
Mask, Richie Rich and Mighty Max. This Prospectus includes other trade names
and trademarks of the Company and other companies.

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Film Roman, Inc. ("Film Roman Holdings") was
incorporated in Delaware in May 1996 in order to acquire all of the outstanding
capital stock of Film Roman, Inc., a California corporation ("Film Roman
California") in the Reorganization (as defined below). Unless otherwise
indicated herein and except as otherwise set forth in the financial statements
contained in this Prospectus, (a) the terms the "Company" and "Film Roman"
refer collectively to Film Roman Holdings and Film Roman California, (b) the
term "Offering" refers to the offering of common stock, $.01 par value, of Film
Roman Holdings ("Common Stock") made hereby, and (c) the information in this
Prospectus gives effect to the Reorganization (each share of common stock of
Film Roman California will be converted into 1.25 shares of Common Stock). All
information in this Prospectus assumes an initial public offering price of
$11.00 and that the Underwriters' over-allotment option is not exercised.

THE COMPANY

Film Roman creates, develops, produces and distributes high quality, family-
oriented animated television programming. Since the Company was founded by Phil
Roman in 1984, it has become the leading independent animation studio in North
America, producing more animated series for broadcast on the U.S. television
networks than any other independent animation studio for the 1996-97 television
season. Film Roman productions include The Simpsons, Garfield & Friends,
Bobby's World, Felix the Cat, Mighty Max, The Critic and The Mask. The Company
is currently producing eight animated series and two specials that will air on
ABC, CBS, FOX and the USA Network, as well as in first-run syndication. The
Company has produced at least three series each season for the television
networks since 1990.

The Company believes that it has a reputation within the entertainment
industry as a reliable producer of high-quality animated programming, making it
one of a select group of suppliers of animated programming to the television
networks. This reputation in the animation industry is critical because
animated series are ordered for production without the benefit of a pilot
episode. As a result, programmers rely to a significant degree on a studio's
track record for producing high-quality programming that is delivered on
schedule and within budget. At the conclusion of the 1996-97 broadcast season,
the Company projects that it will have produced in excess of 550 episodes of
animated programming.

Historically, the Company has produced substantially all of its programming
for third parties on a "fee-for-services" basis. Increasingly, the Company is
producing programming for which it controls the "proprietary rights" associated
with such programming (including, for example, international distribution and
licensing and merchandising rights). Through the retention and exploitation of
these proprietary rights, the Company believes it can earn an attractive return
on its investment and, at the same time, build a library of characters and
programs that will have lasting value. Three of the eight series the Company is
producing for the 1996-97 television season are proprietary (Felix the Cat
(CBS), C-Bear & Jamal (FOX) and Mortal Kombat (USA Network)).

Film Roman's business strategy is to create and develop popular characters
and programs that will form the foundation for enduring character and program
franchises. The Company intends to build a library of characters and programs
which it can exploit through a variety of means, including domestic and
international television and home video distribution, licensing and
merchandising of consumer products (including toys, apparel, school supplies
and books), feature films and interactive software. The Company has recently
expanded its internal creative development of characters and program concepts
and has established an international distribution division and a licensing and
merchandising division to support the exploitation of its proprietary rights.
The Company intends to minimize the financial risk associated with its
production of proprietary programming by securing commitments (such as for
domestic broadcast and international distribution) prior to production which
will generally cover at least 50% of the Company's production costs.

The Company's principal executive offices are located at 12020 Chandler
Boulevard, Suite 200, North Hollywood, California 91607, and its telephone
number is (818) 761-2544.

3
<PAGE>

THE REORGANIZATION

Film Roman Holdings was incorporated in Delaware in May 1996 in order to hold
all of the outstanding capital stock of Film Roman California. Film Roman
Holdings currently conducts no operations. A reorganization will be effected
immediately prior to the closing of the Offering (the "Reorganization")
pursuant to which (i) a wholly-owned subsidiary of Film Roman Holdings will
merge with and into Film Roman California; (ii) each outstanding share of
common stock, no par value, of Film Roman California ("California Common
Stock") will be converted into 1.25 shares of Common Stock (including shares of
California Common Stock to be issued immediately prior to such merger upon
exercise of all outstanding warrants to purchase California Common Stock and
upon conversion of all outstanding shares of Class B convertible preferred
stock, $.01 par value, of Film Roman California ("Convertible Preferred
Stock")), (iii) each outstanding share of Class A redeemable preferred stock,
$.01 par value, of Film Roman California ("California Redeemable Preferred
Stock") will be converted into one share of Series A redeemable preferred
stock, $.01 par value, of Film Roman Holdings ("Redeemable Preferred Stock");
and (iv) all outstanding employee options for the purchase of California Common
Stock will, pursuant to the anti-dilution provisions thereof, become options to
purchase shares of Common Stock. As a result of the Reorganization, Film Roman
California will become a wholly-owned subsidiary of Film Roman Holdings and the
stockholders of Film Roman California will become the stockholders of Film
Roman Holdings. Immediately following the Reorganization and the closing of the
Offering, Film Roman Holdings will redeem all outstanding shares of Redeemable
Preferred Stock (the "Redemption"). See "Certain Transactions--Reorganization."

THE OFFERING

<TABLE>
<C> <S>
Shares offered by the Company.... 3,600,000
Shares offered by the Selling
Stockholders.................... 185,000
Shares outstanding immediately
after the Offering.............. 8,184,636(1)
Use of Proceeds to the Company... To pay accumulated but unpaid dividends on
the Redeemable Preferred Stock and the
Convertible Preferred Stock, to redeem the
Redeemable Preferred Stock, to repay short-
term borrowings, to fund the production of
animated programming and for general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol.......................... ROMN.
</TABLE>
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(1) Excludes 1,227,695 shares of Common Stock issuable upon the exercise of
options granted or to be granted under the Company's Stock Option Plan (as
defined below), of which 864,375 had been granted at May 15, 1996.
See "Management--Stock Option Plan."

4
<PAGE>

SUMMARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, 1995 MARCH 31, 1996
----------------------- ----------------------
ACTUAL ACTUAL AS ADJUSTED(3)
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...... $ 5,176 $ 4,707 $27,065
Film costs, net of
amortization.................. 12,379 12,094 12,094
Total assets................... 18,950 18,575 40,933
Debt........................... 1,737 487 --
Redeemable Preferred Stock..... 6,749 6,990 --
Stockholder's equity........... 1,832 728 31,603
</TABLE>

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(1) The Company operated as an S Corporation until August 4, 1995. As an S
Corporation, the Company was subject to no federal income taxes and only
minimum state taxes. Pro forma amounts reflect adjustments for additional
income taxes that would have been reported if the Company had been a C
Corporation based upon an estimated statutory rate of 40% in 1991, 1992,
1993 and 1994, and 34% in 1995.

(2) The pro forma net income (loss) per common share and weighted average
number of shares outstanding give effect to the Reorganization and are
calculated in accordance with the requirements of the Securities and
Exchange Commission (the "Commission"), whereby common and common
equivalent shares issued within a 12-month period prior to an initial
public offering are treated as outstanding for all periods presented if the
issue price was less than the proposed initial public offering price. For
the year ended December 31, 1995, the pro forma net loss per common share
gives effect to the accretion of the difference between the carrying value
and the liquidation value of the Redeemable Preferred Stock of $484,929 and
to the accrual of dividends of $400,000 on the Redeemable Preferred Stock.
For the three months ended March 31, 1996 (unaudited), the pro forma net
loss per common share gives effect to the accretion of the difference
between the carrying value and the liquidation value of the Redeemable
Preferred Stock of $242,414 and to the accrual of dividends of $240,000, on
the Redeemable Preferred Stock. See "Certain Transactions--Reorganization."

(3) Adjusted to reflect the sale by the Company of 3,600,000 shares of Common
Stock in the Offering at the initial public offering price of $11.00 per
share and the application of the net proceeds therefrom. See "Use of
Proceeds."

5
<PAGE>

RISK FACTORS

This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Exchange Act. Actual results could
differ materially from those projected in the forward-looking statements as a
result of certain of the risk factors set forth below and elsewhere in this
Prospectus. Prospective investors should consider carefully the following
factors, in addition to the other information contained in this Prospectus, in
evaluating the Company and its business before purchasing shares of Common
Stock offered hereby.

DEPENDENCE ON A LIMITED NUMBER OF TELEVISION PROGRAMS

The Company's revenue has historically been derived principally from the
production of a relatively small number of television programs. The Simpsons,
Felix the Cat and The Mask accounted for approximately 35%, 15% and 12%,
respectively, of the Company's total revenue for the year ended December 31,
1995. The Simpsons, Mighty Max and The Critic accounted for approximately 28%,
21% and 17%, respectively, of the Company's total revenue for the year ended
December 31, 1994. As audiences' tastes change frequently, there can be no
assurance that broadcasters will continue to broadcast the Company's
"proprietary" or "fee-for-services" programs or that the Company will continue
to be engaged to produce the programs that it currently produces on a "fee-
for-services" basis. While the Company continually endeavors to develop new
programming, there can be no assurance that revenue from existing or future
programming will replace a possible loss of revenue associated with the
cancellation of any particular program.

LIMITED NUMBER OF TIME SLOTS FOR ANIMATED TELEVISION PROGRAMMING

Film Roman competes for time slots with a variety of companies which produce
animated or live-action television programming. The number of outlets
available to producers of animated programming has expanded in the last decade
due, in part, to growth in the number of broadcast and cable networks.
However, the number of time slots currently allocated to animated television
programming remains limited (a "slot" being a broadcast time period for a
program that either airs five times per week (Monday through Friday) or once
per week (usually on the weekend)). For the 1995-96 season, animated
programming occupied (i) approximately 33 "slots" each week on FOX, CBS, ABC,
UPN and WB networks (the "Networks"); (ii) approximately 16 slots (excluding
slots primarily occupied by repeat programming) each week on cable networks,
such as USA Network, Nickelodeon and HBO; and (iii) approximately 28 slots in
syndication, offered by such syndicators as Buena Vista Television
Distribution, Saban Entertainment, New World Entertainment and Bohbot
Entertainment (based on the Los Angeles area syndicated television market).
See "Business--Animation Industry Overview." During the 1995-96 television
season, the Company produced five animated programs, all of which ran on the
Networks.

LIMITED NUMBER OF BROADCASTERS AND DECLINING VALUE OF LICENSE FEE AGREEMENTS;
MEDIA CONGLOMERATION

The total number of outlets for animated programming has increased in the
last decade. Competition created by the emergence of new broadcasters (such as
UPN, WB, Nickelodeon and the USA Network) has generally caused the market
share of, and license fees paid by, FOX, CBS and ABC to decrease. Even though
the license fees paid by FOX, CBS and ABC have decreased, they continue to be
higher than the license fees paid by the newer Networks. As a result, there
continues to be intense competition for the time slots offered by the
Networks, especially FOX, CBS and ABC. Moreover, broadcasters have recently
begun to demand a greater percentage of the revenue generated from the
exploitation of proprietary rights associated with the programs which they
license, and may seek to control and exploit all of the proprietary rights
associated with programs which they license. These industry-wide trends,
should they continue, may have a significant adverse impact on the Company's
business, results of operations and financial condition.

Over the last decade, broadcasters, distributors and producers of television
and motion picture programming have become increasingly integrated through
mergers, acquisitions, partnerships, joint ventures or other affiliations.
These relationships, coupled with the recent repeal of certain regulations of
the Federal

6
<PAGE>

Communications Commission ("FCC") which had limited the ability of ABC, NBC
and CBS to control certain rights in television programming (see "Business--
Government Regulations"), may result in broadcasters favoring the producers of
animated programming with which they are affiliated, thereby reducing the
number of broadcast slots available for other producers. There can be no
assurance that the number of slots currently available for animated
programming will not decrease, or that the Company will compete successfully
for available time slots.

CONCENTRATION OF CUSTOMERS

Since the number of outlets for the Company's productions are limited,
certain customers have historically accounted for a significant portion of the
Company's revenue. The Company derived approximately 35%, 13%, 13%, 12%, and
10% of its total revenue from its top five customers, Twentieth Television (a
division of Twentieth Century Fox), Adelaide Productions, Inc. (an affiliate
of Columbia Tri-Star), Fox Children's Network (an affiliate of Twentieth
Century Fox), Sunbow Productions and CBS, respectively, for the year ended
December 31, 1995. The loss of any one or more of these customers could have a
material adverse effect on the Company's financial position and results of
operations. No assurance can be given that the Company's existing programs
will continue to be broadcast by its current customers or that the Company
will license its new programs.

RISKS RELATED TO EXPANSION OF PRODUCTION OF PROPRIETARY PROGRAMMING

Substantially all of the programming produced by the Company has been on a
"fee-for-services" basis ("fee-for-services" programming), in which the
Company does not own or control licensing or distribution rights, but may have
profit participation rights. Increasingly, the Company is producing
programming for which it owns or controls licensing and/or distribution rights
("proprietary" programming). Such rights may include domestic and
international broadcast distribution, home video distribution, licensing and
merchandising, feature film and interactive/game development ("proprietary
rights"). Since the Company has only recently begun to retain the proprietary
rights associated with its animated programs, it has a limited history of
operations and management expertise related to the exploitation of such
rights. While the Company seeks to limit its financial risk associated with
its proprietary programming by obtaining commitments prior to production to
cover at least 50% of its direct production costs, there can be no assurance
that the Company will be able to cover the balance of its production costs
through the exploitation of its remaining rights. See "Business--Funding
Production--Proprietary Programming."

POSSIBLE DECLINE IN DEMAND FOR CURRENT PROGRAMS AND UNCERTAINTY OF ACCEPTANCE
OF NEW PROGRAMS

Substantially all of the Company's revenue has been derived from the
production and distribution of animated television programs. Each production
is an individual artistic work, and there can be no assurance that the Company
will be able to continue to create entertaining episodes for its existing
programs or new programs that appeal to broadcasters. Moreover, since the
commercial success of any production is primarily determined by a variety of
factors, including audience reaction, competing programs, other forms of
entertainment, and other factors beyond the Company's control, there can be no
assurance that broadcasters will license the rights to broadcast any of the
Company's programs in development or will renew licenses to broadcast programs
currently produced by the Company. Even if licenses to broadcast the Company's
existing programming are renewed, the popularity of a particular program may
diminish. It is likely that a decrease in the popularity of the Company's
programming will result in reduced revenue generated by the Company's
licensing, merchandising, distribution and other activities associated with
such programs.

OPERATING LOSSES

For the year ended December 31, 1995 and the quarter ended March 31, 1996,
the Company had a net loss of $1.69 million and $0.5 million, respectively.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations." There can be no assurance that the Company will achieve
profitability in the future.

7
<PAGE>

BUDGET AND COST OVERRUNS

The Company reviews cost reports and updates its cost projections regularly.
Although the Company has generally completed its productions within its
budget, there can be no assurance that the actual production costs for its
programming will remain within budget. Risks such as production delays, higher
talent costs, increased subcontractor costs, political instability overseas,
and other unanticipated events may substantially increase production costs and
delay completion of the production of any one or more of the Company's
programs.

RISKS RELATED TO OVERESTIMATION OF REVENUE OR UNDERESTIMATION OF COSTS

The Company follows Financial Accounting Standards Board Statement No. 53,
"Individual Film Forecast" ("FASB 53"), regarding revenue recognition and
amortization of production costs. All costs incurred in connection with an
individual program or film, including acquisition, development, production and
allocable production overhead costs and interest, are capitalized as
television and film costs. These costs are stated at the lower of unamortized
cost or estimated net realizable value. Estimated total production costs for
an individual program or film are amortized in the proportion that revenue
realized relates to management's estimate of the total revenue expected to be
received from such program or film. As a result, if revenue or cost estimates
change with respect to a program or film, the Company may be required to
write-down all or a portion of unamortized costs for such program or film. No
assurance can be given that these write-downs will not have a significant
impact on the Company's results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Accounting Practices."

SEASONALITY

Results of operations in any period depend on the Company's production and
delivery schedule of television programs. Broadcasters typically make most of
their annual programming commitments in the first and second quarters of any
calendar year so that new programs will be ready for delivery in the third
quarter and, to a greater extent, the fourth quarter of that year. As a result
of the production cycle, the Company's revenue is not recognized evenly
throughout the year and a significant portion of such revenue is recognized in
the fourth quarter. The Company's results of operations fluctuate materially
from quarter to quarter and the results of any one quarter are not necessarily
indicative of results for future periods. Cash flows also fluctuate and do not
correlate with revenue recognition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

COMPETITION

The creation, development, production and distribution of television
programming, together with the exploitation of the proprietary rights related
to such programming, is a highly competitive business. The Company faces
intense competition from producers, distributors, licensors and merchandisers,
many of whom are larger and have greater financial resources than the Company.
In addition to competing for available time slots offered by the Networks and
other broadcasters (see "--Limited Number of Time Slots for Animated
Television Programming; Media Conglomeration"), management believes that it
faces competition in two other principal areas:

CREATIVE PROPERTIES AND CREATIVE PERSONNEL

Film Roman competes with other animation companies in the acquisition of
characters, storylines, plots and ideas created by third parties. Such
competition is generally on the basis of which animation company is perceived
to be best able to create and develop a successful program from the initial
idea or character and to fully exploit all potential revenue sources. Film
Roman also competes with other animation companies for the animators, writers,
producers and other creative personnel needed to successfully develop and
produce animated programming. Management believes that it competes for
creative properties and creative personnel with a variety of companies
including The Walt Disney Company, Warner Bros., Hanna-Barbera, DIC, Klasky-
Csupo, Marvel Entertainment, Saban Entertainment, Dreamworks SKG, Nelvana,
Universal Cartoon Studios, Sony Cartoon Studios and Hyperion Productions.

8
<PAGE>

LICENSING AND MERCHANDISING

An important element of the Company's strategy is to license the characters
in its proprietary programs to high quality merchandisers that produce and
distribute a variety of products, ranging from toys to apparel. The Company
believes that in order to fully exploit its licensing and merchandising
rights, it must license such rights to manufacturers and distributors that are
able to distribute merchandise throughout the United States and
internationally. As a result, the Company competes with hundreds of owners of
creative content who seek to license their characters and properties to a
limited number of manufacturers and distributors.

RISKS RELATED TO INTERNATIONAL SUB-CONTRACTING AND SALES

OVERSEAS SUBCONTRACTORS

The Company, like other producers of animated programming, subcontracts some
of the less creative and more labor-intensive components of its production
process to animation studios located in low-cost labor countries, primarily
located in the Far East. With an increasing number of animated feature films
and animated television programs being produced in recent years, the demand
for the services of overseas studios has increased substantially. This
increased demand may lead overseas studios to increase their fees which may
result in increased animated programming production costs incurred by the
Company or the inability of the Company to contract with its preferred
overseas studios.

Many of the subcontractors used by the Company are located in South Korea
which has recently experienced political unrest and the threat of attack from
North Korea. The exacerbation of such conditions could cause significant
economic disruptions in the delivery of animation products to the Company. In
such event, the Company may be required to retain new subcontractors outside
of South Korea. No assurance can be given that different subcontracting
arrangements will be as favorable to the Company as its current arrangements.

INTERNATIONAL SALES

As part of its business strategy to exploit the proprietary rights
associated with its programming or characters, the Company has begun to expand
the distribution of its products in international markets. See "Business--
Principal Elements of the Company's Business--Distribution of Proprietary
Programming--International Distribution." Although approximately 5% of the
Company's revenue for the year ended December 31, 1995 was derived from
licensing international distribution rights to the Company's proprietary
programming, the Company anticipates that revenue from these activities can
grow substantially. The Company's ability to continue to expand its
international business (as well as its ability to contract upon favorable
terms with overseas studios) depends, in part, on the local economic
conditions, currency fluctuations, local changes in regulatory requirements,
compliance with a variety of foreign laws and regulations and cultural
barriers. In addition, political instability in a foreign nation may adversely
affect the ability of the Company to distribute its product in that country.
As a result of the foregoing international risks, there can be no assurance
that the Company's international operations will be profitable.

TECHNOLOGICAL CHANGES; POSSIBLE CHANGES IN PRODUCTION OF COMPANY'S PRODUCTS

The proliferation of new technology may change the manner in which the
Company's programming is created and distributed. Recently, certain animators
have begun to use computer-generated animation, including three-dimensional
digital animation, instead of two-dimensional cel animation, to create their
animated programming. No assurance can be given that the introduction and
proliferation of three-dimensional digital animation or other technological
changes will not cause the Company's current methods of producing animation to
become less cost competitive or less appealing to its audiences. In addition,
there can be no assurance that the Company will be able to adapt to such
changes in a cost-effective manner.

9
<PAGE>

DEPENDENCE UPON KEY PERSONNEL

The Company's success depends to a significant extent upon the expertise and
services of Phil Roman, the Company's President and Chief Executive Officer,
and other key personnel including William Schultz, its Executive Vice
President. The loss of the services of Mr. Roman and/or other key management
personnel could have an adverse effect upon the Company's business, results of
operations and financial condition. The Company has entered into employment
agreements with Messrs. Roman and Schultz and certain of its other key
management personnel. For a description of the terms of such agreements, see
"Management--Employment Agreements." In addition, the Company maintains $5.0
million and $2.0 million "key man" life insurance policies on Messrs. Roman
and Schultz, respectively. There can be no assurance that the Company will be
able to retain its existing management personnel. In addition, the Company's
continued success is highly dependent on the artistic and production
capabilities of its creative staff. The Company believes that its future
success will depend, in part, on its continuing ability to attract, retain and
motivate qualified personnel. Although none of the Company's employees are
represented by a labor union, it is common for animators and other creative
talent to belong to a union and the Company is currently a signatory to the
Screen Actors Guild collective bargaining agreement.

CASUALTY RISKS

Substantially all of the Company's operations and personnel are located in
its North Hollywood headquarters, resulting in vulnerability to fire or other
local conditions, including the risk of seismic activity.

POTENTIAL ANTI-TAKEOVER EFFECTS

Upon completion of the Offering, Phil Roman, the Company's President and
Chief Executive Officer, will beneficially own approximately 35.7% of the
Common Stock and therefore may exercise substantial influence over the
Company's affairs, including whether the Company's operations are acquired by
a third party. The Company's Stock Option Plan and certain of the executive
officers' employment agreements provide for the acceleration of the vesting
and exercisability of stock options and grants of stock thereunder under
certain circumstances, including in the event of certain changes in control of
the Company. In addition, provisions of the Certificate of Incorporation and
Bylaws of Film Roman Holdings, as well as provisions of the Delaware General
Corporation Law, may have the effect of delaying or preventing transactions
involving a change of control of the Company, including transactions in which
stockholders might receive a substantial premium for their shares over then
current market prices, and may limit the ability of stockholders to approve
transactions that they deemed to be in their best interest. For example, under
the Certificate of Incorporation, the Board of Directors is authorized to
issue one or more classes of preferred stock having such designations, rights
and preferences as may be determined by the Board. In addition, the directors
are divided into three classes, each having a term of three years, with the
term of one class expiring each year. These provisions could delay the
replacement of a majority of the directors and have the effect of making
changes in the Board of Directors more difficult than if such provisions were
not in place. Any amendment of the Company's Bylaws by the stockholders or of
certain provisions of the Company's Certificate of Incorporation (including
provisions regarding the classification and election of directors) requires
the affirmative vote of at least 66 2/3% of the shares of Common Stock then
outstanding. See "Description of Capital Stock--Delaware Law and Limitations
on Change in Control."

NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active public market will develop or be
sustained after the Offering. The initial public offering price will be
determined by negotiations between the Company and the Representative (as
defined below), and there can be no assurance that the market price of the
Common Stock after the Offering will equal or exceed the initial public
offering price. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price. Following the
consummation of the Offering, the market price of the Common Stock could be
subject to significant fluctuations in response to variations in results of
operations, general economic and market conditions and other factors.

10
<PAGE>

SUBSTANTIAL DILUTION

Purchasers of Common Stock offered hereby will experience substantial
dilution of $7.14 per share in pro forma net tangible book value per share of
Common Stock from the initial public offering price. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

There will be 8,184,636 shares of Common Stock outstanding immediately
following consummation of the Offering (8,752,386 shares if the Underwriters'
over-allotment option is exercised in full). The 3,785,000 shares of Common
Stock offered hereby (plus an additional 567,750 shares if the Underwriters'
over-allotment option is exercised in full) will be fully tradeable without
restriction or registration under the Securities Act by persons other than
"affiliates" (as defined in the Securities Act) of the Company. The remaining
shares of Common Stock will be "restricted securities" under the Securities
Act and may only be sold pursuant to an effective registration statement under
the Securities Act or an applicable exemption from the registration
requirements of the Securities Act, including Rule 144 thereunder. Holders of
1,481,250 shares of Common Stock have certain registration rights, and upon
completion of the Offering, the Company will file an S-8 Registration
Statement to register up to 1,227,695 shares of Common Stock reserved for
issuance pursuant to the Company's Stock Option Plan. See "Management--Stock
Option Plan." All holders of Common Stock and all directors and executive
officers have agreed with the Underwriters (as defined below) not to offer,
sell, contract to sell, grant any option to purchase or otherwise dispose of
their shares of Common Stock of the Company or any securities convertible into
or exercisable or exchangeable for such Common Stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of such Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation. See "Shares Eligible For Future Sale."

No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or the availability of shares for future sale will have
on the market price of shares of Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock (including shares issuable upon
the exercise of stock options), or the perception that such sales could occur,
could adversely affect prevailing market prices for the Common Stock.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of Common Stock
offered hereby are estimated to be approximately $36.3 million ($42.1 million
if the Underwriters' over-allotment option is exercised in full) after
deducting the estimated underwriting discount and offering expenses payable by
the Company.

The Company intends to use the estimated net proceeds of the Offering as
follows: (i) approximately $1.5 million to pay accumulated but unpaid
dividends on the Redeemable Preferred Stock and the Convertible Preferred
Stock, (ii) approximately $12.0 million for the redemption of the Redeemable
Preferred Stock, (iii) approximately $487,000 to repay short-term debt under
the Company's existing line of credit having a variable interest rate (equal
to 10.75% at March 31, 1996) and maturing on May 31, 1996; and (iv) the
remaining net proceeds to fund the production of animated programming and for
general corporate purposes. See "Capitalization."

DIVIDEND POLICY

The Company does not anticipate paying such dividends in the foreseeable
future. Management anticipates that all earnings and other cash resources of
the Company, if any, will be retained by the Company for investment in its
business. The Company's debt agreements have in the past and are likely in the
future to contain significant restrictions on its ability to pay dividends.

11
<PAGE>

CAPITALIZATION

The following table sets forth the cash and marketable securities, short-
term debt and capitalization of the Company at March 31, 1996, and as adjusted
to reflect the Reorganization and the sale of the shares of Common Stock
offered by the Company hereby (assuming an offering price of $11.00 per share)
and the application of the net proceeds therefrom. See "Use of Proceeds."

<TABLE>
<CAPTION>
AS OF MARCH 31,
1996
--------------------
AS
ACTUAL ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................. $ 4,707 $27,065
======= =======
Short-term debt(1)........................................ $ 487 $ --
======= =======
Redeemable Preferred Stock, $.01 par value, 1,200,000
shares authorized, issued, and outstanding (actual); none
authorized, issued and outstanding (as adjusted)(1)...... $ 6,990 $ --
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares
authorized, none issued and outstanding (as adjusted).. -- --
Convertible Preferred Stock, $.01 par value, 750,000
shares authorized, issued and outstanding (actual);
none authorized, issued and outstanding (as adjusted).. -- (2) --
Common Stock, no par value, 10,000,000 shares
authorized, 1,713,000 shares issued and outstanding
(actual); $.01 par value, 20,000,000 shares authorized,
8,184,636 shares issued and outstanding (as
adjusted)(3)........................................... 1 83
Additional paid-in capital.............................. 4,716 35,509
Retained (deficit)...................................... (3,989) (3,989)
------- -------
Total stockholders' equity............................ 728 31,603
------- -------
Total capitalization...................................... $ 7,718 $31,603
======= =======
</TABLE>
- ---------------------
(1) See Notes 4 and 6 of Notes to Financial Statements.

(2) Actual Convertible Preferred Stock balance as of March 31, 1996 rounds to
zero.

(3) The adjusted number of shares issued and outstanding gives effect to the
Reorganization, the Offering and the Redemption. Excludes 1,227,695 shares
of Common Stock issuable upon the exercise of options granted or to be
granted under the Company's Stock Option Plan. See "Management--Stock
Option Plan."

12
<PAGE>

DILUTION

At March 31, 1996, the net tangible book value of the Company, adjusted to
reflect the effects of the Reorganization, was approximately $728,000 or
$0.16 per share. "Net tangible book value per share as adjusted" is defined as
the book value of tangible assets of the Company, less all liabilities,
divided by the number of shares of Common Stock outstanding after the
Reorganization. Without taking into account any changes in the net tangible
book value as adjusted after March 31, 1996 (other than to give effect to the
sale of Common Stock by the Company in this Offering and the application of
the net proceeds therefrom), the pro forma net tangible book value of the
Company at March 31, 1996 would have been approximately $31,603,000 or $3.86
per share. This represents an immediate increase in pro forma net tangible
book value of $3.70 per share to the existing stockholders and an immediate
dilution of $7.14 per share to new investors. The following table illustrates
the dilution per share:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1)............. $11.00
Net tangible book value per share before offering as
adjusted(2)................................................. $0.16
Increase attributable to purchase by new stockholders in the
Initial Public Offering..................................... 3.70
-----
Pro forma net tangible book value as adjusted after the
Offering...................................................... 3.86
------
Dilution of net tangible book value to new stockholders(3)..... $ 7.14
======
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1996,
the differences between existing shareholders and new investors with respect
to the number of shares owned after the Offering, the total consideration
paid, and the average price paid per share in the Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED(2) TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders... 4,399,636 53.8% $ 77,750 .2% $ 0.02
New investors........... 3,785,000 46.2 41,635,000 99.8 11.00
--------- ----- ----------- -----
Total................. 8,184,636 100.0% $41,712,750 100.0%
========= ===== =========== =====
</TABLE>
- ---------------------
(1) Before deduction of underwriting discounts and commissions and estimated
expenses payable by the Company in connection with the Offering.
(2) Share amounts give effect to the Reorganization.
(3) Dilution is determined by subtracting pro forma net tangible book value
per share from the initial public offering price paid by a new investor
for one share of Common stock.

The computations in the table set forth above assume no exercise of stock
options outstanding under the Company's Stock Option Plan. On the date of this
Prospectus, there were outstanding options to purchase 864,375 shares of
Common Stock at a weighted average exercise price of $7.41 per share. Assuming
the exercise of all such options, the per share dilution to new investors
would be $6.66 as compared to $7.14 presented above.

