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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported): June 8, 1999
TEAM COMMUNICATIONS GROUP, INC.
(Exact name of registrant as specified in charter)
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<S> <C> <C>
California 333-26307 95-4053296
(State or Other Jurisdiction of Commission (I.R.S. Employer
Incorporation) File Number Identification No.)
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12300 Wilshire Boulevard, Suite 400, Los Angeles, California 90025
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 442-3500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On June 2, 1999, Team Communications Group, Inc. (the "Company") entered
into a Letter of Intent (the "Letter of Intent") to acquire Dandelion
Distribution Ltd. ("Dandelion"), for a purchase price of approximately
$5,000,000. Dandelion is a privately held United Kingdom based television
production and distribution company owned by Noel Cronin ("Cronin"). The
purchase price will be 50% in cash and 50% in the Company's Common Stock. The
cash portion would be paid 25% at the closing and 75% paid out over a 2 year
period in quarterly installments.
The number of shares to be issued with respect to the stock portion of
the purchase price will be determined by applying a value for the shares
obtained by using the average of the bid and ask closing prices for the 30 day
period preceding the closing. The Common Stock comprising the stock portion will
be restricted securities for a period of 1 year and will be subject to the
Company's right to re-purchase in the event the seller desires to sell such
shares.
$1,500,000 of the purchase price will be based upon the "Appraised Net
Cash Flow" (as defined below)of the Dandelion library. Dandelion will receive
$150,000 for each million of "Appraised Net Cash Flow" of its library over a ten
year life span from the date of the closing. "Appraised Net Cash Flow" shall
mean the mutually agreed value of the library, determined by discounting the
assumed cash flow of the historical (i.e., existing) library of Dandelion for
the 10 year period after the closing, after deducting assumed expenses including
commissions and fees, normal expenses such as lab fees and storage in servicing
the library, and an agreed upon overhead allocation, but excluding non-cash
items like depreciation or amortization.
As part of the acquisition, Mr. Cronin would enter into a 3 year
employment agreement with the Company, becoming its Managing Director of
European operations and also continuing in his current position at Dandelion.
Mr. Cronin would also enter into a 5 year non-compete agreement.
The Letter of Intent dictates that the parties must enter into a
definitive acquisition agreement within 30 days of the Letter of Intent. The
parties then have 90 days to consummate the acquisition. Upon execution of
definitive acquisition agreement, the Company
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must concurrently therewith tender to an escrow account the sum of $250,000 as a
good faith deposit. If the definitive acquisition agreement is signed by the
parties and the Sellers are ready, willing and able to consummate the
acquisition within such 90 day period, but the Company is unable to do so, the
Company will pay to Dandelion as liquidated damages from the escrow account, the
sum of $62,500.
ITEM 7. EXHIBITS
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Exhibit Description
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10.20 Letter of Intent to Dandelion Distribution Ltd.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIGNATURES
TEAM COMMUNICATIONS GROUP, INC.
Date: June 8, 1999 By: /s/ JONATHAN D. SHAPIRO
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Jonathan D. Shaprio
Its: President and COO
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EXHIBIT 10.20
[TEAM ENTERTAINMENT GROUP LETTERHEAD]
DREW S. LEVIN
CHIEF EXECUTIVE OFFICER
HIGHLY CONFIDENTIAL
June 2, 1999
Dandelion Distribution Ltd.
5 Churchill Court, Station Rd.
North Harrow
Middlesex, England HA2 72A
Attn: Noel Cronin
Re: PURCHASE OF DANDELION
Dear Noel:
This agreement will set forth the terms and conditions for the proposed purchase
(the "Acquisition") by an entity to be formed by Team Communications Group, Inc.
(hereinafter "Purchaser" or "Team") of all or substantially all of the assets
and certain of the liabilities of Dandelion Distribution Ltd. and its
subsidiaries (collectively, the "Company). As indicated herein, the Acquisition
will be structured as a stock transaction, although due consideration will be
given to using the format of an asset acquisition if a structure can be agreed
to which insures that the Acquisition can be effectuated in a tax efficient
manner. Simultaneously with the consummation of the Acquisition, Purchaser will
enter certain separate non-compete agreements with Noel Cronin (the
"Shareholder").
Our agreement to consummate the Acquisition in any and all respects shall be
subject to the terms and conditions set forth below:
1. We shall have entered into a definitive acquisition (and/or merger) agreement
(the "Agreement") with the Company and all other parties who are necessary to
effectuate the conveyance to us of good and marketable title to either all of
the outstanding stock of the Company (the "Shares) or, if structured as an asset
purchase, all of the assets, free and clear of all liens, encumbrances and
claims(1). All other options, convertible securities, warrants or equity
equivalents will be extinguished. The Agreement will contain appropriate
representations and warranties from the Company and the Shareholders for
transactions of this type, which representations and warranties will relate to
the assets and operations of the Company.
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(1) For purposes of the remainder of this agreement, all references to "Shares"
shall be deemed to include applicable assets, to the extent that the Acquisition
is structured as an asset purchase agreement.
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Mr. Noel Cronin
May 6, 1999
Page 2
2. The definitive agreement, to the extent applicable, and any ancillary
documents and any restated employment or consulting arrangements will provide
that:
(a) subject to an audit of Dandelion's financial statements which
reflect, for the most recently concluded fiscal year, an EBITDA of $700,000, the
Purchase Price shall be $3.5 million.