13
<PAGE>

SELECTED FINANCIAL INFORMATION

The selected financial data set forth below as of December 31, 1994 and 1995
and for each of the two years in the period ended December 31, 1995 are derived
from the Company's financial statements audited by Ernst & Young LLP,
independent auditors, included elsewhere in this Prospectus. The selected
financial data presented below as of and for the year ended December 31, 1993
have been derived from the financial statements of the Company audited by
Tanner, Mainstain & Hoffer. The selected financial data presented below as of
and for the years ended December 31, 1991 and 1992 are derived from the
Company's unaudited financial statements. The selected financial data set forth
below as of March 31, 1996 and for the three months ended March 31, 1995 and
1996 are derived from unaudited financial statements but include all
adjustments (consisting of normal recurring adjustments) which management
considers necessary for a full presentation of results for these periods. The
selected financial data presented below and under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" should be read in
conjunction with the Company's financial statements, including the notes
thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................ $ 9,642 $ 21,943 $ 27,867 $ 36,201 $ 34,341 $ 9,111 $ 7,461
Expenses:
Cost of revenue........ 9,021 20,716 25,675 33,190 33,156 8,765 7,111
Selling, general and
administrative
expenses.............. 266 699 1,368 1,829 2,963 594 851
--------- --------- --------- --------- --------- --------- ---------
Operating income
(loss)................ 355 528 824 1,182 (1,778) (248) (501)
Interest income
(expense), net........ 1 (16) (21) (28) 89 (9) 30
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before
provision for income
taxes................. 356 512 803 1,154 (1,689) (257) (471)
Provision for income
taxes................. -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)...... 356 512 803 1,154 (1,689) (257) (471)
Pro forma provision for
income taxes(1)....... (142) (205) (321) (462) 574 87 --
--------- --------- --------- --------- --------- --------- ---------
Pro forma net income
(loss)(1)............. $ 214 $ 307 $ 482 $ 692 $ (1,115) $ (170) $ (471)
========= ========= ========= ========= ========= ========= =========
Pro forma net income
(loss) attributable to
common stock(1)....... $ 214 $ 307 $ 482 $ 692 $ (2,000) $ (170) $ (954)
========= ========= ========= ========= ========= ========= =========
Pro forma net income
(loss) per common
share(2).............. $ 0.05 $ 0.08 $ 0.12 $ 0.18 $ (0.51) (0.04) (0.24)
========= ========= ========= ========= ========= ========= =========
Pro forma net income
(loss) per common
share, giving effect
to the
Reorganization(3)..... $ 0.04 $ 0.06 $ 0.10 $ 0.14 $ (0.41) $ (0.03) $ (0.20)
========= ========= ========= ========= ========= ========= =========
Pro forma weighted
average number of
shares outstanding,
giving effect to the
Reorganization(3)..... 4,866,918 4,866,918 4,866,918 4,866,918 4,866,918 4,866,918 4,866,918
========= ========= ========= ========= ========= ========= =========
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents........... $ 139 $ 463 $ 448 $ 436 $ 5,176 $ 4,707
Film costs, net of
amortization.......... 7,514 7,660 10,603 12,382 12,379 12,094
Total assets........... 7,958 8,608 11,832 13,694 18,950 18,575
Short-term debt........ 297 356 1,270 1,363 1,737 487
Redeemable Preferred
Stock................. -- -- -- -- 6,749 6,990
Stockholder's equity... 622 345 784 1,691 1,832 728
</TABLE>

14
<PAGE>

- ---------------------
(1) The Company operated as an S Corporation until August 4, 1995. As an S
Corporation, the Company was subject to no federal income taxes and only
minimum state taxes. Pro forma amounts reflect adjustments for additional
income taxes that would have been reported if the Company had been a C
Corporation based upon an estimated statutory rate of 40% in 1991, 1992,
1993 and 1994, and 34% in 1995.

(2) The pro forma net income (loss) per common share and weighted average
number of shares outstanding give effect to the split of the Company's
Common Stock which occurred in July 1995 and are calculated in accordance
with a Staff Accounting Bulletin of the Commission whereby common and
common equivalent shares issued within a 12-month period prior to an
initial public offering are treated as outstanding for all periods
presented if the issue price was less than the proposed initial public
offering price. In addition, shares issuable upon the exercise of options
and warrants and Convertible Preferred Stock within the 12-month period
are considered to have been outstanding since inception of the Company.
The weighted average number of shares outstanding for all periods
presented is 3,893,535. For the year ended December 31, 1995, the pro
forma net loss per common share gives effect to the accretion of the
difference between the carrying value and the liquidation value of the
Redeemable Preferred Stock of $484,929 and to the accrual of dividends of
$400,000 on the Redeemable Preferred Stock. For the three months ended
March 31, 1996 (unaudited), the pro forma net loss per common share gives
effect to the accretion of the difference between the carrying value and
the liquidation value of the Redeemable Preferred Stock of $242,414 and to
the accrual of dividends of $240,000 on the Redeemable Preferred Stock.

Giving effect to (i) the issuance of shares of Common Stock whose proceeds
are to be used to repay the debt and redeem the Redeemable Preferred Stock,
and (ii) the reduction of the interest and dividend accruals resulting from
the repayment of the outstanding debt and redemption of the Redeemable
Preferred Stock, the supplemental loss per share for the year ended
December 31, 1995, and the three months ended March 31, 1996 would have
been $(1.39) and $(1.19), respectively. In addition, the loss attributable
to common stockholders used for the supplemental loss per share calculation
has been increased by $5,724,212 and $5,239,212 for the year ended December
31, 1995 and the three months ended March 31, 1996, respectively, which
represents the excess of the price to be paid for the redemption of the
Redeemable Preferred Stock over its carrying value. The supplemental loss
per share does not give effect to the Reorganization.

(3) The pro forma net income (loss) per common share and weighted average
number of shares outstanding, both giving effect to the Reorganization,
reflect the adjustments as outlined under "The Reorganization" in the
Prospectus Summary.

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Film Roman Holdings was incorporated in Delaware in May 1996 in order to
hold all of the outstanding capital stock of Film Roman California. As a
result of the Reorganization, Film Roman California will become a wholly-owned
subsidiary of Film Roman Holdings immediately prior to the closing of the
Offering. See "Certain Transactions--Reorganization."

In 1995 Film Roman California privately placed the California Redeemable
Preferred Stock and warrants to purchase California Common Stock with certain
investors for an aggregate purchase price of $12 million. See "Certain
Transactions--1995 Private Placement."

Film Roman creates, develops, produces and distributes high quality, family-
oriented animated television programming. Historically, the Company has
produced substantially all of its programming for third parties on a "fee-for-
services" basis. Increasingly, the Company is producing programming for which
it controls the "proprietary rights" associated with such programming
(including, for example, international distribution and licensing and
merchandising rights). The Company has recently expanded its internal creative
development of characters and program concepts and has established an
international distribution and a licensing and merchandising division to
support the exploitation of the proprietary rights associated with its
characters and programs.

REVENUE AND COST RECOGNITION

The Company follows Financial Accounting Standards Board Statement No. 53
("FASB 53") for accounting practices related to revenue recognition and
amortization of production costs for its fee-for-services and proprietary
programming.

The Company recognizes revenue when the programming is available pursuant to
the terms of the production or license agreement, typically when the series
has been delivered to and accepted by the customer or licensee, as the case
may be. Cash collected in advance of the time of availability is recorded as
deferred revenue. Profit participations are recognized as cash is received.

All costs incurred in connection with an individual program or film,
including acquisition, development, production and allocable production
overhead costs and interest are capitalized as television and film costs.
These costs are stated at the lower of unamortized cost or estimated net
realizable value. Estimated total production costs for an individual program
or film are amortized in the proportion that revenue realized relates to
management's estimate of the total revenue expected to be received from such
program or film.

OVERHEAD ALLOCATION

Overhead is allocated to production costs on the basis of the total
allocable overhead times the ratio of direct production costs incurred on a
program by program basis to total production costs incurred during the period.
The overhead allocation percentage is determined on the basis of management's
estimates of the percentage of overhead costs which can be attributable to the
productions in progress during the period.

INCOME TAXES

Prior to August 4, 1995, the Company was an S Corporation subject to
taxation under Subchapter S of the Internal Revenue Code of 1986, as amended
(the "Code"). As a result, the net income of the Company, for federal (and
some state) income tax purposes, was reported by and taxed directly to the
Company's sole stockholder, rather than the Company. The Company's S
Corporation status terminated on August 4, 1995 and

16
<PAGE>

the Company became a C Corporation subject to corporate taxation. No adverse
tax consequences to the persons who become stockholders in the Offering are
expected to result from the Company's change to C Corporation status. Pro
forma amounts for the periods presented reflect adjustments for income taxes
that would have been reported if the Company had been a C Corporation based
upon an estimated statutory rate of 40% in 1993 and 1994, and 34% in 1995.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995

Total revenue for the three months ended March 31, 1996 decreased by 18% to
$7.5 million from $9.1 million for the same period in 1995. This decrease was
primarily attributable to a decrease in the total number of episodes produced
and delivered from 16 to 12 and a decrease in revenue from profit
participations. This decrease was partially offset by international sales of
proprietary programs.

Cost of revenue for the three months ended March 31, 1996 decreased by 19%
to $7.1 million from $8.8 million for the same period in 1995, primarily due
to a decrease in production costs related to decreased episodes in production.
Cost of revenue, as a percentage of revenue, decreased to 95% for the three
months ended March 31, 1996 from 96% for the same period in 1995.

Total selling, general and administrative expenses increased for the three
months ended March 31, 1996 by 43% to $0.9 million from $0.6 million for the
same period in 1995. The increase was primarily due to the expansion of the
Company's licensing and merchandising division ($0.1 million), international
division ($0.1 million) and interactive division ($0.1 million). As a
percentage of total revenue, selling, general and administrative expenses
increased to 11% for the three months ended March 31, 1996 from 7% for the
same period in 1995.

Operating loss increased to $0.5 million for the three months ended March
31, 1996 from $0.2 million for the same period in 1995.

The pro forma income tax benefit was $0.1 million for the three months ended
March 31, 1995. The Company became a C corporation on August 4, 1995 and
therefore there was no pro forma income tax provision for the three months
ended March 31, 1996.

As a result of the above, pro forma net loss increased to $0.5 million for
the three months ended March 31, 1996 from $0.2 million for the same period in
1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994

Total revenue decreased by 5% to $34.3 million in 1995 from $36.2 million in
1994, primarily due to a decrease in the total number of episodes produced and
delivered. For the three series that were produced and delivered in both 1994
and 1995, six fewer episodes were produced and delivered in 1995 than in 1994.
In addition, the Company produced three series in 1994 which were not renewed.
This was partially offset by three new series produced and delivered in 1995.
These three new series produced in 1995 represented 19 fewer episodes than the
three series produced in 1994. Although 25 fewer episodes were produced and
delivered in 1995 than in 1994, revenues per episode increased 22%. This
decrease in total revenue was partially offset by an increase in 1995 of
revenue from profit participations of $0.9 million.

Although 25 fewer episodes were produced and delivered in 1995, cost of
revenue was $33.2 million in 1995 and 1994. Cost of revenue, as a percentage
of revenue, increased to 97% in 1995 from 92% in 1994. This increase was
primarily due to higher direct production costs of new shows produced and
delivered in 1995 and an increase in total allocated overhead.

17
<PAGE>

Total selling, general and administrative expenses increased by 62% to $3.0
million in 1995 from $1.8 million in 1994, primarily due to increased costs
related to the expansion of the Company's licensing and merchandising division
($0.4 million), interactive division ($0.2 million) and international division
($0.2 million) and an increase in rent and salaries ($0.3 million). As a
percentage of total revenue, selling, general and administrative expenses
increased to 8.6% in 1995 from 5.0% in 1994.

Operating income (loss) decreased by $3.0 million to ($1.8 million) in 1995
from $1.2 million in 1994.

The pro forma income tax benefit was $0.6 million in 1995, compared to a
provision of $0.5 million in 1994.

As a result of the above, there was a pro forma net loss of $1.1 million in
1995 compared to pro forma net income of $0.7 million in 1994.

YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993

Total revenue increased by 30% to $36.2 million in 1994 from $27.9 million
in 1993. This increase was primarily due to an increase of 20 episodes
produced and delivered.

Cost of revenue increased by 29% to $33.2 million in 1994 from $25.7 million
in 1993, primarily due to an increase in production costs related to increased
episodes in production. As a percentage of revenue, cost of revenue was 92%
for 1993 and 1994.

Total selling, general and administrative expenses increased by 34% to $1.8
million in 1994 from $1.4 million in 1993, primarily due to the establishment
of the Company's international division ($0.2 million) and the addition of new
personnel ($0.2 million). As a percentage of total revenue, selling, general
and administrative expenses were 5% in 1994 and 1993.

Operating income increased by 43% to $1.2 million in 1994 from $0.8 million
in 1993. As a percentage of total revenue, operating income was 3% in 1993 and
1994.

The pro forma income tax provision was $0.5 million in 1994, an increase
from $0.3 million in 1993 as a result of the increase in pretax income.

As a result of the above, pro forma net income increased to $0.7 million in
1994 from $0.5 million in 1993.

LIQUIDITY AND CAPITAL RESOURCES

As the Company endeavors to develop and produce more proprietary programs
and properties, and retain more of the exploitation rights thereto, greater
capital resources may be required to finance production. To the extent the
Company is not able to cover all of its production costs from the licensing of
rights prior to production, the Company may have to utilize its own funds.

The Company intends to increase its presence in the licensing and
merchandising and international distribution markets for its proprietary
programming. These markets have not historically been a material source of
revenue for the Company. To the extent the Company is not able to cover all of
its production costs from the licensing of some of the available rights prior
to production, the Company will need to finance production costs in advance of
generating revenue.

In 1995, financing activities generated cash of approximately $23.1 million,
consisting primarily of approximately $10.7 million from the proceeds from the
issuance of Redeemable Preferred Stock and warrants and $12.4 million from the
increase in debt payable to third party lenders. This was supplemented by an
increase of cash generated by operating activities (after adding back
amortization of film costs) of approximately $28.7 million. Of the cash
provided by financing and adjusted operating activities, approximately $33.2
million

18
<PAGE>

was used to fund productions, approximately $12.0 million was used to reduce
outstanding third party debt and approximately $1.8 million was used to pay
dividends to the common stockholder. After other changes in operating assets
and liabilities, net cash increased by $4.7 million in 1995. At December 31,
1995, the Company had cash on hand of approximately $5.2 million. For the
three months ended March 31, 1996, operating activities (after adding back
amortization of film costs) generated cash of approximately $8.1 million. Of
the cash provided by operating activities, approximately $6.8 million was used
to fund productions and the balance to reduce outstanding third party debt.
After other changes in operating assets and liabilities, net cash decreased by
approximately $0.5 million at March 31, 1996. As of March 31, 1996, the
Company had cash on hand of approximately $4.7 million.

Currently, the Company has a $1,500,000 revolving line of credit with First
Charter Bank. The line of credit bears interest at 1% over the commercial base
rate (11% at December 31, 1995) which is paid monthly, is secured by various
assets of the Company and personally guaranteed by the President of the
Company, and matures on May 31, 1996. The Company is currently negotiating
with First Charter Bank to extend the maturity of its current revolving line
of credit until such date as the credit facility, outlined below, is secured.

The Company is seeking to arrange a $5,000,000 credit facility, secured by
assets of the Company and structured as a two-year revolving credit line.
However, there can be no assurance that it will be able to do so on terms that
are satisfactory to the Company.

Broadcasters typically make most of their annual programming commitments in
the first and second quarters so that new programs will be ready for broadcast
in the third and fourth quarters of the same year. When the Company is
delivering shows to broadcasters, particularly in the fourth quarter, the
Company's receipts of cash generally are less than its expenditures of cash.
As a result of this difference, the Company may be forced to draw on its line
of credit. Additionally, revenue and production fees can vary significantly
between programs. These amount depend on the cost of producing and
distributing the programs, and Film Roman's participation in revenue as
negotiated with other parties.

Management believes that the net proceeds to the Company from the Offering,
together with the Company's existing and additional borrowings, cash on hand,
and anticipated cash flow from operations, will be sufficient to fund the
Company's operating requirements for at least the next 24 months.

19
<PAGE>

BUSINESS

OVERVIEW

Film Roman creates, develops, produces and distributes high quality, family-
oriented animated television programming. Since the Company was founded by
Phil Roman in 1984, it has become the leading independent animation studio in
North America, producing more animated series for broadcast on the Networks
than any other independent animation studio for the 1996-97 television season.
Film Roman productions include The Simpsons, Garfield & Friends, Bobby's
World, Felix the Cat, Mighty Max, The Critic and The Mask. The Company is
currently producing eight animated series and two specials that will air on
ABC, CBS, FOX and USA Network, as well as in first-run syndication. The
Company has produced at least three series each season for the Networks since
1990.

The Company believes that it has a reputation within the entertainment
industry as a reliable producer of high quality animated programming, making
it one of a select group of suppliers of animated programming to the Networks.
This reputation in the animation industry is critical because animated series
are ordered for production without the benefit of a pilot episode. As a
result, programmers rely to a significant degree on a studio's track record
for producing high quality programming that is delivered on schedule and
within budget. At the conclusion of the 1996-97 broadcast season, the Company
projects that it will have produced in excess of 550 episodes of animated
programming.

HISTORY

Phil Roman began his animation career in 1955 at The Walt Disney Company as
an assistant animator on Sleeping Beauty. Over the next 30 years, Mr. Roman
worked at many of the major studios, including MGM Animation and Warner Bros.
Cartoons, and was an animator on such productions as The Cat in the Hat, How
the Grinch Stole Christmas, George of the Jungle, Popeye, Snoopy Come Home and
Lord of the Rings. Mr. Roman also directed 13 Emmy-nominated Charlie Brown
specials.

From its inception in 1984, the Company quickly developed its reputation for
producing quality animation with the production of the Emmy award-winning
television special, Garfield In The Rough. Based upon the success of that and
subsequent Garfield specials, the Company was engaged to produce a weekly
half-hour Garfield series on CBS which, in its second season, was expanded to
a weekly one-hour block. In 1989, the Company, together with comedian Howie
Mandel, developed the concept for the series Bobby's World, which the Company
produced for Fox Children's Network. Bobby's World, entering its seventh
season, continues to be a highly-rated program. As a result of the Company's
strong record of producing high quality animated series, Gracie Films and
Twentieth Television (a division of Twentieth Century Fox) approached Film
Roman in 1991 to produce the successful Simpsons series, which had been
previously produced by a competitor of the Company. To date, Film Roman has
produced 96 episodes of The Simpsons and has another 26 episodes currently in
production.

Historically, the Company has produced substantially all of its programming
for third parties on a "fee-for-services" basis. Increasingly, the Company is
producing programming for which it controls the proprietary rights associated
with such programming (including, for example, international distribution and
licensing and merchandising rights). Through the retention and exploitation of
these proprietary rights, the Company believes that it can earn an attractive
return on its investment and, at the same time, build a library of characters
and programs that will have lasting value. Three of the eight series the
Company is producing for the 1996-97 television season are proprietary--Felix
the Cat (CBS), C-Bear & Jamal (FOX) and Mortal Kombat (USA Network).

20
<PAGE>

STRATEGY

Film Roman's business strategy is to:

. CREATE AND DEVELOP POPULAR CHARACTERS AND PROGRAMS. The Company seeks
to create and develop popular characters and programs that will form
the foundation of enduring character and program franchises. Because
the Company was founded by an animator and has a corporate culture that
emphasizes artistic integrity, the Company believes that it has
consistently attracted some of the most creative artists and
storytellers in the animation industry. The Company believes that
popular characters and program concepts, when creatively developed and
artistically produced, have substantial value in many areas of
exploitation, such as international distribution, licensing and
merchandising, feature film and interactive rights. Popular characters
and programs also enhance the value of the Company's library and may
provide opportunities for exploitation in the future as other means of
exploitation emerge. With its track record of producing high quality,
popular programs, the Company believes it is well-positioned to create
character and program franchises.

. INCREASE PRODUCTION OF PROPRIETARY PROGRAMMING. The Company intends to
continue increasing the amount of proprietary programming it produces
while maintaining a base of "fee-for-services" programming. The Company
believes that its profits can be enhanced by retaining the proprietary
rights to its characters and programs because the Company can better
exploit these rights due to its superior understanding of its
properties. The Company can also optimize its investment in each of its
character and program franchises by coordinating all licensing,
merchandising, international distribution and other activities in order
to maximize the value of such franchises. Moreover, by controlling
proprietary rights, the Company eliminates third party agency and
distributor fees and, at the same time, may capture the profits such
third parties would otherwise retain. See "--Principal Elements of the
Company's Business--Funding Production--Proprietary Programming."

. EXPLOIT LICENSING AND MERCHANDISING RIGHTS. The Company intends to
exploit the licensing and merchandising of its proprietary characters
in order to generate revenue and to increase the popularity of its
characters and programs. By licensing its proprietary characters to
select manufacturers and distributors of consumer products such as
toys, apparel, school supplies, housewares and books, the Company seeks
to capture a portion of the growing licensing and merchandising market
which features entertainment properties, such as animated characters.
In 1995, this segment of the merchandising and licensing market had
retail sales in the United States and Canada in excess of $16 billion.
See "--Principal Elements of the Company's Business--Licensing and
Merchandising."

. CONTROL AND EXPAND INTERNATIONAL DISTRIBUTION. The Company intends to
generate revenue from the distribution of its proprietary programming
to the growing international market. The Company's programs are
currently broadcast in over 50 countries. Due in part to the growth in
the number of international television outlets, the global demand for
animated programming continues to expand. Recently, the Company has
begun to distribute its proprietary programming internationally through
its international division, rather than selling these international
distribution rights to third parties. By retaining these rights, the
Company is able to earn distribution fees while ensuring that its
international distribution rights are properly managed, thereby
increasing the popularity of its characters and programming worldwide.
See "--Principal Elements of the Company's Business--Distribution of
Proprietary Programming--International Distribution."

. PURSUE NEW BUSINESS OPPORTUNITIES WITH MINIMAL FINANCIAL RISK. The
Company intends to pursue new business opportunities, particularly
those which capitalize on the Company's proprietary rights, while
minimizing the financial risk associated with such opportunities. The
Company is currently producing two interactive projects and is
exploring new areas for possible exploitation, including on-line
services. The Company also seeks strategic alliances with third parties
in pursuing feature film opportunities and currently has one film in
development at MCA. The Company does not intend to commence production
of projects related to these new business opportunities, unless
substantially all of the Company's direct costs of production are
covered by third parties. See "--Principal Elements of the Company's
Business--Interactive Products; --Feature Films."

21
<PAGE>

. BUILD A LIBRARY. The Company intends to build a library of proprietary
programs which can be licensed and relicensed in the growing television
marketplace. The Company's ownership and control of distribution
rights, coupled with the Company's enduring and popular characters,
should provide permanent and increasing value for the Company's
programming. The Company believes that, as the number of exhibition
outlets grows domestically and internationally, its library will become
increasingly valuable. See "--Principal Elements of the Company's
Business--Library."

There can be no assurance given that the Company will be successful in
implementing this strategy. The discussion of the Company's strategy contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Actual results could
differ materially from those projected in these forward-looking statements as
a result of certain risk factors described elsewhere in this Prospectus. See
"Risk Factors."

ANIMATION INDUSTRY OVERVIEW

Animation has been a major entertainment medium for decades. Since cartoon
characters appear the same dubbed in any language, animation easily crosses
national and language barriers. In addition, animation generally does not
become "dated" as does live-action programming, allowing an animated series to
be enjoyed by each new generation of children.

Children are the primary target market for animated television programming.
Nielsen data indicate that children aged two to eleven are the nation's
heaviest consumers of television, watching an average of almost 22 hours each
week. Growth in advertising spending targeted at children and the expansion in
the number of television channels dedicated to children's programming around
the world have caused an increase in the demand for animated television
programming.

Animated programming has expanded beyond the traditional Saturday morning
line-up. Monday through Friday mornings and afternoons now attract an even
greater number of young viewers than Saturday morning. There are many
programming blocks targeted toward children, including "The Disney Afternoon,"
Fox Children's Network and WB Kids. In addition, UPN and the USA Network, as
well as many first-run syndicators, provide programming blocks of animation on
Sunday mornings. Furthermore, programming successes such as The Simpsons and
Beavis & Butthead demonstrate that animation also appeals to adults.

Increases in cable and satellite channels worldwide and the privatization
and expansion of the international broadcast industry are providing additional
opportunities for growth for animation companies, especially those companies
which own and distribute their own programs.

U.S. TELEVISION

Networks. The United States network television market is the most valuable
market to producers of animated programming. Networks generally reach the
largest audiences and pay the highest license fees, enabling a producer to
finance a more significant portion of its production costs than if a program
is licensed to a cable network or first-run syndicator. Weekend morning
children's programming now airs on ABC, CBS, FOX, UPN and WB. In addition, FOX
and WB broadcast animated programming for young audiences during weekday
mornings and afternoons. NBC has not broadcast children's programming,
including animation, since 1992.

An initial network license generally increases the value of the program in
other markets, including international television and subsequent "runs" in the
U.S. cable, syndication, and home-video markets. For the 1995-96 season,
animated programming occupied approximately 33 slots on the Networks (a "slot"
being a broadcast time period for a program that either airs five times per
week (Monday through Friday) or once per week (usually on the weekend)).

22
<PAGE>

Syndication. Syndication provides an important first-run, as well as repeat,
broadcast market for animated programs. Traditionally, syndication has been
populated by programs that support merchandise and whose characters are
featured in toy lines, apparel and other consumer products. Based on the Los
Angeles area syndicated television market for the 1995-96 season, animated
programming occupied approximately 28 slots each week in syndication,
distributed by such syndicators as Buena Vista Television Distribution, Saban
Entertainment, Bohbot Entertainment and New World Entertainment.

Cable and Direct Broadcast Satellite ("DBS"). Cable and DBS are increasing
their audience share among children. The growth in the number of cable
channels and the development of DBS provides additional outlets for animated
programming. The cable channels which currently broadcast animated programs
include Nickelodeon, USA Network, The Disney Channel, The Cartoon Network, The
Comedy Channel, The Family Channel, HBO, Showtime and MTV. For the 1995-96
season, animated programs occupied approximately 16 slots (excluding slots
primarily occupied by repeat programming) each week on United States cable
networks.

INTERNATIONAL TELEVISION

The growth in the number of international television outlets has created
additional global demand for animated programming. The privatization of the
international television industry has encouraged a ratings/revenue-oriented
focus among international broadcasters, thereby increasing the demand for
high-quality television entertainment. Animated programs produced in the
United States have enjoyed wide acceptance internationally. In addition, the
international market has experienced an increase in the number of cable and
satellite programming services. These added programming services have created
an opportunity for distributors, including the Company, to license
simultaneously both traditional broadcast and satellite programming rights
within the same territory. International television, cable, satellite and home
video sales of an animated program produced in the United States can account
for almost half of the revenue for a given program.

LICENSING AND MERCHANDISING

Due to the significant revenue that can be generated from licensing and
merchandising television characters, producers and owners of animated
characters seek to drive sales of toys and other licensed products through the
production and distribution of programs featuring their characters. According
to "The Licensing Letter," U.S. and Canadian retail sales of products derived
from licensed entertainment properties were approximately $16 billion in 1995.
Sales of products, such as toys, apparel and games, that feature the likeness
of an animated character have generated significant profits for the owners of
such characters. There are numerous programs (such as The Teenage Mutant Ninja
Turtles, G.I. Joe, Power Rangers, Sonic the Hedgehog and Transformers) which
were initially produced in large part to support the sales of merchandise
associated with these programs.

THE COMPANY'S TELEVISION PROGRAMMING

During the 1996-97 television season, Film Roman expects that ten of its
series occupying over fifteen hours of animated programming (including new and
repeat programming) will air each week, as described below. No assurances can
be provided, however, that any series will be aired during the upcoming
television season or that any series that is aired will not be cancelled.

23
<PAGE>

FILM ROMAN TELEVISION PROGRAMMING TO BE AIRED DURING 1996-97 SEASON
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EPISODES IN
PRODUCTION YEARS
FOR 1996-97 PROGRAM ON CURRENT
SERIES SEASON SCHEDULE(1) AIR(2) BROADCASTER(S) PROGRAM DESCRIPTION
- --------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <S>
"FEE-FOR-SERVICES PROGRAMMING":
- --------------------------------------------------------------------------------------------------
Bobby's World 3 Mon.-Fri. 7 FOX Emmy nominated series starring
Howie Mandel.
- --------------------------------------------------------------------------------------------------
8 Saturday 2 CBS Based on the blockbuster film
starring Jim Carrey.
-------------------------------------------------------------
The Mask
30 Mon.-Fri. 1 First-run
Syndication
- --------------------------------------------------------------------------------------------------
Richie Rich 13(3) TBD 1 First-run Cartoon shorts based on Harvey
Syndication Comics' classic character.
- --------------------------------------------------------------------------------------------------
26 Sunday 5(4) FOX Emmy award-winning series
starring
Homer, Marge, Bart, Lisa and
Maggie Simpson.
-------------------------------------------------------------
The Simpsons
-- Mon.-Fri. 5(4) Syndication
- --------------------------------------------------------------------------------------------------
The Critic -- TBD 2 Comedy Central Highly acclaimed series which
originally aired on ABC in prime-
time featuring the voice of Jon
Lovitz.
- --------------------------------------------------------------------------------------------------
Garfield & -- Mon.-Fri. 7 Cartoon Network Emmy award-winning series
Friends and TBS featuring that lazy, lasagna-
eating cat.
- --------------------------------------------------------------------------------------------------
Mighty Max -- TBD 3 USA Network Based on Mattel's popular
children's toy line.

"PROPRIETARY PROGRAMMING":
- --------------------------------------------------------------------------------

C-Bear & Jamal 10 Saturday 1(5) FOX Features the voice of rap star
Tone Loc as a street-wise teddy
bear.
- --------------------------------------------------------------------------------------------------
Felix the Cat 8 Saturday 2 CBS Features the wonderful, wonderful
cat popular with children and
adults for decades.
- --------------------------------------------------------------------------------------------------
Mortal Kombat: 13 Sunday 1 USA Network Loosely based on the hit video
game.
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Program schedule for the season includes a combination of new and/or repeat
half-hour episodes.
(2) Number of seasons for which new episodes were/are being produced, including
production for the 1996-97 season.
(3) Each Richie Rich cartoon short runs for seven minutes.
(4) The Simpsons has been produced by the Company for five seasons and has run
in syndication for two seasons.
(5) Three additional episodes were produced for broadcast during the 1995-96
season.

24
<PAGE>

PRINCIPAL ELEMENTS OF THE COMPANY'S BUSINESS

The Company's business of creating, developing, producing and distributing
high quality, family-oriented animated television programming, together with
the exploitation of any proprietary rights controlled by the Company, is
described in the sections below and includes: (i) acquiring, creating and
developing programming properties; (ii) funding the production of proprietary
programming; (iii) producing its programs; (iv) distributing its programming
domestically and internationally; (v) licensing and merchandising the rights
to its proprietary programs; (vi) producing feature films; (vii) developing
and licensing distribution rights to interactive software products; and (viii)
building a library.

ACQUISITION, CREATION AND DEVELOPMENT OF PROGRAMMING

The Company pursues ideas and properties it believes feature unique and
popular characters with broad appeal. These ideas and properties may originate
from a variety of sources. As a result of the Company's reputation and
position in the industry, many creators, rightsholders and even broadcasters
bring new concepts to the Company for development and production. The Company
may enter into an option agreement to acquire rights to an existing character,
such as Felix the Cat, develop internally a new character based on an existing
persona or consumer product, such as C-Bear & Jamal and Mighty Max,
respectively, or create or acquire an entirely new idea or character.

Once the Company has created a new property or acquired the rights to an
existing property, the Company begins development by preparing a presentation
to "pitch" the project to targeted domestic broadcasters (and, on some
occasions, to international broadcasters and product licensees). These
presentations generally consist of artwork featuring character designs and
"set-ups" (characters in a story scene) and may also include a brief written
description of the characters and sample storylines. If a broadcaster is
interested in developing an idea further, it will acquire an exclusive option
to order the production of episodes based upon the idea and will agree to
reimburse the Company for a portion of the further development costs if it
does not ultimately order production of any episodes. A broadcaster generally
collaborates in the further stages of development and will have the right to
approve the selection of writer, director and voice-over actors and the
creation of a pilot script.

The Company currently has numerous projects in various stages of internal
development, including Shamu and the Crew and Sea Toons (both being developed
with a division of Anheuser-Busch, owner of Sea World), The Blues Brothers
(based on the Dan Aykroyd and John Belushi characters), BRUNO the Kid
(featuring the voice of Bruce Willis) and 21 (a project which is featured in a
popular comic book series and for which the Company has secured a master toy
license with Playmates Toys). Although the Company has many projects in
development and is continuously considering new ideas, only a relatively small
number of such projects will ultimately be produced.

FUNDING PRODUCTION--PROPRIETARY PROGRAMMING

Historically, the Company has produced programming almost exclusively on a
"fee-for-services" basis. Fees paid to the Company for these production
services generally range from $300,000 to $500,000 per episode and typically
cover all direct production costs plus a profit margin. Prior to commencing
production of its proprietary programming, the Company seeks a domestic
broadcaster to commit to license a program for a fee which generally covers
more than 50% of the Company's direct production costs.

For its proprietary programming, the Company generally does not commence
production unless the Company has obtained commitments to cover at least 50%
of the Company's direct production costs through a combination of one or more
of the following sources: (i) network, cable, syndication, or other license
fees for audiovisual exploitation of the program in the United States, (ii)
licensing of merchandising, home video, and international distribution and
interactive rights, and (iii) strategic partners. For example, production
costs for the Company's first two proprietary programs, Felix the Cat and C-
Bear & Jamal, were covered prior to production by a combination of domestic
licensing commitments from the Networks and international distribution

25
<PAGE>

arrangements. With capital provided by a 1995 equity private placement, the
Company was able to cover the balance of production costs without having to
sell its other proprietary rights, including licensing and merchandising
rights for C-Bear & Jamal. Through the retention and exploitation of these
rights, the Company seeks to earn an attractive return on its investment while
at the same time building a library of programming which will have lasting
value.

While the Company seeks to limit its financial risk associated with its
proprietary programming by obtaining commitments prior to production to cover
at least 50% of its direct production costs through these activities, there
can be no assurance that the Company will be able to cover the balance of its
production costs through the exploitation of its remaining rights. Reasons the
Company may not recover its production costs include: (i) a proprietary
program may not generate demand for licensed products because it was
cancelled; (ii) a proprietary program and/or its related licensed products may
not appeal to the Company's targeted audience or may not appeal to the same
audience targeted by a licensee; or (iii) a licensee may not effectively
market and distribute the Company's programming domestically or
internationally. Moreover, since certain international distribution
arrangements and other domestic and international licensing activities are
conditioned upon the U.S. broadcast of a minimum number of programming
episodes on a network or cable channel, no assurance can be given that any
series will be broadcast in the U.S. for a sufficient period in order to meet
these contractual conditions.

Unlike television production of proprietary programming, the Company does
not intend to commence production of an interactive or feature film projects
unless substantially all of the direct costs of production are funded by a
third party.

ANIMATED TELEVISION PRODUCTION

The Company generally commences production of a program during the first and
second quarters of any year for delivery during the third quarter, and to a
larger extent, the fourth quarter of that same year. The Company typically has
seven to nine months to produce and deliver an order of 13 half-hour episodes
(the number of episodes commonly ordered for the first year of a program). The
first step of the Company's production process is the creation of the script.
The Company selects a story editor to supervise the preparation of each
episode's script by various freelance script writers. The artists depict the
story and action in storyboards which provide a blueprint for the animation
process. Voices and songs are recorded and the recordings are analyzed and
timed so that the animation can be synchronized to the voice track. Based on
the script and storyboard, the Company's artists create character designs, as
well as key background drawings and paintings. These essential elements are
assembled into a pre-production package for each episode which is then shipped
to an overseas subcontractor. Subcontractors use the pre-production materials
to perform most of the labor-intensive aspects of production. Most of these
subcontractors are located in low-cost labor countries in the Far East,
including South Korea, Taiwan, China and The Philippines. The subcontractor
ships the negative and work print for each episode to Film Roman. The film is
then taken through a post-production process which includes editing the
picture and dialogue, transferring the filmed images to video tape, creating
sound effects, composing and producing the musical score and mixing and
synchronizing the sound to the picture. After the post production process, an
episode is ready for delivery.

DISTRIBUTION OF PROPRIETARY PROGRAMMING

Domestic Television Distribution. Prior to commencing production of its
proprietary programming, the Company generally licenses broadcast rights to a
U.S. broadcaster. See "--Funding Production--Proprietary Programming." License
fees paid by Networks and cable networks for the Company's proprietary
programming generally cover over 50% of the Company's direct production costs.
License fees paid by first-run syndicators for the Company's proprietary
programming generally cover less than 50% of the Company's direct production
costs, and, under certain circumstances, first-run syndicators pay no license
fees. The Company may, however, share in a portion of the revenues generated
from the sale of advertising aired by a syndicator during the broadcast of the
Company's programs. The license agreement typically includes provisions
governing the license fee, the term during which the program will be
broadcast, the number of episodes and the territories in which the

26
<PAGE>

episodes will be broadcast. Upon the expiration of an initial broadcast
license, the exhibition rights for the applicable program revert to the
Company and are available for relicensing. In 1995, substantially all of the
Company's revenue was generated from the domestic distribution of its
programming to U.S. television broadcasters.

International Distribution. In 1993, the Company began its transition to the
production of proprietary programming with the establishment of its
international division to capture the economic benefits of owning and
controlling the international distribution rights to its proprietary
programming. The Company believes that by owning and controlling the
international distribution rights to its programming, it can not only generate
significant revenue from the licensing of such programming, but also it can
establish an international presence for the Company and its properties which
should support its international licensing and merchandising efforts.
Furthermore, a strong international division provides the Company with direct
access to market information and feedback which will enable it to produce
programs that are even more marketable on a worldwide basis. Since the
establishment of its international distribution division, Company has entered
into audio-visual license arrangements with international broadcasters and
distributors to exhibit and distribute certain of the Company's proprietary
programming. The Company has also entered into a significant distribution and
co-production agreement with TaurusFilm GmbH ("TaurusFilm"), a division of
Kirch Group, a German media conglomerate. Under the terms of the agreement,
TaurusFilm has an exclusive "first look" right to license Film Roman's
proprietary programming for distribution in certain European territories.
Important features of this arrangement are: (i) TaurusFilm pays a license fee
during production of each program licensed under the agreement (which the
Company estimates will account for between one-third and two-thirds of the
Company's total international audio-visual revenue derived from any such
program); (ii) once TaurusFilm licenses a program, it is required to license
all episodes of that program for all seasons of production; (iii) TaurusFilm
is required to license a minimum number of the Company's proprietary programs
produced for the 1995-96 through the 1998-99 broadcast seasons, and (iv) the
term of the license for each program is 22.5 years. The Company expects that
its international distribution activities will increase as it produces more
proprietary programming. In 1995, revenue generated from its international
distribution activities was $1.8 million, or 5% of total revenue.

Home Video Distribution. The Company may also license to a home video
distributor the rights to manufacture and distribute video cassettes and disks
for a specified term and in a defined territory. The Company generally
receives a non-refundable advance to be applied against royalties which may
range from 8% to 25% of the wholesale selling price of a video cassette or
disk. Although the Company expects that revenue from licensing its home video
distribution rights will increase substantially in the future, the Company
derived less than 1% of its total revenue from such licensing activities in
1995.

LICENSING AND MERCHANDISING

The Company's licensing and merchandising division seeks licensing and
merchandising opportunities for characters and programs to which the Company
retains proprietary rights. Controlling licensing and merchandising rights
provides the Company the opportunity to earn revenue from the sale of products
bearing the likeness of its proprietary characters and other distinctive
features of a program. Although the Company incurs expenses to develop and
establish a licensing campaign, the Company does not incur the cost or assume
the risk associated with manufacturing, distributing and marketing the
merchandise. The Company also evaluates the licensing potential of characters
the Company is considering for development, formulates a licensing strategy,
and creates artwork depicting proposed licensed products and merchandise
featuring its characters for use in soliciting prospective licensees. The
revenue derived from licensing and merchandising depends not only on the
success, recognition and appeal of a character, but also on the quality and
extent of the marketing efforts of the Company and its licensees. Sales of
licensed products in turn promote the programs in which the Company's
characters appear.

Historically, after developing and selling a program for United States
broadcast, Film Roman has had to turn over control of its merchandising rights
to those entities which financed the production of its programming.

27
<PAGE>

For example, even though Bobby's World was created by Film Roman, Twentieth
Television acquired most of the property rights, including the licensing and
merchandising rights to such program.

The Company expects that it will typically earn royalties between 5% and 12%
of the wholesale revenue derived from the sale of licensed products. The
Company has recently entered into licenses to manufacture and distribute
various products related to its proprietary characters C-Bear and Jamal,
including a master toy license. Although the Company believes that these
activities will have a significant impact on future earnings, historically,
the Company has not derived any revenue from these activities.

FEATURE FILMS

In 1991 and 1992, the Company produced on a "fee-for-services" basis a
feature film, Tom & Jerry: The Movie, which was released theatrically by
Miramax Films. Although the Company has produced no other feature films, it is
pursuing feature film opportunities. The Company, together with Universal
Pictures and Dustin Hoffman's Punch Productions, is currently developing (on a
"fee-for-services" basis) the feature film There Goes The Neighborhood, which
is a project featuring a mixture of live-action and animation (similar to that
of Who Framed Roger Rabbit?). Universal Pictures has agreed to pay for the
development of a screenplay and the artwork for the project. If the feature
film is produced, the Company will earn a fee for its services, as well as
financial participations based upon the success of the film and the
exploitation of the Company's rights. The Company currently has a number of
feature film projects in early stages of internal development, primarily
featuring the Company's proprietary characters. The Company intends to obtain
financing for its feature films through strategic alliances with third
parties, such as major motion picture studios. As a result, the Company may be
unable to retain control all or any of the licensing and merchandising rights
associated with its feature films.

INTERACTIVE PRODUCTS

In 1995, Film Roman established an interactive division to produce high-
quality interactive software products for consumer use. Such products may
feature characters from the Company's programs or may introduce new characters
which may become the basis for the development of future television series and
marketed to broadcasters. By combining its creative and production talent with
computer and software technology, the Company is focusing on existing and new
market opportunities created by the popularity of dedicated game machines
(such as those manufactured by Sony, Nintendo and Sega) and wide-spread
computer use by children and adults. The Company intends to license
distribution rights for its interactive products to strategic partners who in
turn will fund substantially all of the Company's direct costs of production.
For example, the interactive division is producing two videogames, one based
upon Felix the Cat and the other based upon the BRUNO the Kid. Both projects
are being financed by International Business Machines Corporation ("IBM").

LIBRARY

A library of proprietary programming can provide a future revenue stream as
such programs are re-licensed for broadcast after the expiration of the
initial broadcast license. Programs in the Company's library can also be
licensed to new channels and outlets in emerging markets around the world. The
Company began building its library in 1993 with the production of Animated
Classic Showcase, a restoration of two hours of existing classic Russian
animation. The Company added to its library the proprietary programming it
produced during the 1995-96 season, including three episodes of C-Bear & Jamal
and 13 episodes of Felix the Cat. In addition, during the 1996-97 season, the
Company will add to its library 10 episodes of C-Bear & Jamal, 8 episodes of
Felix the Cat and 13 episodes of Mortal Kombat.

28
<PAGE>

The Company has retained the following proprietary rights associated with
the programs in its library:

<TABLE>
<CAPTION>
NUMBER OF LICENSING
SERIES EPISODES DOMESTIC INTERNATIONAL AND
TITLE PRODUCED* DISTRIBUTION DISTRIBUTION MERCHANDISING INTERACTIVE
-------- -------------- -------------- ---------------------------- -----------
HOME HOME
TV VIDEO TV VIDEO
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Animated
Classic
Showcase 12 (X 1 hr.) X X X X X X
- ----------------------------------------------------------------------------------
Felix
the Cat 21 (X 1/2 hr.) X X X X X
- ----------------------------------------------------------------------------------
C-Bear
and
Jamal 13 (X 1/2 hr.) X X X X X X
- ----------------------------------------------------------------------------------
Mortal
Kombat 13 (X 1/2 hr.) X X X X
</TABLE>

* Includes episodes currently in production for the 1996-97 season.

COMPETITION

The creation, development, production and distribution of television
programming, together with the exploitation of the proprietary rights related
to such programming, is a highly competitive business. The Company faces
intense competition from producers, distributors, licensors and merchandisers,
many of whom are larger and have greater financial resources than the Company.
Management believes that it faces competition with a variety of companies in
three principal areas: (i) for the time slots for animated programming offered
by broadcasters, (ii) for the acquisition of characters, story lines, plots
and ideas and (iii) for the right to license and distribute its products
throughout the United States and internationally. See "Risk Factors--
Competition."

GOVERNMENT REGULATIONS

The FCC repealed its financial interest and syndication rules, effective as
of September 21, 1995. Those FCC rules, which were adopted in 1970 to limit
television network control over television programming and thereby foster the
development of diverse programming sources, had restricted the ability of the
three established, major U.S. television networks (ABC, CBS and NBC) to own
(or to be owned by) a syndicated television programmer. The impact of the
repeal of the FCC's financial interest and syndication rules on the Company's
operations cannot be predicted at the present time, although it is expected
that there will be an increase in-house productions of television programming
for the networks' own use. It is possible that this change will have a
negative impact on the Company's business to the extent that the networks
target the children's market.

The Company must also comply with the provisions of the Children's
Television Advertising Act of 1990 and the follow-up rules issued by the FCC
in the production and distribution of television programs directed to
children. While the Company is not subject to the direct jurisdiction of the
FCC, it must necessarily comply with the appropriate requirements in order to
be able to place programs on FCC-licensed television stations. The Company may
be subject to local content and quota requirements in the international
markets, which effectively prohibit or limit access to particular markets. The
Company also seeks to comply with self-regulatory rules relating to children's
programming of the Children's Advertising Review Unit of The Council of Better
Business Bureaus and of the national television networks by reviewing the
proposed content of each property prior to acquisition and acquiring rights to
and distributing only those properties for which there will be no material
restrictions on exhibition to children.

29
<PAGE>

TRADEMARKS

FACILITIES

The Company conducts its operations through its 65,000 square foot studio
and headquarters located in North Hollywood, California. These facilities are
occupied pursuant to a lease that expires in August 1999 (and contains renewal
options).

EMPLOYEES

As of March 31, 1996, the Company had approximately 234 full-time employees
and 2 part-time employees. The Company also regularly engages numerous
freelance creative staff and other independent contractors on a project-by-
project basis. The Company is subject to the terms in effect from time to time
of various industry-wide collective bargaining agreements, including the
Screen Actors Guild. The Company believes that its relations with its
employees are good.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings and is not
aware of any pending or threatened litigation that, if decided adversely to
the Company, would have a material adverse effect upon the Company's business,
results of operations or financial condition.

30
<PAGE>

THE COMPANY
PROGRAM HIGHLIGHTS

GARFIELD AND FRIENDS. Garfield and Friends is an example of how the Company
develops a program based on an existing character. Although the Company
produced the program on a "fee-for-services" basis, the Company was able to
participate in the profits of the program. One of the first programs produced
by the Company was a Garfield production special entitled Garfield: In the
Rough. Based upon the success of that Emmy-award winning special and
subsequent Garfield specials produced by the Company, the Company was engaged
to produce a weekly half hour series entitled Garfield and Friends which, in
its second season, was expanded to a one-hour block. Repeat episodes of the
program ran in syndication for the two years and the show is currently
broadcast on the Cartoon Network. Garfield and Friends has also enjoyed
significant success in the international television market. During the 1995-
96 television season, the show was broadcast in over 50 countries. Film
Roman, through its international distribution division, has assisted in
securing significant international distribution sales.

BOBBY'S WORLD. Bobby's World is an example of how the Company created,
developed and produced a program based on an existing popular character, but,
at the time (1989), did not have the financial resources or organizational
infrastructure to retain and exploit the proprietary rights to the program.
Film Roman proposed to Howie Mandel the creation of an animated series based
upon "Bobby," a child-like character created by Mandel for his stand-up
comedy act. Film Roman and Howie Mandel developed the appearance of Bobby and
together with a writing team developed the world in which "Bobby" lives. The
"Bobby's World" concept was pitched to several Networks and was licensed in
1989 to FOX. FOX paid the Company on a "fee-for-services" basis, funded the
entire production cost and acquired substantially all of the proprietary
rights to the series. Subsequently, the Company's merchandising and licensing
division was established and recently negotiated with FOX to license back to
the Company the international merchandising rights to Bobby's World.

MIGHTY MAX. Mighty Max is another example of how the Company acquires the
rights to a concept with potential broad appeal and then develops and
produces a program based on that concept. Film Roman was presented with an
exciting prototype for a toy which the Company believed provided a basis for
a promising animated series for the U.S. market because of the uniqueness of
the toy and Mattel's commitment to distribute it. Since the Company did not
have the financial resources or organizational infrastructure at the time to
retain and exploit proprietary rights, associated with this program, it
formed a partnership with Canal Plus, a French cable company, and negotiated
to participate in the program's profits. Film Roman assembled a creative team
of writers and artists and designed characters and story lines to be
presented to potential broadcasters. Since its original broadcast, Mighty Max
has continued to rank among the top animated syndicated programs.

C-BEAR & JAMAL. C-Bear and Jamal is an example of how the Company creates,
develops and produces proprietary programming based on a well-known
personality. After rap star Tone Loc approached Film Roman with an interest
in developing an animated series, Film Roman's creative team explored a
number of concepts for the show. Ultimately, Tone Loc's husky voice and
street-wise persona were captured by Film Roman in the urban character, C-
Bear. The Company further developed the concept with a team of writers and
artists and presented the program idea to a number of the Networks. FOX
agreed to develop the show with Film Roman and ordered production of three
episodes for the 1995-1996 season. Based upon the success of these episodes,
FOX ordered ten more episodes for the 1996-1997 season. Through its
international and merchandising and licensing divisions, the Company has
secured a number of commitments, including international television license
arrangements and a master toy license.

FELIX THE CAT. Felix the Cat is an example of how the Company acquires the
rights to an existing character, develops and produces programming based on
the character, controls and exploits the distribution rights and participates
in the revenue generated from the licensing and merchandising activities.
Recognizing the equity in the 75 year old character "Felix the Cat," the
Company acquired certain rights from Felix's owners, and after completing
preliminary development for a series, presented the program idea to CBS which
decided to develop the project with Film Roman. The Company's writers and
artists developed the concept, "look" and sample storylines for the series
utilizing the visual style "Felix" had in the 1920's and 1930's. Based upon
the development work, CBS ordered 13 episodes for the 1995-1996 television
season. Film Roman's international distribution division licensed the project
to several territories throughout the world during the development period.
CBS has renewed the series for the 1996-1997 season, ordering 8 new episodes.
The Company is also currently developing a video game based upon "Felix" for
IBM.

31
<PAGE>

THE SIMPSONS. The Simpsons is an example of how the Company produces
programming on a "fee-for-services" basis when the proprietary rights to the
programming are not available for acquisition. In 1991, Twentieth Television
(a division of Twentieth Century Fox) and Jim Brooks' Gracie Films decided to
move animation production of the series from the animation studio then
producing the series. Film Roman was selected to produce the series due to
the Company's strong reputation for producing quality animation on time and
on budget. Film Roman's 80 person production team is now entering its fifth
year producing The Simpsons on a "fee-for-services" basis and anticipates
delivering the 122nd episode of the series in 1997.

32
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The directors and executive officers of the Company are identified below:

<TABLE>
<CAPTION>
NAME AGE POSITION(1)
<C> <C> <S>
Phil Roman.......................... 65 President, Chief Executive Officer
and Chairman of the Board of
Directors (Class III Director)
William Schultz..................... 35 Executive Vice President
Jon F. Vein......................... 32 Senior Vice President
Jacqueline Blum..................... 34 Senior Vice President--Worldwide
Licensing and Marketing
Gregory Arsenault................... 38 Senior Vice President--Finance and
Administration
Robert Cresci(3).................... 52 Class I Director
Dixon Q. Dern(2).................... 67 Class III Director
Dennis W. Draper(2)................. 49 Class II Director
Theodore T. Horton, Jr.(2).......... 45 Class I Director
Peter Mainstain(3).................. 47 Class II Director
</TABLE>
- ---------------------
(1) Each director holds office until his resignation or removal and until his
successor shall have been duly elected and qualified. Elections with
respect to the Class I Directors, Class II Directors and Class III
Directors will be held at the annual meeting of stockholders in 1997,
1998, and 1999, respectively.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.

The principal occupations and positions for the past five years and in
certain cases prior years, of the directors and executive officers named above
are as follows.

Phil Roman, President, Chief Executive Officer and Director. Mr. Roman has
been the Company's President and Chief Executive Officer since the Company was
founded in 1984. Phil Roman began his animation career in 1955 at The Walt
Disney Company as an assistant animator on Sleeping Beauty. Over the next 30
years, Mr. Roman worked at many of the major studios, including MGM Animation
and Warner Bros. Cartoons, and was an animator on such productions as The Cat
in the Hat, How the Grinch Stole Christmas, George of the Jungle, Popeye,
Snoopy Come Home and Lord of the Rings. Mr. Roman also directed 13 Emmy-
nominated Charlie Brown specials.

William Schultz, Executive Vice President. In 1989, Mr. Schultz joined the
Company as a Vice President and in 1993 was promoted to Executive Vice
President. Mr. Schultz currently oversees production and development, as well
as the Company's international division, and coordinates new business
opportunities. Prior to joining the Company, Mr. Schultz was employed by New
World Entertainment, where he served in a variety of positions including
Production Controller and Director of Development at the animation studio
Marvel Productions, a subsidiary of New World Entertainment. Mr. Schultz
received his Bachelor of Science degree from the University of Illinois at
Champaign--Urbana in 1982.

Jon F. Vein, Senior Vice President. In February 1995, Mr. Vein joined Film
Roman as a Senior Vice President where he oversees business and legal affairs
for the Company. Mr. Vein also established and oversees the Company's feature
film and interactive divisions. Prior to joining the Company, Mr. Vein
practiced entertainment law at Dern & Donaldson from 1990 to 1993 and at Dern
& Vein from 1993 to 1995. Mr. Vein received his Bachelor of Science degree in
electrical engineering-computer science and material sciences-engineering from
University of California at Berkeley in 1986 and his Juris Doctor degree from
The Harvard Law School in 1989.

33
<PAGE>

Jacqueline Blum, Senior Vice President--Worldwide Licensing and
Marketing. Ms. Blum joined the Company in 1993 as a Vice President to
establish and oversee the Company's licensing and merchandising division. In
1996, she was promoted to Senior Vice President. Mr. Blum also oversees the
Company's publicity and creative services departments. Prior to joining the
Company, Ms. Blum co-founded Imagination Factory, a licensing and
merchandising agency, in 1991. Previously, Ms. Blum was a principal of
Brentwood Licensing Properties, handling television packaging and
merchandising of the multi-million dollar property Kliban's Cat.

Gregory Arsenault, Senior Vice President--Finance and Administration. Mr.
Arsenault joined the Company in 1991 as Accounting Manager, served as
Controller for two years, served as Vice President of Finance for two years
and was promoted to Senior Vice President--Finance and Administration in 1996.
Mr. Arsenault oversees the Company's accounting department. Prior to joining
Film Roman, Mr. Arsenault served as an accounting systems consultant for Live
Entertainment. Mr. Arsenault received his Bachelor of Science degree in
accounting from the University of Southern California.

Robert Cresci--Director. Mr. Cresci has been a Director of Film Roman since
August 1995 and has been a Managing Director of Pecks Management Partners
Ltd., an investment management firm, since September 1990. Mr. Cresci
currently serves on the board of directors of Bridgeport Machines, Inc., Serv-
Tech, Inc., EIS International, Inc., Sepracor, Inc., Vestro Natural Foods,
Inc., Olympic Financial, Ltd., GeoWaste, Inc., Hitox, Inc., Natures Elements,
Inc., Garnet Resources Corporation, HarCor Energy, Inc. and Meris
Laboratories, Inc.

Dixon Q. Dern--Director. Mr. Dern has been a Director of Film Roman since
August 1995. Mr. Dern has practiced entertainment law for over 40 years and
currently owns and operates his own private practice which specializes in
entertainment, copyright and communications law.

Dennis W. Draper--Director. Mr. Draper has been a Director of Film Roman
since August 1995 and has been an Associate Professor of Finance at the
University of Southern California's School of Business since 1977. Mr. Draper
serves as trustee of the Pacifica Funds.

Theodore T. Horton, Jr.--Director. Mr. Horton has been a Director of Film
Roman since August 1995 and has been a Managing Director of BCI Advisors,
Inc., an investment management firm, since January 1990. Mr. Horton also
serves as a director of People's Choice TV.

Peter Mainstain--Director. Mr. Mainstain has been a Director of Film Roman
since August 1995 and has been a partner of Tanner, Mainstain & Hoffer, an
accountancy corporation, since 1976.

BOARD OF DIRECTORS

The Company's Bylaws provide that directors are divided into three classes,
each having a term of three years, with the term of one class expiring each
year. The directors shall be elected by a plurality vote, with no cumulative
voting, at the annual meeting of stockholders. Each elected director holds
office until his resignation or removal and until his successor shall have
been duly elected and qualified.

Compensation Committee and Audit Committee; Interlocks and Insider
Participation. The Board of Directors has a Compensation Committee and an
Audit Committee. The Compensation Committee, comprised of Messrs. Dern, Draper
and Horton, makes recommendations to the Board concerning salaries and
incentive compensation for officers and employees of the Company and
administers the Stock Option Plan. See "--Stock Option Plan." The Audit
Committee, comprised of Messrs. Cresci and Mainstain, reviews the results and
scope of the audit and other accounting related services. Each of the members
of the Compensation Committee and the Audit Committee is an independent
director who has no significant relationship with the Company or its officers
or directors.

Director Compensation. Directors receive $6,000 per year as compensation for
serving on the Board of Directors, $500 for attendance at each meeting of the
Board of Directors and $250 for attendance at each meeting of a committee of
the Board of Directors. Directors are not reimbursed for out-of-pocket
expenses arising from

34
<PAGE>

attendance at such Board or committee meetings or in respect of related
Company business. The Company's Stock Option Plan provides that non-employee
directors may be granted stock options. On January 5, 1996, each of Messrs.
Dern, Draper and Mainstain were granted options to purchase shares of Common
Stock under the Company's Stock Option Plan. See "--Stock Option Plan."

EXECUTIVE COMPENSATION

The following table provides for the periods shown certain summary
information concerning compensation paid or accrued by the Company to or on
behalf of the Company's Chief Executive Officer and each of the four highest
paid executive officers of the Company (collectively, the "Named Executive
Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS/SAR
POSITION YEAR SALARY BONUS COMPENSATION(1) (2)
<S> <C> <C> <C> <C> <C>
Phil Roman.................. 1995 $306,500 -- $41,974 --
President and Chief 1994 247,500 -- 36,413 --
Executive Officer 1993 208,000 -- 41,493 --
William Schultz............. 1995 $221,912 $71,839 -- 75,000
Executive Vice President 1994 188,827 47,185 -- --
1993 189,462 -- -- --
Jon F. Vein(3).............. 1995 $128,800 -- -- --
Senior Vice President
Jacqueline Blum............. 1995 $123,962 -- -- --
Senior Vice President-- 1994 109,346 -- -- --
Worldwide Licensing and 1993 93,846 -- -- --
Marketing
Gregory Arsenault........... 1995 $144,160 -- -- --
Senior Vice President-- 1994 103,680 -- -- --
Finance and Administration 1993 92,900 -- -- --
</TABLE>
- ---------------------
(1) Each individual in the table, other than Mr. Roman, received annually (i)
a contribution pursuant to the Company's 401(k) profit sharing plan
amounting to less than $2,000 and (ii) perquisites and other persoanl
benefits, securities or property aggregating less than $50,000 or 10% of
the total annual salary and bonus reported for such individual. Mr. Roman
received annually (i) approximately $30,000 in automobile insurance,
service and lease payments, (ii) approximately $2,300 in contributions
pursuant to the Company's 401(k) profit sharing plan and (iii) payments
for personal travel and accounting services which accounted for the
remainder of Mr. Roman's other annual compensation.
(2) The securities underlying the options are shares of the Company's Common
Stock. For a description of terms pertaining to such options and other
information relating thereto, see "--Stock Option Plan."
(3) Mr. Vein began employment with the Company in February 1995.

During the periods indicated above, none of the individuals listed above
received any awards under any long-term incentive plan, and the Company does
not have a pension plan.

35
<PAGE>

EMPLOYMENT AGREEMENTS

The Company has entered into the following employment agreements with the
Named Executive Officers:

Mr. Roman. On August 7, 1995, Mr. Roman and the Company entered into an
employment agreement that expires on August 7, 2000. Pursuant to the terms of
the agreement, Mr. Roman shall serve as the Company's President and Chief
Executive Officer, and the Company will pay Mr. Roman a base salary equal to
$325,000 per year. In the event the Company attains certain earnings
projections, Mr. Roman is entitled to receive an additional $25,000 as base
salary during the fourth year of employment and an additional $50,000 per year
as base salary during the fifth year of employment. Mr. Roman is also entitled
to an incentive bonus at the end of each calendar year based on the
relationship of earnings to projected earnings for such calendar year. The
maximum bonus for each calendar year shall be 100% of Mr. Roman's base salary
for such calendar year. The Company is entitled to terminate Mr. Roman's
agreement upon his death or disability or "for cause."

Mr. Schultz. On August 7, 1995, Mr. Schultz and the Company entered into an
employment agreement that expires on August 7, 1998, and may be extended, at
the Company's option, for up to two additional one-year periods. Pursuant to
the terms of the agreement, Mr. Schultz shall serve as the Company's Executive
Vice President, and the Company will pay Mr. Schultz a base salary equal to
(i) $250,000 per year for each of the first three years of employment, (ii)
$275,000 during the fourth year of employment, if his contract is extended to
a fourth year and, (iii) $300,000 during the fifth year of employment, if his
contract is extended to a fifth year. In the event the Company meets or
exceeds certain earnings projections, Mr. Schultz is entitled to receive an
additional $25,000 per year as base salary during each of the fourth and fifth
years of employment. Mr. Schultz is also entitled to an incentive bonus at the
end of each calendar year based on the relationship of earnings to projected
earnings for such calendar year. The maximum bonus for each calendar year
shall be 100% of Mr. Schultz's base salary for such calendar year. The Company
is entitled to terminate Mr. Schultz's agreement upon his death or disability,
"for cause" or "without cause." Mr. Schultz is entitled to terminate the
agreement if Mr. Roman ceases to be President of the Company and Mr. Schultz
is not selected to replace him or if Mr. Schultz is required to report to any
other person other than Mr. Roman at any time. Pursuant to the terms of
Mr. Schultz's agreement, the Company granted Mr. Schultz options for the
purchase of 60,000 shares of California Common Stock at an exercise price of
$.01 per share and options for the purchase of 124,000 shares of California
Common Stock at an exercise price of $10.00 per share. See "--Stock Option
Plan."

Mr. Vein. On February 14, 1995, Mr. Vein and the Company entered into an
employment agreement that expires on February 12, 1997. Pursuant to the terms
of the agreement, Mr. Vein shall serve as a Senior Vice President of the
Company, and the Company will pay Mr. Vein a base salary equal to $145,600
during the first year of employment and $160,160 during the second year of
employment. The Company is entitled to terminate Mr. Vein's agreement upon his
death or disability, "for cause" or "without cause." Mr. Vein is entitled to
terminate the agreement if Mr. Roman ceases to be the President of the
Company.

Ms. Blum. On December 15, 1995, Ms. Blum and the Company entered into an
employment agreement that expires on January 1, 1998, and may be extended, at
the Company's option, for an additional year. Pursuant to the terms of the
agreement, Ms. Blum shall serve as the Company's Senior Vice President--
Worldwide Licensing and Marketing, and the Company will pay Ms. Blum a base
salary equal to $150,000 during the first year of employment, $157,500 during
the second year of employment, and, if such employment is extended by the
Company, $165,375 during the third year of employment. At the end of each
calendar year, Ms. Blum is eligible to receive a bonus in an amount determined
by the Board of Directors. The Company is entitled to terminate Ms. Blum's
agreement upon her death or disability, "for cause" or "without cause."
Pursuant to the terms of Ms. Blum's agreement, the Company granted Ms. Blum
options for the purchase of 35,000 shares of California Common Stock at an
exercise price of $10.00 per share. See "--Stock Option Plan."

Mr. Arsenault. On January 2, 1996, Mr. Arsenault and the Company entered
into an employment agreement that expires on January 2, 1999, and may be
extended at the Company's option for one additional year. Pursuant to the
terms of the agreement, Mr. Arsenault shall serve as the Company's Senior Vice
President--Finance and

36
<PAGE>

Administration and the Company will pay Mr. Arsenault a base salary equal to
$160,160 during the first year of employment, $168,168 during the second year
of employment and $176,576 during the third year of employment. If Mr.
Arsenault's agreement is extended to include a fourth year of employment, Mr.
Arsenault's base salary during such year will be $194,234. At the end of each
calendar year, Mr. Arsenault is eligible to receive a bonus in an amount
determined by the Board of Directors. The Company is entitled to terminate
Mr. Arsenault's agreement upon his death or disability, "for cause" or
"without cause." Mr. Arsenault is entitled to terminate the agreement if Mr.
Roman ceases to be President of the Company. Pursuant to the terms of
Mr. Arsenault's agreement, the Company granted Mr. Arsenault options for the
purchase of 35,000 shares of California Common Stock at an exercise price of
$10.00 per share.

401(K) PROFIT SHARING PLAN

The Company has a defined contribution 401(k) Profit Sharing Plan which
covers substantially all of its employees. The plan became effective on
January 1, 1991 and was amended effective January 1, 1992. Under the terms of
the plan, employees can elect to defer up to 15% of their wages, subject to
certain Internal Revenue Service limitations, by making voluntary
contributions to the plan. Additionally, the Company, at the discretion of
management, can elect to match up to 100% of the voluntary contributions made
by its employees. The Company has received determination letters from the
Internal Revenue Service indicating that the plan is qualified within the
terms of the applicable provisions of the Employee Retirement Income Security
Act of 1974. For the years ended December 31, 1993, 1994 and 1995, the Company
contributed $42,398, $73,103, and $93,081, respectively, to the plan on behalf
of its employees.