(b) Seller will be entitled to additional compensation of
$150,000 for each million of "Appraised Net Cash Flow" of the library over a ten
year life span from the date of closing. For purposes of this agreement,
Appraised Net Cash Flow shall mean the mutually agreed value of the library,
determined by discounting the assumed cash flow of the historical (i.e.,
existing) library of Dandelion for the 10 year period after the closing, after
deducting assumed expenses including commissions and fees, normal expenses such
as lab fees and storage in servicing the library, and an agreed upon overhead
allocation, but excluding non-cash items like depreciation or amortization.
(c) Payment for both the Shares and the library would be 50% cash
and 50% in shares of Common Stock having a deemed value equal to the average of
the 30 day bid and ask closing prices in the period preceding the closing. With
respect to the cash portion, 25% will be paid at closing and the balance (i.e.,
75%) will be deposited into a third party escrow account, and paid-out over two
years on a quarterly basis. The Common Stock will become free trading after 1
year, but subject to a right of re-purchase by the Company in the event that
Seller wishes to sell such shares.
3. Dandelion will write-down to zero all assets associated with $2,000,000 loan
relating to the Four Star library, which loan shall not be assumed by Purchaser.
To the extent EBITDA does not increase for the fiscal year ended December 31,
2000 as compared to the December 31, 1999 fiscal year, the purchase price shall
be reduced, on a dollar for dollar basis, by an amount equal to the shortfall.
4. The Shareholders will agree to the execution of certain employment agreements
as follows:
(a) Noel Cronin will enter into a 3 year employment contract with
the Company as Managing Director of European operations for Team, while keeping
his current position at Dandelion. John Clutten will also enter into a 2 year
employment agreement with Team. The terms of such agreements are to be mutually
agreeable.
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Mr. Noel Cronin
May 6, 1999
Page 3
(b) The Non-Competition Agreement will provide that, subject to
the payment in full of all amounts due the Shareholders under the definitive
agreement and the employment agreements, the Shareholders may not compete with
the Company for a period of five years after they cease to be employees of the
Company
5. The definitive agreement will also provide that no liabilities whether known
or unknown, contingent or definitive will be assumed other than the current
lease, which must be assumed on current terms, as well as accounts payable,
(collectively, the foregoing, other than future assumed lease obligations being
referred to as the "Assumed Liabilities"), but only to the extent that acquired
accounts receivables, cash and the actual value of inventory (the "Asset Value")
existing as of the Closing Date equal or exceed the Assumed Liabilities. There
will be a dollar for dollar adjustment to the extent that Assumed Liabilities
exceed the Asset Value, but there is no adjustment in the event that the Asset
Value exceeds the Assumed Liabilities.
(a) The Company and the Shareholders shall agree to indemnify
Purchaser and hold Purchaser harmless from any and all claims, costs, losses,
obligations or liabilities, including tax liabilities, (hereinafter collectively
"Claims") which result from breaches of the representations, warranties and/or
covenants in the Agreement and which arise out of occurrences, transactions or
circumstances in existence prior to the Closing. The indemnification referred to
in this paragraph shall cover our costs, expenses and attorneys' fees incurred
in defending such Claims and in enforcing our rights against the indemnifying
parties. Purchaser shall have the right to offset the amount of Claim (as
defined above) against the second or third payment described above.
6. At the Closing, which shall be on or before October 15, 1999, Purchaser will
take title to the Shares in exchange for payment of the purchase price. In
addition, at the Closing the Company shall deliver to us and Purchaser shall
deliver to the Company all additional documents, agreements, consents and
certificates as may be required by the Agreement or contemplated by its terms,
including the consents of all third parties and any regulatory agency whose
consent may be required by either party thereto in order to consummate the
transactions.
Upon execution of this agreement, and a customary confidentiality agreement, the
Shareholder and Company will permit Purchaser and Purchaser's authorized
representatives (or other third party financiers) to conduct a due diligence
review of the Company's books, records and business premises and to discuss same
with representatives of the Company. Purchaser's obligations under the Agreement
will be subject to the results of such due diligence review and approval to
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Mr. Noel Cronin
May 6, 1999
Page 4
the transaction by the Purchaser's Board of Directors. Subject to such due
diligence, all parties agree to use their best efforts to arrive at and execute
definitive agreements and to consummate the transactions as herein provided. All
expenses incurred by any party pursuant to this agreement, shall be borne
exclusively by said parties incurring same.
Upon execution of this agreement, the parties will have 30 days in which to
negotiate and sign the Agreement. The Acquisition must close within 90 days of
the execution of the Agreement. Upon execution of the Agreement, the Purchasers
will concurrently therewith tender to an escrow account the sum of $250,000 as a
good faith deposit. If the Agreement is signed by the parties and the Sellers
are ready, willing and able to close the Acquisition within the 90 days after
the execution of the Agreement, but the Purchasers are unable to close the
Acquisition within that time, the Purchasers shall pay to the Sellers as
liquidated damages from the escrow account, the sum of $62,500.
If the foregoing terms and conditions are acceptable, kindly sign in the space
provided below. Please return one (1) fully signed copy of this agreement to us
at your earliest convenience.
We look forward to accomplishing our mutual objectives and to the continuation
and success of the Company's business.
Very truly yours,
Team Communications Group, Inc.
/s/ DREW S. LEVIN
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Drew S. Levin, Chairman
Agreed and Accepted by:
Dandelion, Inc.
By: /s/ NOEL CRONIN
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Its: Director
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Date: 6/3/99
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