STOCK OPTION PLAN

On January 5, 1996, Film Roman California granted to certain directors,
officers and employees of the Company options to purchase 497,000 shares of
California Common Stock (having a per share exercise price of $10.00). On May
9, 1996, Film Roman California granted to Phil Roman, a consultant and certain
other employees of the Company options to purchase 134,500 shares of
California Common Stock (having a per share exercise price of $10.65). Upon
the effectiveness of the Reorganization and pursuant to the antidilution
provisions of the options, (i) the January 1996 options will become options
for 621,250 shares of Film Roman Holdings at $8.00 per share, and (ii) the May
1996 options will become options for 168,125 shares of Film Roman Holdings at
$8.52 per share. See "Certain Transactions--Reorganization."

37
<PAGE>

Set forth below is a table describing the options granted by the Company to
each of the Named Executive Officers during the year ended December 31, 1995.

STOCK OPTION PLAN
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL OPTION GRANTS(1) FOR OPTION TERM(2)
-------------------------------------------------------------- ------------------------------
NUMBER OF PERCENT OF TOTAL MARKET
SHARES OPTIONS GRANTED EXERCISE PRICE AT
NAME AND UNDERLYING TO EMPLOYEES IN PRICE GRANT EXPIRATION
PRINCIPAL POSITION(3) OPTIONS GRANTED PERIOD PER SHARE DATE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Phil Roman.............. -- -- -- -- -- -- --
President and Chief
Executive Officer
William Schultz......... 75,000 100% $0.01 $3.20 2005 $378,716 $620,552
Executive Vice
President
Jon F. Vein............. -- -- -- -- -- -- --
Senior Vice President
Jacqueline Blum......... -- -- -- -- -- -- --
Senior Vice President
Gregory Arsenault....... -- -- -- -- -- -- --
Senior Vice President
</TABLE>
- ---------------------
(1) After giving effect to the Reorganization (i.e., options for the purchase
of one share of California Common Stock will be exchanged for options for
the purchase of 1.25 shares of Holdings Common Stock, and the per share
exercise price for Film Roman Holdings options will be equal to 80% of the
per share exercise price of Film Roman California options).
(2) The potential realizable value assumes a rate of annual compound stock
price appreciation of 5% and 10% from the date the option was granted over
the full option term. These assumed annual compound rates of stock price
appreciation are mandated by the rules of the Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
(3) In addition, Messrs. Roman, Schultz, Vein and Arsenault and Ms. Blum were
granted options in 1996 as follows (and giving effect to the
Reorganization): 125,000 at $8.52; 155,000 at $8.00; 62,500 at $8.00;
43,750 at $8.00; and 43,750 at $8.00, respectively.

38
<PAGE>

The following table sets forth the number and value as of December 31, 1995
of shares underlying unexercised options held by each of the Named Executive
Officers. Prior to the Offering, no stock options will be exercised by any
Named Executive Officers.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED "IN-THE-MONEY"
OPTIONS AS OF OPTIONS AS OF
DECEMBER 31, 1995 DECEMBER 31, 1995
NAME AND ------------------------- -------------------------
PRINCIPAL POSITION EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Phil Roman................. -- -- -- --
President and Chief
Executive Officer
William Schultz............ 75,000 -- $599,250 --
Executive Vice President
Jon F. Vein................ -- -- -- --
Senior Vice President
Jacqueline Blum............ -- -- -- --
Senior Vice President--
Worldwide Licensing and
Marketing
Gregory Arsenault.......... -- -- -- --
Vice President--Finance
</TABLE>

Administration of the Plan. The Plan is administered by the Board of
Directors and/or the Compensation Committee. No person is eligible to serve on
the Compensation Committee unless such person is then a "disinterested person"
within the meaning of paragraph (c)(2) of Rule 16b-3 and an "outside director"
within the meaning of Section 162(m)(4)(C)(ii) of the Internal Revenue Code of
1986, as amended (the "Code"). The Committee has complete discretion to
determine which eligible individuals are to receive option grants, the number
of shares subject to each such grant, the status of any granted option as
either an incentive option or a non-statutory option under the Federal tax
laws, the exercise schedule to be in effect for the option grant and the
maximum term for which any granted option is to remain outstanding.

Eligibility. All regular salaried employees of the Company may, at the
discretion of the Compensation Committee, be granted incentive and non-
qualified stock options to purchase shares of Common Stock at an exercise
price not less than 100% of the fair market value of such shares on the grant
date. Directors of the Company, consultants and other persons who are not
regular salaried employees of the Company are not eligible to receive
incentive stock options, but are eligible to receive non-qualified stock
options.

Number of Shares Subject to Plan. The Company has reserved up to 1,227,695
shares of Common Stock for issuance pursuant to the Plan, 864,375 of which
have been granted under the Stock Option Plan as of May 15, 1996.

Purchase Price of Shares Subject to Options. The price of the shares of
Common Stock subject to each option shall be set by the Committee; provided,
however, that the price per share of an option shall be not less than 100% of
the fair market value of such shares on the date such option is granted;
provided, further, that, in the case of an incentive stock option, the price
per share shall not be less than 110% of the fair market value of such shares
on the date such option is granted in the case of an individual then owning
(within the meaning of Section 424(d) of the Code) more than ten percent of
the total combined voting power of all classes of stock of the Company, any
subsidiary or any parent corporation ("greater than 10% stockholders").

Non-Assignability. Options may be transferred only by will or by the laws of
descent and distribution. During a participant's lifetime, options are
exercisable only by the participant.

Terms and Exercisability of Options. Unless otherwise determined by the
Board of Directors or the Compensation Committee, all options granted under
the Plan are subject to the following conditions: (i) options

39
<PAGE>

exercisable in installments, on a cumulative basis, at the rate of twenty
(20%) each year beginning on the first anniversary of the date of the grant of
the option, until the options expire or are terminated, and (ii) following an
optionee's termination of employment, the Company has the right to repurchase
any outstanding vested options or any shares of Common Stock issued to an
optionee upon exercise of an option by notifying the optionee of the Company's
decision to so purchase the shares or options within 60 days of such
termination of employment. The purchase price for the shares of Common Stock
is the difference between the fair market value of the shares of common Stock
at the date of notification and the exercise price of such options.

Options are not assignable or transferable by the optionee except by will or
the laws of inheritance following the optionee's death. The optionee has no
stockholder rights with respect to the shares subject to his or her
outstanding options until such options are exercised and the purchase price is
paid for the shares.

To the extent that the aggregate fair market value of stock with respect to
which "incentive stock options" (within the meaning of Section 422 of the
Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company, any subsidiary and any
parent corporation) exceeds $100,000, such options shall be taxed as non-
qualified options. The rule set forth in the preceding sentence shall be
applied by taking options into account in the order in which they were
granted. For this purpose, the fair market value of stock shall be determined
as of the time that the option with respect to such stock is granted.

Options are exercisable in whole or in part by written notice to the
Company, specifying the number of shares being purchased and accompanied by
payment of the purchase price for such shares. The option price may be paid:
(i) in cash or by certified or cashier's check payable to the order of the
Company, (ii) by cancellation of indebtedness owed by the Company to the
optionee, (iii) by delivery of shares of common Stock of the Company already
owned by, and in the possession of the optionee, (iv) if authorized by the
Board of Directors or the Committee or if specified in the option agreement
for the option being exercised, by a recourse promissory note made by the
optionee in favor of the Company or through installment payments to the
Company, or (v) in such other manner as the Board of Directors or the
Committee may specify in order to facilitate the exercise of options by the
holders thereof, including but not limited to a guarantee by the Company of a
third party loan to the optionee.

On the date the option price is to be paid, the optionee (or his or her
successor) must make full payment to the Company of all amounts that must be
withheld by the Company for federal, state or local tax purposes. Such payment
may be effected, with the consent of the Committee, by the Company's retention
of shares otherwise issuable upon such exercise.

Termination of Employment; Death or Permanent Disability. If a holder of an
incentive stock option ceased to be employed by the Company for any reason
other than for cause or the optionee's death or permanent disability, such
optionee's incentive stock option shall expire three months after the date of
such cessation of employment unless by its terms it expires sooner; provided,
however, that during such period after cessation of employment, such incentive
stock option may be exercised only to the extent it was exercisable according
to such option's terms on the date of cessation of employment. If an optionee
dies or becomes permanently disabled while the optionee is employed by the
Company, such optionee's option shall expire three months (or such other
period as specified in such optionee's option agreement) after the date of
such optionee's death or permanent disability unless by its terms it expires
sooner. During such period after death, such incentive stock option may, to
the extent it remains unexercised upon the date of such death, be exercised by
the person or person's to whom the optionee's rights under such incentive
stock option are transferred under the laws of descent and distribution.

Acceleration of Exercisability. In the event the Company is acquired by
merger, consolidation or asset sale, each outstanding option which is not to
be assumed by the successor corporation or replaced with a comparable option
to purchase shares of the capital stock of the successor corporation will, at
the election of the board of Directors (or if so provided in an option or
other agreement with an optionee), automatically accelerate in full.

40
<PAGE>

Adjustments. In the event any change is made to the Common Stock issuable
under the Plan by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change in corporate
structure effected without the Company's receipt of consideration, appropriate
adjustments will be made to (i) the maximum number and class of shares
issuable under the Plan and (ii) the number and/or class of shares and price
per share in effect under each outstanding option.

Amendments to the Plan. The Board of Directors may at any time suspend or
terminate the Plan. The Board of Directors or Committee may also at any time
amend or revise the terms of the Plan, provided that no such amendment or
revision shall, unless appropriate stockholder approval of such amendment or
revision is obtained, (i) increase the maximum number of shares which may be
acquired pursuant to options granted under the Plan (except for adjustments as
described in the foregoing paragraph), (ii) change the minimum purchase price
required under the Plan, (iii) increase the maximum term of options provided
under the Plan or (iv) change the classes of persons eligible to receive
options under the Plan.

Termination. The Plan will terminate on August 7, 2005, unless sooner
terminated by the Board of Directors.

Registration Statement on Form S-8. Promptly after the consummation of the
Offering made hereby, the Company expects to cause to be filed with the
Securities and Exchange Commission a Registration Statement on Form S-8
covering the shares of Common Stock underlying options granted under the Plan.

FEDERAL INCOME TAX CONSEQUENCES TO PARTICIPANTS IN THE PLAN

The following summary of the material federal income tax consequences to
participants in the Plan is based on current law, is for general information
only and is not tax advice. The summary does not purport to discuss all
aspects of federal income taxation that may be relevant to a particular
participant in light of such participant's personal investment circumstances.

A participant may be subject to state or local taxation in various state or
local jurisdictions in which he or she works or resides. State and local tax
treatment of the participants are not discussed in this summary, and such
state and local tax treatment may not conform to the federal income tax
consequences discussed in this summary.

Non-Qualified Stock Options. A participant who is granted non-qualified
stock options does not realize income as a result of the grant of such
options. However, the participant normally realizes compensation income at the
time the options are exercised, in the amount by which the fair market value
of the Common Stock on the date the options are exercised exceeds the option
exercise price paid. This compensation income is taxable at ordinary income
rates, and the Company is required to withhold taxes on the amount treated as
ordinary income to the participant.

The participant's tax basis for Common Stock acquired upon the exercise of a
non-qualified stock option is the price paid to exercise the option plus the
amount of ordinary income realized by the participant as a result of the
exercise of the option. Any appreciation in the value of such Common Stock may
qualify for capital gains treatment, provided that applicable holding period
requirements are satisfied.

The tax consequences resulting from a participant's exercise of non-
qualified options by surrendering Common Stock already owned by the
participant are not completely certain. In published rulings, the Internal
Revenue Service (the "IRS") has taken the position that, to the extent that
the number of shares acquired is equivalent to the number of shares
surrendered, the participant recognizes no gain and the participant's basis in
the shares acquired upon such exercise is equal to the participant's basis in
the surrendered shares, that any additional shares acquired upon such exercise
is compensation to the participant taxable under the rules described above,
and that the participant's basis in any such additional shares will be their
fair market value.

41
<PAGE>

Incentive Stock Options. A participant who is granted incentive stock
options is not treated as having received taxable income upon either the grant
or the exercise of the options. Instead, such participant is taxed at the time
of the sale or other taxable disposition of the Common Stock acquired pursuant
to the exercise of the option. Generally, such participants pay taxes at long
term capital gains rates on the difference between the amount realized on the
sale or other disposition of the shares and the option exercise price. To
qualify for such capital gains treatment, the participant (i) must not sell or
dispose of the shares earlier than either two years from the date of grant of
the incentive stock option or one year from the date of transfer of the shares
to the participant upon exercise, and (ii) must be an employee of the Company
at all times during the period beginning with the date of the grant of the
option and ending three months before the date of exercise. If the shares of
stock are sold or otherwise disposed of before the end of the one-year period
or the two-year period, a portion of the gain, if any, may be treated as
compensation taxable as ordinary income rather than as capital gain.

The tax consequences resulting from a participant's exercise of incentive
stock options by surrendering shares of Common Stock already owned by the
participant are not completely certain. In published rulings and proposed
regulations, the IRS has taken the position that generally the participant
recognizes no income upon such stock-for-stock exercise, that to the extent
that the number of shares acquired is equivalent to the number of shares
surrendered, the participant's basis in the shares acquired upon such exercise
is equal to the participant's basis in the surrendered shares increased by any
compensation income recognized by the participant, that the participant's
basis in any additional shares acquired by such exercise is zero, and that any
sale or other disposition of the acquired shares within the one-year period or
the two-year period described above is viewed as a disposition of the shares
with the lowest basis first.

Alternative minimum tax must be paid when it exceeds a taxpayer's regular
federal income tax. Alternative minimum tax is calculated based on alternative
minimum taxable income, which is taxable income for federal income tax
purposes, modified by certain adjustments and increased by tax preference
items. For purposes of the foregoing, the difference between the exercise
price and the fair market value of shares of Common Stock acquired pursuant to
the exercise of an incentive stock option is classified as alternative minimum
taxable income for the year of exercise. For alternative minimum tax purposes
(but not for regular income tax purposes), the participant's basis in the
acquired shares is the fair market value of the shares at the time the
incentive stock option is exercised. A disqualifying disposition of the
acquired shares during the same year in which the incentive stock option was
exercised will cancel the alternative minimum taxable income generated upon
exercise of the incentive stock option. Should there be a disqualifying
disposition in a year other than the year of exercise, the income on the
disqualifying disposition will not be considered income for alternative
minimum tax purposes.

FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY

The following summary of the material federal income tax consequences to the
Company is based on current law, is for general information only and is not
tax advice.

Section 162(m) Limitation. Subject to a limited number of exceptions,
Section 162(m) of the Code denies a deduction to a publicly held corporation
for payments of remuneration to certain employees to the extent the employee's
remuneration for the taxable year exceeds $1,000,000. For this purpose,
remuneration attributable to stock options is included within the $1,000,000
limitation. However, to the extent that the remuneration is payable solely on
account of the attainment of one or more performance goals and certain other
procedural requirements are met, then such remuneration is not subject to the
$1,000,000 limitation.

The Company has attempted to structure the Plan in such a manner that the
remuneration attributable to the stock options will not be subject to the
$1,000,000 limitation. The Company has not, however, requested a ruling from
the IRS or an opinion of counsel regarding this issue. This discussion will
neither bind the IRS nor preclude the IRS from adopting a contrary position.

42
<PAGE>

Non-Qualified Stock Options. Subject to the limitations set forth in Code
Section 162(m) and discussed above, the Company is entitled to deduct from its
taxable income the amount that the participant is required to include in
ordinary income at the time of such inclusion.

Qualified Stock Options. The Company is not entitled to any deduction on
account of the grant of the incentive stock options or the participant's
exercise of the option to acquire Common Stock. However, in the event of a
subsequent disqualifying disposition of such shares under circumstances
resulting in taxable compensation to the participant, subject to the
limitations set forth in Code Section 162(m) and discussed above, the Company
is entitled to a tax deduction equal to the amount treated as taxable
compensation to the participant.

43
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Film Roman Holdings' Common Stock immediately following the
Reorganization and the redemption of the Redeemable Preferred Stock and as
adjusted to give effect to the Offering by: (i) each Selling Stockholder
(i.e., Phil Roman, the Company's President and Chief Executive Officer,
Oppenheimer & Co., Inc., and a partnership managed by Oppenheimer & Co.,
Inc.), (ii) each person known by Film Roman Holdings' to own beneficially 5%
or more of the outstanding Common Stock of Film Roman Holdings, (iii) each
director and Named Executive Officer of Film Roman Holdings, and (iv) all
directors and executive officers as a group.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)
-------------------- --------------------
NUMBER OF
NAME NUMBER OF SHARES NUMBER OF
---- SHARES PERCENT(2) BEING OFFERED SHARES PERCENT(3)
<S> <C> <C> <C> <C> <C>
Phil Roman(3)........... 3,078,750 66.1% 160,364 2,918,386 35.7%
BCI Growth III, L.P.(4). 740,625 15.9 0 740,625 9.1
Pecks Management
Partners Ltd.(5)....... 740,625 15.9 0 740,625 9.1
Oppenheimer & Co.,
Inc.(6)................ 24,636 * 24,636 0 0
William Schultz(2)(3)... 75,000 1.6 0 75,000 *
Jon F. Vein(2)(3)....... 0 0 0 0 0
Jacqueline Blum(2)(3)... 0 0 0 0 0
Gregory Arsenault(2)(3). 0 0 0 0 0
Robert J. Cresci(5)(7).. 0 0 0 0 0
Dixon Q. Dern(2)(8)..... 0 0 0 0 0
Dennis W. Draper(2)(9).. 0 0 0 0 0
Theodore T. Horton,
Jr.(4)(10)............. 0 0 0 0 0
Peter Mainstain(2)(11).. 0 0 0 0 0
All Directors and
executive officers as a
Group(10 persons)(2)... 3,153,750 67.7% 185,000 4,450,000 36.5%
</TABLE>
- -------------------
*Less than 1%.
(1) Assumes that the persons in the table do not purchase shares in the
Offering and that the Underwriters' over-allotment option is not
exercised. Adjusted to reflect the Reorganization and the redemption of
the Redeemable Preferred Stock (see "Certain Transactions--
Reorganization").
(2) Shares which each identified stockholder has the right to acquire within
the 60 days of the date of the table set forth above are deemed to be
outstanding in calculating the percentage ownership of such stockholder,
but are not deemed to be outstanding as to any other person. Does not
include shares which will become issuable upon exercise of options in
September 1996, as follows: Mr. Schultz--12,500 shares; Mr. Vein--12,500
shares; Ms. Blum--8,750 shares; Mr. Arsenault--8,750 shares; Mr. Dern--
5,000 shares; Mr. Draper--5,000 shares; and Mr. Mainstain--5,000 shares.
(3) The mailing address for such person is: c/o Film Roman, Inc., 12020
Chandler Boulevard, Suite 200, North Hollywood, California 91607.
(4) Teaneck Associates L.P. is the sole general partner of BCI Growth III,
L.P. BCI Advisors, Inc., the investment advisor to BCI Growth III, L.P.,
has sole investment and voting power with respect to the shares
beneficially owned by BCI Growth III, L.P. Mr. Horton, a director of the
Company, is a general partner of Teaneck Associates L.P., and a Managing
Director of BCI Advisors, Inc. The mailing address for BCI Growth III,
L.P. is c/o BCI Advisors, Inc., Glenpointe Centre West, Teaneck, New
Jersey, 07666. Teaneck Associates L.P. and BCI Advisors, Inc. disclaim
beneficial ownership of such shares.
(5) 500,000, 141,500 and 99,125 of such shares are beneficially owned by
Delaware State Employees' Retirement Fund, Declaration of Trust for
Defined Benefit Plans of ICI American Holding Inc. and Declaration of
Trust for Defined Benefit Plans of Zeneca Holding Inc., respectively.
Pecks Management Partners, Ltd., as investment manager for these
beneficial owners, has sole investment and voting power with respect to
such shares. Mr. Cresci, a director of the Company, is a managing partner
of Pecks Management Partners Ltd. The mailing address for Pecks
Management Partners Ltd. is One Rockefeller Plaza, New York, New York
10020. Pecks Management Partners Ltd. disclaims beneficial ownership of
such shares.
(6) 18,750 and 5,886 of such shares are beneficially owned by OPCO Senior
Executive Investment Partnership, L.P. and Oppenheimer & Co., Inc.,
respectively. Oppenheimer & Co., Inc. and OPCO Senior Executive
Investment Partnership, L.P. are affiliates. The mailing address for
Oppenheimer & Co., Inc. is One World Financial Center, 200 Liberty
Street, New York, New York 10281.
(7) Excludes 740,625 shares held by pension trusts and a pension fund which
are managed by Pecks Management Partners Ltd. and for which Mr. Cresci
disclaims any beneficial ownership. The mailing address for Mr. Cresci is
c/o Pecks Management Partners Ltd., One Rockefeller Plaza, New York, New
York 10020.
(8) The mailing address for Mr. Dern is 1901 Avenue of the Stars, Suite 400,
Los Angeles, California 90067.
(9) The mailing address for Mr. Draper is c/o The University of Southern
California Business School, University Park, Los Angeles, California.
(10) Excludes 740,625 shares held by BCI Growth III, L.P. which is managed by
BCI Advisors, Inc. and for which Mr. Horton disclaims any beneficial
ownership. The mailing address for Mr. Horton is c/o BCI Advisors, Inc.,
Glenpointe Centre West, Teaneck, New Jersey 07666.
(11) The mailing address for Mr. Mainstain is c/o Tanner, Mainstain & Hoffer,
10866 Wilshire Boulevard, 10th Floor, Los Angeles, California 90024.

44
<PAGE>

CERTAIN TRANSACTIONS

1995 PRIVATE PLACEMENT

In 1995, Film Roman California entered into a Securities Purchase Agreement
pursuant to which Film Roman California issued 1,200,000 shares of California
Redeemable Preferred Stock and warrants (the "Investor Warrants") to purchase
an aggregate of 1,200,000 shares of California Common Stock to certain
investors (the "Investors") for an aggregate purchase price of $12 million
(collectively, the "1995 Private Placement"). Of the securities issued in the
1995 Private Placement, (i) 592,500 shares of California Redeemable Preferred
Stock and Investor Warrants to purchase 592,500 shares of California Common
Stock were issued to a private equity partnership managed by BCI Advisors,
Inc., for an aggregate purchase price of $5.925 million; (ii) 592,500 shares
of California Redeemable Preferred Stock and Investor Warrants to purchase
592,500 shares of California Common Stock were issued to certain pension
trusts and a pension fund, which are managed by Pecks Management Partners
Ltd., for an aggregate purchase price of $5.925 million; and (iii) 15,000
shares of California Redeemable Preferred Stock and Investor Warrants to
purchase 15,000 shares of California Common Stock were issued to a partnership
managed by Oppenheimer & Co., Inc. ("Oppenheimer") for an aggregate purchase
price of $150,000. Pursuant to a shareholders agreement (the "Shareholders
Agreement"), the Investors are entitled to designate two directors to Film
Roman California's Board of Directors. Mr. Horton, a managing director of BCI
Advisors, Inc., and Mr. Cresci, a managing director of Pecks Management
Partners Ltd., currently serve as directors of Film Roman California and Film
Roman Holdings. The Shareholders Agreement will terminate upon consummation of
the Reorganization. See "--Reorganization."

Concurrently with the 1995 Private Placement, Film Roman California also (a)
issued to Oppenheimer a warrant (the "Oppenheimer Warrant") for the purchase
of 37,000 shares of California Common Stock and (b) effected a
recapitalization pursuant to which Mr. Roman received in exchange for his
1,000 shares of California Common Stock (i) 750,000 shares of Convertible
Preferred Stock, (ii) 1,713,000 shares of California Common Stock, and (iii) a
warrant (the "Roman Warrant") for the purchase of 185,000 shares of California
Common Stock of Film Roman California.

REORGANIZATION

Film Roman Holdings was incorporated in Delaware in May 1996 in order to
hold all of the outstanding capital stock of Film Roman California. Film Roman
Holdings currently conducts no operations. In the Reorganization, which will
be effected immediately prior to the Offering, (i) a wholly-owned subsidiary
of Film Roman Holdings will merge with and into Film Roman California; (ii)
each outstanding share of California Common Stock will be converted into 1.25
shares of Common Stock (including shares of California Common Stock to be
issued immediately prior to such merger upon exercise of the Investor Warrants
and the Oppenheimer Warrant and upon conversion of all outstanding shares of
Convertible Preferred Stock); (iii) each outstanding share of California
Redeemable Preferred Stock will be converted into one share of Redeemable
Preferred Stock; (iv) all outstanding employee options for the purchase of
California Common Stock will, pursuant to the anti-dilution provisions
thereof, become options to purchase Common Stock; (v) the Shareholders
Agreement will terminate; and (vi) the Roman Warrant will be cancelled. As a
result of the foregoing, Film Roman California will become a wholly-owned
subsidiary of Film Roman Holdings and the stockholders of Film Roman
California will become stockholders of Film Roman Holdings. The Reorganization
will be effected pursuant to a Plan of Reorganization Agreement dated as of
May 15, 1996 by and among Film Roman Holdings, Film Roman California, the
Investors, Oppenheimer and Phil Roman. Immediately following the
Reorganization and the closing of the Offering, Film Roman Holdings will
redeem all outstanding shares of Redeemable Preferred Stock. Accrued dividends
on the Redeemable Preferred Stock and Convertible Preferred Stock will be paid
to the date of redemption and conversion, respectively.

45
<PAGE>

OTHER TRANSACTIONS WITH DIRECTORS

Mr. Dern provides legal services to the Company on a regular basis and
receives customary fees for such services. In 1995, Mr. Dern was paid
approximately $84,000 for such services. Mr. Dern and Mr. Vein, a Senior Vice
President of the Company, were partners at the law firm of Dern & Vein from
1993 to 1995. Mr. Draper provides independent financial consulting services to
the Company on an ongoing basis and receives customary fees for such services.
Mr. Mainstain is a shareholder of Tanner, Mainstain & Hoffer, an accountancy
corporation that provides accounting services to the Company on a regular
basis, and such firm receives customary fees for such services.

DESCRIPTION OF CAPITAL STOCK

GENERAL

Film Roman Holdings was incorporated in May 1996 in order to hold all of the
outstanding capital stock of Film Roman California upon completion of the
Offering and the Reorganization. See "Certain Transactions--Reorganization."
Film Roman Holdings currently conducts no operations. Film Roman Holdings'
certificate of incorporation (the "Certificate of Incorporation") authorizes
20,000,000 shares of a single class of Common Stock, par value $0.01 per
share, and 5,000,000 shares of preferred stock, par value $.01 per share, none
of which shares of preferred stock will be issued and outstanding immediately
after completion of the Offering and the redemption of the Redeemable
Preferred Stock. All outstanding shares of Common Stock are, and the shares
offered hereby will be, when issued and sold, fully paid and nonassessable.

The discussion below describes the capital stock of Film Roman Holdings,
unless otherwise noted.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share of Common
Stock on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. The rights, privileges and preferences of the
holders of Common Stock are subject to the rights of the holders of any shares
of preferred stock that may be designated and issued by the Company in the
future. Subject to any restrictions contained in preferred stock issued by the
Company, if any, and to restrictions imposed by certain debt agreements of the
Company, holders of Common Stock are entitled to receive dividends when and if
declared by the Board of Directors out of legally available funds. Upon any
liquidation, dissolution or winding up of the Company, subject to the rights
of holders of shares of preferred stock, if any, holders of Common Stock are
entitled to share pro rata in any distribution to the stockholders. Holders of
Common Stock do not have preemptive or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock.

Pursuant to Section 2115 of the California Corporations Code (the
"California Law"), a corporation incorporated in a State other than California
(such as the Company, which is incorporated in Delaware) may nevertheless be
subject to certain of the provisions of the California Law (as specified in
Section 2115 of the California Law) applicable to California corporations
(commonly designated a "Quasi-California Corporation") if more than one-half
of its outstanding voting securities are owned of record by persons having
addresses in California and more than half of its business is conducted in
California (generally, the average of its property factor, payroll factor and
sales factor (as defined in Sections 25129, 25132 and 25134 of the California
Revenue and Taxation Code) is more than 50 percent during its latest full
income year). Such a foreign corporation will not be treated as a Quasi-
California Corporation, however, if it has outstanding securities trading on
the Nasdaq National Market and has at least 800 holders of its equity
securities as of the record date of its most recent annual shareholders'
meeting. Prior to this Offering, all of the Company's outstanding voting
securities were owned of record by persons having addresses in California. It
is expected that such percentage will be reduced significantly as a result of
this Offering. To the extent, however, that the Company meets the requirements
set forth in Section 2115 of the California Law, the Company could become a
Quasi-California Corporation subject to the California Law which, among other
things, requires cumulative voting and is more restrictive than Delaware law
concerning dividends and other distributions to stockholders.

46
<PAGE>

PREFERRED STOCK

The Company's Board of Directors, without the approval of the holders of the
Common Stock, is authorized to designate for issuance up to 5,000,000 shares
of preferred stock, par value $0.01 per share, in such series and with such
rights, privileges and preferences as the Board of Directors may from time to
time determine. Issuance of preferred stock may adversely affect the rights,
privileges and preferences afforded the holders of Common Stock, including a
decrease in the amount available for distribution to holders of the Common
Stock in the event of a liquidation or payment of preferred dividends.
Issuance of shares of preferred stock may also have the effect of preventing
or delaying a change in control of the Company without further action by the
stockholders and could make removal of present management of the Company more
difficult. The Company currently has no plans to designate and/or issue any
shares of preferred stock.

OPTIONS

For a description of the Company's Stock Option Plan, see "Management--Stock
Option Plan."

DELAWARE LAW AND LIMITATIONS ON CHANGES IN CONTROL

Section 203 of the Delaware General Corporation Law (the "DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging
in a "business combination" (as defined in Section 203) with a publicly-held
Delaware corporation for three years following the date such person became an
interested stockholder unless (i) before such person became an interested
stockholder, the board of directors of the corporation approved the
transaction in which the interested stockholder became an interested
stockholder or approved the business combination; (ii) upon consummation of
the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (iii) following the transaction
in which such person became an interested stockholder, the business
combination is approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of 66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder.

The Company's Bylaws generally require 60 days advance notice of any action
to be proposed at any meeting of stockholders and set forth other specific
procedures that a stockholder must follow. There are also specific procedures,
including advance notice, for the nomination of a person to the Board of
Directors when such person is nominated other than at the direction of the
Board. In addition, the Certificate of Incorporation provides that a special
meeting of the Company's stockholders may only be called by certain officers
of the Company or by the Board of Directors; no such meeting may be called by
the stockholders. Further, the Certificate of Incorporation eliminates the
ability of stockholders to act by written consent and consequently
stockholders may only act at meetings thereof. Any amendment of the Bylaws or
certain provisions of the Certificate of Incorporation by stockholders will
require the affirmative vote of at least 66 2/3% of the shares of Common Stock
then outstanding.

In addition, the Directors are divided into three classes, each having a
term of three years, with the term of one class expiring each year. Directors
may be removed only with cause. These provisions could delay the replacement
of a majority of the Directors and have the effect of making changes in the
Board of Directors more difficult than if such provisions were not in place.

These provisions of the Bylaws and the Certificate of Incorporation,
including the provisions authorizing the Board of Directors to issue preferred
stock without stockholder approval, and the provisions of Section 203 of the
DGCL could have the effect of delaying, deferring or preventing a change in
control of the Company or the removal of existing management. See "Risk
Factors--Control by Management; Potential Anti-Takeover Effects."

47
<PAGE>

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Certificate of Incorporation provides that a director of the Company
will not be personally liable to the Company or its stockholders for monetary
damages for any breach of fiduciary duty as a director, except in certain
cases where liability is mandated by the DGCL. The provision has no effect on
any non-monetary remedies that may be available to the Company or its
stockholders, nor does it relieve the Company or its directors from compliance
with federal or state securities laws. The Bylaws of the Company generally
provide that the Company shall indemnify, to the fullest extent permitted by
law, any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit, investigation,
administrative hearing or any other proceeding (each, a "Proceeding") by
reason of the fact that he is or was a director or officer of the Company, or
is or was serving at the request of the Company as a director, officer,
employee or agent of another entity, against expenses (including attorneys'
fees) and losses, claims liabilities, judgments, fines and amounts paid in
settlement actually incurred by him in connection with such Proceeding. The
Company has entered into, or intends to enter into, agreements to provide
indemnification for the Company's directors and executive officers in addition
to the indemnification provided for in the Bylaws. These agreements, among
other things, will indemnify the Company's directors and executive officers
for certain expenses (including attorney's fees), and all losses, claims,
liabilities, judgments, fines and settlement amounts incurred by such person
arising out of or in connection with such person's service as a director or
officer of the Company to the fullest extent permitted by applicable law.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is .

48
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding 8,184,636
shares of Common Stock (8,752,386 shares if the Underwriters' over-allotment
option is exercised in full). All of the 3,785,000 shares (assuming the
Underwriters' over-allotment option is not exercised) sold in this Offering
will be freely tradeable by persons other than affiliates of the Company.

RULE 144

In general, Rule 144, as currently in effect, provides that a person (or
persons whose sales are aggregated) who is an affiliate of the Company or who
has beneficially owned shares which are issued and sold in reliance upon
certain exemptions from registration under the Securities Act ("Restricted
Shares") for at least two years is entitled to sell within any three-month
period a number of shares that does not exceed the greater of one percent (1%)
of the then outstanding shares of Common Stock (beginning on the 91st day
immediately after this Offering) or the average weekly trading volume in the
Common Stock during the four calendar weeks preceding the filing of a notice
of intent to sell. Sales under Rule 144 are also subject to certain manner-of-
sale provisions, notice requirements and the availability of current public
information about the Company. However, a person who is not deemed to have
been an "affiliate" of the Company at any time during the three months
preceding a sale, and who has beneficially owned Restricted Shares for at
least three years, would be entitled to sell such shares under Rule 144
without regard to volume limitations, manner-of-sale provisions, notice
requirements or the availability of current public information about the
Company. The Company and each of the Company's present stockholders, executive
officers and directors have agreed, subject to certain exceptions relating to
the Company, that they will not, directly or indirectly, offer, sell, contract
to sell or otherwise dispose of or transfer any shares of Common Stock for a
period of 180 days after the date of this Prospectus, without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation. See
"Underwriting."

After the expiration of the lock-up period, (a) Mr. Roman's 2,918,386 shares
of Common Stock will be eligible for sale pursuant to Rule 144, and (b) the
Institutional Investors' 1,481,250 shares of Common Stock will be eligible for
sale pursuant to Rule 144 following satisfaction of the Rule's holding period
and other requirements. Promptly after consummation of the Offering, the
Company expects to file with the Commission a Registration Statement on Form
S-8 covering the 1,227,695 shares of Common Stock issuable upon exercise of
options granted or to be granted under the Company's Stock Option Plan. After
the expiration of the lock-up period, a maximum of 124,250 shares issuable
upon exercise of currently outstanding employee stock options will become
freely tradeable, except that persons deemed "affiliates" of the Company will
be required to comply with the terms and conditions of Rule 144 under the
Securities Act when selling such shares.

Prior to the Offering, there has been no public market for the shares of
Common Stock, and no predictions can be made as to the effect that sales of
Common Stock under Rule 144, pursuant to a registration statement or
otherwise, or the availability of shares of Common Stock for sale, will have
on the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market, or the perception
that such sales could occur, could adversely affect prevailing market prices
and could impair the Company's future ability to raise capital through an
Offering of its equity securities.

REGISTRATION RIGHTS

Pursuant to a Registration Rights Agreement entered into in connection with
the 1995 Private Placement (the "Registration Rights Agreement"), the
Institutional Investors (and Oppenheimer) were granted two demand and
unlimited piggyback registration rights with respect to Common Stock. Upon the
closing of this Offering, there will be 1,481,250 shares of Common Stock owned
by the Institutional Investors subject to the Registration Rights Agreement.
Demand registration rights can be exercised at any time after the date of this
Prospectus subject to the 180-day lock-up period described under
"Underwriting."

49
<PAGE>

UNDERWRITING

Subject to certain terms and conditions contained in the Underwriting
Agreement, the syndicate of Underwriters named below, for whom Donaldson,
Lufkin & Jenrette Securities Corporation is acting as representative (the
"Representative"), have severally agreed to purchase from the Company and the
Selling Stockholders an aggregate of 3,785,000 shares of Common Stock. The
number of shares of Common Stock that each Underwriter has agreed to purchase
is set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...................
---------
Total............................................................. 3,785,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of
the shares of Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all such shares of Common Stock (other than the shares
of Common Stock covered by the over-allotment option described below) must be
so purchased.

Prior to the Offering, there has been no established trading market for the
Common Stock. The initial price to the public for the Common Stock offered
hereby has been determined by negotiation between the Company and the
Representative. The factors considered in determining the initial price to the
public include the history of and the prospects for the industry in which the
Company competes, the ability of the Company's management, the past and
present operations of the Company, the historical results of operations of the
Company, the prospects for future earnings of the Company, the present state
of the Company's development, the general condition of the securities markets
at the time of the Offering and the recent market prices of and the demand for
publicly traded common stock of generally comparable companies.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

The Company and the Selling Stockholders have been advised by the
Representative that the Underwriters propose to offer the Common Stock to the
public initially at the price set forth on the cover page of this Prospectus
and to certain dealers (who may include the Underwriters) at such price less a
concession not to exceed $ per share. The Underwriters may allow, and such
dealers may reallow, discounts not in excess of $ per share to any other
Underwriter and certain other dealers.

The Underwriters have reserved approximately shares of the Common Stock
for sale, at the initial public offering price, to directors, officers and
employees of the Company, their business affiliates and related parties, in
each case as such persons have expressed an interest in purchasing such shares
of Common Stock in the Offering. The number of shares of Common Stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares of the Common Stock. Any reserved shares
of the Common Stock not so purchased will be offered by the Underwriters to
the general public on the same basis as the shares of the Common Stock offered
pursuant to the Offering.

The Company has granted to the Underwriters an option to purchase up to
567,750 additional shares of Common Stock, at the initial public offering
price less underwriting discounts and commissions, solely to cover over-
allotments. Such option may be exercised at any time until 30 days after the
effective date of the Registration Statement of which this Prospectus is part.
To the extent that the Underwriters exercise such option

50
<PAGE>

each of the Underwriters will be committed, subject to certain conditions, to
purchase a number of option shares proportionate to such Underwriter's initial
commitment as indicated in the preceding table.

The Company's directors, executive officers and all other stockholders of
the Company have agreed that they will not directly or indirectly offer, sell,
contract to sell, or otherwise dispose or transfer any shares of Common Stock
of the Company owned by them without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, for a period of 180 days after the
date of this Prospectus. In addition, the Company has agreed that for a period
of 180 days after the date of this Prospectus it will not, without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation,
directly or indirectly offer, sell, issue, distribute or otherwise dispose of
any equity securities or any options, rights or warrants with respect to any
equity securities, except for (i) shares of Common stock offered hereby, (ii)
shares of Common Stock issued pursuant to the exercise of options outstanding
on the date of this Prospectus and (iii) options granted after the date of
this Prospectus pursuant to the Stock Option Plan. "See Shares Available for
Future Sale."

The Representatives have informed the Company and the Selling Stockholder
that the Underwriters do not intend to confirm sales of shares of Common Stock
offered hereby to accounts over which they exercise discretionary authority.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Latham & Watkins, Los Angeles, California. Certain legal matters in
connection with this Offering will be passed upon for the Underwriters by
Simpson Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York. Latham & Watkins has provided legal
services to the Representative.

EXPERTS

The financial statements of Film Roman, Inc. at December 31, 1994 and 1995,
and for each of the two years in the period ended December 31, 1995 and the
Balance Sheet of Film Roman, Inc. (Delaware) at May 16, 1996, appearing in
this Prospectus and Registration Statement, have been audited by Ernst &
Young, LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

The financial statements of Film Roman, Inc. for the year ended December 31,
1993, appearing in this Prospectus and Registration Statement, have been
audited by Tanner, Mainstain & Hoffer, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.

51
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain items
of which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549; at its Chicago Regional Office, 500 W. Madison
Street, 14th Floor, Chicago, Illinois 60661; and at its New York Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048. Copies
of such material can be obtained from the public reference section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20459, at prescribed
rates. For further information pertaining to the Company and the Common Stock
offered hereby, reference is made to the Registration Statement, including the
exhibits thereto and the financial statements, notes and schedules filed as a
part thereof.

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent auditors and with
quarterly reports for each of the first three quarters of each year containing
unaudited, condensed financial statements.

52
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index to Financial Statements............................................. F-1

FILM ROMAN, INC.
Report of Independent Auditors.......................................... F-2
Balance Sheets as of December 31, 1994 and 1995 and for the Three Months
Ended March 31, 1996................................................... F-3
Statements of Operations for the Years Ended December 31, 1993, 1994 and
1995, and for the Three Months Ended March 31, 1995 and 1996........... F-4
Statements of Stockholder's Equity at December 31, 1993, 1994 and 1995,
and at March 31, 1996.................................................. F-5
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995, and for the Three Months Ended March 31, 1995 and 1996........... F-6
Notes to Financial Statements........................................... F-7

FILM ROMAN, INC. (a Delaware corporation)
Report of Independent Auditors.......................................... F-17
Balance Sheet as of May 16, 1996........................................ F-18
Notes to Financial Statements........................................... F-19
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Film Roman, Inc.

We have audited the accompanying balance sheets of Film Roman, Inc. as of
December 31, 1994 and 1995, and the related statements of operations,
stockholder's equity, and cash flows for the years then ended. 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 Film Roman, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.

Ernst & Young LLP

Los Angeles, California
May 16, 1996

F-2
<PAGE>

FILM ROMAN, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------------- -----------
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................ $ 435,580 $ 5,176,090 $ 4,707,216
Accounts receivable...................... 383,121 430,184 582,785
Film costs, net of accumulated
amortization of $85,160,597 (1994),
$118,316,120 (1995) and $125,426,827
(1996) (Notes 1 and 2).................. 12,382,019 12,379,146 12,094,386
Property and equipment, net of
accumulated depreciation and
amortization of $418,719 (1994),
$549,028 (1995) and $596,124 (1996)
(Notes 1 and 3)......................... 263,747 336,875 535,287
Refundable income taxes.................. -- 487,500 487,500
Deposits and other assets................ 229,768 140,583 167,615
----------- ----------- -----------
Total assets......................... $13,694,235 $18,950,378 $18,574,789
=========== =========== ===========
LIABILITIES AND
STOCKHOLDER'S EQUITY
Accounts payable......................... $ 205,835 $ 508,433 $ 559,452
Accrued expenses......................... 724,508 682,183 1,355,270
Dividends payable (Notes 6 and 7)........ -- 650,000 1,040,000
Debt (Note 4)............................ 1,362,576 1,737,145 486,711
Deferred revenue (Note 1)................ 9,710,417 6,791,779 7,415,392
----------- ----------- -----------
Total liabilities.................... 12,003,336 10,369,540 10,856,825
Commitments (Note 8)
Class A Redeemable Preferred Stock, $.01
par value, 1,200,000 shares authorized,
issued and outstanding, $12,000,000
liquidation preference (Notes 1 and 6).. -- 6,748,788 6,989,574
Stockholder's equity (Note 7):
Class B Convertible Preferred stock,
$.01 par value, 750,000 shares
authorized, issued and outstanding,
$7,500,000 liquidation preference..... -- 300 300
Common stock, no par value, 10,000,000
shares authorized, 2,463,000 shares
issued and outstanding in 1994 and
1,713,000 shares issued and
outstanding in 1995 and 1996 1,000 700 700
Additional paid-in capital............. -- 4,716,656 4,716,656
Retained earnings (deficit)............ 1,689,899 (2,885,606) (3,989,266)
----------- ----------- -----------
Total stockholder's equity........... 1,690,899 1,832,050 728,390
----------- ----------- -----------
Total liabilities and stockholder's
equity............................ $13,694,235 $18,950,378 $18,574,789
=========== =========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE>

FILM ROMAN, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ----------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue (Note 1)........ $27,867,300 $36,201,103 $34,340,620 $9,110,613 $7,460,762
Cost of revenue......... 25,675,371 33,190,002 33,155,523 8,764,819 7,110,707
Selling, general and
administrative
expenses............... 1,367,601 1,829,126 2,963,211 594,110 851,215
----------- ----------- ----------- ---------- ----------
Operating income (loss). 824,328 1,181,975 (1,778,114) (248,316) (501,160)
Interest income......... 4,472 5,470 151,534 98 45,768
Interest expense........ (26,004) (32,559) (62,596) (9,472) (15,854)
----------- ----------- ----------- ---------- ----------
Income (loss) before
provision for
income taxes........... 802,796 1,154,886 (1,689,176) (257,690) (471,246)
Provision for income
taxes.................. -- -- -- -- --
----------- ----------- ----------- ---------- ----------
Net income (loss)....... $ 802,796 $ 1,154,886 $(1,689,176) $ (257,690) $ (471,246)
=========== =========== =========== ========== ==========
Pro forma data (Note 12,
unaudited):
Historical net income
(loss)............... $ 802,796 $ 1,154,886 $(1,689,176) $ (257,690) $ (471,246)
Pro forma provision
(benefit) for income
taxes................ 321,118 461,954 (574,319) (87,615) --
----------- ----------- ----------- ---------- ----------
Pro forma net income
(loss)............... $ 481,678 $ 692,932 $(1,114,857) $ (170,075) $ (471,246)
=========== =========== =========== ========== ==========
Net income (loss)
attributable to
common stock......... $ 481,678 $ 692,932 $(2,000,000) $ (170,075) $ (953,660)
=========== =========== =========== ========== ==========
Pro forma net income
(loss) per share..... $ 0.12 $ 0.18 $ (0.51) $ (0.04) $ (0.24)
=========== =========== =========== ========== ==========
Pro forma weighted
average number of
shares outstanding... 3,893,535 3,893,535 3,893,535 3,893,535 3,893,535
=========== =========== =========== ========== ==========
</TABLE>

See accompanying notes.

F-4
<PAGE>

FILM ROMAN, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
CLASS B
CONVERTIBLE
PREFERRED
COMMON STOCK STOCK ADDITIONAL RETAINED TOTAL
----------------- -------------- PAID-IN EARNINGS STOCKHOLDER'S
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of December
31, 1992............... 2,463,000 $1,000 -- $ -- $ -- $ 344,242 $ 345,242
Dividends paid to
common stockholder.... -- -- -- -- -- (364,172) (364,172)
Net income............. -- -- -- -- -- 802,796 802,796
--------- ------ ------- ----- ---------- ----------- -----------
Balance as of December
31, 1993............... 2,463,000 1,000 -- -- -- 782,866 783,866
Dividends paid to
common stockholder.... -- -- -- -- -- (247,853) (247,853)
Net income............. -- -- -- -- -- 1,154,886 1,154,886
--------- ------ ------- ----- ---------- ----------- -----------
Balance as of December
31, 1994............... 2,463,000 1,000 -- -- -- 1,689,899 1,690,899
Exchange of 750,000
shares of common stock
to Class B Convertible
Preferred Stock, $.01
par value.............. (750,000) (300) 750,000 300 -- -- --
Issuance of the Class A
Stock Warrants......... -- -- -- -- 4,474,256 -- 4,474,256
Dividends paid to common
stockholder............ -- -- -- -- -- (1,751,500) (1,751,500)
Dividends accrued to
Class A Preferred
Stockholder............ -- -- -- -- -- (400,000) (400,000)
Dividends accrued to
Class B Convertible
Preferred Stockholder.. -- -- -- -- -- (250,000) (250,000)
Accretion of Class A
Preferred Stock........ -- -- -- -- -- (484,829) (484,829)
Issuance of common stock
options to an employee. -- -- -- -- 242,400 -- 242,400
Net loss................ -- -- -- -- -- (1,689,176) (1,689,176)
--------- ------ ------- ----- ---------- ----------- -----------
Balance as of December
31, 1995............... 1,713,000 700 750,000 300 4,716,656 (2,885,606) 1,832,050
Dividends accrued to
Class A Preferred
Stockholder............ -- -- -- -- -- (240,000) (240,000)
Dividends accrued to
Class B Convertible
Preferred Stockholder.. -- -- -- -- -- (150,000) (150,000)
Accretion of Class A
Preferred Stock........ -- -- -- -- -- (242,414) (242,414)
Net loss................ -- -- -- -- -- (471,246) (471,246)
--------- ------ ------- ----- ---------- ----------- -----------
Balance as of March 31,
1996 (unaudited)....... 1,713,000 $ 700 750,000 $ 300 $4,716,656 $(3,989,266) $ 728,390
========= ====== ======= ===== ========== =========== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE>

FILM ROMAN, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- ------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)..... $ 802,796 $ 1,154,886 $ (1,689,176) $ (257,690) $ (471,246)
Adjustments to
reconcile net income
(loss) to net cash
(used in) provided by
operating activities:
Depreciation and
amortization......... 92,211 106,800 130,309 26,700 47,096
Amortization of film
costs................ 13,549,111 33,190,002 33,155,523 8,764,819 7,110,707
Compensation expense
in connection with
the issuance of
common stock options
to an employee....... -- -- 242,400 -- --
Changes in operating
assets and
liabilities:
Accounts receivable.. (93,894) (165,179) (47,063) 277,641 (152,601)
Film costs........... (16,492,379) (34,969,106) (33,152,650) (6,714,127) (6,825,947)
Refundable income
taxes............... -- -- (487,500) -- --
Deposits and other
assets.............. (146,606) 25,538 89,185 (24,223) (27,032)
Accounts payable..... 553,748 (885,174) 302,598 (13,505) 166,019
Accrued expenses..... 366,174 28,577 (42,325) 159,955 558,087
Deferred revenue..... 951,131 1,719,514 (2,918,638) (2,487,036) 623,613
------------ ------------ ------------ ----------- -----------
Net cash (used in)
provided by
operating
activities......... (417,708) 205,858 (4,417,337) (267,466) 1,028,696
INVESTING ACTIVITIES:
Additions to property
and equipment........ (147,380) (62,881) (203,437) (38,240) (245,508)
------------ ------------ ------------ ----------- -----------
Net cash used in
investing
activities......... (147,380) (62,881) (203,437) (38,240) (245,508)
FINANCING ACTIVITIES:
Proceeds from issuance
of Class A Preferred
Stock and Warrants,
net of issuance
costs................ -- -- 10,738,215 -- (1,628)
Borrowings under debt. 6,165,000 6,350,000 12,350,000 2,250,000 1,000,000
Repayments on debt.... (5,250,859) (6,257,639) (11,975,431) (2,275,213) (2,250,434)
Dividends declared and
paid to common
stockholder.......... (364,172) (247,853) (1,751,500) (94,999) --
------------ ------------ ------------ ----------- -----------
Net cash provided by
(used in) financing
activities......... 549,969 (155,492) 9,361,284 (120,212) (1,252,062)
------------ ------------ ------------ ----------- -----------
Net (decrease)
increase in cash..... (15,119) (12,515) 4,740,510 (425,918) (468,874)
Cash and cash
equivalents at
beginning of period.. 463,214 448,095 435,580 435,580 5,176,090
------------ ------------ ------------ ----------- -----------
Cash and cash
equivalents at end of
period............... $ 448,095 $ 435,580 $ 5,176,090 $ 9,662 $ 4,707,216
============ ============ ============ =========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for:
Interest.............. $ 48,210 $ 65,118 $ 112,355 $ 18,944 $ 44,545
============ ============ ============ =========== ===========
Income taxes.......... $ 16,500 $ 19,950 $ 487,500 $ -- $ --
============ ============ ============ =========== ===========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

In 1995, the Company accrued dividends of $400,000 due to the Redeemable
Preferred stockholders and $250,000 due to the Convertible Preferred
stockholder. In addition, the Company recorded accretion of the difference
between the carrying value and the Liquidation Value of $484,829 on the
Redeemable Preferred Stock. See Note 6.

For the three months ended March 31, 1996, the Company accrued dividends of
$240,000 due to the Redeemable Preferred stockholders and $150,000 due to the
Convertible Preferred stockholder. In addition, the Company recorded accretion
of the difference between the carrying value and the Liquidation Value of
$242,414 on the Redeemable Preferred Stock. See Note 6.

See accompanying notes.

F-6
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND ORGANIZATION

Film Roman, Inc. (the "Company") was incorporated under the laws of the
State of California on October 17, 1989. The Company is the successor company
to Film Roman, a sole proprietorship, which was established by Phil Roman. The
Company's primary business is the production of animated series and specials,
and the distribution of such animation product throughout the world.

In July 1995, the Company amended its Articles of Incorporation to authorize
the issuance of three classes of capital stock--Common Stock, Class A
Preferred Stock ("Redeemable Preferred Stock"), and Class B Convertible
Preferred Stock ("Convertible Preferred Stock"). Pursuant to the amendment,
the sole stockholder exchanged each share of common stock, no par value, of
the Company ("Common Stock") then outstanding into 2,463 shares of Common
Stock, resulting in the number of shares of Common Stock outstanding to
increase from 1,000 to 2,463,000. The financial statements have been adjusted
to give retroactive treatment for this split. Also pursuant to the amendment,
the sole stockholder exchanged 750,000 shares of Common Stock for 750,000
shares of Convertible Preferred Stock (see Note 6). The total number of shares
of authorized capital stock is 11,950,000, consisting of 10,000,000 shares of
Common Stock, 1,200,000 shares of Redeemable Preferred Stock, and 750,000
shares of Convertible Preferred Stock.

Further, in July 1995, pursuant to a Securities Purchase Agreement entered
into among the Company, BCI Growth III, L.P., and several other purchasers,
such entities purchased 1,200,000 shares of Redeemable Preferred Stock and
1,200,000 stock purchase warrants (the "Warrants") from the Company for
$12,000,000.

REORGANIZATION

In May 1996, Film Roman, Inc., a Delaware corporation ("Film Roman
Holdings"), was incorporated in order to hold all of the outstanding capital
stock of the Company. Film Roman Holdings currently conducts no operations. A
reorganization (the "Reorganization") will be effected immediately prior to
the offering (the "Offering") of 3,600,000 shares of Common Stock, $.01 par
value ("Holdings Common Stock"), of Film Roman Holdings, pursuant to which (i)
a wholly-owned subsidiary of Film Roman Holdings will merge with and into the
Company; (ii) each outstanding share of Common Stock will be converted into
1.25 shares of Holdings Common Stock (including shares of Common Stock to be
issued immediately prior to such merger upon the "cashless" exercise of the
Warrants and a warrant for the purchase of 37,000 shares of Common Stock and
upon conversion of all outstanding shares of Convertible Preferred Stock);
(iii) each outstanding share of Redeemable Preferred Stock will be converted
into one share of redeemable preferred stock of Film Roman Holdings, $.01 par
value, of Film Roman Holdings ("Holdings Redeemable Preferred Stock"); (iv)
all outstanding employee options for the purchase of Common Stock will,
pursuant to the anti-dilution provisions thereof, become options to purchase
Holdings Common Stock (with options to purchase each share of Common Stock
becoming options to purchase 1.25 shares of Holdings Common Stock at 80% of
the exercise price theretofore applicable); and (v) a warrant issued to the
President of the Company for the purchase of 185,000 shares of Common Stock
will be cancelled. As a result of the foregoing, the Company will become a
wholly-owned subsidiary of Film Roman Holdings and the stockholders of the
Company will become stockholders of Film Roman Holdings. The Reorganization
will be effected pursuant to an Plan of Reorganization Agreement dated as of
May 15, 1996 by and among Film Roman Holdings, the Company, and the Company's
stockholders. Immediately following the Reorganization and the closing of the
Offering, Film Roman Holdings will redeem all outstanding shares of Holdings
Redeemable Preferred Stock. Accrued dividends on the Holdings Redeemable
Preferred Stock and Convertible Preferred Stock will be paid to the date of
redemption and conversion, respectively.

F-7
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

INTERIM FINANCIAL INFORMATION

The unaudited consolidated financial statements as of March 31, 1996, and
for the three months ended March 31, 1995 and 1996, include, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position,
results of operations and cash flows. Operating results for the three months
ended March 31, 1996, are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996.

CASH AND CASH EQUIVALENTS AND CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of temporary cash investments and trade
receivables. The Company places its temporary cash investments with high
credit, quality financial institutions with original maturities when purchased
of three months or less and therefore are subject to little risk. The Company
has not incurred any losses relating to these investments.

The Company performs production services for various companies within the
entertainment industry and licenses various rights in its animation product to
distributors throughout the world. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not
require collateral. At December 31, 1995, substantially all of the Company's
trade receivables were from customers in the entertainment industry.
Receivables generally are due within 30 days. Credit losses relating to
customers in the entertainment industry consistently have been within
management's expectations.

FINANCIAL INSTRUMENTS

Financial instruments are carried at historical cost which approximates fair
value.

REVENUE RECOGNITION

The Company recognizes revenues in accordance with the provisions of
Financial Accounting Standards Board Statement No. 53 (FAS 53). Revenues from
license and production agreements, which may provide for the receipt by the
Company of nonrefundable guaranteed amounts, are recognized when the license
period begins and the programming is available pursuant to the terms of the
agreement, typically when the finished product has been delivered to and
accepted by the customer. Amounts in excess of minimum guarantees under such
agreements are recognized when earned. Cash collected in advance of the time
of availability is recorded as deferred revenue.

FILM COSTS

Costs incurred in connection with the acquisition of story rights, the
development of stories, production and allocable production overhead and
interest are capitalized as film costs. Film costs are stated at the lower of
unamortized cost or estimated net realizable value. In accordance with FAS 53,
the individual film forecast method is used to amortize film costs. Costs
accumulated in the production of a film are amortized in the proportion that
gross revenues realized bear to management's estimate of the total gross
revenues expected to be received. Estimated liabilities for participations are
accrued and expensed in the same manner as film costs are amortized.

F-8
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

Revenue estimates on a film-by-film basis are reviewed periodically by
management and are revised, if warranted, based upon management's appraisal of
current market conditions. Based on this review, if estimated future gross
revenues from a film are not sufficient to recover the unamortized costs, the
unamortized film cost shall be written down to net realizable value. In
unusual cases, such as a change in public acceptance of certain types of films
or actual costs substantially in excess of budgeted costs, a write-down to net
realizable value may be required before the film is released.

DEPRECIATION AND AMORTIZATION

Property and equipment are recorded at cost. Depreciation on furniture and
equipment is computed by the double-declining balance method over their
estimated useful lives, ranging from five to seven years. Leasehold
improvements are amortized over their estimated useful lives, or the remaining
term of the related lease, whichever is shorter, using the straight-line
method.

INCOME TAXES

Effective January 1, 1994, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes." As permitted under the new rules, prior years' financial statements
have not been restated. Adoption of the new statement did not have an effect
on the Company's financial position or results of operations.

Prior to August 4, 1995 (the "Termination Date"), the Company was treated as
a Subchapter S Corporation for federal and state income tax purposes. Upon the
Termination Date, the Company is subject to federal and state corporate income
taxes.

STOCK-BASED COMPENSATION

The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board (APB) No. 25, "Accounting for Stock
Issued to Employees" and intends to continue to do so.

USE OF ESTIMATES

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
accompanying notes. Actual results could differ from those estimates.

FINANCIAL STATEMENT PRESENTATION

Certain amounts shown in the 1993 and 1994 financial statements have been
reclassified to conform to the 1995 presentation.

PRO FORMA NET INCOME (LOSS) PER COMMON SHARE

The per share data is based on the weighted average number of common and
common equivalent shares outstanding during the period and are calculated in
accordance with a Staff Accounting Bulletin of the Securities

F-9
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996
AND TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

and Exchange Commission whereby common and common share equivalents issued
within a 12-month period prior to an initial public offering are treated as
outstanding for all periods presented if the issue price was less than the
proposed initial public offering price. In addition, shares issuable upon the
exercise of options and warrants and convertible preferred stock within the
12-month period are considered to have been outstanding since inception of the
Company. For the year ended December 31, 1995, the net loss per Common Share
gives effect to the accretion of the difference between the carrying value and
the Liquidation Value of the Redeemable Preferred Stock of $484,829 and to the
accrual of dividends of $400,000 on the Redeemable Preferred Stock.

For the three months ended March 31, 1996 (unaudited), the net loss per
Common Share gives effect to the accretion of the difference between the
carrying value and the Liquidation Value of the Redeemable Preferred Stock of
$242,414 and to dividends of $240,000 on the Redeemable Preferred Stock.

The supplemental loss per share for the year ended December 31, 1995 and the
three months ended March 31, 1996 would be $(1.39) and $(1.19), respectively.
This calculation gives effect to (i) the reduction of the interest and
dividend accruals resulting from the repayment of the outstanding debt and the
redemption of the Redeemable Preferred Stock, and (ii) the offering of
additional shares of common stock whose proceeds are to be used to repay the
debt and redeem the Redeemable Preferred Stock. In addition, the loss
attributable to common stockholders used for the supplemental loss per share
calculation has been increased by $5,724,212 and $5,239,212, respectively, for
the year ended December 31, 1995 and the three months ended March 31, 1996,
which represents the excess of the price to be paid for the redemption of the
Redeemable Preferred Stock over its carrying value.

2. FILM COSTS

The components of unamortized film costs consist of the following:

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
----------------------- ---------------
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
Animated film productions released,
less amortization................. $ 4,427,443 $ 5,391,275 $ 7,125,589
Animated film productions in
process........................... 7,355,012 6,253,597 4,181,009
Animated film productions in
development....................... 599,564 734,274 787,788
----------- ----------- -----------
$12,382,019 $12,379,146 $12,094,386
=========== =========== ===========
</TABLE>

Based on management's estimates of future gross revenues as of December 31,
1995, approximately 78% of unamortized film costs applicable to released films
will be amortized during the three years ending December 31, 1998.

Interest capitalized to film costs in 1993, 1994, and 1995 was, $26,004,
$32,559, and $62,596, respectively.

Interest capitalized to film costs for the three months ended March 31, 1995
and 1996 was $9,472 and $15,854, respectively.

F-10
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1994 1995
<S> <C> <C>
Leasehold improvements................................. $ 117,937 $ 137,373
Furniture and fixtures................................. 205,176 213,138
Office equipment....................................... 359,353 535,392
--------- ---------
682,466 885,903
Less accumulated depreciation and amortization......... (418,719) (549,028)
--------- ---------
$ 263,747 $ 336,875
========= =========
</TABLE>

4. DEBT

At December 31, 1995, the Company had a revolving line of credit of
$2,250,000 which was subsequently reduced to $1,550,000. The line of credit
bears interest at 1% over the commercial base rate (11% at December 31, 1995)
which is paid monthly, is secured by the assets of the Company and personally
guaranteed by the President of the Company, and matures on May 31, 1996. At
December 31, 1994 and 1995 and March 31, 1996, $1,200,000, $1,675,000 and
$450,000, respectively, of the line had been drawn upon.

The Company has a demand note with a bank with a balance of $143,826,
$55,066 and $32,638 outstanding as of December 31, 1994 and 1995 and March 31,
1996, respectively. The note requires payments of $7,476 per month, including
interest at 1% over the commercial base rate (11% at December 31, 1995), is
secured by a life insurance policy on the President of the Company, and is
personally guaranteed by the President of the Company. The note matures on
August 9, 1996.

The Company believes that the bank intends to extend the terms of both of
these notes when they mature.

Additionally, the Company has a term loan with a bank with a balance of
$18,750, $7,079 and $4,073 outstanding as of December 31, 1994 and 1995 and
March 31, 1996, respectively. The note is secured by equipment and is
personally guaranteed by the President of the Company. The loan calls for
payments, including interest at 12% per annum, of approximately $1,100 per
month and matures in July 1996.

5. INCOME TAXES

Prior to the Termination Date, the Company was treated as a Subchapter S
Corporation under the Internal Revenue Code ("IRC") and, consequently, was not
subject to federal income tax prior to that date; the sole shareholder of the
Company included the income (loss) of the Company through the Termination Date
in his own income tax return for federal income tax purposes. Accordingly, the
Company has not recognized any deferred taxes and has no available federal net
operating loss carryforwards prior to the Termination Date. S Corporations pay
tax to the State of California on their taxable incomes at a rate of 2.5% in
1993 and 1.5% in 1994 and 1995. The state tax provision recorded by the S
Corporation prior to the Termination Date is immaterial to the financial
statements.

F-11
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

As of December 31, 1995, significant components of the Company's net
deferred tax assets, for which a 100% valuation allowance has been provided
and which have not been recognized in the Company's financial statements, are
as follows:

<TABLE>
<S> <C>
Film costs..................................................... $ 97,000
Fixed assets................................................... 9,000
Nondeductible accrual.......................................... 21,000
Net operating loss carryforwards............................... 262,000
---------
389,000
Valuation allowance............................................ (389,000)
---------
$ --
=========
</TABLE>

A reconciliation of income tax computed at the statutory federal income tax
rate to the effective tax rate for the Company for the year ended December 31,
1995 is as follows:

<TABLE>
<S> <C>
Provision for income taxes at statutory rate of 35%........... $(551,000)
Taxable loss incurred prior to the Termination Date........... 154,000
Benefit of deferred tax assets not currently recognized....... 397,000
---------
$ --
=========
</TABLE>

At December 31, 1995, the Company had available federal and state tax net
operating loss carryforwards of approximately $689,000 and $345,000,
respectively, expiring through 2010.

6. REDEEMABLE PREFERRED STOCK

The Redeemable Preferred Stock has a par value of $0.01 per share. The
holders of such stock are entitled to an annual dividend of $0.80 per share,
as declared by the Board of Directors. Dividends of $400,000 and $240,000 were
declared and accrued on the Redeemable Preferred Stock as of December 31, 1995
and March 31, 1996, respectively. The Redeemable Preferred Stock ranks senior
to the Convertible Preferred Stock and common stock. The liquidation value of
each share of Redeemable Preferred Stock is $10 ("Liquidation Value"). The net
proceeds from the issuance of the Redeemable Preferred Stock and Warrants were
$10,738,000. The Company determined the fair value of the Warrants to be
approximately $4,474,000, net of issuance costs, and, as such, allocated
$4,474,000 of the net proceeds to the Warrants and $6,264,000 to the
Redeemable Preferred Stock. The difference between the carrying value and the
Liquidation Value of the Redeemable Preferred Stock is being amortized to
retained deficit on a straight-line basis from the issuance date to the
mandatory redemption dates. Accretion recorded for the year ended December 31,
1995 and for the three months ended March 31, 1996 was $484,829 and $242,414,
respectively. The Redeemable Preferred Stock is subject to mandatory
redemption beginning July 31, 2000, or upon the occurrence of a liquidation,
dissolution, or winding up of the Company, or a Liquidity Event, as defined
(which includes a public offering in which the aggregate price paid by the
public for such shares is at least $20,000,000) ("Liquidity Event"). In
addition, the Company may redeem the Redeemable Preferred Stock at any time.
The liquidation preference is equal to the Liquidation Value of their shares
plus any accrued and unpaid dividends. If after July 2000, a Liquidity Event
does not occur, any holder of more than 20% of the Redeemable Preferred Stock
may exercise a put option. The purchase price

F-12
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

for any put security to be purchased by the Company will be equal to the fair
market value. The holders of the Redeemable Preferred Stock are not entitled
to any voting rights unless the Company defaults on its redemption
requirements or dividend payments; if such a default occurs, the Redeemable
Preferred Stockholders shall be entitled to elect a majority of the directors
of the Company. In connection with the Reorganization as described in Note 1,
all of the outstanding shares of the Redeemable Preferred Stock will be
redeemed.

7. STOCKHOLDER'S EQUITY

The Convertible Preferred Stock has a par value of $0.01 per share. The
holder of such stock, who is the sole common shareholder of the Company, is
entitled to an annual dividend of $0.80 per share, as declared by the Board of
Directors. Dividends of $250,000 and $150,000 were declared and accrued on the
Convertible Preferred Stock as of December 31, 1995 and March 31, 1996,
respectively. Dividends are payable (i) upon redemption of the Redeemable
Preferred Stock, (ii) upon the occurrence of a liquidation, dissolution, or
winding up of the Company, or (iii) upon a Liquidity Event. The liquidation
value of each share of Convertible Preferred Stock is $10 (Liquidation Value).
The Convertible Preferred Stock is junior to the Redeemable Preferred stock
but senior to the common stock. The Convertible Preferred Stock is convertible
at any time into an equal number of common stock shares, subject to
adjustment. The Convertible Preferred Stock is subject to mandatory redemption
upon the occurrence of a public offering in which the aggregate price paid by
the public for such shares is at least $20,000,000 ("Public Offering"). In
connection with the Reorganization as described in Note 1, the holder has
agreed to convert the Convertible Preferred Stock into common stock. The
liquidation preference is equal to the Liquidation Value of such shares plus
any accrued and unpaid dividends. The holder of the Convertible Preferred
Stock is entitled to vote along with the common stock with each share entitled
to as many votes as the number of shares of common stock into which it may be
converted.

The Company issued 1,200,000 Warrants to purchase shares of the Company's
common stock as part of the Redeemable Preferred Stock financing. The Warrants
are exercisable at $0.01 per share after the earlier of July 2000 or the
occurrence of the Liquidity Event. The holders of the Warrants are entitled to
vote along with the common stock and Convertible Preferred Stock stockholder
with each Warrant entitled to as many votes as the number of shares of common
stock into which it may be converted. In connection with the Reorganization as
described in Note 1, the Warrants will be exercised.

In August 1995, the Company issued a warrant to purchase 37,000 shares of
the Company's common stock at an exercise price of $12.00. In connection with
the Reorganization as described in Note 1, such warrant will be exercised. In
addition, the Company issued a warrant to the President of the Company to
purchase 185,000 shares of the Company's common stock at an exercise price of
$32.43. However, upon the occurrence of a Public Offering, such warrant
expires 60 days from the Public Offering date. In connection with the
Reorganization as described in Note 1, such warrant will be cancelled.

In August 1995, an officer was granted options to purchase 60,000 shares of
common stock at an exercise price of $0.01 per share in accordance with his
employment agreement. Such options are exercisable immediately and will remain
exercisable during such officer's employment with the Company and for a period
of one year following the expiration of his employment with the Company or
until a Liquidity Event, if later. The Company recorded compensation expense
of $242,400 associated with the granting of these options as such options were
granted at an exercise price less than the deemed fair value of the common
stock at the date of grant.

F-13
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

In 1996 the Company adopted a stock option plan ("Plan"). All regular
salaried employees of the Company may, at the discretion of the compensation
committee of the Board of Directors, be granted incentive and non-qualified
stock options to purchase shares of Common Stock at an exercise price not less
than 100% of the fair market value of such shares on the grant date. Directors
of the Company, consultants and other persons who are not regular salaried
employees of the Company are not eligible to receive incentive stock options,
but are eligible to receive non-qualified stock options.

The maximum number of shares subject to the Plan is 982,156 and the Plan
will terminate on August 7, 2005, unless sooner terminated by the Board of
Directors. The options vest over a five-year period.

Pursuant to the Plan, in January 1996, the Company granted options to
certain employees and directors of the Company to purchase 423,000 shares of
the Company's common stock at an exercise price of $10.00 per share, which was
deemed to be the fair market value at that time. In May 1996, the Company
granted options to an officer to purchase 100,000 shares and options to
certain employees and directors of the Company to purchase 34,500 shares of
the Company's common stock at $10.65 per share, which was deemed to be the
fair market value at that time. Further pursuant to the plan, in May 1996, the
Company granted options to an officer to purchase 74,000 shares of the
Company's common stock at $10.65 per share, which was deemed to be the fair
market value at that time. These options vest (i) upon reaching certain
performance goals, (ii) upon certain extensions of the officer's employment
agreement, or (iii) upon the sixth anniversary of the grant, whichever occurs
earlier.

As of December 31, 1995, 2,678,500 shares of common stock are reserved for
future issuances related to the Convertible Preferred Stock, Redeemable
Preferred Stock and warrants and options.

8. COMMITMENTS

The Company leases facilities for office space and its animation studios
under an operating lease that was amended in April 1994. Under the terms of
the lease agreement, as amended, the Company is required to pay a pro-rata
share of the building's operating expenses, maintenance and property taxes.
The lease is for a five year period expiring August 31, 1999 with an option
for an additional five year term. The lease agreement includes certain free
rent periods and an escalation in the monthly rental amount, as defined. The
accompanying statement of operations for the year ended December 31, 1995
reflects rent expense on a straight-line basis over the term of the lease. The
Company also has various lease agreements for equipment which expire through
1999, certain of which are personally guaranteed by the President of the
Company. The following is a schedule of the future minimum lease payments
under all noncancelable operating lease agreements:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
<S> <C>
1996....................................................... $1,296,393
1997....................................................... 1,298,585
1998....................................................... 1,243,540
1999....................................................... 829,911
----------
Total minimum lease payments............................... $4,668,429
==========
</TABLE>

Rent expense for the years ended December 31, 1993, 1994 and 1995, prior to
any allocation of rent to capitalized film costs, was $776,449, $875,935, and
$1,109,006, respectively.

F-14
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

At December 31, 1995, the Company had outstanding employment agreements with
various employees with initial terms ranging from two to five years. Under the
terms of the agreements, the Company is obligated to pay the following
amounts:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
<S> <C>
1996........................................................ $2,547,296
1997........................................................ 1,219,221
1998........................................................ 942,488
1999........................................................ 840,068
2000........................................................ 393,750
----------
$5,942,823
==========
</TABLE>

Collectively, these employment agreements provide for minimum annual
compensation that can be increased for incentives based on the Company
obtaining certain earning levels, the relationship of earnings to projected
earnings, and/or discretionary incentives to be determined by the Board of
Directors. Such incentives shall not exceed 100% of the employees' base
salary.

9. 401(K) PROFIT SHARING PLAN

The Company has a defined contribution Profit Sharing 401(k) Savings Plan
which covers substantially all of its employees. The plan became effective on
January 1, 1991 and was amended effective January 1, 1992. Under the terms of
the plan, employees can elect to defer up to 15% of their wages, subject to
certain Internal Revenue Service (IRS) limitations, by making voluntary
contributions to the plan. Additionally, the Company, at the discretion of
management, can elect to match up to 100% of the voluntary contributions made
by its employees. The Company has received determination letters from the IRS
indicating that the above plan is qualified within the terms of the applicable
provisions of the Employee Retirement Income Security Act of 1974.

For the years ended December 31, 1993, 1994 and 1995, the Company
contributed $42,398, $73,103, and $93,081, respectively, to the plan on behalf
of its employees.

10. SIGNIFICANT CUSTOMERS

In 1993, the Company earned revenues from four significant customers of
$9,377,000 (34%), $4,550,000 (16%), $4,225,000 (15%) and $3,892,000 (14%). In
1994, the Company earned revenues from four significant customers of
$10,025,000 (28%), $7,695,000 (21%), $5,743,000 (16%), and $4,485,000 (12%).
In 1995, the Company earned revenues from five significant customers of
approximately $11,967,000 (35%), $4,516,000 (13%), $4,400,000 (13%),
$4,229,000 (12%), and $3,575,000 (10%). In 1996, the Company earned revenues
from two significant customers of approximately $4,695,000 (63%) and
$1,042,000 (14%).

11. SUBSEQUENT EVENT

On May 9, 1996, the Company's Board of Directors authorized management of
the Company to file a Registration Statement with the Securities and Exchange
Commission to sell 3,600,000 shares of its common stock.

F-15
<PAGE>

FILM ROMAN, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND
TO THE THREE MONTH PERIODS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)

12. PRO FORMA DATA (UNAUDITED)

The Company operated as an S Corporation through the Termination Date. Pro
forma amounts reflect adjustments for additional income taxes that would have
been reported if the Company had been a C Corporation based upon an estimated
effective tax rate of 40% in 1993 and 1994 and 34% in 1995.

13. RELATED PARTY TRANSACTIONS

A firm in which an outside director of the Company is a partner acts as a
financial consultant to the Company and fees paid to that firm during 1995
amounted to $66,000. A firm in which an outside director of the Company is a
partner acts as a legal consultant to the Company and fees paid to that firm
during 1995 amounted to $84,000. An outside director of the Company acts as a
financial consultant to the Company and fees paid to this director during 1995
amounted to $22,000.

F-16
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Film Roman, Inc. (a Delaware corporation)

We have audited the accompanying balance sheet of Film Roman, Inc. (a
Delaware corporation) as of May 16, 1996. This financial statement is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement 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 statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. 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 statement referred to above presents fairly,
in all material respects, the financial position of Film Roman, Inc. (a
Delaware corporation) as of May 16, 1996, in conformity with generally
accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
May 16, 1996

F-17
<PAGE>

FILM ROMAN, INC. (A DELAWARE CORPORATION)

BALANCE SHEET

MAY 16, 1996

<TABLE>
<S> <C>
ASSETS
Cash................................................................... $10,000
-------
Total assets..................................................... $10,000
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Total liabilities
Stockholders' equity:
Common stock, $.01 par value: 20,000,000 shares authorized, 100
shares issued and outstanding....................................... $ 1
Preferred stock, $.01 par value: 5,000,000 shares authorized,
no shares issued
and outstanding..................................................... --
Additional paid-in capital........................................... 9,999
-------
Total stockholders' equity....................................... $10,000
=======
</TABLE>

See accompanying notes.

F-18
<PAGE>

FILM ROMAN, INC. (A DELAWARE CORPORATION)

NOTES TO FINANCIAL STATEMENTS

MAY 16, 1996

1. DESCRIPTION OF BUSINESS

In May 1996, the Company was incorporated in Delaware in order to hold all
of the outstanding capital stock of Film Roman, Inc., a California corporation
("Film Roman California"). The Company currently conducts no operations. A
reorganization (the "Reorganization") will be effected immediately prior to
the offering (the "Offering") of 3,600,000 shares of common stock, $.01 par
value ("Common Stock"), of the Company, pursuant to which (i) a wholly-owned
subsidiary of the Company will merge with and into Film Roman California;
(ii) each outstanding share of common stock, no par value ("California Common
Stock") of Film Roman California will be converted into 1.25 shares of Common
Stock (including shares of California Common Stock to be issued immediately
prior to such merger upon the "cashless" exercise of certain warrants for the
purchase of California Common Stock and upon conversion of all outstanding
shares of convertible preferred stock, $.01 par value (the "Convertible
Preferred Stock") of Film Roman California); (iii) each outstanding share of
redeemable preferred stock of Film Roman California will be converted into one
share of redeemable preferred stock of the Company, $.01 par value
("Redeemable Preferred Stock"); (iv) all outstanding employee options for the
purchase of California Common Stock will, pursuant to the anti-dilution
provisions thereof, become options to purchase Common Stock (with options to
purchase each share of California Common Stock becoming options to purchase
1.25 shares of Common Stock at 80% of the exercise price theretofore
applicable); and (v) a warrant issued to the President of the Company for the
purchase of 185,000 shares of California Common Stock will be cancelled. As a
result of the foregoing, Film Roman California will become a wholly-owned
subsidiary of the Company and the stockholders of Film Roman California will
become stockholders of the Company. The Reorganization will be effected
pursuant to a Plan of Reorganization Agreement dated as of May 15, 1996 by and
among Film Roman California, the Company, and Film Roman California's
stockholders. Immediately following the Reorganization and the closing of the
Offering, the Company will redeem all outstanding shares of Redeemable
Preferred Stock. Accrued dividends on the Redeemable Preferred Stock and
Convertible Preferred Stock will be paid to the date of redemption and
conversion, respectively.

PREFERRED STOCK

STOCK OPTION PLAN

On May 9, 1996, the Company adopted a stock option plan, substantially
similar to the stock option plan of Film Roman California. Pursuant to the
Reorganization, holders of options to purchase stock of Film Roman California
will contribute such options to the Company and the Company will issue options
with substantially the same rights, conditions and restrictions as the options
contributed (except that each option for the purchase of one share of
California Common Stock will be exchanged for an option to purchase 1.25
shares of Common Stock, and the per share exercise price for Company options
will be equal to 80% of the per share exercise price of the Film Roman
California options).

F-19
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THE UNDERWRITERS. THIS PRO-
SPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAK-
ING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.

-------------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 11
Dividend Policy........................................................... 11
Capitalization............................................................ 12
Dilution.................................................................. 13
Selected Financial Information............................................ 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 20
The Company............................................................... 31
Management................................................................ 33
Principal and Selling Stockholders........................................ 44
Certain Transactions...................................................... 45
Description of Capital Stock.............................................. 46
Shares Eligible for Future Sale........................................... 49
Underwriting.............................................................. 50
Legal Matters............................................................. 51
Experts................................................................... 51
Additional Information.................................................... 52
Index to Financial Statements............................................. F-1
</TABLE>

-------------

UNTIL , 1996 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, 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.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

3,785,000 SHARES

FILM ROMAN, INC.

COMMON STOCK

-----------------

PROSPECTUS

-----------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of the Common Stock being registered hereby. All of
the amounts shown are estimates except for the Commission registration fee and
the NASD filing fee.

<TABLE>
<S> <C>
Commission Registration Fee......................................... $18,012
NASD Filing Fee..................................................... 5,723
Nasdaq National Market Listing Fees................................. *
Accounting Fees and Expenses........................................ *
Blue Sky Fees and Expenses.......................................... *
Legal Fees and Expenses............................................. *
Printing and Engraving Expenses..................................... *
Transfer Agent Fees................................................. *
Miscellaneous Expenses.............................................. *
-------
TOTAL........................................................... $ *
=======
</TABLE>
- ---------------------
* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Bylaws of the Company generally provide that the Company shall
indemnify, to the fullest extent permitted by law, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit, investigation, administrative hearing or any other
proceeding (each, a "Proceeding") by reason of the fact that he is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another entity, against
expenses (including attorneys' fees) and losses, claims, liabilities,
judgments, fines and amounts paid in settlement actually incurred by him in
connection with such Proceeding. The Bylaws also provide that the Company may
advance litigation expenses to a director, officer, employee or agent upon
receipt of an undertaking by or on behalf of such director, officer, employee
or agent to repay such amount if it is ultimately determined that the
director, officer, employee or agent is not entitled to be indemnified by the
Company.

The Company has entered into, or intends to enter into, agreements to
indemnify its directors and executive officers in addition to the
indemnification provided for in the Certificate of Incorporation and Bylaws.
These agreements, among other things, will indemnify the Company's directors
and executive officers for certain expenses (including attorneys' fees), and
all losses, claims, liabilities, judgments, fines and settlement amounts
incurred by such person arising out of or in connection with such person's
service as a director or officer of the Company to the fullest extent
permitted by applicable law.

Policies of insurance may be obtained and maintained by the Company under
which its directors and officers will be insured, within the limits and
subject to the limitations of the policies, against certain expenses in
connection with the defense of, and certain liabilities which might be imposed
as a result of, actions, suits or proceedings to which they are parties by
reason of being or having been such directors or officers.

The form of Underwriting Agreement, filed as Exhibit 1.1. hereto, provides
for the indemnification of the Registrant, its controlling persons, its
directors and certain of its officers by the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").

II-1
<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant was incorporated in Delaware in May 1996 in order to act as a
holding company for Film Roman, Inc., a California corporation ("FRCal"). In
May 1996 the Registrant issued 100 shares of its Common Stock ("Registrant
Common Stock") to FRCal at a price of $100 per share. The transaction was
exempt from registration by virtue of Section 4(2) of the Securities Act.

In May 1996 the Registrant entered into a Plan of Reorganization Agreement
(the "Reorganization Agreement") with FRCal and the holders of all common
stock, preferred stock, and warrants of FRCal. Pursuant to the Reorganization
Agreement, which is filed as Exhibit 2.1 to the Registration Statement, such
holders approved the merger of a wholly-owned subsidiary of Registrant with
and into FRCal (the "Merger"), as a result of which FRCal will become a wholly
owned subsidiary of the Registrant. The Merger is to occur immediately prior
to the closing of the offering (the "Offering") contemplated by this
Registration Statement. Immediately prior to the Merger, (a) Phil Roman will
convert his Convertible Preferred Stock (as defined below) into 750,000 shares
of common stock of FRCal, no par value (the "FRCal Common Stock"), and
surrender his Founder Warrant (as defined below) to FRCal for cancellation,
(b) the five holders of FRCal Redeemable Preferred Stock (as defined below)
and Investor Warrants (as defined below) (BCI Growth III, L.P., Delaware State
Employees' Retirement Fund, Declaration of Trust for Defined Benefit Plan of
ICI American Holding, Inc., Declaration of Trust for Defined Benefit Plans of
Zeneca Holding Inc., and Opco Senior Executive Investment Partnership, L.P.
(collectively, the "Investors")) will exercise their Investor Warrants in full
for 1,200,000 shares of FRCal Common Stock at the price provided in the
Investor Warrants ($.01 per share unless the "Equity Value of the Company" as
defined in the Investor Warrants shall exceed $100,000,000, in which case the
exercise price may escalate from $4.55 per share up to $10.00 per share at
increasing levels of Equity Value of the Company up to $130,000,000) by
surrendering FRCal Redeemable Preferred Stock to satisfy the exercise price,
and (c) Oppenheimer & Co., Inc. ("Opco") will exercise its Opco Warrant (as
defined below) for 37,000 shares of FRCal Common Stock by using the cashless
exercise feature of the Opco Warrant, resulting in the issue of 4,709 shares
of FRCal Common Stock to Opco. Such transactions will be exempt from
registration by virtue of Sections 3(a)(11) or 4(2) of the Securities Act. In
the Merger, each outstanding share of FRCal Common Stock will be converted
into and become 1.25 shares of Registrant Common Stock, and each share of
FRCal Redeemable Preferred Stock will be converted into and become one share
of redeemable preferred stock of the Registrant ("Registrant Redeemable
Preferred Stock"). By virtue of the antidilution provisions of FRCal employee
options (described below), each option will become exercisable after the
Merger for a number of shares of Registrant Common Stock equal to 1.25 times
the number of shares of FRCal Common Stock for which it was theretofore
exercisable, at a price equal to the price at which it was theretofore
exercisable divided by 1.25, disregarding fractions of a share or cent. Such
transactions will be exempt from registration by virtue of Section 4(2) of the
Securities Act (provided that after the effectiveness of the Registration
Statement and prior to the time of the Merger Registrant expects to have filed
an effective Registration Statement on Form S-8 with respect to employee
options). Immediately following the Merger and the closing of the Offering,
the Registrant Redeemable Preferred Stock will be redeemed at the redemption
price of $10 per share plus accrued dividends.

In July 1995 FRCal entered into a Securities Purchase Agreement with the
Investors pursuant to which, in August 1995, FRCal issued to the Investors
1,200,000 shares of FRCal Class A 8% Cumulative Redeemable Preferred Stock
("FRCal Redeemable Preferred Stock") and warrants to purchase 1,200,000 shares
of FRCal Common Stock ("Investor Warrants") for an aggregate purchase price of
$12,000,000. In connection with such transaction, Phil Roman received for his
1,000 shares of FRCal capital stock 1,713,000 shares of FRCal Common Stock and
750,000 shares of FRCal Class B Convertible Preferred Stock ("Convertible
Preferred Stock"). Mr. Roman also received a warrant to purchase 185,000
shares of FRCal Common Stock at a price of $32.43 per share, subject to
adjustment (the "Founder Warrant"). In partial payment for services in
connection with the transaction, FRCal issued to Opco a Warrant to purchase
37,000 shares of FRCal Common Stock at $12 per share (the "Opco Warrant").
Such transactions were exempt from registration by virtue of Sections 3(a)(11)
or 4(2) of the Securities Act.

II-2
<PAGE>

In August 1995 FRCal issued to William Schultz, an officer, an option to
purchase 60,000 shares of FRCal Common Stock at $.01 per share in satisfaction
of certain rights under Mr. Schultz' employment agreement. Such transaction
was exempt from registration by virtue of Section 4(2) of the Securities Act.

In January 1996 FRCal pursuant to its Stock Option Plan granted 45 employees
options to purchase an aggregate of 497,000 shares of FRCal Common Stock at a
price of $10 per share. The options are not transferable, or exercisable prior
to September 1996. Such transactions were exempt from registration by virtue
of Section 4(2) of and Rule 701 under the Securities Act.

In May 1996, FRCal pursuant to this Stock Option Plan granted to five
employees and one consultant options to purchase 134,500 shares of FRCal
Common Stock at a price of $10.65 per share. The options are not transferable,
or exercisable prior to May 1997. Such transactions were exempt from
registration by virtue of Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)Exhibits:

See Exhibit Index.

(b)Financial Statement Schedules:

Schedules for which provision is made in the applicable accounting
regulation of the Commission are either not required under the related
instructions or are inapplicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

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 foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
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 shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such new securities at that time shall
be deemed to be the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NORTH
HOLLYWOOD, STATE OF CALIFORNIA, ON MAY 17, 1996.

FILM ROMAN, INC.

/s/ Phil Roman
By___________________________________
Phil Roman
President, Chief Executive Officer
and Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS PHIL ROMAN, WILLIAM SCHULTZ AND JON F. VEIN,
AND EACH OF THEM, WITH FULL POWER TO ACT WITHOUT THE OTHER, SUCH PERSON'S TRUE
AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL
CAPACITIES, TO SIGN THIS REGISTRATION STATEMENT, ANY AND ALL AMENDMENTS
THERETO (INCLUDING POST-EFFECTIVE AMENDMENTS), ANY SUBSEQUENT REGISTRATION
STATEMENTS PURSUANT TO RULE 462 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
ANY AMENDMENTS THERETO AND TO FILE THE SAME, WITH EXHIBITS AND SCHEDULES
THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND
EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH
OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND
THING NECESSARY OR DESIRABLE TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO
ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING
AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR
THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Phil Roman President, Chief Executive May 17, 1996
____________________________________ Officer and Director
Phil Roman (Principal Executive and
Financial Officer)
/s/ Gregory Arsenault Senior Vice President-- May 17, 1996
____________________________________ Finance and Administration
Gregory Arsenault (Principal Accounting
Officer)
/s/ Robert Cresci Director May 17, 1996
____________________________________
Robert Cresci
/s/ Dennis Draper Director May 17, 1996
____________________________________
Dennis Draper
/s/ Theodore T. Horton, Jr. Director May 17, 1996
____________________________________
Theodore T. Horton, Jr.
/s/ Peter Mainstain Director May 17, 1996
____________________________________
Peter Mainstain
/s/ Dixon Q. Dern Director May 17, 1996
____________________________________
Dixon Q. Dern
</TABLE>

II-4
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
*1.1 Form of Underwriting Agreement
2.1 Plan of Reorganization Agreement dated as of May 15, 1996 by
and among the Registrant, Film Roman, Inc., a California
corporation ("Film Roman California"),
and certain stockholders party thereto
3.1 Certificate of Incorporation of Registrant
3.2 Bylaws of Registrant
*5.1 Opinion and Consent of Latham & Watkins
*10.1 Employment Agreement dated as of August 7, 1995 by and between
Film Roman California and Mr. Phil Roman
*10.2 Employment Agreement dated as of August 7, 1995 by and between
Film Roman California and Mr. William Schultz
*10.3 Employment Agreement dated as of February 14, 1995 by and
between Film Roman California and Mr. Jon Vein
*10.4 Employment Agreement dated as of December 15, 1995 by and
between Film Roman California and Ms. Jacqueline Blum
*10.5 Employment Agreement dated as of January 2, 1996 by and between
Film Roman California and Mr. Gregory Arsenault
*10.6 Stock Option Plan of Film Roman California
*10.7 Amendment No. 1 to Stock Option Plan of the Registrant
*10.8 Distribution Agreement dated as of September 1, 1994 by and
between Film Roman California and Taurus Film GmbH & Company
*10.9 Development and Licensing Agreement dated January 11, 1996 by
and between Film Roman California and International Business
Machines Corporation
*10.10 Lease for Registrant's headquarters and studio in North
Hollywood, California
11.1 Pro forma Earnings Per Share
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
23.2 Consent of Tanner, Mainstain & Hoffer
23.3 Consent of Ernst & Young LLP
*23.4 Consent of Latham & Watkins (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-4)
27.1 Financial Data Schedule
</TABLE>
- ---------------------
* To be filed by amendment.

<PAGE>

EXHIBIT 2.1

PLAN OF REORGANIZATION AGREEMENT
--------------------------------

THIS PLAN OF REORGANIZATION AGREEMENT (the "Agreement") dated as of May 15,
---------
1996, is among Film Roman, Inc., a California corporation ("Film Roman
----------
California"), Film Roman, Inc., a Delaware corporation ("Film Roman Holdings"),
- ---------- -------------------
Phil Roman ("Founder"), certain holders of Class A Redeemable Preferred Stock,
-------
$0.01 par value ("California Redeemable Preferred Stock"), of Film Roman
-------------------------------------
California and of warrants to purchase Common Stock, no par value ("California
----------
Common Stock"), of Film Roman California listed on the signature pages hereto
- ------------
(the "Institutional Investors"), and Oppenheimer & Co., Inc. ("Opco"). Film
----------------------- ----
Roman California and Film Roman Holdings are individually referred to herein as
the "Company" and collectively as the "Companies." The Founder, the
------- ---------
Institutional Investors, and Opco are collectively referred to herein as the

"Stockholders." The Companies and the Stockholders are collectively referred to
- -------------
herein as the "Parties."
-------

RECITALS
--------

A. The Board of Directors of Film Roman California and the Stockholders
have agreed that it is in the best interests of Film Roman California and the
Stockholders to obtain additional financing for the operations of Film Roman
California by effecting a public offering of capital stock (the "Offering").

B. Film Roman Holdings has recently been incorporated in Delaware in order
to hold all of the issued and outstanding capital stock of Film Roman
California. Film Roman California, Film Roman Holdings and the Stockholders are
entering into this Agreement in order to, among other things, adopt the
agreement and plan of reorganization herein contained and to provide for the
merger of a wholly-owned California subsidiary of Film Roman Holdings

("Mergerco") with and into Film Roman California (the "Merger"), as a result of
-------- -------
which, among other things, Film Roman California will become a wholly-owned
subsidiary of Film Roman Holdings.

C. The Founder owns (i) 1,713,000 shares of California Common Stock,
representing all of the issued and outstanding shares of California Common
Stock, (ii) 750,000 shares of Class B Convertible Preferred Stock, $0.01 par
value ("Convertible Preferred Stock"), of Film Roman California, representing
---------------------------
all of the issued and outstanding shares of Convertible Preferred Stock, and
(iii) a warrant for the purchase of 185,000 shares of California Common Stock
(the "Founder Warrant"). Immediately prior to the Merger, the Founder will
---------------
convert his shares of Convertible Preferred Stock and will be issued California
Common Stock upon such conversion, and will surrender his Founder Warrant for
cancellation.

D. The Institutional Investors own, in the aggregate, 1,200,000 shares of
California Redeemable Preferred Stock. Such California Redeemable Preferred
Stock was issued pursuant to the terms of a Securities Purchase Agreement dated
July 26, 1995 (the "Securities Purchase Agreement") by and among the Company and
-----------------------------
the Institutional Investors.

E. The Institutional Investors also own, in the aggregate, warrants for
the purchase of 1,200,000 shares of California Common Stock (the "Regular
-------
Warrants"). Such Regular Warrants were issued pursuant to the Securities
Purchase Agreement. Prior to the Merger, the Institutional Investors will
exercise the Regular Warrants in full and will be issued shares of California
Common Stock upon such exercise.

<PAGE>

F. Opco owns a warrant for the purchase of 37,000 shares of California
Common Stock at an exercise price of $12.00 per share (the "Opco Warrant" and,
------------
together with the Regular Warrants, the "California Warrants"). Prior to the
-------------------
Merger, Opco will exercise the Opco Warrant and will be issued shares of
California Common Stock upon such exercise.

G. Certain employees of and consultants to Film Roman California own
options to purchase California Common Stock (the "Optionees"). The Optionees
---------
own, in the aggregate, options for the purchase of 691,500 shares of California
Common Stock, of which 631,500 options have been granted pursuant to the Film
Roman California Stock Option Plan (the "Regular Options"), and of which 60,000
---------------
options have been granted to William Schultz on special terms and conditions
(the "Schultz Options," and together with the Regular Options, the "California
--------------- ----------
Options"). The California Redeemable Preferred Stock, the California Common
- -------
Stock, the California Warrants and the California Options are collectively
referred to herein as the "Equity Interests."
----------------

AGREEMENT
---------

In consideration of the premises and the mutual covenants herein contained
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Parties agree as follows:

1. STEPS PRIOR TO MERGER.
---------------------

1.1 Founder Conversion/Surrender.
----------------------------

(a) The Founder agrees to convert, immediately prior to the
Merger, all of the outstanding shares of Convertible Preferred Stock.

(b) The Founder agrees to surrender the Founder Warrant,
immediately prior to the Merger, to Film Roman California for cancellation.

(c) Film Roman California agrees to pay to the Founder, following
the conversion of the Convertible Preferred Stock pursuant to clause (a) of this
Section 1.1, accrued but unpaid dividends on the Convertible Preferred Stock
through the date of conversion.

(d) Film Roman California agrees to issue to the Founder 750,000
shares of California Common Stock upon the conversion of Convertible Preferred
Stock.

1.2 Warrant Exercise.
----------------

(a) Each Institutional Investor agrees to exercise in full,
immediately prior to the Merger, the Regular Warrants owned by such
Institutional Investor by surrendering California Redeemable Preferred Stock to
Film Roman California for cancellation in payment of the exercise price pursuant
to Section 1(a) of such Regular Warrant. For purposes of such exercise, the
parties agree that the value of one share of California Redeemable Preferred
Stock will be $10, and that the exercise price of the Regular Warrants shall be
as provided in the Regular Warrants.

(b) Opco agrees to exercise in full, immediately prior to the
Merger, the Opco Warrant through a "Cashless Exercise" pursuant to Section
2.2(ii) of the Opco Warrant. For

2
<PAGE>

purposes of such "Cashless Exercise," the Parties agree that the value of each
share of California Common Stock issuable upon such exercise is an amount equal
to $13.75 per share.

(c) Film Roman California agrees, following the exercise of the
Regular Warrants pursuant to clause (b) of this Section 1.2, (i) to issue to the
Institutional Investors 1,200,000 shares of California Common Stock, and (ii) to
pay to the Institutional Investors, accrued but unpaid dividends on the
California Redeemable Preferred Stock cancelled upon exercise of Regular
Warrants through the date of cancellation, pro rata according to the amount of
Regular Warrants held by such Institutional Investor. Film Roman agrees to
issue, following the exercise of the Opco Warrant pursuant to clause (c) of this
Section 1.2, 4,709 shares of California Common Stock.

2. THE MERGER AND THE REDEMPTION.
-----------------------------

2.1 Merger. In the Merger:
------

(a) Each share of California Common Stock held by the Founder,
each Institutional Investor, and Opco shall be converted into and become 1.25
shares of Common Stock, $.01 par value ("Holdings Common Stock"), of Film Roman
---------------------
Holdings.

(b) Each share of California Redeemable Preferred Stock held by
the Institutional Investors shall be converted into and become 1.0 share of
Series A Redeemable Preferred Stock, $.01 par value ("Holdings Redeemable
-------------------
Preferred Stock"), of Film Roman Holdings. The Holdings Redeemable Preferred
- ---------------
Stock shall have rights as nearly identical to the California Redeemable
Preferred Stock as may be, except that the Holdings Redeemable Preferred Stock
shall have full voting rights (with one vote per share) with holders of Holdings
Common Stock, and shall be entitled to dividends as provided in Section 3.1(n).
Prior to the Closing (as herein defined), Film Roman Holdings will adopt and
file with the Secretary of State of Delaware a certificate of Designation with
respect to the Holdings Redeemable Preferred Stock.

(c) Pursuant to the antidilution provisions of the California
Options, after the effectiveness of the Merger, each such option shall become
exercisable for a number of shares of Holdings Common Stock equal to 1.25 times
the number of shares of California Common Stock for which it was theretofore
exercisable, at a price per share equal to the result of dividing the exercise
price for which it was theretofore exercisable by 1.25, disregarding fractions
of a share or cent, as the case may be.

2.2 Redemption. Immediately following the Merger and the closing of
----------
the Offering, Film Roman Holdings agrees:

(a) To redeem (the "Redemption") all of the outstanding shares of
----------
Holdings Redeemable Preferred Stock pursuant to the terms of such Holdings
Redeemable Preferred Stock.

(b) In the Redemption, to pay dividends on the Holdings
Redeemable Preferred Stock that have accrued but are unpaid through the date of
the Redemption.

3
<PAGE>

3. CLOSING.
-------

Upon the terms and subject to the conditions set forth herein, the
closing (the "Closing") of the Merger, the Offering and the Redemption (the
-------
"Primary Transactions") shall take place on and as of the date of the closing
--------------------
of the Offering (which date shall be determined by Film Roman Holdings and the
managing underwriter of the Offering). The Closing shall be held at the offices
of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California
90071, or at such other location as Film Roman Holdings may designate.

3.1. Deliveries at Closing. At the Closing, the following actions
---------------------
shall be taken:

(a) Delivery of Convertible Preferred Stock and Founder Warrant
-----------------------------------------------------------
to Film Roman California. The Founder shall deliver to Film Roman California (i)
- ------------------------
all issued and outstanding shares of Convertible Preferred Stock (including a
duly executed conversion certificate indicating that all such shares of
Convertible Preferred Stock are to be converted into California Common Stock)
and (ii) the Founder Warrant (including a duly executed cancellation certificate
authorizing the cancellation of such Founder Warrant).

(b) Delivery of California Warrants to Film Roman California.
--------------------------------------------------------
Each Institutional Investor shall deliver to Film Roman California the Regular
Warrant owned by such Institutional Investor (including a duly executed exercise
certificate indicating that such Regular Warrant shall be exercised in full),
and certificates for such number of shares of California Redeemable Preferred
Stock as shall be necessary to exercise such Regular Warrants, duly endorsed to
Film Roman California. Opco shall deliver to Film Roman California the Opco
Warrant (including a duly executed exercise certificate indicating that such
Opco Warrant shall be exercised in full).

(c) Delivery of Shares of California Common Stock to Founder,
---------------------------------------------------------
Institutional Investor and Opco. Film Roman California shall deliver to the
- -------------------------------
Founder 750,000 shares of California Common Stock issuable upon exercise of the
Convertible Preferred Stock. Film Roman California shall deliver to each
Institutional Investor that number of shares of California Common Stock issuable
upon exercise of such Institutional Investor's Regular Warrant, or a total of
1,200,000 shares of California Common Stock, plus certificates for the
uncancelled balance (if any) of shares of California Redeemable Preferred Stock
surrendered upon exercise of Regular Warrants. Film Roman California shall
deliver to Opco 4,709 shares of California Common Stock.

(d) Merger. Film Roman California and Mergerco shall cause an
------
agreement of merger and officers' certificate regarding the Merger to be filed
and become effective with the Secretary of State of the State of California.

(e) Surrender of California Common Stock to Film Roman Holdings.
-----------------------------------------------------------
Pursuant to the Merger, the Founder, the Institutional Investors and Opco shall
surrender all shares of California Common Stock owned by such Stockholders to
Film Roman Holdings.

(f) Surrender of California Redeemable Preferred Stock to Film
----------------------------------------------------------
Roman Holdings. Each Institutional Investor shall surrender all shares of
- --------------
California Redeemable Preferred Stock owned by such Institutional Investor to
Film Roman Holdings.

(g) Delivery of Holdings Common Stock to the Founder, the
-----------------------------------------------------
Institutional Investors and Opco. Film Roman Holdings shall deliver to each of
- --------------------------------
the Founder, the Institutional

4
<PAGE>

Investors and Opco that number of shares of Film Roman Common Stock issued to
such Stockholder in the Merger.

(h) Delivery of Holdings Redeemable Preferred Stock to the
------------------------------------------------------
Institutional Investors. Film Roman Holdings shall deliver to each Institutional
- -----------------------
Investor that number of shares of Holdings Redeemable Preferred Stock to be
issued to such Institutional Investor in the Merger.

(i) Offering. The closing of the Offering shall be completed.
--------

(j) Redemption. Film Roman Holdings shall call for redemption
----------
and redeem the Holdings Redeemable Preferred Stock.

(k) Surrender of Holdings Redeemable Preferred Stock to Film
--------------------------------------------------------
Roman Holdings. Pursuant to the Redemption, each Institutional Investor shall
- --------------
deliver to Film Roman Holdings that number of shares of Holdings Redeemable
Preferred Stock owned by such Institutional Investor.

(l) Capital Contribution. Film Roman Holdings will contribute
--------------------
to Film Roman California funds sufficient to make the payments herein provided
and to apply the proceeds to the Company from the Offering as required.

(m) Delivery of Cash to the Founder. Film Roman California
-------------------------------
shall deliver cash to the Founder, representing payment in full for all accrued
but unpaid dividends on the Convertible Preferred Stock.

(n) Delivery of Cash to Institutional Investors. Film Roman
-------------------------------------------
Holdings shall deliver to each Institutional Investor cash representing payment
in full of the redemption price of the Holdings Redeemable Preferred Stock,
which shall be $10 per share of Holdings Redeemable Preferred Stock, plus an
amount equal to dividends accrued and unpaid thereon (and on California
Redeemable Preferred Stock) to the date of Redemption.

(o) Certificates. Each Party will deliver any certificates or
------------
other evidences of the performance of all obligations and the satisfaction of
all conditions required of such Party pursuant to this Agreement or applicable
law as Film Roman California or Film Roman Holdings shall reasonably request.

4. FURTHER AGREEMENTS.
------------------

4.1 Approval of Charter Documents. The Stockholders as present and
-----------------------------
prospective shareholders of Film Roman California and as prospective
stockholders of Film Roman Holdings hereby approve of and agree to the adoption
of, and ratify and confirm the following:

(a) the Certificate of Incorporation of Film Roman Holdings,
substantially in the form of Exhibit A attached hereto;
---------

(b) the Bylaws of Film Roman Holdings, substantially in the form
of Exhibit B attached hereto;
---------

5
<PAGE>

(c) the form of Indemnification Agreement to be entered into with
the officers and directors of Film Roman Holdings, substantially in the form of
Exhibit C attached hereto;
- ---------

(d) the Film Roman California Stock Option Plan, substantially in
the form of Exhibit D a ttached hereto; and
---------

(e) the Merger and the Redemption.

4.2 Approval of Certain Agreements and Other Instruments. The
----------------------------------------------------
Stockholders, as prospective stockholders of Film Roman Holdings hereby approve
of and agree to the following:

(a) Prior to the Merger, Film Roman Holdings shall adopt a stock
option plan ("Holdings Option Plan") having substantially similar terms to the
--------------------
Film Roman California Stock Option Plan; provided, however, that such Holdings
Option Plan shall provide for the issuance of up to 15% of the number of shares
of Holdings Common Stock to be outstanding after the Offering upon exercise of
options (including all outstanding employee or consultant options), may provide
for automatic director option grants, and may contain such additional provisions
as may be advisable to comply with law, including Rule l6b-3 under the
Securities Exchange Act of 1934, and Section 162 (m) under the Internal Revenue
Code of 1986, as amended (the "Code").

(b) At the Closing, Film Roman Holdings shall assume Film Roman
California's obligations to the Institutional Investors (other than Opco Senior
Executive Investment Partnership, L.P.) under the Registration Rights Agreement
by and among Film Roman California and the Institutional Investors.

4.3 Cooperation. Subject to the terms and conditions herein
-----------
provided, each of the Parties agrees to use all reasonable 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 consummate and make effective as promptly as
practicable the Primary Transactions and the other transactions contemplated by
this Agreement (collectively, the "Transactions"), and to cooperate with each
------------
other in connection with the foregoing, including using reasonable efforts (A)
to obtain all necessary waivers, consents and approvals from other parties to
material loan agreements, leases, licenses and other contracts, (B) to obtain
all necessary consents, approvals and authorizations as are required to be
obtained under any federal, state, local or foreign law or regulations, (C) to
defend all lawsuits or other legal proceedings challenging this Agreement, or
the consummation of the Transactions, (D) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the Transactions, (E) to effect all necessary registrations and
filings and submissions of information requested by governmental authorities;
(F) to fulfill all conditions to this Agreement and the Transactions and (G) to
allow the Institutional Investors to "tack" holding periods of the California
Common Stock currently held by them and the Common Stock to be received in
exchange therefor in connection with the Reorganization for purposes of Section
144 of the Securities Act.

4.4 Lock-up. Each Stockholder agrees to enter into an agreement
-------
with the underwriters on or about the date that the Offering is priced pursuant
to which such Stockholder shall agree that, during the period beginning from the
date hereof and continuing to and including the date 180 days after the date of
the consummation of the Offering, such Stockholder will not (except as set forth
in this Agreement) offer, sell, contract to sell, grant any option to purchase,
or otherwise dispose of, directly or indirectly, or in any other manner transfer
all or a portion of the economic consequences associated with, or make any
announcement of an offering of, any shares of capital stock of Film

6
<PAGE>

Roman California or Film Roman Holdings, including but not limited to any
securities that are convertible into or exercisable or exchangeable for, or that
represent the right to receive, capital stock of Film Roman California or Film
Roman Holdings or any substantially similar securities (any one or more of the
foregoing, a "Transfer"), except for the sale by certain Stockholders to the
--------
underwriters of the Offering (the "Underwriters"); provided, however, that any
Transfer or proposed Transfer during the period commencing on the consummation
of the Offering and ending 180 days thereafter may be effected with the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ").

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.
-----------------------------------------------

The Companies represent and warrant to each of the other Parties, as
follows:

5.1 Organization. Film Roman California is a corporation duly
------------
organized,validly existing and in good standing under the laws of the State of
California and has the requisite corporate power and authority to carry on its
business as is currently conducted. Film Roman Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.

5.2 Authorization. Each Company has the requisite corporate power and
-------------
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the Transactions. The execution and delivery of this Agreement by
each Company and the consummation by each Company of the transactions
contemplated hereby have been duly authorized by each Company's Board of
Directors. This Agreement has been duly executed and delivered by each Company
and constitutes a valid and binding obligation of each Company, enforceable
against each Company in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors rights
generally or by general equitable principles.

5.3 Validly Issued Shares. All shares of capital stock or other
---------------------
securities evidencing equity ownership of Film Roman Holdings or Film Roman
California, as the case may be, to be issued in connection with this Agreement
or the Offering when issued in compliance with the terms herein or therein will
be duly authorized and validly issued, fully paid, and non-assessable and not
issued in violation of, and not subject to, any preemptive or similar rights.

5.4 No Other Subscriptions, Etc. Except as contemplated by this
----------------------------
Agreement, there are not outstanding any subscriptions, calls, commitments,
warrants or options for the purchase of shares of any capital stock or other
securities of Film Roman California or Film Roman Holdings or any securities
convertible into or exchangeable for shares of capital stock or other securities
issued by Film Roman California or Film Roman Holdings, as the case may be, or
any other commitments of any kind for the issuance of additional shares of
capital stock or other securities issued by Film Roman California or Film Roman
Holdings other than as may be made to the Underwriters in connection with the
Offering.

5.5 Investment Intent. Film Roman Holdings is acquiring capital
-----------------
stock and other securities evidencing equity ownership of Film Roman California
only for its own account and not as nominee or agent for any other person, and
Film Roman Holdings is not acquiring such capital stock or securities with a
view to, or for offer or sale in connection with, any distribution thereof
(within the

7
<PAGE>

meaning of the Securities Act of 1933, as amended (the "Securities Act")) that
--------------
would violate the securities laws of the United States of America or any state
thereof.

5.6 No Brokers. Each Company represents and warrants that no
----------
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of either Company, except for underwriting
discounts and commissions to be paid to the Underwriters in connection with the
Offering.

6. REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL INVESTORS AND OPCO.
------------------------------------------------------------------

Each of the Institutional Investors and Opco represent and warrant to
the other Parties, as follows:

6.1 Organization. Such Stockholder is a corporation, partnership
------------
or other entity or organization and is duly organized, validly existing and in
good standing under the laws of its state of organization and has the requisite
corporate, partnership or other power to carry on its business as it is now
being conducted.

6.2 Authorization. Such Stockholder has the requisite corporate,
-------------
partnership or other power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the Primary Transactions.
The execution and delivery of this Agreement by such Stockholder and the
consummation by such Stockholder of the Primary Transactions have been duly
authorized by such Stockholder's Board of Directors (if such Stockholder is a
corporation), General Partner (if such Stockholder is a partnership) or other
person empowered so to do. This Agreement has been duly executed and delivered
by such Stockholder and constitutes a valid and binding obligation of such
Stockholder enforceable against such Stockholder in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors rights generally or by general equitable principles.

6.3 Valid Title. Such Stockholder has valid title to all of the
-----------
Equity Interests set forth under such Stockholder's signature on the signature
pages hereto, free and clear of all encumbrances, and such Stockholder has full
right, power and authority to act with respect to such Equity Interests. Upon
delivery, in accordance herewith to Film Roman California or Film Roman
Holdings, as the case may be, of such Equity Interests, good title to such
Equity Interests will have been acquired by the transferee free and clear of all
encumbrances.

6.4 No Breach or Violation. Neither the execution, delivery and
----------------------
compliance of this Agreement by such Stockholder nor the consummation of the
Primary Transactions by such Stockholder will, to the best of such Stockholder's
knowledge, (a) violate or conflict with any of the charter or other
organizational documents governing such Stockholder; (b) violate or conflict
with any provision or result in or constitute a default under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under any of the terms, conditions or provisions
of any contract, indebtedness, note, bond, indenture, security or pledge
agreement, commitment, license, lease, franchise, permit, agreement, or other
instrument or obligation to which such Stockholder is a party or by which such
Stockholder or such Stockholder's Equity Interests are bound; (c) violate any
laws, statutes, ordinances, regulations or codes of any federal, state,

8
<PAGE>

or local government or governmental agency or any judgment, award, injunction,
ruling, order, decision of any federal, state or local court or government
agency; or (d) impose any claim, lien, pledge, charge, security interest or
other encumbrance on such Stockholder's Equity Interests.

6.5 Investment Intent. Such Stockholder is acquiring securities
-----------------
evidencing equity ownership of Film Roman California and Film Roman Holdings
only for its own account and not as nominee or agent for any other person, and
such Stockholder is not acquiring such capital stock or securities with a view
to, or for offer or sale in connection with, any distribution thereof (within
the meaning of the Securities Act) that would violate the securities laws of the
United States of America or any state thereof.

6.6 No Brokers. No broker, finder or investment banker is entitled
----------
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of such Stockholder,
except for any underwriting discounts and commissions to be paid to the
Underwriters in connection with the Offering.

7. REPRESENTATIONS AND WARRANTIES OF THE FOUNDER.
---------------------------------------------

The Founder represents and warrants to the other Parties, as follows:

7.1 Authorization. This Agreement has been duly executed and
-------------
delivered by such Stockholder and constitutes a valid and binding obligation of
such Stockholder enforceable against such Stockholder in accordance with its
terms, except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors rights generally or by general equitable principles.

7.2 Valid Title. Such Stockholder has valid title to all of the
-----------
Equity Interests set forth under such Stockholder's signature on the signature
pages hereto, free and clear of all encumbrances, and such Stockholder has full
right, power and authority to act with respect to such Equity Interests. Upon
delivery in accordance herewith to Film Roman California or Film Roman Holdings,
as the case may be, of such Equity Interests, good title to such Equity
Interests will have been acquired by the transferee free and clear of all
encumbrances.

7.3 No Breach or Violation. Neither the execution, delivery and
----------------------
compliance of this Agreement by such Stockholder nor the consummation of the
Primary Transactions by such Stockholder, to the best of such Stockholder's
knowledge, will (a) violate or conflict with any provision or result in or
constitute a default under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under any of the terms, conditions or provisions of any contract, indebtedness,
note, bond, indenture, security or pledge agreement, commitment, license, lease,
franchise, permit, agreement, or other instrument or obligation to which such
Stockholder is a party or by which such Stockholder or such Stockholder's Equity
Interests are bound; (b) violate any laws, statutes, ordinances, regulations or
codes of any federal, state or local government or governmental agency or any
judgment, award, injunction, ruling, order, decision of any federal, state or
local court or governmental agency; or (c) impose any claim, lien, pledge,
charge, security interest or other encumbrance on such Stockholder's Equity
Interests.

7.4 Investment Intent. Such Stockholder is acquiring securities
-----------------
evidencing equity ownership of Film Roman California and Film Roman Holdings
only for his own account and not as nominee or agent for any other person, and
such Stockholder is not acquiring such capital stock or

9
<PAGE>

securities with a view to, or for offer or sale in connection with, any
distribution thereof (within the meaning of the Securities Act) that would
violate the securities laws of the United States of America or any state
thereof.

7.5 No Brokers. No broker, finder or investment banker is entitled
----------
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of such Stockholder or
its affiliates, except for any underwriting discounts and commissions to be paid
to the Underwriters in connection with the Offering.

8. CONDITIONS TO CLOSING.
---------------------

8.1 Conditions to All Parties' Obligations. The obligation of each
--------------------------------------
Party to consummate the Primary Transactions are subject to satisfaction, on or
prior to the Closing, of each of the following:

(a) No preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect, which prevent the consummation of the Primary
Transactions.

(b) The Offering shall be consummated immediately following the
Merger and immediately prior to the Redemption.

(d) The Merger shall be a "reorganization" within the meaning of
Section 368 of the Code or shall be a "capital contribution" within the meaning
of Section 351 of the Code.

8.2 Conditions to Companies' Obligations. The respective obligations
------------------------------------
of the Companies to consummate the Primary Transactions are subject to
satisfaction, on or prior to the Closing, of each of the following:

(a) Representations and Warranties. All representations and
------------------------------
warranties made in this Agreement by all Stockholders shall be true and correct
at and as of the date of this Agreement and at and as of the Closing.

(b) Performance. Each Stockholder shall have performed and
-----------
complied with each agreement, covenant and obligation required by this Agreement
to be so performed or complied with at or prior to Closing.

(c) Registration Statement. The registration statement with
----------------------
respect to the Offering shall have become and remain effective with the
Securities and Exchange Commission.

8.3 Conditions to Stockholders' Obligations. The respective
---------------------------------------
obligations of the Stockholders to consummate the Primary Transactions are
subject to satisfaction, on or prior to the Closing, of each of the following:

10
<PAGE>

(a) Representations and Warranties. All representations and
------------------------------
warranties made in this Agreement by each Company shall be true and correct at
and as of the date of this Agreement and at and as of the Closing.

(b) Performance. Each Company shall have performed and complied
-----------
with each agreement, covenant and obligation required by this Agreement to be so
performed or complied with at or prior to Closing.

(c) Registration Statement. The registration statement with
----------------------
respect to the Offering shall have become and remain effective with the
Securities and Exchange Commission.

9. TERMINATION.
-----------

9.1 Termination. This Agreement may be terminated at any time prior
-----------
to Closing:

(a) By mutual written consent of the Parties;

(b) By the Companies if, on or prior to September 30, 1996, there
is (A) a failure of a condition set forth in Section 8.2; (B) a failure of a
condition set forth in Section 8.1 (unless the ability to meet such condition
was within the control of the Companies); or (C) the occurrence of any event
which results or would result in the failure of a condition set forth in Section
8.2 or Section 8.1 (unless the ability to meet such condition was within the
control of the Companies) to be satisfied on or prior to such date; provided,
however, that the Companies may not terminate this Agreement prior to such date
if (x) the Stockholders have not had an adequate opportunity to cure any such
failure or (y) any Stockholder has the right to terminate this Agreement
pursuant to the following clause (c) of this Section 10.1; or

(c) By any Stockholder if, on or prior to September 30, 1996,
there is (A) a failure of a condition set forth in Section 8.3; (B) a failure of
a condition set forth in Section 8.1 (unless the ability to meet such condition
was within the control of such Stockholder); or (C) the occurrence of any event
which results or would result in the failure of a condition set forth in Section
8.3 or Section 8.1 (unless the ability to meet such condition was within the
control of such Stockholder) to be satisfied on or prior to such date; provided,
however, that no Stockholder may terminate this Agreement prior to such date if
(x) the Companies have not had an adequate opportunity to cure any such failure
or (y) the Companies have the right to terminate this Agreement pursuant to the
foregoing clause (b) of this Section 10.1.

9.2 In the Event of Termination. In the event of termination of this
---------------------------
Agreement, this Agreement shall be void. Notwithstanding the foregoing, any
willful or intentional breach of any representation, warranty, covenant or
agreement set forth in this Agreement by any party to this Agreement, prior to
Closing, shall not limit or restrict the availability of specific performance or
other injunctive relief to the extent that specific performance or such other
relief would otherwise be available to a party hereunder.

11
<PAGE>

10. AMENDMENT.
---------

10.1 Amendment. Subject to applicable law, this Agreement may be
---------
amended, modified or supplemented by written agreement of the Parties hereto at
any time before the consummation of the Transactions.

10.2 Waiver. Subject to applicable law, at any time prior to the
------
consummation of the Transactions, any Party hereto may (i) extend the time for
the performance of any of the obligations or other acts of any other Party
hereto or (ii) waive compliance with any of the agreements of any other Party or
with any conditions to its own obligations. Any agreement on the part of a
Party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party by a duly authorized
officer.

11. GENERAL PROVISIONS.
------------------

11.1 Notices. All notices and other communications which are
-------
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:

If to any Company, addressed to:

Film Roman, Inc.
12020 Chandler Boulevard, Suite 200
North Hollywood, California 91607
Telecopier: (818) 985-2973
Attention: Phil Roman

With a copy to:

Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Telecopier: (213) 891-8763
Attention: Thomas W. Dobson, Esq.

If to any Stockholder, to such Stockholder's address on the signature
pages hereto.

11.2 Interpretation. All defined terms herein include the plural as
--------------
well as the singular. All references in this Agreement to designated "Sections"
and other subdivisions are to the designated Sections and other subdivisions of
this Agreement. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision. This Agreement shall not be construed for
or against any Party by reason of the authorship or alleged authorship of any
provisions hereof or by reason of the status of the respective Parties. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.

12
<PAGE>

11.3 Miscellaneous. This Agreement (i) constitutes the entire
-------------
agreement and supersedes all other prior agreements and undertakings, both
written and oral, among the Parties, or any of them, with respect to the subject
matter hereof; (ii) is not intended to confer upon any other person any rights
or remedies hereunder; (iii) shall not be assigned, except by Company to a
directly or indirectly wholly owned subsidiary of either of the Companies which,
in a written instrument shall agree to assume all of such the Company's
obligations hereunder and be bound by all of the terms and conditions of this
Agreement; provided, however, that no such assignment shall relieve the
assigning party of the obligations hereunder; and (iv) shall be governed in all
respects, including validity, interpretation and effect, by the internal laws of
the State of Delaware, without giving effect to the principles of conflict of
laws thereof. This Agreement may be executed in one or more counterparts which
together shall constitute a single agreement.

[SIGNATURE PAGE TO FOLLOW]

13
<PAGE>

IN WITNESS WHEREOF, the Parties hereto have caused this Plan of
Reorganization Agreement to be executed as of the date first written above.

"FILM ROMAN CALIFORNIA"

Film Roman, Inc.,
a California corporation

By /signature/
Name:
Title:

"FILM ROMAN HOLDINGS"

Film Roman, Inc.,
a Delaware corporation

By /signature/
Name:
Title:

"FOUNDER"

By /signature/
Phil Roman

Number of shares of Convertible Preferred Stock: 750,000
Number of shares of California Common Stock for which Founder Warrant is
Exercisable: 185,000
Number of shares of California Common Stock: 1,713,000
Address: 3123 La Suvida Drive
Hollywood, California 90068
(213) 851-3083

I consent to the foregoing:

/signature/
Mrs. Phil Roman

S-1
<PAGE>

"INSTITUTIONAL INVESTORS"

BCI GROWTH III, L.P.

By Teaneck Associates, L.P.,
Its General Partner

By /signature/
General Partner

Number of shares of California Redeemable Preferred Stock: 592,500
Number of shares of California Common Stock for which Regular Warrant is
Exercisable: 592,500
Address: c/o BCI Advisors, Inc.
Glenpointe Centre West
Teaneck, New Jersey 07666-6883
Telephone: (201) 836-3900
Telecopier (201) 836-6368
Attention: _____________________________

DELAWARE STATE EMPLOYEES' RETIREMENT FUND

By Pecks Management Partners Ltd.,
Its Investment Advisor

By /signature/
Managing Director

Number of shares of California Redeemable Preferred Stock: 400,000
Number of shares of California Common Stock for which Regular Warrant is
Exercisable: 400,000
Address: c/o Pecks Management Partners
One Rockefeller Plaza
New York, New York 10020
Telephone: (212) 332-1333
Telecopier: (212) 332-1334
Attention: _____________________________

S-2
<PAGE>

DECLARATION OF TRUST FOR DEFINED BENEFIT
PLANS OF ICI AMERICAN HOLDING INC.

By Pecks Management Partners Ltd.,
Its Investment Advisor

By /signature/
Managing Director

Number of shares of California Redeemable Preferred Stock: 113,200
Number of shares of California Common Stock for which Regular Warrant is
Exercisable: 113,200
Address: c/o Pecks Management Partners
One Rockefeller Plaza
New York, New York 10020
Telephone: (212) 332-1333
Telecopier: (212) 332-1334
Attention: _____________________________

DECLARATION OF TRUST FOR DEFINED BENEFIT
PLANS OF ZENECA HOLDING INC.

By Pecks Management Partners Ltd.,
Its Investment Advisor

By /signature/
Managing Director

Number of shares of California Redeemable Preferred Stock: 79,300
Number of shares of California Common Stock for which Regular Warrant is
Exercisable: 79,300
Address: c/o Pecks Management Partners
One Rockefeller Plaza
New York, New York 10020
Telephone: (212) 332-1333
Telecopier: (212) 332-1334
Attention: _____________________________

S-3
<PAGE>

OPCO SENIOR EXECUTIVE INVESTMENT PARTNERSHIP, L.P.

By OPCO Partners, Inc.,
Its General Partner

By /signature/
General Partner

Number of shares of California Redeemable Preferred Stock: 15,000
Number of shares of California Common Stock for which Regular Warrant is
Exercisable: 15,000
Address: c/o Oppenheimer & Co., Inc.
1 World Financial Center
200 Liberty Street
New York, New York 10281
Telephone: (212) 667-7000
Telecopier: (212) 667-5585/5851
Attention: _____________________________

"OPCO"

OPPENHEIMER & CO., INC.

By /signature/

Number of shares of California Common Stock for which Opco Warrant is
Exercisable: 37,000
Address: c/o Oppenheimer & Co., Inc.
1 World Financial Center
200 Liberty Street
New York, New York 10281
Telephone: (212) 667-7000
Telecopier: (212) 667-5585/5851
Attention: _____________________________

S-4

<PAGE>

EXHIBIT 3.1

CERTIFICATE OF INCORPORATION

FILM ROMAN, INC.

ARTICLE I

The name of the corporation is:

Film Roman, Inc.

ARTICLE II

The address of its registered office in the State of Delaware is 9 East
Loockerman Street, in the City of Dover, County of Kent. The name of its
registered agent at such address is National Registered Agents, Inc.

ARTICLE III

The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.

ARTICLE IV

(a) The Corporation is authorized to issue two classes of shares to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation shall have authority to issue is Twenty
Five Million (25,000,000) shares, and the aggregate par value of all shares
which are to have a par value is Two Hundred Fifty Thousand Dollars ($250,000).
The total number of shares of Common Stock which the Corporation shall have
authority to issue is Twenty Million (20,000,000) shares, and the par value of
each share of Common Stock is One Cent ($0.01). The total number of shares of
Preferred Stock which the Corporation shall have authority to issue is Five
Million (5,000,000) shares, and the par value of each share of Preferred Stock
is One Cent ($0.01).
<PAGE>

(b) The Preferred Stock may be issued in one or more series, each series
to be appropriately designated by a distinguishing letter or title, prior to the
issue of any shares thereof.

(c) The Board of Directors is hereby authorized to fix or alter the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions, if any), the redemption
price or prices, the liquidation preferences, any other designations,
preferences and relative, participating, optional or other special rights, and
any qualifications, limitations or restrictions thereof, of any wholly unissued
series of Preferred Stock, and the number of shares constituting any such
unissued series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.

ARTICLE V

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, repeal, alter, amend
and rescind Bylaws of the Corporation.

ARTICLE VI

Notwithstanding Article V hereof, the bylaws may be rescinded, altered,
amended or repealed in any respect by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting stock
of the corporation, voting together as a single class.

ARTICLE VII

The Board of Directors shall have that number of Directors set out in the
Bylaws of the Corporation as adopted or as set from time to time by a duly
adopted amendment thereto by the Directors or stockholders of the Corporation.

ARTICLE VIII

The Board of Directors shall be and is divided into three classes, Class I,
Class II and Class III. The number of directors in each class shall be the
whole number contained in the quotient arrived at by dividing the number of
directors by three, and if a fraction is also

2
<PAGE>

contained in such quotient then if such fraction is one-third (1/3) the extra
director shall be a member of Class III and if the fraction is two-thirds (2/3)
one of the extra directors shall be a member of Class III and the other shall be
a member of Class II. Each director shall serve for a term ending on the date
of the third annual meeting following the annual meeting at which such director
was elected; provided, however, that the initial directors of the Corporation
-------- -------
shall each be assigned to a class at the time of their election, and the
directors assigned to Class I shall serve for a term ending on the date of the
first annual meeting next following May 1, 1996, the directors assigned to Class
II shall serve for a term ending on the date of the second annual meeting next
following May 1, 1996, and the directors assigned to Class III shall serve for a
term ending on the date of the third annual meeting next following May 1, 1996.

In the event of any increase or decrease in the number of directors, (a)
each director then serving as such shall nevertheless continue as a director of
the class of which he is a member until the expiration of his current term, or
his prior death, retirement, resignation or removal, and (b) the newly created
or eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors to such class or classes as shall, so far
as possible, bring the number of directors in the respective classes into
conformity with the formula in this Article, as applied to the new number of
directors.

Notwithstanding any of the foregoing provisions of this Article, each
director shall serve until his successor is elected and qualified or until his
death, retirement, resignation or removal. Should a vacancy occur or be
created, the remaining directors (even though less than a quorum) may fill the
vacancy for the full term of the class in which the vacancy occurs or is
created.

ARTICLE IX

The first Board of Directors is as follows:

Theodore T. Horton, Jr. Class I
Robert Cresci Class I
Dennis Draper Class II
Peter Mainstain Class II
Phil Roman Class III
Dixon Q. Dern Class III

ARTICLE X

Elections of directors at an annual or special meeting of stockholders need
not be by written ballot unless the Bylaws of the Corporation shall so provide.

3
<PAGE>

ARTICLE XI

No action shall be taken by the stockholders except at an annual or special
meeting of stockholders. The stockholders may not take action by written
consent.

ARTICLE XII

Special meetings of the stockholders of the Corporation for any purpose or
purposes may be called at any time by the Board of Directors, or by a majority
of the members of the Board of Directors, or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and whose
powers and authority, as provided in a resolution of the Board of Directors or
in the Bylaws of the Corporation, include the power to call such meetings, but
such special meetings may not be called by any other person or persons;
provided, however, that if and to the extent that any special meeting of
- -------- -------
stockholders may be called by any other person or persons specified in any
provisions of the Certificate of Incorporation or any amendment thereto or any
certificate filed under Section 151(g) of the Delaware General Corporation Law,
then such special meeting may also be called by the person or persons, in the
manner, at the times and for the purposes so specified.

ARTICLE XIII

The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation; provided, however, that no amendment,
alteration, change or repeal may be made to Article VI, VIII, IX, XI or XIII
without the affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding voting stock of the corporation, voting
together as a single class.

ARTICLE XIV

Each reference in this Certificate of Incorporation to any provision of the
Delaware General Corporation Law refers to the specified provision of the
General Corporation Law of the State of Delaware, as the same now exists or as
it may hereafter be amended or superseded.

4
<PAGE>

ARTICLE XV

A director shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this Article shall not eliminate or limit the liability of a
director (i) for any breach of his 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 the law, (iii) under Section
174 of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derives an improper personal benefit.

If the General Corporation Law of the State of Delaware is hereafter
amended to authorize corporate action further limiting or eliminating the
personal liability of directors, then the liability of the director to the
Corporation shall be limited or eliminated to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended from time to
time. Any repeal or modification of this Article by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.

ARTICLE XVI

The name and mailing address of the incorporator is:

Victoria C. Phelps
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071

5
<PAGE>

I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, herein declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 6th day of May, 1996.

/s/ Victoria C. Phelps
----------------------------
Victoria C. Phelps

<PAGE>

EXHIBIT 3.2

BYLAWS

FILM ROMAN, INC.
<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
ARTICLE I - OFFICES......................................................... 1

Section 1. Registered Office.......................................... 1
Section 2. Other Offices.............................................. 1

ARTICLE II - STOCKHOLDERS................................................... 1

Section 1. Place of Meetings.......................................... 1
Section 2. Annual Meetings of Stockholders............................ 1
Section 3. Special Meetings........................................... 1
Section 4. Notice of Stockholders' Meetings........................... 1
Section 5. Manner of Giving Notice; Affidavit of Notice............... 1
Section 6. Quorum..................................................... 2
Section 7. Adjourned Meeting and Notice Thereof....................... 2
Section 8. Voting..................................................... 2
Section 9. Waiver of Notice or Consent by Absent Stockholders......... 3
Section 10. No Stockholder Action by Written Consent Without a Meeting. 3
Section 11. Record Date for Stockholder Notice and Voting.............. 3
Section 12. Proxies.................................................... 3
Section 13. Inspectors of Election; Opening and Closing the Polls...... 3
Section 14. Nomination and Stockholder Business Bylaw.................. 4

ARTICLE III - DIRECTORS..................................................... 6

Section 1. Powers..................................................... 6
Section 2. Number and Qualification of Directors...................... 6
Section 3. Election and Term of Office of Directors................... 6
Section 4. Vacancies.................................................. 6
Section 5. Place of Meetings and Telephonic Meetings.................. 7
Section 6. Annual Meetings............................................ 7
Section 7. Other Regular Meetings..................................... 7
Section 8. Special Meetings........................................... 7
Section 9. Quorum..................................................... 7
Section 10. Waiver of Notice........................................... 7
Section 11. Adjournment................................................ 8
Section 12. Notice of Adjournment...................................... 8
Section 13. Action Without Meeting..................................... 8
Section 14. Fees and Compensation of Directors......................... 8
Section 15. Classification of Directors................................ 8

ARTICLE IV - COMMITTEES..................................................... 9

Section 1. Committees of Directors.................................... 9
Section 2. Meetings and Action of Committees.......................... 9

ARTICLE V - OFFICERS........................................................ 10
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Section 1. Officers.................................................. 10
Section 2. Election of Officers...................................... 10
Section 3. Subordinate Officers, etc................................. 10
Section 4. Removal and Resignation of Officers....................... 10
Section 5. Vacancies in Office....................................... 10
Section 6. Chairman of the Board..................................... 10
Section 7. President................................................. 10
Section 8. Vice Presidents........................................... 10
Section 9. Secretary................................................. 11
Section 10. Treasurer................................................. 11
Section 11. Assistant Secretaries and Assistant Treasurers............ 11

ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS.............................................................. 11

Section 1. Indemnification........................................... 11
Section 2. Fiduciaries of Corporate Employee Benefit Plan............ 12

ARTICLE VII - GENERAL CORPORATE MATTERS.................................... 12

Section 1. Record Date for Purposes Other Than Notice and Voting..... 12
Section 2. Checks, Drafts, Evidences of Indebtedness................. 13
Section 3. Corporate Contracts and Instruments; How Executed......... 13
Section 4. Stock Certificates........................................ 13
Section 5. Lost Certificates......................................... 13
Section 6. Representation of Stock of Other Corporations............. 13
Section 7. Construction and Definitions.............................. 13
Section 8. Fiscal Year............................................... 13
Section 9. Seal...................................................... 14

ARTICLE VIII - AMENDMENTS.................................................. 14

Section 1. Amendment................................................. 14
</TABLE>

ii
<PAGE>

BYLAWS

FILM ROMAN, INC.

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of Film Roman, Inc.
(hereinafter, called the "corporation") shall be in the City of Wilmington,
County of New Castle, State of Delaware.

Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.

ARTICLE II

STOCKHOLDERS

Section 1. Place of Meetings. Meetings of stockholders shall be held at
any place within or outside the State of Delaware designated by the board of
directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.

Section 2. Annual Meetings of Stockholders. The annual meeting of
stockholders shall be held each year on a date and time designated by the board
of directors. Any previously scheduled annual meeting of the stockholders may
be postponed by resolution of the board of directors upon public notice given
prior to the date previously scheduled for such annual meeting of the
stockholders.

Section 3. Special Meetings. A special meeting of the stockholders may be
called at any time by the board of directors, or by a majority of the directors
or by a committee authorized by the board to do so. Any previously scheduled
special meeting of the stockholders may be postponed by resolution of the board
of directors upon public notice given prior to the date previously scheduled for
such special meeting of the stockholders.

Section 4. Notice of Stockholders' Meetings. All notices of meetings of
stockholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than [fifty (50)] nor more than [eighty (80)] days
before the date of the meeting being noticed. The notice shall specify the
place, date and hour of the meeting and (i) in case of a special meeting, the
general nature of the business to be transacted, or (ii) in the case of the
annual meeting, those matters which the board of directors, at the time of
giving the notice, intends to present for action by the stockholders. The
notice of any meeting at which directors are to be elected shall include the
name of any nominee or nominees who, at the time of the notice, management
intends to present for election.

Section 5. Manner of Giving Notice; Affidavit of Notice. Notice of any
meeting of stockholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
stockholder at the address of such stockholder
<PAGE>

appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or has been so given, notice shall be deemed to have been
given if sent by first-class mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where such office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.

An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving such notice, and shall be filed and
maintained in the minute book of the corporation.

Section 6. Quorum. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at any meeting of stockholders shall
constitute a quorum for the transaction of business. The stockholders present
at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.

Section 7. Adjourned Meeting and Notice Thereof. Any stockholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the chairman of the meeting, but in the absence of a
quorum, no other business may be transacted at such meeting, except as provided
in Section 6 of this Article II.

When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than thirty (30) days from the date
set for the original meeting. Notice of any such adjourned meeting, if
required, shall be given to each stockholder of record entitled to vote at the
adjourned meeting in accordance with the provisions of Sections 4 and 5 of this
Article II. At any adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting.

Section 8. Voting. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section 11
of this Article II. Such vote may be by voice vote or by ballot, at the
discretion of the chairman of the meeting. Any stockholder entitled to vote on
any matter (other than the election of directors) may vote part of the shares in
favor of the proposal and refrain from voting the remaining shares or vote them
against the proposal; but, if the stockholder fails to specify the number of
shares such stockholder is voting affirmatively, it will be conclusively
presumed that the stockholder's approving vote is with respect to all shares
such stockholder is entitled to vote. If a quorum is present, the affirmative
vote of the majority of the shares represented at the meeting and entitled to
vote on any matter shall be the act of the stockholders, unless the vote of a
greater number or voting by classes is required by the Delaware General
Corporation Law or the certificate of incorporation or the certificate of
determination of preferences as to any preferred stock.

At a stockholders' meeting involving the election of directors, no
stockholder shall be entitled to cumulate (i.e., cast for any one or more
candidates a number of votes greater than the

2
<PAGE>

number of the stockholder's shares). The candidates receiving the highest number
of votes, up to the number of directors to be elected, shall be elected.

Section 9. Waiver of Notice or Consent by Absent Stockholders. The
transactions of any meeting of stockholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, not present in person or by proxy, signs a written waiver of
notice or a consent to the holding of the meeting, or an approval of the minutes
thereof. The waiver of notice or consent need not specify either the business
to be transacted or the purpose of any annual or special meeting of
stockholders. All such waivers, consents or approvals shall be filed with the
corporate records or made part of the minutes of the meeting.

Attendance of a person at a meeting shall also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if such objection is expressly made at the meeting.

Section 10. No Stockholder Action by Written Consent Without a Meeting.
Stockholders may take action only at a regular or special meeting of
stockholders.

Section 11. Record Date for Stockholder Notice and Voting. For purposes of
determining the holders entitled to notice of any meeting or to vote, the board
of directors may fix, in advance, a record date, which shall not be more than
sixty (60) days nor less than ten (10) days prior to the date of any such
meeting, and in such case only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date fixed as aforesaid, except as
otherwise provided in the Delaware General Corporation Law.

If the board of directors does not so fix a record date, 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 business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.

Section 12. Proxies. Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney in fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, prior to the vote pursuant thereto, by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy, or (ii) written notice of the death or
incapacity of the maker of such proxy is received by the corporation before the
vote pursuant thereto is counted; provided, however, that no such proxy shall be
valid after the expiration of eleven (11) months from the date of such proxy,
unless otherwise provided in the proxy.

Section 13. Inspectors of Election; Opening and Closing the Polls. The
board of directors by resolution shall appoint one or more inspectors, which
inspector or inspectors may include individuals

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who serve the corporation in other capacities, including, without limitation, as
officers, employees, agents or representatives, to act at the meetings of
stockholders and make a written report thereof. One or more persons may be
designated as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate has been appointed to act or is able to act at a
meeting of stockholders, the chairman of the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before discharging his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by law.

The chairman of the meeting shall fix and announce at the meeting the date
and time of the opening and the closing of the polls for each matter upon which
the stockholders will vote at a meeting.

Section 14. Nomination and Stockholder Business Bylaw

(A) Annual Meetings of Stockholders.

(1) Nominations of persons for election to the board of directors of
the corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the corporation's notice of meeting, (b) by or at the direction of the board of
directors or (c) by any stockholder of the corporation who was a stockholder of
record at the time of giving of notice provided for in this Bylaw, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Bylaw.

(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Bylaw, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice
shall be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
corporation's books, and of such

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beneficial owner and (ii) the class and number of shares of the corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.

(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Bylaw to the contrary, in the event that the number of directors
to be elected to the board of directors of the corporation is increased and
there is no public announcement by the corporation naming all of the nominees
for director or specifying the size of the increased board of directors at least
70 days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the corporation.

(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting. Nominations of
persons for election to the board of directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
corporation's notice of meeting (a) by or at the direction of the board of
directors (b) provided that the board of directors has determined that directors
shall be elected at such meeting, by any stockholder of the corporation who is a
stockholder of record at the time of giving of notice provided for in this
Bylaw, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in this Bylaw. In the event the corporation calls a
special meeting of stockholders for the purpose of electing one or more
directors to the board of directors, any such stockholder may nominate a person
or persons (as the case may be), for election to such position(s) as specified
in the corporation's notice of meeting, if the stockholder's notice required by
paragraph (A)(2) of this Bylaw shall be delivered to the secretary at the
principal executive offices of the corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later than the
close of business on the later of the 60th day prior to such special meeting or
the 10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the board of
directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.

(1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Bylaw. Except as otherwise provided by law, the certificate of
incorporation or these bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to declare that
such defective proposal or nomination shall be disregarded.

(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.

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(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock, if any, to elect directors under certain
circumstances.

ARTICLE III

DIRECTORS

Section 1. Powers. Subject to the provisions of the Delaware General
Corporation Law and any limitations in the certificate of incorporation and
these bylaws relating to action required to be approved by the stockholders or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.

Section 2. Number and Qualification of Directors. The number of directors
of the corporation shall be six (6).

Section 3. Election and Term of Office of Directors. Subject to Section 15
below, one class of the directors shall be elected at each annual meeting of the
stockholders, but if any such annual meeting is not held or the directors are
not elected thereat, the directors may be elected at any special meeting of
stockholders held for that purpose. Each director is elected to a three-year
term and may be re-elected to successive terms. All directors shall hold office
until their respective successors are elected. The election of directors is
subject to any provisions contained in the certificate of incorporation relating
thereto and unless otherwise restricted by the certificate of incorporation or
by law, any director or the entire board of directors may be removed, with
cause, from the board of directors at any meeting of stockholders by the holders
of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting
stock of the corporation, voting together as a single class.

Section 4. Vacancies. Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director. Each director elected to fill a vacancy shall hold
office for the remainder of the term of the person whom he succeeds, and until a
successor has been elected and qualified.

A vacancy or vacancies in the board of directors shall be deemed to
exist in the case of the death, retirement, resignation or removal of any
director, or if the board of directors by resolution declares vacant the office
of a director who has been declared of unsound mind by an order of court or
convicted of a felony, or if the authorized number of directors be increased, or
if the stockholders fail at any meeting of stockholders at which any director or
directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.

Any director may resign or voluntarily retire upon giving written
notice to the chairman of the board, the president, the secretary or the board
of directors. Such retirement or resignation shall be effective upon the giving
of the notice, unless the notice specifies a later time for its effectiveness.
If such retirement or resignation is effective at a future time, the board of
directors may elect a successor to take office when the retirement or
resignation becomes effective.

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No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.

Section 5. Place of Meetings and Telephonic Meetings. Regular meetings of
the board of directors may be held at any place within or without the State of
Delaware that has been designated from time to time by resolution of the board.
In the absence of such designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board
shall be held at any place within or without the State of Delaware that has been
designated in the notice of the meeting or, if not stated in the notice or there
is no notice, at the principal executive office of the corporation. Any meeting,
regular or special, may be held by conference telephone or similar communication
equipment, so long as all directors participating in such meeting can hear one
another, and all such directors shall be deemed to be present in person at such
meeting.

Section 6. Annual Meetings. Immediately following each annual meeting of
stockholders, the board of directors shall hold a regular meeting for the
purpose of organization, any desired election of officers and transaction of
other business. Notice of this meeting shall not be required.

Section 7. Other Regular Meetings. Other regular meetings of the board of
directors shall be held at such time as shall from time to time be determined by
the board of directors. Such regular meetings may be held without notice
provided that notice of any change in the determination of time of such meeting
shall be sent to all of the directors. Notice of a change in the determination
of the time shall be given to each director in the same manner as for special
meetings of the board of directors.

Section 8. Special Meetings. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board or the president or any vice president or the secretary or any two
directors.

Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at his or her address as
it is shown upon the records of the corporation. In case such notice is mailed,
it shall be deposited in the United States mail at least four (4) days prior to
the time of the holding of the meeting. In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered personally, or by
telephone or to the telegraph company at least twenty-four (24) hours prior to
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated to either the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held at the
principal executive office of the corporation.

Section 9. Quorum. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the board of directors. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.

Section 10. Waiver of Notice. The transactions of any meeting of the board
of directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice if a quorum be
present and if, either before or after the meeting, each of

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the directors not present signs a written waiver of notice, a consent to holding
the meeting or an approval of the minutes thereof. The waiver of notice or
consent need not specify the purpose of the meeting. All such waivers, consents
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed given to any
director who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.

Section 11. Adjournment. A majority of the directors present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.

Section 12. Notice of Adjournment. Notice of the time and place of an
adjourned meeting need not be given, unless the meeting is adjourned for more
than twenty-four (24) hours, in which case notice of such time and place shall
be given prior to the time of the adjourned meeting, in the manner specified in
Section 8 of this Article III, to the directors who were not present at the time
of the adjournment.

Section 13. Action Without Meeting. Any action required or permitted to be
taken by the board of directors may be taken without a meeting, if all members
of the board shall individually or collectively consent in writing to such
action. Such action by written consent shall have the same force and effect as a
unanimous vote of the board of directors. Such written consent or consents shall
be filed with the minutes of the proceedings of the board.

Section 14. Fees and Compensation of Directors. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses, as may be fixed or determined by resolution of the
board of directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for such services.

Section 15. Classification of Directors. The board of directors shall be
and is divided into three classes, Class I, Class II and Class III. The number
of directors in each class shall be the whole number contained in the quotient
arrived at by dividing the authorized number of directors by three, and if a
fraction is also contained in such quotient then if such fraction is one-third
(1/3) the extra director shall be a member of Class III and if the fraction is
two-thirds (2/3) one of the extra directors shall be a member of Class III and
the other shall be a member of Class II. Each director shall serve for a term
ending on the date of the third annual meeting following the annual meeting at
which such director was elected.

In the event of any increase or decrease in the number of directors,
(a) each director then serving as such shall nevertheless continue as a director
of the class of which he is a member until the expiration of his current term,
or his prior death, resignation or removal, and (b) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the board of directors to such class or classes as shall, so far
as possible, bring the number of directors in the respective classes into
conformity with the formula in this Section 15, as applied to the new authorized
number of directors.

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ARTICLE IV

COMMITTEES

Section 1. Committees of Directors. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, including an executive committee, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the board, shall have all
the authority of the board, except with respect to:

(a) the approval of any action which, under the General Corporation
Law of Delaware, also requires stockholders' approval or approval of the
outstanding shares;

(b) the filling of vacancies on the board of directors or in any
committee;

(d) the amendment or repeal of bylaws or the adoption of new bylaws;

(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;

(f) a distribution to the stockholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the
board of directors; or

(g) the appointment of any other committees of the board of directors
or the members thereof.

Section 2. Meetings and Action of Committees. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Sections 5 (place of meetings), 7
(regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of
notice), 11 (adjournment), 12 (notice of adjournment) and 13 (action without
meetings), with such changes in the context of those bylaws as are necessary to
substitute the committee and its members for the board of directors and its
members, except that the time of regular meetings of committees may be
determined by resolution of the board of directors as well as the committee,
special meetings of committees may also be called by resolution of the board of
directors, and notice of special meetings of committees shall also be given to
all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.

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ARTICLE V

OFFICERS

Section 1. Officers. The officers of the corporation shall be chosen by
the board of directors and shall include a chairman of the board or president,
or both, a vice president, a secretary and a treasurer. The corporation may also
have, at the discretion of the board of directors, a president, one or more
additional vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be held by the same person.

Section 2. Election of Officers. The officers of the corporation, except
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article V, shall be chosen annually by the board of
directors, and each shall hold his office until he shall resign or be removed or
otherwise disqualified to serve or his successor shall be appointed in
accordance with the provisions of Section 3 of this Article V. Any number of
offices may be elected and qualified.

Section 3. Subordinate Officers, etc. The board of directors may appoint,
and may empower the chairman of the board to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in the
bylaws or as the board of directors may from time to time determine.

Section 4. Removal and Resignation of Officers. Any officer may be
removed, either with or without cause, by the board of directors, at any regular
or special meeting thereof, or, except in case of an officer chosen by the board
of directors, by any officer upon whom such power of removal may be conferred by
the board of directors.

Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.

Section 5. Vacancies in Office. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these bylaws for regular appointments to such office.

Section 6. Chairman of the Board. The chairman of the board shall be the
chief executive officer of the corporation and shall, subject to the control of
the board of directors, have general supervision, direction and control of the
business and affairs of the corporation.

Section 7. President. The president, and in the absence of a president the
chief executive officer, shall be the chief operating officer of the corporation
and shall exercise and perform such powers and duties with respect to the
administration of the business and affairs of the corporation as may from time
to time be assigned to him by the chairman of the board or by the board of
directors, or as may be prescribed by the bylaws.

Section 8. Vice Presidents. In the absence or disability of the president,
a vice president designated by the board of directors shall perform all the
duties of the president, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice

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presidents shall have such other powers and perform such other duties as form
time to time may be prescribed for them respectively by the board of directors
or the bylaws.

Section 9. Secretary. The secretary shall keep or cause to be kept, at the
principal executive office or such other place as the board of directors may
order, a book of minutes of all meetings and actions of directors, committees of
directors and stockholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice thereof given, the names
of those present at directors' and committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a stock
register, or a duplicate register, showing the names of all stockholders and
their addresses, the number and classes of shares held by each, the number and
date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required by the bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the board of directors or by the bylaws.

Section 10. Treasurer. The treasurer shall keep and maintain, or cause to
be kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall be open at all
reasonable times to inspection by any director.

The treasurer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositories as may be designated
by the board of directors. The treasurer shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
chairman of the board and directors, whenever they request it, an account of all
of his transactions as treasurer and of the financial condition of the
corporation, and shall have other powers and perform such other duties as may be
prescribed by the board of directors or the bylaws.

Section 11. Assistant Secretaries and Assistant Treasurers. Any assistant
secretary may perform any act within the power of the secretary, and any
assistant treasurer may perform any act within the power of the treasurer,
subject to any limitations which may be imposed in these bylaws or in board
resolutions.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS

Section 1. Indemnification. The corporation shall indemnify, in the manner
and to the full extent permitted by law, any person (or the estate of any
person) who was or is a party to, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the corporation, and whether civil, criminal, administrative,

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investigative or otherwise, by reason of the fact that such person is a director
or officer of the corporation, and at the discretion of the board of directors
may indemnify any person (or the estate of any person) who is such a party or
threatened to be made such a party by reason of the fact that such person is or
was an employee or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. Unless
otherwise permitted by law, the indemnification provided for herein shall be
made only as authorized in the specific case upon a determination, in the manner
provided by law, that indemnification of the director, officer, employee or
agent is proper in the circumstances. The corporation may, to the full extent
permitted by law, purchase and maintain insurance on behalf of any such person
against any liability which may be asserted against him. To the full extent
permitted by law, the indemnification provided herein shall include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement,
and, in the manner provided by law, any such expenses may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit the
right of the corporation to indemnify any other person for any such expenses to
the full extent permitted by law, nor shall it be deemed exclusive of any other
rights to which any person seeking indemnification from the corporation may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.

Section 2. Fiduciaries of Corporate Employee Benefit Plan. This Article VI
does not apply to any proceeding against any trustee, investment manager or
other fiduciary of an employee benefit plan in such person's capacity as such,
even though such person may also be an agent of the corporation as defined in
Section 1 of this Article VI. Nothing contained in this Article VI shall limit
any right to indemnification to which such a trustee, investment manager or
other fiduciary may be entitled by contract or otherwise, which shall be
enforceable to the extent permitted by Section 410 of the Employee Retirement
Income Security Act of 1974, as amended, other than this Article VI.

ARTICLE VII

GENERAL CORPORATE MATTERS

Section 1. Record Date for Purposes Other Than Notice and Voting. For
purposes of determining the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days prior to any such action, and in such case only stockholders of record
on the date so fixed are entitled to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date fixed as aforesaid, except as otherwise provided in the Delaware
General Corporation Law.

If the board of directors does not so fix a record date, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the resolution relating thereto,
or the sixtieth (60th) day prior to the date of such action, whichever is later.

Section 2. Checks, Drafts, Evidences of Indebtedness. All checks, drafts
or other orders for payment of money, notes or other evidences of indebtedness,
issued in the name of or payable to the

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corporation shall be signed or endorsed by such person or persons and in such
manner as, from time to time, shall be determined by resolution of the board of
directors.

Section 3. Corporate Contracts and Instruments; How Executed. The board of
directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or to any amount.

Section 4. Stock Certificates. A certificate or certificates for shares of
the capital stock of the corporation shall be issued to each stockholder when
any such shares are fully paid. All certificates shall be signed in the name of
the corporation by the chairman of the board or the president or vice president
and by the treasurer or an assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the stockholder. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if such
person were an officer, transfer agent or registrar at the date of issue.

Section 5. Lost Certificates. Except as hereinafter in this Section 5
provided, no new stock certificate shall be issued in lieu of an old certificate
unless the latter is surrendered to the corporation and canceled at the same
time. The board of directors may in case any stock certificate or certificate
for any other security is lost, stolen or destroyed, authorize the issuance of a
new certificate in lieu thereof, upon such terms and conditions as the board of
directors may require, including provision for indemnification of the
corporation secured by a bond or other adequate security sufficient to protect
the corporation against any claim that may be made against it, including any
expense or liability, on account of the alleged loss, theft or destruction of
such certificate or the issuance of such new certificate.

Section 6. Representation of Stock of Other Corporations. The chairman of
the board, the president, or any vice president, or any other person authorized
by resolution of the board of directors by any of the foregoing designated
officers, is authorized to vote on behalf of the corporation any and all stock
of any other corporation or corporations, foreign or domestic, standing in the
name of the corporation. The authority herein granted to said officers to vote
or represent on behalf of the corporation any and all stock by the corporation
in any other corporation or corporations may be exercised by any such officer in
person or by any person authorized to do so by proxy duly executed by said
officer.

Section 7. Construction and Definitions. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
Delaware General Corporation Law shall govern the construction of the bylaws.
Without limiting the generality of the foregoing, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.

Section 8. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.

13
<PAGE>

Section 9. Seal. The seal of the corporation shall be round and shall bear
the name of the corporation and words and figures denoting its organization
under the laws of the State of Delaware and year thereof, and otherwise shall be
in such form as shall be approved from time to time by the board of directors.

ARTICLE VIII

AMENDMENTS

Section 1. Amendment. The bylaws, or any of them, may be rescinded,
altered, amended or repealed, and new bylaws may be made (i) by the board of
directors, by vote of a majority of the number of directors then in office as
directors, acting at any meeting of the board of directors, or (ii) by the
stockholders, by the vote of the holders of sixty-six and two-thirds percent
(66-2/3%) of the outstanding voting stock of the corporation, at any annual or
special meeting of stockholders, provided that notice of such proposed
amendment, modification, repeal or adoption is given in the notice of the annual
or special meeting; provided, however, that the bylaws can only be amended if
-------- -------
such amendment would not conflict with the certificate of incorporation. Any
bylaw made or altered by the requisite number of stockholders may be altered or
repealed by the board of directors or may be altered or repealed by the
requisite number of stockholders.

<PAGE>

EXHIBIT 11.1

PRO FORMA EARNINGS PER SHARE

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Pro forma weighted
average shares
outstanding............ 1,713,000 1,713,000 1,713,000 1,713,000 1,713,000
Incremental effect of
issuance of Convertible
Preferred Stock within
one year prior to an
initial public offering
at a price below the
offering price (i.e.
cheap stock)........... 750,000 750,000 750,000 750,000 750,000
Incremental effect of
issuance of warrants
and options within one
year prior to an
initial public offering
with an exercise price
below the offering
price (i.e. cheap
stock) based on the
treasury stock method
using the offering
price.................. 1,430,535 1,430,535 1,430,535 1,430,535 1,430,535
--------- --------- ----------- --------- ---------
3,893,535 3,893,535 3,893,535 3,893,535 3,893,535
========= ========= =========== ========= =========
Pro forma net income
(loss) attributable to
common stock .......... $ 481,678 $ 692,432 $(2,000,000) $(170,075) $(953,660)
========= ========= =========== ========= =========
Pro forma net income
(loss) per share....... $ 0.12 $ 0.18 $ (0.51) $ (0.04) $ (0.24)
========= ========= =========== ========= =========
</TABLE>

<PAGE>

EXHIBIT 21.1

SUBSIDIARIES OF REGISTRANT

Prior to the offering described in the Registration Statement: None.
Film Roman Acquisition, Inc., a
California corporation.

Following the offering described in the Registration Statement: Film Roman,
Inc., a California corporation.

<PAGE>

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Information" and to the use of our report dated May 16,
1996 with respect to Film Roman, Inc., in the Registration Statement (Form S-1
No. 333- ) and related Prospectus, of Film Roman, Inc. for the
registration of 3,785,000 shares of its common stock.

ERNST & YOUNG LLP

Los Angeles, California
May 16, 1996

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Information" and to the use of our report dated May 13,
1994, in the Registration Statement (Form S-1 No. 333- ) and related
Prospectus, of Film Roman, Inc. for the registration of 3,785,000 shares of
its common stock.

TANNER, MAINSTAIN & HOFFER

Los Angeles, California
May 16, 1996

<PAGE>

EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

We consent to the use of our report dated May 16, 1996 with respect to Film
Roman, Inc. (a Delaware corporation) in the Registration Statement (Form S-1
No. 333- ) and related Prospectus of Film Roman, Inc. for the
registration of 3,785,000 shares of its common stock.

ERNST & YOUNG LLP

Los Angeles, California
May 16, 1996

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS OF FILM ROMAN, INC. AS OF AND FOR THE YEAR ENDED DECEMBER
31, 1995 AND FROM THE UNAUDITED FINANCIAL STATEMENTS OF FILM ROMAN, INC. AS OF
AND FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 5,176,090 4,707,216
<SECURITIES> 0 0
<RECEIVABLES> 430,184 582,785
<ALLOWANCES> 0 0
<INVENTORY> 12,379,146 12,094,386
<CURRENT-ASSETS> 0 0
<PP&E> 885,903 1,131,411
<DEPRECIATION> 549,028 596,124
<TOTAL-ASSETS> 18,950,378 18,574,789
<CURRENT-LIABILITIES> 0 0
<BONDS> 1,737,145 486,711
0 0
6,748,788 6,989,574
<COMMON> 700 700
<OTHER-SE> 1,831,350 727,690
<TOTAL-LIABILITY-AND-EQUITY> 18,950,378 18,574,789
<SALES> 34,340,620 7,460,762
<TOTAL-REVENUES> 34,340,620 7,460,762
<CGS> 33,155,523 7,110,707
<TOTAL-COSTS> 33,155,523 7,110,707
<OTHER-EXPENSES> 2,963,211 851,215
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (88,938) (24,914)
<INCOME-PRETAX> (1,689,176) (471,246)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,689,176) (471,246)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,689,176) (471,246)
<EPS-PRIMARY> (0.51) (0.25)
<EPS-DILUTED> 0 0

</TABLE>